$9,920,000 SCHOOLCRAFT COLLEGE STATE OF MICHIGAN 2018 COLLEGE FACILITY BONDS (GENERAL OBLIGATION - LIMITED TAX)

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1 New Issue Book-Entry-Only Moody s ¹: Aa1 TAX STATUS: In the opinion of Thrun Law Firm, P.C., Bond Counsel, assuming continued compliance by the College with certain requirements of the Internal Revenue Code of 1986, as amended (the Code ), interest on the Bonds is excluded from gross income for federal income tax purposes, as described in the opinion, and the Bonds and interest thereon are exempt from all taxation in the State of Michigan, except inheritance and estate taxes and taxes on gains realized from the sale, payment or other disposition thereof. The College has designated the Bonds as QUALIFIED TAX-EXEMPT OBLIGATIONS within the meaning of the Code, and has covenanted to comply with those requirements of the Code necessary to continue the exclusion of interest on the Bonds from gross income for federal income tax purposes. $9,920,000 SCHOOLCRAFT COLLEGE STATE OF MICHIGAN 2018 COLLEGE FACILITY BONDS (GENERAL OBLIGATION - LIMITED TAX) PURPOSE AND SECURITY: The 2018 College Facility Bonds (General Obligation - Limited Tax) (the Bonds ) were authorized by the Board of Trustees of Schoolcraft College, State of Michigan (the College ) by a resolution adopted on November 14, 2018 (the Resolution ) for the purpose of acquiring, purchasing, constructing, developing, improving, equipping and furnishing lands and buildings for College purposes. The Bonds are issued under the provisions of Act 331, Public Acts of Michigan, 1966, as amended. The College has pledged the limited tax full faith and credit of the College for the payment of principal and interest on the Bonds. The College has further pledged to levy sufficient ad valorem taxes within its authorized millage annually, as a first budget obligation, said levy must be subject to constitutional, statutory and charter tax rate limitations. The College not having the power to levy taxes for the payment of the Bonds in excess of its constitutional, statutory or charter tax rate limitation, the Bonds will be limited tax general obligations of the College, and, if tax collections are insufficient to pay the principal of or interest on the Bonds when due, subordinate only to any first liens on said funds pledged for the payment of operating notes, lines of credit or tax anticipation notes heretofore or hereafter issued and, if taxes are insufficient to pay the Bonds when due, the College pledges to use any and all other resources available for the payment of the Bonds. The College has reserved the right to issue additional bonds of equal standing. BOOK-ENTRY-ONLY: The Bonds are issuable only as fully registered bonds without coupons and, when issued, will be registered in the name of Cede & Co., as Bondholder and nominee for The Depository Trust Company ( DTC ), New York, New York. DTC will act as securities depository for the Bonds. Purchases of beneficial interests in the Bonds will be made in book entry only form in the denomination of $5,000 or any integral multiple thereof. Purchasers of beneficial interests in the Bonds (the Beneficial Owners ) will not receive certificates representing their beneficial interest in Bonds purchased. So long as Cede & Co. is the Bondholder, as nominee of DTC, references herein to the Bondholders or registered owners shall mean Cede & Co., as aforesaid, and shall not mean the Beneficial Owners of the Bonds. See BOOK-ENTRY ONLY SYSTEM herein. PAYMENT OF BONDS: Principal of and interest on the Bonds will be paid by U.S. Bank National Association, Detroit, Michigan (the Paying Agent ). So long as DTC or its nominee, Cede & Co., is the Bondholder, such payments will be made directly to such Bondholder. Disbursement of such payments to the DTC Participants is the responsibility of DTC and disbursement of such payments to the Beneficial Owners is the responsibility of the DTC Participants and Indirect Participants, as more fully described herein. Interest will be payable semiannually on May 1 and November 1, commencing May 1, 2019, to the Bondholders of record as of the applicable record dates herein described. Dated: December 20, 2018 Principal Due: May 1, years shown below (Base CUSIP : ) CUSIP Numbers AR3 AS1 AT9 AU6 AV4 AW2 AX0 AY8 AZ5 BA9 Year Interest Rate 3.000% Amount $210, , , , , , , , , ,000 Yield 1.900% CUSIP Numbers BB7 BC5 BD3 BE1 BF8 BG6 BH4 BJ0 BK7 Year Amount $540, , , , , , , , ,000 Interest Rate 3.000% Yield 3.000% Baird PRIOR REDEMPTION: Bonds of this issue maturing in years 2029 and thereafter, shall be subject to redemption at the option of the College prior to maturity as described in PRIOR REDEMPTION Optional Redemption herein. BOND COUNSEL: The Bonds will be offered when, as and if issued by the College subject to the approving legal opinion of Thrun Law Firm, P.C., East Lansing, Michigan. This cover page contains information for a quick reference only. It is not a summary of this issue. Investors must read the entire Official Statement to obtain information essential to the making of an informed investment decision. Additional information relative to this Bond issue may be obtained from: PFM Financial Advisors LLC 555 Briarwood Circle, Suite 333 Ann Arbor, MI This Official Statement is dated December 6, For an explanation of the rating, see RATING herein. ¹ As of date of delivery. Copyright 2018, American Bankers Association. CUSIP data herein is provided by CUSIP Global Services, managed on behalf of the American Bankers Association by S&P Global Marketing Intelligence. The College shall not be responsible for the selection of CUSIP numbers, nor any representation made as to their correctness on the Bonds or as indicated above.

2 SCHOOLCRAFT COLLEGE Haggerty Rd Livonia, Michigan Phone: (734) Fax: (734) BOARD OF TRUSTEES Chair Brian D. Broderick Vice Chair Carol M. Strom Secretary Gretchen Alaniz Treasurer Eric Stempien Trustees William P. Erwin, Jr. Joan A. Gebhardt Terry Gilligan ADMINISTRATION President Dr. Conway A. Jeffress Vice President and Chief Financial Officer Dr. Glenn Cerny Controller and Director of Financial Operations Jon Lamb PROFESSIONAL SERVICES Bond Counsel... Thrun Law Firm, P.C. East Lansing, Michigan Financial Advisor... PFM Financial Advisors LLC Ann Arbor, Michigan Paying Agent... U.S. Bank National Association Detroit, Michigan i

3 No dealer, broker, salesperson or other person has been authorized by the College to give any information or to make any representations, other than those contained in the Official Statement. This Official Statement does not constitute any 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 jurisdiction in which it is unlawful for such person to make such offer, solicitation or sale. The information, estimates 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 affairs of the College since the date hereof. This Official Statement is submitted in connection with the sale of the securities referred to herein and may not be reproduced or used, in whole or in part, for any other purpose. This Official Statement and any addenda thereto were prepared relying on information of the College and other sources and are believed to be reliable. In making an investment decision, investors must rely on their own examination of the College s financial records, and the terms of the offering, including the merits and risks involved. ii

4 TABLE OF CONTENTS INTRODUCTION... 1 INTEREST... 1 PRIOR REDEMPTION... 1 A. Optional Redemption... 1 B. Notice of Redemption and Manner of Selection... 1 NOTICE OF SALE... 1 PURPOSE AND SECURITY... 1 ESTIMATED SOURCES AND USES OF FUNDS... 2 TAX PROCEDURES... 2 MICHIGAN PROPERTY TAX REFORM... 2 BOOK-ENTRY-ONLY SYSTEM... 3 PAYING AGENT AND BOND REGISTRATION... 4 TRANSFER OUTSIDE BOOK-ENTRY-ONLY SYSTEM... 5 LITIGATION... 5 TAX MATTERS... 5 State... 5 Federal... 5 Original Issue Discount... 6 Original Issue Premium... 6 Future Developments... 6 MUNICIPAL FINANCE QUALIFYING STATEMENT... 6 BOND COUNSEL S RESPONSIBILITY... 6 MUNICIPAL ADVISOR... 7 CONTINUING DISCLOSURE... 7 RATING... 8 OTHER MATTERS... 8 APPENDIX A: APPENDIX B: APPENDIX C: APPENDIX D: APPENDIX E APPENDIX F GENERAL FINANCIAL, ECONOMIC & COLLEGE INFORMATION GENERAL FUND BUDGET SUMMARY AND COMPARATIVE FINANCIAL STATEMENTS AUDITED FINANCIAL STATEMENTS FORM OF LEGAL OPINION FORM OF CONTINUING DISCLOSURE AGREEMENT DRAFT OFFICIAL NOTICE OF SALE AND ADDENDUM iii

5 $9,920,000 SCHOOLCRAFT COLLEGE STATE OF MICHIGAN 2018 COLLEGE FACILITY BONDS (GENERAL OBLIGATION - LIMITED TAX) INTRODUCTION The purpose of this Official Statement, which includes the cover page and Appendices, is to furnish information in connection with the issuance and sale by Schoolcraft College, State of Michigan (the "College") of its 2018 College Facility Bonds (General Obligation Limited Tax) (the "Bonds"). INTEREST Interest on the Bonds will be payable on May 1, 2019 and semiannually on the 1st day of each November and May thereafter. Interest will be computed on the basis of a 360-day year of twelve 30-day months. PRIOR REDEMPTION A. Optional Redemption Bonds of this issue maturing in the years 2020 through 2028, inclusive, shall not be subject to redemption prior to maturity. Bonds or portions of Bonds in multiples of $5,000 of this issue maturing in the year 2029 and thereafter shall be subject to redemption prior to maturity, at the option of the College, in such order as the College may determine and by lot within any maturity, on any date occurring on or after May 1, 2028, at par and accrued interest to the date fixed for redemption. B. Notice of Redemption and Manner of Selection Notice of redemption of any Bond shall be given not less than thirty (30) days and not more than sixty (60) days prior to the date fixed for redemption by mail to the Registered Owner at the registered address shown on the registration books kept by the Paying Agent. Bonds shall be called for redemption in multiples of $5,000 and Bonds of denominations of more than $5,000 shall be treated as representing the number of Bonds obtained by dividing the denomination of the Bond by $5,000 and such Bonds may be redeemed in part. The notice of redemption for Bonds redeemed in part shall state that upon surrender of the Bond to be redeemed a new Bond or Bonds in an aggregate principal amount equal to the unredeemed portion of the Bond surrendered shall be issued to the Registered Owner thereof. No further interest payment on the Bonds or portions of Bonds called for redemption shall accrue after the date fixed for redemption, whether presented for redemption, provided funds are on hand with the Paying Agent to redeem the same. If less than all of the Bonds of any maturity shall be called for redemption prior to maturity unless otherwise provided, the particular Bonds or portions of Bonds to be redeemed shall be selected by the Paying Agent, in such manner as the Paying Agent in its discretion may deem proper, in the principal amounts designated by the College. Upon presentation and surrender of such Bonds at the corporate trust office of the Paying Agent, such Bonds shall be paid and redeemed. NOTICE OF SALE See APPENDIX F - DRAFT OFFICIAL NOTICE OF SALE AND ADDENDUM. PURPOSE AND SECURITY The Bonds were authorized by the Board of Trustees of the College by a resolution adopted on November 14, 2018 (the Resolution ) for the purpose of acquiring, purchasing, constructing, developing, improving, equipping and furnishing lands and buildings for College purposes. The Bonds are issued under the provisions of Act 331, Public Acts of Michigan, 1966, as amended. The College has pledged the limited tax full faith and credit of the College for the payment of principal and interest on the Bonds. The College has further pledged to levy sufficient ad valorem taxes within its authorized millage annually, as a first budget obligation, said levy must be subject to constitutional, statutory and charter tax rate limitations. The College not having the power to levy taxes for the payment of the Bonds in excess of its constitutional, statutory or charter tax rate limitation, the Bonds will be limited tax general obligations of the College, and, if tax collections are insufficient to pay the principal of or interest on the Bonds when due, subordinate only to any first liens on said funds pledged for the payment of operating notes, lines of credit or tax anticipation notes heretofore or hereafter issued and, if taxes are insufficient to pay the Bonds when due, the College 1

6 pledges to use any and all other resources available for the payment of the Bonds. The College has reserved the right to issue additional bonds of equal standing. ESTIMATED SOURCES AND USES OF FUNDS TAX PROCEDURES Sources of Funds: Par Value of Bonds $9,920, Original Issue Premium/Discount 77, TOTAL SOURCES $9,997, Uses of Funds: Capital Projects Fund $9,795, Underwriter s Discount 127, Costs of Issuance 74, TOTAL USES $9,997, Article IX, Section 3, of the Michigan Constitution provides that the proportion of true cash value at which property shall be assessed shall not exceed 50% of true cash value. The Michigan Legislature by statute has provided that property shall be assessed at 50% of its true cash value, except as described below. The Michigan Legislature or the electorate may at some future time reduce the percentage below 50% of true cash value. On March 15, 1994, the electors of the State approved an amendment to the Michigan Constitution permitting the Legislature to authorize ad valorem taxes on a non-uniform basis. The legislation implementing this constitutional amendment added a new measure of property value known as "Taxable Value." Beginning in 1995, taxable property has two valuations -- State equalized valuation ("SEV") and Taxable Value. Property taxes are levied on Taxable Value. Generally, Taxable Value of property is the lesser of (a) the Taxable Value of the property in the immediately preceding year, adjusted for losses, and increased by the lesser of the inflation rate or 5%, plus additions, or (b) the property's current SEV. Under certain circumstances, therefore, the Taxable Value of property may be different from the same property's SEV. When property is sold or transferred, Taxable Value is adjusted to the SEV, which under existing law is 50% of the current true cash value. The Taxable Value of new construction is equal to current SEV. Taxable Value and SEV of existing property are also adjusted annually for additions and losses. Responsibility for assessing taxable property rests with the local assessing officer of each township and city. Any property owner may appeal the assessment to the local board of review, the Michigan Tax Tribunal, and ultimately to the Michigan courts. The Michigan Constitution also mandates a system of equalization for assessments. Although the assessors for each local unit of government within a county are responsible for actually assessing at 50% of true cash value, adjusted for Taxable Value purposes, the final SEV and Taxable Value are arrived at through several steps. Assessments are established initially by the municipal assessor. Municipal assessments are then equalized to the 50% levels as determined by the county's department of equalization. Thereafter, the State equalizes the various counties in relation to each other. SEV is important, aside from its use in determining Taxable Value for the purpose of levying ad valorem property taxes, because of its role in the spreading of taxes between overlapping jurisdictions, the distribution of various State aid programs, State revenue sharing and in the calculation of debt limits. Property that is exempt from property taxes (e.g., churches, government property, public schools) is not included in the SEV and Taxable Value data in the Official Statement. Property granted tax abatements under Act 198, Public Acts of Michigan, 1974, amended, is recorded on a separate tax roll while subject to tax abatement. The valuation of tax-abated property is based upon SEV but is not included in either the SEV or Taxable Value data in the Official Statement except as noted. Under limited circumstances, other state laws permit the partial abatement of certain taxes for other types of property for periods of up to 12 years. MICHIGAN PROPERTY TAX REFORM On November 5, 2013, March 28, 2014, and April 1, 2014, Governor Snyder signed into law a package of bills amending and replacing legislation enacted in 2012 to phase-out most personal property taxes in Michigan. The bills were contingent on Michigan voters approving a ballot question authorizing a new municipal entity, the Local Community Stabilization Authority ("LCSA"), to levy a local component of the statewide use tax and distribute that revenue to local units of government to offset their revenue losses resulting from the personal property tax reform. On August 5, 2014, voters approved that ballot question. 2

7 The bill package, together with the original 2012 legislation, created two new exemptions from the personal property tax. Under the "small taxpayer exemption," the commercial and industrial personal property of each owner with a combined true cash value in a local tax collecting unit of less than $80,000 is exempt from ad valorem taxes in that collecting unit beginning in For businesses that do not qualify for the "small taxpayer exemption," all "eligible manufacturing personal property" (personal property used more than 50% of the time in industrial processing or direct integrated support) purchased and placed into service before 2006 or during or after 2013 became exempt beginning in Taxation on "eligible manufacturing personal property" placed into service after 2006 but before 2013 is being phased-out over time; with the exemption taking effect after the property has been in service for the immediately preceding 10 years. The legislation extends certain personal property tax exemptions and tax abatements for technology parks, industrial facilities and enterprise zones that were to expire after 2012, until the voter-approved personal property tax exemptions take effect. Pursuant to voter approval in August 2014, the legislation also includes formulas to reimburse municipalities, including community colleges, for 100% of their calculated lost operating millage revenue. To provide the reimbursement, the legislation reduces the state share of the use tax and authorizes the LCSA to levy a local component of the use tax and distribute that revenue to qualifying local units. While the legislation provides reimbursement for prospective municipality operating losses, municipalities will only be reimbursed for ad valorem property taxes and any specific tax levied for the payment of obligations incurred before January 1, 2013 pledging the unlimited or limited tax power of the municipality. For the and fiscal years, the State of Michigan appropriated funds to the LCSA to reimburse municipalities for such debt losses. Because the Bonds are not to be incurred before January 1, 2013, the College will not be reimbursed for debt millage revenue it could have otherwise generated without the exemptions to make payments on the Bonds. BOOK-ENTRY-ONLY SYSTEM The information in this section has been furnished by The Depository Trust Company, New York, New York ("DTC"). No representation is made by the College or the Paying Agent as to the completeness or accuracy of such information or as to the absence of material adverse changes in such information subsequent to the date hereof. No attempt has been made by the College, the Paying Agent or the Underwriter to determine whether DTC is or will be financially or otherwise capable of fulfilling its obligations. Neither the College nor the Paying Agent will have any responsibility or obligation to DTC Participants, Indirect Participants (both as defined below) or the persons for which they act as nominees with respect to the Bonds, or for any principal, premium, if any, or interest payment thereof. 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, 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 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 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 3

8 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 Bonds, except in the event that use of the book-entry system for the Bonds is discontinued. To facilitate subsequent transfers, all Bonds deposited by Direct Participants with DTC are registered in the name of DTC's partnership nominee, Cede & Co., or such other name as may be requested by an authorized representative of DTC. The deposit of Bonds with DTC and their registration in the name of Cede & Co. or such other DTC nominee do not effect any change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the Bonds; DTC's records reflect only the identity of the Direct Participants to whose accounts such Bonds are credited, which may or may not be the Beneficial Owners. The Direct and Indirect Participants will remain responsible for keeping account of their holdings on behalf of their customers. Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. 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 shall be sent to DTC. If less than all of the Bonds within an issue are being redeemed, DTC's practice is to determine by lot the amount of the interest of each Direct Participant in such issue to be redeemed. Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to Bonds unless authorized by a Direct Participant in accordance with DTC's MMI Procedures. Under its usual procedures, DTC mails an Omnibus Proxy to the College 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, interest and redemption amounts, if any, 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 College or the Paying Agent, on the payable date in accordance with their respective holdings shown on DTC's records. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered in "street name," and will be the responsibility of such Participant and not of DTC (nor its nominee), Paying Agent, or College, subject to any statutory or regulatory requirements as may be in effect from time to time. Payments of principal, interest and redemption amounts, if any, to Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) are the responsibility of the College or Paying Agent, disbursement of such payments to Direct Participants shall be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners shall be the responsibility of Direct and Indirect Participants. DTC may discontinue providing its services as depository with respect to the Bonds at any time by giving reasonable notice to the College or 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 College 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. PAYING AGENT AND BOND REGISTRATION Principal and interest shall be payable and the Bonds shall be registered and transferred as described under the heading BOOK-ENTRY-ONLY SYSTEM above until the book-entry only system is discontinued. The College has appointed the Paying Agent shown on the cover. In the event the book-entry only system is discontinued, the Paying Agent will also act as bond registrar and transfer agent. 4

9 TRANSFER OUTSIDE BOOK-ENTRY-ONLY SYSTEM In the event that the book-entry-only system is discontinued, the following provisions would apply to the Bonds. The Paying Agent shall keep the registration books for the Bonds (the Bond Register ) at its corporate trust office. Subject to the further conditions contained in the Resolutions, the Bonds may be transferred or exchanged for one or more Bonds in different authorized denominations upon surrender thereof at the corporate trust office of the Paying Agent by the registered owners or their duly authorized attorneys; upon surrender of any Bonds to be transferred or exchanged, the Paying Agent shall record the transfer or exchange in the Bond Register and shall authenticate replacement bonds in authorized denominations; during the fifteen (15) days immediately preceding the date of mailing (the Record Date ) of any notice of redemption or any time following the mailing of any notice of redemption, the Paying Agent shall not be required to effect or register any transfer or exchange of any Bond which has been selected for such redemption, except the Bonds properly surrendered for partial redemption may be exchanged for new Bonds in authorized denominations equal in the aggregate to the unredeemed portion; the College and Paying Agent shall be entitled to treat the registered owners of the Bonds, as their names appear in the Bond Register as of the appropriate dates, as the owners of such Bonds for all purposes under the Resolutions. No transfer or exchange made other than as described above and in the Resolutions shall be valid or effective for any purposes under the Resolutions. LITIGATION The College has not been served with any litigation, administrative action or proceeding, and to the knowledge of the appropriate officials of the College no litigation or administrative action or proceeding has been threatened against it, seeking to restrain or enjoin the issuance and delivery of the Bonds, or questioning or contesting the validity of the Bonds or the proceedings or authorities under which they are authorized to be issued, sold, executed and delivered or that would materially impact the College finances or their ability to meet the debt service obligations on the Bonds. A certificate to such effect will be delivered to the Purchaser at the time of the original delivery of the Bonds. TAX MATTERS State In the opinion of Thrun Law Firm, P.C., East Lansing, Michigan ("Bond Counsel"), based on its examination of the documents described in its opinion, under existing State of Michigan statutes, regulations, rulings and court decisions, the Bonds and the interest thereon are exempt from all taxation in the State of Michigan, except inheritance and estate taxes and taxes on gains realized from the sale, payment or other disposition thereof. Federal In the opinion of Bond Counsel, based upon its examination of the documents described in its opinion, under existing statutes, regulations, rulings and court decisions, the interest on the Bonds is excluded from gross income for federal income tax purposes and is not an item of tax preference for purposes of the federal alternative minimum tax imposed on individuals. The opinions set forth in the preceding sentence are subject to the condition that the College comply with all requirements of the Internal Revenue Code of 1986, as amended (the "Code"), that must be satisfied subsequent to the issuance of the Bonds in order that interest thereon be, or continue to be, excluded from gross income for federal income tax purposes. The College has covenanted to comply with such requirements. Failure to comply with certain of such requirements may cause the inclusion of interest on the Bonds in gross income for federal income tax purposes to be retroactive to the date of issuance of the Bonds. Bond Counsel will express no opinion regarding other federal tax consequences with respect to the Bonds. There are additional federal tax consequences relative to the Bonds and the interest thereon. The following is a general description of some of these consequences but is not intended to be complete or exhaustive and investors should consult with their tax advisors with respect to these matters. Prospective purchasers of the Bonds should be aware that (i) interest on the Bonds is included in the effectively connected earnings and profits of certain foreign corporations for purposes of calculating the branch profits tax imposed by Section 884 of the Code, (ii) interest on the Bonds may be subject to a tax on excess net passive income of certain S Corporations imposed by Section 1375 of the Code, (iii) interest on the Bonds is included in the calculation of modified adjusted gross income for purposes of determining the taxability of social security or railroad retirement benefits, (iv) the receipt of interest on the Bonds by life insurance companies may affect the federal tax liability of such companies, (v) in the case of property and casualty insurance companies, the amount of certain loss deductions otherwise allowed is reduced by a specific percentage of, among other things, interest on the Bonds, (vi) holders of the Bonds may not deduct interest on indebtedness incurred or continued to purchase or carry the Bonds, and (vii) commercial banks, thrift institutions and other financial institutions may deduct their costs of carrying certain obligations such as the Bonds. 5

10 Original Issue Discount The initial public offering prices of certain Bonds, as set forth on the cover page of this Official Statement, may be less than the stated redemption prices at maturity (hereinafter referred to as the "OID Bonds"), and, to the extent properly allocable to each owner of such OID Bond, the original issue discount is excludable from gross income for federal income tax purposes with respect to such owner. Original issue discount is the excess of the stated redemption price at maturity of an OID Bond over the initial offering price to the public (excluding bond houses and brokers) at which price a substantial amount of the OID Bonds were sold. Under Section 1288 of the Code, original issue discount on tax-exempt bonds accrues on a compound basis. For an owner who acquires an OID Bond in this offering, the amount of original issue discount that accrues during any accrual period generally equals (i) the issue price of such OID Bond plus the amount of original issue discount accrued in all prior accrual periods, multiplied by (ii) the yield to maturity on such OID Bond (determined on the basis of compounding at the close of each accrual period and properly adjusted for the length of the accrual period), less (iii) any interest payable on such OID Bond during such accrual period. The amount of original issue discount so accrued in a particular accrual period will be considered to be received ratably on each day of the accrual period, will be excluded from gross income for federal income tax purposes, and will increase the owner's tax basis in such OID Bond. Any gain realized by an owner from a sale, exchange, payment or redemption of an OID Bond would be treated as gain from the sale or exchange of such OID Bond. Owners of OID Bonds should consult with their individual tax advisors to determine whether the application of the original issue discount federal regulations will require them to include, for state and local income tax purposes, an amount of interest on the OID Bonds as income even though no corresponding cash interest payment is actually received during the tax year. Original Issue Premium For federal income tax purposes, the initial offering prices to the public (excluding bond houses and brokers) of certain Bonds, as set forth on the cover of this Official Statement, may be greater than the stated redemption prices at maturity (the "Premium Bonds"), and constitutes for the original purchasers of the Premium Bonds an amortizable bond premium. Such amortizable bond premium is not deductible from gross income. The amount of amortizable bond premium allocable to each taxable year is generally determined on the basis of a taxpayer's yield to maturity determined by using the taxpayer's basis (for purposes of determining loss on sale or exchange) of such Premium Bonds and compounding at the close of each six-month accrual period. The amount of amortizable bond premium allocable to each taxable year is deducted from the taxpayer's adjusted basis of such Premium Bonds to determine taxable gain upon disposition (including sale, redemption or payment on maturity) of such Premium Bonds. Future Developments No assurance can be given that any future legislation or clarifications or amendments to the Code, if enacted into law, will not contain proposals which could cause the interest on the Bonds to be subject directly or indirectly to federal or state income taxation, adversely affect the market price or marketability of the Bonds, or otherwise prevent bondholders from realizing the full current benefit of the status of the interest thereon. Furthermore, no assurance can be given that the impact of any future court decisions will not cause the interest on the Bonds to be subject directly or indirectly to federal or state income taxation, adversely affect the market price or marketability of the Bonds, or otherwise prevent bondholders from realizing the full current benefit of the status of the interest thereon. It is to be understood that the rights of the holders of the Bonds and the enforceability thereof may be subject to bankruptcy, insolvency, reorganization, moratorium and other similar laws affecting creditors' rights heretofore or hereafter enacted to the extent constitutionally applicable and that their enforcement may also be subject to the exercise of judicial discretion in appropriate cases. INVESTORS SHOULD CONSULT WITH THEIR TAX ADVISORS AS TO THE TAX CONSEQUENCES OF THEIR ACQUISITION, HOLDING OR DISPOSITION OF THE BONDS, INCLUDING THE TREATMENT OF ORIGINAL ISSUE PREMIUM AND ORIGINAL ISSUE DISCOUNT. MUNICIPAL FINANCE QUALIFYING STATEMENT The Michigan Department of Treasury has determined that the College is in material compliance with the criteria identified in the Revised Municipal Finance Act 34, Public Acts of Michigan, 2001, as amended, for a municipality to be granted qualified status. The College may therefore proceed to issue the Bonds without further approval from the Department of Treasury of the State of Michigan. BOND COUNSEL S RESPONSIBILITY Bond Counsel has reviewed the statements made in this Official Statement under the headings Interest, Prior Redemption, Purpose and Security, Transfer Outside Book-Entry-Only System, Tax Matters, 6

