$6,100,000 Bond Anticipation Notes, 2017 (Renewals) (the Notes ) Dated: August 10, 2017 Due: June 29, 2018

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1 NEW/RENEWAL ISSUE PRELIMINARY OFFICIAL STATEMENT BOND ANTICIPATION NOTES In the opinion of Orrick, Herrington & Sutcliffe LLP, Bond Counsel, based upon an analysis of existing laws, regulations, rulings and court decisions, and assuming among other matters, the accuracy of certain representations and compliance with certain covenants, interest on the Notes is excluded from gross income for federal income tax purposes under Section 103 of the Internal Revenue Code of In the further opinion of Bond Counsel, interest on the Notes is not a specific preference item for purposes of the federal individual or corporate alternative minimum taxes, although Bond Counsel observes that such interest is included in adjusted current earnings when calculating corporate alternative minimum taxable income. Bond Counsel is also of the opinion that interest on the Notes is exempt from personal income taxes imposed by the State of New York or any political subdivision thereof (including The City of New York). Bond Counsel expresses no opinion regarding any other tax consequences related to the ownership or disposition of, or the amount, accrual or receipt of interest on, the Notes. See TAX MATTERS herein. The School District will designate the Notes as "qualified tax-exempt obligations" pursuant to Section 265(b)(3) of the Code. $6,100,000 PORTVILLE CENTRAL SCHOOL DISTRICT CATTARAUGUS AND ALLEGANY COUNTIES, NEW YORK GENERAL OBLIGATIONS $6,100,000 Bond Anticipation Notes, 2017 (Renewals) (the Notes ) Dated: August 10, 2017 Due: June 29, 2018 The Notes are general obligations of the Portville Central School District, Cattaraugus and Allegany Counties, New York (the School District ), all the taxable real property within which is subject to the levy of ad valorem taxes to pay the Notes and interest thereon, without limitation as to rate or amount. See THE NOTES - Nature of the Obligation and TAX LEVY LIMITATION LAW herein. The Notes will be issued without the option of prior redemption. At the option of the purchaser(s), the Notes will be issued in (i) registered certificated form registered in the name of the successful bidder(s) or (ii) registered book-entry-only form registered to Cede & Co., as the partnership nominee for The Depository Trust Company, New York, New York ( DTC ). If the Notes are issued as registered in the name of the purchaser, principal of and interest on the Notes will be payable in Federal Funds at the office of the School District. A single note certificate will be issued for Notes bearing the same rate of interest in the aggregate principal amount awarded to such purchaser at such interest rate. If the Notes are issued in book-entry-only form, such notes will be delivered to DTC, which will act as securities depository for the Notes. Beneficial owners will not receive certificates representing their interest in the Notes. Individual purchases may be made in denominations of $5,000 or integral multiples thereof. A single note certificate will be issued for those Notes bearing the same rate of interest and CUSIP number in the aggregate principal amount awarded to such purchaser(s) at such interest rate. Principal of and interest on said Notes will be paid in Federal Funds by the District to Cede & Co., as nominee for DTC, which will in turn remit such principal and interest to its participants for subsequent distribution to the beneficial owners of the Notes as described herein. Transfer of principal and interest payments to beneficial owners by participants of DTC will be the responsibility of such participants and other nominees of beneficial owners. The District will not be responsible or liable for payments by DTC to its participants or by DTC participants to beneficial owners or for maintaining, supervising or reviewing the records maintained by DTC, its participants or persons acting through such participants. (See BOOK-ENTRY-ONLY SYSTEM herein). The Notes are offered when, as and if issued and received by the purchaser(s) and subject to the receipt of the approving legal opinion as to the validity of the Notes of Orrick, Herrington & Sutcliffe, LLP, Bond Counsel, New York, New York. It is anticipated that the Notes will be available for delivery through the facilities of DTC located in Jersey City, New Jersey or as may be agreed upon on or about August 10, ELECTRONIC BIDS for the Notes must be submitted on Grant Street Group's MuniAuction website ("MuniAuction") accessible via on July 25, 2017 no later than 10:45 A.M. EDT. Bids may also be submitted by facsimile at (315) No other form of electronic bidding services will be accepted. No phone bids will be accepted. No bid will be received after the time for receiving bids specified above. Once the bids are communicated electronically via MuniAuction or facsimile to the School District, each bid will constitute an irrevocable offer to purchase the Notes pursuant to the terms provided in the Notice of Sale. July 14, 2017 THE SCHOOL DISTRICT DEEMS THIS OFFICIAL STATEMENT TO BE FINAL FOR PURPOSES OF SECURITIES AND EXCHANGE COMMISSION RULE 15c2-12 ( THE RULE ), EXCEPT FOR CERTAIN INFORMATION THAT HAS BEEN OMITTED HEREFROM IN ACCORDANCE WITH SAID RULE AND THAT WILL BE SUPPLIED WHEN THIS OFFICIAL STATEMENT IS UPDATED FOLLOWING THE SALE OF THE OBLIGATIONS HEREIN DESCRIBED. THIS OFFICIAL STATEMENT WILL BE SO UPDATED UPON REQUEST OF THE SUCCESSFUL BIDDER(S), AS MORE FULLY DESCRIBED IN THE NOTICE OF SALE WITH RESPECT TO THE OBLIGATIONS HEREIN DESCRIBED. THE SCHOOL DISTRICT WILL COVENANT IN AN UNDERTAKING TO PROVIDE NOTICE OF CERTAIN MATERIAL EVENTS AS DEFINED IN THE RULE. SEE APPENDIX-C, MATERIAL EVENT NOTICES HEREIN.

2 PORTVILLE CENTRAL SCHOOL DISTRICT CATTARAUGUS AND ALLEGANY COUNTIES, NEW YORK DISTRICT OFFICIALS BOARD OF EDUCATION DANIEL WENKE President STEVE ANDRIANOFF CHRIS KLOC 1 st Vice President 2 nd Vice President GEORGE NUFFER THOMAS ROWE DOUGLAS DOTY WEST LONG CHERYL WOOD JAMES TKACIK * * * * * * * * * * * THOMAS J. SIMON Superintendent PAMELA SUE ANDERSON Business Executive ROBIN OWENS School District Treasurer FISCAL ADVISORS & MARKETING, INC. School District Municipal Advisor ORRICK, HERRINGTON & SUTCLIFFE LLP Bond Counsel

3 No person has been authorized by the Portville Central School District to give any information or to make any representations not contained in this Official Statement, and, if given or made, such information or representations must not be relied upon as having been authorized. This Official Statement does not constitute an offer to sell or solicitation of an offer to buy any of the Notes in any jurisdiction to any person to whom it is unlawful to make such offer or solicitation in such jurisdiction. 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 Portville Central School District. TABLE OF CONTENTS Page THE NOTES... 4 Description of the Notes... 4 Purpose of Issue... 4 Nature of the Obligation... 5 BOOK-ENTRY-ONLY SYSTEM... 6 Certificated Notes... 7 THE SCHOOL DISTRICT... 8 General Information... 8 District Population... 8 Selected Wealth and Income Indicators... 8 Major Employers... 9 Unemployment Rate Statistics... 9 Form of School Government... 9 Budgetary Procedures and Recent Budget Votes... 9 Investment Policy State Aid State Aid Revenues School Facilities Enrollment Trends Employees Status and Financing of Employee Pension Benefits Other Post-Employment Benefits Other Information Financial Statements Projected (unaudited) Results of Operations FYE New York State Comptroller Reports of Examination The State Comptroller s Fiscal Stress Monitoring System TAX INFORMATION Valuations Tax Rate Per $1,000 (Assessed) Tax Collection Procedure Tax Collection Record Real Property Tax Revenues Larger Taxpayers 2016 for Tax Roll STAR - School Tax Exemption Additional Tax Information TAX LEVY LIMITATION LAW Real Property Tax Rebate STATUS OF INDEBTEDNESS Constitutional Requirements Statutory Procedure Debt Outstanding End of Fiscal Year Details of Outstanding Indebtedness Debt Statement Summary Bonded Debt Service Page STATUS OF INDEBTEDNESS (cont.) Capital Project Plans Cash Flow Borrowings Estimated Overlapping Indebtedness Debt Ratios SPECIAL PROVISIONS AFFECTING REMEDIES UPON DEFAULT MARKET AND RISK FACTORS TAX MATTERS LEGAL MATTERS LITIGATION CONTINUING DISCLOSURE COMPLIANCE MUNICIPAL ADVISOR RATINGS MISCELLANEOUS APPENDIX - A GENERAL FUND - Balance Sheets APPENDIX - A1 GENERAL FUND Revenues, Expenditures and Changes in Fund Balance APPENDIX - A2 GENERAL FUND Revenues, Expenditures and Changes in Fund Balance - Budget and Actual APPENDIX B BONDED DEBT SERVICE APPENDIX B1 CURRENT BONDS OUTSTANDING APPENDIX - C MATERIAL EVENT NOTICES APPENDIX - D FORM OF BOND COUNSEL S OPINION APPENDIX - E AUDITED FINANCIAL STATEMENTS FISCAL YEAR ENDING JUNE 30, 2016 PREPARED WITH THE ASSISTANCE OF Fiscal Advisors & Marketing, Inc. 120 Walton Street, Suite 600 Syracuse, New York (315)

4 OFFICIAL STATEMENT of the PORTVILLE CENTRAL SCHOOL DISTRICT CATTARAUGUS AND ALLEGANY COUNTIES, NEW YORK Relating To $6,100,000 Bond Anticipation Notes, 2017 (Renewals) This Official Statement, which includes the cover page, has been prepared by the Portville Central School District, Cattaraugus and Allegany Counties, New York (the "School District" or "District", "Counties", and "State", respectively) in connection with the sale by the District of $6,100,000 principal amount of Bond Anticipation Notes, 2017 (Renewals) (the "Notes"). The factors affecting the District s financial condition and the Notes are described throughout this Official Statement. Inasmuch as many of these factors, including economic and demographic factors, are complex and may influence the District tax base, revenues, and expenditures, this Official Statement should be read in its entirety, and no one factor should be considered more or less important than any other by reason of its relative position in this Official Statement. All quotations from and summaries and explanations of provisions of the Constitution and laws of the State and acts and proceedings of the District contained herein do not purport to be complete and are qualified in their entirety by reference to the official compilations thereof, and all references to the Notes and the proceedings of the District relating thereto are qualified in their entirety by reference to the definitive forms of the Notes and such proceedings. Description of the Notes THE NOTES The Notes are general obligations of the School District, and will contain a pledge of its faith and credit for the payment of the principal thereof and interest thereon as required by the Constitution and laws of the State of New York (State Constitution, Art. VIII, Section 2: Local Finance Law, Section ). All the taxable real property within the School District is subject to the levy of ad valorem taxes to pay the Notes and interest thereon, without limitation as to rate or amount. See Nature of the Obligation and TAX LEVY LIMITATION LAW herein. The Notes will be dated August 10, 2017 and will mature June 29, The Notes are not subject to redemption prior to maturity. Interest will be calculated on a 30-day month and 360-day year basis, payable at maturity. The Notes will be issued in registered form at the option of the Purchaser(s) either (i) registered in the name of the purchaser, or (ii) registered in the name of Cede & Co. as nominee of The Depository Trust Company, New York, New York ( DTC ) which will act as the securities depository for the Notes. See "BOOK-ENTRY-ONLY SYSTEM" herein. Purpose of Issue The Notes are issued pursuant to the Constitution and Status of the State of New York, including the Education Law and the Local Finance Law, pursuant to a bond resolution duly adopted by the Board of Education on August 5, 2014, authorizing the issuance of $6,135,894 serial bonds for the construction of additions and improvements to and reconstruction of various District facilities. The proceeds of the Notes together with $35,894 available funds of the School District will redeem $6,135,894 bond anticipation notes outstanding and maturing August 11,

5 Nature of the Obligation Each Note when duly issued and paid for will constitute a contract between the District and the holder thereof. Holders of any series of notes or bonds of the District may bring an action or commence a proceeding in accordance with the civil practice law and rules to enforce the rights of the holders of such series of notes or bonds. The Notes will be general obligations of the District and will contain a pledge of the faith and credit of the District for the payment of the principal thereof and the interest thereon as required by the Constitution and laws of the State. For the payment of such principal and interest, the District has power and statutory authorization to levy ad valorem taxes on all real property within the District subject to such taxation by the District, without limitation as to rate or amount. Although the State Legislature is restricted by Article VIII, Section 12 of the State Constitution from imposing limitations on the power to raise taxes to pay interest on or principal of indebtedness theretofore contracted prior to the effective date of any such legislation, the New York State Legislature may from time to time impose additional limitations or requirements on the ability to increase a real property tax levy or on the methodology, exclusions or other restrictions of various aspects of real property taxation (as well as on the ability to issue new indebtedness). On June 24, 2011, Chapter 97 of the Laws of 2011 was signed into law by the Governor (the Tax Levy Limitation Law or Chapter 97 ). The Tax Levy Limitation Law applies to local governments and school districts in the State (with certain exceptions) and imposes additional procedural requirements on the ability of municipalities and school districts to levy certain year-to-year increases in real property taxes. Under the Constitution of the State, the District is required to pledge its faith and credit for the payment of the principal of and interest on the Notes and is required to raise real estate taxes, and without specification, other revenues, if such levy is necessary to repay such indebtedness. While the Tax Levy Limitation Law imposes a statutory limitation on the District s power to increase its annual tax levy, with the amount of such increase limited by the formulas set forth in the Tax Levy Limitation Law, it also provides the procedural method to surmount that limitation. See TAX INFORMATION - Tax Levy Limitation Law herein. The Constitutionally-mandated general obligation pledge of municipalities and school districts in New York State has been interpreted by the Court of Appeals, the State s highest court, in Flushing National Bank v. Municipal Assistance Corporation for the City of New York, 40 N.Y.2d 731 (1976), as follows: A pledge of the city s faith and credit is both a commitment to pay and a commitment of the city s revenue generating powers to produce the funds to pay. Hence, an obligation containing a pledge of the City s faith and credit is secured by a promise both to pay and to use in good faith the city s general revenue powers to produce sufficient funds to pay the principal and interest of the obligation as it becomes due. That is why both words, faith and credit are used and they are not tautological. That is what the words say and this is what the courts have held they mean So, too, although the Legislature is given the duty to restrict municipalities in order to prevent abuses in taxation, assessment, and in contracting of indebtedness, it may not constrict the City s power to levy taxes on real estate for the payment of interest on or principal of indebtedness previously contracted While phrased in permissive language, these provisions, when read together with the requirement of the pledge and faith and credit, express a constitutional imperative: debt obligations must be paid, even if tax limits be exceeded. In addition, the Court of Appeals in the Flushing National Bank (1976) case has held that the payment of debt service on outstanding general obligation bonds and notes takes precedence over fiscal emergencies and the police power of political subdivisions in New York State. The pledge has generally been understood as a promise to levy property taxes without limitation as to rate or amount to the extent necessary to cover debt service due to language in Article VIII Section 10 of the Constitution, which provides an exclusion for debt service from Constitutional limitations on the amount of a real property tax levy, insuring the availability of the levy of property tax revenues to pay debt service. As the Flushing National Bank (1976) Court noted, the term faith and credit in its context is not qualified in any way. Indeed, in Flushing National Bank v. Municipal Assistance Corp., 40 N.Y.2d 1088 (1977) the Court of Appeals described the pledge as a direct constitutional mandate. In Quirk v. Municipal Assistance Corp., 41 N.Y.2d 644 (1977), the Court of Appeals stated that, while holders of general obligation debt did not have a right to particular revenues such as sales tax, with respect to traditional real estate tax levies, the bondholders are constitutionally protected against an attempt by the State to deprive the city of those revenues to meet its obligations. According to the Court in Quirk, the State Constitution requires the city to raise real estate taxes, and without specification other revenues, if such a levy be necessary to repay indebtedness. 5

