$41,740,000 HAZELWOOD SCHOOL DISTRICT ST. LOUIS COUNTY, MISSOURI General Obligation Refunding Bonds (Missouri Direct Deposit Program) Series 2014

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1 NEW ISSUE Book - Entry Only Underlying: S&P: AA- RATINGS: Direct Deposit Program: S&P: AA+ See BOND RATINGS herein. In the opinion of Gilmore & Bell, P.C., St. Louis, Missouri, and White Coleman & Associates, LLC, St. Louis, Missouri, Co-Bond Counsel, under existing law and assuming continued compliance with certain requirements of the Internal Revenue Code of 1986, as amended (the Code ), (1) the interest on the Bonds is excludable from gross income for federal income tax purposes, and is not an item of tax preference for purposes of the federal alternative minimum tax imposed on individuals and corporations, (2) the interest on the Bonds is exempt from Missouri income taxation by the State of Missouri and (3) the Bonds have not been designated as qualified tax-exempt obligations within the meaning of Section 265(b)(3) of the Code. See TAX MATTERS in this Official Statement. $41,740,000 HAZELWOOD SCHOOL DISTRICT ST. LOUIS COUNTY, MISSOURI General Obligation Refunding Bonds (Missouri Direct Deposit Program) Series 2014 Dated: Date of Delivery Due: As shown on the inside cover The General Obligation Refunding Bonds (Missouri Direct Deposit Program), Series 2014 (the Bonds ) will be issued by the Hazelwood School District, St. Louis County, Missouri (the District ) for the purpose of providing funds to (1) refund the Refunded Bonds, as defined and described herein, and (2) pay the costs of issuance of the Bonds. Principal on the Bonds will be payable as set forth on the inside cover of this Official Statement. Interest on the Bonds is payable semiannually on each March 1 and September 1, commencing March 1, The Bonds are subject to redemption prior to maturity as described herein under the section captioned THE BONDS Redemption Provisions. THE BONDS AND INTEREST THEREON WILL CONSTITUTE GENERAL OBLIGATIONS OF THE DISTRICT, PAYABLE FROM AD VALOREM TAXES WHICH MAY BE LEVIED WITHOUT LIMITATION AS TO RATE OR AMOUNT UPON ALL OF THE TAXABLE TANGIBLE PROPERTY, REAL AND PERSONAL, WITHIN THE TERRITORIAL LIMITS OF THE DISTRICT. See inside cover page for maturities, principal amounts, interest rates, prices, yields and CUSIP numbers. The Bonds are offered when, as and if issued by the District and accepted by the Underwriters, subject to the approval of their validity by Gilmore & Bell, P.C., St. Louis, Missouri, and White Coleman & Associates, LLC, St. Louis, Missouri, Co-Bond Counsel, and subject to certain other conditions. Certain legal matters related to this Official Statement will be passed upon for the Underwriters by Thompson Coburn LLP, St. Louis, Missouri, and Richard G. Hughes & Associates, LLC, St. Louis, Missouri, Co-Underwriters Counsel. It is expected that the Bonds will be available for delivery through the facilities of The Depository Trust Company in New York, New York on or about December 9, BACKSTROM MCCARLEY BERRY & CO., LLC The date of this Official Statement is November 18, 2014.

2 HAZELWOOD SCHOOL DISTRICT ST. LOUIS COUNTY, MISSOURI MATURITY SCHEDULE Base CUSIP: $41,740,000 General Obligation Refunding Bonds (Missouri Direct Deposit Program) Series 2014 Maturity (March 1) Principal Amount Interest Rate Price Yield CUSIP 2015 $ 515, % % 0.200% P ,900, P ,225, Q ,200, Q ,175, Q ,100, Q ,325, Q ,275, Q ,850, Q ,350, C R ,825, C R35 C Priced to a call date of March 1, 2024.

3 HAZELWOOD SCHOOL DISTRICT ST. LOUIS COUNTY, MISSOURI New Halls Ferry Road Florissant, Missouri (314) BOARD OF EDUCATION Desiree D. Whitlock, President and Director Brenda C. Youngblood, Ph.D., Vice President and Director Karlton Thornton, Secretary and Director Mark J. Behlmann, Treasurer and Director Ann Gibbons, Director Cheryl D. Latham, Director Charles Woods, Director ADMINISTRATION Dr. Grayling Tobias, Superintendent Dr. Eric Arbetter, Assistant Superintendent for Curriculum and Instruction Julia Burke, Assistant Superintendent for Student Services Dr. Ingrid Clark-Jackson, Associate Superintendent for Human Resources Dr. Jeff Haug, Assistant Superintendent for Instruction Dr. Willicia Hobbs, Assistant Superintendent for Instruction Dwight L. Lindhorst, Assistant Superintendent for Facilities and Finance Dr. Crystal Reiter, Assistant Superintendent for Accountability, Assessment, Professional Development and Technology CO-BOND COUNSEL Gilmore & Bell, P.C. St. Louis, Missouri White Coleman & Associates, LLC St. Louis, Missouri UNDERWRITERS Stifel, Nicolaus & Company, Incorporated St. Louis, Missouri Backstrom McCarley Berry & Co., LLC St. Louis, Missouri Stern Brothers & Co. St. Louis, Missouri CO-UNDERWRITERS COUNSEL Thompson Coburn LLP St. Louis, Missouri Richard G. Hughes & Associates, LLC St. Louis, Missouri PAYING AGENT UMB Bank, N.A. Kansas City, Missouri

4 REGARDING USE OF THIS OFFICIAL STATEMENT THE BONDS HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION UNDER THE SECURITIES ACT OF 1933, AS AMENDED, IN RELIANCE UPON THE EXEMPTION CONTAINED IN SECTION 3(a)(2) OF SUCH ACT. The information set forth herein has been obtained from the District and other sources which are deemed to be reliable, but is not guaranteed as to accuracy or completeness by, and is not to be construed as a representation by, the District. The Underwriters have provided the following sentence for inclusion in this Official Statement. The Underwriters have 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 Underwriters do not guarantee the accuracy or completeness of such information. No dealer, broker, salesperson or any other person has been authorized by the District to give any information or make any representations, other than those contained in this Official Statement, in connection with the offering of the Bonds, and if given or made, such other information or representations must not be relied upon as having been authorized by the foregoing. This Official Statement does not constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of the Bonds by any person in any state in which it is unlawful for such person to make such offer, solicitation or sale. The information herein is subject to change without notice, and neither the delivery of this Official Statement nor the sale of any of the Bonds hereunder shall under any circumstances create any implication that there has been no change in the affairs of the District or the other matters described herein since the date hereof. IN CONNECTION WITH THE OFFERING OF THE BONDS, THE UNDERWRITERS MAY OVER- ALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF SUCH BONDS AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME. CAUTIONARY STATEMENTS REGARDING FORWARD- LOOKING STATEMENTS IN THIS OFFICIAL STATEMENT Certain statements included in or incorporated by reference in this Official Statement that are not purely historical are forward-looking statements within the meaning of the United States Private Securities Litigation Reform Act of 1995, Section 21E of the United States Securities Exchange Act of 1934, as amended, and Section 27A of the United States Securities Act of 1933, as amended, and reflect the District s current expectations, hopes, intentions, or strategies regarding the future. Such statements may be identifiable by the terminology used such as plan, expect, estimate, budget, intend or other similar words. THE ACHIEVEMENT OF CERTAIN RESULTS OR OTHER EXPECTATIONS CONTAINED IN SUCH FORWARD-LOOKING STATEMENTS INVOLVE KNOWN AND UNKNOWN RISKS, UNCERTAINTIES AND OTHER FACTORS WHICH MAY CAUSE ACTUAL RESULTS, PERFORMANCE OR ACHIEVEMENTS DESCRIBED TO BE MATERIALLY DIFFERENT FROM ANY FUTURE RESULTS, PERFORMANCE OR ACHIEVEMENTS EXPRESSED OR IMPLIED BY SUCH FORWARD-LOOKING STATEMENTS. INCLUDED IN SUCH RISKS AND UNCERTAINTIES ARE (i) THOSE RELATING TO THE POSSIBLE INVALIDITY OF THE UNDERLYING ASSUMPTIONS AND ESTIMATES, (ii) POSSIBLE CHANGES OR DEVELOPMENTS IN SOCIAL, ECONOMIC, BUSINESS, INDUSTRY, MARKET, LEGAL AND REGULATORY CIRCUMSTANCES, AND (iii) CONDITIONS AND ACTIONS TAKEN OR OMITTED TO BE TAKEN BY THIRD PARTIES, INCLUDING CUSTOMERS, SUPPLIERS, BUSINESS PARTNERS AND COMPETITORS, AND LEGISLATIVE, JUDICIAL AND OTHER GOVERNMENTAL AUTHORITIES AND OFFICIALS. ASSUMPTIONS RELATED TO THE FOREGOING INVOLVE JUDGMENTS WITH RESPECT TO, AMONG OTHER THINGS, FUTURE ECONOMIC, COMPETITIVE, AND MARKET CONDITIONS AND FUTURE BUSINESS DECISIONS, ALL OF WHICH ARE DIFFICULT OR IMPOSSIBLE TO PREDICT ACCURATELY. FOR THESE REASONS, THERE CAN BE NO ASSURANCE THAT THE FORWARD-LOOKING STATEMENTS INCLUDED IN THIS OFFICIAL STATEMENTS WILL PROVE TO BE ACCURATE. UNDUE RELIANCE SHOULD NOT BE PLACED ON FORWARD-LOOKING STATEMENTS. ALL FORWARD-LOOKING STATEMENTS INCLUDED IN THIS OFFICIAL STATEMENT ARE BASED ON INFORMATION AVAILABLE TO THE DISTRICT ON THE DATE HEREOF, AND THE DISTRICT ASSUMES NO OBLIGATION TO UPDATE ANY SUCH FORWARD-LOOKING STATEMENTS IF OR WHEN ITS EXPECTATIONS OR EVENTS, CONDITIONS OR CIRCUMSTANCES ON WHICH SUCH STATEMENTS ARE BASED OCCUR OR FAIL TO OCCUR, OTHER THAN AS INDICATED UNDER THE CAPTION CONTINUING DISCLOSURE UNDERTAKING.

5 TABLE OF CONTENTS INTRODUCTION...1 General...1 Authority for the Bonds...1 Purpose of the Bonds...1 Security for the Bonds...1 Continuing Disclosure...2 Descriptions of Documents...2 THE BONDS...2 General...2 Redemption Provisions...3 Selection of Bonds to be Redeemed...3 Notice and Effect of Call for Redemption...3 Book-Entry Only System...4 Registration, Transfer and Exchange of Bonds...6 SECURITY FOR THE BONDS...6 General...6 Direct Deposit of State Aid Payments...7 BONDOWNERS RISKS...8 Risk of Taxability of Interest on the Bonds...8 Risk of Audit of the Bonds...8 PLAN OF FINANCING...8 General...8 Refunding of the Refunded Bonds...8 Sources and Uses of Funds...9 THE DISTRICT...9 LEGAL MATTERS...9 BOND RATINGS...9 VERIFICATION OF MATHEMATICAL COMPUTATIONS...10 TAX MATTERS...10 Opinion of Co-Bond Counsel...10 Other Tax Consequences...11 CONTINUING DISCLOSURE UNDERTAKING...12 ABSENCE OF LITIGATION...13 UNDERWRITING...13 CERTAIN RELATIONSHIPS...14 MISCELLANEOUS...14 APPENDIX A Information Regarding the District APPENDIX B Audited Financial Statements and Independent Auditor s Report of the District for the Fiscal Year Ended June 30, 2014 APPENDIX C Form of Opinion of Co-Bond Counsel Page (i)

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7 OFFICIAL STATEMENT $41,740,000 HAZELWOOD SCHOOL DISTRICT ST. LOUIS COUNTY, MISSOURI General Obligation Refunding Bonds (Missouri Direct Deposit Program) Series 2014 INTRODUCTION The following introductory information is subject in all respects to more complete information contained elsewhere in this Official Statement. The order and placement of materials in this Official Statement, including the appendices hereto, are not to be deemed to be a determination of relevance, materiality or relative importance, and this Official Statement, including the cover pages and appendices, should be considered in its entirety. The offering of the Bonds to potential investors is made only by means of the entire Official Statement. General This Official Statement, including the cover pages and appendices hereto, is furnished to prospective purchasers in connection with the offering and sale of $41,740,000 aggregate principal amount of General Obligation Refunding Bonds (Missouri Direct Deposit Program), Series 2014 (the Bonds ) by the Hazelwood School District, St. Louis County, Missouri (the District ). The issuance and sale of the Bonds is authorized by a resolution adopted by the Board of Education of the District on November 18, 2014 (the Resolution ). All capitalized terms not otherwise defined herein have the meanings assigned to those terms in the Resolution. Authority for the Bonds The Bonds are being issued pursuant to and in full compliance with the Constitution and statutes of the State of Missouri and the Resolution. See the captions THE BONDS and SECURITY FOR THE BONDS. Purpose of the Bonds The Bonds are being issued for the purpose of providing funds to (1) refund the Refunded Bonds, as defined and described under the section herein captioned PLAN OF FINANCING Refunding of the Refunded Bonds and (2) pay the costs of issuance of the Bonds. Security for the Bonds General. The Bonds will constitute general obligations of the District and will be payable as to principal or Redemption Price of and interest on the Bonds from ad valorem taxes which may be levied without limitation as to rate or amount upon all the taxable tangible property, real and personal, within the territorial limits of the District. See the section herein captioned SECURITY FOR THE BONDS General. Direct Deposit Agreement. Pursuant to a Direct Deposit Agreement among the Office of the Treasurer of the State of Missouri, the Department of Elementary and Secondary Education of the State of Missouri, the Health and Educational Facilities Authority of the State of Missouri, Wells Fargo Bank, N.A. and the District dated as of the date of issuance of the Bonds, the District will agree that a portion of its state aid payments will be transferred to Wells Fargo Bank, N.A., as direct deposit trustee, in order to pay debt

8 service on the Bonds. See the section herein captioned SECURITY FOR THE BONDS Direct Deposit of State Aid Payments. Continuing Disclosure The District has agreed in the Omnibus Continuing Disclosure Agreement dated as of July 1, 2013 entered into by the District and UMB Bank, N.A., as dissemination agent, made applicable to the Bonds by an Adoption Agreement dated as of December 1, 2014 (collectively, the Continuing Disclosure Agreement ) to provide certain financial information and operating data relating to the District and to provide notices of the occurrence of certain enumerated events relating to the Bonds. The financial information, operating data and notice of events will be filed by or on behalf of the District in compliance with Rule 15c2-12 promulgated by the Securities and Exchange Commission. See the section herein captioned CONTINUING DISCLOSURE UNDERTAKING. Descriptions of Documents Brief descriptions of the Bonds, the security for the Bonds and certain other matters are included in this Official Statement. Such information, summaries and descriptions do not purport to be comprehensive or definitive. All references herein to the Bonds and the Resolution are qualified in their entirety by reference to such documents. General THE BONDS The Bonds will be issued in the aggregate principal amount of $41,740,000. The Bonds shall consist of fully registered bonds without coupons, numbered from R-1 upward in order of issuance, in denominations of $5,000 or any integral multiple thereof. The Bonds shall be dated the date of initial issuance and delivery thereof and shall become due in the amounts on the Stated Maturities set forth on the inside cover page hereof, subject to redemption and payment prior to their Stated Maturities as provided in the Resolution, and will bear interest at the rates shown on the inside cover page hereof (computed on the basis of a 360-day year of twelve 30-day months) from the date thereof or from the most recent date to which interest has been paid or duly provided for, payable semiannually on March 1 and September 1 in each year (each an Interest Payment Date ), beginning on March 1, The interest payable on each Bond on any Interest Payment Date will be paid to the person in whose name such Bond is registered (the Registered Owner ) as shown on the registration books (the Bond Register ) at the close of business on the 15 th day (whether or not a Business Day) of the calendar month next preceding such Interest Payment Date (the Record Date ) for such interest (1) by check or draft mailed by UMB Bank, N.A., Kansas City, Missouri (the Paying Agent ) to the address of such Registered Owner shown on the Bond Register or at such other address furnished to the Paying Agent in writing by such Registered Owner, or (2) in the case of an interest payment to any Registered Owner of $500,000 or more in aggregate principal amount of Bonds, by electronic transfer to such Registered Owner upon written notice signed by such Registered Owner and given to the Paying Agent not less than 15 days prior to the Record Date for such interest, containing the electronic transfer instructions including the name and address of the bank (which shall be in the continental United States), its ABA routing number and the account number to which such Registered Owner wishes to have such transfer directed. The principal or Redemption Price of each Bond will be paid at Maturity by check or draft to the Registered Owner at the Maturity thereof, upon presentation and surrender of such Bond at the principal payment office of the Paying Agent, or such other office designated by the Paying Agent

9 Redemption Provisions At the option of the District, the Bonds or portions thereof maturing on March 1, 2025 and thereafter may be called for redemption and payment prior to their Stated Maturity on March 1, 2024 and thereafter as a whole or in part at any time at the Redemption Price of 100% of the principal amount thereof plus accrued interest thereon to the Redemption Date. Selection of Bonds to be Redeemed The Paying Agent shall call Bonds for redemption and payment and shall give notice of such redemption as provided in the Resolution upon receipt by the Paying Agent at least 45 days prior to the Redemption Date of the District s written instructions specifying the principal amount, Stated Maturities, Redemption Date and Redemption Prices of the Bonds to be called for redemption. If the Bonds are to be refunded more than 90 days in advance of such Redemption Date, any escrow agreement entered into by the District in connection with such refunding shall provide that such written instructions to the Paying Agent shall be given by or on the District s behalf not less than 45 days prior to the Redemption Date. The Paying Agent may in its discretion waive such notice period so long as the notice requirements set forth in the Resolution are met. Bonds shall be redeemed only in the principal amount of $5,000 or any integral multiple thereof. When less than all of the Outstanding Bonds are to be redeemed, such Bonds shall be redeemed in such order of their Stated Maturities as shall be determined by the District, and Bonds of less than a full Stated Maturity and bearing interest at the same interest rate shall be selected by the Paying Agent in $5,000 units of principal amount by lot or in such other equitable manner as the Paying Agent may determine. In the case of a partial redemption of Bonds, when Bonds of denominations greater than $5,000 are then Outstanding, then for all purposes in connection with such redemption each $5,000 of face value shall be treated as though it were a separate Bond of the denomination of $5,000. If it is determined that one or more, but not all, of the $5,000 units of face value represented by any Bond are selected for redemption, then upon notice of intention to redeem such $5,000 unit or units, the Registered Owner of such Bond or the Registered Owner s duly authorized agent shall present and surrender such Bond to the Paying Agent (1) for payment of the Redemption Price and interest to the Redemption Date of such $5,000 unit or units of face value called for redemption, and (2) for exchange, without charge to the Registered Owner thereof, for a new Bond or Bonds of the aggregate principal amount of the unredeemed portion of the principal amount of such Bond. If the Registered Owner of any such Bond fails to present such Bond to the Paying Agent for payment and exchange as aforesaid, such Bond shall, nevertheless, become due and payable on the redemption date to the extent of the $5,000 unit or units of face value called for redemption (and to that extent only). Notice and Effect of Call for Redemption Unless waived by any Registered Owner of Bonds to be redeemed, official notice of any redemption shall be given by the Paying Agent on the District s behalf by mailing a copy of an official redemption notice by first class mail at least 30 days but not more than 60 days prior to the Redemption Date to the State Auditor of Missouri, Stifel, Nicolaus & Company, Incorporated, as representative of the Underwriters, and each Registered Owner of the Bond or Bonds to be redeemed at the address shown on the Bond Register. All official notices of redemption shall be dated and shall contain the following information: (1) the Redemption Date; (2) the Redemption Price; (3) if less than all Outstanding Bonds are to be redeemed, the identification number, Stated Maturity and, in the case of partial redemption of any Bonds, the respective principal amounts of the Bonds to be redeemed; (4) a statement that on the Redemption Date the Redemption Price will become due and payable upon each such Bond or portion thereof called for redemption and that interest thereon shall cease to accrue from and after the Redemption Date; and (5) the place where such Bonds are to be surrendered for payment of the Redemption Price, which shall be the principal payment office of the Paying Agent