11 Municipal Finance Qualifying Statement, Bond Counsel s Responsibility, and Continuing Disclosure (first two paragraphs only). Except as otherwise disclosed on pages herein, Bond Counsel has not been retained to review and has not reviewed any other portion of this Official Statement for accuracy or completeness, and has not made inquiry of any official or employee of the College or any other person and has not made independent verification of such other portions hereof, and further has not expressed and will not express an opinion as to the portions hereof. Except as stated in the immediately preceding paragraph and to the extent necessary to render its approving opinion respecting the validity of the Bonds and the exemption of the Bonds and the interest thereon from taxation, Bond Counsel has not been retained to examine or review, and has not examined or reviewed, any financial documents, statements or other materials that have been or may be furnished in the connection with the authorization, marketing or issuance of the Bonds, and, therefore, will not express an opinion with respect to the accuracy or completeness of any such documents, statements or other materials. The fees of Bond Counsel for services rendered in connection with its approving opinion are expected to be paid from Bond proceeds. MUNICIPAL ADVISOR The College has retained PFM Financial Advisors LLC, of Ann Arbor, Michigan as municipal financial advisor (the Municipal Advisor ) in connection with the issuance of the Bonds. In assisting to prepare the Official Statement, the Municipal Advisor has relied upon governmental officials and other sources which have access to relevant data, to provide accurate information for the Official Statement and the Municipal Advisor has not been engaged, nor has it undertaken, to independently verify the accuracy of such information. To the best of the Municipal Advisor s knowledge and belief, the information contained in the Official Statement which it assisted in preparing, while it may be summarized, is complete and accurate. The Municipal Advisor is not a public accounting firm and has not been engaged by the College to compile, review, examine or audit any information in the Official Statement in accordance with accounting standards. The Municipal Advisor is an independent advisory firm and is not engaged in the business of underwriting, trading or distributing municipal securities or other public securities and therefore will not participate in the underwriting of the Bonds. PFM Financial Advisors LLC is registered with the Securities and Exchange Commission and the Municipal Securities Rulemaking Board as a municipal advisor. Requests for information concerning the College should be addressed to PFM Financial Advisors LLC, 555 Briarwood Circle, Suite 333, Ann Arbor, Michigan 48108, (734) CONTINUING DISCLOSURE Prior to delivery of the Bonds, the College will execute a Continuing Disclosure Agreement (the "Agreement") for the benefit of the holders of the Bonds and the Beneficial Owners (as hereinafter defined under this caption only) to send certain information annually and to provide notice of certain events to certain information repositories pursuant to the requirements of Rule 15c2-12(b)(5) (the "Rule") adopted by the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended. "Beneficial Owner" means, under this caption only, any person who has the power, directly or indirectly, to vote or consent with respect to, or to dispose of ownership of, any Bonds (including any person holding Bonds through nominees, depositories or any other intermediaries). The information to be provided on an annual basis, the events which will be noticed on an occurrence basis and the other terms of the Agreement, are set forth in APPENDIX E, "Form of Continuing Disclosure Agreement." Additionally, the College shall provide certain annual financial information and operating data generally consistent with the information contained within the tables under the headings "COLLEGE ENROLLMENT Historical Enrollment," "PROPERTY VALUATIONS - History of Valuations," "MAJOR TAXPAYERS," "COLLEGE TAX RATES (Per $1,000 of Valuation)," "TAX LEVIES AND COLLECTIONS," "RETIREMENT PLAN - Contribution to MPSERS," "STATE APPROPRIATIONS," "TUITION AND STUDENT FEES," and "DEBT STATEMENT - DIRECT DEBT," in Appendix A and the General Fund Budget Summary in Appendix B. A failure by the College to comply with the Agreement will not constitute an event of default under the Resolutions and holders of the Bonds or Beneficial Owners are limited to the remedies described in the Agreement. A failure by the College to comply with the Agreement must be reported in accordance with the Rule and must be considered by any broker, dealer or municipal securities dealer before recommending the purchase or sale of the Bonds in the secondary market. Consequently, such a failure may adversely affect the transferability and liquidity of the Bonds and their market price. Except as disclosed below, the College has not in the previous five years, failed to comply, in all material respects, with any previous continuing disclosure agreements executed by the College pursuant to the Rule. The 7

12 College s annual disclosure information and its audit for fiscal year ending 2013 were both filed 47 days late. Additionally, the annual filing for the fiscal years ending 2013 through 2015 did not include the pension contribution rates, which information was subsequently disclosed in the filing for fiscal year ending The College is in the process of putting systems in place to identify and file its annual disclosure reports in a timely manner in the future. RATING Bonds. Moody's has assigned, as of the date of delivery of the Bonds, its municipal bond rating of "Aa1" to the No application has been made to any other ratings service for a rating on the Bonds. The College furnished to Moody's certain materials and information in addition to that provided herein. Generally, rating agencies base their ratings on such information and materials, and on investigations, studies and assumptions. There is no assurance that such ratings will prevail for any given period of time or that they will not be revised downward or withdrawn entirely by Moody's if, in its judgment, circumstances so warrant. Any such downward revision or withdrawal of such ratings may have an adverse effect on the market price of the Bonds. Any ratings assigned represent only the views of Moody's. Further information is available upon request from Moody's Investors Service, 7 Trade Center at 250 Greenwich Street, New York, New York 10007, telephone: (212) OTHER MATTERS All information contained in this Official Statement, in all respects, is subject to the complete body of information contained in the original sources thereof. In particular, no opinion or representation is rendered as to whether any projection will approximate actual results, and all opinions, estimates and assumptions, whether or not expressly identified as such, should not be considered statements of fact. The College certifies that to its best knowledge and belief, this Official Statement, insofar as it pertains to the College and its economic and financial condition, is true and correct as of the date of this Official Statement, and does not contain, nor omit, any material facts or information which would make the statements contained herein misleading. SCHOOLCRAFT COLLEGE STATE OF MICHIGAN /s/ By: Its: Dr. Glenn Cerny Dr. Glenn Cerny Vice President and Chief Financial Officer 8

13 APPENDIX A * SCHOOLCRAFT COLLEGE GENERAL FINANCIAL, ECONOMIC AND COLLEGE INFORMATION LOCATION AND AREA The geographic area of Schoolcraft College (the College District ) encompasses an area of square miles. The College District includes portions of Wayne, Oakland and Washtenaw Counties. The College is located the following distances from these commercial and industrial areas: POPULATION 20 miles west of Detroit, MI 65 miles south of Flint, MI 65 miles north of Toledo, OH 77 miles east of Lansing, MI The U.S. Census reported and 2016 estimated populations for the College District and the County of Wayne are as follows: College County of District 1 Wayne 2016 Estimate 327,993 1,767, U.S. Census 313,842 1,820, U.S. Census 301,154 2,061, U.S. Census 263,591 2,111,687 1 Based upon an extrapolation of the figures of the local units within the College District. Source: U.S. Census Bureau via American FactFinder website BOARD OF TRUSTEES The Board of Trustees consists of seven members who are elected biennially at-large and serve overlapping terms. The Board annually elects a Chairperson, Vice Chairperson, Treasurer and Secretary. The Board is responsible for the selection and appointment of the College President. The Board meets as a single body to set or amend policy, develop long range educational goals and act upon recommendations of the College President. The Board is also responsible for adopting and periodically amending the operating budget and evaluating College programs in accordance with governing laws. * Information included in Appendix A of this Official Statement was obtained from the College unless otherwise noted. A-1

14 COLLEGE ENROLLMENT Historical Enrollment The College s historical enrollment is as follows: Total Fiscal Credit Credit Year Traditional Hours Equated Head Count Credentials Year Generated Students Duplicated / Unduplicated Assoc. only / Additional Credentials / Total 2017/18 220,555 7,351 28,567 / 17,002 1,332 / 351 / 1, /17 228,744 7,625 30,662 / 17,875 1,426 / 370 / 1, /16 245,205 7,910 31,472 / 18,115 1,383 / 389 / 1, /15 254,122 8,197 32,335 / 18,855 1,407 / 357 / 1, /14 264,012 8,517 33,358 / 19,307 1,493 / 383 / 1,876 COLLEGE FACILITIES Total Fiscal Non-Credit Credit Year CEPD Hours Equated Head Count Year Generated Students Duplicated / Unduplicated 2017/18 28, ,199 / 13, /17 27, ,958 / 13, /16 24, ,721 / 13, /15 27, ,275 / 13, /14 27, ,323 / 13,673 The following is a table showing the existing College facilities. Year Type of Ground Facility Built Construction Sq. Ft. Administration (Grote Admin) 1963 Masonry Noncombustible 15,076 Applied Science (Classroom) 1965 Masonry Noncombustible 46,755 North Wing 1972 Masonry Noncombustible 24,542 Welding Lab Addition 2003 Masonry Noncombustible 2,732 Children's Center (Classroom) 1995 Masonry Noncombustible 9,597 Jeffress Center (Admin/Classroom) 2015 Masonry Noncombustible 111,622 Forum - Original 1963 Masonry Noncombustible 53,867 Pump House 2004 Masonry Noncombustible 1,024 Green House (Forum South Court Yard) 2006 Noncombustible 389 Kiln Sheds (Forum South Court Yard) 2006 Masonry Noncombustible 855 Liberal Arts (Classroom) 1967 Masonry Noncombustible 40,071 South Addition 1972 Masonry Noncombustible 5,404 Bradner Library (Library) 1963 Masonry Noncombustible 24,236 McDowell Center (Admin/Classroom) 1994 Masonry Noncombustible 66,746 Physical Education (Classroom) 1968 Masonry Noncombustible 94,045 Radcliff Center (Classroom) 1955 Masonry Noncombustible 87,433 Radcliff Center Garage 1995 Joisted Masonry Construction 1,020 (With the Exception of Noncombustible Floor) Service Building - Total (Admin) 1963 Masonry Noncombustible 4,243 North & South Additions 1969 Masonry Noncombustible 29,262 Bookstore Addition 2011 Masonry Noncombustible 4,439 VisTaTech Center (Multi Use) 2002 Masonry Noncombustible 95,158 VisTaTech; Waterman Wing - Total (Multi Use) 1965 Masonry Noncombustible 42,284 Expansion 1981 Masonry Noncombustible A-2

15 Year Type of Ground Facility Built Construction Sq. Ft. Biotechnology Center (Classroom) 2008 Masonry Noncombustible 50,128 Academy Training Center (Classroom) 1988 Masonry Noncombustible 23,122 Firearms Training Center (Classroom) 1989 Masonry Noncombustible 26,609 Re-purposed for Firearms Training 2012 Masonry Noncombustible Fire Training Service Building 2010 Joisted Masonry Construction 284 (With the Exception of Noncombustible Floor) Fire Training Tower 2010 Noncombustible 3,400 Cold Storage Garages 1996 Noncombustible 4,400 Tennis/Motorcycle Storage 1989 Frame Construction 1,440 Salt Storage 1987 Frame Construction 3,200 PROPERTY VALUATIONS In accordance with Act No. 539, Public Acts of Michigan, 1982, and Article IX, Section 3 of the Michigan Constitution, the ad valorem State Equalized Valuation (SEV) represents 50% of true cash value. SEV does not include any value of tax exempt property (e.g. churches, governmental property) or property granted tax abatements under Act No. 198, Public Acts of Michigan, 1974, as amended. Since 1994, ad valorem property taxes are assessed on the basis of Taxable Value, which is subject to assessment caps. SEV is used in the calculation of debt margin and true cash value. See TAX PROCEDURES herein for further information. Taxable property in the College District is assessed by the local municipal assessors and is subject to review by the County Equalization Department. History of Valuations Total Percent State Percent Year Taxable Value Change Equalized Value Change 2018 $14,049,804, % $16,939,217, % ,469,173, ,347,710, ,051,233, ,556,433, ,960,517, ,906,200, ,631,746, ,574,699, Source: Wayne, Oakland and Washtenaw Counties Equalization Departments $20,000 History of Valuations Millions $15,000 $10,000 $5,000 $ Total Taxable Value State Equalized Value A-3

16 A summary of the 2018 valuation subject to taxation is as follows: 2018 Taxable Value $14,049,804,516 Plus: 2018 Equivalent IFT Taxable Value 1 76,200,489 Total 2018 Equivalent Taxable Value $14,126,005,005 Less: 2018 Captured Taxable Value 2 (46,476,826) Net 2018 Taxable Value $14,079,528,179 1 See INDUSTRIAL FACILITY TAX ABATEMENTS herein. 2 See TAX INCREMENT AUTHORITIES herein. Source: Wayne, Oakland and Washtenaw Counties Equalization Departments Taxable Value by Class and Use A breakdown of the College District 2018 Taxable Value by class and use is as follows: 2018 Percent By Class: Taxable Value of Total Real Property $13,329,669, % Personal Property 720,135, TOTAL $14,049,804, % By Use: Agricultural $2,832, % Commercial 1,861,040, Industrial 664,571, Residential 10,801,223, Personal 720,135, TOTAL $14,049,804, % Taxable Value by Use 5.13% 0.02% 13.25% 4.73% 76.87% Agricultural Commercial Industrial Residential Personal Source: Wayne, Oakland and Washtenaw Counties Equalization Departments Tax Base Composition A breakdown of the College District 2018 Taxable Value by municipality is as follows: Total Percent Municipality Taxable Value of Total County of Wayne Clarenceville School District $206,754, % Garden City School District 522,363, Livonia School District 4,366,243, Northville School District 2,181,734, Plymouth-Canton School District 5,811,085, County of Oakland Clarenceville School District 88,906, Northville School District 791,862, County of Washtenaw 80,854, TOTAL $14,049,804, % Source: Wayne, Oakland and Washtenaw Counties Equalization Departments A-4

17 INDUSTRIAL FACILITY TAX ABATEMENTS Under the provisions of Act 198 of the Public Acts of Michigan, 1974 ( Act 198 ), plant rehabilitation districts and/or industrial development districts may be established. Businesses in these districts are offered certain property tax incentives to encourage restoration or replacement of obsolete facilities and to attract new facilities to the area. An industrial facilities tax ( IFT ) is paid, at a lesser effective rate and in lieu of ad valorem property taxes, on such facilities for a period of up to 12 years. Qualifying facilities are issued abatement certificates for specific periods. After expiration of the abatement certificate, the then-current SEV of the facility is returned to the ad valorem tax roll. The owner of such facility may obtain a new certificate, provided it has complied with the provisions of Act 198. The 2018 Taxable Value for the properties which have been granted IFT abatements within the College s boundaries is $152,400,978, all of which is taxed at ½ rate. For purposes of computing Equivalent Taxable Value, it has been shown in the History of Valuations section as 50% of the Taxable Value. Source: Wayne County Equalization Department TAX INCREMENT AUTHORITIES Act 450 of the Public Acts of Michigan, 1980, as amended (the TIFA Act ) 1, Act 197 of the Public Acts of Michigan, 1975, as amended (the DDA Act ) 1, Act 281 of the Public Acts of Michigan, 1986, as amended (the LDFA Act ) 1 and Act 381 of the Public Acts of Michigan, 1996, as amended (the Brownfield Act ) (together the TIF Acts ) authorize the designation of specific districts known as Tax Increment Finance Authority ( TIFA ) Districts, Downtown Development Authority ( DDA ) Districts, Local Development Finance Authority ( LDFA ) Districts or Brownfield Redevelopment Authority ( BRDA ) Districts (each a TIF District ) and authorize the formulation of tax increment financing plans for public improvements, economic development, neighborhood revitalization, historic preservation and environmental cleanup within the TIF District. Tax increment financing permits the TIFA, DDA, LDFA, and BRDA to capture tax revenues attributable to increases in value of real and personal property located within an approved development area while any tax increment financing plans by an established TIF District are in place. These captured revenues are used by the TIF District and are not passed on to the local taxing jurisdictions. The following is a list of tax increment districts within the College s boundaries and their respective 2018 Captured Taxable Values: 2018 Captured Operating Taxable Millage Value Captured? City of Livonia Brownfield (2008) $6,858,381 Yes Brownfield (2015) 1,285,733 Yes City of Garden City DDA (1983) 13,628,948 Yes City of Northville DDA3R 2,023 Yes DDAR 22,512,804 Yes DDA2R 326,627 Yes DDA 1,862,310 Yes TOTAL $46,476,826 1 The TIFA Act, the DDA Act and the LDFA Act are repealed and replaced by the Recodified Tax Increment Financing Act, Act 57 of the Public Acts of Michigan, 2018, which becomes effective on January 1, Source: Cities of Livonia, Garden City and Northville A-5

18 MAJOR TAXPAYERS Shown below are the ten largest identifiable taxpayers in the College District based on their 2018 total valuation subject to taxation "Equivalent" 2018 Taxpayer Product/Service Taxable Value IFT Value 1 Total Valuation Detroit Edison Utility $103,630,705 $0 $103,630,705 Consumers Energy Utility 63,589, ,589,757 Ford Motor Company Automotive 24,202,100 5,294,250 29,496,350 Wilson Park Place Apt. Apartments 24,065, ,065,400 Robert Bosch Corporation Automotive Components 10,030,330 11,939,855 21,970,185 Adient US LLC Auto Seating Systems 21,474, ,474,740 Ashley Livonia North/South LLC Real Estate Management 16,347, ,347,386 BMSH I Cedarbrook Northville MI LLC Assisted Living Facility 15,940, ,940,406 Prime Health Care Services Health Care 15,877, ,877,207 T-Mobile Central LLC Communication 13,046, ,046,600 TOTALS $308,204,631 $17,234,105 $325,438,736 Total 2018 Values $14,049,804,516 $14,126,005,005 Top 10 Taxpayers as a % of 2018 Total Values 2.19% 2.30% 1 Represents 50% of the actual Taxable Value. Source: Wayne, Oakland and Washtenaw Counties Equalization Departments CONSTITUTIONAL MILLAGE ROLLBACK Article IX, Section 31 of the Michigan Constitution requires that if the total value of existing taxable property (State Equalized Valuation) in a local taxing unit, exclusive of new construction and improvements, increases faster than the U.S. Consumer Price Index from one year to the next, the maximum authorized tax rate for that local taxing unit must be reduced through a Millage Reduction Fraction unless new millage is authorized by a vote of the electorate of the local taxing unit. COLLEGE TAX RATES - (Per $1,000 of Valuation)* Each community college district, school district, county, township, special authority and city has a geographical definition which constitutes a tax district. Since community college districts, local school districts and the county overlap either a township or a city, and intermediate school districts overlap community college districts, local school districts and county boundaries, the result is many different tax rate districts. The following table shows the total College tax rates for the past five years Operating Voted TAX RATE LIMITATION* The College is authorized to levy the following tax rates: 2019 Millage Maximum Allowable Purpose Authorized Millage Operating Voted Operating Voted Operating Voted *At the November 2018 election, the College s tax rates were restored to the net original authorized amount of 2.27 mills, effective with the 2019 levy, for a period of 10 years. A-6

19 OTHER JURISDICTIONS TAX RATES - (Per $1,000 of Valuation) The following table provides the 2018 and 2017 tax rates for select municipal units of government that overlap with the College s boundaries. 2018* 2017 State Education Tax Wayne County Oakland County** Washtenaw County City of Livonia City of Plymouth Oakland ISD Wayne RESA Northville District Library Plymouth District Library *2018 Tax Rates were obtained from the Michigan Department of Treasury website and are subject to change until February 1, **Includes the following millages: Oakland County operating, parks and recreation, Zoo Authority, Art Institute Authority and Huron Clinton Metro Authority. Source: Wayne, Oakland and Washtenaw Counties Equalization Departments and State of Michigan Treasury Website TAX LEVIES AND COLLECTIONS The College s fiscal year begins July 1 and ends June 30. College property taxes are due July 1 of each fiscal year and are payable without interest on or before the following September 14 and without penalty on or before the following February 14. All real property taxes remaining unpaid on March 1st of the year following the levy are turned over to the County Treasurers for collection. Wayne, Oakland and Washtenaw Counties (the Counties ) annually pay from their Tax Payment Funds delinquent taxes on real property to all taxing units in the Counties, including the College, shortly after the date delinquent taxes are returned to the County Treasurers for collection. *Estimated. A history of operating tax levies and collections for the College is as follows: Levy Operating Collections to Collections Plus Funding to Year Tax Levy March 1, Each Year June 30, Each Year 2018 $25,016,988* (In process of collections) N/A ,133,891 $23,134, % $23,981, % ,545,608 22,497, ,523, ,484,207 22,575, ,296, ,888,890 21,938, ,686, RETIREMENT PLAN For the period October 1 through September 30, the College pays an amount equal to a percentage of its employees wages to the Michigan Public School Employees Retirement System ( MPSERS ), which is a statewide retirement plan for employees of Michigan public schools administered by the State of Michigan including employees of community colleges. These contributions are established and required by law and are calculated by using the contribution rates as determined annually by the State. In 2010, Michigan Governor Jennifer Granholm signed into law Public Act 75 of 2010 ( Act 75 ) which significantly modified MPSERS and among other provisions required all employees hired after July 1, 2010 to participate in a new Pension Plus Plan which provides a combined defined benefit and defined contribution structure. On July 13, 2017, Governor Rick Snyder signed into law Public Act 92 of 2017 ( Act 92 ), which further modified MPSERS for all employees hired on or after February 1, Act 92 requires all employees hired on or after February 1, 2018 to elect to participate in a new 401(k) style defined contribution plan or a new hybrid plan with different assumptions and cost sharing. A-7

20 Since 2010, the annual MPSERS contribution rates have been set separately for the pre-july 1, 2010 hires (the Basic Plan ) and the post-july 1, 2010 hires (the Pension Plus Plan ). The College s annual contribution rates under both the Basic Plan and the Pension Plus Plan and the estimated annual contribution to MPSERS for the contribution period and the previous four contribution periods are shown below: Contribution Rates Contribution Period Basic Plan Pension Plus Plan Oct. 1, 2018 Sept. 30, % % Feb. 1, 2018 Sept. 30, Oct. 1, Jan. 31, Oct. 1, Sept. 30, Oct. 1, Sept. 30, Oct. 1, 2014 Sept. 30, Contribution to MPSERS *Estimated. Fiscal Year Ended June 30 Amount 2019 $14,833,000* ,136, ,529, ,365, ,243,000 Effective for fiscal years beginning after June 15, 2014, GASB Statement 68 requires all reporting units in a multi-employer cost sharing pension plan to record a balance sheet liability for their proportionate share of the net pension liability of the plan. The College implemented GASB 68 in its year ended June 30, 2015 financial statements. In its June 30, 2018 financial statements, the College reported a proportionate share of the net pension liability of $116,825,000 as of September 30, OPTIONAL RETIREMENT PROGRAM Full-time faculty, administrators and full-time classified employees may elect to participate in an optional retirement program (ORP) in lieu of participating in the MPSERS plan. The ORP is a defined contribution plan affiliated with Teachers' Insurance and Annuity Association - College Retirement Equities Fund (TIAA-CREF). Under ORP, the College contributes 12.00%, and the participant contributes 4.00% of the participant s compensation. The estimated total contribution to ORP for the fiscal year and the contributions for the previous four years are shown below. Contribution to ORP *Estimated. Fiscal Year Ended June 30 Amount 2019 $1,280,000* ,088, ,004, , ,000 A-8

21 LABOR RELATIONS The College has labor agreements with the following employee groups. The agreements all provide for complete and comprehensive salary, wage, fringe benefit and working conditions provisions. The number of employees and duration of the agreements are as follows: Full-Time Part-Time Exp. Date Employee Group Employees Employees Affiliation of Contract Administrators 37 0 Non-Affiliated N/A Executives 15 0 Non-Affiliated Annually Faculty Faculty Forum 08/31/21 Support Staff SCAOP 06/30/20 Student Employees Non-Affiliated N/A Maintenance / Custodial 53 1 SCSPA 06/30/20 Food Service 0 21 SCAFSE 06/30/20 Professionals Non-Affiliated N/A On-Call Non-Affiliated N/A TOTAL The College has not experienced a strike by any of its bargaining units within the past ten years. STATE APPROPRIATIONS The Michigan Constitution requires that the Legislature provide by law for the financial support of community colleges. Each year the College submits to the State a request for an appropriation for the ensuing fiscal year of the College. The following sets forth the State appropriations to the College for the current and each of the last four fiscal years. *Estimated. Source: Audited Financial Statements TUITION AND STUDENT FEES Fiscal Year Ended State June 30 Appropriations 2019 $18,993,366* ,426, ,437, ,118, ,804,127 The Board of Trustees of individual community colleges have the authority to set tuition rates. For the 2018/19 academic year, the College's tuition rates are $115 per contact hour for students residing within the College District, $166 per contact hour for students residing outside the College District, but within the State, and $245 per contact hour for students residing outside the State. The following sets forth the amounts collected from student tuition for each of the last five fiscal years. Fiscal Year Ended Tuition & June 30 Fees 2018 $42,584, ,099, ,818, ,632, ,372,720 A-9

22 SOURCES OF REVENUES FOR OPERATIONS The College has received during each of the last five fiscal years the following general fund revenues for operational purposes: Fiscal Year Ended State Tuition & Property Interest & Total June 30, Appropriation Student Fees Taxes Other Income Revenues 2018 $20,426,477 $42,584,086 $23,981,659 $17,725,827 $104,718, ,437,143 43,099,012 23,523,202 19,618, ,677, ,118,950 40,818,710 23,296,021 18,807,751 97,041, ,804,127 40,632,676 22,686,332 17,942,199 97,065, ,064,425 38,372,720 22,106,576 17,681,390 92,225,111 Source: Audited Financial Statements and College. DEBT STATEMENT - (As of 12/06/18 including the Bonds described herein) DIRECT DEBT: Dated Bond Final Principal Date Purpose Type Maturity Outstanding 05/09/13 College Facility Bonds GOLT 05/01/28 $12,860,000 05/11/16 College Facilities Bonds GOLT 05/01/31 7,020,000 12/20/18 College Facility Bonds GOLT 05/01/38 9,920,000 NET DIRECT DEBT $29,800,000 OVERLAPPING DEBT: College's Municipality Share Cities $63,064,527 Townships 65,464,450 School Districts 460,162,929 Oakland County 5,998,378 Washtenaw County 106,352 Wayne County 91,145,804 Oakland ISD 473,767 Libraries 553,317 TOTAL OVERLAPPING DEBT $686,969,524 NET DIRECT AND OVERLAPPING DEBT $716,769,524 Source: Municipal Advisory Council of Michigan DEBT HISTORY The College has no record of default on its obligations. FUTURE FINANCING The College expects to issue additional limited tax bonds for several capital improvement projects over the next 12 to 24 months. The amounts and timing of such future bond issuances has not been determined at this time. OTHER DEBT The College has no short-term borrowing outstanding. A-10

23 DEBT RATIOS Estimated College District Population 327, Taxable Value $14,049,804, State Equalized Value (SEV) $16,939,217, True Cash Value (TCV) $33,878,435,458 Per Capita 2018 Taxable Value $42, Per Capita 2018 State Equalized Value $51, Per Capita 2018 True Cash Value $103, Per Capita Net Direct Debt $90.86 Per Capita Net Direct and Overlapping Debt $2, Percent of Net Direct Debt of 2018 Taxable Value 0.21% Percent of Net Direct and Overlapping Debt of 2018 Taxable Value 5.10% Percent of Net Direct Debt of 2018 SEV 0.18% Percent of Net Direct and Overlapping Debt of 2018 SEV 4.23% Percent of Net Direct Debt of 2018 TCV 0.09% Percent of Net Direct and Overlapping Debt of 2018 TCV 2.12% LEGAL DEBT MARGIN - (As of 12/06/18 including the Bonds described herein) 2018 Taxable Value $14,049,804,516 Legal Debt Limit - 15% of Taxable Value (1) $2,107,470,677 Less: Debt Outstanding, including Bonds described herein (29,800,000) VOTED LEGAL DEBT MARGIN AVAILABLE $2,077,670, State Equalized Value $16,939,217,729 Non-Voted Debt Limit (2) $170,642,177 Less: Debt Outstanding, including Bonds described herein (29,800,000) NON-VOTED LEGAL DEBT MARGIN AVAILABLE $140,842,177 Under Act 331, Public Acts of Michigan, 1966, as amended, the College is subject to the following debt limitations: (1) Loans and bonds, including bonds approved by the qualified electors of the College, may not be issued in an amount in excess of 15% of the taxable value of the taxable property of the community college district of the College. (2) Within the foregoing limitation. The College may incur indebtedness that is not greater than 1-1/2% of the first $250,000,000 of SEV of the taxable property within the community college district of the College and 1% of the excess over $250,000,000 of SEV of the taxable property within the community college district of the College without a vote of the electors of the College. (3) Community colleges may enter into installment purchase contracts for real or personal property payable out of the funds of the college provided for that purpose. The College has an outstanding installment purchase contract as shown above. (4) Community colleges may issue revenue bonds to pay for educational facilities. Such revenue bonds would be payable out of the income and revenues from college facilities, or from fees and charges required to be paid by students enrolling in the college. The College does not have any outstanding revenue bonds. (5) Community colleges may finance energy conservation improvements by installment contracts or the issuance of notes. The College does not have any outstanding energy conservation improvement debt. A-11

24 EMPLOYMENT CHARACTERISTICS Listed below are the largest employers that are located within the College District boundaries and surrounding communities: Employer Product or Service Approx. No. of Employees Ford Motor Company Automotive 42,740 Rock Ventures Investment & Real Estate 16,617 Beaumont Health Health Care System 9,436 City of Detroit Government 9,066 Detroit Medical Center Health Care System 9,014 Henry Ford Health System Health Care System 8,923 Ilitch Companies Food, Sports & Entertainment 7,686 U.S. Government Government 6,361 General Motors Co. Automotive Manufacturer 6,341 FCA US LLC Automotive Manufacturer 5,981 Detroit Public Schools Education 5,794 Wayne State University Higher Education 5,780 Blue Cross Blue Shield of Michigan Health Care Insurer 5,511 Trinity Health Health Care System 4,636 DTE Energy Energy Technology 4,027 State of Michigan State Government 3,753 Ascension Michigan Health Care System 3,155 U.S. Postal Service Postal Service 2,664 MGM Grand Detroit LLC Casino 2,420 Wayne County County Government 2,121 MotorCity Casino Hotel Casino 1,956 Schoolcraft College Higher Education 1,364 Source: 2018 Michigan Manufacturers Directory, Crain s Detroit Business Book of Lists 2018 edition, Manta via and individual employers. EMPLOYMENT BREAKDOWN The U.S. Census Bureau, American Community Survey reports the occupational breakdown of persons 16 years and over for the County of Wayne is as follows: County of Wayne Number Percent PERSONS BY OCCUPATION 710, % Management, Business, Science & Arts 223, Service 145, Sales & Office 172, Natural Resources, Construction & Maintenance 48, Production, Transportation & Material Moving 121, A-12

25 The U.S. Census Bureau, American Community Survey reports the breakdown by industry for persons 16 years and over for the County of Wayne is as follows: UNEMPLOYMENT County of Wayne Number Percent PERSONS BY INDUSTRY 710, % Agriculture, Forestry, Fishing, Hunting & Mining 2, Construction 28, Manufacturing 121, Wholesale Trade 16, Retail Trade 77, Transportation, Warehousing & Utilities 42, Information 12, Finance, Insurance & Real Estate 39, Professional, Scientific & Management Services 76, Educational, Health & Social Services 162, Arts, Entertainment, Recreation & Food Services 73, Other Services except Public Administration 35, Public Administration 23, The U.S. Department of Labor, Bureau of Labor Market Statistics, reports unemployment averages for the County Wayne as compared to the State of Michigan are as follows: POPULATION BY AGE Annual County of State of Average Wayne Michigan October, % 3.8% The 2010 U.S. Census estimate of population by age for the County of Wayne is as follows: County of Wayne Number Percent Total Population 1,820, % 0 through 19 years 518, through 64 years 1,071, years and over 230, Median Age 37.3 years A-13