6 In addition, the Constitution of the State requires that every county, city, town, village, and school district in the State provide annually by appropriation for the payment of all interest and principal on its serial bonds and certain other obligations, and that, if at any time the respective appropriating authorities shall fail to make such appropriation, a sufficient sum shall be set apart from the first revenues thereafter received and shall be applied to such purposes. In the event that an appropriating authority were to make an appropriation for debt service and then decline to expend it for that purpose, this provision would not apply. However, the Constitution of the State does also provide that the fiscal officer of any county, city, town, village, or school district may be required to set apart and apply such first revenues at the suit of any holder of any such obligations. In Quirk v. Municipal Assistance Corp., the Court of Appeals described this as a first lien on revenues, but one that does not give holders a right to any particular revenues. It should thus be noted that the pledge of the faith and credit of a political subdivision in New York State is a pledge of an issuer of a general obligation bond or note to use its general revenue powers, including, but not limited to, its property tax levy to pay debt service on such obligations, but that such pledge may not be interpreted by a court of competent jurisdiction to include a constitutional or statutory lien upon any particular revenues. While the courts in New York State have historically been protective of the rights of holders of general obligation debt of political subdivisions, it is not possible to predict what a future court might hold. BOOK-ENTRY-ONLY SYSTEM The Depository Trust Company ( DTC ), New York, NY, will act as securities depository for the Notes if so requested. The Notes will be issued as fully-registered securities registered in the name of Cede & Co. (DTC s partnership nominee) or such other name as may be requested by an authorized representative of DTC. One fully-registered note certificate will be issued for each of the Notes bearing the same CUSIP, and will be deposited with DTC. DTC, the world s largest 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 ). The DTC Rules applicable to its Participants are on file with the Securities and Exchange Commission. More information about DTC can be found at and Purchases of Notes under the DTC system must be made by or through Direct Participants, which will receive a credit for the Notes on DTC s records. The ownership interest of each actual purchaser of each Bond ( Beneficial Owner ) is in turn to be recorded on the Direct and Indirect Participants records. Beneficial Owners will not receive written confirmation from DTC of their purchase. Beneficial Owners are, however, expected to receive written confirmations providing details of the transaction, as well as periodic statements of their holdings, from the Direct or Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers of ownership interests in the Notes 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 Notes, except in the event that use of the book-entry system for the Notes is discontinued. To facilitate subsequent transfers, all Notes 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 Notes 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 Notes; DTC s records reflect only the identity of the Direct Participants to whose accounts such Notes 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. 6

7 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 Notes may wish to take certain steps to augment the transmission to them of notices of significant events with respect to the Notes, such as redemptions, tenders, defaults, and proposed amendments to the Bond documents. For example, Beneficial Owners of Notes may wish to ascertain that the nominee holding the Notes 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. Principal and interest payments on the Notes 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 School District, on payable date in accordance with their respective holdings shown on DTC s records. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered in street name, and will be the responsibility of such Participant and not of DTC nor its nominee, or the School District, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of redemption proceeds, principal and interest payments to Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) is the responsibility of the School District, disbursement of such payments to Direct Participants will be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners will be the responsibility of Direct and Indirect Participants. DTC may discontinue providing its services as depository with respect to the Notes at any time by giving reasonable notice to the School District. Under such circumstances, in the event that a successor depository is not obtained, note certificates are required to be printed and delivered. The School District may decide to discontinue use of the system of book-entry only transfers through DTC (or a successor securities depository). In that event, principal of and interest on the Notes will be payable at a principal corporate trust office of a bank or trust company located and authorized to do business in the State of New York to be named as fiscal agent by the District. The information in this section concerning DTC and DTC s book-entry system has been obtained from sources that the School District believes to be reliable, but the School District takes no responsibility for the accuracy thereof. Source: The Depository Trust Company. THE SCHOOL DISTRICT CANNOT AND DOES NOT GIVE ANY ASSURANCES THAT DTC, DIRECT PARTICIPANTS OR INDIRECT PARTICIPANTS OF DTC WILL DISTRIBUTE TO THE BENEFICIAL OWNERS OF THE NOTES (1) PAYMENTS OF PRINCIPAL OF OR INTEREST OR REDEMPTION PREMIUM ON THE NOTES (2) CONFIRMATIONS OF THEIR OWNERSHIP INTERESTS IN THE NOTES OR (3) OTHER NOTICES SENT TO DTC OR CEDE & CO., ITS PARTNERSHIP NOMINEE, AS THE REGISTERED OWNER OF THE NOTES, OR THAT THEY WILL DO SO ON A TIMELY BASIS, OR THAT DTC, DIRECT PARTICIPANTS OR INDIRECT PARTICIPANTS WILL SERVE AND ACT IN THE MANNER DESCRIBED IN THIS OFFICIAL STATEMENT. THE SCHOOL DISTRICT WILL NOT HAVE ANY RESPONSIBILITY OR OBLIGATIONS TO DTC, THE DIRECT PARTICIPANTS, THE INDIRECT PARTICIPANTS OF DTC OR THE BENEFICIAL OWNERS WITH RESPECT TO (1) THE ACCURACY OF ANY RECORDS MAINTAINED BY DTC OR ANY DIRECT PARTICIPANTS OR INDIRECT PARTICIPANTS OF DTC; (2) THE PAYMENT BY DTC OR ANY DIRECT PARTICIPANTS OR INDIRECT PARTICIPANTS OF DTC OF ANY AMOUNT DUE TO ANY BENEFICIAL OWNER IN RESPECT OF THE PRINCIPAL AMOUNT OF OR INTEREST OR REDEMPTION PREMIUM ON THE NOTES; (3) THE DELIVERY BY DTC OR ANY DIRECT PARTICIPANTS OR INDIRECT PARTICIPANTS OF DTC OF ANY NOTICE TO ANY BENEFICIAL OWNER THAT IS REQUIRED OR PERMITTED TO BE GIVEN TO OWNERS, OR (4) ANY CONSENT GIVEN OR OTHER ACTION TAKEN BY DTC AS THE REGISTERED HOLDER OF THE NOTES. THE INFORMATION CONTAINED HEREIN CONCERNING DTC AND ITS BOOK-ENTRY ONLY SYSTEM HAS BEEN OBTAINED FROM DTC AND THE SCHOOL DISTRICT MAKES NO REPRESENTATION AS TO THE COMPLETENESS OR THE ACCURACY OF SUCH INFORMATION OR AS TO THE ABSENCE OF MATERIAL ADVERSE CHANGES IN SUCH INFORMATION SUBSEQUENT TO THE DATE HEREOF. Certificated Notes DTC may discontinue providing its services with respect to the Notes at any time by giving notice to the School District and discharging its responsibilities with respect thereto under applicable law, or the School District may terminate its participation in the system of book-entry-only system transfers through DTC at any time. In the event that such book-entryonly system is discontinued, the following provisions will apply: The Notes will be issued registered in the name of the owner in denominations of $5,000 or integral multiples thereof. Principal of and interest on the Notes will be payable at a principal corporate trust office of a bank or trust company located and authorized to do business in the State of New York to be named as fiscal agent by the District. 7

8 THE SCHOOL DISTRICT General Information Portville Central School District encompasses approximately 100 square miles within the Towns of Hinsdale, Olean and Portville, in Cattaraugus County, and the Towns of Clarksville and Genesee in Allegany County. The District is located in the southwestern corner of New York State. The City of Jamestown lies approximately forty miles to the west of the District. The School District is served by a road network which includes New York State Route #17, #417, #305 and a variety of local roadways. National Fuel and National Grid provide electricity and gas service to residential, commercial and industrial users. Fire protection is furnished throughout the District by volunteer fire companies and through fire protection districts. Police protection is provided by local police departments. Commercial banks located within or in close proximity to the School District include Community Bank, N.A. and Five Star Bank. Source: District officials. District Population The current estimated population of the District is 4,841. (Source: 2015 U.S. Census Bureau estimate) Selected Wealth and Income Indicators Per capita income statistics are not available for the District as such. The smallest areas for which such statistics are available, which includes the District, are the Towns and the Counties listed below. The figures set below with respect to such Towns and Counties is included for information only. It should not be inferred from the inclusion of such data in the Official Statement that the Towns or the Counties are necessarily representative of the District, or vice versa. Per Capita Income Median Family Income Towns of: Olean $ 19,265 $ 22,601 $ 27,314 $ 47,232 $ 50,042 $ 69,083 Portville 18,043 24,343 29,437 41,270 55,240 61,399 Clarksville 13,931 19,168 22,345 35,000 39,375 53,631 Genesee 16,169 21,489 24,248 44,100 52,629 50,000 Counties of: Cattaraugus 15,959 20,824 22,336 39,318 51,227 53,921 Allegany 14,975 20,058 20,940 38,580 49,864 52,942 State of: New York 23,389 30,948 33,236 51,691 67,405 71,913 Note: American Community Survey estimates are not available as of the date of this Official Statement. Source: U.S. Census Bureau, 2000 census, and American Community Survey data. 8

9 Major Employers Name Type Employees Olean Wholesale Wholesale Grocery Co-op 250 Portville Central School District Public Education 175 Sprague s Restaurant/Farm Market 100 Keystone Tool & Dye Tool and Dye Work 65 Portville Truck & Auto repair Truck & Auto repair, tractor trailer sales, parts store 42 Source: District officials. Unemployment Rate Statistics Unemployment statistics are not available for the District as such. The smallest area for which such statistics are available (which includes the District) are the Counties of Cattaraugus and Allegany and the State of New York. The information set forth below with respect to the Counties and State is included for informational purposes only. It should not be implied from the inclusion of such data in this Official Statement that the Counties or State, are necessarily representative of the District, or vice versa. Annual Average Cattaraugus County 9.5% 9.3% 9.3% 8.5% 7.0% 6.3% 5.9% Allegany County 9.2% 8.9% 8.4% 7.5% 6.2% 6.5% 6.2% New York State 8.6% 8.3% 8.5% 7.7% 6.3% 5.3% 4.8% Monthly Figures Aug Sept Oct Nov Dec Jan Feb Mar Apr May Jun Jul Cattaraugus County 5.5% 5.6% 5.5% 5.6% 6.3% 7.2% 7.2% 6.3% 6.0% 5.6% N/A N/A Allegany County 5.7% 5.6% 5.4% 5.8% 6.6% 7.8% 7.5% 6.7% 6.6% 6.0% N/A N/A New York State 4.9% 4.9% 4.8% 4.5% 4.5% 4.9% 5.0% 4.4% 4.2% 4.3% N/A N/A Note: Unemployment rates for the months of June and July of 2017 are unavailable as of the date of this Official Statement. Source: Department of Labor, State of New York. (Note: Figures not seasonally adjusted). Form of School Government The Board of Education, which is the policy-making body of the School District, consists of nine members with overlapping three-year terms. Each Board member must be a qualified voter of the School District and no Board member may hold certain other School District offices or positions while serving on the Board of Education. The President and the Vice President are selected by the Board members. The President of the Board is the chief fiscal officer of the School District. Budgetary Procedures and Recent Budget Votes Pursuant to the Education Law, the Board of Education annually prepares or causes to be prepared a tentative budget of the School District for the ensuing fiscal year. This tentative budget must be completed at least seven days before the annual or district meeting at which it is to be presented. Copies are available upon request to taxpayers within the School District, seven days preceding such meeting and at each such meeting. The Board must also give notice that a copy of the tentative budget may be obtained at each schoolhouse within the School District. The Board of Education causes a notice to be published stating the time, date, place and purpose of the annual or district meeting. At least forty-five days must elapse between the first publication of such notice and the date specified for such meeting. The meeting must be held at the time and place specified but it may be adjourned to permit voting on the following day. If the qualified voters at the annual or School District meeting approve the tentative budget, the Board of Education, by resolution adopts the tentative budget as the budget of the School District for the ensuing year. 9

10 If by majority vote the budget is rejected, the Board of Education may make any change, alteration or revision to the budget and may hold a second public hearing and referendum. If no budget is approved, at the option of the Board of Education, such Board of Education may, pursuant to law, adopt by resolution an austerity budget for the ensuing fiscal year. The Board of Education may then levy a tax for ordinary contingent expenses of the School District, which includes debt service, in a like manner as if the same had been voted by the qualified voters. Pursuant to Chapter 97 of the Laws of 2011 ( Chapter 97 ), beginning with the fiscal year, if the proposed budget requires a tax levy increase that does not exceed the lesser of 2% or the rate of inflation (the Tax Cap ), then a majority vote is required for approval. If the proposed budget requires a tax levy that exceeds the Tax Cap, the budget proposition must include special language and a 60% vote is required for approval. Any separate proposition that would cause the School District to exceed the Tax Cap also must receive at least 60% voter approval. If the proposed budget is not approved by the required margin, the Board of Education may resubmit the original budget or a revised budget to the voters on the 3 rd Tuesday in June, or adopt a contingency budget (which would provide for ordinary contingent expenses, including debt service) that levies a tax levy no greater than that of the prior fiscal year (i.e. a 0% increase in the tax levy). If the resubmitted and/or revised budget is not approved by the required margin, the Board of Education must adopt a budget that requires a tax levy no greater than that of the prior fiscal year (i.e. a 0% increase in the tax levy). For a complete discussion of Chapter 97, see Tax Levy Limitation Law herein. Recent Budget Votes The budget was adopted by the qualified voters of the School District on May 21, The budget was within the allowable tax levy limit for the fiscal year. The budget was adopted by the qualified voters of the School District on May 20, The budget was within the allowable tax levy limit for the fiscal year. The budget was adopted by the qualified voters of the School District on May 19, The budget was within the allowable tax levy limit for the fiscal year. The budget was adopted by the qualified voters of the School District on May 17, 2016 by a vote of 229 to 67. The budget was within the allowable tax levy limit for the fiscal year. The budget was adopted by the qualified voters of the School District on May 16, 2017 by a vote of 205 to 41. The budget was within the allowable tax levy limit for the fiscal year. Investment Policy Pursuant to the statutes of the State of New York, the School District is permitted to invest only in the following investments: (1) special time deposits or certificates of deposits in a bank or trust company located and authorized to do business in the State of New York; (2) obligations of the United States of America; (3) obligations guaranteed by agencies of the United States of America where the payment of principal and interest is guaranteed by the United States of America; (4) obligations of the State of New York; (5) with the approval of the New York State Comptroller, tax anticipation notes and revenue anticipation notes issued by any New York municipality or district corporation, other than the School District; (6) obligations of a New York public corporation which are made lawful investments by the School District pursuant to another provision of law; (7) certain certificates of participation issued on behalf of political subdivisions of the State of New York; and, (8) in the case of School District moneys held in certain reserve funds established pursuant to law, obligations issued by the School District. These statutes further require that all bank deposits, in excess of the amount insured under the Federal Deposit Insurance Act be secured by a pledge of eligible notes as that term is defined in the law. Consistent with the above statutory limitations, it is the School District's current policy to invest in: (1) certificates of deposit or time deposit accounts that are fully secured as required by statute, (2) obligations of the United States of America or (3) obligations guaranteed by agencies of the United States of America where the payment of principal and interest is guaranteed by the United States of America or (4) obligations of the State of New York. In the case of obligations of the United States government, the School District may purchase such obligations pursuant to a written repurchase agreement that requires the purchased securities to be delivered to a third party custodian. General Municipal Law and the School District policy does not permit the School District to enter into reverse repurchase agreements or make other derivative type investments. 10