10 Prior to any Redemption Date, the District shall deposit with the Paying Agent an amount of money sufficient to pay the Redemption Price of all the Bonds or portions of Bonds that are to be redeemed on such Redemption Date. Official notice of redemption having been given as aforesaid, the Bonds or portions of Bonds to be redeemed shall become due and payable on the Redemption Date, at the Redemption Price therein specified, and from and after the Redemption Date (unless the District defaults in the payment of the Redemption Price) such Bonds or portion of Bonds shall cease to bear interest. Upon surrender of such Bonds for redemption in accordance with such notice, the Redemption Price of such Bonds shall be paid by the Paying Agent. Installments of interest due on or prior to the Redemption Date shall be payable as herein provided for payment of interest. Upon surrender for any partial redemption of any Bond, the Paying Agent shall prepare for the Registered Owner a new Bond or Bonds of the same Stated Maturity in the amount of the unpaid principal as provided in the Resolution. All Bonds that have been surrendered for redemption shall be canceled and destroyed by the Paying Agent as provided in the Resolution and shall not be reissued. The failure of any Registered Owner to receive the foregoing notice or any defect therein shall not invalidate the effectiveness of the call for redemption. Book-Entry Only System General. The Bonds are available in book-entry only form. Purchasers of the Bonds will not receive certificates representing their interests in the Bonds. Ownership interests in the Bonds will be available to purchasers only through a book-entry system (the Book-Entry System ) maintained by The Depository Trust Company ( DTC ), New York, New York. The following information concerning DTC and DTC s book-entry system has been obtained from DTC. The District takes no responsibility for the accuracy or completeness thereof and neither the Indirect Participants nor the Beneficial Owners should rely on the following information with respect to such matters, but should instead confirm the same with DTC or the Direct Participants, as the case may be. There can be no assurance that DTC will abide by its procedures or that such procedures will not be changed from time to time. DTC will act as securities depository for the Bonds. The Bonds will be issued as fully-registered securities registered in the name of Cede & Co. (DTC s partnership nominee) or such other name as may be requested by an authorized representative of DTC. One fully-registered Bond certificate will be issued for each maturity of the Bonds, each in the aggregate principal amount of such maturity and will be deposited with DTC. DTC and its Participants. DTC, the world s largest securities depository, is a limited-purpose trust company organized under the New York Banking Law, a banking organization within the meaning of the New York Banking Law, a member of the Federal Reserve System, a clearing corporation within the meaning of the New York Uniform Commercial Code, and a clearing agency registered pursuant to the provisions of Section 17A of the Securities Exchange Act of DTC holds and provides asset servicing for over 3.5 million issues of U.S. and non-u.s. equity issues, corporate and municipal debt issues, and money market instruments (from over 100 countries) that DTC s participants ( Direct Participants ) deposit with DTC. DTC also facilitates the post-trade settlement among Direct Participants of sales and other securities transactions in deposited securities, through electronic computerized book-entry transfers and pledges between Direct Participants accounts. This eliminates the need for physical movement of securities certificates. Direct Participants include both U.S. and non-u.s. securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations. DTC is a wholly-owned subsidiary of The Depository Trust & Clearing Corporation ( DTCC ). DTCC is the holding company for DTC, National Securities Clearing Corporation and Fixed Income Clearing Corporation, all of which are registered clearing agencies. DTCC is - 4 -

11 owned by the users of its regulated subsidiaries. Access to the DTC system is also available to others such as both U.S. and non-u.s. securities brokers and dealers, banks, trust companies, and clearing corporations that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly ( Indirect Participants ). DTC has a Standard & Poor s rating of AA+. The DTC Rules applicable to its Participants are on file with the Securities and Exchange Commission. More information about DTC can be found at Purchases of Ownership Interests. Purchases of Bonds under the DTC system must be made by or through Direct Participants, which will receive a credit for the Bonds on DTC s records. The ownership interest of each actual purchaser of each Bond ( Beneficial Owner ) is in turn to be recorded on the Direct and Indirect Participants records. Beneficial Owners will not receive written confirmation from DTC of their purchase. Beneficial Owners are, however, expected to receive written confirmations providing details of the transaction, as well as periodic statements of their holdings, from the Direct or Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers of ownership interests in the Bonds are to be accomplished by entries made on the books of Direct and Indirect Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interests in the Bonds, except in the event that use of the book-entry system for the Bonds is discontinued. Transfers. To facilitate subsequent transfers, all Bonds deposited by Direct Participants with DTC are registered in the name of DTC s partnership nominee, Cede & Co., or such other name as may be requested by an authorized representative of DTC. The deposit of Bonds with DTC and their registration in the name of Cede & Co. or such other DTC nominee do not effect any change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the Bonds; DTC s records reflect only the identity of the Direct Participants to whose accounts such Bonds are credited, which may or may not be the Beneficial Owners. The Direct and Indirect Participants will remain responsible for keeping account of their holdings on behalf of their customers. Notices. Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. Beneficial Owners of Bonds may wish to take certain steps to augment the transmission to them of notices of significant events with respect to the Bonds, such as redemptions, tenders, defaults, and proposed amendments to the Bond documents. For example, Beneficial Owners of Bonds may wish to ascertain that the nominee holding the Bonds for their benefit has agreed to obtain and transmit notices to Beneficial Owners. In the alternative, Beneficial Owners may wish to provide their names and addresses to the registrar and request that copies of notices be provided directly to them. Redemption notices will be sent to DTC. If less than all of the Bonds within a maturity are being redeemed, DTC s practice is to determine by lot the amount of the interest of each Direct Participant in such maturity to be redeemed. Voting. Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to Bonds unless authorized by a Direct Participant in accordance with DTC s MMI Procedures. Under its usual procedures, DTC mails an Omnibus Proxy to the District as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co. s consenting or voting rights to those Direct Participants to whose accounts Bonds are credited on the record date (identified in a listing attached to the Omnibus Proxy). Payments of Principal, Redemption Price and Interest. Payment of principal or Redemption Price of and interest on the Bonds will be made to Cede & Co., or such other nominee as may be requested by an authorized representative of DTC. DTC s practice is to credit Direct Participants accounts upon DTC s receipt of funds and corresponding detail information from the District or the Paying Agent, on the payment date in accordance with their respective holdings shown on DTC s records. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with - 5 -

12 securities held for the accounts of customers in bearer form or registered in street name, and will be the responsibility of such Participant and not of DTC, the Paying Agent or District, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of principal of and interest on the Bonds to Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) is the responsibility of the District or Paying Agent, disbursement of such payments to Direct Participants will be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners will be the responsibility of Direct and Indirect Participants. Discontinuation of Book-Entry System. DTC may discontinue providing its services as depository with respect to the Bonds at any time by giving reasonable notice to the District or the Paying Agent. Under such circumstances, in the event that a successor depository is not obtained, Bond certificates are required to be printed and delivered. The District may decide to discontinue use of the system of book-entry-only transfers through DTC (or a successor securities depository). In that event, Bond certificates will be printed and delivered to DTC. The information in this section concerning DTC and DTC s book-entry system has been obtained from sources that the District believes to be reliable, but the District takes no responsibility for the accuracy thereof. Registration, Transfer and Exchange of Bonds The District covenants that, as long as any Bonds remain Outstanding, it will cause the Bond Register to be kept at the principal payment office of the Paying Agent or such other office designated by the Paying Agent for the registration, transfer and exchange of the Bonds. Upon surrender of any Bond at the principal payment office of the Paying Agent or at such other office designated by the Paying Agent, the Paying Agent shall transfer or exchange such Bond as provided in the Resolution. The Paying Agent shall transfer or exchange such Bond for a new Bond or Bonds in any authorized denomination of the same Stated Maturity and in the same aggregate or principal amount as the Bond that was presented for transfer or exchange. Bonds presented for transfer or exchange shall be accompanied by a written instrument or instruments of transfer or authorization for exchange, in a form and with guarantee of signature satisfactory to the Paying Agent, duly executed by the Registered Owner thereof or by the Registered Owner s duly authorized agent. Any additional costs or fees that might be incurred in the secondary market, other than fees of the Paying Agent, are the responsibility of the Registered Owners of the Bonds. If any Registered Owner fails to provide a correct taxpayer identification number to the Paying Agent, the Paying Agent may make a charge against such Registered Owner sufficient to pay any governmental charge required to be paid as a result of such failure. The District and the Paying Agent shall not be required (1) to register the transfer or exchange of any Bond that has been called for redemption after notice of such redemption has been mailed by the Paying Agent in accordance with the Resolution and during the period of 15 days next preceding the date of mailing of such notice of redemption, or (2) to register the transfer or exchange of any Bond during a period beginning at the opening of business on the day after receiving written notice from the District of its intent to pay Defaulted Interest and ending at the close of business on the date fixed for the payment of Defaulted Interest pursuant to the Resolution. General SECURITY FOR THE BONDS Pledge of Full Faith and Credit. The Bonds will be general obligations of the District payable as to both principal or Redemption Price of and interest on the Bonds from ad valorem taxes which may be levied without limitation as to rate or amount upon all the taxable tangible property, real and personal, within the territorial limits of the District

13 Levy and Collection of Annual Tax. Under the Resolution, there is levied upon all of the taxable tangible property within the District a direct annual tax sufficient to produce the amounts necessary for the payment of the principal or Redemption Price of and interest on the Bonds as the same becomes due and payable in each year. Such taxes shall be extended upon the tax rolls in each year of the several years, respectively, and shall be levied and collected at the same time and in the same manner as the District s other ad valorem taxes are levied and collected. Except as otherwise provided in the subsection herein captioned Direct Deposit of State Aid Payments, the proceeds derived from said taxes with respect to the Bonds shall be deposited in the Debt Service Fund, shall be kept separate and apart from all other funds of the District and shall be used solely for the payment of the principal or Redemption Price of and interest on the Bonds as and when the same become due, taking into account scheduled mandatory redemptions, if any, and the fees and expenses of the Paying Agent. Direct Deposit of State Aid Payments Pursuant to Section et seq. of the Revised Statutes of Missouri and related statutes (the Deposit Law ), the State of Missouri (the State ) and the District may agree to transfer to a State bank, as direct deposit trustee (the Deposit Trustee ), a portion of the District s State Aid payments and distributions normally used for operational purposes ( State Aid ) in order to provide for payment of debt service on the Bonds. On the date of issuance of the Bonds, the District will enter into a Direct Deposit Agreement (the Deposit Agreement ) with the Office of the Treasurer of the State of Missouri ( Treasurer s Office ), the Department of Elementary and Secondary Education of the State of Missouri ( DESE ), the Health and Educational Facilities Authority of the State of Missouri and the Deposit Trustee. Under the Deposit Agreement, the District will pledge its State Aid to the payment of the Bonds. The District will direct the Direct Deposit Trustee to pay the debt service due on the Bonds on March 1, 2015 from funds currently on deposit for the hereinafter defined Series 2007A Refunded Bonds. The Deposit Agreement will provide for the payment of one-tenth (1/10) of the aggregate amount of debt service on the Bonds to be paid on September 1, 2015 and March 1, 2016 in each of the ten (10) months of March 2015 through December 2015 and one-tenth (1/10) of the annual debt service in each succeeding ten (10) similar months (i.e., March through December) for each bond year after the Bonds are issued as long as the Bonds are outstanding. Amounts of State Aid to the District in excess of the one-tenth (1/10) monthly deposit will not be deposited with the Deposit Trustee but will be transferred directly to the District as has historically been the case with all State Aid. Each month, pursuant to the terms of the Deposit Agreement, DESE will advise the Treasurer s Office of the amount of the District s State Aid to be deposited with the Deposit Trustee for the purpose of paying the Bonds, as specified in the Deposit Agreement. Following receipt of the deposits, the Deposit Trustee will invest the amounts for the benefit of the District. The Deposit Trustee will transfer to the Paying Agent the amount necessary for payment of debt service on the Bonds not later than the day prior to each payment date with respect to the Bonds. The District remains obligated to provide funds to the Paying Agent for debt service on the Bonds if the amounts of State Aid transferred are not sufficient to pay the Bonds when due. Nothing in the Deposit Law or the Deposit Agreement relieves the District of its obligation to make payments of principal or Redemption Price of and interest on the Bonds, or to impose any debt service levy sufficient to retire the Bonds. Moneys of the District which would otherwise be used to pay the Bonds on each payment date may be transferred to the District s operational funds to replace State Aid funds used to pay the Bonds. The State has not committed pursuant to the Deposit Law, the Deposit Agreement or otherwise to maintain any particular level of State Aid on behalf of the District, and the State is not obligated in any manner, contractually or morally, to make payments of debt service on the Bonds, other than its obligation to make transfers to the Deposit Trustee as described above. No assurance can be made that the amount of annual State Aid to the District will not in the future drop below that of the annual debt service requirements on the Bonds

14 Risk of Taxability of Interest on the Bonds BONDOWNERS RISKS For information with respect to events that may cause interest on the Bonds to be included in gross income for purposes of federal income taxation or not be exempt from income taxation by the State, see TAX MATTERS herein. Furthermore, the Resolution does not require the District to redeem the Bonds or to pay any additional interest or penalty in the event that interest on the Bonds becomes taxable. Risk of Audit of the Bonds The Internal Revenue Service (the Service ) has established an ongoing program to audit tax-exempt obligations like the Bonds to determine whether or not interest on such obligations should be excluded from gross income for federal income tax purposes. No assurance can be given that the Service will not commence an audit of the Bonds resulting in a negative determination with respect to the Bonds causing the loss to the owners thereof of the tax exemption of the interest on the Bonds for federal and State income tax purposes. Owners of the Bonds are advised that, if an audit of the Bonds were commenced, the Service, in accordance with its current published procedures, will treat the District as the taxpayer, and the owners of the Bonds may not have a right to participate in such audit. Public awareness of any audit could adversely affect the market value and liquidity of the Bonds during the pendency of the audit, regardless of the ultimate outcome of the audit. General PLAN OF FINANCING The Bonds are being issued for the purpose of providing funds to (1) refund the Refunded Bonds, as defined and further discussed below, and (2) pay the costs of issuance of the Bonds. Refunding of the Refunded Bonds The District will use a portion of the proceeds of the Bonds for the purpose of providing funds to (1) current refund a portion of the District s outstanding General Obligation Bonds (Missouri Direct Deposit Program), Series 2005A (the Series 2005A Bonds ), being those Series 2005A Bonds maturing on March 1 in the years 2016 and 2024 (the Series 2005A Refunded Bonds ), outstanding in the aggregate principal amount of $3,815,000, and (2) advance refund a portion of the District s outstanding General Obligation Refunding and Improvement Bonds (Missouri Direct Deposit Program), Series 2007A (the Series 2007A Bonds ), being a portion of those Series 2007A Bonds maturing on March 1 in the years 2018 through 2026, (the Series 2007A Refunded Bonds and together with the Series 2005A Refunded Bonds, the Refunded Bonds ), outstanding in the aggregate principal amount of $40,055,000. In order to do so, the District will enter into an Escrow Trust Agreement dated as of December 1, 2014 (the Escrow Agreement ) with UMB Bank, N.A., Kansas City, Missouri, as escrow agent (the Escrow Agent ). Pursuant to the Escrow Agreement, the District will deposit with the Escrow Agent a portion of the proceeds of the Bonds as indicated below under the caption Sources and Uses of Funds. Pursuant to the Escrow Agreement, the Escrow Agent will apply the moneys so deposited to purchase direct non-callable obligations of the United States of America (the Escrowed Securities ) maturing in such amounts and at such times as shall be sufficient, together with the interest to accrue thereon, to redeem and pay the Series 2005A Refunded Bonds on March 1, 2015 and the Series 2007A Refunded Bonds on March 1, 2017, each at a redemption price of 100% of the principal amount thereof, plus accrued interest thereon to the respective date of redemption. After the issuance of the Bonds and the deposit of the proceeds thereof with the Escrow Agent pursuant to the Escrow Agreement, the Refunded Bonds will be payable from the maturing principal of the Escrowed Securities, together with earnings thereon and other money held for such purpose by the Escrow - 8 -

15 Agent. The Escrow Agreement provides that the Escrowed Securities and the moneys held uninvested by the Escrow Agent in an escrow fund established under the Escrow Agreement (the Escrow Fund ) are irrevocably pledged to the payment of the Refunded Bonds and the interest thereon and may be applied only to such payment. Sources and Uses of Funds The anticipated sources and uses of the proceeds of the Bonds are as follows: Sources of Funds Par Amount of Bonds $41,740, Plus: Original issue premium 6,699, Total $48,439, Uses of Funds Deposit to the Escrow Fund $48,178, Costs of issuance (including Underwriters Discount) 260, Total $48,439, THE DISTRICT The District is located in the northern portion of St. Louis County, Missouri, covers an area of approximately 78 square miles and includes all or part of the communities of Florissant, Hazelwood, Bridgeton, Black Jack and Ferguson, plus parts of unincorporated St. Louis County. See APPENDIX A: INFORMATION REGARDING THE DISTRICT for further information regarding the District. LEGAL MATTERS All legal matters incident to the authorization and issuance of the Bonds are subject to the approving legal opinions of Gilmore & Bell, P.C., St. Louis, Missouri and White Coleman & Associates, LLC, St. Louis, Missouri, Co-Bond Counsel. Co-Bond Counsel has participated in the preparation of this Official Statement; however, Co-Bond Counsel expresses no opinion as to the accuracy or sufficiency thereof except for the matters appearing in the sections of this Official Statement captioned THE BONDS (other than the information appearing in the subsection captioned Book-Entry Only System ), SECURITY FOR THE BONDS, LEGAL MATTERS, TAX MATTERS and APPENDIX C: FORM OF OPINION OF CO-BOND COUNSEL. Certain legal matters related to this Official Statement will be passed upon by Thompson Coburn LLP, St. Louis, Missouri and Richard G. Hughes & Associates, LLC, St. Louis, Missouri, Co-Underwriters Counsel. The legal opinions to be delivered concurrently with the delivery of the Bonds express the professional judgment of the attorneys rendering the opinions as to the legal issues explicitly addressed therein. By rendering a legal opinion, the opinion giver does not become an insurer or guarantor of that expression of professional judgment, of the transactions opined upon or of the future performance of parties to such transaction, and the rendering of an opinion does not guarantee the outcome of any legal dispute that may arise out of the transaction. BOND RATINGS Standard & Poor s Ratings Services, a division of McGraw-Hill Financial, Inc. (the Rating Agency ) has assigned a municipal bond rating of AA+ to the Bonds based on the Missouri Direct Deposit - 9 -

16 Program which is conditioned upon the execution and delivery of the Deposit Agreement as described under the section herein captioned SECURITY FOR THE BONDS Direct Deposit of State Aid Payments. The Rating Agency has assigned an underlying rating to the Bonds of AA- without taking into account the benefits of the Missouri Direct Deposit Program. Such underlying rating on the Bonds is based upon the credit of the District and is not based on the District s execution of the Deposit Agreement. The ratings reflect only the view of the Rating Agency at the time such ratings are given, and the Underwriters and the District make no representation as to the appropriateness of such ratings. An explanation of the significance of such ratings may be obtained only from the Rating Agency. The District has furnished the Rating Agency with certain information and materials relating to the Bonds and the District that have not been included in this Official Statement. Generally, rating agencies base their ratings on the information and materials so furnished and on investigations, studies and assumptions made by the rating agencies. The above ratings are not a recommendation to buy, sell or hold the Bonds. There is no assurance that a particular rating will be maintained for any given period of time or that it will not be lowered or withdrawn entirely if, in the judgment of the rating agency originally establishing such rating, circumstances so warrant. Except as described under the section herein captioned CONTINUING DISCLOSURE UNDERTAKING, neither the Underwriters nor the District have undertaken any responsibility to bring to the attention of the holders of the Bonds any proposed revision or withdrawal of the ratings of the Bonds or to oppose any such proposed revision or withdrawal. Any such revision or withdrawal of the ratings could have an adverse effect on the market price and marketability of the Bonds. VERIFICATION OF MATHEMATICAL COMPUTATIONS Robert Thomas CPA, LLC, Shawnee Mission, Kansas, certified public accountants, will deliver to the District a report indicating that such firm has examined, in accordance with standards established by the American Institute of Certified Public Accountants, the information and assertions provided by the Underwriters and the District and its representatives. Included in the scope of their examination will be a verification of the mathematical accuracy of the mathematical computations of the adequacy of the initial cash deposit together with the maturing principal of and interest on the Escrowed Securities in the Escrow Fund to pay, when due, the maturing principal of and interest on the Refunded Bonds as the same becomes due and payable prior to and on the redemption dates for the Refunded Bonds (as described herein under the captions PLAN OF FINANCING Refunding of the Refunded Bonds ). TAX MATTERS The following is a summary of the material federal and State income tax consequences of holding and disposing of the Bonds. This summary is based upon laws, regulations, rulings and judicial decisions now in effect, all of which are subject to change (possibly on a retroactive basis). This summary does not discuss all aspects of federal income taxation that may be relevant to investors in light of their personal investment circumstances or describe the tax consequences to certain types of owners subject to special treatment under the federal income tax laws (for example, dealers in securities or other persons who do not hold the Bonds as a capital asset, tax-exempt organizations, individual retirement accounts and other tax deferred accounts, and foreign taxpayers), and, except for the income tax laws of the State, does not discuss the consequences to an owner under any state, local or foreign tax laws. The summary does not deal with the tax treatment of persons who purchase the Bonds in the secondary market. Prospective investors are advised to consult their own tax advisors regarding federal, state, local and other tax considerations of holding and disposing of the Bonds. Opinion of Co-Bond Counsel In the opinion of Gilmore & Bell, P.C., St. Louis, Missouri, and White Coleman & Associates, LLC, St. Louis, Missouri, Co-Bond Counsel, under the law existing as of the issue date of the Bonds:

17 Federal and Missouri Tax Exemption. The interest on the Bonds is excludable from gross income for federal income tax purposes and is exempt from income taxation by the State. Alternative Minimum Tax. Interest on the Bonds is not an item of tax preference for purposes of computing the federal alternative minimum tax imposed on individuals and corporations, but is taken into account in determining adjusted current earnings for the purpose of computing the alternative minimum tax imposed on certain corporations. Bank Qualification. The Bonds have not been designated as qualified tax-exempt obligations for purposes of Section 265(b) of the Internal Revenue Code of 1986, as amended (the Code ). Co-Bond Counsel s opinions are provided as of the date of the original issue of the Bonds, subject to the condition that the District comply with all requirements of the Code that must be satisfied subsequent to the issuance of the Bonds in order that interest thereon be, or continue to be, excludable from gross income for federal income tax purposes. The District has covenanted to comply with all such requirements. Failure to comply with certain of such requirements may cause the inclusion of interest on the Bonds in gross income for federal and State income tax purposes retroactive to the date of issuance of the Bonds. Co-Bond Counsel is expressing no opinion regarding other federal, state or local tax consequences arising with respect to the Bonds but has reviewed the discussion under the heading TAX MATTERS. Other Tax Consequences Original Issue Premium. If a Bond is issued at a price that exceeds the stated redemption price at maturity of the Bond, the excess of the purchase price over the stated redemption price at maturity constitutes premium on that Bond. Under Section 171 of the Code, the purchaser of that Bond must amortize the premium over the term of the Bond using constant yield principles, based on the purchaser s yield to maturity. As premium is amortized, the owner s basis in the Bond and the amount of tax-exempt interest received will be reduced by the amount of amortizable premium properly allocable to the owner. This will result in an increase in the gain (or decrease in the loss) to be recognized for federal income tax purposes on sale or disposition of the Bond prior to its maturity. Even though the owner s basis is reduced, no federal income tax deduction is allowed. Prospective investors should consult their own tax advisors concerning the calculation and accrual of bond premium. Sale, Exchange or Retirement of Bonds. Upon the sale, exchange or retirement (including redemption) of a Bond, an owner of the Bond generally will recognize gain or loss in an amount equal to the difference between the amount of cash and the fair market value of any property received on the sale, exchange or retirement of the Bond (other than in respect of accrued and unpaid interest) and such owner s adjusted tax basis in the Bond. To the extent a Bond is held as a capital asset, such gain or loss will be capital gain or loss and will be long-term capital gain or loss if the Bond has been held for more than 12 months at the time of sale, exchange or retirement. Reporting Requirements. In general, information reporting requirements will apply to certain payments of principal, interest and premium paid on the Bonds, and to the proceeds paid on the sale of the Bonds, other than certain exempt recipients (such as corporations and foreign entities). A backup withholding tax will apply to such payments if the owner fails to provide a taxpayer identification number or certification of foreign or other exempt status or fails to report in full dividend and interest income. The amount of any backup withholding from a payment to an owner will be allowed as a credit against the owner s federal income tax liability. Collateral Federal Income Tax Consequences. Prospective purchasers of the Bonds should be aware that ownership of the Bonds may result in collateral federal income tax consequences to certain taxpayers, including, without limitation, financial institutions, property and casualty insurance companies, individual recipients of Social Security or Railroad Retirement benefits, certain S corporations with excess net passive

18 income, foreign corporations subject to the branch profits tax, life insurance companies, and taxpayers who may be deemed to have incurred or continued indebtedness to purchase or carry or have paid or incurred certain expenses allocable to the Bonds. Co-Bond Counsel expresses no opinion regarding these tax consequences. Purchasers of Bonds should consult their tax advisors as to the applicability of these tax consequences and other federal income tax consequences of the purchase, ownership and disposition of the Bonds, including the possible application of state, local, foreign and other tax laws. CONTINUING DISCLOSURE UNDERTAKING The District will covenant in the Continuing Disclosure Agreement to provide certain financial information and operating data relating to the District (updated within not later than 180 days following the end of its fiscal year, which currently ends on June 30) (the Annual Report ) commencing with the Annual Report for the fiscal year ending June 30, 2015, and to provide notices of the occurrence of certain enumerated events. The Annual Report shall be filed by or on behalf of the District with the Municipal Securities Rulemaking Board (the MSRB ) via the Electronic Municipal Market Access system ( EMMA ). The Annual Report shall include: (1) The audited financial statements of the District for the prior fiscal year, prepared in accordance with accounting principles generally accepted in the United States. (2) Updates as of the end of the fiscal year of financial information and operating data contained in APPENDIX A of this Official Statement relating to the Bonds in the tables located under the sections captioned: THE DISTRICT Enrollment, FINANCIAL INFORMATION CONCERNING THE DISTRICT Summary of Revenues and Expenditures, PROPERTY TAX INFORMATION Historic Assessed Valuation, Tax Rates and Tax Collection Rates, and DEBT STRUCTURE OF THE DISTRICT General Obligation Bonds Outstanding and General Obligation Debt Service Requirements. No later than 10 Business Days after the occurrence of any of the following events, the District shall give, or cause to be given to the MSRB, through EMMA, notice of the occurrence of any of the following events with respect to the Bonds ( Material Events ): (1) principal and interest payment delinquencies; (2) non-payment related defaults, if material; (3) unscheduled draws on debt service reserves reflecting financial difficulties; (4) unscheduled draws on credit enhancements reflecting financial difficulties; (5) substitution of credit or liquidity providers, or their failure to perform; (6) adverse tax opinions; the issuance by the Service of proposed or final determinations of taxability, Notices of Proposed Issue (IRS Form 5701-TEB) or other material notices or determinations with respect to the tax status of the Bonds, or other material events affecting the tax status of the Bonds; (7) modifications to rights of bondholders, if material; (8) bond calls, if material, and tender offers; (9) defeasances; (10) release, substitution or sale of property securing repayment of the Bonds, if material; (11) rating changes; (12) bankruptcy, insolvency, receivership or similar event of the District; (13) the consummation of a merger, consolidation, or acquisition involving the District or the sale of all or substantially all of the assets of the District, other than in the ordinary course of business, the entry into a definitive agreement to undertake such an action or the termination of a definitive agreement relating to any such actions, other than pursuant to its terms, if material; and

19 (14) appointment of a successor or additional trustee or the change of name of the trustee, if material. Nothing in the Continuing Disclosure Agreement shall be deemed to prevent the District from disseminating any other information, using the means of dissemination set forth in the Continuing Disclosure Agreement or any other means of communication, or including any other information in any Annual Report or notice of occurrence of a Material Event, in addition to that which is required by the Continuing Disclosure Agreement. If the District chooses to include any information in any Annual Report or notice of occurrence of a Material Event in addition to that which is specifically required by the Continuing Disclosure Agreement, the District shall have no obligation under the Continuing Disclosure Agreement to update such information or include it in any future Annual Report or notice of occurrence of a Material Event. These covenants have been made in order to assist the Underwriters in complying with Rule 15c2-12 promulgated by the Securities and Exchange Commission (the Rule ). The District has made similar continuing disclosure undertakings with respect to its outstanding general obligation bonds and certificates of participation to file an Annual Report for each fiscal year of the District. The District covenanted to include in its Annual Report the District s audited financial statements for the previous year in addition to updated information relating to the District and its operations. A review of the District s continuing disclosure obligations for the past five years was conducted in connection with the issuance of the Bonds. Based on such review, the District believes it has complied in all material respects with its continuing disclosure obligations with regard to outstanding indebtedness for which the District is responsible pursuant to a continuing disclosure agreement. However, items identified in the recent review include incomplete cross references by CUSIP numbers to annual financial statements and operating data and not reporting certain rating changes. The District has subsequently linked its annual financial statements and operating data on the MSRB s EMMA website to prior bond issues subject to continuing disclosure undertakings. Furthermore, on occasion the District may not have filed timely notice with respect to changes in ratings reflecting the credit quality of its bond insurers. The District believes, however, that notice of such changes was widely disseminated in both the popular and financial media. The District has adopted written policies and procedures to promote future compliance with its undertakings to disclose annual financial statements and operating data under the Rule. ABSENCE OF LITIGATION As of the date hereof, there is no controversy, suit or other proceeding of any kind pending or to the District s knowledge, threatened in any court (either State or federal) restraining or enjoining the issuance or delivery of the Bonds or which might affect the District s ability to meet its obligations to pay the Bonds, or questioning, disputing or affecting in any way (1) the proceedings under which the Bonds are to be issued, (2) the constitutionality or validity of the Bonds, (3) the levy and collection of a tax to pay the principal and interest on the Bonds or the pledge by the District of the moneys under the Resolution of the District authorizing the issuance of the Bonds, or (4) the legal existence of the District or its boundaries, or the title to office of the present officials of the District. UNDERWRITING Stifel, Nicolaus & Company, Incorporated, Backstrom McCarley Berry & Co., LLC and Stern Brothers & Co. (collectively, the Underwriters ) have agreed to purchase the Bonds from the District at a price equal to $48,272, (which is equal to the aggregate principal amount of the Bonds, plus original issue premium of $6,699,209.10, less an underwriting discount of $166,960.00). The Underwriters are purchasing the Bonds for resale in the normal course of the Underwriters business activities. The Underwriters reserve the right to offer any of the Bonds to one or more purchasers on such terms and conditions and at such price or prices as the Underwriters, in their discretion, shall determine

20 CERTAIN RELATIONSHIPS Gilmore & Bell, P.C. has represented certain of the Underwriters and the Paying Agent in transactions unrelated to the issuance of the Bonds, but is not representing them in connection with the issuance of the Bonds. White Coleman & Associates, LLC has represented certain of the Underwriters in transactions unrelated to the issuance of the Bonds, but is not representing them in connection with the issuance of the Bonds. MISCELLANEOUS The references, excerpts and summaries of all documents referred to herein do not purport to be complete statements of the provisions of such documents, and reference is made to all such documents for full and complete statements of all matters of fact relating to the Bonds, the security for the payment of the Bonds and the rights of the Owners thereof. During the period of the offering, copies of drafts of such documents may be examined at the offices of the Underwriters; following delivery of the Bonds, copies of such documents may be examined at the principal corporate trust office of the Paying Agent. The information contained in this Official Statement has been compiled from official and other sources deemed to be reliable, and while not guaranteed as to completeness or accuracy, is believed to be correct as of this date. Any statement made in this Official Statement involving matters of opinion or of estimates, whether or not expressly so stated, are set forth as such and not as representations of fact, and no representation is made that any of the estimates will be realized. The information and expressions of opinion herein are subject to change without notice and neither the delivery of this Official Statement nor any sale made hereunder shall, under any circumstances, create any implication that there has been no change in the information presented herein since the date hereof. This Official Statement is not to be construed as a contract or agreement between the District, the Paying Agent, or the Underwriters and the purchasers or Owners of any Bonds. [Remainder of page intentionally left blank]

21 The District has duly authorized the execution and delivery of this Official Statement. HAZELWOOD SCHOOL DISTRICT, ST. LOUIS COUNTY, MISSOURI By: /s/ Desiree D. Whitlock President of the Board of Education

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23 APPENDIX A INFORMATION REGARDING THE DISTRICT

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25 TABLE OF CONTENTS THE DISTRICT...A-1 General...A-1 Board of Education...A-1 Administration...A-1 Professional Staff...A-1 Enrollment...A-2 Student Transfers from Unaccredited School Districts...A-2 School Rating and Accreditation...A-3 School Facilities...A-3 Educational Programs and Services...A-4 FINANCIAL INFORMATION CONCERNING THE DISTRICT...A-5 Sources of Revenue...A-5 Local Revenue...A-5 State Revenue...A-6 Federal Revenue...A-9 Tax Limitation Provisions...A-9 Accounting, Budgeting and Auditing Procedures...A-10 Summary of Revenues and Expenditures...A-12 PROPERTY TAX INFORMATION...A-14 Historic Assessed Valuation...A-14 Assessed Valuation Components...A-14 Tax Assessments and Collections...A-14 Tax Rates...A-15 Tax Collection Rates...A-16 Major Taxpayers...A-17 Tax Abatement and Tax Increment Financing...A-17 District s Rights in the Event of Tax Delinquencies...A-18 DEBT STRUCTURE OF THE DISTRICT...A-18 General Obligation Bonds Outstanding...A-18 History of General Obligation Indebtedness...A-19 General Obligation Debt Service Requirements...A-20 Lease Obligations...A-20 Overlapping Bonded Indebtedness...A-22 Debt Ratios and Related Information...A-23 Short-Term Borrowings...A-23 Debt Limitation and Debt Capacity...A-23 Future Plans...A-23 Revenue Obligations...A-23 Employee Relations...A-24 Retirement Plan...A-24 Page (i)

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27 THE DISTRICT General The District is located in the northern portion of St. Louis County, Missouri and is one of the largest suburban districts in the State of Missouri (the State ). The District encompasses approximately 78 square miles and includes all or part of the communities of Florissant, Hazelwood, Bridgeton, Black Jack and Ferguson plus parts of unincorporated St. Louis County. The present population of the communities served by the District is approximately 118,853. The student/teacher ratio was approximately 18:1 for the past academic year. The cost of instruction in the District was approximately $10,593 per pupil for the fiscal year ended June 30, Board of Education The District is governed by a seven-member Board of Education (the Board ), whose members are selected by voters within the District for staggered three-year terms. The Board is a policy-making body whose primary function is to establish policies for the District, to provide for the general operation and personnel of the District, and to oversee the property and affairs of the District. The Board elects a President and a Vice President from its members for one-year terms. The present officers and members are as follows: Title Name Year First Elected Current Term Expires (April) President and Director Desiree D. Whitlock Vice President and Director Brenda C. Youngblood, Ph.D Secretary and Director Karlton Thornton Treasurer and Director Mark J. Behlmann Director Ann Gibbons Director Cheryl D. Latham Director Charles Woods Administration The District s general administrative team is headed by the Superintendent of Schools who reports directly to the Board and serves as the chief executive officer of the District. The Superintendent s central administrative staff is comprised of an Assistant Superintendent for Curriculum and Instruction, an Assistant Superintendent for Student Services, an Associate Superintendent for Human Resources, two Assistant Superintendents for Instruction, an Assistant Superintendent for Facilities and Finance, and an Assistant Superintendent for Accountability, Assessment, Professional Development and Technology. Professional Staff The District employs 97 administrators, 1,327 teacher-level staff and 934 support personnel. Below is some information regarding the District s professional staff. Approximately 50% of the District s teachers hold master s degrees or higher Many are accomplished experts in fields such as writing, history, music, art, science, athletics, and many more. They are highly sought-after speakers for local, state and nationwide A-1

28 conventions, and frequently are invited to write articles for assorted professional publications. Top-Quality Professional Staff Hired The District maintains its present staff s high standards for quality by hiring the best candidates available for new openings. The District s interviewing and selection procedures for professional staff are extensive and sophisticated. Staff Development Program The District conducts an on-going staff development program to help keep up to date on the latest in educational research and theory. Days during the school year are set aside specifically for this purpose, as are several days during the summer. The District also sends teachers to many workshops conducted outside the District. Selected as a finalist for a national award, the District s program is viewed as a model for other districts throughout the State and the nation. The following table sets forth the number of staff employed by the District for the preceding five school years: School Year Certificated Personnel Non-Certificated Personnel Total Staff , , , , , , , , , ,472 Source: District. Enrollment Listed below are the District s enrollment figures for the current school year and the preceding four school years: Year Elementary Grades K-5 Middle Grades 6-8 High School Grades 9-12 Total % Increase (Decrease) ,086 4,183 5,621 17,890 (0.37)% ,127 4,303 5,527 17, ,917 4,292 5,722 17, ,718 4,358 5,790 17,866 (0.36) ,739 4,274 5,918 17,931 (2.79) Source: District. Student Transfers from Unaccredited School Districts On June 11, 2013, the Missouri Supreme Court issued its opinion in Breitenfeld v. Sch. Dist. of Clayton, No. SC92653, 2013 WL (Mo. June 11, 2013) (en banc), upholding Section et seq. of the Revised Statutes of Missouri, as amended, which provides that the board of education of each district in this state that does not maintain an accredited school... shall pay the tuition of and provide transportation... for each pupil resident therein who attends an accredited school in another district of the same or an adjoining county. During the school year, the Normandy School District and the School District of Riverview Gardens, both unaccredited school districts located in St. Louis County, A-2

29 Missouri, designated certain accredited school districts to which they would pay tuition and transportation costs for students in the event such students desired to transfer to accredited school districts pursuant to state law. For the school year, approximately 261 students elected to transfer to the District from the unaccredited school districts, though some of the transferring students withdrew prior to the end of the school year and did not attend the entire year. The District indicates that tuition and other payments related to such transfers were paid timely by the unaccredited school districts and that the transfer of such students did not impact the District s budget or operations. The State recently lapsed the unaccredited Normandy School District and reorganized it as a new school district named the Normandy Schools Collaborative. The District has continued to accept transfer students from the unaccredited School District of Riverview Gardens and the Normandy Schools Collaborative for the school year. School Rating and Accreditation State law requires the Department of Elementary and Secondary Education ( DESE ) to regularly evaluate each public school district. The process of accrediting school districts is mandated by State law, and the specific responsibilities are outlined both by rules of the State Board of Education and in Section of the Revised Statutes of Missouri, as amended. Under DESE s current accreditation system, school districts are evaluated every five years based on DESE standards in three areas: resource standards, educational process standards and performance standards. Districts receive an evaluation judgment for each of the three sets of standards and an overall evaluation, which evaluations are in one of four categories: accredited, provisionally accredited, unaccredited or interim accredited. As of August 2014, 506 (97.3%) of all school districts in the State were accredited, 11 (2.1%) were provisionally accredited and 3 (0.6%) were unaccredited under the Missouri School Improvement Program ( MSIP ) rating system. MSIP is the State s accountability system for reviewing and accrediting school districts. MSIP evaluates districts in five areas: achievement, subgroup achievement, college and career readiness, attendance and graduation rate. DESE has currently assigned the District accredited status, the highest accreditation status given by DESE. School Facilities Listed below is information about each of the school facilities currently owned by the District. In addition, the District owns three facilities for early childhood special education, the West Early Childhood Center, Central Early Childhood Center and East Early Childhood Center. Hazelwood Central High School Location: New Halls Ferry Road Enrollment: 1,985 Hazelwood West High School Location: 1 Wildcat Lane Enrollment: 2,223 Hazelwood West Middle School Location: Missouri Bottom Road Enrollment: 822 East Middle School Location: 1865 Dunn Road Enrollment: 420 Hazelwood East High School Location: Dunn Road Enrollment: 1,413 Hazelwood Northwest Middle School Location: 1605 Shackelford Road Enrollment: 843 Central Middle Location: Old Jamestown Road Enrollment: 672 North Middle Location: 4420 Vaille Avenue Enrollment: 762 A-3

30 Southeast Middle Location: 918 Prigge Road Enrollment: 664 Cold Water Elementary School Location: 1105 Wiethaupt Road Enrollment: 413 Grannemann Elementary School Location: 2324 Redman Road Enrollment: 445 Jana Elementary School Location: 405 Jana Drive Enrollment: 349 Keeven Elementary School Location: Old Halls Ferry Road Enrollment: 384 Lawson Elementary School Location: 1830 Charbonier Road Enrollment: 394 McCurdy Elementary School Location: 975 Lindsay Lane Enrollment: 458 Russell Elementary School Location: 7350 Howdershell Road Enrollment: 395 Twillman Elementary School Location: Bellefontaine Road Enrollment: 343 McNair Elementary School Location: 585 Coachway Lane Enrollment: 422 Walker Elementary School Location: 1250 Humes Lane Enrollment: 379 Barrington Elementary School Location: Old Halls Ferry Road Enrollment: 364 Armstrong Elementary School Location: 6255 Howdershell Road Enrollment: 436 Arrowpoint Elementary Location: 2017 Arrowpoint Drive Enrollment: 551 Brown Elementary School Location: 3325 Chickory Creek Lane Enrollment: 432 Garrett Elementary School Location: 1400 Villa Rosa Lane Enrollment: 367 Jamestown Elementary School Location: Old Jamestown Road Enrollment: 344 Jury Elementary School Location: Old Halls Ferry Road Enrollment: 432 Larimore Elementary School Location: 1025 Trampe Lane Enrollment: 425 Lusher Elementary School Location: 2015 Mullanphy Road Enrollment: 435 Townsend Elementary School Location: 6645 Parker Road Enrollment: 318 Educational Programs and Services The District is proud of the programs and services it provides and the quality of students it educates. Outlined in the following paragraphs are selected honors programs, special education programs and extracurricular activities offered by the District. Accelerated Programs. The District identifies gifted and talented students at all levels and provides them with differentiated instruction suitable for their levels of intellectual, physical and social maturity. Special Education Programs. The District is a component district of the Special School District of St. Louis County. The District s special education for its students is supplied by the Special School District of St. Louis County. Extracurricular Activities. Each of the high schools have a full program of extracurricular activities. The athletic program includes fall, winter and spring sports for both boys and girls. Some interscholastic teams include both underclass and varsity level competition. An intramural program offers A-4