26 INCOME The U.S. Census Bureau, American Community Survey estimates of household income for the County of Wayne is as follows: County of Wayne Number Percent HOUSEHOLDS BY INCOME 669, % Less than $ 10,000 84, $ 10,000 to $ 14,999 45, $ 15,000 to $ 24,999 84, $ 25,000 to $ 34,999 73, $ 35,000 to $ 49,999 89, $ 50,000 to $ 74, , $ 75,000 to $ 99,999 69, $100,000 to $149,999 68, $150,000 to $199,999 23, $200,000 or MORE 20, Median Income $42,043 A-14

27 APPENDIX B GENERAL FUND BUDGET SUMMARY AND COMPARATIVE FINANCIAL STATEMENTS Schoolcraft College General Fund Budget Summary As Adopted 2018/19 Revenue: Property Taxes $24,096,785 State Appropriations 14,255,751 Tuition & Fees 39,889,067 Transfer from Bookstore 250,000 Other Sources 1,340,500 Total Revenue $79,832,103 Expenditures: Instruction $42,124,632 Technology 5,175,085 Public Service 1,222,070 Student Services 9,351,552 Institutional Administration 11,216,985 Facilities Management 10,768,061 Transfers (26,282) Total Expenditures $79,832,103 Excess of Expenditures (over) under Revenues $0 Beginning Net Position - July 1 ($133,330,643)* Projected Net Position - June 30 ($133,330,643)* *Effective in 2018, the GASB Statement 75 requires governments that provide defined benefit pensions to recognize their unfunded OPEB obligation as a liability on their annual report. Prior to treatment of Statement No. 68 and 75, as of June 30, 2018, the General Fund balance would have been positive $23,531,746. Source: College B-1

28 Schoolcraft College General Fund Statement of Net Position For Fiscal Years Ended June 30th Assets: Current Assets Cash and Cash Equivalents $6,640,829 $5,324,415 $5,273,625 Property Taxes Receivable 357, , ,996 State Appropriation Receivable 3,087,491 3,199,004 3,272,574 Accounts Receivable 1,093,849 1,600,266 1,517,024 Accrued Interest Receivable 57,356 27,916 26,299 Inventories 341, , ,278 Prepaid Expenses and Other Assets 669, , ,362 Deposits 170, , ,532 Due From (to) Other Funds 1,618, ,435 1,819,639 Total Current Assets $14,037,704 $13,384,620 $14,065,329 Noncurrent Assets Long-term Investments $9,257,415 $8,276,734 $7,030,382 Total Noncurrent Assets $9,257,415 $8,276,734 $7,030,382 Total Assets $23,295,119 $21,661,354 $21,095,711 Deferred Outflows of Resources: $11,687,016 $17,886,563 $30,362,153 Liabilities: Current Liabilities Accounts Payable $1,160,913 $1,027,425 $1,209,976 Accrued Payroll and Other Compensation 6,268,783 4,841,305 4,867,299 Unearned Revenue 4,145,182 4,190,171 5,630,160 Total Current Liabilities $11,574,878 $10,058,901 $11,707,435 Noncurrent Liabilities Accrued Early Retirement Payable $0 $0 $2,960,530 Accrued Payroll and Other Compensation 0 3,727,867 0 Net Pension Liability 102,572, ,537, ,825,440 Net OPEB Liability ,036,949 Accrued Severance Pay 1,091,844 1,054, ,778 Total Noncurrent Liabilities $103,663,974 $114,319,297 $160,726,697 Total Liabilities $115,238,852 $124,378,198 $172,434,132 Deferred Inflows of Resources: $3,310,138 $3,744,098 $12,354,375 Net Position: Unrestricted ($83,566,855) ($88,574,379) ($133,330,643) Total Net Position ($83,566,855) ($88,574,379) ($133,330,643) Source: Audited Financial Statements B-2

29 Schoolcraft College General Fund Statement of Revenues, Expenses, Transfers and Changes in Net Position For Fiscal Years Ended June 30th Operating Revenues: Tuition and Fees $39,488,548 $41,707,000 $41,179,711 State and Local Grants and Contracts 18,400 9,200 9,200 Indirect Cost Recoveries 139, , ,753 Miscellaneous 737,229 1,117,868 1,564,468 Total Operating Revenues $40,383,426 $42,960,044 $42,858,132 Operating Expenses: Instruction $34,462,823 $35,934,773 $34,583,951 Information Technology 0 0 7,280,078 Public Service 1,103,954 1,283,106 1,440,237 Instructional Support 12,194,181 12,736,958 12,686,273 Student Services 12,416,577 12,810,513 12,355,853 Institutional Administration 9,237,172 13,124,767 8,683,918 Operation and Maintenance of Plant 9,504,982 10,124,039 10,305,642 Total Operating Expenses $78,919,689 $86,014,156 $87,335,952 Operating (Loss) Income ($38,536,263) ($43,054,112) ($44,477,820) Nonoperating Revenues (Expenses): State Appropriations $14,118,950 $18,437,143 $20,426,477 Property Tax Levy 23,296,021 23,523,202 23,981,659 Interest Income 330, , ,638 Unrealized Gain (Loss) on Investments 802,157 (765,561) (668,892) Total Nonoperating Revenues (Expenses): $38,547,983 $41,585,137 $44,215,882 Income Gain (Loss) Before Other Revenues (Expenses) $11,720 ($1,468,975) ($261,938) Other Revenues (Expenses): Transfers Between College and Component Units ($270,216) ($110,000) $0 Total Other Revenues (Expenses): ($270,216) ($110,000) $0 Increase (Decrease) in Net Position ($258,496) ($1,578,975) ($261,938) Transfer In (Out) ($2,464,359) ($3,428,549) ($3,989,045) Net Increase (Decrease) in Net Position: ($2,722,855) ($5,007,524) ($4,250,983) Net Position - Beginning ($80,844,000) ($83,566,855) ($88,574,379) Adjustment for Change in Accounting Principle 0 0 (40,505,281) Net Position - Beginning, As Restated ($80,844,000) ($83,566,855) ($129,079,660) Net Position - Ending ($83,566,855) ($88,574,379) ($133,330,643) Source: Audited Financial Statements B-3

30 Schoolcraft College Consolidating Statement of Net Position For Fiscal Years Ended June 30th Assets: Current Assets Cash and Cash Equivalents $16,583,611 $10,844,088 $10,638,615 Property Taxes Receivable 357, , ,996 State Appropriation Receivable 3,087,491 3,199,004 3,272,574 Accounts Receivable 1,594,910 1,959,100 1,894,448 Accrued Interest Receivable 57,356 27,916 26,299 Federal and State Grants Receivable 530, , ,771 Student Loans Receivable 16,250 16,250 16,250 Inventories 1,867,205 1,629,221 1,493,993 Prepaid Expenses and Other Assets 669, , ,362 Deposits 170, , ,532 Total Current Assets $24,935,578 $20,034,523 $19,951,840 Noncurrent Assets Restricted Cash and Investments $8,045,718 $0 $0 Long-term Investments 19,963,070 16,201,887 12,933,434 Property and Equipment 117,170, ,339, ,492,283 Total Noncurrent Assets $145,179,353 $142,541,104 $135,425,717 Total Assets $170,114,931 $162,575,627 $155,377,557 Deferred Outflows of Resources: $11,687,016 $17,886,563 $30,362,153 Liabilities: Current Liabilities Current Portion of Debt Obligations $2,582,887 $2,982,192 $3,515,021 Accounts Payable 5,185,705 1,927,068 1,782,762 Accrued Interest Payable 161, , ,034 Accrued Payroll and Other Compensation 6,552,006 4,990,001 5,007,316 Deposits 266, , ,682 Unearned Revenue 4,417,648 4,459,514 5,822,483 Total Current Liabilities $19,165,816 $14,842,913 $16,603,298 Noncurrent Liabilities Accrued Early Retirement Payable $0 $3,727,867 $2,960,530 Net Pension Liability 102,572, ,537, ,825,440 Net OPEB Liability ,036,949 Long-term Debt Obligations 27,008,269 29,939,072 26,424,051 Accrued Severance Pay 1,091,844 1,054, ,778 Total Noncurrent Liabilities $130,672,243 $144,258,369 $187,150,748 Total Liabilities $149,838,059 $159,101,282 $203,754,046 Deferred Inflows of Resources: $3,310,138 $3,744,098 $12,354,375 Net Position: Net Investment in Capital Assets $95,625,127 $93,417,953 $92,553,211 Restricted 77, , ,136 Unrestricted (67,048,792) (75,913,196) (123,094,058) Total Net Position $28,653,750 $17,616,810 ($30,368,711) Source: Audited Financial Statements B-4

31 Schoolcraft College Consolidating Statement of Revenue, Expenses, Transfers and Changes in Net Position For Fiscal Years Ended June 30th Operating Revenues: Tuition and Fees $29,385,110 $32,585,159 $31,896,171 Federal Grants and Contracts $1,731,868 $2,026,291 $1,403,126 State and Local Grants and Contracts 657, , ,658 Nongovernmental Grants 73,833 97,688 51,838 Auxiliary Enterprises 7,502,518 7,898,764 6,853,487 Gain on Disposal of Assets 11,674 17,771 15,864 Miscellaneous 4,519,586 5,659,312 6,163,217 Total Operating Revenues $43,882,017 $49,128,370 $47,206,361 Operating Expenses: Instruction $35,361,074 $36,864,728 $35,471,932 Information Technology 0 0 7,392,438 Public Service 2,168,768 2,767,713 2,819,419 Instructional Support 13,069,733 14,140,791 13,935,529 Student Services 25,593,484 25,776,589 23,649,316 Institutional Administration 9,137,151 13,059,567 8,560,083 Operation and Maintenance of Plant 11,288,045 11,433,054 11,665,179 Depreciation 5,765,384 6,614,455 6,974,619 Total Operating Expenses $102,383,639 $110,656,897 $110,468,515 Operating (Loss) Income ($58,501,622) ($61,528,527) ($63,262,154) Nonoperating Revenues (Expenses): State Appropriations $14,118,950 $18,437,143 $20,426,477 Property Tax Levy 23,296,021 23,523,202 23,981,659 Interest Income 521, , ,034 Interest Expense (557,230) (1,011,689) (1,378,955) Unrealized Gain (Loss) on Investments 1,243,968 (881,515) (600,819) Pell Grants 13,979,373 13,102,528 12,655,518 Total Nonoperating Revenues (Expenses): $52,602,185 $53,656,198 $55,531,914 Income Gain (Loss) Before Other Revenues (Expenses) ($5,899,437) ($7,872,329) ($7,730,240) Other Revenues (Expenses): Transfers Between College and Component Units ($270,151) ($3,164,611) $250,000 Total Other Revenues (Expenses): ($270,151) ($3,164,611) $250,000 Increase (Decrease) in Net Position ($6,169,588) ($11,036,940) ($7,480,240) Net Position - Beginning $34,823,338 $28,653,750 $17,616,810 Adjustment for Change in Accounting Principle 0 0 (40,505,281) Net Position - Beginning, As Restated $34,823,338 $28,653,750 ($22,888,471) Net Position - Ending $28,653,750 $17,616,810 ($30,368,711) Source: Audited Financial Statements B-5

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33 APPENDIX C AUDITED FINANCIAL STATEMENTS The auditor has not examined or reviewed any financial documents, statements or materials that have been or may be furnished in connection with the authorization, issuance or marketing of the Bonds and accordingly will not express any opinion with respect to the accuracy or completeness of such financial documents, statements or materials.

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35 Table of Contents Schoolcraft College Annual Report 2018 C-1 Independent Auditors Report 1-2 Financial Statements Management s Discussion and Analysis - Unaudited 3-13 Statement of Net Position 14 Schoolcraft College Foundation Statement of Net Assets 15 Statement of Revenue, Expenses and Changes in Net Position 16 Schoolcraft College Foundation Statement of Activities and Changes in Net Assets 17 Statement of Cash Flows Notes to Financial Statements ANNUAL FINANCIAL REPORT JUNE 30, 2018 Required Supplementary Information 46 Notes to Required Supplementary Information 47 Supplementary Information 48-51

36 To the Board of Trustees Schoolcraft College C-2 To the Board of Trustees Schoolcraft College Independent Auditor's Report Report on the Financial Statements We have audited the accompanying financial statements of Schoolcraft College and the aggregate of its discretely presented component units, as of and for the years ended June 30, 2018 and 2017, and the related notes to the financial statements, which collectively comprise Schoolcraft College's basic financial statements, as listed in the table of contents. Management s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor s Responsibility Our responsibility is to express opinions on these financial statements based on our audits. We conducted our audits 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 audits to obtain reasonable assurance about whether the financial statements are free from material misstatement. The discretely presented component units were not audited under Government Auditing Standards. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions. Opinions In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of Schoolcraft College and the aggregate of its discretely presented component units as of June 30, 2018 and 2017 and the respective changes in its financial position and, where applicable, cash flows for the years then ended, in accordance with accounting principles generally accepted in the United States of America. Emphasis of Matter As described in Note 1 to the basic financial statements, the College adopted the provisions of GASB Statement No. 75, Accounting and Financial Reporting for Postemployment Benefits Other than Pensions, as of July 1, Our opinion is not modified with respect to this matter. Required Supplementary Information Accounting principles generally accepted in the United States of America require that the management's discussion and analysis, schedules of the College's proportionate share of net pension and net OPEB liabilities, and schedules of college contributions for pension and OPEB be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board, which considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management's responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Other Information Our audits were conducted for the purpose of forming opinions on the financial statements that collectively comprise Schoolcraft College's basic financial statements. The other supplementary information is presented for the purpose of additional analysis and is not a required part of the basic financial statements. The other supplementary information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the other supplementary information is fairly stated in all material respects in relation to the basic financial statements as a whole. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated October 8, 2018 on our consideration of Schoolcraft College's internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, 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 the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering Schoolcraft College's internal control over financial reporting and compliance. October 8,

37 C-3 Management s Discussion & Analysis - Unaudited 3 Schoolcraft College Annual Report 2018 The discussion and analysis of Schoolcraft College s financial statements provides an overview of the College s financial position at June 30, 2018 and 2017 and its financial activities for the three years ended June 30, Management has prepared the financial statements and the related footnote disclosures, along with the discussion and analysis. Responsibility for the completeness and fairness of this information rests with the College. Using The Annual Report The annual financial report includes the report of independent auditors, this management s discussion and analysis, the basic financial statements, notes to financial statements, and required supplementary information. The financial statements report information on the College as a whole. Following the basic financial statements and footnotes are two supplementary schedules, the Consolidating Statement of Net Position and the Consolidating Statement of Revenue, Expenses, and Transfers and Changes in Net Position. These additional schedules are required by the State of Michigan. Though the Governmental Accounting Standards Board does not require this information for a fair and complete presentation, the statements do provide additional information regarding the various funds and activities of the College not disclosed in the basic statements. In November 2010, Governmental Accounting Standards Board (GASB) issued Statement No. 61, The Financial Reporting Entity: Omnibus. As a result, the College is required to include the Schoolcraft Development Authority, Inc., SC Development Unit 14, Inc., SC Sports Dome, Inc., SC Technology Center, Inc. (collectively, the Development Component Units ), and the Schoolcraft College Foundation as component units in the financial statements. The Development Component Units statement of net position and statement of revenue, expenses, and changes in net position have been discretely presented on the face of the College statements. The Foundation s statement of financial position and statement of activities and changes in net assets have been included on separate pages. Financial Highlights The Statement of Net Position reports the College s financial position as of June 30, 2018 and The Statement of Revenues, Expenses, and Changes in Net Position reports the change in net position for the years ended June 30, 2018 and The College s financial position deteriorated during the years ended June 30, 2018 and 2017 with net position decreasing by $7.5 million (before adjustment for the change in accounting principle) and $11.0 million, respectively. The decrease in 2018 is primarily due to decreases in bookstores sales and enrollment combined with a modest increase in salaries and wages offset by increases in tuition and fees rates. Additionally, the effects of GASB 68 and 75, as fully explained in Note 3 of the financial statements, resulted in a decrease in net position of $2.9 million. The implementation of GASB 75 also resulted in a decrease of $40.5 million in the net position balance as of July 1, The decrease in 2017 is primarily due to decreases in enrollment combined with a modest increase in salaries and wages offset by increases in tuition and fees rates. An early retirement incentive was offered to employees meeting certain eligibility requirements which resulted in a decrease in net position of $3.7 million. Additionally, depreciation and interest expense also increased due to projects fully capitalized in 2016 and therefore depreciated for a full year in Finally, the effects of GASB 68, as fully explained in Note 3 of the financial statements resulted in a decrease in net position of $1.2 million. Management s Discussion & Analysis - Unaudited 4 Schoolcraft College Annual Report 2018 Following is a summary of the major components of the financial position of the College as of June 30, 2018, 2017 and 2016, in millions: Financial Position (in millions) Current assets $ 20.0 $ 20.0 $ 24.9 Non-current assets Other Capital assets Total assets Deferred outflow of resources Current liabilities Long-term liabilities Total liabilities Deferred inflow of resources Net position Net investment in capital assets Restricted Unrestricted (123.1) (75.9) (67.0) Total net (deficit) position $ (30.4) $ 17.6 $ 28.7 During the year end June 30, 2018, total assets decreased by $7.2 million and total liabilities increased by $44.7 million. The primary changes in assets include decreases in unrestricted cash and investments of $3.5 million due to funding of operations and capital expenditures, and a decrease in property and equipment of $3.8 million due to depreciation and a reduction in typical yearly capital expenditures. The primary changes in liabilities include a decrease in debt obligations due to principal payments made totaling $3.0 million, an increase in net pension liability of $7.3 million due to the recognition of the College s proportionate share of the State of Michigan Public Schools Employees Retirement System s (MPSERS) unfunded actuarial accrued liability as required by GASB 68, and an increase in net other postemployment benefits (OPEB) liability of $40.0 million due to the recognition of the College s proportionate share of the MPSERS unfunded actuarial accrued liability as required by GASB 75. In addition to assets, the statement of net position reports a separate section for deferred outflows of resources. This separate financial statement element represents a consumption of net position that applies to a future period and so will not be recognized as an outflow of resources (expense) until that time. During the year end June 30, 2018 deferred outflows increased by $12.5 million. Approximately $2.2 million of the increase was due to the implementation of GASB 75 resulting in the College recording its contributions to the OPEB plan subsequent to the measurement date of September 30, 2017 as a deferred outflow for the first time. The primary changes in deferred outflows for the pension plan were an increase of $11.1 million due to changes in actuarial assumptions, a decrease of $1.8 million in the balance related to differences between projected and actual earnings on pension and OPEB plan assets, and an increase of $1.1 million due to changes in proportionate share of the total net pension liabilities of the MPSERS plan. In addition to liabilities, the statement of net position reports a separate section for deferred inflows of resources. This separate financial statement element represents an acquisition of net position that applies to a future period and so will not be recognized as an inflow of resources (revenue) until that time. During the year end June 30, 2018 deferred inflows increased by $8.6 million. Approximately $1.4 million of the increase was due to the implementation of GASB 75 resulting in the College recording deferred inflows for the first time related to differences between expected and actual plan results. The primary changes in deferred inflows for the pension plan were an increase of $5.6 million due to differences between projected and actual earnings on pension plan assets and an increase of $1.4 million in state aid revenue allocated to fund the MPSERS actuarial accrued liability (UAAL) received subsequent to the measurement date of September 30, 2017.

38 C-4 Management s Discussion & Analysis - Unaudited Schoolcraft College Annual Report 2018 During the year end June 30, 2017, total assets decreased by $7.5 million and total liabilities increased by $9.3 million. The primary changes in assets include decreases in unrestricted cash and investments of $5.7 million due to funding of operations and capital expenditures, a decrease in restricted cash and investments of $8.0 million due to the expenditure of bond proceeds, major capital expenditures and the resulting increase in capital assets of $9.2 million, and a decrease in long-term investments of $3.8 million due to unrealized investment losses and liquidating investments to help cover operations. The primary changes in liabilities include a decrease in accounts payable of $3.3 million due to timing of construction projects ongoing near year-end, an increase in both short-term and long-term debt obligations due to the 2017 capital lease relating to the St. Joe s Sports dome offset by principal payments made totaling $3.3 million, and increase in accrued payroll and other compensation of $2.2 million due to the aforementioned early retirement incentive combined with a decrease in accrued insurance payable, and an increase in net pension liability of $7.0 million due to the recognition of the College s proportionate share of the State of Michigan Public Schools Employees Retirement System s (MPSERS) unfunded actuarial accrued liability as required by GASB 68. In addition to assets, the statement of net position reports a separate section for deferred outflows of resources. This separate financial statement element represents a consumption of net position that applies to a future period and so will not be recognized as an outflow of resources (expense) until that time. During the year end June 30, 2017 deferred outflows increased by $6.2 million. The primary changes in deferred outflows was an increase of $552,000 due to changes in actuarial assumptions, an increase of $1.3 million due to differences between projected and actual earnings on pension plan assets, an increase of $3.5 million due to changes in proportionate share of the total net pension liability of the MPSERS plan, and an increase of $880,000 in College contributions subsequent to the measurement date of September 30, In addition to liabilities, the statement of net position reports a separate section for deferred inflows of resources. This separate financial statement element represents an acquisition of net position that applies to a future period and so will not be recognized as an inflow of resources (revenue) until that time. During the year end June 30, 2017 deferred inflows increased by $434,000. The primary change in deferred inflows was an increase in state aid revenue allocated to fund the MPSERS unfunded actuarial accrued liability (UAAL) of $446,000 received subsequent to the measurement date of September 30, Management s Discussion & Analysis - Unaudited Revenue, Expenses and Changes in Net Position (in millions) Schoolcraft College Annual Report 2018 Following is a summary of the major components of the changes in net position of the College for the years ended June 30, 2018, 2017 and 2016, in millions: Operating revenues Tuition and fees (net of scholarship allowance) $ 31.9 $ 32.6 $ 29.4 Federal grants and contracts State and other grants and contracts Sales and services of auxiliary activities Gain on disposal of assets Miscellaneous Total operating revenue Operating expenses Instruction Information Technology Public services Instructional support Student services Institutional administration Operation and maintenance of plant Depreciation Total operating expenses Net operating loss (63.3) (61.4) (58.5) Nonoperating revenues and (expenses) State appropriations Property taxes Pell grants Other nonoperating revenues and (expenses) - net (1.5) (1.5) 1.2 Net nonoperating revenues Other revenues Transfers between College and Development Component Units 0.3 (3.2) (0.2) Net decrease in net position (7.5) (11.1) (6.1) Net position, beginning of year Adjustment for change in accounting principle (40.5) - - Net position, beginning of year, as restated (22.9) Net position, end of year $ (30.4) $ 17.6 $ 28.7 Operating Revenues Operating revenues include charges for all exchange transactions such as tuition and fees, the sale of books and supplies, and the sale of food by Food Service and Culinary Arts. In addition, certain federal, state, and private grants are considered operating if they are not for capital purposes. Operating revenue changes were the result of the following for the year ended June 30, 2018: Student tuition and fee revenue decreased $689,000 due to enrollment declines offset by tuition and fee increases and a slight increase in Pell grants covering the cost of attendance. Actual tuition and fee revenue before scholarship allowances decreased $515,000 or 1.19% due to tuition and per credit hour fee increases of 5.97%, as well as additional fee revenue charged for classes that require extra faculty time outside of the normal class credit hours, coupled with an enrollment decrease of 6.22%. Auxiliary enterprises revenue decreased by $1.0 million primarily due to an $800,000 decrease in sales at the bookstore. 5 6

39 Management s Discussion & Analysis - Unaudited Schoolcraft College Annual Report 2018 Operating revenue changes were the result of the following for the year ended June 30, 2017: Student tuition and fee revenue increased $3.2 million due to tuition and fee increases and a slight decrease in Pell grants covering the cost of attendance. Actual tuition and fee revenue before scholarship allowances increased $2.3 million or 5.59% due to tuition and per credit hour fee increases of 6.3%, as well as additional fee revenue charged for classes that require extra faculty time outside of the normal class credit hours, coupled with an enrollment decrease of 3.9%. Auxiliary enterprises revenue increased by $396,000 primarily due to rental and sales activity at the St. Joe s Sports Dome. Miscellaneous revenues increased by $1.1 million primarily due to donated equipment and increases in Wayne State University fees for the Schoolcraft 2 U partnership. The following chart illustrates operating revenues by source as a percent of total operating revenue: Management s Discussion & Analysis - Unaudited Schoolcraft College Annual Report 2018 Institutional administration decreased 25.90%, or $3.0 million, primarily due to the early retirement incentive offered to employees of $3.7 million recognized in 2017 only. Operating expense changes were the result of the following for the year ended June 30, 2017: Operating expenses overall increased 8.08%. Average salary and benefit packages increased moderately due to increases in retirement payments. Instruction and instructional support increased 5.32% primarily due to salary and benefit increases as well as the effects on expenditures related to the increase in the MPSERS net pension liability. Public service increased 27.62%, or $599,000, primarily due to additional grant projects including the Advance Michigan Center for Apprenticeship Innovation and the Hosting On-going Professional Experiences in Math and Sciences program. Institutional administration increased 42.93%, or $3.9 million, primarily due to the early retirement incentive offered to employees of $3.7 million 80% Operating Revenue By Source The following chart illustrates operating expenses by function as a percent of total operating expenses: 70% 68% 66% 67% Operating Expenses By Function 60% 50% C-5 50% 40% 30% 20% 10% 0% Tuition & Fees 15% 16% 17% Auxiliary Enterprises 13% 12% 10% Miscellaneous % 4% 4% Federal Grants & Contracts 1% 2% 2% State & Local Grants and Contracts 40% 30% 20% 10% 0% 32% 32% 31% Instruction 24% 22% 21% Student Services 11% 11% 10% 10% 8% 8% 7% 6% 5% Operation and Institutional Information Maintenance Administration Technology of Plant 13% 12% 12% Instructional Support 6% 6% 6% 3% 2% 2% Depreciation Public Service Operating Expenses Operating expenses are the costs associated with achieving the mission of the college; providing instruction, enrolling and counseling students, maintaining the facilities, and managing the finances. Operating expense changes were the result of the following for the year ended June 30, 2018: Operating expenses overall decreased 0.17%. Average salary and benefit packages increased moderately due to increases in retirement payments. Instruction and instructional support increased 4.41% primarily due to salary and benefit increases as well as the effects on expenditures related to the increase in the MPSERS net pension and OPEB liabilities. Information Technology increased 19.28%, or $1.2 million, primarily due to salary and benefit increases, effects on expenditures related to the increase in MPSERS net pension and OPEB liabilities, and increases of $195,000 in software licenses & fees Non-Operating Revenues and Expenses Non-operating revenues represent all revenue sources that are primarily non-exchange in nature. They consist primarily of state appropriations, property taxes, Pell grants, and investment income. Non-operating revenues and expenses changes were the result of the following factors for the year ended June 30, 2018: State appropriations increased by $2.0 million. This is primarily due to an increase of $1 million in payments over last year from the State of Michigan for retirement contributions to the MPSERS plan in an effort to fund the difference between the Colleges capped contribution rate for unfunded accrued liabilities (25.78%) and the actual unfunded actuarial accrued liability 8

40 C-6 Management s Discussion & Analysis - Unaudited 9 Schoolcraft College Annual Report 2018 contribution rate pursuant to MPSERS reform legislation, combined with an increase of $289,000 in personal property tax reimbursement as well as $243,000 in MPSERS offset revenue which was a new income stream in Normal state appropriations for operations only increased $82,000 from Property taxes increased by $458,000 due to slight increases in property tax values offset by a millage reduction fraction. Interest expense increased by $367,000 primarily due to expensing a full year s worth of interest from the capital lease related to the St. Joe s Sports Dome compared to only 8 months in Unrealized losses on investments of approximately $601,000 were recognized compared to unrealized losses on investments of approximately $882,000 in Losses were due to the rising interest rate environment in 2018 that affects the fair value of the College s bond investments. Pell grant awards decreased by $447,000 due to a decrease in the number of students qualifying for financial aid as well as an approximate 6.2% decrease in enrollment. Non-operating revenues and expenses changes were the result of the following factors for the year ended June 30, 2017: State appropriations increased by $4.3 million. This is primarily due to an increase of $410,000 in payments over last year from the State of Michigan for retirement contributions to the MPSERS plan in an effort to fund the difference between the Colleges capped contribution rate for unfunded accrued liabilities (25.78%) and the actual unfunded actuarial accrued liability contribution rate pursuant to MPSERS reform legislation, combined with an increase of $2.97 million due to recognizing deferred inflows from 2016 pursuant to GASB 68. Normal state appropriations for operations only increased $207,000 from Property taxes increased by $227,000 due to slight increases in property tax values offset by a millage reduction fraction. Interest expense increased by $454,000 primarily due to the addition of the capital lease related to the St. Joe s Sports Dome. Unrealized losses on investments of approximately $882,000 were recognized compared to unrealized gains on investments of approximately $1.2 million in Losses were due to sizable increases in interest rates compared to 2016 that affect the College's bond investments. Pell grant awards decreased by $919,000 due to a decrease in the number of students qualifying for financial aid as well as an approximate 3.9% decrease in enrollment. Other Revenue Other revenue consists of items that are typically non-recurring, extraordinary, or unusual to the College. Other revenue changes were the result of the following factors for the year ended June 30, 2018: The College received $250,000 from SC Development Unit 14, Inc. Other revenue changes were the result of the following factors for the year ended June 30, 2017: The College received $859,000 less in payments from the Schoolcraft Development Authority, as these payments are now being made to SC Development Unit 14, Inc. The College transferred $3.2 million to the Development Component Units to fund capital contributions for road and infrastructure improvements. Statement of Cash Flows The primary purpose of this statement is to provide relevant information about the cash receipts and cash payments of an entity during a period. The Statement of Cash Flows may also help users assess: An entity s ability to generate future net cash flows Its ability to meet its obligations as they come due Its need for external financing Management s Discussion & Analysis - Unaudited 10 Schoolcraft College Annual Report 2018 The College s cash and cash equivalent position decreased by $205,000 at June 30, 2018, primarily due to making investments in construction and facilities improvements of $3.1 million offset by moving $2.7 million from government bonds into cash and receiving $250,000 from SC Development Unit 14, Inc. Additional cash was used in 2018 to fund operating losses. Statement of Cash Flows (in millions) Cash provided (used) by: Operating activities $ (53.1) $ (55.8) $ (47.9) Noncapital financing activities Capital and related financing activities (7.3) (16.5) (1.6) Investing activities Net (decrease) increase in cash and equivalents (0.2) (13.8) 9.8 Cash and equivalents - beginning of year Cash and equivalents - end of year $ 10.6 $ 10.8 $ 24.6 Capital Assets and Debt Administration: Capital Assets The College had $122.5 million and $126.3 million invested in capital assets, net of accumulated depreciation of $74.8 million and $68.8 million at June 30, 2018 and 2017, respectively. Depreciation charges totaled $7.0 and $6.6 million, respectively, for the years then ended Land and land improvements $ 16.1 $ 16.4 $ 10.7 Buildings and improvements Equipment Infrastructure Construction in progress $ $ $ Major capital additions were all funded by operating funds this year and include: Projects completed this year: St. Joe's Urgent Care $ 772,469 Jeffress Center Enhancements 478,212 Applied Science Enhancements 169,161 CGT Relocation 229,927 Projects started this year or last year: Applied Science Capital Outlay 24,285 Radcliff Center T-Lab Renovation 40,910 Total major additions $ 1,714,963 The College has entered into construction contracts and commitments totaling approximately $831,000 for the Applied Science Capital Outlay project and the T-Lab renovation taking place at the Radcliff Campus. As of June 30, 2018 the College had incurred $65,000 relating to these projects. The projects are expected to be completed during the year ending June 30, The remaining commitments totaling $766,000 will be funded by operating funds. More detailed information about the College s capital assets is presented in the footnotes to the financial statements.