11 State Aid The School District receives financial assistance from the State. In its adopted budget for the fiscal year, approximately 67.7% of the revenues of the School District are estimated to be received in the form of State aid. If the State should not adopt its budget in a timely manner, in any year, municipalities and school districts in the State, including the School District, may be affected by a delay in the payment of State aid. The State is not constitutionally obligated to maintain or continue State aid to the District. No assurance can be given that present State aid levels will be maintained in the future. State budgetary restrictions, which could eliminate or substantially reduce State aid, could have a material adverse effect upon the District, requiring either a counterbalancing increase in revenues from other sources to the extent available, or a curtailment of expenditures. Building Aid A portion of the District s State aid consists of building aid which is related to outstanding indebtedness for capital project purposes. In order to receive building aid, the District must have building plans and specifications approved by the Facilities Planning Unit of the State Education Department. A maximum construction and incidental cost allowance is computed for each building project that takes into account a pupil construction cost allowance and assigned pupil capacity. For each project financed with debt obligations, a bond percentage is computed. The bond percentage is derived from the ratio of total approved cost allowances to the total principal borrowed. Approved cost allowances are estimated until a project final cost report is completed. Aid on debt service is generally paid in the current fiscal year provided such debt service is reported to the Commissioner of Education by November 15 of that year. Any debt service in excess of amounts reported by November 15 will not be aided until the following fiscal year. The building aid received is equal to the approved building expense, or bond percent, times the building aid ratio that is assigned to the District. The building aid ratio is calculated based on a formula that involves the full valuation per pupil in the District compared to a State-wide average. Pursuant to the provisions of Chapter 760 of the Laws of 1963, the District is eligible to receive a Building Aid Estimate from the New York State Department of Education. Since the gross indebtedness of the District is within the debt limit, the District is not required to apply for a Building Aid Estimate. Based on preliminary building aid ratios, the District State Building aid of approximately 93.8% for debt service on State Education Department approved expenditures from July 1, 2004 to the present. The State building aid ratio is calculated each year based upon a formula which reflects Resident Weighted Average Daily Attendance (RWADA) and the full value per pupil compared with the State average. Consequently, the estimated aid will vary over the life of each issue. State building aid is further dependent upon the continued apportionment of funds by the State Legislature. State aid history State aid to school districts within the State has declined in some recent years before increasing again in more recent years. School district fiscal year ( ): The total reduction in State aid for school districts fiscal year was approximately $2.1 billion; however, this amount was partially offset by $726 million in Federal aid for education, including funding from ARRA and other federal initiatives. As a result, the net State aid reduction totaled approximately $1.4 billion. School district fiscal year ( ): The total reduction in State aid for school districts fiscal year was $1.3 billion or 6.1% from the previous year, and all aid was received on time. School district fiscal year ( ): The State Legislature adopted the State budget on March 30, The budget included an increase of $751 million in State aid for school districts. The State budget linked additional school aid to compliance with a new teacher evaluation process. A school district would not be eligible for an aid increase in unless it had its teacher evaluation process reviewed and approved by the New York State Education Department by January 12, The New York State Education Department approved the District s initial Annual Professional Performance Review Plan (APPR) on September 25, The most current APPR was approved on March 13, School district fiscal year ( ): The State Legislature adopted the State budget on March 29, The budget included an increase of $1.0 billion in State aid for school districts. 11

12 School district fiscal year ( ): The State budget included a $1.1 billion or 5.3% increase in State aid to school districts for the school year. High-need school districts received 70% of the school aid increase. The State budget restored $602 million of Gap Elimination Adjustment ( GEA ) reductions that had been imposed on school districts from to The State budget invested $1.5 billion over five years to support the phase-in of a statewide universal full-day pre-kindergarten program. The Smart Schools Bond Act was proposed as part of the State budget and was subsequently approved by the voters of the State. The Smart Schools Bond Act authorizes the issuance of $2 billion of general obligation bonds to financed improved educational technology and infrastructure to improve learning and opportunity for students throughout the State. The District s estimated allocation of funds thereunder is $974,908. School district fiscal year ( ): The State budget included a partial reduction in the Gap Elimination Adjustment with $603 million in GEA cuts being restored, and provided an additional $428 million in foundation aid and $268 million in expense base aids which reimbursed school districts for prior year expenses in school construction, transportation, BOCES and special education services. School district fiscal year ( ): The State budget included a school aid increase of $991 million over , $863 million of which consists of traditional operating aid. In addition to full-funding of expense based aids ($408 million), the budget also includes a $266 million increase in Foundation Aid and an $189 million restoration to the Gap Elimination Adjustment. The bulk of the remaining increase included $100 million in Community Schools Aid, an aid category, to support school districts that wish to create community schools. The funds may only be used for certain purposes such as providing health, mental health and nutritional services to students and their families. The District not a part of the Community Schools Grant Initiative (CSGI). Gap Elimination Adjustment (GEA). The GEA law was first introduced for the fiscal year (although it existed in and was called Deficit Reduction Assessment ) as a way to help close the State s then $10 billion budget deficit. Under the legislation, a portion of the funding shortfall at the State level is divided among all school districts throughout the State and reflected as a reduction in school district State aid. The GEA is a negative number, money that is deducted from the aid originally due to the District. The total GEA and Deficit Reduction Assessment reduction in school aid for the District amounted to approximately $6,630,475. The District was forced to deliver programs in new and creative ways, while reducing where necessary based on student-driven needs and increasing taxes accordingly. The District did not lose any additional State aid as a result of the GEA in fiscal year as the GEA was completely eliminated in the State budget. School district fiscal year ( ): The State Enacted Budget increases State aid to education by $1.1 billion, including a $700 million increase in Foundation Aid, bringing the total amount of State aid to education to $25.8 billion or an increase of 4.4%. Expense-based aids to support school construction, pupil transportation, BOCES and special education were continued in full, as is the State s usual practice. Transportation aid increased by 5.5% and building aid increased by 4.8%. The State Enacted Budget continues to link school aid increases for and to teacher and principal evaluation plans approved by September 1 of the current year in compliance with Education Law Section 3012-d. The State Enacted Budget allows the Governor to reduce aid to school districts mid-year if receipts from the federal government are less than what was expected. The Legislature then will have 90 days to approve the Governor s plan. There can be no assurance that the State appropriation for building aid and other State aid to school districts will be continued in future years, either pursuant to existing formulas or in any form whatsoever. State aid, including building aid appropriated and apportioned to the District, can be paid only if the State has such monies available therefor. The availability of such monies and the timeliness of such payment could be affected by a delay in the adoption of the State budget or their elimination therefrom. State Aid Litigation In January 2001, the State Supreme Court issued a decision in Campaign for Fiscal Equity v. New York mandating that the system of apportionment of State aid to school districts within the State be restructured by the Governor and the State Legislature. On June 25, 2002, the Appellate Division of the State Supreme Court reversed that decision. On June 26, 2003, the State Court of Appeals, the highest court in the State, reversed the Appellate Division, holding that the State must, by July 30, 2004, ascertain the actual cost of providing a sound basic education, enact reforms to the system of school funding and ensure a system of accountability for such reforms. The Court of Appeals further modified the decision of the Appellate Division by deciding against a Statewide remedy and instead limited its ruling solely to the New York City school system. 12

13 After further litigation, on appeal in 2006, the Court of Appeals held that $1.93 billion of additional funds for the New York City schools as initially proposed by the Governor and presented to the Legislature as an amount sufficient to provide a sound basic education was reasonably determined. State legislative reforms in the wake of The Campaign for Fiscal Equity decision included increased accountability for expenditure of State funds and collapsing over 30 categories of school aid for school districts in the State into one classroom operating formula referred to as foundation aid. The stated purpose of foundation aid is to prioritize funding distribution based upon student need. As a result of the Court of Appeals ruling schools were to receive $5.5 billion increase in foundation aid over a four fiscal year phase-in covering 2007 to In school district fiscal year , foundation aid funding was frozen by the State Legislature to the prior fiscal year level, and in the fiscal year thereafter foundation aid funding was reduced through a gap elimination adjustment as described above, and other aid adjustments. The final phase-in of foundation aid as originally projected has not occurred as of this date. A case related to the Campaign for Fiscal Equity, Inc. v. State of New York is scheduled to be heard on appeal on May 30, 2017 in New Yorkers for Students Educational Rights v. State of New York ( NYSER ) and a consolidated case on the right to a sound basic education. The NYSER lawsuit asserts that the State has failed to comply with the original decision in the Court of Appeals in the Campaign for Fiscal Equity case, and asks the Court of Appeals to require the State to develop new methodologies, formulas and mechanisms for determining State aid, to fully fund the foundation aid formula, to eliminate the supermajority requirement for voter approval of budgets which increase school district property tax levies above the property tax cap limitation, and related matters. It is not possible to predict the outcome of this litigation. State Aid Revenues The following table illustrates the percentage of total revenues of the District for each of the below completed fiscal years and budgeted new figures comprised of State aid. Percentage of Total Revenues Fiscal Year Total Revenues (1) Total State Aid Consisting of State Aid $ 14,748,740 $ 9,756, % ,130,313 9,927, % ,213,735 9,840, % ,728,936 10,315, % ,045,842 10,841, % (estimated actual) 16,737,085 11,313, % (budgeted) 17,224,096 11,669, % (1) General fund only, does not include inter-fund transfers or reserve funds. Source: 2012 through 2016 audited financial statements, estimated and unaudited projections, and budget of the District. This table is not audited. School Facilities Name Grades Year(s) Built/Additions Capacity Portville Central School K , 99 2,500 Source: District officials. Enrollment Trends School Year Enrollment School Year Projected Enrollment Source: District officials. 13

14 Employees The number of persons employed by the School District, the collective bargaining agents, if any, which represent them and the dates of expiration of the collective bargaining agreements are as follows: # of Employees Union Contract Expiration Date 83 Portville Faculty Association August 31, 2017 (1) 92 Regular full and part-time non-union employees N/A (1) Currently in negotiation. Source: District officials. Status and Financing of Employee Pension Benefits Substantially all employees of the District are members of either the New York State and Local Employees' Retirement System ("ERS") (for non-teaching and non-certified administrative employees) or the New York State Teachers' Retirement System ("TRS") (for teachers and certified administrators). (Both Systems are referred to together hereinafter as the "Retirement Systems" where appropriate.) These Retirement Systems are cost-sharing multiple public employer retirement systems. The obligation of employers and employees to contribute and the benefits to employees are governed by the New York State Retirement and Social Security Law (the "Retirement System Law"). The Retirement Systems offer a wide range of plans and benefits which are related to years of service and final average salary, vesting of retirement benefits, death and disability benefits and optional methods of benefit payments. All benefits generally vest after ten years of credited service. The Retirement System Law generally provides that all participating employers in each retirement system are jointly and severally liable for any unfunded amounts. Such amounts are collected through annual billings to all participating employers. Generally, all employees, except certain part-time employees, participate in the Retirement Systems. The Retirement Systems are non-contributory with respect to members hired prior to July 27, All members working less than ten years must contribute 3% (ERS) or 3.5% (TRS) of gross annual salary towards the cost of retirement programs. On December 12, 2009, a new Tier V was signed into law. The legislation created a new Tier V pension level, the most significant reform of the State s pension system in more than a quarter-century. Key components of Tier V include: Raising the minimum age at which most civilians can retire without penalty from 55 to 62 and imposing a penalty of up to 38% for any civilian who retires prior to age 62. Requiring ERS employees to continue contributing 3% of their salaries and TRS employees to continue contributing 3.5% toward pension costs so long as they accumulate additional pension credits. Increasing the minimum years of service required to draw a pension from 5 years to 10 years. Capping the amount of overtime that can be considered in the calculation of pension benefits for civilians at $15,000 per year, and for police and firefighters at 15% of non-overtime wages. On March 16, 2012, the Governor signed into law the new Tier VI pension program, effective for new ERS and TRS employees hired after April 1, The Tier VI legislation provides for increased employee contribution rates of between 3% and 6% and contributions at such rates continue so long as such employee continues to accumulate pension credits, an increase in the retirement age from 62 years to 63 years, a readjustment of the pension multiplier, and a change in the time period for the final average salary calculation from 3 years to 5 years. Tier VI employees will vest in the system after ten years of employment and will continue to make employee contribution throughout employment. The District is required to contribute at an actuarially determined rate. The actual contributions for the last six years and budgeted figures for the fiscal years are as follows: Source: District officials. Fiscal Year ERS TRS $ 211,291 $ 462, , , , , , , , , (unaudited actual) 250, , (budgeted) 347, ,693 14

15 Pursuant to various laws enacted between 1991 and 2002, the State Legislature authorized local governments to make available certain early retirement incentive programs to its employees. The District has a retirement incentive for the Teachers Union members for retirement at the end of It is anticipated that one employee is taking the options and the cost will be $26,352, with anticipation savings of $33,000 in the budget. The District offers contractual sick incentive to employees who retire in the first year of eligibility. Historical Trends and Contribution Rates. Historically there has been a State mandate requiring full (100%) funding of the annual actuarially required local governmental contribution out of current budgetary appropriations. With the strong performance of the Retirement System in the 1990s, the locally required annual contribution declined to zero. However, with the subsequent decline in the equity markets, the pension system became underfunded. As a result, required contributions increased substantially to 15% to 20% of payroll for the employees' and the police and fire retirement systems, respectively. Wide swings in the contribution rate resulted in budgetary planning problems for many participating local governments. A chart of average ERS and TRS rates as a percent of payroll (2010 to 2018) is shown below: Fiscal Year ERS TRS % 6.19% * * Estimated. The final TRS rate for fiscal year is expected to be adopted by the TRS Retirement Board in July In 2003, Chapter 49 of the Laws of 2003 amended the Retirement and Social Security Law and the Local Finance Law. The amendments empowered the State Comptroller to implement a comprehensive structural reform program for ERS. The reform program established a minimum contribution for any local governmental employer equal to 4.5% of pensionable salaries for bills which were due December 15, 2003 and for all fiscal years thereafter, as a minimum annual contribution where the actual rate would otherwise be 4.5% or less due to the investment performance of the fund. In addition, the reform program instituted a billing system to match the budget cycle of municipalities and school districts that will advise such employers over one year in advance concerning actual pension contribution rates for the next annual billing cycle. Under the previous method, the requisite ERS contributions for a fiscal year could not be determined until after the local budget adoption process was complete. Under the new system, a contribution for a given fiscal year is based on the valuation of the pension fund on the prior April 1 of the calendar year preceding the contribution due date instead of the following April 1 in the year of contribution so that the exact amount may now be included in a budget. Chapter 57 of the Laws of 2010 (Part TT) amended the Retirement and Social Security Law to authorize participating employers, if they so elect, to amortize an eligible portion of their annual required contributions to ERS when employer contribution rates rise above certain levels. The option to amortize the eligible portion began with the annual contribution due February 1, The amortizable portion of an annual required contribution is based on a graded rate by the State Comptroller in accordance with formulas provided in Chapter 57. Amortized contributions are to be paid in equal annual installments over a ten-year period, but may be prepaid at any time. Interest is to be charged on the unpaid amortized portion at a rate to be determined by State Comptroller, which approximates a market rate of return on taxable fixed rate securities of a comparable duration issued by comparable issuers. The interest rate is established annually for that year s amortized amount and then applies to the entire ten years of the amortization cycle of that amount. When in any fiscal year, the participating employer s graded payment eliminates all balances owed on prior amortized amounts, any remaining graded payments are to be paid into an employer contribution reserve fund established by the State Comptroller for the employer, to the extent that amortizing employer has no currently unpaid prior amortized amounts, for future such use. The annual required pension contribution is due annually February 1 with the ability to pre-pay on December 15 at a discount. The District pre-pays this cost annually. The District is not amortizing any pension payments nor does it intend to do so in the foreseeable future. 15