31 recreational opportunities for students interested in exercise and leisure time pursuits. Clubs and organizations ranging from athletic support groups to music, journalism, drama, yearbook and student council are also available. At the intermediate schools, students have the opportunity to participate in intramurals, student council, drama and music. The District is committed to encouraging students to take advantage of the opportunity offered by its program of extracurricular activities. Other Programs. The District has a strong commitment to provide programs that meet the academic needs of students. The District believes that early intervention is important in identifying and working with student reading problems. To this end, the District has several special reading programs that are designed to provide instructional support, which are based on effective teaching practices and research on how children learn to successfully read and communicate. Sources of Revenue FINANCIAL INFORMATION CONCERNING THE DISTRICT The District finances its operations through local property taxes, revenues from a 1% State sales tax, State Aid formula funds, including certain categorical source add-ons to the State formula funds, federal grant programs and miscellaneous sources including State Aid for transportation, State Aid for handicapped students, a State tax on cigarettes ( fair share revenues) and a pro rata share of interest income from the counties in which each school district operates. Debt service is financed primarily through local property taxes. State and federal revenue, as well as Proposition C sales tax revenue (as defined under the caption Local Revenue below), are received on a continuous monthly basis throughout the fiscal year. Local taxes, however, are received primarily in January, over six months into a school district s fiscal year. School districts that receive a smaller percentage of revenue from state and federal aid and depend more on local revenues will typically carry a larger fund balance than other school districts that may be receiving a larger percent of its revenue from State Aid amounts rather than local taxes. A recent history of the breakdown of the sources of revenues (all funds) for the District is as follows: Source Local Revenue 1 $124,793,545 $128,795,564 $132,585,781 $143,448,543 $144,198,108 County Revenue 3,015,888 2,746,942 3,279,515 2,056,303 2,514,910 State Revenue 61,670,835 61,192,081 62,330,054 58,587,696 56,625,976 Federal Revenue 14,461,233 15,830,950 17,696,271 20,824,296 20,572,651 Other Revenue 2 50,585, , ,996 60,650, ,049 TOTAL $254,426,922 $209,176,219 $216,451,617 $285,566,981 $224,577,030 Source: District and District s Audited Financial Statements. 1 Under the provisions of an initiative petition adopted by the voters of the State on November 2, 1982, revenues generated by a 1% State sales tax are credited to a special trust fund for school districts and are deemed to be local revenues. See the section below captioned Local Revenue. 2 Includes other financing sources, including general obligation bond proceeds and certificate of participation proceeds. Local Revenue The primary sources of local revenue are (1) taxes upon real and personal property within a school district, excluding railroad and utility property taxes (which are classified as County Revenues for A-5

32 school taxation purposes), which are more fully described below under the caption PROPERTY TAX INFORMATION, (2) fines and forfeitures collected as a result of violations within a school district s boundaries, (3) a school district s allocable portion of State assessed railroad and utility property taxes collected and distributed by the county or counties in which it is located, and (4) receipts from a 1% State sales tax (commonly referred to as Proposition C ). For school taxation purposes, all State assessed railroad and utility property within a county is taxed uniformly at a rate determined by averaging the tax rates of all school districts in the county. No determination is made of the assessed value of the railroad and utility property that is physically located within the boundaries of each school district. Such tax collections for each county are distributed to the school districts within that county according to a formula, based in part on total student enrollment in each district and in part on the taxes levied by each district. Proposition C revenues are generated by a 1-cent State sales tax that was approved by the voters in The sales tax proceeds are deemed to be local revenues for school district accounting purposes. Such revenues are distributed under the provisions of a revised State Aid formula using weighted average daily attendance (see the section below captioned FINANCIAL INFORMATION CONCERNING THE DISTRICT State Revenue ). Historically, each school district has received approximately $800 per pupil per year from Proposition C revenues. Under Proposition C, after determining its budget and the levy rate needed to produce required revenues to fund the budget, a school district must reduce the operating levy by an amount sufficient to decrease the revenues it would have received therefrom by an amount equal to approximately one-half of the estimated revenues to be received through Proposition C during the year. School districts may submit propositions to voters to forego some or all of the reduction in the operating levy that is otherwise required under terms of Proposition C. On November 4, 1997, District voters approved a proposition to waive all of the reduction in the operating levy required under Proposition C. State Revenue State Aid. Senate Bill 287 passed by the Missouri General Assembly in its 2005 regular session transitioned the State away from a local tax rate based formula to a formula that is primarily student-needs based. The new formula was phased in over a seven-year period that started with the fiscal year and ended with the fiscal year. During the phase-in period, State Aid for each school district was based on a percentage of both the old local tax rate based formula (determined as a percentage of the State Aid payments), and the student-needs based formula. Effective with the fiscal year, State Aid will be calculated solely using the student-needs based formula. Property Tax Levy Requirements. The sum of a district s local property tax levies in its Incidental and Teachers Funds must be at least $2.75 per $100 assessed valuation in order for the district to receive increases in State Aid above the level of State Aid it received in the fiscal year. Levy reductions required as a result of a Hancock rollback or an SB 711 rollback (see FINANCIAL INFORMATION CONCERNING THE DISTRICT Tax Limitation Provisions below) will not affect a district s eligibility for State Aid increases. The Formula. A district s State Aid is determined by first multiplying the district s weighted average daily attendance ( ADA ) by the state adequacy target (discussed below). This figure may be adjusted upward by a dollar value modifier, which is an index of the relative purchasing power of a dollar, calculated as one plus 15% of the difference of the regional wage ratio minus one. The product of the weighted ADA multiplied by the state adequacy target is then reduced by a district s local effort (discussed below) to calculate a district s final State Aid amount. A-6

33 Weighted ADA. Weighted ADA is based upon regular term ADA plus summer school ADA, with additional weight assigned in certain circumstances for students who qualify for free and reduced lunch, receive special education services, or possess limited English language proficiency. Students receive additional weighted treatment if, categorically, they exceed certain thresholds (based on the percentage of students in each of the categories in Performance Districts, as defined below), which thresholds can change every two years. The District s State Aid revenues would be adversely affected by decreases in its weighted ADA resulting from decreased enrollment generally and, specifically, decreased enrollment of students eligible for free and reduced lunch, special education students, or students with limited English language proficiency. State Adequacy Target. The new State Aid formula requires DESE to calculate a state adequacy target, which is intended to be the minimum amount of funds a school district needs in order to educate each student. DESE s calculation of the state adequacy target will be based upon amounts spent, excluding federal and State transportation revenues, by certain high performing districts (known as Performance Districts ). Every two years, using the most current list of Performance Districts, DESE will recalculate the state adequacy target. The recalculation can never result in a decrease from the previous state adequacy target amount. DESE established the base state adequacy target at $6,131 per pupil, which was scheduled to increase to $6,423 for the fiscal year and to $6,716 in the fiscal year. However, because of a shortfall in education funding, DESE has frozen the state adequacy target at $6,131 and has prorated cuts to make up for the shortfall in funding. Local Effort. For the fiscal year, the local effort figure utilized in a district s State Aid calculation is the amount of locally generated revenue that the district would have received in the fiscal year if its operating levy was set at $3.43. The $3.43 amount is called the performance levy. For all subsequent years, a district s local effort amount will be frozen at the amount, except for adjustments due to increased locally collected fines or decreased assessed valuation in the district. Growth in assessed valuation and operating levy increases will result in additional local revenue to the district, without affecting State Aid payments. Categorical-Source Add-Ons. In addition to State Aid distributed pursuant to the formula as described above, the formula provides for the distribution of certain categorical sources of State Aid to school districts. These include (1) 75% of allowable transportation costs, (2) the career ladder entitlement, (3) the vocational education entitlement, and (4) educational and screening program entitlements. Classroom Trust Fund (Gaming Revenues) Distribution. A portion of the State Aid received under the formula will be in the form of a distribution from the Classroom Trust Fund a fund of the State treasury containing a portion of the State s gaming revenues. This money is distributed to school districts on the basis of average daily attendance (versus weighted ADA, which applies to the basic formula distribution). The funds deposited into the Classroom Trust Fund are not earmarked for a particular fund or expense and may be spent at the discretion of the local school district, except that, beginning with the fiscal year, all proceeds of the Classroom Trust Fund in excess of amounts received in the fiscal year must be placed in the Teachers or Incidental Funds. Mandatory Deposit and Expenditures of Certain Amounts in the Teachers Fund. The following State and local revenues must be deposited in the Teachers Fund: (1) 75% of basic formula State Aid, excluding State Aid distributed from the Classroom Trust Fund (gaming revenues); (2) 75% of one-half of the district s local share of Proposition C revenues; (3) 100% of the career ladder State matching payments; and (4) 100% of local revenue from fines and escheats based on violations or abandoned property within the district s boundaries. A-7

34 In addition to these mandatory deposits, school districts are also required to spend for certificated staff compensation and tuition expenditures each year the amounts described in clauses (1) and (2) of the preceding paragraph. School districts are further required to spend for certificated staff compensation and tuition expenditures each year, per the second preceding year s weighted ADA, as much as was spent in the previous year from local and county tax revenues deposited in the Teachers Fund, plus the amount of any transfers from the Incidental Fund to the Teachers Fund that are calculated to be local and county tax sources. This amount is to be determined by dividing local and county tax sources in the Incidental Fund by total revenue in the Incidental Fund. The formula provides that certificated staff compensation now includes the costs of public school retirement and Medicare for those staff members. These items were previously paid from the Incidental Fund. Failure to satisfy the deposit and expenditure requirements applicable to the Teachers Fund will result in a deduction of the amount of the expenditure shortfall from a district s basic formula State Aid for the following year, unless the district receives an exemption from the State Board of Education. In fiscal years through , under certain circumstances, school districts were excused from compliance with certain spending requirements for professional development, as well as certain of these fund placement and expenditure requirements. School districts were also excused from complying with these requirements if the Governor withholds funds appropriated for funding the basic formula in any of the same three years. A school board may transfer any portion of the unrestricted balance remaining in the Incidental Fund to the Teachers Fund. Any district that uses a transfer from the Incidental Fund to pay for more than 25% of the annual certificated compensation obligation of the district, and has an Incidental Fund balance on June 30 in any year in excess of 50% of the combined Incidental and Teachers Fund expenditures for the fiscal year just ended, will be required to transfer the excess from the Incidental Fund to the Teachers Fund. Limited Sources of Funds for Capital Expenditures. School districts may only pay for capital outlays from the Capital Projects Fund. Sources of revenues in the Capital Projects Fund are limited to: (1) proceeds of general obligation bonds (which are repaid from a Debt Service Fund levy), (2) revenue from the school district s local property tax levy for the Capital Projects Fund, (3) certain permitted transfers from the Teachers and Incidental Funds, and (4) a portion of the funds distributed to school districts from the Classroom Trust Fund. Capital Projects Fund Levy. Prior to setting tax rates for the Teachers and Incidental Funds, each school district must annually set the tax rate for the Capital Projects Fund as necessary to meet the expenditures of the Capital Projects Fund for capital outlays, except that the tax rate set for the Capital Projects Fund may not be in an amount that would result in the reduction of the equalized combined tax rates for the Teachers and Incidental Funds to an amount below $2.75. Transfers from Incidental Fund to Capital Projects Fund. In addition to money generated from the Capital Projects Fund levy, each school district may transfer money from the Incidental Fund to the Capital Projects Fund under the following limited circumstances: (1) The amount to be expended for transportation equipment that is considered an allowable cost under the State Board of Education rules for transportation reimbursements during the current year; (2) Current year obligations for lease-purchase obligations entered into prior to January 1, 1997; A-8

35 (3) The amount necessary to repay costs of one or more guaranteed energy savings performance contracts to renovate buildings in the school district, provided that the contract specified that no payment or total of payments shall be required from the school district until at least an equal total amount of energy and energy-related operating savings and payments from the vendor pursuant to the contract have been realized; and (4) To satisfy current year capital project expenditures, an amount not to exceed the greater of: a. $162,326; or b. Seven percent (7%) of the state adequacy target (which DESE has frozen at $6,131) times the district s weighted ADA. Transfers from Incidental Fund to Debt Service Fund and/or Capital Projects Fund. If a school district is not using the seven percent (7%) or the $162,326 transfer (as discussed above) and is not making payments on lease purchases pursuant to Section , Revised Statutes of Missouri, as amended, then the school district may transfer from the Incidental Fund to the Debt Service and/or the Capital Projects Fund the greater of: (1) The State Aid received in the school year as a result of no more than eighteen (18) cents of the sum of the debt service and capital projects levy used in the foundation formula and placed in the Capital Projects or Debt Service fund; or (2) Five percent (5%) of the state adequacy target (which DESE has frozen at $6,131) times the district s weighted ADA. Federal Revenue School districts receive certain grants and other revenue from the federal government, which are usually required to be used for the specified purposes of the grant or funding program. The federal No Child Left Behind law requires that every public school student must score at a proficient level or higher in math and reading by Each state establishes its own proficiency levels. Federal sanctions for school districts that fail to meet established proficiency standards include providing parents and students from underperforming schools within a district the right to request a transfer to a school within the district that meets proficiency standards. In addition, schools that continue to fail to meet proficiency standards must, in addition to transfers and tutoring, make additional changes in staffing, curriculum and management. Federal sanctions apply only to public schools that receive Title I federal money. In July of 2012, the State earned a waiver from the No Child Left Behind law when the United States Department of Education approved the State s proposed accountability system aimed at replacing the existing accountability measures of the No Child Left Behind law. The State s proposed system, Top 10 by 20, outlines a plan for the State to be in the top 10 states by 2020, with a focus on having students be college and career ready by graduation. Tax Limitation Provisions The operating levy of a school district (consisting of all ad valorem taxes levied except the debt service levy) cannot exceed the tax rate ceiling for the current year without voter approval. The tax rate ceiling, determined annually, is the rate of levy which, when charged against the district s assessed A-9

36 valuation for the current year, excluding new construction and improvements, will produce an amount of tax revenues equal to tax revenues for the previous year increased by the lesser of actual assessment growth, 5% or the Consumer Price Index. Without the required percentage of voter approval, the tax rate ceiling cannot at any time exceed the greater of the tax rate in effect in 1980 or the most recent voterapproved tax rate (as adjusted pursuant to the provisions of the Hancock Amendment and SB 711, more fully explained below). Under Article X, Section 11(b) of the Missouri Constitution, a school district may increase its operating levy up to $2.75 per $100 assessed valuation without voter approval. Any increase above $2.75, however, must be approved by a majority of the voters voting on the proposition. Further, pursuant to Article X, Section 11(c) of the Missouri Constitution, any increase above $6.00 must be approved by two-thirds of the voters voting on the proposition. The tax levy for debt service on a school district s general obligation bonds is exempt from these limitations upon the tax rate ceiling. Article X, Section 22(a) of the Missouri Constitution (popularly known as the Hancock Amendment ), approved in 1980, places limitations on total State revenues and the levying or increasing of taxes without voter approval. The Missouri Supreme Court has interpreted the definition of total state revenues to exclude voter-approved tax increases. The Hancock Amendment also includes provisions for rolling back tax rates. By statute, in each odd-numbered year, the value of taxable real and personal property is reassessed. If the assessed valuation of property, excluding the value of new construction and improvements, increases by a larger percentage than the increase in the Consumer Price Index from the previous year (or 5%, if greater), the maximum authorized current tax levy ceiling must be reduced to yield the same gross revenue from existing property, adjusted for changes in the Consumer Price Index, as could have been collected at the existing tax levy ceiling on the prior assessed value. This reduction is often referred to as a Hancock rollback. The limitation on local governmental units does not apply to taxes levied in the Debt Service Fund for the payment of principal and interest on general obligation bonds. In 2008, through the enactment of Senate Bill 711 ( SB 711 ), the Missouri General Assembly approved further limitations on the amount of property taxes that can be imposed by a local governmental unit. Prior to the enactment of SB 711, a Hancock rollback would not necessarily result in a reduction of a district s actual operating tax levy if its current tax levy was less than its current tax levy ceiling, due to the district s voluntary rollback from the maximum authorized tax levy. Under SB 711, in reassessment years (odd-numbered years), the Hancock rollback is applied to a district s actual operating tax levy, regardless of whether that levy is at the district s tax levy ceiling. This further reduction is sometimes referred to as an SB 711 rollback. In non-reassessment years (even-numbered years), the operating levy may be increased to the district s tax levy ceiling (as adjusted by the Hancock rollback), only after a public hearing and adoption of a resolution or policy statement justifying the action. Further pursuant to SB 711, governing bodies of political subdivisions, including school districts, are required to informally project non-binding tax rate levies and provide the projected levies to the County Clerk by April 8 th of each year. Accounting, Budgeting and Auditing Procedures The accounts of the District are organized on the basis of legally established funds and account groups, each of which is considered a separate accounting entity. The operations of each fund are accounted for with a separate set of self-balancing accounts that comprise its assets, liabilities, fund equity, revenues and expenditures. District resources are allocated to, and accounted for, individual funds based upon the purposes for which they are to be spent and the means by which spending activities are controlled. The following fund types and account groups are used by the District. A-10

37 Governmental Funds General (Incidental) Fund This fund is used to account for general activities of the District, including expenditures for noncertified employees, pupil transportation costs, plant operation, fringe benefits, student body activities, community services, food service and any expenditures not required or permitted to be accounted for in other funds. Special Revenue (Teachers ) Fund This fund is used to account for financial resources and expenditures for certificated employees involved in administration and instruction. It includes revenues restricted by the State and the local tax levy for the payment of teacher salaries and certain employee benefits. Capital Projects Fund This fund is used to account for the accumulation of resources to be used for the acquisition or construction of major capital assets. Debt Service Fund This fund is used to account for the accumulation of resources for, and the payment of, principal, interest and fiscal charges on long-term debt. Basis of Presentation and Accounting The District s audited financial statements present financial information regarding the District in two formats: one regarding the District as a whole (District-wide financial statements) and one that provides information about District funds (fund financial statements). Basis of accounting refers to when transactions are recorded in the financial records and reported in the financial statements. The District prepares its District-wide and fund financial statements using the modified cash basis which is a comprehensive basis of accounting other than U.S. generally accepted accounting procedures. Budgets and Budgetary Accounting The District follows these procedures in establishing the budgetary data reflected in the financial statements: 1. In accordance with Chapter 67 of the Revised Statutes of Missouri, as amended, the District adopts a budget for each fund. 2. Prior to July, the Superintendent, who serves as the budget officer, submits to the Board a proposed budget for the fiscal year beginning on the following July 1. The proposed budget includes estimated revenues and proposed expenditures for all District funds. Budgeted expenditures cannot exceed beginning available monies plus estimated revenues for the year. 3. A public hearing is conducted to obtain taxpayer comments. Prior to its approval by the Board, the budget document is available for public inspection. 4. Prior to July 1, the budget is enacted by a vote of the Board. 5. Subsequent to its formal approval of the budget, the Board has the authority to make necessary adjustments to the budget by formal vote of the Board. Adjustments made during the year are reflected in the budget information included in the financial statements. Budgeted amounts are as originally adopted or as finally amended by the Board. A-11

38 The financial statements of the District are audited annually by a firm of independent certified public accountants in accordance with generally accepted auditing standards. The firm of Kerber, Eck & Braeckel LLP, audited the financial statements of the District for the fiscal year ended June 30, 2014, a copy of which is included in this Official Statement as APPENDIX B. A summary of significant accounting policies of the District is contained in the notes to the financial statements. The District neither requested nor received the consent of Kerber, Eck & Braeckel LLP to the inclusion of its audit report in this Official Statement. Neither the firm of Kerber, Eck & Braeckel LLP, nor any other independent accountants, has examined the District s records, or performed any procedures with respect to the District since the date of the District s audit for the fiscal year ended June 30, Summary of Revenues and Expenditures Under State law each school district accounts for its moneys within four funds: The Special Revenue (Teachers ) Fund, the General (Incidental) Fund, the Capital Projects Fund and the Debt Service Fund. Summary revenues, expenditures and fund balances for each fund are shown below and are comprised of financial information for the fiscal years shown. Copies of the audited financial statements of the District for any of the fiscal years shown on the following table are available upon request from the District s Assistant Superintendent Finance and Facilities. [Remainder of page intentionally left blank.] A-12

39 SUMMARY STATEMENT OF REVENUES, EXPENDITURES CHANGES IN FUND BALANCES Fiscal Years Ended June Incidental Fund: Beginning Balance $ 69,587,165 $ 69,007,516 $ 60,242,006 1 $ 46,321,372 1 $ 39,380,076 Revenues 120,156, ,358, ,056, ,364, ,834,547 Expenditures 71,191,057 69,339,704 71,958,269 71,196,780 72,153,927 Other Sources (Uses) (57,145,768) (69,439,170) (65,332,677) (65,247,260) (67,739,323) Ending Balance $ 61,406,604 $ 69,587,165 $ 69,007,516 $ 60,242,005 1 $ 46,321,373 1 Teachers Fund: Beginning Balance $ $ $ $ $ Revenues 64,483,492 48,442,644 51,264,859 50,858,811 50,167,958 Expenditures 121,629, ,881, ,597, ,106, ,907,281 Other Sources (Uses) 57,145,768 69,439,170 65,352,677 65,247,260 67,739,323 Ending Balance $ $ $ $ $ Capital Projects Fund 2 : Beginning Balance $ 10,070,317 $ 66,480,290 $ 69,166,779 1 $ 8,728,077 $ 11,866,196 Revenues 5,865,353 4,212,059 2,495,672 66,176,918 8,812,766 Expenditures 43,637,586 60,628,086 26,471,267 5,738,216 11,956,548 Other Sources (Uses) 42,131,842 6,054 21,289,106 5,663 Ending Balance $ 14,429,926 $ 10,070,317 $ 66,480,290 $ 69,166,778 1 $ 8,728,077 Debt Service Fund: Beginning Balance $ 17,995,913 $ 19,708,189 $ 21,793,389 $ 19,502,256 $ 16,854,111 Revenues 16,465,390 17,162,993 16,634,630 18,166,577 18,756,759 Expenditures 19,556,206 18,875,269 18,877,643 15,875,444 16,108,614 Other Sources (Uses) 29, ,813 Ending Balance $ 14,934,888 $ 17,995,913 $ 19,708,189 $ 21,793,389 $ 19,502,256 Total Funds: Beginning Balance $ 97,653,395 $ 155,195,995 $ 151,202,174 $ 74,551,706 $ 68,100,383 Revenues 206,970, ,176, ,451, ,566, ,572,030 Expenditures 256,014, ,724, ,904, ,916, ,126,370 Other Sources (Uses) 42,161,633 6,054 21,446,919 5,663 Ending Balance $ 90,771,418 $ 97,653,395 $ 155,195,995 $ 151,202,174 $ 74,551,706 Source: District s Audited Financial Statements. 1 Differences in ending balance and beginning balance due to rounding. 2 Includes amounts in the Bond Issue Funds used to account for the proceeds of the District s general obligations bonds and certificates of participation. A-13