41 C-7 Management s Discussion & Analysis - Unaudited Debt Administration 11 Schoolcraft College Annual Report 2018 At year-end, the College had $20.1 million in debt outstanding from the issuance of $18.0 million in general obligation, limited-tax bonds, issued for various construction projects, as authorized by the Board of Trustees on March 27, 2013, as well as from the issuance of $8.0 million in general obligation, limited-tax bonds, issued for various construction projects, as authorized by the Board of Trustees on March 23, All construction projects funded by bonds have been completed. Bond principal payments are due annually each May through maturity in fiscal year Interest payments are due semi-annually through maturity at rates ranging from 2.0% to 3.0%. The College s general obligation bond rating was Aa1 by Moody s in May 2016 upon issuance. According to Moody s, at the time of the bond issuance, the strong rating was based upon the College s sizeable tax base located in Southeast Michigan, sound management of financial operations, healthy financial position, and very low debt burden. Also at year-end, the College had $4.0 million in debt outstanding from the lease agreement signed to fund the upgrade of the College s network through installation and implementation of hardware and software, which included desktop virtualization as well as network equipment enhancements campus-wide, as authorized by the Board of Trustees on November 19, Lease payments, including principal and interest of 2.4%, are due annually each December through maturity in fiscal year Finally, at year-end, the College had $5.9 million in debt outstanding from the lease agreement signed to lease the St. Joe s Sports Dome from SC College Dome LLC, as authorized by the Board of Trustees on June 23, Lease payments, including principal and interest of 13.64%, are due monthly through maturity in fiscal year Component Units During 2016, the College formed two component unit entities, SC Development Unit 14, Inc. and SC Sports Dome, Inc. During 2017, the College formed one additional entity, SC Technology Center, Inc. All three entities were established as 501(c)(3) charitable, non-profit organizations in an effort to generate additional revenue streams for the College. SC Development Unit 14, Inc. was formed to partner with an outside developer to develop College owned land, specifically Unit 14. The main purpose of the resulting partnership, Seven Delta, LLC, which was formed as a Michigan limited liability company, is to construct and subsequently lease a building to a Fortune 500 company to generate additional revenue for the charitable and educational purposes that support the College. SC Sports Dome, Inc. was formed to partner with an outside developer to develop College owned land, specifically Unit 15. The main purpose of the resulting partnership, SC College Dome LLC, which was also formed as a Michigan limited liability company, is to build the College Soccer Dome to help bolster enrollment and generate additional revenue for the charitable and educational purposes that support the College. During 2017, SC Technology Center, Inc. was formed to enter into lease agreements with third parties to sell services and amenities to generate additional revenue for the charitable and educational purposes that support the College. Economic Factors Which Will Affect the Future Revenue - In 2017/18 the College anticipates receiving State appropriation funding of $13.5 million for operations, which excludes UAAL funding, and is only slightly above the amount received from the State in 2001/02 of $12.7 million. State equalized value and taxable values have increased slightly in the College district along with new construction. Property tax revenue for 2018/2019 will increase by approximately 3% and is estimated to continue increasing at a modest rate for 2019/2020. It is projected Management s Discussion & Analysis - Unaudited 12 Schoolcraft College Annual Report 2018 that it will take nine more fiscal years to recover to pre-recession property tax revenue levels. The Board has approved an average tuition increase of 6.08%, effective with the fall 2018 term, and enrollment for the fall semester compared to last year is projected to decrease by approximately 5%. MPSERS - On September 5, 2012 Public Act 300 (or Senate Bill 1040) was signed into law by the Governor. The law outlines significant reforms to the MPSERS retirement system that has dramatically affected the expected retirement rates paid by the College as well as the benefits provided to MPSERS participants. In connection with Public Act 300, the College s MPSERS contribution rate will be capped at 26.18% for 2018/19 until further legislation is enacted. Under these rates, this represents a cumulative increase from 2007/08 of approximately 57%. During that same period of time, the cumulative CPI for the United States increased 20.92%. If MPSERS had limited increases to the CPI figures over that period, the current actual rate would be 20.22%. Schoolcraft s recurring revenue streams are relegated to increases tied to the CPI rate. Contributions to MPSERS using the adjusted CPI figure of 20.22% would net the college a recurring savings of approximately $2.1 million annually. Unfortunately, the MPSERS contribution rate has increased beyond the CPI and the MPSERS plan still has unfunded pension and postemployment benefit liabilities totaling approximately $25.9 billion and $8.9 billion, respectively. GASB pronouncement number 68 addresses the accounting and financial reporting of the unfunded pension liability and was effective for the College s year ending June 30, The College s portion of the unfunded pension liability is approximately $116.8 million and $109.5 million as of June 30, 2018 and 2017, respectively. GASB pronouncement number 75, effective for the College s year ending June 30, 2018, addresses the unfunded postemployment health care benefit. The College s portion of the unfunded postemployment benefit liability is approximately $40.0 million and $42.2 million as of June 30, 2018 and 2017, respectively. Current retirement contribution rates are unsustainable long term and will require structural changes to the MPSERS Plan or College operations in order for the College to be able to continue to provide affordable and effective services. In light of this, on July 13, 2017, the State of Michigan passed Public Act 92 of 2017, Senate Bill 401, which closed the school employees pension system to new hires and instead provided them with a 401(k) option beginning February 1, All employees hired on or after September 4, 2012 were given the opportunity to opt out of the Pension Plus retirement plan and enroll instead in a Defined Contribution (DC) plan. All DC participants who first worked on or after September 4, 2012 have new contribution and employer match amounts mandated by the new law. Employers began mandatory contributions of 4% for current DC participants hired since September 4, 2012 and all future DC participants. The contributions began with the first pay period after October 1, Employers will match 100% of the contributions made by the employee up to a maximum of 3% of compensation beginning on February 1, Employees must contribute at least 3% of wages to receive the 3% match from their employer. The DC plan is the default option for new employees who first work on or after February 1, PA 92 also requires the DC plan to offer one or more fixed and variable annuity options that members can use at retirement. This law establishes a new hybrid plan for Michigan public school employees who first work on or after February 1, This plan is similar to the Pension Plus retirement plan established in 2010 (and changed again in 2012) in that it will have both a pension component and a savings component. Eligibility for pension benefits remains the same as Pension Plus at 60 years old with at least 10 years of service. Contributions are made in the savings component by both the employer and employee and are deposited into a 401(k) and/or 457 tax deferred account. An employee must affirmatively elect the new hybrid plan to participate. If the employee makes no choice, as mentioned above, the default set by the law means the employee will be enrolled in the DC plan. The Office of Retirement Services will provide each employee with a summary of the benefit options available.

42 C-8 Management s Discussion & Analysis - Unaudited Schoolcraft College Annual Report 2018 Early retirement incentive - In an effort to continually reduce expenditures, effective May 2017, the College offered an early retirement incentive to all full-time employees with at least 10 years of experience in the higher education industry. 55 employees took advantage of this buyout which would generate $5.97 million in annual savings in salary, retirement, and benefit costs. While as anticipated a number of these positions were replaced, it was done strategically to ensure the net savings to the College are significant. Property Taxes - In 1978, Michigan voters approved an amendment to the Michigan Constitution known as the Headlee Amendment. This amendment included a number of provisions related to state and local taxes. These became Sections 25 through 33 of Article IX of the state constitution. Section 31, which concerns local government taxes, created several new laws related to local government taxation, including: Requiring voter approval for any local tax increases or new taxes established after Headlee was approved Limiting property tax revenue resulting from property tax assessments increasing Limiting revenue collected to the amount the millage originally was to generate (with factor for inflation) The property tax revenue limitation requires that if the assessed value of a local tax unit s total taxable property increases by more than the inflation rate, the maximum property tax millage must be reduced so that the local unit s total taxable property yields the same gross revenue, adjusted for inflation. The College s original millage rate of mills was approved by the voters in Headlee has rolled back that rate to as of June 30, 2018, which resulted in $6.7 million less in property tax revenue for fiscal year The College is currently exploring a ballot proposal for the fall 2018 elections which would restore the College s millage rate levied to what the voters originally approved in Statement of Net Position Schoolcraft College Annual Report 2018 College Development Component Units As of June 30 As of June Assets Current Assets Cash and cash equivalents - Note 2 $ 10,638,615 $ 10,844,088 $ 2,204,564 $ 914,964 Property taxes receivable, net of allowance for doubtful - - accounts of $39,800 in 2018 and $44,100 in , , State appropriation receivable 3,272,574 3,199, Accounts receivable, net of allowance for doubtful - - accounts of $942,758 in 2018 and $981,008 in ,894,448 1,959, , ,793 Capital lease receivable - Note ,646 32,871 Related party receivable - Note ,086 Accrued interest receivable 26,299 27,916 66,846 67,220 Federal and state grants receivable 787, , Student loans receivable, net of allowance for doubtful - - accounts of $0 in both 2018 and ,250 16, Inventories 1,493,993 1,629, Prepaid expenses and other assets 762, , Deposits 499, , Total Current Assets 19,951,840 20,034,523 2,618,043 1,842,934 Noncurrent Assets Restricted cash and investments - Note ,700 5,761,239 Long-term investments - Note 2 12,933,434 16,201,887 4,414,003 3,622,323 Rent receivable - - 2,170, ,855 Capital lease receivable - Note 11 5,842,478 5,880,124 Property and equipment - Note 7 122,492, ,339,217 30,680,341 31,149,206 Total Assets 155,377, ,575,627 45,733,688 48,435,681 Deferred Outflows of Resources - Note 3 30,362,153 17,886, Liabilities Current Liabilities Current portion of debt obligations - Note 9 3,515,021 2,982, ,696 55,462 Accounts payable 1,782,762 1,927,068 4,647 4,219,728 Related party payable - Note ,748 1,479,986 Accrued interest payable 189, ,645 55,101 55,229 Accrued payroll and other compensation 5,007,316 4,990, Deposits 286, , Unearned revenue 5,822,483 4,459, , ,425 Total Current Liabilities 16,603,298 14,842,913 1,588,650 6,225,830 Noncurrent Liabilities Accrued early retirement payable - Note 9 2,960,530 3,727, Net pension liability - Note 3 116,825, ,537, Net OPEB liability - Note 3 40,036, Long-term debt obligations - Note 9 26,424,051 29,939,072 22,656,044 23,345,740 Unearned revenue - - 2,209,935 2,233,167 Accrued severance pay - Note 9 903,778 1,054, Total Liabilities 203,754, ,101,282 26,454,629 31,804,737 Deferred Inflows of Resources - Note 3 12,354,375 3,744, Net Position Net investment in capital assets 92,553,211 93,417,953 5,593,288 8,736,677 Restricted for: Expendable restricted grants 172, , Nonexpendable Minority interest - - 9,407,531 8,544,891 Unrestricted (123,094,058) (75,913,196) 4,278,240 (650,624) Total Net (Deficit) Position $ (30,368,711) $ 17,616,810 $ 19,279,059 $ 16,630,944 The accompanying notes are an integral part of these statements

43 C-9 Schoolcraft College Annual Report 2018 Schoolcraft College Foundation Statement of Net Assets As of June Assets Cash and cash equivalents $ 162,443 $ 300,043 Marketable securities 14,671,863 14,044,439 Assets held under charitable remainder unitrust agreement 90,811 93,509 Accounts receivable 5,800 12,000 Contributions receivable - net 11,487 - Beneficial interest in remainder trusts 6,980 17,055 Cash surrender value - life insurance policy 11,119 13,643 Prepaid expenses 31,694 28,858 Total Assets $ 14,992,197 $ 14,509,547 Liabilities And Net Assets Liabilities Payable to Schoolcraft College $ 255,550 $ 205,572 Other liabilities 5,748 37,051 Liability under charitable remainder unitrust and gift annuity agreements 48,895 49,651 Total Liabilities 310, ,274 Net Assets Unrestricted Board designated 3,440,347 3,166,968 Undesignated 768, ,632 Temporarily restricted 2,703,321 2,452,033 Permanently restricted 7,769,992 7,616,640 Total Net Assets 14,682,004 14,217,273 Total Liabilities And Net Assets $ 14,992,197 $ 14,509,547 Statement of Revenue, Expenses and Changes in Net Position Schoolcraft College Annual Report 2018 College Development Component Units Years Ended June 30 Years Ended June Operating Revenue Tuition and fees (Net of scholarship allowances of $ 31,896,171 $ 32,585,159 $ - $ - $10,687,915 in 2018 and $10,513,853 in 2017) Federal grants and contracts 1,403,126 2,026, State and local grants and contracts 822, , Nongovernmental grants 51,838 97, Auxiliary enterprises 6,853,487 7,898, Gain on disposal of assets 15,864 17, Miscellaneous 6,163,217 5,659,312 3,904,610 1,890,654 Total Operating Revenue 47,206,361 49,128,370 3,904,610 1,890,654 Operating Expenses Instruction 35,471,932 34,215, Information Technology 7,392,438 6,197,641 Public service 2,819,419 2,767, Instructional support 13,935,529 13,104, Student services 23,649,316 24,771, Institutional administration 8,560,083 11,552, Operation and maintenance of plant 11,665,179 11,433, Depreciation 6,974,619 6,614, ,608 61,762 Other expenditures , ,691 Total Operating Expenses 110,468, ,656,897 1,237, ,453 Operating (Loss) Income (63,262,154) (61,528,527) 2,667,205 1,559,201 Nonoperating Revenue and (Expenses) State appropriations 20,426,477 18,437, Property tax levy 23,981,659 23,523, Interest income 448, , , ,717 Interest expense (1,378,955) (1,011,689) (1,325,378) - Unrealized (loss) gain on investments (600,819) (881,515) 423, ,730 Pell grants 12,655,518 13,102, Contribution revenue ,588,854 Net Nonoperating Revenue and (Expenses) 55,531,914 53,656,198 (15,860) 6,590,301 (Loss) Gain Before Other Revenue (7,730,240) (7,872,329) 2,651,345 8,149,502 Other Revenue and (Expenses) Transfers between College and component units 250,000 (3,164,611) (250,000) 3,164,611 Minority interest contributions ,093 4,643,369 Distribution to minority owner - - (698,323) (682,677) Total Other Revenue and (Expenses) 250,000 (3,164,611) (3,230) 7,125,303 (Decrease) Increase in Net Position (7,480,240) (11,036,940) 2,648,115 15,274,805 Net Position Net Position - Beginning of Year 17,616,810 28,653,750 16,630,944 1,356,139 Adjustment for change in accounting principle - Note 1 (40,505,281) Net Position - Beginning of Year, As Restated (22,888,471) 28,653,750 16,630,944 1,356,139 Net Position - End of Year $ (30,368,711) $ 17,616,810 $ 19,279,059 $ 16,630,944 The accompanying notes are an integral part of these statements. The accompanying notes are an integral part of these statements

44 Schoolcraft College Annual Report 2018 Schoolcraft College Annual Report 2018 Schoolcraft College Foundation Statement of Activities and Changes in Net Assets Statement of Cash Flows C-10 Years Ended June Revenue Gifts and contributions $ 432,416 $ 510,413 Fund-raising events 166, ,350 Investment income 416, ,982 Decrease in value of beneficial interest in remainder trusts (10,075) 2,258 Change in cash surrender value of life insurance policy (2,524) (141) Realized and unrealized losses on investments 381, ,481 Decrease in actuarial value of charitable remainder unitrust agreement (2,463) 4,463 Donated administrative support 589, ,796 Total Revenue 1,971,598 2,538,602 Expenses Scholarships 431, ,318 Other College support 152, ,166 Fund-raising expenses 39,384 28,588 Donated administrative expenses 589, ,796 Administrative expenses 293, ,882 Total Expenses 1,506,867 1,604,750 Increase in Net Assets 464, ,852 Net Assets - Beginning of Year 14,217,273 13,283,421 Net Assets - End of Year $ 14,682,004 $ 14,217,273 Years Ended June Cash Flows From Operating Activities Tuition and fees $ 33,338,981 $ 32,268,304 Grants and contracts 1,930,704 3,099,558 Payments to suppliers (52,037,745) (54,467,690) Payments to employees (49,396,485) (50,215,129) Auxiliary enterprise charges 6,853,487 7,898,764 Other 6,179,081 5,677,083 Net Cash Used For Operating Activities (53,131,977) (55,739,110) Cash Flows From Noncapital Financing Activities Local property taxes 23,998,169 23,304,402 Pell grants 12,635,418 13,043,237 William D. Ford Direct Lending receipts 8,400,662 10,056,113 William D. Ford Direct Lending disbursements (8,403,776) (10,062,466) State appropriations 20,432,454 18,771,373 Net Cash Provided by Noncapital Financing Activities 57,062,927 55,112,659 Cash Flows From Capital And Related Financing Activities Purchase of capital assets (3,136,498) (12,837,717) Principal paid on capital debt (1,605,000) (1,570,000) Interest paid on capital debt (466,892) (332,595) Capital lease principal payments (1,359,646) (1,082,346) Interest paid on capital lease (935,673) (626,291) Net transfers from (to) component units 250,000 (110,000) Net Cash Used For Capital and Related Financing Activities (7,253,709) (16,558,949) Cash Flows From Investing Activities Proceeds from sales and maturities of investment 2,667,635 4,887,412 Interest on investments 449, ,969 Purchase of investments - (2,003,222) Net Cash Provided By Investing Activities 3,117,286 3,400,159 Net Decrease In Cash And Cash Equivalents (205,473) (13,785,241) Cash And Cash Equivalents - Beginning Of Year 10,844,088 24,629,329 Cash And Cash Equivalents - End Of Year $ 10,638,615 $ 10,844,088 Significant Noncash Transactions Property acquired under capital lease $ - $ 6,000,000 Capital assets transferred to development component units - 3,054,611 The accompanying notes are an integral part of these statements. The accompanying notes are an integral part of these statements

45 Statement of Cash Flows (continued) Schoolcraft College Annual Report 2018 Notes to Financial Statements Schoolcraft College Annual Report 2018 Note 1 - Reporting Entity, Basis of Presentation and Significant Accounting Policies C-11 Years Ended June Reconciliation Of Net Loss To Net Cash Used For Operating Activities: Operating loss $ (63,262,154) $ (61,528,527) Adjustment to reconcile operating loss to net cash used for operating activities: Depreciation 6,974,619 6,614,455 (Increase) decrease in assets and deferred outflows: Accounts receivable, net 64,652 (364,190) Federal and state grant receivable (346,918) 90,123 Inventories 135, ,984 Prepaid assets and other current assets 160,709 (253,097) Deposits (81,018) (248,415) Deferred outflows of assets (9,480,130) (6,199,547) Increase (decrease) in liabilities and deferred inflows: Accounts payable (129,827) (3,216,766) Accrued payroll and other compensation (750,022) 2,165,862 Accrued severance pay (150,245) (37,821) Deposits 15,189 5,469 Unearned revenue 1,362,969 41,866 Deferred inflows of assets 7,260,101 (11,783) Net pension liability 7,288,033 6,965,277 Net OPEB liability (2,193,163) - Net Cash Used For Operating Activities $ (53,131,977) $ (55,739,110) The accompanying notes are an integral part of these statements. 19 Reporting Entity Schoolcraft College (College) is a community college located in Southeast Michigan. The Main Campus and Public Safety Training Complex are located in Livonia and the Radcliff Center is located in Garden City. Founded in 1961 and named after Henry Rowe Schoolcraft, a nineteenth century writer, historian, scientist and educator, it is governed by a seven member Board of Trustees elected for six year overlapping terms. The College has five affiliated organizations, collectively referred to as Component Units, which were evaluated in accordance with Governmental Accounting Standards Board (GASB) Statement No. 61, The Financial Reporting Entity: Omnibus, which the College adopted on July 1, Each organization is described below, with additional information provided regarding the impact to the College s financial statements and accompanying condensed financial statements. The Schoolcraft College Foundation (Foundation) is discretely reported as a part of the College reporting entity (although it is a separate legal entity established as a 501(c)3 not for profit corporation and governed by its own Board of Governors) because its sole purpose is to provide support to the College and its students. Disclosures related to the Foundation that are immaterial compared to the College as a whole are not included in the financial statements of the College as separate audited financial statements of the Foundation are available by contacting the Schoolcraft College Foundation, Haggerty Rd, Livonia, Michigan Schoolcraft Development Authority, Inc. (SDA) is a Michigan nonprofit organization established by the College in March 1986 to direct College land development activities and operates and acts exclusively for the charitable and educational purposes that support the College. The College leases a total of approximately 62 acres of land to the SDA under a lease for approximately 17 acres that expires in 2061 and a lease for approximately 45 acres that expires in The leases require annual payments of $1 per year. The revenue realized by the College from the ground lease is to be used for the purpose of financing capital improvements. At the end of the lease term, all improvements revert to the College. The College has operational responsibility for the SDA. In accordance with GASB Statement No. 61, the SDA is reported as a discrete component unit. SC Development Unit 14, Inc. (SCDU 14) is a Michigan nonprofit organization established by the College in September 2015 to lease land, specifically Unit 14, from the College to be subleased to Seven Delta, LLC (7 Delta). In accordance with GASB Statement No. 61, SCDU 14 is reported as a discrete component unit because the College has operational responsibility for SCDU 14. SCDU 14 is the sole member of SD Member LLC (SDM), a Michigan limited liability company, which was formed in December 2015 to oversee and partner with an outside developer. 7 Delta is a Michigan limited liability company formed in December 2015 whose main purpose is to construct and subsequently lease a building constructed on College land. SDM holds a 51% voting interest and 50% interest in income in 7 Delta, with the outside developer holding a 49% voting interest and 50% interest in income. In accordance with GASB Statement No. 61, SDM is a component unit of SCDU 14 and 7 Delta is a component unit of SDM because each entity has a voting majority and there is a financial benefit and burden relationship. SDM and 7 Delta are blended with SCDU 14 for purposes of the College s financial statements. SC Sports Dome, Inc. (SCSD) is a Michigan nonprofit organization established by the College in December 2015 to lease land, specifically Unit 15, from the College to be subleased to SC College Dome, LLC (SCCD) as well as to oversee and partner with an outside developer to build the Soccer Dome on Unit 15. In accordance with GASB Statement No. 61, SCSD is reported as a discrete component unit of the College because the College has operational responsibility for SCSD. SCCD is a Michigan limited liability company formed in June 2016 whose main purpose is to construct and subsequently lease the Soccer Dome facility to the College. SCSD holds a 51% voting interest in SCCD, with the outside developer holding a 49% voting interest. Income will be distributed in accordance with SCCD s operating agreement. In accordance with GASB Statement No. 61, SCCD is a component unit of SCSD because SCSD has a voting majority and there is a financial benefit and burden relationship. SCCD is blended with SCSD for purposes of the College s financial statements. SC Technology Center, Inc. (SCTC) is a Michigan nonprofit organization established by the College in November 2016 to provide ancillary support services to tenants. In accordance with GASB Statement No. 61, SCTC is reported as a discrete component unit of the College because the College has operational responsibility for SCTC. Income will be distributed in accordance with SCTC s bylaws. 20

46 Schoolcraft College Annual Report 2018 Schoolcraft College Annual Report 2018 Notes to Financial Statements Notes to Financial Statements Condensed Statement of Revenue, Expenses, and Changes in Net Position C-12 Financial statements for the SDA, SCDU 14, SCSD, and SCTC (collectively referred to as Development Component Units ) as of and for the years ended June 30, 2018 and 2017 are as follows: Schoolcraft Development Authority SC Development Unit 14, Inc. SC Sports Dome, Inc. SC Technology Center, Inc. Combined Total Assets Current Assets 275,955 $ 789,775 $ 1,384,035 $ 168,278 $ $ 2,618,043 43,115,645 Noncurrent Assets - 35,992,258 6,982, ,812 Total Assets 275,955 36,782,033 8,366, ,090 45,733,688 Liabilities Current Liabilities 235, , ,856 88,709 1,588,650 Noncurrent Liabilities 2,209,935 22,656, ,865,979 Total Liabilities 2,445,318 23,569, ,856 88,709 26,454,629 Net Position Net investment in capital assets - 4,379,741 1,213,547-5,593,288 Restricted for Nonexpendable Minority interest - 3,407,531 6,000,000-9,407,531 Unrestricted (2,169,363) 5,425, , ,381 4,278,240 Total Net Position $ (2,169,363) $ 13,212,287 $ 8,015,754 $ 220,381 $ 19,279,059 Schoolcraft Development Authority SC Development Unit 14, Inc. SC Sports Dome, Inc. SC Technology Center, Inc. Combined Total Assets Current Assets 231,567 $ 492,519 $ 672,898 $ 445,950 $ $ 1,842,934 46,592,747 Noncurrent Assets - 39,549,640 7,043,107 - Total Assets 231,567 40,042,159 7,716, ,950 48,435,681 Liabilities Current Liabilities 234,143 5,268, , ,083 6,225,830 Noncurrent Liabilities 2,233,167 23,345, ,578,907 Net Position Condensed Statement of Net Position Total Liabilities 2,467,310 28,614, , ,083 31,804,737 Net investment in capital assets - 7,523,130 1,213,547-8,736,677 Restricted for Nonexpendable Minority interest - 2,549,636 5,995,255-8,544,891 Unrestricted (2,235,743) 1,354,834 55, ,867 (650,624) Schoolcraft Development Authority SC Development Unit 14, Inc. SC Sports Dome, Inc. SC Technology Center, Inc. Combined Total Revenue Operating Revenue $ 869,132 $ 2,137,698 $ 739,976 $ 157,804 $ 3,904,610 Expenses Operating Expenses 2, , , ,290 1,237,405 Nonoperating Revenue and (Expenses) Interest income , , ,221 Interest expense - (1,325,378) - - (1,325,378) Unrealized gain on investments - 423, ,297 Distribution to minority owner - - (698,323) - (698,323) Total Nonoperating Revenue and (Expenses) 128 (820,248) 105,937 - (714,183) Other Revenue and (Expenses) Transfers between Component Units (800,000) 800, Transfers to/from Schoolcraft College - (250,000) - - (250,000) Minority interest contributions - 849,488 95, ,093 Total Other Revenue and (Expenses) (800,000) 1,399,488 95, ,093 Increase in Net Position 66,380 1,784, ,533 45,514 2,648,115 Net Position - Beginning of Year (2,235,743) 11,427,600 7,264, ,867 16,630,944 Net Position - End of Year $ (2,169,363) $ 13,212,288 $ 8,015,753 $ 220,381 $ 19,279,059 Schoolcraft Development Authority SC Development Unit 14, Inc. SC Sports Dome, Inc. SC Technology Center, Inc. Combined Total Revenue Operating Revenue $ 862,954 $ 540,941 $ 345,706 $ 141,053 $ 1,890,654 Expenses Operating Expenses 80, ,152 65,483 76, ,453 Nonoperating Revenue and (Expenses) Interest income , , ,717 Unrealized gain on investments 372, ,730 Contribution revenue 5,588,854 5,588,854 Distribution to minority owner - - (682,677) - (682,677) Total Nonoperating Revenue and (Expenses) 130 6,051,620 (144,126) - 5,907,624 Other Revenue and (Expenses) Transfers between Component Units (760,000) 750,000 10, Transfers to/from Schoolcraft College - 1,841,064 1,213, ,000 3,164,611 Minority interest contributions - - 4,643,369-4,643,369 Total Net Position $ (2,235,743) $ 11,427,600 $ 7,264,220 $ 174,867 $ 16,630,944 Total Other Revenue and (Expenses) (760,000) 2,591,064 5,866, ,000 7,807,980 Increase (Decrease) in Net Position 22,452 9,074,473 6,003, ,867 15,274,805 Net Position - Beginning of Year (2,258,195) 2,353,127 1,261,207-1,356,139 Net Position - End of Year $ (2,235,743) $ 11,427,600 $ 7,264,220 $ 174,867 $ 16,630,944 Basis of Presentation The accompanying financial statements have been prepared in accordance with the generally accepted accounting principles as applicable to public colleges and universities outlined in Governmental Accounting Standards Board Statement (GASB) No. 35 and the State of Michigan Manual for Uniform Financial Reporting Michigan Public Community Colleges, The College reports as a Business Type Activity, as defined by GASB Statement No. 35. Business Type Activities are those that are financed in whole or part by fees charged to external parties for goods and services