16 Stable Rate Pension Contribution Option: The State Budget included a provision that authorized local governments, including the District, with the option to lock-in long-term, stable rate pension contributions for a period of years determined by the State Comptroller and ERS and TRS (the Stable Rate Pension Contribution Option ). For the stable contribution option rate is 15.1% for ERS and 14.13% for TRS. The pension contribution rates under this program would reduce near-term payments for employers, but require higher than normal contributions in later years. The District did not participate in the Stable Rate Pension Contribution Option nor does it intend to do so in the foreseeable future. The investment of monies, and assumptions underlying same, of the Retirement Systems covering the District s employees is not subject to the direction of the District. Thus, it is not possible to predict, control or prepare for future unfunded accrued actuarial liabilities of the Retirement Systems ( UAALs ). The UAAL is the difference between total actuarially accrued liabilities and actuarially calculated assets available for the payment of such benefits. The UAAL is based on assumptions as to retirement age, mortality, projected salary increases attributed to inflation, across-the-board raises and merit raises, increases in retirement benefits, cost-of-living adjustments, valuation of current assets, investment return and other matters. Such UAALs could be substantial in the future, requiring significantly increased contributions from the District which could affect other budgetary matters. Concerned investors should contact the Retirement Systems administrative staff for further information on the latest actuarial valuations of the Retirement Systems. Other Post-Employment Benefits Healthcare Benefits. It should also be noted that the District provides employment healthcare benefits to various categories of former employees. These costs may be expected to rise substantially in the future. There is now an accounting rule that will require governmental entities, such as the District, to account for employment healthcare benefits as it accounts for vested pension benefits. GASB Statement No. 45 ("GASB 45") of the Governmental Accounting Standards Board ("GASB"), described below, requires such accounting. School districts and Boards of Cooperative Educational Services, unlike other municipal units of government in the State, have been prohibited from reducing health benefits received by or increasing health care contributions paid by retirees below the level of benefits or contributions afforded to or required from active employees since the implementation of Chapter 729 of the Laws of Legislative attempts to provide similar protection to retirees of other local units of government in the State have not succeeded as of this date. Nevertheless, many such retirees of all varieties of municipal units in the State do presently receive such benefits. GASB 45 and OPEB. OPEB refers to "other post-employment benefits," meaning other than pension benefits, disability benefits and OPEB consist primarily of health care benefits, and may include other benefits such as disability benefits and life insurance. Until now, these benefits have generally been administered on a pay-as-you-go basis and have not been reported as a liability on governmental financial statements. GASB 45 requires municipalities and school districts to account for OPEB liabilities much like they already account for pension liabilities, generally adopting the actuarial methodologies used for pensions, with adjustments for the different characteristics of OPEB and the fact that most municipalities and school districts have not set aside any funds against this liability. Unlike GASB 27, which covers accounting for pensions, GASB 45 does not require municipalities or school districts to report a net OPEB obligation at the start. Under GASB 45, based on actuarial valuation, an annual required contribution ("ARC") will be determined for each municipality or school district. The ARC is the sum of (a) the normal cost for the year (the present value of future benefits being earned by current employees) plus (b) amortization of the unfunded accrued liability (benefits already earned by current and former employees but not yet provided for), using an amortization period of not more than 30 years. If a municipality or school district contributes an amount less than the ARC, a net OPEB obligation will result, which is required to be recorded as a liability on its financial statements. GASB 45 does not require that the unfunded liability actually be amortized nor that it be advance funded, only that the municipality or school district account for its unfunded accrued liability and compliance in meeting its ARC. Actuarial valuation will be required every 2 years for OPEB plans with more than 200 members, every 3 years if there are fewer than 200 members. The School District has engaged the services of Allegany-Cattaraugus BOCES to perform actuarial valuation. 16

17 Based on the most recent actuarial valuation and financial data as of June 30, 2016, the following tables shows the components of the District's annual OPEB cost, the amount actuarially contributed to the plan, changes in the District's net OPEB obligation and funding status as of the June 30, 2015 and 2016 fiscal years. Annual OPEB Cost and Net OPEB Obligation: Normal Cost $ 146,824 $ 147,461 Amortization of unfunded actuarial accrued liability 539, ,040 Amortization on adjustment (82,538) (89,381) Interest adjustment 30,879 29,003 Annual required contribution adjustment 44,887 54,023 Annual OPEB cost (expense) $ 684,428 $ 638,146 Contributions made (529,514) (504,803) Increase in net OPEB obligation 91,911 $ 133,343 Net OPEB obligation - beginning of year 1,108,598 1,200,509 Net OPEB obligation - end of year $ 1,200,509 $ 1,333,852 Percentage of annual OPEB cost contributed 86.6% 79.1% Funding Status: Actuarial Accrued Liability (AAL) $ 7,570,482 $ 6,976,305 Actuarial Value of Assets 0 0 Unfunded Actuarial Accrued Liability (UAAL) $ 7,570,482 $ 6,976,305 Funded Ratio (Assets as a Percentage of AAL) 0.0% 0.0% Percentage of Fiscal Annual Annual OPEB Net OPEB Year Ended OPEB Cost Cost Contributed Obligation 2016 $ 638, % $ 1,333, , ,200, , ,108, , ,407 Source: Audited financial statements of the District. The above tables are not audited. The aforementioned liability and ARC are recognized and disclosed in accordance with GASB 45 standards in the School District s audited financial statements. There is no authority in current State law to establish a trust account or reserve fund for this liability. The District has reserved $0 towards its OPEB liability. The District meets this liability on a pay-as-you-go basis. The District s unfunded actuarial accrued OPEB liability could have a material adverse impact upon the District s finances and could force the District to reduce services, raise taxes or both. In April 2015, the State Comptroller announced legislation to create an optional investment pool to help the State and local governments fund retiree health insurance and other post-employment benefits. The proposed legislation would have allowed the following: Authorize the creation of irrevocable OPEB trusts, not part of the New York State Common Retirement Fund, so that New York state and its local governments can, at their option, help fund their OPEB liabilities; Establish an OPEB investment fund in the sole custody of the State Comptroller for the investment of OPEB assets of the state and participating eligible local governments; Designate the president of the Civil Service Commission as the trustee of the state s OPEB trust and the governing boards as trustee for local governments; and Allow school districts to transfer certain excess reserve balances to an OPEB trust once it is established. Under the State Comptroller s proposal, there are no restrictions on the amount a government can deposit into the trust. The proposal was not enacted into law in the two most recent legislative sessions. It is not possible to predict whether the Comptroller s proposed legislation will be reintroduced and enacted into law this year. 17

18 Other Information The statutory authority for the power to spend money for the object or purpose, or to accomplish the object or purpose, for which the Notes are to be issued is the Education Law and the Local Finance Law. The District is in compliance with the procedure for the publication of the estoppel notice with respect to the Notes as provided in Title 6 of Article 2 of the Local Finance Law. No principal or interest upon any obligation of the District is past due. The fiscal year of the District is July 1 to June 30. Except for as shown under STATUS OF INDEBTEDNESS Estimated Overlapping Indebtedness this Official Statement does not include the financial data of any political subdivision having power to levy taxes within the District. Financial Statements The School District retains independent certified public accountants. The last audit report covers the period ending June 30, 2016 and may be found attached hereto as APPENDIX-E to this Official Statement. Certain summary financial information of the School District can also be found attached as Appendices to this Official Statement. The District complies with the Uniform System of Accounts as prescribed for school districts in New York State by the State. This system differs from generally accepted accounting principles as prescribed by the American Institute of Certified Public Accountants' Industry Audit Guide, "Audits of State and Local Governmental Units", and codified in Government Accounting, Auditing and Financial Reporting (GAAFR), published by the Governmental Accounting Standards Board (GASB). Beginning with the fiscal year ending June 30, 2003, the District issues its financial statements in accordance with GASB Statement No. 34. This statement includes reporting of all assets including infrastructure and depreciation in the Government Wide Statement of Activities, as well as the Management s Discussion and Analysis. Projected (Unaudited) Results of Operations for Fiscal Year Ending June 30, 2017 Summary unaudited projected results of operations for the General Fund for the period ending June 30, 2017 is as follows: Projected Revenues: $ 16,882,214 Projected Expenditures: 16,521,932 Net Total Other Sources & Uses: 0 Projected Excess Revenues over Expenditures: $ 360,382 These projections are based upon certain current assumptions and estimates and the audited results may vary therefrom. Source: District officials. New York State Comptroller Reports of Examination The State Comptroller's office, i.e., the Department of Audit and Control, periodically performs a compliance review to ascertain whether the District has complied with the requirements of various State and Federal statutes. These audits can be found by visiting the Audits of Local Governments section of the Office of the State Comptroller website. The State Comptroller s office released an audit report of the District on April 18, The purpose of the audit was to evaluate the District s financial condition for the period July 1, 2012 through November 13,

19 Key Findings: The Board failed to ensure that fund balance was maintained within legally established limits and that residents were not taxed more than necessary. The balances of four reserve funds were higher than necessary or were not supported by a plan or other documentation validating the amounts retained. Key Recommendations: Ensure that the unexpended surplus fund balance is in compliance with Real Property Tax Law statutory limits and develop a plan for the use of excess fund balance. Develop a policy for establishing and using reserve funds, review existing reserves and develop a plan for using surplus reserve fund balances. A copy of the complete report and the District s response, and prior audit reports of the District, can be found by visiting the Audits of Local Governments section of the Office of the State Comptroller website. There are no State Comptrollers audits of the District in progress or pending release as of the date of this Official Statement. Note: Reference to websites implies no warranty of accuracy of information therein. The State Comptroller s Fiscal Stress Monitoring System The New York State Comptroller has reported that New York State s school districts and municipalities are facing significant fiscal challenges. As a result, the Office of the State Comptroller has developed a Fiscal Stress Monitoring System ( FSMS ) to provide independent, objectively measured and quantifiable information to school district and municipal officials, taxpayers and policy makers regarding the various levels of fiscal stress under which the State s school districts and municipalities are operating. The fiscal stress scores are based on financial information submitted as part of each school district s ST-3 report filed with the State Education Department annually, and each municipality s annual report filed with the State Comptroller. Using financial indicators that include year-end fund balance, cash position and patterns of operating deficits, the system creates an overall fiscal stress score which classifies whether a school district or municipality is in Significant Fiscal Stress, in Moderate Fiscal Stress, as Susceptible Fiscal Stress or No Designation. Entities that do not accumulate the number of points that would place them in a stress category will receive a financial score but will be classified in a category of No Designation. This classification should not be interpreted to imply that the entity is completely free of fiscal stress conditions. Rather, the entity s financial information, when objectively scored according to the FSMS criteria, did not generate sufficient points to place them in one of the three established stress categories. The reports of the State Comptroller for the past three fiscal years of the District are as follows: Fiscal Year Ending In Stress Designation Fiscal Score 2016 No Designation 6.7% 2015 No Designation 6.7% 2014 No Designation 6.7% Source: Website of the Office of the New York State Comptroller. Note: Reference to website implies no warranty of accuracy of information therein. 19

20 Valuations Taxable Assessed Valuations TAX INFORMATION Years Ending June 30: Towns of: Olean $ 9,746,421 $ 10,111,340 $ 9,547,247 $ 10,424,515 $ 8,659,077 Portville 140,057, ,007, ,829, ,549, ,174,992 Clarksville 10,554,215 10,612,873 10,634,999 10,759,918 10,906,590 Genesee 31,138,538 31,207,695 31,105,264 31,165,286 31,245,000 Totals $ 191,496,922 $ 191,939,132 $ 191,117,450 $ 191,899,133 $ 188,985,659 State Equalization Rate Towns of: Olean 78.00% 78.00% 78.00% 78.00% 78.00% Portville 98.00% 98.00% % % 98.00% Clarksville % % % 90.00% 90.00% Genesee % % % 95.00% 90.00% Taxable Full Valuation $ 197,104,234 $ 197,648,339 $ 193,200,356 $ 197,675,205 $ 198,931,370 Tax Rate Per $1,000 (Assessed) Years Ending June 30: Towns of: Olean $ $ $ $ $ Portville Clarksville Genesee Tax Collection Procedure Tax payments are due on September 1 st with no penalties for the first 30 days. The school district receives their full levies before the end of their fiscal year. Uncollected amounts are not segregated by the Town tax receivers, and any deficiency in tax collection is the Counties liability. Tax Collection Record Years Ending June 30: Amount of Levy $ 4,235,061 $ 4,383,288 $ 4,383,288 $ 4,383,288 $ 4,456,367 Uncollected (1) 383, , , , ,155 % Uncollected (1) 9.06% 9.24% 9.22% 8.59% 8.55% (1) At end of local collection period. The School District receives its levy in full from the Counties prior to the end of the School District fiscal year. 20

21 Real Property Tax Revenues The following table illustrates the percentage of total revenues of the District for each of the below completed fiscal years and budgeted figures comprised of Real Property Taxes and Tax Items. Percentage of Total Revenues Total Real Property Consisting of Fiscal Year Total Revenues Taxes & Tax Items Real Property Tax $14,748,740 $4,162, % ,130,313 4,247, % ,213,735 4,394, % ,728,936 4,388, % ,045,842 4,389, % (estimated actual) 16,737,085 4,468, % (Budgeted) 17,224,096 4,545, % (1) General fund only, does not include inter-fund transfers or reserve funds. Source: 2012 through 2016 audited financial statements, estimated and unaudited projections, and budget of the District. This table is not audited. Larger Taxpayers 2016 Assessment Roll for Tax Roll Taxable Name Type Assessed Valuation Olean Wholesale Cold Storage $ 5,203,916 National Fuel Gas Utility 4,643,627 National Grid Utility 4,188,333 New York State Electric & Gas Utility 1,518,041 Verizon Utility 1,467,809 Rochester Gas & Electric Utility 1,178,127 CFK Associates, LLC Manufacturer 845,500 Sprague s Pancake House Restaurant 580,500 Fibercel Manufacturer 558,100 Portville Manor Apartments 500,000 The larger taxpayers listed above have a total assessed valuation of $20,683,953 that represents 10.94% of the tax base of the School District. The District currently does not have any pending or outstanding tax certioraris that are known to have a material impact on the District. Source: District Tax Rolls. STAR School Tax Exemption The STAR (School Tax Relief) program provides State-funded exemptions from school property taxes to homeowners for their primary residences. School Districts are reimbursed by the State for real property taxes exempted pursuant to the STAR Program. Homeowners over 65 years of age with household adjusted gross incomes, less the taxable amount of total distributions from individual retirement accounts and undisclosed retirement annuities ( STAR Adjusted Gross Income ) of $84,550 and $86,000 for 2016 and 2017, respectively, or less, increased annually according to a Cost-of-Living adjustment, are eligible for an enhanced exemption. Other homeowners with household STAR Adjusted Gross Income not in excess of $500,000 are eligible for a basic exemption on their primary residence. 21

22 The below table lists the basic and enhanced exemption amounts for the municipalities applicable to the District: Towns of: Enhanced Exemption Basic Exemption Date Certified Hinsdale $ 57,640 $ 26,400 4/7/17 Olean 51,090 23,400 4/7/17 Portville 64,190 29,400 4/7/17 Clarksville 58,950 27,000 4/7/17 Genesee 58,950 27,000 4/7/17 $1,188,589 of the $4,456,367 school tax levy for the fiscal year was exempted by the STAR Program. The School District received full reimbursement of such exempt taxes from the State in January, Additional Tax Information Real property located in the School District is assessed by the towns. Senior citizens' exemptions are offered to those who qualify. The estimated total annual property tax bill of a $100,000 market value residential property located in the School District is approximately $3,960 including County, Town, School District and Fire District taxes. TAX LEVY LIMITATION LAW On June 24, 2011, Chapter 97 of the Laws of 2011 was signed into law by the Governor ( Chapter 97 or the Tax Levy Limitation Law ). The Tax Levy Limitation Law applies to all local governments, including school districts (with the exception of New York City, and the counties comprising New York City and school districts in New York City, Buffalo, Rochester, Syracuse, and Yonkers, the latter four of which are indirectly affected by applicability to their respective City.) Prior to the enactment of the Tax Levy Limitation Law, there was no statutory limitation on the amount of real property taxes that a school district could levy as part of its budget if its budget had been approved by a simple majority of its voters. In the event the budget had been defeated by the voters, the school district was required to adopt a contingency budget. Under a contingency budget, school budget increases were limited to the lesser of four percent (4%) of the prior year s budget or one hundred twenty percent (120%) of the consumer price index ( CPI ). Chapter 97 requires that a school district submit its proposed tax levy to the voters each year beginning with the fiscal year. Chapter 97 restricts, among other things, the amount of real property taxes that may be levied by or on behalf of a school district in a particular year. It expires on June 15, 2020 unless extended. Pursuant to the Tax Levy Limitation Law, the tax levy of a school district cannot increase by more than the lesser of (i) two percent (2%) or (ii) the annual increase in the CPI, over the amount of the prior year s tax levy. Certain adjustments are permitted for taxable real property full valuation increases due to changes in physical or quantity growth in the real property base as defined in Section 1220 of the Real Property Tax Law. A school district can exceed the tax levy limitation for the coming fiscal year only if the voters of such school district first approve a tax levy by at least 60% affirmative vote of those voting to override such limitation for such coming fiscal year only. Tax levies that do not exceed the limitation will only require approval by at least 50% of those voting. In the event that the voters reject a tax levy and the district does not go out for a second vote, or if a second vote is likewise defeated, Chapter 97 provides that the tax levy for the new fiscal year may not exceed the tax levy for the prior fiscal year. A school district s calculation of each fiscal year s tax levy limit is subject to review by the Commissioner of Education and the Commissioner of Taxation and Finance prior to adoption of each fiscal year budget. There are exceptions for school districts to the tax levy limitation provided in Chapter 97, including expenditures made on account of certain tort settlements and certain increases in the average actuarial contribution rates of the New York State and Local Employees Retirement System and the Teachers Retirement System. School districts are also permitted to carry forward a certain portion of their unused levy limitation from a prior year. 22