40 PROPERTY TAX INFORMATION Historic Assessed Valuation The assessed valuation of all taxable tangible property situated in the District as of January 1, as finalized on December 31, for the following years is shown below: Calendar Assessed Percentage Year Valuation 1 Change 2014 $1,660,170, % ,640,046, ,717,344, ,703,643, ,898,468, Source: St. Louis County Department of Revenue Collections Division. 1 Includes the incremental increase in assessed valuation over the established assessed valuation base within tax increment financing districts within the District. 2 As of January 1, adjusted through September 11, Assessed Valuation Components The following table shows the total assessed valuation and the estimated actual value by category, of all taxable tangible property (excluding State assessed railroad and utility property) situated in the District as of January 1, 2014, as adjusted through September 11, Assessed Valuation 1 Assessment Rate Estimated Actual Total Valuation Real Estate 2 : Residential Commercial $ 823,060, ,650,210 19% 32% $4,331,897,105 1,489,531,906 Agriculture 744,780 12% 6,206,500 Total Real Estate $1,300,455,440 $5,827,635,511 Personal Property 2 359,714,790 33⅓% 1,079,144,370 Total $1,660,170,230 $6,906,779,881 Source: St. Louis County Department of Revenue Collections Division. 1 Includes the incremental increase in assessed valuation over the established assessed valuation base within tax increment financing districts within the District. 2 Locally assessed railroad and utility property are included in the real estate and personal property totals. Tax Assessments and Collections Property taxes are levied and collected for the District by St. Louis County (the County ), for which the County receives a collection fee of 1.5% of the gross tax collections. On or before the first day of October in each year, the Board estimates the amount of taxes that will be required during the next succeeding fiscal year to pay interest due on bonds issued and the principal of bonds maturing in such year and the costs of operation and maintenance plus such amount as A-14

41 may be required to cover emergencies and anticipated tax delinquencies, and the tax rate required to produce that amount. The Board certifies the tax rate to the County Clerk (the County Clerk ). The officers of the County, at the time they make the levy for State, County, city, school district, and other ad valorem taxes, levy the tax rate certified by the Board upon all taxable tangible property in the District. All officers of the County and of the State concerned with the assessment and collection of taxes, fines, and penalties must perform their duties in relation to the levy, assessment, and collection of District taxes as they do in relation to State, County, city, school district, and other ad valorem taxes. All District taxes levied must be based upon the assessed valuation of lands and other taxable tangible property in the District as may be determined by the records in the offices of the County Assessor (the County Assessor ) and County Clerk, and must be collected and remitted to the District. All the rights and remedies provided by the laws of the State for the collection of State, County, city, school district, and other ad valorem taxes are applicable to the collection of taxes authorized to be collected by the District. The County levies taxes against real and tangible personal property, other than inventory of merchants and manufacturers and household goods of individuals. Prior to January 1, 1985, State law required that property be assessed at 33-⅓ percent of its true value. A 1982 amendment to the Constitution of Missouri changed the provisions requiring uniformity in taxation of real property by directing such property to be subclassed as agricultural, residential or commercial and permitting different assessment ratios for each subclass. As a result of the 1982 amendment, agricultural property is assessed at 12 percent of true value, residential property is assessed at 19 percent of true value, and commercial property is assessed at 32 percent of true value. Tangible personal property continues to be assessed at 33-⅓ percent of its true value. Real property within each County is assessed by the County Assessor. The County Assessor is responsible for preparing the tax roll each year and for submitting the tax roll to the Board of Equalization. The Board of Equalization has the authority to adjust and equalize the assessment of properties appearing on the tax rolls. Certain properties, such as those used for charitable, educational, and religious purposes, are exempt from ad valorem taxes. In addition, pursuant to various State statutes, the County may grant real property tax abatement, under certain conditions, to businesses building or rehabilitating property within the County. Tax Rates Debt Service Levy. The District is required under Article VI, Section 26(f) of the Missouri Constitution to levy an annual tax on all taxable tangible property therein sufficient to pay the interest and principal of the indebtedness as they fall due and to retire the same within 20 years from the date of issue. The Board of Education may set the tax rate for debt service, without limitation as to the rate or amount, at the level required to make such payments. Operating Levy. The District s operating levy (all ad valorem taxes levied except the debt service levy) for the year is $ per $100 of assessed valuation. A-15

42 The following table shows the District s tax levies (per $100 of assessed valuation) for each of the following fiscal years: Fiscal Year Ended June 30 Capital Projects Fund Debt Service Fund Incidental Fund Teachers Fund Tax Adjusted Levy Total 2015 $ $ $ $ $ Source: District s Annual Secretary of the Board Reports. Tax Collection Rates years: The following table sets forth tax collection information for the District for the last five fiscal Total Taxes Levied 2 Fiscal Year Ended June 30 Current Taxes Collected 1, 2 Current and Delinquent Taxes Collected 2, 3 Amount % Amount % 2014 $ 99,618,767 $ 94,923, $ 98,740, ,150,635 99,379, ,519, ,526,841 99,196, ,719, ,657, ,483, ,745, ,939, ,011, ,542, Source: St. Louis County Department of Revenue Collections Division. 1 Tax collection figures reflect the taxes actually received by the District and are therefore net of any payments in lieu of taxes allocable to the incremental increase in assessed valuation over the established base assessed valuation for real property within tax increment financing districts within the District. 2 3 Taxes are levied and collected on a calendar year basis. Numbers shown reflect taxes levied and collected in the District s fiscal year, as indicated. Delinquent taxes are shown in the year payment is actually received, which may cause the percentage of current and delinquent taxes collected to exceed 100%. Current and Delinquent Taxes Collected also includes the current year s protested taxes which have been released. [Remainder of page intentionally left blank.] A-16

43 Major Taxpayers The ten largest real property taxpayers within the District according to their 2013 assessed valuations are listed below. These taxpayers represent 8.46% of the District s 2013 assessed valuation of $1,640,046,440, as of January 1, as finalized on December 31. Assessed Valuation 1 The Boeing Company $ 24,255,550 MSCI 2007-IQA13 Retail 5555 LLC 22,052,760 IBM Corp. 19,735,610 Mallinckrodt Pharmaceuticals 17,669,480 Republic Services 11,180,730 CRP 3 Lambert LLC 9,590,820 Dugan Realty/Financing LLC 8,750,240 Forest Pharmaceuticals, Inc. 8,689,790 Westcore Delta LLC 8,414,010 Ryan Tax Compliance Services 8,320,990 Total $138,659,980 Source: St. Louis County Department of Revenue Collections Division. 1 Includes taxpayers located in TIF districts within the District. See the explanation below under the caption Tax Abatement and Tax Increment Financing. Tax Abatement and Tax Increment Financing Under State law, tax abatement is available for redevelopers of areas determined by the governing body of a city to be blighted. The Land Clearance for Redevelopment Authority Law authorizes ten year tax abatement pursuant to Sections to , Revised Statutes of Missouri, as amended. In lieu of 10-year tax abatement, a redeveloper that is an urban redevelopment corporation formed pursuant to Chapter 353, Revised Statutes of Missouri, as amended, may seek real property tax abatement for a total period of 25 years. In addition, the Industrial Development Law, Chapter 100, Revised Statutes of Missouri, as amended, authorizes real and personal property tax abatement for corporations for projects for industrial development. The Real Property Tax Increment Allocation Redevelopment Act, Sections to , Revised Statutes of Missouri, as amended, makes available tax increment financing for redevelopment projects in certain areas determined by the governing body of a city or county to be a blighted area, conservation area, or economic development area, each as defined in such statute. Portions of the District are currently located in tax increment financing districts ( TIF districts ). Neither tax abatement nor tax increment financing would diminish the amount of property tax revenues currently collected by the District in the affected areas, but instead would act to freeze such revenues at current levels and would deprive the District of future increases in ad valorem property tax revenues which would otherwise have resulted from increases in assessed valuation in such areas until the tax increment financing obligations issued are repaid and the tax abatement period terminates. A-17

44 According to the County Assessor s Office, the tax increment financing increment attributable to property in the District is $56,110,810 for the 2013 tax year. District s Rights in the Event of Tax Delinquencies Taxes on real estate become delinquent on January 1 and the collector is required to enforce the State s lien by offering the property for sale on the fourth Monday in August. If the offering does not produce a bid equal to the delinquent taxes plus interest, penalty, and costs, the property is offered for sale again the following year. If the second offering also does not produce a bid adequate to cover the amount due, the property is sold the following year to the highest bidder. Tax sales at the first or second offerings are subject to the owner s redemption rights. Delinquent personal property taxes constitute a debt of the person assessed with the taxes, and a personal judgment can be rendered for such taxes against the debtor. Personal property taxes become delinquent on January 1. Collection suits may be commenced on or after February 1 and must be commenced within three years. General Obligation Bonds Outstanding DEBT STRUCTURE OF THE DISTRICT The District fixes an annual debt service levy and levies taxes to meet the annual debt service requirements of its general obligation bonds. Article VI, Section 26(b) of the Missouri Constitution limits the outstanding amount of authorized general obligation bonds of a school district to 15% of assessed valuation of taxable tangible property within the school district. The District s total outstanding general obligation indebtedness, including the Bonds, is currently $254,016, The District has never defaulted on the payment of any of its debt obligations. The following table illustrates the District s total principal amount of outstanding general obligation bond debt at the time of issuance of the Bonds. Date of Issue Original Amount of Issue Range of Interest Rates Amount Outstanding Final Maturity 2004A $ 23,109, % 1 $ 1,492, A 70,000, ,760, B 7,694, , A 92,550, ,380, A 59,000, ,000, ,450, ,850, A 39,999, ,999, B 4,985, ,985, ,740, ,740, Total $ 400,308, $254,016, Source: District. 1 Includes accretion rate of 8.71% for capital appreciation bonds. 2 Includes accretion rates ranging from 2.50% % for capital appreciation bonds. 3 Excludes the Refunded Bonds. A-18

45 History of General Obligation Indebtedness years: The following table sets forth District debt information as of the end of each of the last five fiscal Total Outstanding General Obligation Debt Debt as % of Assessed Value As of June 30 Assessed Value $256,146,241 $1,660,170, % ,642,220 1,640,046, ,391,695 1,717,344, ,016,125 1,703,643, ,991,695 1,898,468, Source: District s Audited Financial Statements. 1 Includes the incremental increase in assessed valuation over the established assessed valuation base within tax increment financing districts within the District. 2 As of January 1, adjusted through September 11, [Remainder of page intentionally left blank.] A-19

46 General Obligation Debt Service Requirements The following schedule shows the debt service requirements for the District s outstanding general obligation bonds, including the Bonds and excluding the Refunded Bonds. Calendar Year Outstanding Bonds The Bonds Total Ending Total Net Debt Total Net Debt Dec. 31 Service 1, 2 Principal Interest Debt Service Service 2015 $ 16,576,116 $ 515,000 $ 1,334,908 $ 1,849,908 $18,426, ,798,439 1,900,000 1,812,000 3,712,000 18,510, ,821,927-1,793,000 1,793,000 18,614, ,728,521 2,225,000 1,759,625 3,984,625 18,713, ,818,396 2,200,000 1,704,250 3,904,250 18,722, ,175,921 2,175,000 1,638,750 3,813,750 18,989, ,372,546 4,100,000 1,513,250 5,613,250 18,985, ,655,996 2,325,000 1,373,125 3,698,125 19,354, ,819,821 2,275,000 1,258,125 3,533,125 19,352, ,793,321 4,850,000 1,080,000 5,930,000 19,723, ,660,682 9,350, ,000 10,075,000 19,735, ,035,057 9,825, ,625 10,070,625 20,105, ,430, ,430, ,824, ,824, ,820, ,820, ,224, ,224, ,224, ,224, ,631, ,631, ,628, ,628,125 Totals $319,041,236 $41,740,000 $16,237,658 $57,977,658 $377,018,894 1 Excludes the Refunded Bonds. 2 Represents a 35% interest subsidy expected to be paid to the District by the U.S. Government with respect to the District s outstanding Series 2010A Bonds. The Internal Revenue Service has indicated that sequestration regarding the federal budget, as implemented under the terms which are presently applicable, will reduce interest rate subsidies with respect to obligations like the Series 2010A Bonds by 7.3%. The District has experienced a similar reduction in interest subsidy in connection with its previous interest payments in respect of the Series 2010A Bonds for fiscal years 2013 and The payment of interest rate subsidies is subject to budget developments involving the U.S. Government and the amount, if any, of the reduction in the interest rate subsidies on the Series 2010A Bonds in future federal fiscal years is not yet known. Lease Obligations Obligations secured by annually appropriated funds do not constitute an indebtedness for purposes of any State statutory or constitutional debt limit. Such obligations are payable solely from annually appropriated funds of a governmental body available therefor and neither taxes nor a specific source of revenues can be pledged to make payments on such obligations. Any increase in taxes required to generate sufficient funds with which to make payments on such obligations are subject to voter approval. The District entered into an annually renewable Lease Purchase Agreement dated as of April 1, 2006 (the Series 2006 Lease ) with UMB Bank, N.A., as lessor, in connection with the financing of certain energy-related improvements through the offering and sale by the District of Certificates of A-20

47 Participation (the Series 2006 Certificates ) evidencing proportionate ownership interest in the right to receive rent payments pursuant to the Series 2006 Lease. At the time the Bonds are issued, the Series 2006 Certificates will be outstanding in the principal amount of $4,395,000 and the final rent payment date is March 1, The District s obligations with respect to the Series 2006 Certificates are subject to annual appropriation by the Board. The District has also entered into an annually renewable Lease Purchase Agreement dated as of June 1, 2003 (the Series 2003 Lease ) with UMB Bank, N.A., as lessor, in connection with the financing of certain energy-related improvements through the offering and sale by the District of Certificates of Participation (the Series 2003 Certificates ) evidencing proportionate ownership interest in the right to receive rent payments pursuant to the Series 2003 Lease. The District entered into a First Supplemental Lease Purchase Agreement dated as of November 1, 2011 with UMB Bank, N.A., as lessor, which supplements and amends the Series 2003 Lease, in connection with the refinancing of the Series 2003 Certificates through the offering and sale by the District of Certificates of Participation (the Series 2011 Certificates ). The Series 2003 Certificates matured on March 1, At the time the Bonds are issued, the Series 2011 Certificates will be outstanding in the principal amount of $3,530,000 and the final rent payment date for the Series 2011 Certificates is March 1, The District s obligations with respect to the Series 2011 Certificates are subject to annual appropriation by the Board. The District has entered into leases for various office equipment. See the notes to the District s audited financial statements in APPENDIX B hereto for a discussion of such equipment leases. The District has no other outstanding lease obligations. [Remainder of page intentionally left blank.] A-21

48 Overlapping Bonded Indebtedness (As of October 1, 2014) General Obligation Debt Approximate Percent Applicable Amount of Overlapping Debt Taxing Body St. Louis County $ 109,755, % $ 17,560, City of Hazelwood 10,580, ,522, City of Black Jack 2,654, ,654, City of Bellefontaine Neighbors 4,180, ,128, City of Ferguson 7,010, , Black Jack Fire Protection District 7,225, ,863, Florissant Valley Fire Protection District 7,835, ,014, Spanish Lake Fire Protection District 1,525, ,525, Riverview Fire Protection District 2,958, , Pattonville Fire Protection District 16,725, ,839, Robertson Fire Protection District 5,185, ,251, Totals $ 175,633, $ 50,840, Source: St. Louis County, individual taxing jurisdiction s records and finance officers of respective taxing bodies. To the knowledge of the District, there are no other political subdivisions with boundaries overlapping the District or lying wholly within the District that have any general obligation bonds outstanding. However, political subdivisions may have ongoing programs requiring the issuance of bonds, the amounts of which cannot be determined at this time. [Remainder of page intentionally left blank.] A-22

49 Debt Ratios and Related Information Estimated Population, District (2014): 123,000 Assessed Valuation (2014) 1 $ 1,660,170, Estimated Actual Value (2014) 1 $ 6,906,779, Outstanding Direct General Obligation Debt 2 $ 254,016, Overlapping General Obligation Debt $ 50,840, Total Direct and Overlapping General Obligation Debt 2 $ 304,857, Per Capita Direct Debt 2 $ 2, Per Capita Direct and Overlapping General Obligation Debt 2 $ 2, Ratio of Direct Debt to Assessed Valuation 1, % Ratio of Direct Debt to Estimated Actual Value 1, % Ratio of Direct and Overlapping General Obligation Debt to Assessed Valuation % Ratio of Direct and Overlapping General Obligation Debt to Estimated Actual Value 1, % Source: District; St. Louis County Department of Revenue Collections Division. 1 As of January 1, adjusted through September 11, 2014, and includes the incremental increase in assessed valuation over the established assessed valuation base within tax increment financing districts within the District. 2 Includes the Bonds, excludes the Refunded Bonds. Short-Term Borrowings The District has no outstanding short-term debt. Debt Limitation and Debt Capacity Under Article VI, Section 26(b) of the Missouri Constitution, a school district, by the vote of the qualified voters voting thereon, may become indebted in an amount not to exceed 15% of the value of taxable tangible property in the District according to the last completed assessment for State and county purposes. The assessed valuation of the District has declined over the last several years. Based on $1,640,046, assessed valuation as of January 1, 2013 (as finalized December 31, 2013), the current legal debt limit of the District is approximately $246,006, The total outstanding indebtedness of the District, including the Bonds, is $254,016, and, therefore, the District currently has no capacity to seek voter approval for the issuance of additional general obligation indebtedness. In order to have capacity to seek voter approval to incur any additional indebtedness in the future, the outstanding principal amount of the District s general obligation indebtedness will have to decrease and/or the assessed valuation of the District will have to increase. Future Plans The District does not anticipate any debt financings during the next several years. Revenue Obligations The District has no outstanding revenue obligations. A-23

50 Employee Relations Pursuant to State law, the District conducts a meet and confer process with the representative teacher organization. The District s teaching staff may not strike in order that the District accept certain demands. The District s teaching staff may join various professional groups and/or associations. Retirement Plan The District contributes to the Public School and Non-Teacher Retirement Systems of Missouri ( PSRS ), a cost-sharing multiple-employer defined benefit pension plan. PSRS provides retirement and disability benefits to full-time (and certain part-time) employees and death benefits to members and beneficiaries. Positions covered by PSRS are not covered by Social Security. PSRS benefit provisions are set forth in Chapter 169 of the Missouri Revised Statutes. The statutes assign responsibility for the administration of the system to a seven-member Board of Trustees. PSRS issues a publicly available financial report that includes financial statements and required supplementary information. That report may be obtained by writing to: The Public School Retirement System of Missouri, P.O. Box 268, Jefferson City, Missouri 65102, or by calling For additional information regarding PSRS, see the notes to the District s audited financial statements in APPENDIX B hereto. * * * A-24

51 APPENDIX B AUDITED FINANCIAL STATEMENTS AND INDEPENDENT AUDITOR S REPORT OF THE DISTRICT FOR THE FISCAL YEAR ENDED JUNE 30, 2014

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53 FINANCIAL STATEMENTS AND INDEPENDENT AUDITORS' REPORT HAZELWOOD SC HOOL DISTRICT June 30,2014

54 HAZELWOOD SCHOOL DISTRICT CONTENTS lndependent Auditors' Report Management's Discussion and Analysis - Unaudited Basic Financial Statements Government-wide Financial Statements Statement of Net Position - Modified Cash Basis 16 Statement of Activities - Fund Financial Statements Modified Cash Basis 17 Balance Sheet - Modified Cash Basis - Governmental Funds 18 Statement of Revenues, Expenditures and Changes in Fund Balances - Modified Cash Basis - Governmental Funds Notes to Basic Financial Statements Supplementary lnformation Schedule of Revenues, Expenditures and Changes in Fund Balance - Modified Cash Basis - Budget and Actual - Unaudited General Fund Special Revenue Fund Debt Service Fund Capital Projects Fund 2010 Bond lssue Fund 2012 Bond lssue Fund 2013 Bond lssue Fund Note to Supplementary lnformation