47 Notes to Financial Statements Schoolcraft College Annual Report 2018 Notes to Financial Statements Schoolcraft College Annual Report 2018 C-13 Significant Accounting Policies Measurement Focus and Basis of Accounting The financial statements have been prepared on the accrual basis, whereby revenue is recognized when earned and expenditures are recognized when the related liabilities are incurred and certain measurement and matching criteria are met. Cash and Cash Equivalents Cash and cash equivalents consist of all highly liquid investments with an initial maturity of three months or less. Investments Investments are recorded at fair value, based on quoted market prices. Accounts Receivable College Accounts receivable are recorded net of allowance for doubtful accounts. The allowance for doubtful accounts is established using a general valuation allowance based on historical loss experience. All amounts deemed to be uncollectible are charged against the allowance in the period that determination is made. Accounts Receivable Development Component Units Revenue earned and not paid prior to year-end is recorded as a receivable. An allowance for bad debts is established based on a specific assessment of all invoices that remain unpaid following normal customer payment periods. All amounts deemed uncollectible are charged against bad debt expense in the period that determination is made. Inventories Inventories are stated at the lower of cost or market using the first-in, first-out method and consist of books, food and supplies. Restricted Cash and Investments Restricted cash and investments consist of mortgage proceeds which are restricted for capital expenditures. Rent Receivable The Development Component Units recognize rent revenue on a straight-line basis over the lease term when the operating lease contains payment requirements that are artificially low in a particular year. Rent receivables represent the difference between the scheduled payments and revenue recognized on a straightline basis. The outstanding balance is expected to be collected over the life of the lease in accordance with the payment schedule in the lease agreement. Property and Equipment Property and equipment are recorded at cost or, if acquired by gift, at the fair market value as of the date of acquisition. Depreciation is provided for on a straight-line basis over the estimated useful life of the assets. Deferred Outflows of Resources In addition to assets, the statement of net position reports a separate section for deferred outflows of resources. This separate financial statement element, deferred outflows of resources, represents a consumption of net position that applies to a future period and so will not be recognized as an outflow of resources (expense) until then. The College reports deferred outflows of resources for certain pension-related and OPEB-related amounts, such as change in expected and actual experience, changes in assumptions, and certain contributions made to the plan subsequent to the measurement date. More detailed information can be found in Note 3. Unearned Revenue Revenue received prior to year-end that relates to the next fiscal period is recorded as unearned revenue. Unearned revenue for the College at June 30, 2018 is for the summer 2018 semester which began July 2, 2018 and for the fall 2018 semester which began August 27, Unearned revenue for the Development Component Units at June 30, 2018 is for rental revenue due in advance of or received prior to year-end that relates to the next fiscal period. In addition, advance payments received in connection with leases or lease extensions are recorded as unearned revenue and recognized on a straight-line basis over the lease term. Accrued Severance Pay Accrued severance pay represents the accumulated liability to be paid under the College s current severance pay policy. Under the College s policy, certain employees earn severance pay based on length of service with the College. 23 Pensions For purposes of measuring the net pension liability, deferred outflows of resources and deferred inflows of resources related to pensions, and pension expense, information about the fiduciary net position of the Michigan Public School Employees Retirement System (MPSERS) and additions to/deductions from MPSERS fiduciary net position have been determined on the same basis as they are reported by MPSERS. MPSERS uses the economic resources measurement focus and the full accrual basis of accounting. Contribution revenue is recorded as contributions are due, pursuant to legal requirements. Benefit payments (including refunds of employee contributions) are recognized as expense when due and payable in accordance with the benefit terms. Related plan investments are reported at fair value. Other Postemployment Benefit Costs For purposes of measuring the net other postemployment benefit (OPEB) liability, deferred outflows of resources and deferred inflows of resources related to OPEB, and OPEB expense, information about the fiduciary net position of the MPSERS and additions to/deductions from MPSERS fiduciary net position have been determined on the same basis as they are reported by MPSERS. MPSERS uses the economic resources measurement focus and the full accrual basis of accounting. For this purpose, MPSERS recognizes benefit payments when due and payable in accordance with the benefit terms. Investments are reported at fair value, except for money market investments and participating interest-earning investment contracts that have a maturity at the time of purchase of one year or less, which are reported at cost. Deferred Inflows of Resources In addition to liabilities, the statement of net position reports a separate section for deferred inflows of resources. This separate financial statement element represents an acquisition of net position that applies to a future period and so will not be recognized as an inflow of resources (revenue) until that time. The College reports deferred inflows of resources for certain pension-related and OPEB-related amounts, such as funding received through state appropriations for contributions to the plans after the measurement date and the difference between projected and actual earnings of the plans' investments. More detailed information can be found in Note 3. Net Position GASB No. 34 establishes standards for external financial reporting for public colleges and universities and requires that resources be classified for accounting and reporting purposes into the following net position categories: Unrestricted Net Position Unrestricted net position represents net position that is not subject to externally imposed restrictions. A portion of the unrestricted net position has been designated for certain future expenditures and contingent liabilities of the College. While these items are not actual liabilities, they do represent commitments of College resources at June 30, 2018 and 2017 and the Board of Trustees believes that provision should be made for these future expenditures. These designations are as follows: College Designated for: Scholarships $ 323,070 $ 301,000 Technology replacements 1,415,000 1,365,000 Major maintenance & renovation 833, ,000 Instructional and student support systems 750, ,000 Instructional equipment 969,000 2,035,000 Personnel commitments, self insurance reserves and working capital 6,446,000 6,382,000 Reserve for executive orders 2,500,000 2,500,000 Debt service costs 3,515,000 2,949,000 Unrestricted and unallocated (139,845,128) (92,657,196) Total Unrestricted Net Position $ (123,094,058) $ (75,913,196) Unrestricted net position of the Development Component Units is entirely unrestricted and unallocated at both June 30, 2018 and Net Investment in Capital Assets Capital assets, net of accumulated depreciation and outstanding principal balances of debt attributable to the acquisition, construction, or improvement of those assets. 24

48 Notes to Financial Statements Schoolcraft College Annual Report 2018 Notes to Financial Statements Schoolcraft College Annual Report 2018 C-14 Restricted Net Position - Expendable Net position whose use by the College is subject to externally imposed constraints that can be fulfilled by actions of the College pursuant to those constraints or that expire by the passage of time. Restricted Net Position - Nonexpendable Net position whose use by the College is subject to externally imposed constraints as amounts relate to the noncontrolling interest share of income and capital contributions in 7 Delta and SCCD. Operating Revenue and Expenses Revenue and expense transactions are normally classified as operating revenue and expenses when such transactions are generated by the College's principal ongoing operations. However, most revenue that is considered to be non-exchange, such as tax revenue and state appropriations, are non-operating revenues. For the Development Component Units, rental revenue is recognized based on monthly or quarterly payments in accordance with the terms of each rental agreement. Rent revenue is recognized on a straight-line basis over the lease term when the operating lease contains payment requirements that are artificially low in a particular year. Miscellaneous Revenue - College Miscellaneous revenue for the College includes a number of items including cell tower rentals, library copier revenue, restaurant receipts related to educational activities, fitness center membership revenue, Wayne County Head Start receipts, university partnerships revenue, urgent care lease revenue, contributions revenue for donated equipment, indirect cost rate recoveries for various grants, VistaTech Center facility rental revenue, and Michigan New Jobs Training Program receipts. Miscellaneous Revenue - Development Component Units Miscellaneous revenue for the Development Component Units primarily includes rent revenue as explained in more detail in Note 11. Property Taxes Property tax revenue is recognized in the year for which taxes have been levied. Property taxes are levied on July 1 and December 1 based on taxable values as of the preceding December 31. The taxes, which are collected and remitted to the College by townships and cities within the College district boundaries, are collected through February 28. Uncollected real property taxes of the College are turned over to the counties in which the district is located for subsequent collection. The College is subsequently paid 100 percent of delinquent real property taxes through the counties' tax revolving funds. These payments are usually received within three to five months after the delinquency date. Property tax revenue levied for general operating purposes was $24,133,891 and $23,545,608 based on $ and $ of tax per $1,000 of taxable property value in the community college taxing district for the years ended June 30, 2018 and 2017, respectively. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect reported amounts and disclosures in the financial statements. Actual results could differ from those estimates. Reclassification Certain 2017 amounts have been reclassified to conform to the 2018 presentation. The College previously classified $2,648,924 as instruction, $1,036,689 as instructional support, $1,004,651 as student services and $1,507,377 as institutional administration within operating expenses on the 2017 statement of revenue, expenses and changes in net position. These amounts, totaling $6,197,641, have been reclassified to information technology expense to conform to the 2018 presentation based on requirements by the State of Michigan. The reclassification did not change the total operating expenses for the year ended June 30, Subsequent Events The financial statements and related disclosures include evaluation of events up through and including October 8, 2018, which is the date the financial statements were available to be issued. Adoption of New Standards For the year ended June 30, 2018, the College implemented GASB Statement No. 75, Accounting and Financial Reporting for Postemployment Benefits Other than Pensions, which requires governments providing OPEB plans to recognize their unfunded OPEB obligation as a liability for the first time, and to more comprehensively and comparably measure the annual costs of OPEB benefits. The statement also enhances accountability and transparency through revised note disclosures and required supplementary information (RSI). In accordance with the statements, the College has reported a change in accounting principle adjustment to unrestricted net position of $40,505,281, which is the net of the net OPEB liability and related deferred inflows and outflows as of July 1, June 30, 2017 amounts have not been restated to reflect the impact of GASB No. 75 because the information is not available to calculate the impact on OPEB expense for the fiscal year ended June 30, Upcoming Accounting Pronouncements In June 2017, the GASB issued Statement No. 87, Leases, which increases the usefulness of governments' financial statements by requiring recognition of certain lease assets and liabilities for leases that previously were classified as operating leases and recognized as inflows of resources or outflows of resources based on the payment provisions of the contract. This Statement establishes a single model for lease accounting based on the foundational principle that leases are financings of the right to use an underlying asset. Under this Statement, a lessee is required to recognize a lease liability and an intangible right-to-use lease asset, and a lessor is required to recognize a lease receivable and a deferred inflow of resources. The new lease standard is expected to have a significant effect on the College's statement of net position as a result of the SDA and SCDU 14 leases described in Note 11 that are classified as operating leases, including an increase in lease receivables and deferred inflows. The effects on the statement of revenues, expenses and changes in net position is not expected to be significant. The provisions of this statement are effective for the College s financial statements for the year ended June 30, In June 2018, the GASB issued Statement No. 89, Accounting for Interest Cost Incurred before the End of a Construction Period, which simplifies accounting for interest cost incurred before the end of construction and requires those costs to be expensed in the period incurred. As a result, interest cost incurred before the end of a construction period will not be capitalized and included in the historical cost of a capital asset reported in a business-type activity or enterprise fund. The requirements of the standard will be applied prospectively and result in increased interest expense during periods of construction. The provisions of this statement are effective for the College s financial statements for the year-ended June 30, Note 2 - Deposits and Investments The College s deposits and investments are included on the statement of net position under the following classifications: Cash and cash equivalents $ 10,638,615 $ 10,844,088 Long-term investments 12,933,434 16,201,887 Total $ 23,572,049 $ 27,045,975 The Development Component Units deposits and investments are included on the statement of net position under the following classifications: Cash and cash equivalents $ 2,213,264 $ 6,676,203 Long-term investments 4,414,003 3,622,323 Total $ 6,627,267 $ 10,298,526 As of June 30, 2018 and 2017, the College s investments are comprised entirely of federal government agency bonds with maturities of more than 5 years. As of June 30, 2018 and 2017, the Development Component Units investments do not include investments with maturity dates

49 Notes to Financial Statements Schoolcraft College Annual Report 2018 Notes to Financial Statements Schoolcraft College Annual Report 2018 C-15 The above amounts for the College are classified by GASB Statement Number 3 in the following categories: Bank deposits (checking & savings accounts) $ 10,541,921 $ 9,856,018 Institutional money market fund 65, ,456 Petty cash and cash on hand 30,915 38,614 Federal government agency bonds 12,933,434 16,201,887 Total $ 23,572,049 $ 27,045,975 The above amounts for the Development Component Units are classified by GASB Statement Number 3 in the following categories: Bank deposits (checking & savings accounts) $ 2,204,564 $ 914,964 Institutional money market fund 8,700 5,761,239 Publicly traded stocks 3,748,546 3,074,116 Exchange traded funds 665, ,207 Total $ 6,627,267 $ 10,298,526 Deposits The above College deposits were reflected in the accounts of the bank at June 30, 2018 and 2017 (without recognition of checks written but not yet cleared or of deposits in transit) at $11,387,133 and $10,528,738 respectively. Of this amount $250,000 in both 2018 and 2017 was covered by federal depository insurance and $11,137,133 and $10,278,738, respectively, was uninsured and uncollateralized. The College believes that due to the dollar amounts of cash deposits and the limits of FDIC insurance, it is impractical to insure all bank deposits. As a result, the College evaluates each financial institution it deposits funds with and assesses the level of risk of each financial institution; only those institutions with an acceptable estimated risk level are used as depositories. The above Development Component Units deposits were reflected in the accounts of the bank at June 30, 2018 and 2017 at the same amount due to no outstanding checks or deposits in transit at year-end. At June 30, 2018 and 2017, $1,072,458 and $665,420, respectively, was covered by federal depository insurance and $1,132,106 and $249,544, respectively, was uninsured and uncollateralized. Interest Rate Risk The College and Development Component Units do not have a formal investment policy that limits investment maturities as a means of managing its exposure to fair value losses arising from increasing interest rates. Credit Risk The College is authorized by Michigan Public Act 331 of 1966, as amended through 2012, and by resolution of the Board of Trustees to invest surplus monies in bonds, bills and notes of the United States or obligations of the State of Michigan, mutual funds and investment pools that are composed of authorized investments, bankers acceptances, commercial paper rated prime by at least one of the standard rating services, negotiable certificates of deposits and certain repurchase agreements. The College has no investment policy that would further limit its investment choices. The Development Component Units do not have a policy limiting credit risk. Concentration of Credit Risk The College places no limit on the amount the College may invest in any one issuer. More than 5 percent of the College s investments at June 30, 2018 and 2017 were invested in federal government-backed securities. The Development Component Units place no limit on the amount that may be invested in any one issuer. More than 5 percent of the Development Component Unit s investments at June 30, 2018 and 2017 were invested as follows: Exchange traded funds - ishares Core U.S. Aggregate 15% 15% Custodial Credit Risk The College s and Development Component Units investments are all in the name of the respective entity. The investments are custodied with each bank they were purchased from. Therefore, custodial risk is limited. Schoolcraft College Foundation Investments Investments are comprised of mutual funds, bond and exchange traded funds with a fair market value of $14,671,863 and $14,044,439 as of June 30, 2018 and June 30, 2017, respectively. Note 3 - Retirement Plans and Postemployment Benefits Michigan Public Schools Employees Retirement System Plan Description The College participates in the Michigan Public Schools Employees Retirement System (MPSERS), a statewide, cost-sharing, multiple employer defined benefit public employee retirement system governed by the State of Michigan covering substantially all college employees. Certain College employees also receive defined contribution retirement and healthcare benefits through MPSERS. MPSERS provides retirement, survivor and disability benefits to plan members and their beneficiaries. MPSERS also provides postemployment health care benefits to retirees and beneficiaries who elect to receive those benefits. MPSERS issues a publicly available financial report that includes financial statements and required supplementary information for the pension and post-employment health care plans. That report may be obtained by writing to Office of Retirement Services (ORS) at 7150 Harris Drive, P.O. Box 30171, Lansing, MI or at Benefits Provided Benefit provisions of the Defined Benefit (DB) pension plan and the postemployment healthcare plan are established by state statute, which may be amended. State of Michigan Public Act 300 of 1980, as amended, establishes eligibility and benefit provisions for the defined benefit pension plan and the postemployment healthcare plan. Depending on the plan option selected, member retirement benefits are calculated as final average compensation times years of service times a pension factor ranging from 1.25 percent to 1.50 percent. The requirements to retire range from attaining the age of 46 to 60 with years of service ranging from 5 to 30 years, depending on when the employee became a member. Early retirement is computed in the same manner as a regular pension, but is permanently reduced 0.50 percent for each full and partial month between the pension effective date and the date the member will attain age 60. There is no mandatory retirement age. Depending on the member s date of hire, MPSERS offers the option of participating in the Defined Contribution (DC) plan that provides a 50 percent employer match (up to 3 percent of salary) on employee contributions. Members are eligible for non-duty disability benefits after 10 years of service and for duty-related disability benefits upon hire. Disability retirement benefits are determined in the same manner as retirement benefits but are payable immediately without an actuarial reduction. The disability benefits plus authorized outside earnings are limited to 100 percent of the participant s final average compensation with an increase of 2 percent each year thereafter. Benefits may transfer to a beneficiary upon death, and are determined in the same manner as retirement benefits, but with an actuarial reduction. Benefit terms provide for annual cost-of-living adjustments to each employee s retirement allowance subsequent to the employee s retirement date. The annual adjustment, if applicable, is 3 percent. For some members that do not receive an annual increase, they are eligible to receive a supplemental payment in those years when investment earnings exceed actuarial assumptions. MPSERS provides medical, prescription drug, dental, and vision coverage for retirees and beneficiaries. A subsidized portion of the premium is paid by MPSERS with the balance deducted from the monthly pension of each retiree healthcare recipient. Depending on the member s date of hire, this subsidized portion ranges from 80 percent to the maximum allowed by the statute. Contributions State of Michigan Public Act 300 of 1980, as amended, required the College to contribute amounts necessary to finance the coverage of pension benefits of active and retired members. Contribution provisions are specified by state statute and may be amended only by action of the State Legislature. Under these 28

50 Notes to Financial Statements Schoolcraft College Annual Report 2018 Notes to Financial Statements Schoolcraft College Annual Report 2018 C-16 provisions, each College s contribution is expected to finance the costs of benefits earned by employees during the year, with an additional amount to finance a portion of the unfunded accrued liability. Under the OPEB plan, retirees electing this coverage contribute an amount equivalent to the monthly cost for Part B Medicare and 10 percent, or 20 percent for those not Medicare eligible, of the monthly premium amount for the health, dental, and vision coverage at the time of receiving the benefits. The MPSERS board of trustees annually sets the employer contribution rate to fund the benefits. Participating employers are required to contribute at that rate. Under Public Act 300 of 2012, members were given the choice between continuing the 3 percent contribution to the retiree healthcare and keeping the premium subsidy benefit described above, or choosing not to pay the 3 percent contribution and instead opting out of the subsidy benefit and becoming a participant in the Personal Healthcare Fund (PHF), a portable, tax-deferred fund that can be used to pay healthcare expenses in retirement. Participants in the PHF are automatically enrolled in a 2 percent employee contribution into their 457 account as of their transition date, earning them a 2 percent employer match into a 401(k) account. Members who selected this option stop paying the 3 percent contribution to the retiree healthcare as of the day before their transition date, and their prior contributions were deposited into their 401(k) account. College contributions are determined based on employee elections. There are multiple different pension and healthcare benefit options included in the plan available to employees based on date of hire and the elections available at that time. Contribution rates are adjusted annually by the ORS. The range of rates during the periods covered by this report is as follows: Pension OPEB October 1, 2015 September 30, % % 6.40% % October 1, 2016 September 30, % % 5.69% % October 1, 2017 January 31, % % 7.42% % February 1, 2018 September 30, % % 7.42% % Depending on the plan selected, member pension contributions range from 0 percent up to 7.0 percent of gross wages. For certain plan members, a 4 percent employer contribution to the defined contribution pension plan is required. In addition, for certain plan members, a 3 percent employer match is provided to the defined contribution pension plan. The College s required and actual pension contributions to MPSERS for the years ended June 30, 2018 and 2017 were $12,277,000 and $10,919,000, respectively, which include the College s contributions for those members with a defined contribution benefit. The College s required and actual pension contributions include an allocation of $4,765,000 and $3,415,000 in revenue received from the State of Michigan, and remitted to the System, to fund the MPSERS Unfunded Actuarial Accrued Liability (UAAL) stabilization rate for the years ended June 30, 2018 and 2017, respectively. The College s required and actual OPEB contributions to MPSERS for the years ended June 30, 2018 and 2017 were $2,859,000 and $3,610,000, respectively, which include the College s contributions for those members with a defined contribution benefit. The College s required and actual OPEB contributions include an allocation of $0 and $1,271,000 in revenue received from the State of Michigan, and remitted to the System, to fund the MPSERS Unfunded Actuarial Accrued Liability (UAAL) stabilization rate for the years ended June 30, 2018 and 2017, respectively. Net Pension Liability At June 30, 2018 and 2017, the College reported a liability of approximately $116,825,000 and $109,537,000, respectively, for its proportionate share of the net pension liability. The net pension liability was measured as of September 30, 2017 and 2016, respectively, and the total pension liability used to calculate the net pension liability was determined by an actuarial valuation as of September 30, 2016 and 2015, which used updated procedures to roll forward the estimated liability to September 30, 2017 and The College s proportion of the net pension liability was based on a projection of its long-term share of contributions to the pension plan relative to the projected contributions of all participating reporting units, actuarially determined. At September 30, 2017 and 2016, the College s proportion was percent and percent, respectively. Net OPEB Liability At June 30, 2018, the College reported a liability of approximately $40,037,000 for its proportionate share of the net OPEB liability. The net OPEB liability for fiscal year 2018 was measured as of September 30, 2017, and the total OPEB liability used to calculate the net OPEB liability was determined by an actuarial valuation as of September 30, 2016, which used updated procedures to roll forward the estimated liability to September 30, The College s proportion of the net OPEB liability was based on a projection of its long-term share of contributions to the OPEB plan relative to the projected contributions of all participating reporting units, actuarially determined. At September 30, 2017, College s proportion was percent of MPSERS in total. Pension Expense and Deferred Outflows of Resources and Deferred Inflows of Resources Related to Pensions For the years ended June 30, 2018 and 2017, the College recognized pension expense of $13,726,304 and $11,491,364, respectively, inclusive of payments to fund the MPSERS UAAL stabilization rate. At June 30, 2018, the College reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources: Differences between expected and actual experience Differences between expected and actual experience Deferred Outflows of Resources Deferred Outflows of Resources Deferred Inflows of Resources $ 1,015,293 $ 573,238 Changes of assumptions 12,799,155 - Net difference between projected and actual earnings on pension plan assets - 5,585,025 Changes in proportion and differences between College contributions and 4,921,694 77,815 proportionate share of contributions College contributions subsequent to the measurement date 9,487,356 - Total $ 28,223,498 $ 6,236,078 At June 30, 2017, the College reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources: Deferred Inflows of Resources $ 1,365,125 $ 259,606 Changes of assumptions 1,712,532 - Net difference between projected and actual earnings on pension plan assets 1,820,511 - Changes in proportion and differences between College contributions and 3,801,735 69,912 proportionate share of contributions College contributions subsequent to the measurement date 9,186,660 - Total $ 17,886,563 $ 329,518 In addition, the $4,764,756 and $3,414,580 reported as deferred inflows of resources resulting from the pension portion of state aid payments received pursuant to Section 201(5) of the State School Aid Act (PA 94 of 1979), will be recognized as state appropriations revenue for the years ended June 30, 2019 and 2018, respectively

51 Notes to Financial Statements Schoolcraft College Annual Report 2018 Notes to Financial Statements Schoolcraft College Annual Report 2018 Amounts reported as deferred outflows of resources and deferred inflows of resources related to pensions will be recognized in pension expense as follows: Year Ending June 30 Amount 2019 $ 3,745, ,687, ,992, , Thereafter - Total $ 12,500,064 In addition, the contributions subsequent to the measurement date will be included as a reduction of the net OPEB liability in the next year (2019). Actuarial Assumptions The total pension liability and total OPEB liability as of September 30, 2017 and 2016 are based on the results of an actuarial valuation as of September 30, 2016 and 2015, respectively, and rolled forward. The total pension and OPEB liabilities were determined using the following actuarial assumptions: Actuarial cost method Entry age normal cost actuarial cost method Assumed rate of return (Pension) 7.00 to 7.50 percent (2017) and 7.00 to 8.00 percent (2016), net of investment expenses based on the groups In addition, the contributions subsequent to the measurement date will be included as a reduction of the net pension liability in the next year (2019). Assumed rate of return (OPEB) 7.50 percent (2017), net of investment expenses based on the groups C-17 OPEB Expense and Deferred Outflows of Resources and Deferred Inflows of Resources Related to OPEB For the year ended June 30, 2018, the College recognized OPEB expense of $2,678,075. Information is not available to calculate the impact on OPEB expense for the year ended June 30, At June 30, 2018, the College reported deferred outflows of resources and deferred inflows of resources related to OPEB from the following sources: Differences between expected and actual experience Deferred Outflows of Resources Deferred Inflows of Resources $ - $ 426,276 Changes of assumptions - - Net difference between projected and actual earnings on pension plan assets - 927,265 Changes in proportion and differences between College contributions and proportionate share of contributions College contributions subsequent to the measurement date 2,138,205 - Total $ 2,138,655 $ 1,353,541 In addition, $1,270,629 resulting from the OPEB portion of state aid payments received pursuant to Section 201(5) of the State School Aid Act (PA 94 of 1979) was recognized as state appropriations revenue for the year ended June 30, There are no deferred inflows of resources resulting from the OPEB portion of state aid payments at June 30, Amounts reported as deferred outflows of resources and deferred inflows of resources related to OPEB will be recognized as a reduction of OPEB expense as follows: Year Ending June 30 Amount Salary increases 3.50 percent to percent, including wage inflation of 3.50 percent Healthcare cost trend rate 7.50 percent (2017), year 1 graded to 3.50 percent year 12 Mortality basis RP-2000 Combined Healthy Mortality Table, adjusted for mortality improvements to 2025 using projection scale BB Cost of living pension adjustments 3.00 percent, annual non-compounded for MIP members Assumption changes as a result of an experience study for the periods 2007 through 2012 have been adopted by the System for use in the annual pension valuations beginning with the September 30, 2014 valuation. Discount Rate The discount rate used to measure the total pension liability was and percent as of September 30, 2017 and 2016, respectively, depending on the plan option. The discount rate used to measure the total OPEB liability was 7.50 percent as of September 30, The projection of cash flows used to determine the discount rate assumed that employee contributions will be made at the current contribution rate and that employer contributions will be made at contractually required rates. Based on those assumptions, the pension plan s fiduciary net position and the OPEB plan s fiduciary net position were projected to be available to make all projected future benefit payments for current active and inactive employees. Therefore, the long-term expected rate of return on pension plan and OPEB plan investments was applied to all periods of projected benefit payments to determine the total pension liability and total OPEB liability. The long-term expected rate of return on pension plan and OPEB plan investments was determined using a building-block method in which best-estimate ranges of expected future real rates of return (expected returns, net of pension plan investment expense and inflation) are developed for each major asset class. These ranges are combined to produce the long-term expected rate of return by weighting the expected future real rates of return by the target asset allocation percentage and by adding expected inflation $ 326, , , , ,147 Thereafter - Total $ 1,353,