23 There is also an exception for school districts for Capital Local Expenditures subject to voter approval where required by law. This term is defined in a manner that does not include certain items for which a school district may issue debt, including the payment of judgments or settled claims, including tax certiorari payments, and cashflow borrowings, including tax anticipation notes, revenue anticipation notes, budget notes and deficiency notes. Capital Local Expenditures, are defined as the taxes associated with budgeted expenditures resulting from the financing, refinancing, acquisition, design, construction, reconstruction, rehabilitation, improvement, furnishing and equipping of or otherwise providing for school district capital facilities or school district capital equipment, including debt service and lease expenditures, and transportation capital debt service, subject to the approval of the qualified voters where required by law. The portion of the tax levy necessary to support Capital Local Expenditures is defined as the Capital Tax Levy, and is an exclusion from the tax levy limitation, applicable to the Notes. On February 20, 2013, the New York State United Teachers ( NYSUT ) and several individuals filed a lawsuit in State Supreme Court in Albany County seeking a declaratory judgment and a preliminary injunction that the Tax Levy Limitation Law is unconstitutional as it applies to public school districts. On September 23, 2014, a justice of the New York State Supreme Court dismissed each of NYSUT s causes of action but granted NYSUT s motion to amend the complaint. NYSUT subsequently served a second amended complaint seeking a preliminary injunction and challenging the Tax Levy Limitation Law as violative of the Education Article of the New York State Constitution, the Equal Protection and Due Process clauses and the First Amendment. On March 16, 2015, a New York State Supreme Court Justice denied NYSUT s motion for a preliminary injunction and dismissed all causes of action contained in NYSUT s second amended complaint. NYSUT appealed the decision to continue its challenge to the constitutionality of the Tax Levy Limitation Law. On May 5, 2016, the Appellate Division upheld the lower court dismissal, noting that while the State is required to provide the opportunity of a sound basic education, the Constitution does not require that equal educational offerings be provided to every student, and further noted the legitimate government interest of restraining crippling property tax increases. An appeal by NYSUT was dismissed on October 20, 2016 by the Court of Appeals, New York s highest court, on the ground that no substantial constitutional question was directly involved and thereafter leave to appeal was denied on January 14, 2017 by the Court of Appeals. See also THE DISTRICT - State Aid for a discussion of the New Yorkers for Students Educational Rights v. State of New York case which includes a challenge to the supermajority requirements regarding school district property tax increases. Real Property Tax Rebate Chapter 59 of the Laws of 2014 ( Chapter 59 ), a newly adopted State budget bill includes provisions which provide a refundable personal income tax credit to real property taxpayers in school districts and certain municipal units of government. Real property owners in school districts are eligible for this credit in the 2014 and 2015 taxable years of those property owners. Real property taxpayers in certain other municipal units of government are eligible for this credit in the 2015 and 2016 taxable years of those real property taxpayers. The eligibility of real property taxpayers for the tax credit in each year depends on such jurisdiction s compliance with the provisions of the Tax Levy Limitation Law. School districts budgets must comply in their and fiscal years. Other municipal units of government must have their budgets in compliance for their 2015 and 2016 fiscal years. Such budgets must be within the tax cap limits set by the Tax Levy Limitation Law for the real property taxpayers to be eligible for this personal income tax credit. The affected jurisdictions include counties, cities (other than any city with a population of one million or more and its counties), towns, villages, school districts (other than the dependent school districts of New York City, Buffalo, Rochester, Syracuse and Yonkers, the latter four of which are indirectly affected by applicability to their respective city) and independent special districts. Certain additional restrictions on the amount of the personal income tax credit are set forth in Chapter 59 in order for the tax cap to qualify as one which will provide the tax credit benefit to such real property taxpayers. The refundable personal income tax credit amount is increased in the second year if compliance occurs in both taxable years. For the second taxable year of the program, the refundable personal income tax credit for real property taxpayers is additionally contingent upon adoption by the school district or municipal unit of a state approved government efficiency plan which demonstrates three year savings and efficiencies of at least one per cent per year from shared services, cooperation agreements and/or mergers or efficiencies. Municipalities, school districts and independent special districts must provide certification of compliance with the requirements of the new provisions to certain state officials in order to render their real property taxpayers eligible for the personal income tax credit. While the provisions of Chapter 59 do not directly further restrict the taxing power of the affected municipalities, school districts and special districts, they do provide an incentive for such tax levies to remain within the tax cap limits established by the Tax Levy Limitation Law. The implications of this for future tax levies and for operations and services of the District are uncertain at this time. 23

24 An additional real property tax rebate program applicable solely to school districts was enacted by Chapter 20 of the Laws of 2015, signed into law by the Governor on June 26, The program applies in the years 2016 through 2019 and includes continued tax cap compliance. See THE SCHOOL DISTRICT Budgetary Procedures and Recent Budget Votes herein for additional information regarding the District s Tax Levy. Constitutional Requirements STATUS OF INDEBTEDNESS The New York State Constitution limits the power of the District (and other municipalities and certain school districts of the State) to issue obligations and to contract indebtedness. Such constitutional limitations in summary form and as generally applicable to the District include the following: Purpose and Pledge. The District shall not give or loan any money or property to or in aid of any individual or private undertaking or give or loan its credit to or in aid of any of the foregoing or any public corporation. The District may contract indebtedness only for a District purpose and shall pledge its faith and credit for the payment of principal of and interest thereon. Payment and Maturity. Except for certain short-term indebtedness contracted in anticipation of taxes or to be paid within three fiscal year periods, indebtedness shall be paid in annual installments commencing no later than two years after the date such indebtedness shall have been contracted and ending no later than the expiration of the period of probable usefulness of the object or purpose as determined by statute; unless substantially level or declining annual debt service is authorized by the Board of Education and utilized, no installment may be more than fifty percent in excess of the smallest prior installment. The District is required to provide an annual appropriation for the payment of interest due during the year on its indebtedness and for the amounts required in such year for amortization and redemption of its serial bonds and such required annual installments on its notes. Statutory Procedure In general, the State Legislature has, by the enactment of the Local Finance Law, authorized the powers and procedure for the District to borrow and incur indebtedness subject, of course, to the constitutional provisions set forth above. The power to spend money, however, generally derives from other law, including the Education Law. The District is generally required by such laws to submit propositions for the expenditure of money for capital purposes to the qualified electors of the District. Upon approval thereby, the Board of Education may adopt a bond resolution authorizing the issuance of bonds, and notes in anticipation of the bonds. Debt Limit. The District has the power to contract indebtedness for any District purpose authorized by the Legislature of the State of New York provided the aggregate principal amount thereof shall not exceed ten per centum of the full valuation of the taxable real estate of the District and subject to certain enumerated deductions such as State aid for building purposes. The statutory method for determining full valuation is by taking the assessed valuation of taxable real estate for the last completed assessment roll and applying thereto the equalization rate which such assessed valuation bears to the full valuation; such rate is determined by the State Office of Real Property Services. The Legislature prescribes the manner by which such rate shall be determined. The Local Finance Law also provides that where a bond resolution is published with a statutory form of notice, the validity of the bonds authorized thereby, including bond anticipation notes issued in anticipation of the sale thereof, may be contested only if: (1) Such obligations are authorized for a purpose for which the District is not authorized to expend money, or (2) There has not been substantial compliance with the provisions of law which should have been complied within the authorization of such obligations and an action contesting such validity, is commenced within twenty days after the date of such publication or, (3) Such obligations are authorized in violation of the provisions of the Constitution. 24

25 Except on rare occasions the District complies with this estoppel procedure. It is a procedure that is recommended by Bond Counsel, but it is not an absolute legal requirement. The Board of Education, as the finance board of the District, has the power to enact bond resolutions. In addition, such finance board has the power to authorize the sale and issuance of obligations. However, such finance board may delegate the power to sell the obligations to the President of the Board of Education, the chief fiscal officer of the District, pursuant to the Local Finance Law. The District is further subject to constitutional limitation by the general constitutionally imposed duty on the State Legislature to restrict the power of taxation and contracting indebtedness; however, the State Legislature is prohibited by a specific constitutional provision from restricting the power of the District to levy taxes on real estate for the payment of interest on or principal of indebtedness theretofore contracted. Debt Outstanding End of Fiscal Year Fiscal Years Ending June 30 th : Bonds $ 10,430,000 $ 9,250,000 $ 8,030,000 $ 6,780,000 $ 5,485,000 Bond Anticipation Notes 595, , ,329 3,112,739 5,143,341 Other Debt Total Debt Outstanding $ 11,025,926 $ 9,846,298 $ 8,637,329 $ 9,892,739 $ 10,628,341 Details of Outstanding Indebtedness The following table sets forth the indebtedness of the School District evidenced by bonds and notes as of July 14, 2017: Type of Indebtedness Maturity Amount Bonds: $ 5,485,000 Bond Anticipation Notes: Capital Project August 11, ,500,000 (1) Capital Project August 11, ,635,894 (1) Acquisition of Buses September 15, ,341 (2) Total Indebtedness $ 12,264,235 (1) To be renewed at maturity with proceeds of the Notes and $35,894 available funds of the District. (2) To be retired within five years with budgeted appropriations and bond anticipation renewal notes. THE REMAINDER OF THIS PAGE LEFT INTENTIONALLY BLANK 25

26 Debt Statement Summary Summary of Indebtedness, Debt Limit and Net Debt-Contracting Margin as of July 14, 2017: Full Valuation of Taxable Real Property... $ 198,931,370 Debt Limit 10% thereof... 19,893,137 Inclusions: Bonds... $ 5,485,000 Bond Anticipation Notes... 6,779,235 Total Inclusions... $ 12,264,235 Exclusions: Building Aid (1)... $ 0 Total Exclusions... $ 0 Total Net Indebtedness... $ 12,264,235 Net Debt-Contracting Margin... $ 7,628,902 The percent of debt contracting power exhausted is % (1) Based on preliminary building aid estimates, the District anticipates State Building aid of 93.8% for debt service on State Education Department approved expenditures from July 1, 2004 to the present. The District has no reason to believe that it will not ultimately receive all of the building aid it anticipates, however, no assurance can be given as to when and how much building aid the District will receive in relation to the outstanding bonds. Note: The State Constitution does not provide for the inclusion of tax anticipation or revenue anticipation notes in the computation of the net indebtedness of the District. Bonded Debt Service A schedule of bonded debt service may be found in APPENDIX B to this Official Statement. Capital Project Plans The School District proposed a building project on May 20, 2014 and received approval by the voters for $6,135,894. The project includes an energy performance contract of $2.1 million and also a capital project with an estimated cost of $4 million. To date, the District has borrowed $6,135,894 pursuant to this authorization, of which $6,135,894 is currently outstanding and will be renewed in full with proceeds of the Notes. The District annually asks the voters for approval to purchase buses. On May 16, 2017 the voters of the District approved $232,587 for the purchase of buses. The District will issue bond anticipation notes to finance the purchase of buses in the Fall of Cash Flow Borrowing The School District historically does not issue revenue anticipation notes or tax anticipation notes and does not anticipate doing so in foreseeable future. 26

27 Estimated Overlapping Indebtedness In addition to the School District, the following political subdivisions have the power to issue bonds and to levy taxes or cause taxes to be levied on taxable real property in the School District. The estimated outstanding indebtedness of such political subdivisions is as follows: Status of Gross Net District Applicable Municipality Debt as of Indebtedness (1) Exclusions (2) Indebtedness Share Indebtedness County of: Cattaraugus 6/25/2017 (3) $ 49,631,145 $ 1,520,000 $ 48,111, % $ 1,881,146 Allegany 6/29/2017 (3) 25,465, ,000 24,630, % 561,564 Town of: Olean 12/31/2015 (4) 1,032,252-1,032, % 121,599 Portville 12/31/2015 (4) 81,250 81, % - Clarksville 12/31/2015 (4) % - Genesee 12/31/2015 (4) % - Total: $ 2,564,309 Notes: (1) Outstanding bonds and bond anticipation notes. Not adjusted to include subsequent bond or note sales, if any. (2) Water and sewer debt and / or appropriations. Pursuant to the Local Finance Law, this indebtedness is excluded from the constitutional debt limit. Sources of information: (3) Most recent available official statement or annual disclosure filing of the municipality obtained from the Electronic Municipal Market Access Website. (4) Most recent available State Comptroller s Special Report for the respective fiscal year. Debt Ratios The following table sets forth certain ratios relating to the District's indebtedness as of July 14, 2017: Percentage of Amount Per Capita (a) Full Value (b) Net Indebtedness (c)...$ 12,264,235 $ 2, % Net Indebtedness Plus Net Overlapping Indebtedness (d)... 14,828,544 3, % (a) (b) (c) (d) The 2015 estimated population of the District is 4,841. (See THE SCHOOL DISTRICT School District Population herein.) The District's full value of taxable real estate for is $198,931,370. (See TAX INFORMATION Valuations herein.) See "Debt Statement Summary" herein. Estimated net overlapping indebtedness is $2,564,309. (See "Estimated Overlapping Indebtedness" herein.) Note: The above ratios do not take into account State building aid the District will receive for past and current construction building projects. 27

28 SPECIAL PROVISIONS AFFECTING REMEDIES UPON DEFAULT State Aid Intercept for School Districts. In the event of a default in the payment of the principal of and/or interest on the Notes, the State Comptroller is required to withhold, under certain conditions prescribed by Section 99-b of the State Finance Law, state aid and assistance to the School District and to apply the amount thereof so withheld to the payment of such defaulted principal and/or interest, which requirement constitutes a covenant by the State with the holders from time to time of the Notes. The covenant between the State of New York and the purchasers and the holders and owners from time to time of the notes and bonds issued by the school districts in the State for school purposes provides that it will not repeal, revoke or rescind the provisions of Section 99-b, or amend or modify the same so as to limit, impair or impede the rights and remedies granted thereby. Said section provides that in the event a holder or owner of any bond issued by a school district for school purposes shall file with the State Comptroller a verified statement describing such bond and alleging default in the payment thereof or the interest thereon or both, it shall be the duty of the State Comptroller to immediately investigate the circumstances of the alleged default and prepare and file in his office a certificate setting forth his determinations with respect thereto and to serve a copy thereof by registered mail upon the chief fiscal officer of the school district which issued the bond. Such investigation by the State Comptroller shall cover the current status with respect to the payment of principal of and interest on all outstanding bonds of such school district issued for school purposes and the statement prepared and filed by the State Comptroller shall set forth a description of all such bonds of the school district found to be in default and the amount of principal and interest thereon past due. Upon the filing of such a certificate in the office of the State Comptroller, he shall thereafter deduct and withhold from the next succeeding allotment, apportionment or payment of such State aid or assistance due to such school district such amount thereof as may be required to pay (a) the school district s contribution to the State teachers retirement system, and (b) the principal of and interest on such bonds of such school district then in default. In the event such State aid or assistance initially so withheld shall be insufficient to pay said amounts in full, the State Comptroller shall similarly deduct and withhold from each succeeding allotment, apportionment or payment of such State aid or assistance due such school district such amount or amounts thereof as may be required to cure such default. Allotments, apportionments and payments of such State aid so deducted or withheld by the State Comptroller for the payment of principal and interest on bonds shall be forwarded promptly to the paying agent or agents for the bonds in default of such school district for the sole purpose of the payment of defaulted principal of and interest on such bonds. If any of such successive allotments, apportionments or payments of such State Aid so deducted or withheld shall be less than the amount of all principal and interest on the bonds in default with respect to which the same was so deducted or withheld, then the State Comptroller shall promptly forward to each paying agent an amount in the proportion that the amount of such bonds in default payable to such paying agent bears to the total amount of the principal and interest then in default on such bonds of such school district. The State Comptroller shall promptly notify the chief fiscal officer of such school district of any payment or payments made to any paying agent or agents of defaulted bonds pursuant to said Section 99-b. General Municipal Law Contract Creditors Provision. Each Note when duly issued and paid for will constitute a contract between the School District and the holder thereof. Under current law, provision is made for contract creditors of the School District to enforce payments upon such contracts, if necessary, through court action. Section 3-a of the General Municipal Law provides, subject to exceptions not pertinent, that the rate of interest to be paid by the School District upon any judgment or accrued claim against it on an amount adjudged due to a creditor shall not exceed nine per centum per annum from the date due to the date of payment. This provision might be construed to have application to the holders of the Notes in the event of a default in the payment of the principal of and interest on the Notes. Execution/Attachment of Municipal Property. As a general rule, property and funds of a municipal corporation serving the public welfare and interest have not been judicially subjected to execution or attachment to satisfy a judgment, although judicial mandates have been issued to officials to appropriate and pay judgments out of certain funds or the proceeds of a tax levy. In accordance with the general rule with respect to municipalities, judgments against the School District may not be enforced by levy and execution against property owned by the School District. Authority to File for Municipal Bankruptcy. The Federal Bankruptcy Code allows public bodies, such as municipalities, recourse to the protection of a Federal Court for the purpose of adjusting outstanding indebtedness. Section of the Local Finance Law contains specific authorization for any municipality in the State or its emergency control board to file a petition under any provision of Federal bankruptcy law for the composition or adjustment of municipal indebtedness. While this Local Finance Law provision does not apply to school districts, there can be no assurance that it will not be made so applicable in the future. 28