55 CPAs and Management Consultants Kerber, Eck & Braeckel.,' One South Memorial Drive, Ste.900 St. Louis, MO 63 I ph, fax Independent Auditors' Report Board of Education Hazelwood School District We have audited the accompanying modified cash basis financial statements of the governmental activities and each major fund of Hazelwood School District as of and for the year ãnded June 30, 2014, and the related notes to the financial statements, which collectively comprise Hazelwood School District's basic financial statements as listed in the table of contents' Management's Responsibitity for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with the modif,red cash basis of accounting as described in Note l; this includes determining that the modif,red cash basis of accounting is an acceptable basis for the preparation of the hnancial statements in the circumstances. Management is also responsible for the à.rigtr, implementation, and maintenance of intemal control relevant to the preparation and fair preséntation of financial statements that are free from material misstatement, whether due to fraud or e1ïor. Auditors' Responsibility Our responsibility is to express opinions on these financial statements based on our audit. We conducted our àudit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States, Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditors' judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fráud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the financial statements in order to design audit procedures thuf uré upptopriate in the circumstances, but not for the purpose of expressing an opinion ãn the effectiveness-of the entity's internal control. AccordinglY, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting éstimates made by management, as well as evaluating the overall presentation of the financial statements. Other Locations Belleville, ll. Carbondale, ll. Jacksonville, ll. Litchfìeld, ll ' Springfìeld, ll ' Cape Girardeau, MO ' Milwaukee,Wl

56 We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions. Opinions In our opinion, the modified cash basis financial statements referred to above present fairly, in all material respects, the respective modified cash basis fìnancial position of the governmental activities and each major fund of Hazelwood School District as of June 30,2014, and the respective changes in modified cash basis financial position, thereof for the year then ended in accordance with the basis of accounting described in Note 1. Basis of Accounting We draw attention to Note I of the financial statements, which describes the basis of accounting. The financial statements are prepared on the modified cash basis of accounting, which is a basis of accounting other than accounting principles generally accepted in the United States of America. Our opinions are not modified with respect to that matter. Other Matters Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise Hazelwood School District's basic hnancial statements. The management's discussion and analysis on pages 5 through 15 and budgetary comparison information on pages 39 through 46, which are the responsibility of management, are presented for purposes of additional analysis and are not a required part of the basic financial statements. Such information has not been subjected to the auditing procedures applied in the audit of the basic financial statements, and accordingly, we do not express an opinion or provide any assurance on it. Other Reporting Required by Government Audíling Støndørds In accordance with Government Auditing Standards, we have also issued our report dated November ll,2ol4,on our consideration of Hazelwood School District's intemalcontrol over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on intemal control over f,rnancial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering Hazelwood School District's intemal control over financialreporting and compliance. St. Louis, Missouri November 71,2014 K,),* U"+!3^"MLLP

57 HAZELWOOD SCHOOL DISTRICT MANAGEMENT'S DISCUSSION AND ANALYS S - UNAUDITED JUNE 30,2014 The management's discussion and analysis (MD&A) of Hazelwood School District's financial performance provides an overall review of the District's financial activities for the fiscal year ended June 30, The intent of this discussion and analysis is to look at the District's financial performance as a whole; readers should also review the notes to the basic financial statements and the financial statements to enhance their understanding of the District's financial performance. Financial Highlights.. Total revenues for the fiscal year amounted to $254.5 million. General revenues accounted for $213.8 million or eighty-four percent of total revenues. Charges for services, operating grants and contributions, and capital grants and contributions accounted for $40.7 million or sixteen percent of total revenues. * Net position decreased for the fiscal year 2014 from 2013 by $0.9 million. This seven percent decrease is mainly due to an operating deficit and capital outlay expenditures related to bond issues. A The primary resources available to the District were: a Local revenues, primarily tax receipts, which totaled $124.8 million or forty-nine percent of total revenue. State revenues, primarily basic formula, entitlements and special grants, which totaled $61.7 million or twenty-four percent of total revenue. a a Intermediate revenue, primarily state assessed utilities, totaling $3.0 million or one percent of total revenue. Federal revenues, primarily special grants, totaling $14.4 million or six percent of total revenues. Other revenues, primarily bond issue proceeds, totaling $50.6 million or twenty percent of total revenues. Ã

58 HOOL DISTRI MANAGEMENT'S DISCUSSION AND ANALYSIS - UNAUDITED JUNE 30,2014 Financial Highlights (continued) Revenue By Source (Fund Statements) For The Year Ended June 30,2Ot4 Other 20% Federal 60/o lntermediate L% * District expenses totaled $261.4 million, of which $40.7 million were offset by program specific charges for services, grants or contributions. General revenues and accumulated net position were adequate to provide for these programs. -6-

59 HAZELWOOD SCHOOL DISTRICT MANAGEMENT'S DISCUSSION AND ANALYSIS - UNAUDITED JUNE 30,2014 Financial Highlights (continued) Comparison of Total Cost to Net Cost of Services June 30,20t4 Total Cost of Services r Net Cost of Services (20.0) r-"t. ""-tdr**' oð* The District's Basic Financial Statements consist of a series of financial statements and the associated notes to those statements. These statements are organized so the reader can understand the operations of the District as a whole, i.e., an entire operating entity, The "Basic Financial Statements" section, consisting of the Statement of Net Position, and the Statement of Activities, provide highly consolidated financial information, and render a government-wide perspective of the District's financial condition. They present an aggregate view of the District's finances. These statements seek to answer the question, "How did the District do financially during the fiscal year?" These statements include all assefs and liabilifies using the modified cash basrs of accounting. The modified cash basis takes into account the District's current year revenues when received and expenses when paid. By showing the change in net position for the year, the reader may ascertain whether the District's financial condition has improved or deteriorated. The changes, which are discussed in the MD&A, may be financial or non-financial in nature. Nonfinancial factors which may have an impact on the District's financial condition include increases in or erosion of the properly tax base within the District, facilities maintenance and condition, mandated educational programs for which little or no funding is provided, or other external factors. -7 -

60 HAZELWOOD SCHOOL DISTRICT MANAGEMENT'S DISCUSSION AND ANALYSIS - UNAUDITED JUNE 30,2014 Financial Highlights (continued) To provide more in-depth reporting of the District's financial position and the results of operations, fund basis financial information is presented in the "Fund Financial Statements" Section. Fund Financial Statements provide data on the District's most significant funds, specifically its General Fund, Special Revenue (Teachers') Fund, Debt Service Fund, Capital Projects Fund and Bond lssue Funds. These funds are considered "major funds" by the District. Governmental Activities The District's net position was $90.8 million as of June 30, 2014 and $97.7 million as of June 30, Of these amounts, the District had a restricted net position of $30.1 million and $24.1 million at June 30,2014, and 2013, respectively. Restricted net position is reported separately to show legal restraints from debt covenants and enabling legislation that limit the District's ability to use the net position for day-to-day operations. Net Position (ln Millions) 6 tro = 80, s0.0 40, f I Restricted I Unrestricted 20L Our following analysis focuses on the net position (Table 1) and changes in net position (Table 2) of the District's governmental activities. -8-

61 SCHOOL DISTRI MANAGEMENT'S DISCUSSION AND ANALYSIS - UNAUDITED JUNE 30,2014 Governmental Activities (continued) Current and other assets Totalassets Table I Net Position (in millions) June 30, 2014 $ 90.8 $ $ 97.7 $ 97 7 Net Position: Restricted,.. Unrestricted Total net position $ $ $ 90.8 I gt.t The $60.7 million in the unrestricted net position of governmental activities represents the accumulated results of all past years' operations. The results of this year's operations for the District as a whole are reported in the Statement of Activities. Table 2 takes the rounded information from that Statement, and rearranges them slightly to present our total revenues versus our total expenses for the year. -9-

62 HAZELWOOD SCHOOL DISTRICT MANAGEMENT'S DISCUSSION AND ANALYSIS - UNAUDITED JUNE 30,2014 Governmental Activities (continued) Table 2 Changes in Net Position (in millions) For the Year Ended June 30, Revenues: Program revenues: Charges for services Federal 9rants... State grants Bond proceeds... General revenues: Taxes... State aid... Grants and other... Bond proceeds... lnvestment earnings... Total revenues... Program/Fu nction Expenses: lnstruction,.. Food service Student transportation...,...,... Other support services... Capital out1ay... Debt service Total expenses... lncrease (decrease) in net assets. $ $ ' ,7 $ (57.6) As reported in the Statement of Activities, the cost of the District's activities for the year ended June 30,2014, was $261.4 million. However, not all of this costwas borne bythetaxpayers of Hazelwood School District. Of this amount, $6,1 million was paid by those who used or benefited from the services rendered (e.9. charges for school lunches), and $29.2 million was paid through various federal and state grants. Consequently, the net cost o'f million, after taking into consideration these fees, and the bond refunding and subsidies, was paid by the taxpayers of the District and the State of Missouri. Table 3 shows the total cost of services and the net cost of these services (after charges for services and grants received) for the largest categories of expense of the District for the year ended June 30,2014. The "net cost" presentation allows District taxpayers to determine the remaining cost of the various categories which were borne by them, and allows them the opportunity to assess the cost of each of these functions in comparison to the perceived benefits received. Costs associated with building operations are not allocated to the various functions and are included in "Other Support Services". -10-

63 HOOL DISTRI MANAGEMENT'S DISCUSSION AND ANALYSIS - UNAUDITED JUNE 30,2014 Governmental Activities (continued) Table 3 Total and Net Cost of Activities (in millions) For The Year Ended June 30, Total Cost of Services Net Cost Total Cost of Services of Services Net Cost of Services lnstruction... Food service Student transportation. Other support services Capital out ay... Debt service $ $ 86.1 (0.5) $ 87.1 (1.1) $ $ $ $ Debt service 9% Net Cost of Services For The Year Ended June 30,20L4 The District's Funds Food service Student o% transportation 3o/o The District uses funds to control and manage money for particular purposes. Some funds are required to be established by state law or by bond covenants. The fund basis financial statements allow the District to demonstrate its stewardship over and accountability for resources provided by taxpayers and other entities. These statements also allow the reader to obtain more insight into the financial workings of the District, and assess further the District's overall financial health

64 HAZELWOOD HOOL DISTRICT MANAGEMENT'S DISCUSS ON AND ANALYSIS - UNAUDITED JUNE 30,2014 The District's Funds (continued) The District's fund balances decreased from total fund balances of $97.7 million at June 30,2013 to $90.8 million at June 30,2014. This decrease is due primarily to operating deficits. Fund Balances (ln Millions) o r 2013 ) ,00 Ge:reral Special Revenue - Debt Service Capital Projects Bond tssue To eliminate the deficit balance in the Special Revenue Fund, the District transferred $57.1 million from the General Fund. The District completed the fiscal year ended June 30, 2014, with combined operating fund balances of $O1.4 million, as compared to combined operating fund balances of $69.6 million as of June 30, Operating fund balances equal approximately thirty-two and thirty-seven percent of annual operating expenses for the fiscal years ended June 30, 2014 and 2013, respectively. General Fund Budgetary Highlights Over the course of the year, the District revises its budget to take into consideration significant changes in revenues or expenditures. The original budget for the District was adopted on June 11, 2013 and the final budget amendment was adopted on June 17,2014. Schedules showing the District's original and final budget compared with actual operating results for the funds are provided in the Supplementary lnformation. Significant revisions to the general fund were made to add revenues and expenditures for grants received during the year. -12-

65 Debt Administration HAZELWOOD SCHOOL DISTRICT MANAGEMENT'S DISCUSSION AND ANALYSIS - UNAUDITED JUNE 30,2014 At June 30, 2014, the District had outstanding general obligation bonded indebtedness of $256,146,241, as compared to $223,642,220 at June 30, On July 1,2013, the District issued $44,984,121 in general obligation refunding and improvement bonds. The District used a portion of the net bond proceeds to purchase U.S. government securities to advance refund $5,050,000 of the outstanding 2004 and 2005 general obligation bonds. During the upcoming fiscal year, $6,797,120 of the outstanding bonds will be retired, leaving a long-term balance outstanding of $249,349,121. Article Vl, Section 26(b), Constitution of Missouri, limits the outstanding amount of authorized general obligation bonds of a District to fifteen (15%) percent of the assessed valuation of the District (including State assessed railroad and utility), plus amounts available in the Debt Service Fund for repayment of this debt. The District's net debt, which is the total bonds outstanding less the amount available in the Debt Service Fund, is above this limit, however, the debt was authorized before the decrease in assessed valuation and is therefore in compliance with the debt limit. Constitutional debt limit... General obligation bonds payable. Amount available in Debt Service Fund... $ 237,590,345 (256,146,241) Legal Debt Margin $ (3,621,008) Also at June 30, 2014 the District had outstanding Certificates of Participation totaling $7,925,000. During the upcoming fiscal year, $1,320,000 of the outstanding certificates will be retired by lease payments from the District, leaving a long-term balance outstanding of $6,605,000. Economic Factors and Next Year's Budget The Hazelwood School District is financially solid. The District's Board of Education's adopted policy is to maintain a minimum of twenty percent of annual operating expenditures in its unrestricted operating fund balances. Historically, the District has only used excess operating balances for one-time capital purchases and infrastructure repairs and improvements. Given the balances in excess of twenty percent and the anticipated budget shortfalls in state budgets across the country, including Missouri, which will probably lead to revenue decreases, the District will use some balances to cover operating deficits for the next 1-3 years. This will allow the District to protect classroom instruction and other services provided to students

66 HAZELWOOD SCHOOL DISTRICT MANAGEMENT'S DISCUSSION AND ANALYSIS - UNAUDITED JUNE 30,2014 Economic Factors and Next Year's Budget (continued) St. Louis County levies taxes against real and tangible personal property, other than inventory of merchants and manufacturers and household goods of individuals. The county undergoes reassessment every odd numbered year. The most recent reassessment during 2013 resulted in decreased assessed valuations. This is consistent with a national trend of falling home and business values is not a reassessment year, however, due to State Tax Commission settlements, total assessed valuation is expected to drop. The budget reflects an overall decrease in total assessed valuation of $8.5 million, equaling a 0.52o/o decrease. The District's tax revenue for the fiscal year ended June 30,2015 will be approximately the same as originally budgeted, and approximately $.5 million less than the year ended June 30,2014. The District's tax rates are at the maximum approved by taxpayers, so they cannot be increased to offset the decrease in assessed values without voter approval. The District also expects stable revenues from local property taxes for the following 2-3 years based on stabilizing residential and commercial values, The majority of state funding from the State of Missouri is received through the basic formula apportionment. The budget reflects approximately $2.3 million more in total state revenue compared to the amount the district expects to receive in the fiscal year. The State of Missouri has experienced budget deficits in the past, which required cuts to state programs and expenditures in order to balance its budget as required by the state constitution, similar to most states across the nation. Nonetheless, the appropriations for K-12 education funding have remained at the same level over the past several years, and increased in and again for However, the state formula is still under-funded by approximately $560 million. ln response to decreasing revenue in general due to the nation's economic downturn, the District has continued to review all personnel positions and eliminated some positions through attrition. During the past 4-5 years, HSD has been preparing for decreasing revenue and a "funding cliff." During that time, operating balances have grown in order to protect the district's instructional programs during years of greatly reduced revenue. During the fiscal year, the district began an extended, detailed review of the entire budget and positions in order to plan for the budget. This has continued during 13-14, and will continue throughoul to plan for future years. ln addition, during the year, the district began extensive community engagement programs for both a strategic plan and instructional programs ("Hazelwood Next"), and to review the budget, operations and make recommendations in order to improve the fiscal stability of HSD ("Budget Advisory Committee"). Again in , the HSD budget reflects the use of some of its operating fund balances to protect its instructional programs. Finally, revenue is normally budgeted conservatively to error on the side of caution and make up for unanticipated cuts in state or other revenue. -14-

67 HAZELWOOD SCHOOL DISTRICT MANAGEMENT'S DISCUSSION AND ANALYSIS - UNAUDITED JUNE 30,2014 Economic Factors and Next Year's Budget (continued) lnterest rates are at historic lows and are projected to remain at the current levels through the fiscal year, resulting in consistently low investment income. Enrollment has remained stable or decreased slightly over the past few years and is projected to remain relatively stable or decrease slightly, During 2003, the District's community was involved in Hazelwood 1't, a public engagement process. As part of this process, over one-thousand community members met over a series of informational meetings, and recommended to the Board of Education a three-phase long-range facilities plan. ln the first phase of the plan, voters approved issuing $70 million in bonds in order to construct four new middle schools. The $65 million in bonds issued during the fiscal year were phase two of this plan. Additions/renovations to nineteen elementary schools have been completed. ln addition, a new library was added to Central High School. The administration building was completely renovated and includes two additional wings for early childhood and gifted education. In November, 2010, seventy-five percent of District voters approved a $120 million no-tax-increase bond issue, which will be used to complete phase three of this plan. The District issued approximately $60 million in bonds in fiscal year During fiscal year , another $20 million in those bonds were issued, along with refunding $41.5 million in outstanding bonds at lower interest rates. The remaining $40 million was issued in July, Phase 3 consists of classroom/library additions/renovations at the high schools, science lab renovations at the high schools, needed elevators at remaining schools, life/health/safety upgrades, and replacing HVAC equipment with new efficient systems. The largest increase in expenditures is expected to be for salaries and related benefits in order to remain competitive among other districts in the St. Louis metropolitan area. The district is committed to keeping and recruiting the best employees. Contacting The District's Financial Management While these Basic Financial Statements are designed to provide full and complete disclosure of the financial condition and operations of the District, citizens groups, taxpayers, students, other District officials, investors or creditors may need further details. To obtain such details, please contact Dwight L. Lindhorst, Assistant Superintendent of Facilities and Finance, at the Hazelwood School District, New Halls Ferry Road, Florissant, Missouri 63031, or by calling (314) during Friday, 8:00 a.m. to 4:30 p.m. Mr. Lindhorst's regular office hours, Monday - address is dlindhst@hazelwoodschools.org. -15-

68 HAZELWOOD SCHOOL DISTRICT STATEMENT OF NET POSITION - MODIFIED CASH BASIS JUNE ASSETS Governmental Activities Cash and investments... Restricted cash and investments TOTAL ASSETS $ 73,006,676 17,764,742 $ 90,771,419 NET POSITION Restricted for: Capital projects... Debt service... Child Nutrition Program Unrestricted... TOTAL NET POSITION $ 9,312,960 14,934, ,860 65,786,810 $ 90,771,418 The accompanying notes are an integral part of this statement. -16-

69 HAZELWOOD SCHOOL DISTRICT STATEMENT OF ACTIVITIES - MODIFIED CASH BASIS YEAR ENDED JUNE Expenses Charges for Services Proqram Operating Grants and Contributions Capital Grants and Contributions Net (Expense) Revenue and Changes in Net Assets Total Governmental Activities GOVERNMENTAL ACTIVITIES: lnstruction.. Guidance. lmprovement of instruct on.. Professional development.,.. Media serv ces Board of Education services Executive administration Building level administration...,... Business, fìscal and internal services..., Operation of plant Pup l transportation... Food senice.. Central office suppol services... Adult continuing education Community services,, Capital outlay Debt service: Principal retirements $ 110,347, ,886 6,060,358 2,566,223 4,708, ,922 3,388,800 1,250,250 2,642,951 11,720,007 2,274,556 21,912,983 2,7',t8,145 7,310,406 6,762,641 6,431,763 2,325 1,840,934 41,815,153 14,335,446 12,437,983 $ 4,681,391 $ 19,338,473 g 297,324 $ 36,626 1,384,561 19, , ,138 1,358,564 5,879, ,540 5,424,581 I,159,493 (86,030,366) (354,886) (6,060,358) (2,566,223) (4,213,4431 (4e,784) (3,388,800) (1,250,250) (2,642,951) (11,720,017',) (2,274,556\ (21,912,983) (2,718,145) (5,915,216) 501,679 (6,431,763) (2,325) (1,626,20r ) (41,815,153) (8,910,865) (11,278,490) TOTAL GOVERNMENTAL ACTtVtTrES... $ 261,408,899 $ 6,121,771 $ 34,328,718 S 297,324 (220,661,086) General revenues Taxes State aid Grants and contributions not restricted to specific programs... Sale of property.. Sale of bonds.. lnvestment earnings.. TOTAL GENERAL REVENUES.. CHANGE IN NET POSITION.. NET POSITION - BEGINNING OF YEAR. NET POSITION. END OF YEAR ,998,748 47,236, ,331 22,924 42,108, , (6,881,977) 97,653,395 $ 90,771,418 The accompanying notes are an integral part of this statement

70 HAZELWOOD SCHOOL DISTRICT BALANCE SHEET - MODIFIED CASH BASIS. GOVERNMENTAL FUNDS June?.t1 2ñ14 General Funcl ASSETS Cash and investments.. $ 61,406,604 $ Restricted cash and nvestments... Special Revenue Fund $ Debt Service Fund I Capital Projects Fund $ 5,1r7, $ 2010 Bond lssue Fund $ 2O'l2Bond lssue Fund 2013 Bond lssue Fund Total Governmental Funds $ $ 73,006, TOTAL ASSETS... $ 61,406,604 $ $ $ 6,736,457 s s $ $ FUND BALANCES Restricted for: Capital projects $ Child Nutrition Program.. Retirement of long-term debt... Assigned for: Professional development. Student activ t es... Capital projects.. Unassigned. 736, , , $ 1,619,39'r $ $ $ $ 14,934,888 5,117,066 $ 7,693,469 $ 9,312, ,860-14,934, , ,575 5,117, ,452 TOTAL FUND BALANCES. s S $ $ 6,736,457 $ s s S The accompanying notes are an integral part of this statement -18-