52 Notes to Financial Statements Schoolcraft College Annual Report 2018 Notes to Financial Statements Schoolcraft College Annual Report 2018 C-18 The target allocation and best estimates of arithmetic real rates of return for each major asset class are summarized in the following table: Asset Class Target Allocation Long-term Long-term Expected Real Rate of Return Target Allocation Expected Real Rate of Return Domestic equity pools 28.0% 5.60% 28.0% 5.90% Private equity pools 18.0% 8.70% 18.0% 9.20% International equity pools 16.0% 7.20% 16.0% 7.20% Fixed-income pools 10.5% -0.10% 10.5% 0.90% Real estate & infrastructure pools 10.0% 4.20% 10.0% 4.30% Real return, opportunistic, and absolute pool 15.5% 5.00% 15.5% 6.00% Short-term investment pools 2.0% -0.90% 2.0% 0.00% Total 100.0% 100.0% MPSERS approved a decrease in the discount rate for the September 30, 2017 annual actuarial valuation for the pension plan and the OPEB plan to 7.05% and 7.15%, respectively. As a result, the actuarial computed employer contributions, the net pension liability, and net OPEB liability will increase for the measurement period ending September 30, Sensitivity of the Net Pension Liability to Changes in the Discount Rate The following presents the net pension liability of the College, calculated using the current discount rate depending on the plan option, as well as what the College s net pension liability would be if it were calculated using a discount rate that is 1.00 percentage point lower or 1.00 percentage point higher than the current rate: 1.00 percent decrease (6.00/6.50 percent) 2018 Current discount rate (7.00/7.50 Percent) 1.00 percent increase (8.00/8.50 percent) $ 152,184,691 $ 116,825,440 $ 87,055, percent decrease (6.00/7.00 percent) 2017 Current discount rate (7.00/8.00 Percent) 1.00 percent increase (8.00/9.00 percent) $ 141,056,608 $ 109,537,407 $ 82,963,689 Sensitivity of the Net OPEB Liability to Changes in the Discount Rate The following presents the net OPEB liability of the College, calculated using the current discount rate, as well as what the College s net OPEB liability would be if it were calculated using a discount rate that is 1.00 percentage point lower or 1.00 percentage point higher than the current rate: 1.00 percent decrease (6.50 percent) 2018 Current discount rate (7.50 Percent) 1.00 percent increase (8.50 percent) $ 46,894,839 $ 40,036,949 $ 34,216,748 Sensitivity of the Net OPEB Liability to Changes in the Healthcare Cost Trend Rate The following presents the net OPEB liability of the College, calculated using the current healthcare cost trend rate, as well as what the College s net OPEB liability would be if it were calculated using a discount rate that is 1.00 percentage point lower or 1.00 percentage point higher than the current rate: 1.00 percent decrease (6.50 percent) 2018 Current discount rate (7.50 Percent) 1.00 percent increase (8.50 percent) $ 33,905,914 $ 40,036,949 $ 46,998,312 Pension Plan and OPEB Plan Fiduciary Net Position Detailed information about the plan s fiduciary net position is available in the separately issued MPSERS financial report. Payable to the Pension and OPEB Plan At June 30, 2018, the College reported a payable of $1,181,557 and $142,723 for the outstanding amount of contributions to the pension plan and OPEB plan, respectively, required for the year ended June 30, At June 30, 2017, the College reported a payable of $1,093,118 and $375,570 for the outstanding amount of contributions to the pension plan and OPEB plan, respectively, required for the year ended June 30, Defined Contribution Pension Plan Full-time faculty, administrators and full-time classified employees may elect to participate in an optional retirement program (ORP) in lieu of participating in the MPSERS plan. The ORP is a defined contribution plan affiliated with Teachers' Insurance and Annuity Association - College Retirement Equities Fund (TIAA-CREF). Under ORP, the College contributes 12.00%, and the participant contributes 4.00% of the participant s compensation. Compensation covered under the plan for the year ended June 30, 2018 was approximately $9,065,000, resulting in contributions of approximately $1,088,000 and $363,000 for the College and employee, respectively. Compensation covered under the plan for the year ended June 30, 2017 was approximately $8,368,000, resulting in contributions of approximately $1,004,000 and $335,000 for the College and employee, respectively. Note 4 - Risk Management The College is exposed to various risks of loss related to property loss, general liability, errors and omissions, workers compensation as well as medical benefits provided to employees. The College was self-insured for vision benefits and was partially insured for workers compensation to a maximum of $400,000 for each claim and, in the aggregate, for claims up to $1,000,000 for the two-year insurance policy period expired June 30, The insurance policy was extended for another two-year period expiring June 30, The College is self-insured for medical benefits for substantially all employees. The maximum of $150,000 for each claim and up to $2,951,760 in the aggregate through December 2017, was subsequently increased to a maximum of $170,000 for each claim effective January 2018, and up to $3,509,618 for calendar year 2018 in the aggregate. Claims are funded by the College and paid by the plan administrator on a fiscal year basis. Actual payments are based on claims filed. The College pays administrative costs of the plan up to their obligation under PA152. The Michigan Community College Risk Management Authority (MCCRMA) risk pool program operates as a claims servicing pool for amounts up to member retention limits, and operated as a common risk-sharing management program for losses in excess of member retention amounts. Although premiums are paid annually to MCCRMA, which MCCRMA uses to pay claims up to the retention amounts, the ultimate liability for those claims remains with the College. The College and nineteen other Michigan community colleges have formed MCCRMA to provide liability, vehicle physical damage and property and crime insurances. For the year ended June 30, 2018, the College is responsible for a self-insured retention (SIR) of $27,000 per occurrence and $81,000 in the aggregate. Claims in excess of the SIR are covered by the Authority and are reinsured through third party insurance carriers, up to coverage limits of $15 million for liability, $300,000 per vehicle and $650,000 per disaster for vehicle physical damage, and $271 million aggregate for property and crime coverage of buildings and personal property. The College made contributions during the years ended June 30, 2018 and 2017 to the Authority of approximately $340,000 and $330,000 respectively for insurance coverage. 34

53 Notes to Financial Statements Schoolcraft College Annual Report 2018 Notes to Financial Statements Schoolcraft College Annual Report 2018 C-19 Changes in the estimated self-insured liabilities are as follows: Balance, beginning of year $ 435,109 $ 197,765 $ 484 Claims incurred and changes in estimates 2,543,693 2,646, ,225 Claims and premium payments (2,522,009) (2,409,379) (106,944) Balance, end of year $ 456,793 $ 435,109 $ 197,765 Note 5 - Fair Value Measurements The College and its Component Units categorize their fair value measurements within the fair value hierarchy established by generally accepted accounting principles. The hierarchy is based on the valuation inputs used to measure the fair value of the asset. Level 1 inputs are quoted prices in active markets for identical assets that the College has the ability to access; Level 2 inputs are significant other observable inputs; Level 3 inputs are significant unobservable inputs. In instances where inputs used to measure fair value fall into different levels in the above fair value hierarchy, fair value measurements in their entirety are categorized based on the lowest level input that is significant to the valuation. The College s and Component Unit s assessment of the significance of particular inputs to these fair value measurements requires judgment and considers factors specific to each asset or liability. The College has the following recurring fair value measurements as of June 30, 2018 and 2017: Assets and Liabilities Measured at Fair Value on a Recurring Basis at June 30, 2018 Fair Value Measurements Using Quoted Prices in Active Markets Significant Other Significant Balance at for Identical Observable Unobservable June 30, 2018 Assets (Level 1) Inputs (Level 2) Inputs (Level 3) Investments by fair value level: Debt Securities Federal government agency securities $ 12,933,434 $ - $ 12,933,434 $ - Total investments by fair value level $ 12,933,434 $ - $ 12,933,434 $ - Total investments measured at fair value $ 12,933,434 Assets and Liabilities Measured at Fair Value on a Recurring Basis at June 30, 2017 Quoted Prices in Active Markets Significant Other Significant Balance at for Identical Observable Unobservable June 30, 2017 Assets (Level 1) Inputs (Level 2) Inputs (Level 3) Investments by fair value level: Debt Securities Federal government agency securities $ 16,201,887 $ - $ 16,201,887 $ - Total investments by fair value level $ 16,201,887 $ - $ 16,201,887 $ - Total investments measured at fair value $ 16,201,887 Fair Value Measurements Using The fair value of the Federal government agency securities at June 30, 2018 and 2017, were determined primarily based on level 2 inputs. The College estimates the fair value of these investments using other inputs such as interest rates and yield curves that are observable at commonly quoted intervals. The Development Component Units have the following recurring fair value measurements as of June 30, 2018 and 2017: Assets and Liabilities Measured at Fair Value on a Recurring Basis at June 30, 2018 Fair Value Measurements Using Balance at June 30, 2018 Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Investments by fair value level: Equity Securities Publicly traded stocks $ 3,748,546 $ 3,748,546 $ - $ - Exchange traded funds 665, , Total investments by fair value level $ 4,414,003 $ 4,414,003 $ - $ - Total investments measured at fair value $ 4,414,003 Assets and Liabilities Measured at Fair Value on a Recurring Basis at June 30, 2017 Fair Value Measurements Using Quoted Prices in Active Markets Significant Other Significant Balance at for Identical Observable Unobservable June 30, 2017 Assets (Level 1) Inputs (Level 2) Inputs (Level 3) Investments by fair value level: Equity Securities Publicly traded stocks $ 3,074,116 $ 3,074,116 $ - $ - Exchange traded funds 548, , Total investments by fair value level $ 3,622,323 $ 3,622,323 $ - $ - Total investments measured at fair value $ 3,622,323 Equity securities classified in level 1 are valued using prices quoted in active markets for those securities. The Foundation has the following recurring fair value measurements as of June 30, 2018 and 2017: Assets and Liabilities Measured at Fair Value on a Recurring Basis at June 30, 2018 Fair Value Measurements Using Balance at June 30, 2018 Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Investments by fair value level: Equity Securities Domestic mutual funds $ 4,153,448 $ 4,153,448 $ - $ - International mutual funds 5,323,953 5,323, Fixed Income Mutual Funds 2,227,010 2,227, Real Assets Mutual Funds 1,536,875 1,536, Diversifying Strategies Mutual Funds 1,352,558 1,352, Money Market Mutual Fund 78,019 78, Assets Held Under Charitable Remainder Unitrust 90,811-90,811 - Beneficial Interest in Remainder Trusts 6, ,980 Total investments by fair value level $ 14,769,654 $ 14,671,863 $ 90,811 $ 6,980 Total investments measured at fair value $ 14,769,

54 Schoolcraft College Annual Report 2018 Schoolcraft College Annual Report 2018 Notes to Financial Statements Notes to Financial Statements Assets and Liabilities Measured at Fair Value on a Recurring Basis at June 30, 2017 Fair Value Measurements Using Quoted Prices in Active Markets Significant Other Significant Balance at for Identical Observable Unobservable June 30, 2017 Assets (Level 1) Inputs (Level 2) Inputs (Level 3) Note 7 - Property and Equipment The following tables presents the changes in the various fixed asset class categories for the College for the years ended June 30, 2018 and June 30, 2017: Investments by fair value level: C-20 Equity Securities Domestic mutual funds $ 2,723,793 $ 2,723,793 $ - $ - International mutual funds 4,842,028 4,842, Fixed Income Mutual Funds 3,066,398 3,066, Real Assets Mutual Funds 1,212,354 1,212,354 Diversifying Strategies Mutual Funds 2,090,626 2,090,626 Money Market Mutual Fund 109, , Assets Held Under Charitable Remainder Unitrust 93,509-93,509 - Beneficial Interest in Remainder Trusts 17, ,055 Total investments by fair value level $ 14,155,003 $ 14,044,439 $ 93,509 $ 17,055 Total investments measured at fair value $ 14,155,003 The following tables summarize the valuation methods and inputs used to determine fair value at June 30, 2018 for assets measured at fair value on a recurring basis using unobservable inputs (Level 3 inputs). Asset Valuation Technique Significant Unobservable Inputs Used Beneficial interest in remainder trust Discounted Cash Flow Discount Rate Life expectancy of beneficiary Fair value of trust assets Range (Weighted Average) 3.11% 16 years The Foundation has processes in place to select the appropriate valuation technique and unobservable inputs to perform Level 3 fair value measurements. These processes include management s review of annual statements from the outside trustee for the beneficial interest in remainder trust. The Foundation cannot independently assess the value of these underlying positions through a public exchange or over the counter market. For the year ended June 30, 2018, changes in level 3 assets measured at fair value on a recurring basis included an unrealized loss of $10,075. For the year ended June 30, 2017, changes in level 3 assets measured at fair value on a recurring basis included an unrealized gain of $2,258. Note 6 - Commitments, Contingencies and Capital Outlay The College is involved in various legal proceedings which have arisen in the normal course of operations. Management does not believe that the ultimate resolution of these proceedings will have a material effect on the College s financial position. The College has entered into construction contracts and commitments totaling approximately $831,000 for the Applied Science State Capital Outlay project as well as the T-Lab being constructed at the Radcliff Campus. As of June 30, 2018 the College incurred $65,000 relating to these projects. The projects are expected to be completed at various points during the year ending June 30, Beginning Ending Estimated Year ended June 30, 2018 Balance Additions Deletions Balance Useful Life Nondepreciable Capital Assets Land 1,831,228 $ - $ - $ $ 1,831,228 65,195 Construction in Progress 432,993 1,714,963 (2,082,761) Total Nondepreciable Capital Assets 2,264,221 1,714,963 (2,082,761) 1,896,423 Depreciable Capital Assets Land Improvements 20,392, ,484-20,698, Buildings and Improvements 139,969,001 1,435, ,404, Infrastructure 6,715, ,887-7,057, Furniture, Fixtures and Equipment 25,754,529 1,421,535 (982,262) 26,193, Total Depreciable Capital Assets 192,831,657 3,504,293 (982,262) 195,353,688 Total Capital Assets 195,095,878 5,219,256 (3,065,023) 197,250,111 Less Accumulated Depreciation Land Improvements 5,797, ,680-6,420,964 Buildings and Improvements 42,306,175 3,301,252-45,607,427 Infrastructure 3,062, ,881-3,378,622 Furniture, Fixtures and Equipment 17,590,461 2,733,806 (973,452) 19,350,815 Total Accumulated Depreciation 68,756,661 6,974,619 (973,452) 74,757,828 Total Capital Assets, Net 126,339,217 $ (1,755,363) $ (2,091,571) $ $ 122,492,283 Beginning Ending Estimated Year ended June 30, 2017 Balance Additions Deletions Balance Useful Life Nondepreciable Capital Assets Land 1,831,228 $ - $ - $ $ 1,831,228 Construction in Progress 4,788,825 11,101,113 (15,456,945) 432,993 Total Nondepreciable Capital Assets 6,620,053 11,101,113 (15,456,945) 2,264,221 Depreciable Capital Assets Land Improvements 14,113,772 6,278,882-20,392, Buildings and Improvements 129,480,357 10,488, ,969, Infrastructure 5,080,664 1,634,809-6,715, Furniture, Fixtures and Equipment 24,317,357 1,736,604 (299,432) 25,754, Total Depreciable Capital Assets 172,992,150 20,138,939 (299,432) 192,831,657 Total Capital Assets 179,612,203 31,240,052 (15,756,377) 195,095,878 Less Accumulated Depreciation Land Improvements 5,283, ,940-5,797,284 Buildings and Improvements 39,153,736 3,152,439-42,306,175 Infrastructure 2,794, ,098-3,062,741 Furniture, Fixtures and Equipment 15,209,915 2,679,978 (299,432) 17,590,461 Total Accumulated Depreciation 62,441,638 6,614,455 (299,432) 68,756,661 Total Capital Assets, Net $ 117,170,565 $ 24,625,597 $ (15,456,945) $ 126,339,217 Equipment under capital lease (see Note 9) totaled $7,040,381 and $7,060,281 at June 30, 2018 and 2017, respectively. Amortization of the equipment under capital lease totaled $1,427,644 and $1,428,971 for the years ended June 30, 2018 and 2017, respectively. The amortization is included in the depreciation expense above. Accumulated amortization of the asset under capital lease is $4,240,705 and $2,824,669 at June 30, 2018 and 2017, respectively

55 Notes to Financial Statements Schoolcraft College Annual Report 2018 Notes to Financial Statements Schoolcraft College Annual Report 2018 C-21 Buildings and improvements under capital lease (see Note 9) totaled $6,000,000 at both June 30, 2018 and Amortization of the buildings and improvements under capital lease totaled $240,000 and $160,000 for the years ended June 30, 2018 and 2017, respectively. The amortization is included in the depreciation expense above. Accumulated amortization of the asset under capital lease is $400,000 and $160,000 at June 30, 2018 and 2017, respectively. The following table presents the changes in the various fixed asset class categories for the Development Component Units for the years ended June 30, 2018 and 2017: Beginning Ending Estimated Year ended June 30, 2018 Balance Additions Deletions Balance Useful Life Nondepreciable Capital Assets Construction in Progress - 2,910-2,910 Total Nondepreciable Capital Assets - 2,910-2,910 Depreciable Capital Assets Land Improvements 3,913,547 64,274-3,977, Buildings and Improvements 27,297, ,573-27,530, Equipment - 155, , Total Depreciable Capital Assets 31,210, ,833-31,664,801 Total Capital Assets 31,210, ,743-31,667,711 Less Accumulated Depreciation Land Improvements 52, , ,574 Buildings and Improvements 9, , ,623 Equipment - 15,173-15,173 Total Accumulated Depreciation 61, , ,370 Total Capital Assets, Net $ 31,149,206 $ (468,865) $ - $ 30,680,341 Beginning Ending Estimated Year ended June 30, 2017 Balance Additions Deletions Balance Useful Life Nondepreciable Capital Assets Construction in Progress 9,693,927 27,517,041 (37,210,968) - Total Nondepreciable Capital Assets 9,693,927 27,517,041 (37,210,968) - Depreciable Capital Assets Land Improvements - 3,913,547-3,913, Buildings and Improvements - 27,297,421-27,297, Total Depreciable Capital Assets - 31,210,968-31,210,968 Total Capital Assets 9,693,927 58,728,009 (37,210,968) 31,210,968 Less Accumulated Depreciation Land Improvements - 52,414-52,414 Buildings and Improvements - 9,348-9,348 Total Accumulated Depreciation - 61,762-61,762 Total Capital Assets, Net $ 9,693,927 $ 58,666,247 $ (37,210,968) $ 31,149,206 $1,841,064 and $1,213,547 of construction in progress was transferred from the College to 7 Delta, LLC and SC College Dome, LLC, respectively, during the year ended June 30, 2017 in accordance with the operating agreements. No transfers were made during the year ended June 30, Note 8 - Federal Loan Programs The College participates in the U.S. Department of Education William D. Ford direct lending program and disbursed $8,403,776 and $10,062,466 for the years ended June 30, 2018 and 2017, respectively, for student loans. These distributions and related funding source are not included as expenses and revenue in the accompanying financial statements because they are considered agency transactions. 39 Note 9 - Long-Term Liabilities Long-Term liability activity for the College for the years ended June 30, 2018 and 2017 are as follows: Beginning Ending Current Balance Additions Reductions Balance Portion Year ended June 30, 2018 Accrued Severance Pay $ 1,054,023 $ 53,894 $ 204,139 $ 903,778 $ - Accrued Early Retirement Payable 3,727, ,337 2,960,530 - Capital Lease Payable - Equipment 5,318,180-1,326,775 3,991,405 1,819,829 Capital Lease Payable - Building 5,912,995-32,871 5,880,124 37,646 Bonds Payable 21,690,089-1,622,546 20,067,543 1,657,546 Total Long Term Liabilities $ 37,703,154 $ 53,894 $ 3,953,668 $ 33,803,380 $ 3,515,021 Year ended June 30, 2017 Accrued Severance Pay $ 1,091,844 $ 20,918 $ 58,739 $ 1,054,023 $ - Accrued Early Retirement Payable - 3,727,867-3,727,867 - Capital Lease Payable - Equipment 6,313, ,341 5,318,180 1,326,775 Capital Lease Payable - Building - 6,000,000 87,005 5,912,995 32,871 Bonds Payable 23,277,635-1,587,546 21,690,089 1,622,546 Total Long Term Liabilities $ 30,683,000 $ 9,748,785 $ 2,728,631 $ 37,703,154 $ 2,982,192 Accrued Severance Pay The College provides termination benefits to certain employees upon departure from the College resulting from years of service under the vesting method. Under the vesting method, the liability is accrued for employees based on the amount eligible and certain assumptions used to determine probability of reaching the criteria required for eligibility. Accrued Early Retirement Payable The College offered an early retirement incentive to employees meeting certain requirements as of June 30, For eligible employees, the amount payable by the College amounts to one year of salary up to $90,000 payable to the employee over 5 years. Capital Leases Payable During the year ended June 30, 2015, the College signed agreements with two vendors to upgrade the College s network through installation and implementation of hardware and software, which included desktop virtualization as well as network equipment enhancements campus-wide. The College then entered into a lease arrangement with a financial institution, which is classified as a capital lease. Ownership of the network equipment will eventually pass to the College after completion of the lease term or upon full payment by the College of all lease payable related to the project, whichever comes first. As of June 30, 2016, the College has fully drawn down the authorized principal amount of $7,672,707. The primary equipment provider of the project offered the College a discount of $612,425, which was paid directly to the financial institution and reflected as a reduction of principal during the year ended June 30, As of June 30, 2018 and 2017, the College s outstanding lease liability is $3,991,405 and $5,318,180 respectively. The capital lease is listed as a long-term liability and the related asset is listed as equipment. The College is required to meet certain financial covenants in accordance with the lease agreement. The interest rate is 2.4%. Interest expense related to the capital lease was $113,037 and $141,263 for the year ended June 30, 2018 and 2017, respectively. Under the lease agreement, the future minimum lease payments are as follows: Year Ending June Payments ,918, ,225,085 Total Payments $ 4,143,262 Amount representing interest (151,857) Total $ 3,991,405 During the year ended June 30, 2017, the College signed an agreement with SC College Dome LLC to lease the St. Joe s Sports Dome, which is classified as a capital lease. As of June 30, 2018 and 2017, the College s outstanding lease liability is $5,880,124 and $5,912,995, respectively. The capital lease is listed as a longterm liability and the related asset is listed as buildings and improvements. The imputed interest rate is 13.64%. Interest expense related to the capital lease was $804,260 and $538,551 for the years ended June 30, 2018 and 2017, respectively.

56 Notes to Financial Statements Schoolcraft College Annual Report 2018 Notes to Financial Statements Schoolcraft College Annual Report 2018 C-22 Under the lease agreement, the future minimum lease payments are as follows: Year Ending June 30 Payments , , , , ,504 Thereafter 15,354,240 Total Payments $ 19,541,760 Amount representing interest (13,661,636) Total $ 5,880,124 Bonds Payable During 2013, the College issued $18.0 million in general obligation, limited-tax bonds, for various construction projects, as authorized by the Board of Trustees on March 27, The total amount of $12,983,347 including unamortized bond premium of $123,347, was outstanding as of June 30, The total amount of $14,805,890 including unamortized bond premium of $135,890, was outstanding as of June 30, Bond principal payments are due annually each May through maturity in fiscal year Interest payments are due semi-annually through maturity at rates ranging from 2.0% to 3.0%. During 2016, the College issued $8.045 million in general obligation, limited-tax bonds, for various construction projects, as authorized by the Board of Trustees on March 23, The total amount of $7,084,196 including unamortized bond premium of $64,196, was outstanding as of June 30, The total amount of $7,604,199 including unamortized bond premium of $69,199, was outstanding as of June 30, Bond principal payments are due annually each May through maturity in fiscal year Interest payments are due semi-annually through maturity at rates ranging from 2.0% to 2.5%. As of June 30, 2018 bond maturities are as follows: Year Principal Interest Total ,657, ,338 2,109, ,692, ,538 2,112, ,732, ,038 2,118, ,772, ,738 2,124, ,812, ,638 2,129, ,695, ,413 10,667, ,704,172 83,613 1,787,785 $ 20,067,543 $ 2,981,313 $ 23,048,858 Capitalized Interest Total capitalized interest related to the bonds was $156,507 during the year ended June 30, No interest was capitalized in the year ended June 30, Long-Term liability activity for the Development Component Units for the years ended June 30, 2018 and 2017 are as follows: Beginning Ending Current Balance Additions Reductions Balance Portion Year ended June 30, 2018 Mortgage Payable $ 23,401,202 $ - $ 55,462 $ 23,345,740 $ 689,696 Total Long Term Liabilities $ 23,401,202 $ - $ 55,462 $ 23,345,740 $ 689,696 Year ended June 30, 2017 Mortgage Payable $ 23,401,202 $ - $ - $ 23,401,202 $ 55,462 Total Long Term Liabilities $ 23,401,202 $ - $ - $ 23,401,202 $ 55,462 Mortgage Payable During 2016, 7 Delta issued two series of senior secured bank notes totaling $23,401,202 for construction of a building. Mortgage principal payments on series A1, with a loan amount of $19,401,202, are due monthly beginning June 15, 2018 through maturity in fiscal year Interest payments on series A1 are due monthly through maturity in fiscal year 2032 at a rate of 5.56%. Only one mortgage principal payment on series A2, with a loan amount of $4,000,000, is due upon maturity in fiscal year Interest payments on series A2 are due monthly through maturity in fiscal year 2032 at a rate of 6.17%. The notes are secured by substantially all assets of 7 Delta. In addition, all leases and rental income received by 7 Delta are assigned to the notes. The notes are guaranteed by an owner of the co-member of 7 Delta and are subject to certain covenants. As of June 30, 2018 mortgage maturities are as follows: Year Principal Interest Total ,696 1,305,118 1,994, ,363 1,264,610 2,039, ,916 1,219,215 2,085, ,634 1,168,656 2,130, ,062,812 1,112,636 2,175, ,045,639 4,508,979 11,554, ,944,680 1,893,261 13,837,941 $ 23,345,740 $ 12,472,475 $ 35,818,215 Capitalized Interest Total capitalized interest related to the mortgage payable was $1,325,507 during the year ended June 30, No interest was capitalized in the year ended June 30, Note 10 - Tax Abatements The College receives reduced property tax revenues as a result of Industrial Facilities Tax exemptions (PA 198 of 1974) and Brownfield Redevelopment Agreements granted by cities and townships within Wayne County that impact the College. Industrial facility exemptions are intended to promote construction of new industrial facilities, or to rehabilitate historical facilities; Brownfield redevelopment agreements are intended to reimburse taxpayers that remediate environmental contamination on their properties. For the fiscal years ended June 30, 2018 and 2017, the College s property tax revenues were reduced by $263,010 and $288,395, respectively, under these programs. There are no abatements made by the College. Note 11 - Development Component Units The SDA leases land from the College. The first lease, dated March 11, 1987, is for 74 years and requires annual payments of $1. The second lease, dated June 17, 2003, is for 77 years and requires annual payments of $1. The SDA may use the land for the construction, maintenance and operation of certain commercial real estate. At the end of the lease term the land and improvements revert to the College. The SDA has entered into sublease agreements with unrelated third parties. On October 8, 2015, the SDA entered into an amended restated and consolidated ground sublease. In connection with the lease restatement, the tenant paid $2.3 million to extend the term of the lease to September 30, This payment is being amortized over the life of the lease on a straight-line basis. The sublease agreement provides for base quarterly rental payments due in advance on June 30, September 30, December 31 and March 31. Per the amended restated and consolidated ground sublease, the tenant is entitled to a base rent credit on four quarterly installments for each lease year that the tenant is not profitable. The base rent credit will be $10,000 during any of the first 10 lease years and will increase by $10,000 during each subsequent 10 lease year period

57 Notes to Financial Statements Schoolcraft College Annual Report 2018 Notes to Financial Statements Schoolcraft College Annual Report 2018 C-23 The following is a summary of the leases, including the base rent rates for lease years 1-10: Quarterly Lease Acres Base Rent Parcel $24,786 Parcel ,173 Parcel ,944 Parcel ,398 Minimum future lease receipts, excluding amortization of the lease extension payments as described above, are as follows: Years Ending June 30 Amount , , , , ,204 Thereafter 30,872,139 On July 30, 2003 the SDA entered into a lease agreement with an unrelated third party to sublease approximately 45 acres of land owned by the College. The lease agreement is for 75 years. The sublease agreements provide for base quarterly rental payments due in advance on June 30, September 30, December 31 and March 31. The rental payment for 2009/10 was approximately $576,000 increasing by 1% per year for the next 16 years, increasing by $100,000 in year 18, and then increasing by ½% per year for the next 57 years. In April 2016, one of the units defaulted back to the College as allowed by the agreement, reducing the lease payments by approximately $64,000 per year beginning in Minimum future lease receipts are as follows: Years Ending June 30 Amount , , , , ,281 Thereafter 39,749,247 SCDU 14 leases land from the College. The lease, dated October 2, 2015, is for 75 years and requires annual payments of $220,000 increasing by 1%; however, rent is abated to $1 for the first 30 years of the lease and for each year thereafter provided that 7 Delta is still the subtenant of the lease and is not in default. SCDU 14 may use the land to enter into the partnership described in Note 1. At the end of the lease term the land and improvements revert to the College. SCDU 14 then subleased the land to 7 Delta. The sublease, also dated October 2, 2015, is for 75 years and has the same payment terms as the ground lease. On October 2, 2015, 7 Delta entered into a lease agreement with an unrelated third party for real estate, including an office building, to be built on College owned land, specifically unit 14. The lease agreement is for 15 years, with three options to extend the lease for a period of 5 years each, and commenced on June 1, The lease agreement provides for base monthly rental payments due in advance during the term of the lease. The base rent, expressed as dollars per square foot, will be $0 for the first 12 months of the term and for months of the term will be $167,997 per month. Beginning with the 25 th month of the lease, the base rent shall be increased annually by $0.50 per square foot of the actual gross area of 91,220 square feet. Under the sublease, 7 Delta is responsible for constructing the building and related land improvements. Also pursuant to the lease, 7 Delta was responsible for up to $ per square foot for the total cost of the building, and the lessor was responsible for all costs over that figure. As a result, 7 Delta received $5.6 million in revenue during the year ended June 30, 2017 as that was the amount that the construction costs exceeded 7 Delta s contractually obligated portion. The College, as the original ground lessor, is responsible 43 for constructing and maintaining certain land improvements, for which the unrelated third party will pay an annual 5% maintenance fee to the College. Minimum future lease receipts are as follows: SCSD leases land from the College. The lease, dated June 23, 2016, is for 50 years and requires annual payments of $1. SCSD may use the land to enter into the partnership described in Note 1. At the end of the lease term the land and improvements revert to the College. SCSD then subleased the land to SCCD. The sublease, also dated June 23, 2016, is for 50 years and requires annual payments of $1. The sublease may be terminated by SCSD or SCCD after the later of 25 years or the date the dome being built on the land is no longer reasonably operational. On June 23, 2016, SCCD entered into a master lease agreement with Schoolcraft College for use of the Soccer Dome. The lease agreement is for 25 years and commenced on November 4, The lease agreement provides for base monthly rental payments due in advance of $69,792 or $837,500 per year, and has been classified as a capital lease. SCCD has recognized a capital lease receivable of $5,880,124 and $5,912,995 as of June 30, 2018 and 2017, respectively, which represents the net present value of the future minimum lease payments. The schedule of the future minimum lease payments is described in more detail in Note 9. On December 22, 2015, the College entered into a sublease agreement with a third party Soccer Club. The sublease agreement is for 25 years and is for use of the dome facilities during specific times each week. The base rent, payable in monthly installments of $35,417 or $425,000 per year, commenced on November 1, 2016 and is due on the first day of each month thereafter. According to the sublease agreement, the rent is to increase 1.0% each lease year from month 37 through month 180, and 2.0% each lease year from month 181 until the end of the lease term. The tenant will also pay the College $37,500 in turf maintenance fees annually, increasing 1.0% each lease year from month 13 through month 180, and 2.0% each lease year from month 181 until the end of the lease term. The tenant also paid a security deposit of $231,250 during the year ended June 30, Minimum future lease receipts are as follows: Note 12 - Related Party Transactions Years Ending June 30 Amount ,019, ,065, ,110, ,156, ,202,203 Thereafter 21,651,067 Years Ending June 30 Amount , , , , ,473 Thereafter 10,024,987 Under the terms of the 7 Delta operating agreement, a development fee equal to 5% of the total hard construction costs is payable to the owners for management and development services performed during construction. This amount is to be paid to the minority owner and subsequently, 30% is to be paid by the minority owner to SDM. During the year ended June 30, 2018, it was determined that final total hard construction costs were $22,701,249, resulting in payments from 7 Delta of $794,543 to the minority owner and $340,519 to SDM. As of June 30, 2017, a payable of $1,203,620 was recorded by 7 Delta and a receivable of $361,086 was recorded by SDM as an estimate of the development fee. Under the terms of the SCCD operating agreement, a preferred return of 10% per annum is incurred on the first $5 million of the minority owner's contributed capital until the capital is returned. During the year ended 44