29 Constitutional Non-Appropriation Provision. There is in the Constitution of the State, Article VIII, Section 2, the following provision relating to the annual appropriation of monies for the payment of due principal of and interest on indebtedness of every county, city, town, village and school district in the State: If at any time the respective appropriating authorities shall fail to make such appropriations, a sufficient sum shall be set apart from the first revenues thereafter received and shall be applied to such purposes. The fiscal officer of any county, city, town, village or school district may be required to set aside and apply such revenues as aforesaid at the suit of any holder of obligations issued for any such indebtedness. This constitutes a specific non-exclusive constitutional remedy against a defaulting municipality or school district; however, it does not apply in a context in which monies have been appropriated for debt service but the appropriating authorities decline to use such monies to pay debt service. However, Article VIII, Section 2 of the Constitution of the State also provides that the fiscal officer of any county, city, town, village or school district may be required to set apart and apply such revenues at the suit of any holder of any obligations of indebtedness issued with the pledge of the faith of the credit of such political subdivision. See General Municipal Law Contract Creditors Provision herein. The Constitutional provision providing for first revenue set asides does not apply to tax anticipation notes, revenue anticipation notes or bond anticipation notes. Default Litigation. In prior years, certain events and legislation affecting a holder s remedies upon default have resulted in litigation. While courts of final jurisdiction have upheld and sustained the rights of bondholders, such courts might hold that future events including financial crises as they may occur in the State and in political subdivisions of the State require the exercise by the State or its political subdivisions of emergency and police powers to assure the continuation of essential public services prior to the payment of debt service. No Past Due Debt. No principal of or interest on School District indebtedness is past due. The School District has never defaulted in the payment of the principal of and interest on any indebtedness. MARKET AND RISK FACTORS There are various forms of risk associated with investing in the Notes. The following is a discussion of certain events that could affect the risk of investing in the Notes. In addition to the events cited herein, there are other potential risk factors that an investor must consider. In order to make an informed investment decision, an investor should be thoroughly familiar with the entire Official Statement, including its appendices, as well as all areas of potential risk. The financial condition of the School District as well as the market for the Notes could be affected by a variety of factors, some of which are beyond the School District's control. There can be no assurance that adverse events in the State or in other jurisdictions in the country, including, for example, the seeking by a municipality or large taxable property owner of remedies pursuant to the Federal Bankruptcy Code or otherwise, will not occur which might affect the market price of and the market for the Notes. If a significant default or other financial crisis should occur in the affairs of the State or any of its agencies or political subdivisions thereby further impairing the acceptability of obligations issued by borrowers within the State, both the ability of the School District to arrange for additional borrowings, and the market for and market value of outstanding debt obligations, including the Notes, could be adversely affected. The School District is dependent in part on financial assistance from the State. However, if the State should experience difficulty in borrowing funds in anticipation of the receipt of State taxes in order to pay State aid to municipalities and school districts in the State, including the School District, in any year, the School District may be affected by a delay, until sufficient taxes have been received by the State to make State aid payments to the School District. In several recent years, the School District has received delayed payments of State aid which resulted from the State's delay in adopting its budget and appropriating State aid to municipalities and school districts, and consequent delay in State borrowing to finance such appropriations. (See also "THE SCHOOL DISTRICT - State Aid"). The enactment of the Tax Levy Limitation Law, which imposes a tax levy limitation upon municipalities, school districts and fire districts in the State, including the School District could have an impact upon the market price of the Notes. See TAX INFORMATION Tax Levy Limitation Law herein. Current and future legislative proposals, if enacted into law, or clarification of the Code or court decisions may cause interest on the Notes to be subject, directly or indirectly, to federal income taxation or to be subject to or exempted from state income taxation, or otherwise prevent the beneficial owners of the Notes from realizing the full current benefit of the tax status of such interest. No assurance can be given that pending or future legislation or amendments to the Code, if enacted into law, or any proposed legislation or amendments to the Code, will not adversely affect the value of the Notes, or the tax status of interest on the Notes. See TAX MATTERS herein. 29

30 TAX MATTERS In the opinion of Orrick, Herrington & Sutcliffe LLP ( Bond Counsel ), based upon an analysis of existing laws, regulations, rulings, and court decisions, and assuming, among other matters, the accuracy of certain representations and compliance with certain covenants, interest on the Notes is excluded from gross income for federal income tax purposes under Section 103 of the Internal Revenue Code of 1986 (the Code ) and is exempt from personal income taxes imposed by the State of New York or any political subdivision thereof (including The City of New York). Bond Counsel is of the further opinion that interest on the Notes is not a specific preference item for purposes of the federal individual or corporate alternative minimum taxes; although Bond Counsel observes that such interest is included in adjusted current earnings when calculating corporate alternative minimum taxable income. A complete copy of the proposed form of opinion of Bond Counsel is set forth in APPENDIX D. The Code imposes various restrictions, conditions and requirements relating to the exclusion from gross income for federal income tax purposes of interest on obligations such as the Notes. The District has covenanted to comply with certain restrictions designed to insure that interest on the Notes will not be included in federal gross income. Inaccuracy of these representations or failure to comply with these covenants may result in interest on the Notes being included in gross income for federal income tax purposes possibly from the date of original issuance of the Notes. The opinion of Bond Counsel assumes compliance with these covenants. Bond Counsel has not undertaken to determine (or to inform any person) whether any actions taken (or not taken) or events occurring (or not occurring) after the date of issuance of the Notes may adversely affect the value of, or the tax status of interest on, the Notes. Further, no assurance can be given that pending or future legislation or amendments to the Code, if enacted into law, or any proposed legislation or amendments to the Code, will not adversely affect the value of, or the tax status of interest on, the Notes. Certain requirements and procedures contained or referred to the in the Arbitrage Certificate, and other relevant documents may be changed and certain actions (including, without limitation, economic defeasance of the Notes) may be taken or omitted under the circumstances and subject to the terms and conditions set forth in such documents. Bond Counsel expresses no opinion as to any Notes or the interest thereon if any such change occurs or action is taken or omitted. Although Bond Counsel is of the opinion that interest on the Notes is excluded from gross income for federal income tax purposes and is exempt from personal income taxes imposed by the State of New York or any political subdivision thereof (including The City of New York), the ownership or disposition of, or the amount, accrual or receipt of interest on, the Notes may otherwise affect a Owner s federal or state tax liability. The nature and extent of these other tax consequences will depend upon the particular tax status of the Owner or the Owner s other items of income or deduction. Bond Counsel expresses no opinion regarding any such other tax consequences. Current and future legislative proposals, if enacted into law, clarification of the Code or court decisions may cause interest on the Notes to be subject, directly or indirectly, to federal income taxation or to be subject to or exempted from state income taxation, or otherwise prevent Beneficial Owners from realizing the full current benefit of the tax status of such interest. Legislative proposals have been made in recent years which would limit the exclusion from gross income of interest on obligations like the Notes to some extent for taxpayers who are individuals and whose income is subject to higher marginal income tax rates. Other proposals have been made that could significantly reduce the benefit of, or otherwise affect, the exclusion from gross income of interest on obligations like the Notes. The introduction or enactment of any such legislative proposals, clarification of the Code or court decisions may also affect the market price for, or marketability of, the Notes. Prospective purchasers of the Notes should consult their own tax advisors regarding any pending or proposed federal or state tax legislation, regulations or litigation, as to which Bond Counsel expresses no opinion. LEGAL MATTERS Legal matters incident to the authorization, issuance and sale of the Notes are subject to the approving legal opinion of Orrick, Herrington & Sutcliffe LLP, Bond Counsel. Bond Counsel expects to deliver an opinion at the time of issuance of the Notes substantially in the form set forth in APPENDIX D hereto. LITIGATION The District is subject to a number of lawsuits in the ordinary conduct of its affairs. The District does not believe, however, that such suits, individually or in the aggregate, are likely to have a material adverse effect on the financial condition of the District. 30

31 There is no action, suit, proceedings or investigation, at law or in equity, before or by any court, public board or body pending or, to the best knowledge of the District, threatened against or affecting the District to restrain or enjoin the issuance, sale or delivery of the Notes or the levy and collection of taxes or assessments to pay same, or in any way contesting or affecting the validity of the Notes or any proceedings or authority of the District taken with respect to the authorization, issuance or sale of the Notes or contesting the corporate existence or boundaries of the District. CONTINUING DISCLOSURE COMPLIANCE In order to assist the purchasers in complying with Rule 15c2-12 promulgated by the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended ( Rule 15c2-12 ), the District will enter into a Continuing Disclosure Undertaking, a description of which is attached hereto as APPENDIX C, MATERIAL EVENT NOTICES. The District is in compliance, in all material respects, within the last five years with all previous undertakings made pursuant to the Rule 15c2-12. MUNICIPAL ADVISOR Fiscal Advisors & Marketing, Inc. (the "Municipal Advisor"), is a municipal advisor, registered with the Securities and Exchange Commission and the Municipal Securities Rulemaking Board. The Municipal Advisor serves as independent municipal advisor to the District on matters relating to debt management. The Municipal Advisor is a municipal advisory and consulting organization and is not engaged in the business of underwriting, marketing, or trading municipal securities or any other negotiated instruments. The Municipal Advisor has provided advice as to the plan of financing and the structuring of the Notes and has reviewed and commented on certain legal documents, including this Official Statement. The advice on the plan of financing and the structuring of the Notes was based on materials provided by the District and other sources of information believed to be reliable. The Municipal Advisor has not audited, authenticated, or otherwise verified the information provided by the District or the information set forth in this Official Statement or any other information available to the District with respect to the appropriateness, accuracy, or completeness of disclosure of such information and no guarantee, warranty, or other representation is made by the Municipal Advisor respecting the accuracy and completeness of or any other matter related to such information and this Official Statement. RATINGS The Notes are not rated. The purchaser(s) of the Notes may choose to have a rating completed after the sale pending the approval of the School District and at the expense of the purchaser(s), including any fees to be incurred by the District, as such rating action will result in a material event notification to be posted to EMMA which is required by the District s Continuing Disclosure Undertakings. (See APPENDIX-C, MATERIAL EVENT NOTICES herein.) S&P Global Ratings, a business unit of Standard & Poor s Financial Services LLC ( S&P ) has assigned their underlying rating of A+ with a stable outlook to the District s outstanding bonds. The rating reflects only the view of S&P and any desired explanation of the significance of such rating should be obtained from S&P, Public Finance Ratings, 55 Water Street, 38 th Floor, New York, New York 10041, Phone: (212) Generally, rating agencies base their ratings on the information and materials furnished to it and on investigations, studies and assumptions by the respective rating agency. There is no assurance that a particular rating will apply for any given period of time or that it will not be lowered or withdrawn entirely if, in the judgment of the agency originally establishing the rating, circumstances so warrant. Any downward revision or withdrawal of the rating of the outstanding bonds may have an adverse effect on the market price of the outstanding bonds. MISCELLANEOUS So far as any statements made in this Official Statement involve matters of opinion or estimates whether or not expressly stated, they are set forth as such and not as representations of fact, and no representation is made that any of the statements will be realized. Neither this Official Statement nor any statement which may have been made verbally or in writing is to be construed as a contract with the holders of the Notes. 31

32 Statements in this official statement, and the documents included by specific reference, that are not historical facts are forward-looking statements, which are based on the District management s beliefs as well as assumptions made by, and information currently available to, the District s management and staff. Because the statements are based on expectations about future events and economic performance and are not statements of fact, actual results may differ materially from those projected. Important factors that could cause future results to differ include legislative and regulatory changes, changes in the economy, and other factors discussed in this and other documents that the District s files with the repositories. When used in District documents or oral presentation, the words anticipate, estimate, expect, objective, projection, forecast, goal, or similar words are intended to identify forward-looking statements. To the extent any statements made in this Official Statement involve matters of opinion or estimates, whether or not expressly stated, they are set forth as such and not as representations of fact, and no representation is made that any of the statements will be realized. Neither this Official Statement nor any statement which may have been made verbally or in writing is to be construed as a contract with the holder of the Notes. Orrick, Herrington & Sutcliffe, LLP, New York, New York, Bond Counsel to the District, expresses no opinions as to the accuracy or completeness of information in any documents prepared by or on behalf of the District for use in connection with the offer and sale of the Notes, including but not limited to, the financial or statistical information in this Official Statement. References herein to the Constitution of the State and various State and federal laws are only brief outlines of certain provisions thereof and do not purport to summarize or describe all of such provisions. Concurrently with the delivery of the Notes, the District will furnish a certificate to the effect that as of the date of the Official Statement, the Official Statement did not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements herein, in the light of the circumstances under which they were made, not misleading, subject to a limitation as to information in the Official Statement obtained from sources other than the District. The Official Statement is submitted only in connection with the sale of the Notes by the District and may not be reproduced or used in whole or in part for any other purpose. The District hereby disclaims any obligation to update developments of the various risk factors or to announce publicly any revision to any of the forward-looking statements contained herein or to make corrections to reflect future events or developments except to the extent required by Rule 15c2-12 promulgated by the Securities and Exchange Commission. Fiscal Advisors & Marketing, Inc. may place a copy of this Official Statement on its website at Unless this Official Statement specifically indicates otherwise, no statement on such website is included by specific reference or constitutes a part of this Official Statement. Fiscal Advisors & Marketing, Inc. has prepared such website information for convenience, but no decisions should be made in reliance upon that information. Typographical or other errors may have occurred in converting original source documents to digital format, and neither the District nor Fiscal Advisors & Marketing, Inc. assumes any liability or responsibility for errors or omissions on such website. Further, Fiscal Advisors & Marketing, Inc. and the District disclaim any duty or obligation either to update or to maintain that information or any responsibility or liability for any damages caused by viruses in the electronic files on the website. Fiscal Advisors & Marketing, Inc. and the District also assume no liability or responsibility for any errors or omissions or for any updates to dated website information. The District contact information is as follows: Ms. Pamela Sue Anderson, Business Manager, Portville Central School District, 500 Elm Street, P.O. Box 790, Portville, New York 14770, phone (716) , ext. 6705, telefax (716) , panderson@portville.wnyric.org. Additional copies of the Notice of Sale and the Official Statement may be obtained upon request from the offices of Fiscal Advisors & Marketing, Inc., telephone number (315) , or at PORTVILLE CENTRAL SCHOOL DISTRICT Dated: July 14, 2017 DANIEL WENKE PRESIDENT OF THE BOARD OF EDUCATION AND CHIEF FISCAL OFFICER 32

33 APPENDIX - A Portville CSD GENERAL FUND Balance Sheets Fiscal Years Ending June 30: ASSETS Unrestricted Cash $ 1,999,389 $ 2,130,751 $ 2,175,540 $ 2,063,920 $ 1,982,549 Restricted Cash 1,780,513 2,093,906 1,968,065 1,843,789 2,126,472 Due from Other Funds 585, , , , ,496 Accounts Receivable State and Federal Aid Receivable 183, , ,563 96, ,965 Due from Other Governments - 32,161 34,189 10,006 9,839 Other Receivables 192, , , , ,662 Investments TOTAL ASSETS $ 4,741,022 $ 4,829,956 $ 4,750,740 $ 4,713,528 $ 4,701,983 LIABILITIES AND FUND EQUITY Accounts Payable $ 92,942 $ 67,415 $ 82,993 $ 102,534 $ 64,114 Notes Payable Accrued Liabilities 34, , ,819 60, ,129 Due to Other Funds 79,682 29,675-2,598 20,712 Due to Other Governments Due to Teachers' Retirement System 571, , , , ,048 Due to Employees' Retirement System 74,976 76,098 75,100 76,208 66,522 Overpayments Deferred Revenue TOTAL LIABILITIES $ 853,481 $ 886,897 $ 1,197,382 $ 1,150,028 $ 984,525 FUND EQUITY Nonspendable $ - $ - $ - $ - $ - Restricted 1,780,513 2,093,906 1,968,065 1,843,789 2,126,472 Assigned 814, , , , ,808 Unassigned 1,292,308 1,132, ,046 1,280,414 1,180,178 TOTAL FUND EQUITY $ 3,887,541 $ 3,943,059 $ 3,553,358 $ 3,563,500 $ 3,717,458 TOTAL LIABILITIES and FUND EQUITY $ 4,741,022 $ 4,829,956 $ 4,750,740 $ 4,713,528 $ 4,701,983 Source: Audited financial reports of the School District. This Appendix is not itself audited.