71 HAZELWOOD SCHOOL DISTRICT STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - MODIFIED CASH BASIS - GOVERNMENTAL YEAR ENDED JIJNE 30.20'14 FUNDS REVENUES: Loæl souræs: Property tsxes.,, $ 82,1 91,530 Salês tax6s lnvestment income..., 7,138 Studentactivities...,... 1,598,622 Food sorvice. 1,384,560 M&M surtax 2,130,113 Othsr local 2, Total local, ,868,705 County sources: Ståte asssssed utilities....., 2,280,342 Other county Total county..... Stgtê sources: Basic formulâ Stato grants and contributions, Total slate Federal souræs:.... Othêr Spocial O bt Cap tal 2010 Bond 2012Bond 2013 Bond Total General Revenue Sefv ce Pfojects lssue lssue lssue Governmêntal Fund Fund Fund Fund Fund Fund - Fund Funds 2,280,342 11,928,442 3,730,23',1 '15,658,673 9,319,546 3,028,998 I 5,835,91 5 2, ,838, , ,925 35,785, ,454 44,712,785 3,578,220 $ 14,456,860 98, ,924, ,ô21 38'1, ,'t54,982 4,156,179 1,299,377 1,299,377 '1,159, ,974 -$ 5,823 5,823 s 9ô,648, ,835,91 5 I 15,558 1,598,622 1,384,560 6,285,095 2,925, ,793,545 2,661, ,925 3,01 5,888 47,713,769 I 3, ,670,835 14,461,233 3,028,998 Total Revenuês ,156,264 64,483,492 16,465,390 5,859,530 5,823 20ô,970,499 EXPENDITURES: Cuffent: lnslruction Attendance Guidancg Health sêruicss.... lmprovemênt of instruclion Professional d velopment.,. M6dia seru cos...,.. Board of Eduæt on serv ces Execulivê adm nistration Building level administration....., Bus ness, f scal and internal seruicês,... Operat on of plant Sêcurity seruices......,., Pup l Food Central off ce support soruices Adult continuing eduætion Commun ty seryices Cap tal outlây. D bt senice: Pr nc pal rot roments. lnterest,, Oth r chargss 1 I,329, ,886 1,281,825 2,473,659 1,512, , ,330 't,250, ,357 3,819,572 2,274,556 21,912,983 2,713,O38 7,31 0,406 6,762,641 5,884,855 2, ,348 99,0 1 7,973 4,778,533 92, , ,616 2,915,470 1,790,594 7,900,435 5, ,908 1,1 12, ,547,218 34,232, ,347, ,88ô 6,060,358 2,566,225 4,708, ,922 3,388,800 1,250,250 2,642,951 11,720,007 2,274,556 21,912,983 2,718,145 7,3 1 0,406 6,762,641 6,431,763 2,325 't,840,934 41,815,153 _ 7,43O,1OO 1,200,000 _ 8,710,100-12,094, ,535-12'437 ' , , ,556 Total Expsndituros 71,191,057 12'1,629,260 19, ,547,218 34,42'1,272 25ô.014'109 EXCESS OF REVENUES OVER (UNDER) EXPENDITURES 48,965,2O7 (57,145,768) (3,090,816) 190,s33 (es) (3,547,2181 (34,415,44e) (49,043,610) OTHER FINANCING SOURCES (USES): Transfers (to) from other lunds Sala of bonds... Premium on sale of bonds.,. Refunding bonds,.... Payments to refunded bond escrow agent (57,14s,768) 57,145, ,581 4,985,000 (5,394,790) Sale of oth6r orooertv Total Othsr Financing Sourcês (Uses) (57,'145,768\ 57,'145]68 29, ,999,1 21 2,109,797 39,999,1 21 2,549,378 4,985,000 (5,394,7e0) '9'18 42' NETCHANGES IN FUND BALANCES.,,,.. (8,180,561) (3,061,025) 213,457 (e9) (3,547,2161 7,6e3,469 (6,881,977) The accompanying notes are an integral part of this statement. FUND BALANCES, BEGINNING OF YEAR.,... 69,587,165 - :_ 17,995, , ,395 FUND BALANCES, END of YEAR. -$ !3 $ $-l-{,931,99q- -$.-0J30lgL -$ $-JÉ eoll

72 HAZELWOOD SCHOOL DISTRICT NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The Hazelwood School District (the "District") operates under the regulations pursuant to Section RSMo of the Public School Laws of Missouri, which designates a Board of Education to act as the governing authority. The District provides educational services. As discussed further in Note 1, these financial statements are presented on the modified cash basis of accounting. This modified cash basis of accounting differs from accounting principles generally accepted in the United States of America (GAAP) as established by the GovernmentalAccounting Standards Board (GASB). Princioles Determininq the Scooe of Reoortino Entitv The financial statements of the District consist only of the funds of the District. The District has no financial accountability for any other governmental entity, since no other entities are considered to be controlled or dependent on the District. Control or dependence is determined on the basis of budget adoption, taxing authority, funding, and appointment of the respective Board, In addition, the District is not aware of any entity which would exercise such oversight which would result in the District being considered a component unit of the entity. ln addition, the District is associated with other organizations which may include various Parent Teacher Associations (PTA's), booster clubs, etc. Under governmental standards for defining the financial reporting entity, these organizations may be considered to be part of the reporting entity of the District. However, the balances and activities of such organizations have not been included in these financial statements due to the overall immateriality to the District. Fund Accountinq The accounts of the District are organized on the basis of legally established funds, each of which is considered a separate accounting entity. The operations of each fund are accounted for with a separate set of self-balancing accounts that comprise its assets, liabilities, fund equity, revenues and expenditures. District resources are allocated to, and accounted for, in individual funds based upon the purposes for which they are to be spent and the means by which spending activities are controlled. The District's policy is to close all encumbrances at the end of each fiscal year. The following fund types are used by the District: -20-

73 HAZELWOOD SC HOOL DISTRICT L NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30,2014 SUMMARY OF SIGNIFICANT ACCOUNTING POL CIES (continued) Governmental Funds Governmental Funds are those through which most functions of the District are financed. The District's expendable financial resources are accounted for through Governmental Funds. The measurement focus is upon determination of changes in the financial position rather than upon net income determination. The following are the District's governmental funds, each of which the District considers to be a major fund: General Fund This fund is the general operating fund of the District and accounts for expenditures for noncertified employees, pupil transportation costs, operation of plant, fringe benefits, student body activities, community services, the food service program, and any expenditures not required or permitted to be accounted for in other funds. Special Revenue Fund A special revenue fund accounts for restricted sales tax and revenue sources assigned for the payment of salaries and certain benefits of certified teachers involved in administration and instruction. Debt Service Fund This fund is used to account for the accumulation of resources for, and the payment of, principal, interest and fiscal charges on long-term debt. Capital Proiects Fund This fund is used to account for the proceeds of long-term debt, taxes and other revenues assigned for acquisition or construction of major capital assets. Bond lssue Funds This fund is used to account for the proceeds of the 2010,2012 and 2013 general obligation bonds issued for facility improvements. The 2010, 2012 and 2013 bonds are currently being used to make improvements at high schools, such as libraries, science labs, new STEM (science, technology, engineering and math) studios, and increasing school safety. The bonds are also upgrading facilities on a district-wide basis, such as replacing out of date heating and cooling systems, improving handicapped accessibility, improving electric power and technology data infrastructure, and other classroom improvements. 21 -

74 HAZELWOOD OOL DISTRICT NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Basis of Presentation G overn ment-wide F i n anci al Statements : The statement of net position and the statement of activities present financial information about the District as a whole. These statements include the financial activities of the primary government. Governmental activities generally are financed through taxes, intergovernmental revenues, and other nonexchange transactions. The statement of net position presents the financial condition of the governmental activities of the District at year-end. The statement of activities presents a comparison between direct expenses and program revenues for each function of the District's governmental activities. Direct expenses are those that are specifically associated with and are clearly identifiable to a particular function. Amounts reported as program revenues include (a) charges paid by the students for tuition, fees, or goods and services offered by the programs and (b) grants and contributions that are restricted to meeting the operational or capital requirements of a particular program. Revenues not classified as program revenues are presented as general revenues and include all property taxes. The comparison of direct expenses with program revenues identifies the extent to which each governmental function is self-financing or draws from the general revenues of the District. F u nd F in anci al Sfafemenfs: The fund financial statements provide information about the District's funds. A balance sheet and statement of revenues, expenditures, and changes in fund balances are presented. The emphasis of fund financial statements is on maior governmental funds, each displayed in a separate column. The District considers each of its funds to be major, Basis of Accountinq Basis of accounting determines when transactions are recorded in the financial records and reported on the financial statements. Government-wide financial statements and fund financial statements are prepared using a modified cash basis of accounting. This basis of accounting recognizes assets, liabilities, net position/fund balances, revenues, and expenditures/expenses when they result from cash transactions except that the purchases of investments are recorded as assets. This basis is a comprehensive basis of accounting other than accounting principles generally accepted in the United States of America. -22-

75 OOL DIST NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Basis of Accountinq (continued) As a result of the use of this modified cash basis of accounting, certain assets (such as accounts receivable and capital assets), certain revenues (such as revenue for billed or provided services not yet collected), certain liabilities (such as accounts payable, general and leasehold revenue bonds and obligations under capital leases) and certain expenses (such as expenses for goods or services received but not yet paid) are not recorded in these financial statements. lf the District utilized the basis of accounting recognized as generally accepted, the fund financial statements for governmental funds would use the modified accrual basis of accounting. All government-wide financials would be presented on the accrual basis of accounting, Propefty Taxes Property taxes attach as an enforceable lien on property as of January 1. Taxes are levied on November 1 and are payable by December 31. The County collects the property tax and remits it to the District. The assessed valuation of the tangible taxable property for the calendar years 2013 and 2012 lor purposes of local taxation was $1,583,935,630 and $1,660,480,030, respectively. The blended tax levy per $100 of the assessed valuations of tangible taxable property for the calendar year 2013 for purposes of local taxation was: General Fund Debt Service Fund...,... Total $ The receipts of current and delinquent property taxes during the fiscal year ended June 30, 2014, aggregated approximately 97% of the current assessment computed on the basis of the levy as shown above. Pooled Cash and Temporary lnvestments Cash resources are combined to form a pool of cash and temporary investments which is managed by the District Treasurer, except resources from the Debt Service Fund, as state law requires these deposits to be separately maintained. -23-

76 HAZELWOOD SCHOOL DISTRICT NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Pooled Cash and Temporarv lnvestments (continued) The District may invest in United States Treasury bills, United States Treasury notes, bonds, government agency and instrumentality obligations, repurchase agreements collateralized by government securities, time certificates of deposit, bankers' acceptances issued by domestic commercial banks, and commercial paper issued by domestic corporations. lnterest income earned is allocated to contributing funds based on each funds' proportionate share of funds invested. Restricted Cash and lnvestments Restricted cash and investments represent amounts whose use is limited by legal requirements and consist of unexpended bond proceeds, unexpended proceeds from certificates of participation, and amounts escrowed for future general obligation bond principal and interest payments in conjunction with the Missouri School District Direct Deposit Program as discussed in Note 2 and Note 3. Fund Balance ln the fund financial statements, governmental funds repod the following classifications of fund balance: Nonspendable - includes amounts that cannot be spent because they are either not spendable in form or are legally or contractually required to be maintained intact. Restricted includes amounts restricted constitutional provision or enabling legislation. by external sources or by Committed - includes amounts that can only be used for specific purposes determined by a resolution of the Board of Education. Commitments may be modified or rescinded only through resolutions approved by the Board of Education. Assigned - includes amounts that the District intends to use for a specific purpose, but do not meet the definition of restricted or committed fund balance, Under the District's adopted policy, amounts may be assigned by the Chief Financial Officer. Unassigned includes all amounts not included in other spendable classifications. The District's policy requires a minimum unassigned fund balance of 20% of the prior year General Fund and Special Revenue Fund expenditures in order to cover unexpected expenditures and revenue shodfalls. 24-

77 HAZELWOOD OOL DISTRICT NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, SUMMARY OF SIGN FICANT ACCOUNTING POLICIES (continued) Fund Ba lcontinued) When an expenditure is incurred for purposes for which both restricted and unrestricted fund balances are available, the District considers restricted funds to have been spent first. When an expenditure is incurred for which committed, assigned, or unassigned fund balances are available, the District considers amounts to have been spent first out of committed funds, then assigned funds, and finally unassigned funds, as needed, unless the Board has provided othenryise in its commitment or assignment actions. The details of the fund balances are included in the Governmental Funds Balance Sheet. Net Position Net position represent the difference between assets and liabilities. Net position is reported as restricted when there are limitations imposed on their use either through the enabling legislation adopted by the District or through external restrictions imposed by creditors, grantors or laws or regulations of other governments. All other net position is reported as unrestricted. The District applies restricted resources first when an expense is incurred for purposes for which both restricted and unrestricted net position is available. lnterfund Activitv lnterfund transfers are reported as other financing sources/uses in governmental funds. Repayments from funds responsible for particular expenditures/expenses to the funds that initially paid for them are not presented on the financial statements. A transfer of $57,145,768 was made from the General Fund to the Special Revenue Fund to cover the Special Revenue Fund expenditures in excess of revenues. Extraordinary and Special ltems Extraordinary items are transactions or events that are both unusual in nature and infrequent in occurrence. Special items are transactions or events that are within the control of the Board of Education and that are either unusual in nature or infrequent in occurrence

78 HAZELWOOD HOOL DISTRICT 2. CASH AND INVESTMENTS NOTES TO BASIC F]NANCIAL STATEMENTS JUNE 30,2014 The District is governed by the deposit and investment limitations of state law. The depository bank is to pledge securities in addition to Federal Deposit lnsurance Corporation (FDIC) insurance at least equal to the amount on deposit at all times in accordance with sections and of the Missouri Revised Statutes. The District may invest the funds in bonds or any instrument permitted by law for the investment of state money's in accordance with section of the Missouri Revised Statutes. The District participates in the Missouri School District Direct Deposit Program which is a mechanism for public school bond repayments through the MOHEFA Bond Program. lt authorizes the direct deposit of a portion of the school district's state aid payment by the State of Missouri to a trustee bank that accumulates these payments and then makes the principal and interest payments to the paying agent on the bonds. The direct deposits occur monthly and the balance is withdrawn every six months to pay the debt service requirement of the related bond issues. At June 30, 2014, the District had $8,451,882 in this program, which has been included in investments. The District also participates in the Missouri Securities lnvestment Program (MOSIP). MOSIP is an external investment pool in which a District's monies are pooled with other Districts' monies to purchase investments that are permitted by state statutes. The District's monies purchase a pro-rata share of the pool. A board of directors comprised of Missouri school administrators, school board members, and school business officials provides governance and oversight of MOSIP's operations. The board seeks to maintain a stable net asset value of $1 per share. -26-

79 HAZELWOOD SC HOOL DISTRICT NOTES TO BASIC FINANC AL STATEMENTS JUNE 30, CASH AND INVESTMENTS (continued) The deposits and investments held at June 30,2014, and reported at cost, are as follows: lnvestment Maturities Cost 0tolyear 1to3 VEATS Deposits: Demand deposits Certificates of Deposit lnvestments: Money market mutual funds External investment pool MOHEFA MOSIP Agency Securities Commercialpaper $ 5,178,712 N/A 17,2 19,976 $ 17,219,976 22,398,688 34,218,037 34,218,037 $ 8,451,882 7,693,469 10,028, ,451,882 7,693,469 5,028,097 7,981,245 N/A N/A 5,000,000 68,372,730 $ 63,372,730 5,000,000 Total Deposits and lnvestments $ 90, Reconciliation to financial statements: Cash and investments Cash and investments - restricted $ 73,006, $ 90,771,418 Custodial Credit Rtsk - Deposifs - Custodial credit risk is the risk that in the event of a bank failure, the District's deposits may not be returned to it. The District requires that all deposits with financial institutions be collateralized in an amount at least equal to uninsured deposits. As of June 30, 2014, none of the District's deposits were exposed to custodial credit risk. Custodial Credit Rrbk - lnvestmenfs - lnvestment securities are exposed to custodial credit risk if the securities are uninsured, are not registered in the name of the government, and are held by the party who sold the security to the district or its agent but not in the government's name. All investments, evidenced by individual securities, are registered in the name of the District or of a type that are not exposed to custodial credit risk

80 HAZELWOOD SCHOOL DISTRICT NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, CASH AND INVESTMENTS (continued) lnvestment lnterest Rate Rrbk - The District minimizes the risk that the market value of securities in the portfolio will fall due to changes in general interest rates by structuring the investments portfolio so that securities mature to meet cash requirements for ongoing operations, thereby avoiding the need to sell securities on the open market prior to maturity and by investing operating funds primarily in shorter-term securities. lnvestments in banker's acceptances and commercial paper shall mature in no more than 180 days from purchase date and all other investments shall mature and become payable in no more than five (5) years from purchase date. Maturities of investments held at June 30, 2014, are provided in the schedule above, lnvestment Credit Risk - The District has policies in place to minimize credit risk, the risk of loss due to the failure of the security issuer or backer, by pre-qualifying the institution with which the District will do business and by diversifying the portfolio so that potential losses on individual securities will be minimized. At June 30,2014, the District's investments were rated as follows: Rating 444 1S&P) AA1 (S&P) A-1 (S&P) A-1 (sf) (S&P) Amount $ 9,451,882 10,028,097 6,983, ,805 Concentration of lnvestment Credit Rrbk - As a means of limiting its exposure to losses arising from concentration of investments, the District's investment policy mandates that the portfolio not have a concentration of assets in specific maturity, specific issuer or specific class of securities. At a minimum, diversification standards by security type and issuer are established as: (a) U.S. treasuries and securities having principal and/or interest guaranteed by the U.S. Government, 100o/o', (b) collateralized time and demand deposits, 100o/o', (c) U.S. Government agencies, and government sponsored enterprises, no more than 60%; (d) collateralized repurchase agreements, no more than 50%; (e) U.S. Government agency callable securities, no more than 30%; (f) commercial paper and bankers' acceptances, no more than 50%

81 HAZELWOOD SCHOOL DISTRICT NOTES TO BASIC F]NANCIAL STATEMENTS JUNE 30, CASH AND INVESTMENTS (continued) lnvestments in any one issuer representing 5% or more of total investments (excluding investments issued by or explicitly guaranteed by the US Government, investments in mutual funds, investments in external investment pools and investments in other pooled investments) are as follows at June 30,2014: lssuer Federal Home Loan Mortgage Corp Federal Farm Credit Bank lnvestment Type Percentage U.S. Agency 7% U.S. Agency 7o/o 3. LONG-TERM DEBT The following is a summary of changes occurring in long-term debt for the year ended June 30,2014. Balance Balance June Add tions Reductions June Governmental Activities: General obl gat on bonds $ 223,642,220 $ 44,984,121 $ (12,480,100) $ 256J46241 Amounts Due Within One Year $ 6,797,120 Cert ficates of participation (1,280,000) 7,925,000 1,320,000 Total governmental activities long-term liabilities $ ,220 $ ,121 $ (13,760,100) $ ,241 $ 8,1',17,120 Payments on the general obligation bonds are made by the debt service fund. The certificates of participation are paid by the capital projects fund. -29-

82 3 LONG-TERM DEBT (continued) Bonds Pavable OD SC NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30,2014 Bonds payable at June 30,2014, consist of: $23,109, general obligation bonds, due in varying installments through 2017, average interest rate of 3.66% $70,000, general obligation bonds, due in varying installments through 2024, average interest rate of 4.70% $7,694, general obligation bonds, due in varying installments through 2018, average interest rate of 4.70% $92,550, general obligation refunding and improvement bonds, due in varying installments through 2027, average interest rate of 4.660/o $59,000, general obligation bonds, due in varying installments through 2030, average interest rate of 6J0% $61,450, general obligation bonds, due in varying installments through 2032, average interest rate of 4.08% $1,492,120 5,575, ,000 83,435,000 59,000,000 60,850,000 $39,999, A general obligation bonds, due in varying installments through 2033, average interest rate of 4.85o/o $4,985, taxable general obligation refunding bonds, due in varying installments through 2018, average interest rate of 4.00% 39,999,121 4,985,000 $256JÆ,U1-30-

83 3. LONG-TERM DEBT (continued) HAZELWOOD SC HOOL DISTRICT NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30,2014 The annual requirements to amortize bonded debt outstanding as of June 30, 2014, are as follows: Year Ending June 30, Principal lnterest Total $ 6,797,120 $ 8,540,000 8,930,000 9,545,000 9,995,000 60,179,754 78,233,671 73,925,696 13,241,321 11,739,850 11,331,337 10,940,075 10,506,775 45,087,425 29,388,350 8,464,938 $ 20,038,441 20,279,850 20,261,337 20,485,075 20,501, ,267, ,622,021 92,390,634 Total $ 256,146,241 $ 140,700,071 $ 396,846,312 Repayment of the bond issues are made through the Missouri School District Direct Deposit Program which is a mechanism for public school bond payments. lt authorizes the direct deposit of a portion of the school district's state aid payment by the State of Missouri to a trustee bank that accumulates these payments and then makes the principal and interest payments to the paying agent on the bonds. The District has $8,451,882 on deposit with Wells Fargo in conjunction with this program, as discussed in Note 2. The 2010A bonds were issued as "Build America Bonds" and as "qualified bonds under the lnternal Revenue Code." Accordingly, the District receives a subsidy payment from the federal government equal to 35% of the amount of each interest payment on these taxable bonds