58 Schoolcraft College Annual Report 2018 C-24 Notes to Financial Statements June 30, 2018, $595,889 was distributed and $150,000 was payable as of June 30, During the year ended June 30, 2017, $483,898 was distributed and $154,026 was payable as of June 30, In addition, an equity contribution fee equal to 2.5% of actual construction costs totaling $136,669 was distributed to the minority owner in accordance with the operating agreement during the year ended June 30, 2017 with $12,169 payable as of June 30, Additional distributions of $102,434 in 2018 and $62,110 in 2017 were also made to the minority owner based on provisions of the operating agreement with $45,110 and $34,985 payable as of June 30, 2018 and 2017, respectively. The College provided security and IT services totaling $68,780 and $75,186 to SCTC during the year ended June 30, 2018 and 2017, respectively, which are payable from SCTC to the College at each respective year end. See Note 9 and Note 11 for a description of the capital lease between the College and SCCD. See Note 13 for a description of the transactions between the College and the Foundation. Note 13 - Schoolcraft College Foundation Schoolcraft College Foundation (Foundation) is a separate legal entity established as a 501(c)3 not for profit corporation and governed by its own Board of Governors to accept, collect, hold and invest donations made for the promotion of educational and cultural activities. The College receives support from the Foundation whose bylaws require that the Foundation s net assets be used solely for the benefit of Schoolcraft College. During the years ended June 30, 2018 and 2017 the College and its students received support from the Foundation of approximately $585,000 and $646,000 respectively. The College provides supervisory and clerical staff and office space to the Foundation at no charge, valued at approximately $590,000 and $609,000 for the year ended June 30, 2018 and 2017, respectively. One member of the College Board of Trustees, the College president and the College Executive Director of Development are ex-officio members of the Foundation Board of Governors. The Foundation financial statements are prepared in accordance with generally accepted accounting principles as prescribed by the Financial Accounting Standards Board (FASB). As such, certain revenue recognition criteria and presentation features are different from those under GASB. No modifications have been made to the Foundation financial information included in the College's financial report to account for these differences. Required Supplementary Information Schedule of College's Proportionate Share of Net Pension Liability: As of September College's proportion of the collective MPSERS net pension liability: As a percentage % % % % Amount $ 116,825,440 $ 109,537,407 $ 102,572,130 $ 92,367,456 College's covered-employee payroll $ 38,344,336 $ 37,139,786 $ 35,623,198 $ 35,788,975 College's proportionate share of the collective pension liability (amount), as a percentage of the College's covered-employee payroll % % % % MPSERS fiduciary net position as a percentage of the total pension liability 63.96% 63.01% 63.17% 66.20% Schedule of College Contributions - Pension: As of June Statutorily required contribution 11,182,180 10,780,622 10,174,578 8,313,567 Contributions in relation to the actuarially determined contractually required contribution 11,182,180 10,780,622 10,174,578 8,313,567 Contribution deficiency (excess) Covered employee payroll $ 37,475,378 $ 39,285,558 $ 36,796,837 $ 35,928,448 Contributions as a percentage of covered-employee payroll 29.84% 27.44% 27.65% 23.14% Schedule of College's Proportionate Share of Net OPEB Liability: As of September College's proportion of the collective MPSERS net pension liability: As a percentage % Amount $ 40,036,949 College's covered-employee payroll $ 38,344,336 College's proportionate share of the collective pension liability (amount), as a percentage of the College's covered-employee payroll % MPSERS fiduciary net position as a percentage of the total pension liability 36.53% Schedule of College Contributions - OPEB: As of June Statutorily required contribution 2,686,750 Contributions in relation to the actuarially determined contractually required contribution 2,686,750 Contribution deficiency (excess) - Covered employee payroll $ 37,475,378 Contributions as a percentage of covered-employee payroll 7.17% Schoolcraft College Annual Report

59 Schoolcraft College Annual Report 2018 Notes to Required Supplementary Information C-25 Pension Information RSI covered-payroll - The employers covered payroll to be reported in the required supplementary information is defined by GASB 82, Pension Issues an amendment to GASB Statements No. 67, No. 68, and No. 73, as payroll on which contributions to a pension plan are based; and by GASB 85, Omnibus 2017, as payroll on which contributions to the OPEB plan are based. For university employers, covered payroll for both pension and OPEB is the greater of 1) university payroll on which contributions to the plan are based or 2) the required minimum payroll amount required by PA 136 of For non-university employers, covered payroll represents payroll on which contributions to both plans are based. Benefit Changes There were no changes of benefit terms for the plan year ended September 30, 2017 Changes in Assumptions Changes in Assumptions There were no changes of assumptions for the plan year ended September 30, 2017 except that the discount rate used in the September 30, 2016 actuarial valuation decreased by 0.5% OPEB Information RSI covered-payroll - The employers covered payroll to be reported in the required supplementary information is defined by GASB 82, Pension Issues an amendment to GASB Statements No. 67, No. 68, and No. 73, as payroll on which contributions to a pension plan are based; and by GASB 85, Omnibus 2017, as payroll on which contributions to the OPEB plan are based. For university employers, covered payroll for both pension and OPEB is the greater of 1) university payroll on which contributions to the plan are based or 2) the required minimum payroll amount required by PA 136 of For non-university employers, covered payroll represents payroll on which contributions to both plans are based. Benefit Changes There were no changes of benefit terms for the plan year ended September 30, Changes in Assumptions There were no changes of benefit assumptions for the plan year ended September 30, [THIS PAGE INTENTIONALLY LEFT BLANK] 47

60 Consolidating Statement of Net Position (Continued) As of June 30, 2018 (With Comparative Totals for 2017) Schoolcraft College Annual Report 2018 Auxiliary Expendable Student General Designated Activities Restricted Loan Plant Agency College Combined Total Fund Fund Fund Funds Funds Funds Fund Liabilities Current Liabilities Current portion of debt obligations $ - $ - $ - $ - $ - $ 3,515,021 $ - 3,515,021 $ 2,982,192 Accounts payable 1,209,976 57, , , ,350-1,782,762 1,927,068 Accrued interest payable , , , ,645 Accrued payroll and other compensation 4,867,299 33,380 88,410 18, ,007,316 4,990,001 Deposits , , , ,493 Unearned revenue 5,630, , ,822,483 4,459,514 Total Current Liabilities 11,707, , , ,737-3,739,559 55,432 16,603,298 14,842,913 Noncurrent Liabilities Accrued early retirement payable 2,960, ,960,530 3,727,867 Net pension liability 116,825, ,825, ,537,407 Net OPEB liability 40,036, ,036,949 - Long-term debt obligations ,424,051-26,424,051 29,939,072 Accrued severance pay 903, ,778 1,054,023 Total Liabilities 172,434, , , ,737-30,163,610 55, ,754, ,101,282 Deferred Inflows of Resources 12,354, ,354,375 3,744,098 Net Position Net investment in capital assets ,553,211-92,553,211 93,417,953 Restricted for: Expendable restricted grants , , ,053 Unrestricted (133,330,643) 6,871,078 4,380,637-16,250 (1,031,380) - (123,094,058) (75,913,196) Total Net Position $ (133,330,643) $ 6,871,078 $ 4,380,637 $ 172,136 $ 16,250 $ 91,521,831 $ - $ (30,368,711) $ 17,616, Consolidating Statement of Net Position As of June 30, 2018 (With Comparative Totals for 2017) Schoolcraft College Annual Report 2018 Auxiliary Expendable Student General Designated Activities Restricted Loan Plant Agency College Combined Total Fund Fund Funds Funds Funds Funds Fund Assets Current Assets Cash and cash equivalents $ 5,273,625 $ 3,515,763 $ 1,793,795 $ - $ - $ - $ 55,432 $ 10,638,615 $ 10,844,088 Property taxes receivable 559, , ,506 State appropriation receivable 3,272, ,272,574 3,199,004 Accounts receivable 1,517, , , ,894,448 1,959,100 Accrued interest receivable 26, ,299 27,916 Federal and state grants receivable , , ,853 Student loans receivable , ,250 16,250 Inventories 334,278-1,159, ,493,993 1,629,221 Prepaid expenses and other assets 762, , ,071 Deposits 499, , ,514 Due from (to) other funds 1,819, (323,898) - (1,495,741) Total Current Assets 14,065,329 3,701,413 3,145, ,873 16,250 (1,495,741) 55,432 19,951,840 20,034,523 Noncurrent Assets - Long-term investments 7,030,382 3,452,580 1,761, ,899-12,933,434 16,201,887 Property and Equipment: Land and improvements ,108,403-16,108,403 16,426,599 Infrastructure ,678,739-3,678,739 3,652,731 Buildings and improvements ,796,960-95,796,960 97,662,824 Equipment ,842,986-6,842,986 8,164,069 Construction in progress ,195-65, ,994 Total Property and Equipment ,492, ,492, ,339,217 Total Assets 21,095,711 7,153,993 4,906, ,873 16, ,685,441 55, ,377, ,575,627 Deferred Outflows of Resources 30,362, ,362,153 17,886, C-26

61 Consolidating Statement of Revenue, Expenses, Transfers and Changes in Net Position (Continued) For the Year Ended June 30, 2018 (With Comparative Totals for 2017) Schoolcraft College Annual Report 2018 Auxiliary Expendable Student General Designated Activities Restricted Loan Plant College Combined Total Fund Fund Fund Funds Funds Funds Elimination Nonoperating Revenue and (Expenses) State appropriations $ 20,426,477 $ - $ - $ - $ - $ - $ - $ 20,426,477 $ 18,437,143 Property tax levy 23,981, ,981,659 23,523,202 Interest income 476, (28,604) - 448, ,529 Interest expense (1,378,955) - (1,378,955) (1,011,689) Unrealized loss on investments (668,892) ,073 - (600,819) (881,515) Pell grants ,655, ,655,518 13,102,528 Net Nonoperating Revenue and (Expenses) 44,215, ,655,518 - (1,339,486) - 55,531,914 53,656,198 (Loss) Gain Before Other Revenue and Expenses (261,938) (392,621) 154,936 (193,742) - (7,036,875) - (7,730,240) (7,872,329) Other Revenue and (Expenses) Transfers between College and component units , ,000 (3,164,611) Total Other Revenue , ,000 (3,164,611) Increase (Decrease) in Net Position (261,938) (392,621) 154,936 (193,742) - (6,786,875) - (7,480,240) (11,036,940) Transfers In (Out) (3,989,045) (267,561) (648,731) 253,825-4,651, Net Increase (Decrease) in Net Position (4,250,983) (660,182) (493,795) 60,083 - (2,135,363) - (7,480,240) (11,036,940) Net Position - Beginning of Year (88,574,379) 7,531,260 4,874, ,053 16,250 93,657,194-17,616,810 28,653,750 Adjustment for change in accounting principle (40,505,281) (40,505,281) - Net Position - Beginning of Year, As Restated (129,079,660) 7,531,260 4,874, ,053 16,250 93,657,194 - (22,888,471) 28,653,750 Net Position - End of Year $ (133,330,643) $ 6,871,078 $ 4,380,637 $ 172,136 $ 16,250 $ 91,521,831 $ - $ (30,368,711) $ 17,616, Consolidating Statement of Revenue, Expenses, Transfers and Changes in Net Position For the Year Ended June 30, 2018 (With Comparative Totals for 2017) Schoolcraft College Annual Report 2018 Auxiliary Expendable Student General Designated Activities Restricted Loan Plant College Combined Total Fund Fund Funds Funds Funds Funds Elimination Revenue Operating Revenue Tuition and fees (Net of scholarship allowances of $10,687,915 in 2018 and $10,513,853 in 2017) $ 41,179,711 $ 1,404,375 $ - $ - $ - $ - $ (10,687,915) $ 31,896,171 $ 32,585,159 Federal grants and contracts ,403, ,403,126 2,026,291 State and local grants and contracts 9, , , ,385 Nongovernmental grants , ,838 97,688 Auxiliary enterprises - - 8,029, (1,176,094) 6,853,487 7,898,764 Indirect cost recoveries 104, (104,753) - - Gain on disposal of assets ,864-15,864 17,771 Miscellaneous 1,564,468 3,219,529 14, ,414-1,261,366 (135,859) 6,163,217 5,659,312 Total Operating Revenue 42,858,132 4,623,904 8,043,880 2,507,836-1,277,230 (12,104,621) 47,206,361 49,128,370 Expenses Operating Expenses Instruction 34,583, ,513 31, , (610,965) 35,471,932 34,215,804 Information Technology 7,280, , (535,072) 7,392,438 6,197,641 Public service 1,440,237 1,736, , (1,119,174) 2,819,419 2,767,713 Instructional support 12,686, , , , (136,462) 13,935,529 13,104,102 Student services 12,355,853 1,213,341 7,704,364 13,216, (10,840,563) 23,649,316 24,771,938 Institutional administration 8,683,918 4,782 7, (136,117) 8,560,083 11,552,190 Operation and maintenance of plant 10,305,642 85, ,273,732 11,665,179 11,433,054 Depreciation ,974,619-6,974,619 6,614,455 Total Operating Expenses 87,335,952 5,016,525 7,888,944 15,357,096-6,974,619 (12,104,621) 110,468, ,656,897 Operating Income (Loss) (44,477,820) (392,621) 154,936 (12,849,260) - (5,697,389) - (63,262,154) (61,528,527) 50 C-27

62 C-28 [THIS PAGE INTENTIONALLY LEFT BLANK] Board of Trustees Brian D. Broderick, Chair Carol M. Strom, Vice Chair Gretchen Alaniz, Secretary Eric Stempien, Treasurer William P. Erwin, Jr., Trustee Joan A. Gebhardt, Trustee Terry Gilligan, Trustee Conway A. Jeffress, Ph.D., President Management Glenn Cerny, Vice President & CFO Jon Lamb, CPA, Controller & Director of Finance On the Cover The Winter 2018 Commencement is a visible realization of the College s mission, which is to provide a transformational learning experience designed to increase the capacity of individuals and groups to achieve intellectual, social, and economic goals. Cover photo by Rena Laverty

63 APPENDIX D FORM OF LEGAL OPINION

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65 U.S. Mail Address P.O. Box 2575 East Lansing, MI Phone: (517) Fax: (517) Fax: (517) All Other Shipping 2900 West Road, Suite 400 East Lansing, MI Gordon W. VanWieren, Jr. Michael D. Gresens Matthew F. Hiser Ryan J. Nicholson Jessica E. Baker Martha J. Marcero Christopher J. Iamarino Kari K. Shay Fredric G. Heidemann Katerina M. Vujea Lisa L. Swem Raymond M. Davis Robert A. Dietzel Timothy T. Gardner, Jr. Brennan M. Ackerman Jeffrey J. Soles Michele R. Eaddy Katherine Wolf Broaddus Philip G. Clark Roy H. Henley Kirk C. Herald Daniel R. Martin Piotr M. Matusiak Kevin S. Harty (of counsel) Robert G. Huber Margaret M. Hackett Jennifer K. Starlin Cristina T. Patzelt Traverse City DRAFT LEGAL OPINION Schoolcraft College State of Michigan We have acted as bond counsel in connection with the issuance by Schoolcraft College, State of Michigan (the Issuer ), of 2018 College Facility Bonds (General Obligation - Limited Tax) (the Bonds ), in the aggregate principal amount of $9,920,000. The Bonds are in fully registered form and issued without coupons, are dated December 20, 2018, are of $5,000 denomination or any integral multiple thereof, mature serially on May 1 of each year, and bear interest payable on May 1, 2019, and semiannually thereafter on the first day of November and May of each year, in the amounts and at the rates as follows: Year Amount Rate Year Amount Rate $210, , , , , , , , , , % $540, , , , , , , , , % The Bonds maturing on or after May 1, 2029, are subject to redemption prior to maturity at the option of the Issuer on May 1, 2028, or on any date occurring thereafter in the manner, at the times and at the prices as set forth in the Bonds. We have examined the documents which we deem authentic and pertinent to the validity of the Bonds, including the certified record evidencing the authorization of the Bonds by the board of trustees of the Issuer, a copy of the approval of the Department of Treasury of the State of Michigan to issue the Bonds, and a specimen of the Bond certificate of said issue. Based upon the foregoing, we are of the opinion that under existing law: (1) the Bonds have been lawfully authorized and issued and are enforceable obligations of the Issuer in accordance with their terms; (2) the Bonds are the limited tax general obligation of the Issuer for which its full faith, credit and resources have been irrevocably pledged; D-1 East Lansing Novi West Michigan

66 Schoolcraft College State of Michigan December 20, 2018 Page 2 (3) the Issuer has the power, has pledged, and is obligated to levy taxes, within its authorized millage rate, on all taxable property now situated within the corporate boundaries of the Issuer in an amount sufficient to pay the principal of and interest on the Bonds, taking into account other available funds, but the Issuer does not have the power to levy taxes for the payment of the Bonds in excess of its constitutional, statutory and charter tax rate limitations; (4) if tax collections are insufficient to pay the principal of and interest on the Bonds when due, the Issuer has pledged and is obligated to use any and all other resources available for payment of the Bonds; (5) the Issuer has designated the Bonds as qualified tax-exempt obligations within the meaning of the Internal Revenue Code of 1986, as amended; (6) the Bonds and the interest thereon are exempt from all taxation in the State of Michigan, except inheritance and estate taxes and taxes on gains realized from the sale, payment or other disposition thereof; and (7) the interest on the Bonds is excluded from gross income for federal income tax purposes and is not an item of tax preference for purposes of the federal alternative minimum tax imposed on individuals. The opinions set forth in the preceding sentence are subject to the condition that the Issuer comply with all requirements of the Internal Revenue Code of 1986, as amended, that must be satisfied subsequent to the issuance of the Bonds in order that interest thereon be, or continue to be, excluded from gross income for federal income tax purposes. The Issuer has covenanted to comply with such requirements. Failure to comply with certain of such requirements may cause the inclusion of interest on the Bonds in gross income for federal income tax purposes to be retroactive to the date of issuance of the Bonds. We express no opinion regarding other federal tax consequences arising with respect to the Bonds. The rights of the owners of the Bonds and the enforceability thereof may be subject to bankruptcy, insolvency, reorganization, moratorium and other similar laws affecting creditors rights heretofore or hereafter enacted to the extent constitutionally applicable and that their enforcement of such rights may also be subject to the exercise of judicial discretion in appropriate cases. THRUN LAW FIRM, P.C. D-2

67 APPENDIX E FORM OF CONTINUING DISCLOSURE AGREEMENT

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69 FORM OF CONTINUING DISCLOSURE AGREEMENT $9,920,000 SCHOOLCRAFT COLLEGE STATE OF MICHIGAN 2018 COLLEGE FACILITY BONDS (GENERAL OBLIGATION - LIMITED TAX) This Continuing Disclosure Agreement (the Agreement ) is executed and delivered by Schoolcraft College, State of Michigan (the Issuer ), in connection with the issuance of $9,920, College Facility Bonds (General Obligation - Limited Tax) (the Bonds ). The Bonds are being issued pursuant to a resolution adopted by the Board of Trustees of the Issuer on November 14, 2018 (the Resolution ). The Issuer covenants and agrees as follows: SECTION 1. Purpose of the Disclosure Agreement. This Agreement is being executed and delivered by the Issuer for the benefit of the Bondholders and in order to assist the Participating Underwriter in complying with the Rule. The Issuer acknowledges that this Agreement does not address the scope of any application of Rule 10b-5 promulgated by the SEC pursuant to the 1934 Act to the Annual Reports or notices of the Listed Events provided or required to be provided by the Issuer pursuant to this Agreement. SECTION 2. Definitions. In addition to the definitions set forth in the Resolution, which apply to any capitalized term used in this Agreement unless otherwise defined in this Section, the following capitalized terms shall have the following meanings: Annual Report shall mean any Annual Report provided by the Issuer pursuant to, and as described in, Sections 3 and 4 of this Agreement. Bondholder means the registered owner of a Bond or any person which (a) has the power, directly or indirectly, to vote or consent with respect to, or to dispose of ownership of, any Bonds (including any person holding Bonds through nominees, depositories or other intermediaries), or (b) is treated as the owner of any Bond for federal income tax purposes. Dissemination Agent means any agent designated as such in writing by the Issuer and which has filed with the Issuer a written acceptance of such designation, and such agent s successors and assigns. EMMA shall mean the MSRB s Electronic Municipal Market Access which provides continuing disclosure services for the receipt and public availability of continuing disclosure documents and related information required by Rule 15c2-12 promulgated by the SEC. Listed Events shall mean any of the events listed in Section 5(a) of this Agreement. MSRB shall mean the Municipal Securities Rulemaking Board Act shall mean the Securities Exchange Act of 1934, as amended. E-1

70 Official Statement shall mean the final Official Statement for the Bonds dated December 6, Participating Underwriter shall mean any of the original underwriters of the Bonds required to comply with the Rule in connection with the offering of the Bonds. Resolution shall mean the resolution duly adopted by the Issuer authorizing the issuance, sale and delivery of the Bonds. Rule shall mean Rule 15c2-12 promulgated by the SEC pursuant to the 1934 Act, as the same may be amended from time to time. SEC shall mean the Securities and Exchange Commission. State shall mean the State of Michigan. State Repository shall mean any public or private repository or entity designated by the State as a state repository for the purpose of the Rule and recognized as such by the SEC. Currently, the following is the State Repository: Municipal Advisory Council of Michigan Buhl Building 535 Griswold Street, Suite 1850 Detroit, Michigan Tel: (313) Fax: (313) mac@macmi.com SECTION 3. Provision of Annual Reports. (a) Each year, the Issuer shall provide, or shall cause the Dissemination Agent to provide, on or prior to the end of the sixth month after the end of the fiscal year of the Issuer commencing with the fiscal year ending June 30, 2019, to EMMA and the State Repository an Annual Report for the preceding fiscal year which is consistent with the requirements of Section 4 of this Agreement. Currently, the Issuer s fiscal year ends on June 30. In each case, the Annual Report may be submitted as a single document or as separate documents comprising a package, and may include by specific reference other information as provided in Section 4 of this Agreement; provided, however, that if the audited financial statements of the Issuer are not available by the deadline for filing the Annual Report, they shall be provided when and if available, and unaudited financial statements in a format similar to the financial statements contained in the Official Statement shall be included in the Annual Report. (b) The Annual Report shall be submitted to EMMA either through a web-based electronic submission interface or through electronic computer-to-computer data connections with EMMA in accordance with the submission process, document format and configuration requirements established by the MSRB. The Annual Report shall also include all related information required by MSRB to accurately identify: (i) the category of information being provided; (ii) the period covered by the Annual Report; (iii) the issues or specific securities to which the Annual Report is related (including CUSIP number, Issuer name, state, issue E-2

71 description/securities name, dated date, maturity date, and/or coupon rate); (iv) the name of any obligated person other than the Issuer; (v) the name and date of the document; and (vi) contact information for the Dissemination Agent or the Issuer s submitter. (c) If the Issuer is unable to provide to EMMA an Annual Report by the date required in subsection (a), the Issuer shall send a notice in a timely manner to the MSRB and to the State Repository in substantially the form attached as Appendix A. (d) If the Issuer s fiscal year changes, the Issuer shall send a notice of such change to the MSRB and to the State Repository in substantially the form attached as Appendix B. If such change will result in the Issuer s fiscal year ending on a date later than the ending date prior to such change, the Issuer shall provide notice of such change to the MSRB and to the State Repository on or prior to the deadline for filing the Annual Report in effect when the Issuer operated under its prior fiscal year. Such notice may be provided to the MSRB and to the State Repository along with the Annual Report, provided that it is filed at or prior to the deadline described above. SECTION 4. Content of Annual Reports. The Issuer s Annual Report shall contain or include by reference the following: (a) audited financial statements of the Issuer prepared pursuant to State laws, administrative rules and guidelines and pursuant to accounting and reporting policies conforming in all material respects to generally accepted accounting principles as applicable to governmental units as such principles are prescribed, in part, by the Financial Accounting Standards Board and modified by the Government Accounting Standards Board and in effect from time to time; and (b) additional annual financial information and operating data as set forth in the Official Statement under CONTINUING DISCLOSURE. Any or all of the items listed above may be included by specific reference to other documents, including official statements of debt issues of the Issuer or related public entities, which previously have been provided to each of the Repositories or filed with the SEC. If the document included by specific reference is a final official statement, it must be available from the MSRB. The Issuer shall clearly identify each such other document so included by reference. SECTION 5. Reporting of Significant Events. (a) The Issuer covenants to provide, or cause to be provided, notice in a timely manner not in excess of ten business days of the occurrence of any of the following events with respect to the Bonds in accordance with the Rule: (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 Internal Revenue Service of proposed or final determinations of taxability, Notices of Proposed Issue (IRS Form 5701-TEB) or other material notices or determinations with E-3

72 respect to the tax status of the security, or other material events affecting the tax status of the security; (7) modifications to rights of security holders, if material; (8) bond calls, if material, and tender offers; (9) defeasances; (10) release, substitution, or sale of property securing repayment of the securities, if material; (11) rating changes; (12) bankruptcy, insolvency, receivership or similar event of the obligated person; (13) the consummation of a merger, consolidation, or acquisition involving an obligated person or the sale of all or substantially all of the assets of the obligated person, other than in the ordinary course of business, the entry into a definitive agreement to undertake such an action or the termination of a definitive agreement relating to any such actions, other than pursuant to its terms, if material; (14) appointment of a successor or additional trustee or the change of name of a trustee, if material. (b) Whenever the Issuer obtains knowledge of the occurrence of a Listed Event, the Issuer shall as soon as possible determine if such event would constitute material information for the Bondholders, provided, that any event other than those listed under Section 5(a)(1), (3), (4), (5), (9), (11) (only with respect to any change in any rating on the Bonds) or (12) above will always be deemed to be material. Events listed under Section 5(a)(6) and (8) above will always be deemed to be material except with respect to that portion of those events which must be determined to be material. (c) The Issuer shall promptly cause a notice of the occurrence of a Listed Event, determined to be material in accordance with the Rule, to be electronically filed with EMMA and with the State Repository together with a significant event notice cover sheet substantially in the form attached as Appendix C. In connection with providing a notice of the occurrence of a Listed Event described in Section 5(a)(9) above, the Issuer shall include in the notice explicit disclosure as to whether the Bonds have been escrowed to maturity or escrowed to call, as well as appropriate disclosure of the timing of maturity or call. (d) The Issuer acknowledges that the rating changes referred to above in Section 5(a)(11) of this Agreement may include, without limitation, any change in any rating on the Bonds or other indebtedness for which the Issuer is liable. (e) The Issuer acknowledges that it is not required to provide a notice of a Listed Event with respect to credit enhancement when the credit enhancement is added after the primary offering of the Bonds, the Issuer does not apply for or participate in obtaining such credit enhancement, and such credit enhancement is not described in the Official Statement. SECTION 6. Termination of Reporting Obligation. (a) The Issuer s obligations under this Agreement shall terminate upon the legal defeasance of the Resolution or the prior redemption or payment in full of all of the Bonds. E-4

73 (b) This Agreement, or any provision hereof, shall be null and void in the event that the Issuer (i) receives an opinion of nationally recognized bond counsel, addressed to the Issuer, to the effect that those portions of the Rule, which require such provisions of this Agreement, do not or no longer apply to the Bonds, whether because such portions of the Rule are invalid, have been repealed, amended or modified, or are otherwise deemed to be inapplicable to the Bonds, as shall be specified in such opinion, and (ii) delivers notice to such effect to the MSRB, and to the State Repository, if any. SECTION 7. Dissemination Agent. The Issuer, from time to time, may appoint or engage a Dissemination Agent to assist it in carrying out its obligations under this Agreement, and may discharge any such Dissemination Agent, with or without appointing a successor Dissemination Agent. SECTION 8. Amendment. Notwithstanding any other provision of this Agreement, this Agreement may be amended, and any provision of this Agreement may be waived to the effect that: (a) such amendment or waiver is made in connection with a change in circumstances that arises from a change in legal requirements, a change in law or a change in the identity, nature or status of the Issuer, or the types of business in which the Issuer is engaged; (b) this Agreement as so amended or taking into account such waiver, would have complied with the requirements of the Rule at the time of the primary offering of the Bonds, after taking into account any amendments or interpretations of the Rule, as well as any change in circumstances, in the opinion of independent legal counsel; and (c) such amendment or waiver does not materially impair the interests of the Bondholders, in the opinion of independent legal counsel. If the amendment or waiver results in a change to the annual financial information required to be included in the Annual Report pursuant to Section 4 of this Agreement, the first Annual Report that contains the amended operating data or financial information shall explain, in narrative form, the reasons for the amendment and the impact of such change in the type of operating data or financial information being provided. If the amendment or waiver involves a change in the accounting principles to be followed in preparing financial statements, the Annual Report for the year in which the change is made shall present a comparison between the financial statements or information prepared based on the new accounting principles and those prepared based on the former accounting principles. The comparison should include a qualitative discussion of such differences and the impact of the changes on the presentation of the financial information. To the extent reasonably feasible, the comparison should also be quantitative. A notice of the change in the accounting principles should be sent by the Issuer to the MSRB and to the State Repository. Further, if the annual financial information required to be provided in the Annual Report can no longer be generated because the operations to which it related have been materially changed or discontinued, a statement to that effect shall be included in the first Annual Report that does not include such information. SECTION 9. Additional Information. Nothing in this Agreement shall be deemed to prevent the Issuer from disseminating any other information, using the means of dissemination set E-5