34 APPENDIX - A1 Portville CSD GENERAL FUND Revenues, Expenditures and Changes in Fund Balance Fiscal Years Ending June 30: REVENUES Real Property Taxes $ 4,150,283 $ 4,247,978 $ 4,382,192 $ 4,375,908 $ 4,377,277 Real Property Tax Items 12,385-12,095 12,906 12,146 Charges for Services 503, , , , ,350 Use of Money & Property 136, , , ,219 5,042 Sale of Property and Compensation for Loss 8,343 4, ,520 9,770 Miscellaneous 172, , , , ,873 Revenues from State Sources 9,756,321 9,927,697 9,840,196 10,315,868 10,841,582 Revenues from Federal Sources 8,601 23,303 50,999 31,301 53,802 Total Revenues $ 14,748,740 $ 15,130,313 $ 15,213,735 $ 15,728,936 $ 16,045,842 Other Sources: Interfund Transfers - 107, ,000 96,746 97,971 Total Revenues and Other Sources $ 14,748,740 $ 15,237,313 $ 15,313,735 $ 15,825,682 $ 16,143,813 EXPENDITURES General Support $ 1,919,855 $ 2,050,273 $ 2,167,831 $ 2,173,673 $ 2,191,850 Instruction 6,612,711 6,841,537 7,295,815 7,357,271 7,628,496 Pupil Transportation 904, , ,175 1,053,970 1,031,975 Community Services Employee Benefits 3,195,759 3,254,062 3,492,912 3,490,630 3,403,601 Debt Service 1,744,821 2,020,143 1,700,888 1,705,862 1,715,855 Total Expenditures $ 14,378,082 $ 15,094,568 $ 15,630,621 $ 15,781,406 $ 15,971,777 Other Uses: Interfund Transfers 164,283 87,227 72,815 34,133 18,078 Total Expenditures and Other Uses $ 14,542,365 $ 15,181,795 $ 15,703,436 $ 15,815,539 $ 15,989,855 Excess (Deficit) Revenues Over Expenditures 206,375 55,518 (389,701) 10, ,958 FUND BALANCE Fund Balance - Beginning of Year 3,681,166 3,887,541 3,943,059 3,553,358 3,563,500 Prior Period Adjustments (net) Fund Balance - End of Year $ 3,887,541 $ 3,943,059 $ 3,553,358 $ 3,563,501 $ 3,717,458 Source: Audited financial reports of the School District. This Appendix is not itself audited.

35 APPENDIX - A2 Portville CSD GENERAL FUND Revenues, Expenditures and Changes in Fund Balance - Budget and Actual Fiscal Years Ending June 30: Adopted Modified Adopted Adopted Budget Budget Actual Budget Budget REVENUES Real Property Taxes $ 4,383,288 $ 4,383,288 $ 4,377,277 $ 4,456,367 $ 4,545,494 Real Property Tax Items 10,000 10,000 12, Charges for Services 577, , , , ,634 Use of Money & Property 15,742 15,742 5,042 16,000 16,000 Sale of Property and - - Compensation for Loss 22,500 22,500 9, Miscellaneous 172, , , , ,500 Revenues from State Sources 11,155,411 11,155,411 10,841,582 11,666,822 11,669,968 Revenues from Federal Sources 50,000 50,000 53,802 47,500 47,500 Total Revenues $ 16,386,120 $ 16,386,120 $ 16,045,842 $ 17,117,553 $ 17,224,096 Other Sources: Interfund Transfers 247, ,971 97,971 89,913 85,876 Total Revenues and Other Sources $ 16,634,091 $ 16,634,091 $ 16,143,813 $ 17,207,466 $ 17,309,972 EXPENDITURES General Support $ 2,392,375 $ 2,447,681 $ 2,191,850 $ 2,433,483 $ 2,454,648 Instruction 7,891,335 7,904,519 7,628,496 8,341,142 8,708,927 Pupil Transportation 1,174,992 1,185,317 1,031,975 1,199,703 1,243,714 Community Services Employee Benefits 3,825,248 3,776,067 3,403,601 3,879,891 3,868,023 Debt Service 1,724,855 1,724,537 1,715,855 1,727,247 1,408,660 Total Expenditures $ 17,008,805 $ 17,038,121 $ 15,971,777 $ 17,581,466 $ 17,683,972 Other Uses: Interfund Transfers 25,286 25,604 18,078 26,000 26,000 Total Expenditures and Other Uses $ 17,034,091 $ 17,063,725 $ 15,989,855 $ 17,607,466 $ 17,709,972 Excess (Deficit) Revenues Over Expenditures (400,000) (429,634) 153,958 (400,000) (400,000) FUND BALANCE Fund Balance - Beginning of Year 400, ,634 3,563, , ,000 Prior Period Adjustments (net) Fund Balance - End of Year $ - $ - $ 3,717,458 $ - $ - Source: Audited financial report and budgets of the School District. This Appendix is not itself audited.

36 APPENDIX - B Portville CSD BONDED DEBT SERVICE Fiscal Year Ending June 30th Principal Interest Total 2018 $ 530,000 $ 182,738 $ 712, , , , , , , , , , , , , ,000 85, , ,000 64, , ,000 46, , ,000 34, , ,000 21, , ,000 14,400 99, ,000 11,531 96, ,000 8,663 98, ,000 5,513 95, ,000 2,250 62,250 TOTALS $ 5,485,000 $ 1,022,175 $ 6,507,175

37 APPENDIX - B1 Portville CSD CURRENT BONDS OUTSTANDING Fiscal Year Ending 2009 School District Improvements 2012 Construction June 30th Principal Interest Total Principal Interest Total 2018 $ 195,000 $ 58,988 $ 253,988 $ 335,000 $ 123,750 $ 458, ,000 50, , , , , ,000 42, , , , , ,000 33, , ,000 92, , ,000 24, , ,000 81, , ,000 15, , ,000 70, , ,000 5, , ,000 58, , ,000 46, , ,000 34, , ,000 21, , ,000 14,400 99, ,000 11,531 96, ,000 8,663 98, ,000 5,513 95, ,000 2,250 62,250 TOTALS $ 1,430,000 $ 231,619 $ 1,661,619 $ 4,055,000 $ 790,556 $ 4,845,556

38 APPENDIX C MATERIAL EVENT NOTICES In accordance with the provisions of Rule 15c2-12, as the same may be amended or officially interpreted from time to time (the "Rule"), promulgated by the Securities and Exchange Commission (the "SEC") pursuant to the Securities Exchange Act of 1934, the School District has agreed to provide or cause to be provided, in a timely manner not in excess of ten (10) business days after the occurrence of the event, during the period in which the Notes are outstanding, to the Electronic Municipal Market Access ("EMMA") system of the Municipal Securities Rulemaking Board ( MSRB ) or any other entity designated or authorized by the SEC to receive reports pursuant to the Rule, notice of the occurrence of any of the following events with respect to the Notes: (a) (b) (c) (d) (e) (f) (g) (h) (i) (j) (k) (l) (m) (n) principal and interest payment delinquencies non-payment related defaults, if material unscheduled draws on debt service reserves reflecting financial difficulties in the case of credit enhancement, if any, provided in connection with the issuance of the securities, unscheduled draws on credit enhancements reflecting financial difficulties substitution of credit or liquidity providers, or their failure to perform 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 securities, or other material events affecting the tax status of the Note modifications to rights of Note holders, if material note calls, if material and tender offers defeasances release, substitution, or sale of property securing repayment of the Notes rating changes bankruptcy, insolvency, receivership or similar event of the School District the consummation of a merger, consolidation, or acquisition involving the School District or the sale of all or substantially all of the assets of the School District, other than in the ordinary course of business, the entry into a definitive agreement to undertake such an action or the termination of a definitive agreement relating to any such actions, other than pursuant to its terms, if material appointment of a successor or additional trustee or the change of name of a trustee, if material Event (c) is included pursuant to a letter from the SEC staff to the National Association of Bond Lawyers dated September 19, However, event (c) is not applicable, since no "debt service reserves" will be established for the Note. With respect to event (d) the School District does not undertake to provide any notice with respect to credit enhancement added after the primary offering of the Notes. With respect to event (l) above, the event is considered to occur when any of the following occur: the appointment of a receiver, fiscal agent or similar officer for the School District in a proceeding under the U.S. Bankruptcy Code or in any other proceeding under state or federal law in which a court or government authority has assumed jurisdiction over substantially all of the assets or business of the School District, or if such jurisdiction has been assumed by leaving the existing governing body and officials or officers in possession but subject to the supervision and orders of a court or governmental authority, or the entry of an order confirming a plan of reorganization, arrangement or liquidation by a court or governmental authority having supervision or jurisdiction over substantially all of the assets or business of the School District. The School District may from time to time choose to provide notice of the occurrence of certain other events, in addition to those listed above, if the School District determines that any such other event is material with respect to the Note; but the School District does not undertake to commit to provide any such notice of the occurrence of any material event except those events listed above.

39 The School District reserves the right to terminate its obligation to provide the aforedescribed notices of material events, as set forth above, if and when the School District no longer remains an obligated person with respect to the Note within the meaning of the Rule. The School District acknowledges that its undertaking pursuant to the Rule described under this heading is intended to be for the benefit of the holders of the Note (including holders of beneficial interests in the Note). The right of holders of the Note to enforce the provisions of the undertaking will be limited to a right to obtain specific enforcement of the School District s obligations under its material event notices undertaking and any failure by the School District to comply with the provisions of the undertaking will neither be a default with respect to the Note nor entitle any holder of the Note to recover monetary damages. The School District reserves the right to modify from time to time the specific types of information provided or the format of the presentation of such information, to the extent necessary or appropriate in the judgment of the School District; provided that the School District agrees that any such modification will be done in a manner consistent with the Rule. An "Undertaking to Provide Notice of Material Events" to this effect shall be provided to the purchaser(s) at closing.

40 APPENDIX D FORM OF BOND COUNSEL S OPINION August 10, 2017 Portville Central School District Cattaraugus and Allegany Counties State of New York Re: Portville Central School District School District, Cattaraugus and Allegany Counties, New York $6,100,000 Bond Anticipation Notes, 2017 (Renewals) Ladies and Gentlemen: We have been requested to render our opinion as to the validity of a $6,100,000 Bond Anticipation Notes, 2017 (Renewals) (the "Obligation"), of the Portville Central School District School District, Cattaraugus and Allegany Counties, New York (the "Obligor"), dated August 10, 2017, numbered 1, of the denomination of $6,100,000, bearing interest at the rate of % per annum, payable at maturity, and maturing June 29, We have examined: (1) the Constitution and statutes of the State of New York; (2) the Internal Revenue Code of 1986, including particularly Sections 103 and 141 through 150 thereof, and the applicable regulations of the United States Treasury Department promulgated thereunder (collectively, the "Code"); (3) an arbitrage certificate executed on behalf of the Obligor which includes, among other things, covenants, relating to compliance with the Code, with the owners of the Obligation that the Obligor will, among other things, (i) take all actions on its part necessary to cause interest on the Obligation not to be includable in the gross income of the owners thereof for Federal income tax purposes, including, without limitation, restricting, to the extent necessary, the yield on investments made with the proceeds of the Obligation and investment earnings thereon, making required payments to the Federal government, if any, and maintaining books and records in a specified manner, where appropriate, and (ii) refrain from taking any action which would cause interest on the Obligation to be includable in the gross income of the owners thereof for Federal income tax purposes, including, without limitation, refraining from spending the proceeds of the Obligation and investment earnings thereon on certain specified purposes (the Arbitrage Certificate ); and (4) a certificate executed on behalf of the Obligor which includes, among other things, a statement that compliance with such covenants is not prohibited by, or violative of, any provision of local or special law, regulation or resolution applicable to the Obligor. We also have examined a certified copy of proceedings of the finance board of the Obligor and other proofs authorizing and relating to the issuance of the Obligation, including the form of the Obligation. In rendering the opinions expressed herein we have assumed (i) the accuracy and truthfulness of all public records, documents and proceedings, including factual information, expectations and statements contained therein, examined by us which have been executed or certified by public officials acting within the scope of their official capacities, and have not verified the accuracy or truthfulness thereof, and (ii) compliance by the Obligor with the covenants contained in the Arbitrage Certificate. We also have assumed the genuineness of the signatures appearing upon such public records, documents and proceedings and the certifications thereof.

41 In our opinion: (a) (b) (c) The Obligation has been authorized and issued in accordance with the Constitution and statutes of the State of New York and constitutes a valid and legally binding general obligation of the Obligor, all the taxable real property within which is subject to the levy of ad valorem taxes to pay the Obligation and interest thereon, without limitation as to rate or amount; provided, however, that the enforceability (but not the validity) of the Obligation: (i) may be limited by any applicable bankruptcy, insolvency or other law now existing or hereafter enacted by said State or the Federal government affecting the enforcement of creditors' rights, and (ii) may be subject to the exercise of judicial discretion in appropriate cases. The Obligor has the power to comply with its covenants with respect to compliance with the Code as such covenants relate to the Obligation; provided, however, that the enforceability (but not the validity) of such covenants may be limited by any applicable bankruptcy, insolvency or other law now existing or hereafter enacted by said State or the Federal government affecting the enforcement of creditors' rights. Interest on the Obligation is excluded from gross income for federal income tax purposes under Section 103 of the Internal Revenue Code of 1986, and is exempt from personal income taxes imposed by the State of New York and any political subdivision thereof (including The City of New York). Interest on the Obligation is not a specific preference item for purposes of the federal individual or corporate alternative minimum taxes, although it is included in adjusted current earnings when calculating corporate alternative minimum taxable income. We express no opinion regarding other tax consequences related to the ownership or disposition of, or the amount, accrual or receipt of interest on, the Obligation. Certain agreements, requirements and procedures contained or referred to in the Arbitrage Certificate and other relevant documents may be changed and certain actions (including, without limitation, economic defeasance of the Obligation) may be taken or omitted under the circumstances and subject to the terms and conditions set forth in such documents. The opinions expressed herein are based on an analysis of existing laws, regulations, rulings and court decisions and cover certain matters not directly addressed by such authorities. Such opinions may be affected by actions taken or omitted or events occurring after the date hereof. Accordingly, this opinion is not intended to, and may not, be relied upon in connection with any such actions, events or matters. Our engagement with respect to the Obligation has concluded with their issuance, and we disclaim any obligation to update this opinion. We have assumed, without undertaking to verify, the accuracy of the factual matters represented, warranted or certified in the documents. Furthermore, we have assumed compliance with all covenants and agreements contained in the Arbitrage Certificate, including without limitation covenants and agreements compliance with which is necessary to assure that future actions, omissions or events will not cause interest on the Obligation to be included in gross income for federal income tax purposes. We call attention to the fact that the rights and obligations under the Obligation and the Arbitrage Certificate and their enforceability may be subject to bankruptcy, insolvency, reorganization, arrangement, fraudulent conveyance, moratorium or other laws relating to or affecting creditors rights, to the application of equitable principles, to the exercise of judicial discretion in appropriate cases and to the limitations on legal remedies against municipal corporations such as the Obligor in the State of New York. We express no opinion with respect to any indemnification, contribution, penalty, choice of law, choice of forum, choice of venue, or waiver provisions contained in the foregoing documents. The scope of our engagement in relation to the issuance of the Obligations has extended solely to the examination of the facts and law incident to rendering the opinions expressed herein. Such opinions are not intended and should not be construed to express or imply any conclusion that the amount of real property subject to taxation within the boundaries of the Obligor, together with other legally available sources of revenue, if any, will be sufficient to enable the Obligor to pay the principal of or interest on the Obligations as the same respectively become due and payable. Reference should be made to the Official Statement prepared by the Obligor in relation to the Obligations for factual information which, in the judgment of the Obligor, could materially affect the ability of the Obligor to pay such principal and interest. While we have participated in the preparation of such Official Statement, we have not verified the accuracy, completeness or fairness of the factual information contained therein and, accordingly, we express no opinion as to whether the Obligor, in connection with the sale of the Obligations, has made any untrue statement of a material fact or omitted to state a material fact necessary in order to make any statements made, in the light of the circumstances under which they were made, not misleading. Very truly yours, /s/ ORRICK, HERRINGTON & SUTCLIFFE LLP

42 APPENDIX E PORTVILLE CENTRAL SCHOOL DISTRICT CATTARAUGUS & ALLEGANY COUNTIES, NEW YORK AUDITED FINANCIAL STATEMENTS JUNE 30, 2016 Such Financial Report and opinions were prepared as of date thereof and have not been reviewed and/or updated in connection with the preparation and dissemination of this Official Statement.