84 3. LONG-TERM DEBT (continued) Bond Defeasance HAZELWOOD SCHOOL DISTRICT NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30,2014 On July 1,2013, the District issued $4,985,000 in general obligation refunding bonds with an interest rate of 4%. The District used the net bond proceeds to purchase U.S. government securities to advance refund $5,050,000 of the outstanding 2004 and 2005 general obligation bonds with interest rates ranging from 4.00% to 5.00%. These securities were deposited in an irrevocable trust to provide for all future debt service on the refunded portion of the 2004 and 2005 general obligation bonds. As a result, that portion of the 2004 and 2005 bonds is considered defeased, and the District has removed the liability from its accounts. The outstanding principal of all defeased bonds is $36,640,000 at June 30, The advance refunding reduced total debt service payments by $239,671 resulting in an economic gain (difference between the present values of the debt service payments on the old and new debt) of $234,723. Leqa I Debt Marqin Article Vl, Section 26(b), Constitution of Missouri, limits the outstanding amount of authorized general obligation bonds of a District to fifteen (15%) percent of the assessed valuation of the District (including State assessed railroad and utility). The legal debt margin, computed excluding the assessed valuation of State assessed railroad and utilities, of the District at June 30, 2014, was. Constitutional debt limit... General obligation bonds payable... Amount available in Debt Service Fund Legal Debt Margin $ 237,590,345 (256,146,241) 14,934,888 $_G*04008) A decrease in the assessed valuation caused the debt limit to decrease from $249,072,005 in 2013 to $237,590,345 in The District's net debt, which is the total bonds outstanding less the amount available in the Debt Service Fund, is above the constitutional limit, however, the debt was authorized prior to the decrease in assessed valuation and debt limit. Certificates of Participation The District has issued certificates of participation (COPS) evidencing interest in the right to receive rental payments to be paid by the District pursuant to an annually renewable lease-purchase agreement (the "Lease"). The proceeds of the certificates were used and will be used for the acquisition and installation of certain equipment in District buildings designed to reduce energy consumption or operating costs and increases in school safety and security ("Leased Property".) Pursuant to the lease, the District is leasing from the trustee the equipment acquired and installed in connection with the project. -32-

85 3. LONG-TERM DEBT (continued) LWOOD SCH NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30,2014 Certificates of lcontinued) The Lease provides for, among other things, Basic Rental Payments equal to the COPS proceeds. The Certificates are secured by a security interest in the Leased Property. ln addition, the Lease provides that the District's obligations are year to year and such obligations do not extend beyond the District's budgeted expenditures for any respective fiscal year. The District has the option to purchase the Trustee's interest in the Leased Property on any date at a purchase price equal to an amount to provide for the Basic Rent Payments on each Basic Rent Payment date through the term of the lease. Certificates of participation at June 30,2014, consist of: $8,310,000 Series 2006, due in varying installments through 2020, interest rates ranging between 5.3o/o to 5.65% $ 4,395,000 $3,700,000 Series 2011, due in varying installments through 2018, interest rates ranging between 2Vo to 3o/o $ 7,925,000 The following is a schedule of Basic Rent Payments under the Lease, assuming the agreement is renewed each year: Year Ending June 30, Principal lnterest Total $ 1,320,000 $ 1,365,000 1,410,000 2,235, , ,845 $ 250, , ,799 73,574 1,613,845 1,615,226 1,613,086 2,386, , $ 7,925,000 $ 1,010,224 $ 8,935,

86 HAZELWOOD S HOOL DISTRICT 4. RETIREMENT PLAN NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30,2014 The District contributes to the Public School Retirement System of Missouri (PSRS), a cost-sharing multiple-employer defined benefit pension plan. PSRS provides retirement and disability benefits to full-time (and certain part-time) certified employees and death benefits to members and beneficiaries. Positions covered by PSRS are not covered by Social Security. PSRS benefit provisions are set forth in Chapter of the Missouri Revised Statutes. The statutes assign responsibility for the administration of the system to a seven member Board of Trustees. PSRS issues a publicly available financial report that includes financial statements and required supplementary information. That report may be obtained by writing to: The Public School Retirement System of Missouri, P.O. Box 268, Jefferson City, Missouri, 65102, or by calling PSRS members are required to contribute 14.50% of their annual covered salary and certain benefits and the District is required to contribute a matching amount. The contribution requirements of members and the District are established and may be amended by the PSRS Board of Trustees. The District's contributions to PSRS for the years ended June 30, 2012 through June 30, 2014 were equalto the required contributions as listed in the table below. The District also contributes to The Public Education Employee Retirement System of Missouri (PEERS), a cost-sharing multiple-employer defined benefit pension plan. PEERS provides retirement and disability benefits to employees of the district who work 20 or more hours per week and who do not contribute to PSRS. Positions covered by PEERS are also covered by Social Security. Benefit provisions are set forth in Chapter of the Missouri Revised Statutes. The statutes assign responsibility for the administration of the system to the Board of Trustees of PSRS. PEERS issues a publicly available financial report that includes financial statements and required supplementary information, That report may be obtained by writing to: The Public Education Employee Retirement System of Missouri, P. O. Box 268, Jefferson City, Missouri, or by calling PEERS members are required to contribute 6,86% of their annual covered salary and certain benefits and the District is required to contribute a matching amount. The contribution requirements of members and the District are established and may be amended by the Board of Trustees. The District's contributions to PEERS for the years ended June 30, 2012 through June 30, 2014 were equal to the required contributions as listed in the table below, Year Ended June 30, PSRS PEERS $14,516,211 $13,968,100 $13,881, $2,348,741 $2,264,420 $2,303,616

87 5. EMPLOYEE BENEFIT PLANS OOL DISTRI NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30,2014 The District offers its employees tax-sheltered annuity programs created in accordance with lnternal Revenue Code Section 403(b). The plans, available to all District employees, permit them to defer a portion of their salary for investment purposes. The District also offers a Section 125 cafebria plan to all employees. Under this plan, the deferred portion can be used to purchase health insurance benefits. 6. DEFERRED COMPENSATION PLAN Employees of the District may participate in a deferred compensation plan adopted under the provisions of lnternal Revenue Code ("lrc") Section 457. The deferred compensation plan is available to all employees of the District. Under the plan, employees may elect to defer a portion of their salaries and avoid paying taxes on the deferred portion until the withdrawal date. The deferred compensation amount is not available for withdrawal by employees until termination, retirement, death or unforeseeable emergency. 7. INSURANCE PROGRAM The District, along with various other local school districts, participates in the Missouri United School lnsurance Council ("MUSlC"), an insurance association for workers' compensation, general liability, and property and casualty insurance. The purpose of MUSIC is to distribute the cost of self-insurance over similar entities. MUSIC requires an annual premium payment to cover estimated claims payable and reserves for claims from each entity. The members of MUSIC have no legal interest in the assets, liabilities, or fund balances of the insurance association. However, although MUSIC purchases stop-loss insurance for excessively large claims, the District retains a contingent liability to fund its pro rata share of any deficit incurred by MUSIC should it cease operations at some future date. The District's premium assessment from MUSIC for the year ended December 31, 2014, was $2,954,

88 HAZELWOOD SCHOOL DISTRICT NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, COMMITMENTS AND CONTINGENCIES The District is involved in various lawsuits at June 30,2014. ln the District's opinion, based on consultation with legal counsel, these items will be resolved with no material adverse effect on the District. The District has entered into leases for office equipment, print shop services and network upgrades. Future minimum lease payments are as follows: Year Endinq June 30, Total Total $ , , , $_0t42J03 The District receives Federal grants and State funding for specific purposes that are subject to review and audit. These reviews and audits could lead to request for reimbursement or to withholding of future funding for disallowed expenditures or other noncompliance with the terms of grants and funding. The District is not aware of any noncompliance with the Federal or State provisions that might require the District to provide reimbursement. Each year, the County remits ceilain unresolved tax payments to the District. When County refunds tax payments to those who are successful in their protests, it withholds the refunded amount from future distributions to taxing districts. Normal withholdings by the County are not material in relation to the District's financial position and results of operations. The District's remaining commitment for uncompleted work under its construction contracts totaled approximately $5,800,000 as of June 30,

89 HAZELWOOD OOL DISTRICT 9. POST EMPLOYMENT BENEFITS NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30,2014 ln addition to the pension benefits described in Note 4, the District allows employees who retire from the District to participate in the District's health, dental and life insurance plans. Upon meeting the retirement requirements per PSRS or PEERS, the employees can elect to participate in the District's plans. The retirees must pay for 100o/o of their coverage for each plan in which they elect to participate. The premiums are based on a single blended rate used for both active employees and retirees. The difference between the amount the retiree is required to pay and the actual cost to the district is considered to be a post employment benefit. The District has not established an irrevocable trust fund for the accumulation of resources for the future payment of benefits under the plan; benefits are paid on a pay as you go basis. A stand alone financial report is not available for the plan. During the current year, 844 retirees participated in the District's insurance plans and paid premiums totaling $3,009, FUTUREACCOUNTINGPRONOUNCEMENTS ln June 2012, GASB issued statement No. 68, Accounting and Financial Reporting or Pensions - An Amendment of GASB Statement No. 27, to improve accounting and financial reporting by state and local governments for pensions, and to improve information provided by state and local governmental employers about financial supporl or pensions that is provided by other entities. This statement establishes standards for measuring and recognizing liabilities, deferred outflows and inflows of resources, and expense/expenditures. The Statement further identifies the methods and assumptions that should be used to project benefit payments, discount projected benefit payments to their actual present value, and attribute the present value to periods of employee service. The District is required to implement this Statement for the year ended June 30, ln November 2013, GASB issued Statement No. 71, Pension Transition for Contributions Made Subsequent to the Measurement Date - An Amendment of GASB Statemenf No.68. This Statement requires a state or local government employer to recognize a net pension liability measured as of a date (the measurement date) no earlier than the end of its prior fiscal year. This Statement also requires recognition of deferred outflows and inflows of resources for changes in the net pension liability of a state or local government employer or non-employer contributing entity that arise from other types of events. The District is required to implement this Statement simultaneously with GASB Statement No

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91 MENTARY INFO

92 HAZELWOOD SCHOOL DISTRICT SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE - MODIFIED CASH BASIS - BUDGET AND ACTUAL - GENERAL FUND - UNAUDITED YEAR ENDED JUNE REVENUES: 1oca1..., County... State... Federal... Other... Budqeted Amounts Oriqinal Final $ 104,053,499 2,600,000 20,504,213 7,110, ,000 $ 90,135,251 2,262,748 15,663,158 9,237,655 2,800,000 Actual $ 89,868,705 2,280,342 15,658,673 9,319,546 3,028,998 Variance with Final Budget Favorable (Unfavorable) $ (266,546) 17,594 (4,485) 81, Total Revenues ,943, ,098, ,156,264 57,452 EXPENDITURES: lnstruction... Attendance.. Guidance... Health services... I mprovement of instruction Professional development Media services... Board of Education services... Executive administration... Building level administration... Business, fiscal and internal services... Operation of p ant...,. Security services... Pupil transportation... Food services... Central office support services... Adult continuing education Community services... 11,708, ,703 1,004,894 2,465,828 2,069, , ,175 1,143, ,421 3,728,421 2,430,965 21,051,187 2,798,994 6,379,621 6,748,394 s,599,364 3, ,504 13,238, ,318 1,315,195 2,577,548 1,076, , ,947 1,237, ,467 3,786,573 2,382,383 21,526,743 2,712,597 7,062,373 6,659,993 5,099,526 3, ,069 11,329,581 1,908, ,886 17,432 1,281,825 33,370 2,473, ,889 1,512,139 (435,39e) 254,306 6, ,330 29,617 1,250,250 (12,375) 852,357 2,110 3,819,572 (32,9ee) 2,274, ,827 21,912,983 (386,240) 2,713,038 (441) 7,310,406 (248,033) 6,762,641 (102,648) 5,884,855 (785,329) 2,325 1, Total Expenditures... EXCESS OF REVENUES OVER EXPENDtTURES... OTHER FINANCING USES: Transfers out... 69,587,171 71,532, ,073 65,356,465 48,566,682 48,965, ,525 (72, ) (58,761,162) (57,145,768\ 1,6 15,394 NET CHANGE IN FUND BALANCE... (7,059,e83) (10,194,480) (8,180,s61) 2,013,919 FUND BALANCE, BEGINNING OF YEAR. FUND BALANCE, END OF YEAR. 69,876, $ 62,816,421 $ 59, $ 61,406,604 $ 2,013,919 The accompanying note is an integral part of this schedule, -39-

93 HAZELWOOD SCHOOL DISTRICT SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE - MODIFIED CASH BASIS - BUDGET AND ACTUAL - SPECIAL REVENUE FUND - UNAUDITED YEAR ENDED JUNE REVENUES: loca1... County... State... Federal... Budqeted Amounts Oriqinal Final $ 5,973, ,000 40,487,200 4,288,492 $ 15,672, ,925 44,594,727 3,67 1,836 Actual $ 15,838, ,925 44,712,785 3,578,220 Variance with Final Budget Favorable (Unfavorable) $ 165,624 Total Revenues EXPENDITURES: lnstruction... Guidance... Health services... lmprovement of instruction... Professional development... Media services... Executive administration... Building level administration... Security services... Central office support services Community services... 50,998,772 64,293,426 64,483,492 98,773,496 4,738,114 3,710, ,558 2,877,018 1,522,071 7,898, ,007,767 4,884, ,398 3,394, ,662 2,867,934 1,786,337 7,969,962 99,017,973 4,778,533 92,564 3,196, ,616 2,915,470 1,790,594 7,900,435 5, , , , ,173, , ,921 83, ,658 (16,e54) (47,536) (4,257) 69,527 (5, I 07) (8,664) 61,112 Total Expenditures.... EXCESS OF REVENUES OVER (UNDER) EXPENDITURES... OTHER FINANCING SOURCES: Transfers in...,, ,415, ,054, ,629,260 1, (72,416,448) (58,761,162) (57,145,768) 1,615,394 72,416,448 58,761J62 57,145,768 (1,615,394) NET CHANGE IN FUND BALANCE. FUND BALANCE, BEGINNING OF YEAR... FUND BALANCE, END OF YEAR $ $ $ $ The accompanying note is an integral part of this schedule -40-

94 HAZELWOOD SCHOOL DISTRICT SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE - MODIFIED CASH BASIS - BUDGET AND ACTUAL - DEBT SERVICE FUND - UNAUDITED YEAR ENDED JUNE 30,2014 REVENUES Loca1... County... Federal... Budgeted Amounts Oriqinal Final $ 15,426,947 $ 14,827, , ,215 1, Actual I 14,924, ,621 1,159,493 Variance with Final Budget Favorable (Unfavorable) $ 96,927 (17,594) 1 Total Revenues 15,871,947 16,386,056 16,465,390 79,334 EXPENDITURES: Debt service: Principal retirements lnterest... Other charges... 7,430,100 11,210,243 10,000 7,430,100 12,094,449 39,791 7,430,100 12,094,448 31, ,133 Total Expenditures EXCESS OF REVENUES OVER (UNDER) EXPENDITURES... other FTNANCTNG SOURCES (USES): Refunding bonds... Premium on sale of bonds... Payment to refunded bond escrow agent. NET CHANGE IN FUND BAIANCE. 18,650,343 19,564,340 19,556,206 (2,778,396) (3,178,284) (3,090,816) 4,985, ,581 (5,394,790) 29,791 (2,778,396) (3,148,493) (3,061,025) 8,134 71,200 71,200 FUND BALANCE, BEGINNING OF YEAR... 18,109,393 17,995,913 17,995,913 FUND BAI.ANCE, END OF YE4R... $ ts, $ 14,847,420 $ 14,934,888 $ The accompanying note is an integral part of this schedule -41 -

95 HAZELWOOD SCHOOL DISTR.ICT SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE - MODIFIED CASH BASIS - BUDGET AND ACTUAL - CAPITAL PROJECTS FUND - UNAUDITED YEAR ENDED JUNE 30,2014 REVENUES Loca... State... Federal... Budgeted Amounts Oriqinal Final $ 2,306, , ,766 $ 4,191,089 1,274, ,560 $ Actual 4,156,179 1,299, ,974 Variance with Final Budget Favorable (Unfavorable) $ (34,e10) 24,942 48,414 Total Revenues.. 3,067,376 5,821,084 5,859,530 38,446 EXPENDITURES: Capital out ay... Debt service: Principal retirements. lnterest... Other charges... Total Expenditures. 1,896,341 4,198,607 4,035,521 1,280, ,535 7,500 1,280, ,535 9,942 3,527,376 5,832, ,086 1,280, ,535 I ,087 EXCESS OF REVENUES OVER (UNDER) EXPENDITURES... (460,000) (1 1,000) 190, ,533 OTHER FINANCING SOURCES: Sale of other property , , ,000 22, NET CHANGE IN FUND BALANCE... (450,000) 213, ,457 FUND BALANCE, BEGINNING OF YEAR. 6,076,641 6, 523,000 6,523,000 FUND BALANCE, END OF YE4R... $ 5,626,641 $ 6,523,000 $ 6, $ 213,457 The accompanying note is an integral part of this schedule -42-

96 HAZELWOOD SCHOOL DISTRICT SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE - MODIFIED CASH BASIS - BUDGET AND ACTUAL - 2O1O BOND ISSUE FUND - UNAUDITED YEAR ENDED JUNE 30,2014 EXPENDITURES: Debt service: Bond issuance costs..,... $ Budqeted Amounts Oriqinal Final $ee Actual $ ee$ Variance with Final Budget Favorable (Unfavorable) NET CHANGE IN FUND BALANCE... FUND BALANCE, BEGINNING OF YEAR... (ee) 99 (ee) 99 FUND BALANCE, END OF YEAR.. $ $ $ $ The accompany ng note is an integral part of this schedule -43-

97 HAZELWOOD SCHOOL DISTRICT SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BAI.ANCE - MODIFIED CASH BASIS - BUDGET AND ACTUAL.2012 BOND ISSUE FUND - UNAUDITED YEAR ENDED JUNE REVENUES: Loca1... Budoeted Amounts Original Final $ 5,ooo $ $ Actual Variance with Final Budget Favorable (Unfavorable) $ EXPENDITURES: Capital out ay..,... I,086, ,547,218 NET CHANGE IN FUND BAIANCE (1,081,159) (3,547,218) FUND BALANCE, BEGINNING OF YEAR ,547,218 FUND BALANCE, END OF YEAR... $ $- $ The accompanying note is an integral part of this schedule. -44-

98 HAZELWOOD SCHOOL DISTRICT SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BAIANCE. MODIFIED CASH BASIS - BUDGET AND ACTUAL BOND ISSUE FUND - UNAUDITED YEAR ENDED JUNE 30,2014 REVENUES Loca... $ Budgeted Amounts Oriqinal Final $ 5,850 Actual $ 5,823 Variance with Final Budget Favorable (Unfavorable) $ (27) EXPENDITURES: Capital outlay... Debt service: Other charges. 34,043,040 40,448,330 34,232, ,858 6,215,916 Total Expenditures.. EXCESS OF REVENUES UNDER EXPENDITURES... 34,043,040 40,637, ,215,916 (34,043,040) (40,631,338) (34,415,449) 6,215,889 OTHER FINANCING SOURCES: Sale of bonds... Premium on sale of bonds.,... 40,000,000 40,000,000 39,999,121 2,109,797 42J08,918 39,999,121 2,109,797 42,108,918 NET CHANGE IN FUND BALANCE 5,956,960 1,477,580 7,693,469 6,215,889 FUND BALANCE, BEGINNING OF YEAR. FUND BAIANCE, END OF YE4R... $s, $ 1,477,580 $ 7,693,469 $6, The accompanying note is an integral part of this schedule -45-

99 D SCHOOL DISTRI NOTE TO SUPPLEMENTARY INFORMATION JUNE 30,2014 Budoets and B rv Accountino The District follows these procedures in establishing the budgetary data reflected in the financial statements: 1 ln accordance with Chapter 67 RSMo, the District adopts a budget for each fund Prior to July, the Superintendent, who serves as the budget officer, submits to the Board of Education a proposed budget for the fiscal year beginning on the following July 1. The proposed budget includes estimated revenues and proposed expenditures for all District funds. Budgeted expenditures cannot exceed beginning available monies plus estimated revenues for the year. A public hearing is conducted to obtain taxpayer comments. Prior to its approval by the Board of Education, the budget document is available for public inspection, Prior to July 1, the budget is legally enacted by a vote of the Board of Education. Subsequent to its formal approval of the budget, the Board of Education has the authority to make necessary adjustments to the budget by formal vote of the Board. Adjustments made during the year are reflected in the final budgeted amounts. Budgeted amounts are as originally adopted on June 11, 2013, or as amended by the Board of Education on June 17,2014. o 7 Budgets are adopted on the modified cash basis of accounting. Lapsing of Appropriations - At the close of each year, all unspent appropriations revert to the respective funds from which they were appropriated and become subject to future appropriation. -46-