74 forth in this Agreement or any other means of communication, or including any other information in any Annual Report or notice of occurrence of a Listed Event, in addition to that which is required by this Agreement. If the Issuer chooses to include any information in any Annual Report or notice of occurrence of a Listed Event in addition to that which is specifically required by this Agreement, the Issuer shall have no obligation under this Agreement to update such information or include it in any future Annual Report or notice of occurrence of a Listed Event. SECTION 10. Default. In the event of a failure of the Issuer to comply with any provision of this Agreement, any Bondholder may take such actions as may be necessary and appropriate, including seeking mandamus or specific performance by court order, to cause the Issuer to comply with its obligations under this Agreement. A default under this Agreement shall not be deemed an Event of Default under the Resolution or the Bonds, and the sole remedy under this Agreement in the event of any failure of the Issuer to comply with the Agreement shall be an action to compel performance. SECTION 11. Duties of Dissemination Agent. The Dissemination Agent shall have only such duties as are specifically set forth in this Agreement. SECTION 12. Beneficiaries. This Agreement shall inure solely to the benefit of the Issuer, the Dissemination Agent, the Participating Underwriter, and the Bondholders and shall create no rights in any other person or entity. SECTION 13. Governing Law. This Agreement shall be construed and interpreted in accordance with the laws of the State, and any suits and actions arising out of this Agreement shall be instituted in a court of competent jurisdiction in the State. Notwithstanding the foregoing, to the extent this Agreement addresses matters of federal securities laws, including the Rule, this Agreement shall be construed and interpreted in accordance with such federal securities laws and official interpretations thereof. SCHOOLCRAFT COLLEGE STATE OF MICHIGAN Dated: December 20, 2018 By: Its: Vice President and Chief Financial Officer E-6

75 APPENDIX A NOTICE TO THE MSRB AND TO THE STATE REPOSITORY OF FAILURE TO FILE ANNUAL REPORT Name of Issuer: Name of Bond Issue: Schoolcraft College, Michigan 2018 College Facility Bonds (General Obligation - Limited Tax) Date of Bonds: December 20, 2018 NOTICE IS HEREBY GIVEN that the Issuer has not provided an Annual Report with respect to the above-named Bonds as required by Section 3 of its Continuing Disclosure Agreement with respect to the Bonds. The Issuer anticipates that the Annual Report will be filed by. SCHOOLCRAFT COLLEGE STATE OF MICHIGAN Dated: By: Its: Vice President and Chief Financial Officer E-7

76 APPENDIX B NOTICE TO THE MSRB AND THE STATE REPOSITORY OF CHANGE IN ISSUER S FISCAL YEAR Name of Issuer: Schoolcraft College, Michigan Name of Bond Issue: 2018 College Facility Bonds (General Obligation - Limited Tax) Date of Bonds: December 20, 2018 NOTICE IS HEREBY GIVEN that the Issuer s fiscal year has changed. Previously, the Issuer s fiscal year ended on. It now ends on. SCHOOLCRAFT COLLEGE STATE OF MICHIGAN Dated: By: Its: Vice President and Chief Financial Officer E-8

77 APPENDIX C SIGNIFICANT EVENT NOTICE COVER SHEET This cover sheet and significant event notice should be provided in an electronic format to the Municipal Securities Rulemaking Board and the State Repository pursuant to Securities and Exchange Commission Rule 15c2-12(b)(5)(i)(C) and (D). Issuer s and/or other Obligated Person s Name: Issuer s Six-Digit CUSIP Number(s): or Nine-Digit CUSIP Number(s) to which this significant event notice relates: Number of pages of attached significant event notice: Description of Significant Events Notice (Check One): 1. Principal and interest payment delinquencies 2. Non-payment related defaults 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 Internal Revenue 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 security, or other material events affecting the tax status of the security 7. Modifications to rights of security holders 8. Bond calls 9. Tender offers 10. Defeasances 11. Release, substitution, or sale of property securing repayment of the securities 12. Rating changes 13. Bankruptcy, insolvency, receivership or similar event of the obligated person 14. The consummation of a merger, consolidation, or acquisition involving an obligated person or the sale of all or substantially all of the assets of the obligated person, other than in the ordinary course of business, the entry into a definitive agreement to undertake such an action or the termination of a definitive agreement relating to any such actions, other than pursuant to its terms 15. Appointment of a successor or additional trustee or the change of name of a trustee 16. Other significant event notice (specify) I hereby represent that I am authorized by the issuer or its agent to distribute this information publicly: Signature: Name: Employer: Address: City, State, Zip Code: Voice Telephone Number: ( ) Title: The MSRB Gateway is or through the EMMA portal at emma.msrb.org/submission/ Submission_Portal.aspx. Contact the MSRB at (703) with questions regarding this form or the dissemination of this notice. The cover sheet and notice may also be faxed to the MAC at (313) E-9

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79 APPENDIX F DRAFT OFFICIAL NOTICE OF SALE AND ADDENDUM

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81 NOTICE OF AMENDMENT TO OFFICIAL NOTICE OF SALE $10,000,000 SCHOOLCRAFT COLLEGE STATE OF MICHIGAN 2018 COLLEGE FACILITY BONDS (GENERAL OBLIGATION - LIMITED TAX) BIDS for the purchase of the above 2018 College Facility Bonds (the Bond or Bonds ) will be received by Schoolcraft College, Michigan (the Issuer ), at the administrative offices of the Issuer, Haggerty Road, Livonia, Michigan , on Thursday, the 6th day of December, 2018, until 11:30 o clock in the a.m., prevailing Eastern Time, at which time and place said bids will be publicly opened and read. BIDS also will be received on the same date and the same hour by an agent of the undersigned at the offices of the Municipal Advisory Council of Michigan, Buhl Building, 535 Griswold Street, Suite 1850, Detroit, Michigan 48226, where the bids will simultaneously be opened and read. Bidders may choose either location to present bids but not both locations. Award of the bids will be made on behalf of the Issuer by the authorized officer of the Issuer by 5:00 o clock in the p.m., prevailing Eastern Time, on that date. All other provisions of the Official Notice of Sale printed on Tuesday, November 27, 2018, remain the same. Gretchen Alaniz Secretary, Board of Trustees F-1

82 OPTIONAL DTC BOOK-ENTRY-ONLY OFFICIAL NOTICE OF SALE $10,000,000 SCHOOLCRAFT COLLEGE STATE OF MICHIGAN 2018 COLLEGE FACILITY BONDS (GENERAL OBLIGATION - LIMITED TAX) BIDS for the purchase of the above 2018 College Facility Bonds (the Bond or Bonds ) will be received by Schoolcraft College, Michigan (the Issuer ), at the administrative offices of the Issuer, Haggerty Road, Livonia, Michigan , on Wednesday, the 5th day of December, 2018, until 11:30 o clock in the a.m., prevailing Eastern Time, at which time and place said bids will be publicly opened and read. BIDS also will be received on the same date and the same hour by an agent of the undersigned at the offices of the Municipal Advisory Council of Michigan, Buhl Building, 535 Griswold Street, Suite 1850, Detroit, Michigan 48226, where the bids will simultaneously be opened and read. Bidders may choose either location to present bids but not both locations. Award of the bids will be made on behalf of the Issuer by the authorized officer of the Issuer by 5:00 o clock in the p.m., prevailing Eastern Time, on that date. FAXED BIDS: Bidders may submit signed bids via facsimile transmission to the Issuer at (734) or the Municipal Advisory Council at (313) , provided that the faxed bids are received prior to the time and date fixed for receipt of bids. Bidders submitting faxed bids bear the full risk of failed or untimely transmission of their bids. Bidders are encouraged to confirm the timely receipt of their full and complete bids by telephoning the Issuer at (734) or the Municipal Advisory Council at (313) Bidders submitting bids by fax must satisfy the requirements of the good faith deposit obligations described herein. ELECTRONIC BIDS may be presented via PARITY on the date and at the time shown above provided that such bidders must also comply with the good faith deposit requirements described herein. To the extent any instructions or directions set forth in PARITY conflict with this Notice, the terms of this Notice shall control. For further information about PARITY, potential bidders may contact PFM Financial Advisors LLC, at (734) or PARITY at (212) OPTIONAL DTC BOOK-ENTRY-ONLY: Unless otherwise requested by the winning bidder (the Purchaser ), the Bonds will be initially offered as registered in the name of Cede & Co., as registered owner and nominee for The Depository Trust Company, New York, New York ( DTC ) under DTC s Book-Entry-Only system of registration. Purchasers of interests in the Bonds (the Beneficial Owners ) will not receive physical delivery of bond certificates, and ownership by the Beneficial Owners of the Bonds will be evidenced by book-entry-only. As long as Cede & Co. is the registered owner of the Bonds as nominee of DTC, payments of principal and interest payments will be made directly to such registered owner which will in turn remit such payments to the DTC participants for subsequent disbursement to the Beneficial Owners. BOND DETAILS: Said Bonds will be fully registered Bonds, of the denomination of $5,000 each or multiples thereof up to the amount of a single maturity, shall be dated the date of delivery, numbered in order of issue from 1 upwards and will bear interest from their dated date payable on May 1, 2019, and semiannually thereafter. F-2

83 The Bonds will mature on May 1 as follows: Year Amount Year Amount $200, , , , , , , , , , $545, , , , , , , , ,000 MATURITY ADJUSTMENT: The Issuer reserves the right to decrease the aggregate principal amount of the Bonds after receipt of the bids and prior to final award. Such adjustment, if necessary, will be made in increments of $5,000 and may be made in any maturity. ADJUSTMENT TO PURCHASE PRICE: The purchase price of the Bonds will be adjusted proportionately to the adjustment in principal amount of the Bonds and in such manner as to maintain as comparable an underwriter spread as possible to the winning bid. TERM BOND OPTION: Bidders shall have the option of designating bonds maturing in any year as serial bonds or term bonds, or both. The bidder must designate whether each of the principal amounts shown above represent a serial maturity or a mandatory redemption requirement for a term bond maturity. There may be more than one term bond maturity. In any event, the above principal amount schedule shall be represented by either serial bond maturities or mandatory redemption requirements, or a combination of both. Any such designation must be made within one (1) hour of the Bond sale. PAYING AGENT: Principal and interest shall be payable at a bank or trust company qualified to act as a paying agent in Michigan (the Paying Agent ), or such other Paying Agent as the Issuer may hereafter designate by notice mailed to the registered owner not less than sixty (60) days prior to any change in Paying Agent. In the event the Bonds cease to be held in book entry form only, the Paying Agent will serve as bond registrar and transfer agent, interest shall be paid by check mailed to the owner as shown by the registration books of the Issuer as of the close of business on the 15th day of the month preceding any interest payment date and the Bonds will be transferable only upon the registration books of the Issuer kept by the Paying Agent. See Optional DTC Book-Entry-Only above. PRIOR REDEMPTION: A. Mandatory Redemption - Term Bonds. Principal designated by the Purchaser of the Bonds as a term maturity shall be subject to mandatory redemption, in part, by lot, at par and accrued interest on the redemption dates corresponding to the maturities hereinbefore scheduled. When term Bonds are purchased by the Issuer and delivered to the Paying Agent for cancellation or are redeemed in a manner other than by mandatory redemption, the principal amount of the term Bonds affected shall be reduced by the principal amount of the Bonds so redeemed or purchased in the order determined by the Issuer. F-3

84 B. Optional Redemption. Bonds of this issue maturing in the years 2020 through 2028, inclusive, shall not be subject to redemption prior to maturity. Bonds or portions of Bonds in multiples of $5,000 of this issue maturing in the year 2029 and thereafter shall be subject to redemption prior to maturity, at the option of the Issuer, in such order as the Issuer may determine and by lot within any maturity, on any date occurring on or after May 1, 2028, at par and accrued interest to the date fixed for redemption. Notice of redemption of any Bond shall be given not less than thirty (30) days and not more than sixty (60) days prior to the date fixed for redemption by mail to the Registered Owner at the registered address shown on the registration books kept by the Paying Agent. Bonds shall be called for redemption in multiples of $5,000 and Bonds of denominations of more than $5,000 shall be treated as representing the number of Bonds obtained by dividing the denomination of the Bond by $5,000 and such Bonds may be redeemed in part. The notice of redemption for Bonds redeemed in part shall state that upon surrender of the Bond to be redeemed a new Bond or Bonds in an aggregate principal amount equal to the unredeemed portion of the Bond surrendered shall be issued to the Registered Owner thereof. No further interest payment on the Bonds or portions of Bonds called for redemption shall accrue after the date fixed for redemption, whether presented for redemption, provided funds are on hand with the Paying Agent to redeem the same. If less than all of the Bonds of any maturity shall be called for redemption prior to maturity, unless otherwise provided, the particular Bonds or portions of Bonds to be redeemed shall be selected by the Paying Agent, in such manner as the Paying Agent in its discretion may deem proper, in the principal amounts designated by the Issuer. Upon presentation and surrender of such Bonds at the corporate trust office of the Paying Agent, such Bonds shall be paid and redeemed. INTEREST RATE AND BIDDING DETAILS: The Bonds shall bear interest at a rate or rates not exceeding five percent (5%) per annum, to be fixed by the bids therefor, expressed in multiples of 1/8 or 1/100 of 1%, or both. The interest on any one Bond shall be at one rate only. All Bonds maturing in any one year must carry the same interest rate. The difference between the highest and lowest interest rates bid shall not exceed three percent (3%) per annum. No proposal for the purchase of less than all of the Bonds or at a price less than 99% or greater than 105% of the par value, or at a price which will cause the net interest cost on the Bonds to exceed five percent (5%) per annum, will be considered. The interest rate borne by Bonds maturing in any year shall not be less than the interest rate borne by Bonds maturing in the preceding year. PURPOSE AND SECURITY: The Bonds are issued for the purpose of acquiring, purchasing, constructing, developing, improving, equipping and furnishing lands and buildings for college purposes. The Bonds are issued under the provisions of Act 331, Public Acts of Michigan, 1966, as amended. The Issuer has pledged the limited tax full faith and credit of the Issuer for the payment of principal and interest on the Bonds. The Issuer has further pledged to levy sufficient ad valorem taxes within its authorized millage annually, as a first budget obligation, said levy must be subject to constitutional, statutory and charter tax rate limitations. The Issuer not having the power to levy taxes for the payment of the Bonds in excess of its constitutional, statutory or charter tax rate limitation, the Bonds will be limited tax general obligations of the Issuer, and, if tax collections are insufficient to pay the principal of or interest on the Bonds when due, subordinate only to any first liens on said funds pledged for the payment of operating notes, lines of credit or tax anticipation notes heretofore or hereafter issued and, if taxes are insufficient to pay the Bonds when due, the Issuer pledges to use any and all other resources available for the payment of the Bonds. The Issuer has reserved the right to issue additional bonds of equal standing. F-4

85 GOOD FAITH: A certified or cashier s check in the amount of $100,000 may be submitted contemporaneously with the bid or, in the alternative, a deposit in the amount of $100,000 shall be made by the Purchaser by federal wire transfer as directed by PFM Financial Advisors LLC, to be received by the Issuer not later than noon, prevailing Eastern Time, on the next business day following the award as a guarantee of good faith on the part of the Purchaser to be forfeited as liquidated damages if such bid is accepted and the Purchaser fails to take delivery of and pay the purchase price for the Bonds. Any award made to the Purchaser is conditional upon receipt of the good faith deposit. The good faith deposit will be applied to the purchase price of the Bonds. In the event the Purchaser fails to honor its accepted bid, the good faith deposit will be retained by the Issuer. No interest shall be allowed on the good faith deposit. Payment for the balance of the purchase price of the Bonds shall be made at the closing. Good faith checks of unsuccessful bidders will be returned via U.S. Mail. AWARD OF BONDS: The Bonds will be awarded to the bidder whose bid produces the lowest true interest cost which is the rate that will discount all future cash payments so that the sum of the present value of all cash flows will equal the Bond proceeds computed from December 20, 2018 (the anticipated date of delivery). LEGAL OPINION: Bids shall be conditioned upon the unqualified approving opinion of Thrun Law Firm, P.C., East Lansing, Michigan, bond counsel, the original of which will be furnished without expense to the Purchaser of the Bonds at the delivery thereof. The fees of Thrun Law Firm, P.C. for services rendered in connection with such approving opinion are expected to be paid from Bond proceeds. Except to the extent necessary to issue its approving opinion as to the validity of the above Bonds, Thrun Law Firm, P.C. has not been requested to examine or review, and has not examined or reviewed, any financial documents, statements or other materials that have been or may be furnished in connection with the authorization, marketing or issuance of the Bonds and, therefore, has not expressed and will not express an opinion with respect to the accuracy or completeness of any such financial documents, statements or materials. TAX MATTERS: In the opinion of bond counsel, assuming continued compliance by the Issuer with certain requirements of the Internal Revenue Code of 1986, as amended (the Code ), interest on the Bonds is excluded from gross income for federal income tax purposes, as described in the opinion, and the Bonds and interest thereon are exempt from all taxation in the State of Michigan, except inheritance and estate taxes and taxes on gains realized from the sale, payment or other disposition thereof. The Issuer has designated the Bonds as QUALIFIED TAX-EXEMPT OBLIGATIONS within the meaning of the Code, and has covenanted to comply with those requirements of the Code necessary to continue the exclusion of interest on the Bonds from gross income for federal income tax purposes. OFFICIAL STATEMENT: Upon the sale of the Bonds, the Issuer will publish an Official Statement in substantially the same form as the Preliminary Official Statement, subject to minor additions, deletions and revisions as required to complete the Preliminary Official Statement. Promptly after the sales date, but in no event later than seven (7) business days after such date, the Issuer will provide the Purchaser with either a reasonable number of final Official Statements or a reasonably available electronic version of the same. The Issuer will determine which format will be provided. The Purchaser agrees to supply to the Issuer all necessary pricing information and any underwriter identification necessary to complete the Official Statement within twenty-four (24) hours after the award of Bonds. Additional copies of the final Official Statement may be obtained up to three months following the sale of the Bonds by a request and payment of costs to the financial consultant. The Issuer agrees to provide to the Purchaser at closing a certificate executed by appropriate officers of the F-5

86 Issuer acting in their official capacities, to the effect that as of the date of delivery the information contained in the Official Statement, and any supplement to the Official Statement, relating to the Issuer and the Bonds are true and correct in all material respects, and that the Official Statement does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. CONTINUING DISCLOSURE: As more particularly described in the Official Statement, the Issuer will agree in the bond resolution or sales resolution to provide or cause to be provided, in accordance with the requirements of Rule 15c2-12 (the Rule ) promulgated by the Securities and Exchange Commission, (i) on or prior to the end of the sixth month after the end of the fiscal year of the Issuer, commencing with the fiscal year ended June 30, 2019, certain annual financial information and operating data, including audited financial statements for the preceding fiscal year, generally consistent with the information contained or cross-referenced in the Official Statement relating to the Bonds, (ii) timely notice of the occurrence of certain significant events with respect to the Bonds and (iii) timely notice of a failure by the Issuer to provide the required annual financial information on or before the date specified in (i) above. CERTIFICATE REGARDING ISSUE PRICE : The Purchaser must assist the Issuer in establishing the issue price of the Bonds and will be required to furnish, at least ten (10) days prior to the delivery of the Bonds, a certificate in a form acceptable to bond counsel as to the issue price of the Bonds within the meaning of Section 1273 of the Internal Revenue Code of 1986, as amended. The certificate will set forth the reasonably expected initial offering price to the public or the sales price or prices of the Bonds, together with the supporting pricing wires or equivalent communications with such modifications as may be appropriate or necessary in the sole judgment of bond counsel. The Issuer intends that the provisions of Treasury Regulation Section (f)(3)(i) (defining competitive sale for purposes of establishing the issue price of the Bonds) will apply to the initial sale of the Bonds (the competitive sale requirements ) because: (i) (ii) (iii) (iv) the Issuer shall disseminate this Notice of Sale to potential underwriters in a manner that is reasonably designed to reach potential underwriters; all bidders shall have an equal opportunity to bid; the Issuer may receive bids from at least three underwriters of municipal bonds who have established industry reputations for underwriting new issuances of municipal bonds; and the Issuer anticipates awarding the sale of the Bonds to the bidder who submits a firm offer to purchase the Bonds at the highest price (or lowest interest cost), as set forth in this Notice of Sale. Any bid submitted pursuant to this Notice of Sale shall be considered a firm offer for the purchase of the Bonds, as specified in the bid. Bids will not be subject to cancellation in the event that the competitive sale requirements are not satisfied. Unless the bidder intends to hold the Bonds for its own account with no intention to offer the Bonds to the public, the bidder, by submitting a bid, represents to the Issuer that the bidder has an established industry reputation for underwriting new issuances of municipal bonds. In the event that the competitive sale requirements are not satisfied, the Issuer shall so advise the Purchaser. In that case, the Purchaser shall have the option to designate whether the issue price will be calculated upon either (a) the first price at which 10% of each maturity of the Bonds (the 10% test ) is sold to the public as the issue price of that maturity, applied on a maturity-by-maturity basis, F-6

87 or (b) a commitment to neither offer nor sell any of the Bonds of any maturity to any person at a price that is higher than the initial offering price referenced in the Purchaser s bid (the initial offering price ) during the holding period as defined herein. If the 10% test is selected, the Purchaser shall advise the Issuer if any maturity of the Bonds satisfies the 10% test as of the date and time of the award of the Bonds, and bidders should prepare their bids on the assumption that all of the maturities of the Bonds will be subject to the 10% test in order to establish the issue price of the Bonds. If the competitive sale requirements are not satisfied and the 10% test is selected, then until the 10% test has been satisfied as to each maturity of the Bonds, the Purchaser agrees to promptly report to the Issuer the prices at which the unsold Bonds of that maturity have been sold to the public. That reporting obligation shall continue, whether or not the Closing Date has occurred, until the 10% test has been satisfied as to the Bonds of that maturity or until all Bonds of that maturity have been sold. In the event the hold-the-offering-price method is selected, for each maturity of the Bonds the Purchaser shall (a) neither offer nor sell any of the Bonds of such maturity to any person at a price that is higher than the initial offering price for such maturity during the holding period for such maturity (the hold-the-offering-price rule ), and (b) verify that any selling group agreement shall contain the agreement of each dealer who is a member of the selling group, and any retail distribution agreement shall contain the agreement of each broker-dealer who is a party to the retail distribution agreement, to comply with the hold-the-offering-price rule. Pursuant to such agreement, no underwriter (as defined below) shall offer or sell any maturity of the Bonds at a price that is higher than the respective initial offering price for that maturity of the Bonds during the holding period. By submitting a bid, each bidder confirms that: (i) any agreement among underwriters, any selling group agreement and each retail distribution agreement (to which the bidder is a party) relating to the initial sale of the Bonds to the public, together with the related pricing wires, contains or will contain language obligating each underwriter, each dealer who is a member of the selling group, and each broker-dealer that is a party to such retail distribution agreement, as applicable, to either abide by the hold-the-offering-price limitations stated herein or to report the prices at which it sells to the public the unsold Bonds of each maturity allotted to it until it is notified by the Purchaser that the 10% test has been satisfied as to the Bonds of that maturity or all Bonds of that maturity have been sold to the public, if and for so long as directed by the Purchaser and as set forth in the related pricing wires, depending on whether the hold-the-offering-price method or the 10% test is selected by the Purchaser, and (ii) any agreement among underwriters relating to the initial sale of the Bonds to the public, together with the related pricing wires, contains or will contain language obligating each underwriter that is a party to a retail distribution agreement to be employed in connection with the initial sale of the Bonds to the public to require each broker-dealer that is a party to such retail distribution agreement to either abide by the hold-the-offering-price limitations stated herein or to report the prices at which it sells to the public the unsold Bonds of each maturity allotted to it until it is notified by the Purchaser or such underwriter that the 10% test has been satisfied as to the Bonds of that maturity or all Bonds of that maturity have been sold to the public, if and for so long as directed by the Purchaser or such underwriter and as set forth in the related pricing wires, depending on whether the hold-the-offeringprice method or the 10% test is selected by the Purchaser. Sales of any Bonds to any person who is a related party to an underwriter shall not constitute sales to the public for purposes of this Notice of Sale. Further, for purposes of this section of the Notice of Sale: F-7

88 (i) (ii) (iii) (iv) (v) (vi) public means any person other than an underwriter or a related party, underwriter means (A) any person who agrees pursuant to a written contract with the Issuer (or with the lead underwriter to form an underwriting syndicate) to participate in the initial sale of the Bonds to the public and (B) any person who agrees pursuant to a written contract directly or indirectly with a person described in clause (A) to participate in the initial sale of the Bonds to the public (including a member of a selling group or a party to a retail distribution agreement participating in the initial sale of the Bonds to the public), a purchaser of any of the Bonds is a related party to an underwriter if the underwriter and the purchaser are subject, directly or indirectly, to (i) at least 50% common ownership of the voting power or the total value of their stock, if both entities are corporations (including direct ownership by one corporation of another), (ii) more than 50% common ownership of their capital interests or profit interests, if both entities are partnerships (including direct ownership by one partnership of another), or (iii) more than 50% common ownership of the value of the outstanding stock of the corporation or the capital interests or profit interests of the partnership, as applicable, if one entity is a corporation and the other entity is a partnership (including direct ownership of the applicable stock or interests by one entity of the other), sale date means the date that the Bonds are awarded by the Issuer to the Purchaser, holding period means, for each maturity of the Bonds, the period starting on the Sale Date and ending on the earlier of (i) the close of the fifth business day after the Sale Date, or (ii) the date on which the Underwriter has sold at least 10% of each maturity to the Public at prices that are no higher than the Initial Offering Price for such maturity, and maturity means Bonds with the same credit and payment terms. Bonds with different maturity dates, or Bonds with the same maturity date but different stated interest rates, are treated as separate maturities. In addition, if the Purchaser will obtain a municipal bond insurance policy or other credit enhancement for the Bonds in connection with their original issuance, the Purchaser will be required, as a condition of delivery of the Bonds, to certify whether the premium therefor representing the transfer of credit risk will be less than the present value of the interest expected to be saved as a result of such insurance or other credit enhancement. The form of an acceptable certificate will be provided by bond counsel. CLOSING DOCUMENTS: Drafts of all closing documents, including the form of Bond and bond counsel s legal opinion, may be requested from Thrun Law Firm, P.C. Final closing documents will be in substantially the same form as the drafts provided. Closing documents will not be modified at the request of a bidder, regardless of whether the bidder s proposal is accepted. DELIVERY OF BONDS: The Issuer will furnish Bonds ready for execution at its expense. Bonds will be delivered without expense to the Purchaser at a place to be mutually agreed upon with the Purchaser. The usual closing documents, including a certificate that no litigation is pending affecting the issuance of the Bonds, will be delivered at the time of the delivery of the Bonds. If the Bonds are not tendered for delivery by twelve o clock, noon, prevailing Eastern Time, on the 45th day following the date of sale, or the first business day thereafter if the 45th day is not a business day, the Purchaser may on that day, or any time thereafter until delivery of the Bonds, withdraw the proposal by serving notice of cancellation in writing, on the undersigned, in which event the Issuer shall promptly return the good faith deposit. Accrued interest to the date of delivery of the Bonds shall be F-8

89 paid by the Purchaser at the time of delivery. Payment for the Bonds shall be made in federal reserve funds. Unless the Purchaser furnishes the Paying Agent with a list giving the denominations and names in which it wishes to have the certificates issued at least five (5) business days prior to delivery of the Bonds, the Bonds will be delivered in the form of a single certificate for each maturity registered in the name of the Purchaser, subject to the election under the Optional DTC Book-Entry-Only provisions herein. CUSIP NUMBERS: It is anticipated that CUSIP numbers will be printed on the Bonds, but neither the failure to print CUSIP numbers nor any improperly printed CUSIP numbers shall be cause for the Purchaser to refuse to take delivery of and pay the purchase price for the Bonds. Application for CUSIP numbers will be made by PFM Financial Advisors LLC, municipal advisor to the Issuer. The CUSIP Service Bureau s charge for the assignment of CUSIP identification numbers shall be paid by the Purchaser. BIDDER CERTIFICATION - NOT IRAN-LINKED BUSINESS : By submitting a bid, the bidder shall be deemed to have certified that it is not an Iran-Linked Business as defined in Act 517, Public Acts of Michigan, 2012; MCL , et seq. FURTHER INFORMATION may be obtained from PFM Financial Advisors LLC, 555 Briarwood Circle, Suite 333, Ann Arbor, Michigan 48108, telephone: (734) THE RIGHT IS RESERVED TO REJECT ANY OR ALL BIDS. ENVELOPES containing the bids should be plainly marked Proposal for Schoolcraft College 2018 College Facility Bonds. Gretchen Alaniz Secretary, Board of Trustees F-9

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92 Additional information relative to this Bond issue may be obtained from: PFM Financial Advisors LLC 555 Briarwood Circle, Suite 333 Ann Arbor, MI (734)