43 PORTVILLE CENTRAL SCHOOL DISTRICT TABLE OF CONTENTS 2016 FINANCIAL STATEMENTS Schedule Page Independent Auditor s Report Management s Discussion and Analysis Government-wide Financial Statements Statement of Net Position Statement of Activities Fund Financial Statements Combined Balance Sheet - Governmental Funds Combined Statement of Revenue, Expenditures and Changes in Fund Equity - Governmental Funds Statement of Fiduciary Net Position - Fiduciary Funds Statement of Change in Fiduciary Net Position - Fiduciary Funds Reconciliation of Governmental Funds Balance Sheet to the Statement of Net Position Reconciliation of Governmental Funds Revenue, Expenditures and Changes in Fund Equity to the Statement of Activities Notes to Financial Statements Supplementary Information Combining Schedule of Revenue and Expenditures and Changes in Fund Equity - Budget and Actual - Governmental Funds... SS1&SS1A Schedule of Change from Adopted Budget to Final Budget and the Real Property Tax Limit... SS2..39 Schedule of Project Expenditures - Capital Projects Fund... SS3..40 Budget Comparison Statement for State and Other Grant Programs - Special Aid and Food Service Funds...SS4A...41 Notes to Schedule of Expenditures Federal Awards...SS4B...42 Schedule of Expenditures Federal Awards... SS4C...42 Schedule of Certain Revenue and Expenditures Compared to ST-3 Data - General Fund... SS5 43 Schedule of Capital Assets Net of Related Debt... SS Schedule of Funding Progress... SS Schedule of District Contributions - New York State Teachers' Retirement System (NYSTRS) and New York State and Local Employees' Retirement System (NYSLERS)... SS8 46 Schedule of the District's Proportionate Share of the Net Pension Asset - New York State Teachers' Retirement System (NYSTRS) and District's Proportionate Share of the Net Pension Liability - New York State and Local Employees' Retirement System (NYSLERS)... SS9..47 Independent Auditor s Report on Internal Control over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with "Government Auditing Standards"

44 PORTVILLE CENTRAL SCHOOL DISTRICT TABLE OF CONTENTS (CONTINUED) 2016 FINANCIAL STATEMENTS Schedule of Findings and Questioned Costs Management Letter Annual Financial Statement on Extraclassroom Activity Fund

45 INDEPENDENT AUDITOR S REPORT To the President and Members of The Board of Education Portville Central School District Portville, New York We have audited the accompanying financial statements of the governmental activities and each major fund of Portville Central School District as of and for the year ended June 30, 2016, and the related notes to the financial statements which collectively comprise the Portville Central School District s basic financial statements as listed in the accompanying table of contents. We have also audited the fiduciary fund types of the Portville Central School District as of June 30, 2016, as displayed in the District s basic financial statements. 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 these financial statements that are free from material misstatement, whether due to fraud or error. Auditor s Responsibility Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in the Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions. Opinions In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities and each major fund of the Portville Central School District as of June 30, 2016, and the respective changes in financial position, thereof, for the year then ended in conformity with accounting principles generally accepted in the United States of America. Report on Summarized Comparative Information We have previously audited Portville Central School District s June 30, 2015 financial statements and our report dated September 20, 2015, expressed unmodified opinions on the respective financial statements of the governmental activities and each major fund financial statements. In our opinion, the summarized comparative information presented herein as of and for the year ended June 30, 2015, is consistent, in all material respects, with the audited financial statements from which it has been derived. -1- Member of American Institute of Certified Public Accountants Private Companies Practice Section

46 Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that the management s discussion and analysis, budgetary comparison information, schedule of funding progress, schedule of the District s share of the net pension asset/liability, and the schedule of the District s contributions for defined benefit pension plans on pages 3 through 9, 37 through 38, and 45 through 47 be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Other Information Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the Portville Central School District s basic financial statements. The combining and individual fund financial statements and other schedules listed in the table of contents are presented for purposes of additional analysis and are not a required part of the basic financial statements. The combining and individual fund financial statements and other schedules are the responsibility of management and were derived from and relate 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 combining and individual fund financial statements, the schedule of expenditures of federal awards, and other schedules are 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 September 20, 2016 on our consideration of Portville Central School District's internal control over financial reporting and our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on 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 Portville Central School District's internal control over financial reporting and compliance. BUFFAMANTE WHIPPLE BUTTAFARO, P.C. Olean, New York September 20,

47 PORTVILLE CENTRAL SCHOOL DISTRICT MANAGEMENT S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2016 Page 3 I. Discussion and Analysis II. The following is a discussion and analysis of the Portville Central School District s financial performance for the year ended June 30, This section is a summary of the District s financial activities based on currently known facts, decisions, or conditions. It is based on both the governmentwide and fund-based financial statements. The results of the current year are discussed in comparison with the prior year, with an emphasis placed on the current year. This section is only an introduction and should be read in conjunction with the District s financial statements, which follows this section. Financial Highlights The following items are the financial highlights experienced by the Portville Central School District during the fiscal year ended June 30, 2016: Overall net position from operations of the District increased during the current year in the amount of $1,045,000 as compared to an increase of $1,302,000 during the prior fiscal year. The District s enrollment was 1,022 students as compared with 1,011 during the prior year. The District s total revenue increased from $17,183,000 during June 30, 2015 to $17,269,000 during June 30, This increase was primarily the result of an increase in State aid. The District s total expenses increased approximately 2% from $15,881,000 during the year ended June 30, 2015 to $16,224,000 during the year ended June 30, This increase was primarily the result of an increase in instructional salaries. The District s had capital outlays during the current year in the amount of approximately $1,212,000, which primarily related to its capital improvement project and bus purchases. III. Overview of the Financial Statements This annual report consists of three parts: MD&A (this section), the basic financial statements, and required supplementary information. The basic financial statements include two kinds of statements that present different views of Portville Central School District. III. Overview of the Financial Statements (continued) A. Reporting the School District as a Whole (Districtwide Financial Statements): The district-wide statements report information about the School District as a whole using accounting methods similar to those used by private-sector companies. Activities that are fiduciary in nature are not included in these statements. 1. Statement of Net Position The Statement of Net Position (page 10) shows the assets (what is owned), liabilities (what is owed) and the net position (the resources that would remain if all obligations were settled) of the District. The Statement categorizes assets to show that some assets are very liquid, such as cash and cash equivalents. Some assets are restricted for certain purposes or reserved for emergencies and cash flow purposes. Some assets are invested in fixed or capital assets, such as buildings, equipment and other long-lived property; and some assets are available to fund budgets of the following year. 2. Statement of Activities The Statement of Activities (page 11) shows the amounts of program-specific and general District revenue used to support the District s various functions. The Statement of Net Position and Statement of Activities divide the activities of the District into two categories: governmental activities (the school functions, including general support, instruction, transportation, administration, etc.; property taxes, state and federal revenue usually support most of these functions) and proprietary activities. The District only had governmental activities during the current fiscal year. The two district-wide statements report the School District s net position and how they have changed. Net Position the difference between the District s assets and liabilities is one way to measure the District s financial health or position. Over time, increases or decreases in the District s net position are an indicator of whether its financial position is improving or deteriorating, respectively. To assess the District s overall health, you need to consider additional nonfinancial factors such as changes in the District s property tax base and the condition of school buildings and other facilities.

48 PORTVILLE CENTRAL SCHOOL DISTRICT MANAGEMENT S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2016 Page 4 III. Overview of the Financial Statements (continued) B. Reporting the District s Most Significant Funds (Fund Financial Statements): The fund financial statements provide more detailed information about the District s funds, focusing on its most significant or major funds not the District as a whole. Funds are accounting devices the District uses to keep track of specific sources of funding and spending on particular programs. Significance of funds is determined based on the proportional size of the funds, the relative importance of the activities of the funds to the District s operations, and the existence of legal budget requirements. Internal Service funds are never reported as major funds, but are combined and presented in a separate column. The District has two kinds of funds: 1. Governmental Funds Most of the District s basic services are included in governmental funds, which generally focus on (1) how cash and other financial assets that can readily be converted to cash flow in and out and the balances left at year-end that are available for spending. Consequently the governmental funds III. Overview of the Financial Statements (continued) B. Reporting the District s Most Significant Funds (Fund Financial Statements) (continued): 1. Governmental Funds (continued) statements provide a detailed short-term view that helps you determine whether there are more or fewer financial resources that can be spent in the near future to finance the District s programs. Because this information does not encompass the additional long-term focus of the district-wide statements, additional information at the bottom of the governmental funds statements explains the relationship (or differences) between them. 2. Fiduciary Funds The District is the trustee, or fiduciary, for assets that belong to others, such as the scholarship fund and the student activities funds. The District is responsible for ensuring that the assets reported in these funds are used only for their intended purposes and by those to whom the assets belong. The District excludes these activities from the district-wide financial statements because it cannot use these assets to finance its operations. Figure A-1 - Major Features of the District-Wide Statements and Fund Financial Statements Scope Required financial statements Accounting basis and measurement focus Type of asset/liability information Type of inflow/outflow information Fund Financial Statements District-Wide Governmental Funds Fiduciary Funds The activities of the District that are not proprietary or fiduciary, such as special education and building maintenance Entire district (except fiduciary funds) Statement of Net Position Statement of Activities Accrual accounting and economic resources focus All assets and liabilities, both financial and capital, shortterm and long-term All revenues and expenses during the year, regardless of when cash is received or paid Balance Sheet Statement of Revenue, Expenditures, and Changes in Fund Balances Modified accrual accounting and current financial focus Generally, all assets expected to be used up and liabilities that come due during the year or soon thereafter; no capital assets or long-term liabilities included Revenues for which cash is received during or soon after the end of the year; expenditures when goods or services have been received and the related liability is due and payable Instances in which the District administers resources on behalf of someone else, such as scholarship programs and student activities monies Statement of Fiduciary Net Position Statement of Changes in Fiduciary Net Position Accrual accounting and economic resources focus All assets and liabilities, both short-term and long-term; funds do not currently contain capital assets, although they can All additions and deductions during the year, regardless of when cash is received or paid

49 PORTVILLE CENTRAL SCHOOL DISTRICT MANAGEMENT S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2016 Page 5 Figure A-2 - Required Components of the District s Annual Financial Report IV. Financial Analysis of the School District as a Whole (continued) Changes in Net Position (continued) The total cost of all programs and services of the District increased 2% to $16,224,000. The District s expenses cover a range of services, with 69% related to instruction and 17% related to general support. Figure A-4 through figure A-8 and the narrative that follows considers the operations of governmental activities, along with revenue and net costs percentages for governmental activities. Governmental Activities Revenue of the District s governmental activities increased approximately 1%, while total expenses increased 2%. The District s total net position increased approximately $1,045,000 or 7% from operations during the fiscal year ended June 30, Figure A-5 presents the major sources of revenue of the District. Revenue of the District totaled $17,269,000 for the fiscal year ended June 30, The most significant changes in the District s governmental revenue are more thoroughly discussed as follows: IV. Financial Analysis of the School District as a Whole Net Position The District s total reporting entity net position was approximately $16,766,000. The components of net position include: invested in capital assets, net of related debt, of $11,981,000; restricted net position of $2,231,000; and unrestricted net position of $2,554,000 as of June 30, Changes in Net Position The District s total government-wide revenue increased by approximately 1% to $17,269,000. Approximately 26%, 6% and 63% of total revenue is derived from the property taxes, operating grants and state aid, respectively. The remaining 6% comes from federal aid, use of money and property, miscellaneous, charges for services and other operating grants and contributions. Property tax revenue, which represents approximately 26% of the District s total revenue for governmental activities, decreased approximately 0% during the year ended June 30, There was no increase in the property tax levy during the year ended June 30, The District s most significant revenue is state sources which represent $10,842,000 or 63% of total governmental revenue. The District s state sources increased approximately 5% which was primarily related to increases in basic state aid and excess cost aid. During the year ended June 30, 2016, the District saw a decrease in program revenue which mostly resulted from a decrease in operating grants in the amount of $273,000. This decrease was primarily related to the phase out of the Physical Education Program grant in the current year.

50 PORTVILLE CENTRAL SCHOOL DISTRICT MANAGEMENT S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2016 Page 6 IV. Financial Analysis of the School District as a Whole (continued) Expenses Figure A-8 presents the cost of each of the District s largest expenditure-types, which include; general support, instruction, transportation and cost of sales; as well as each expenditure-type s net cost (total cost less fees generated by the activities and intergovernmental aid). The net cost shows the financial burden that was placed on the District s taxpayers and NYS by each of these functions. Total costs of the District s governmental activities were $16,224,000. The most significant changes in the District s governmental expenses are more thoroughly discussed as follows: The District s general support increased by approximately $65,000 or 2% which was primarily due to an increase in salaries and materials and supplies expenditures. The District s instruction costs increased by approximately $280,000 or 3% which was the result of an increase in salaries, contractual and materials partially offset by a decrease in BOCES services. Debt service of the District decreased approximately $20,000 during the year ended June 30, 2016, which primarily resulted from a decrease in interest expense. Transportation costs of the District increased $8,000 during the year ended June 30, 2016 as a result of an increase in salaries. The District s cost of sales (food service fund) totaled $540,000 during the current year as compared to $530,000 during the fiscal year ended June 30, This increase was related to an increase in salaries and benefits. The District received approximately $1,769,000 of operating grants and charges for services from its state and federal grants and tuition and transportation aid which subsidized certain programs of the District. Most of the Districts net costs ($14.5 million) were financed by state aid and real property taxes. Figure A-3 Condensed Statement of Net Position Portville Central School District Condensed Statement of Net Position (in thousands of dollars) Governmental Activities and Total District-wide % Change Assets Current and other assets $ 9,658 $ 8,396 15% Capital assets 20,753 20,791 0% Total assets 30,411 29,187 4% Deferred outflows of resources Deferred outflows related to pensions 1,691 1,006 68% Deferred outflows of resources and assets $ 32,102 $ 30,193 6% Liabilities Other liabilities $ 4,285 $ 1, % Long-term liabilities 9,752 10,118-4% Total liabilities 14,037 11,908 18% Deferred inflows of resources Deferred inows related to pensions 1,299 2,563-49% Deferred inflows of resources and liabilities 15,336 14,471 6% Net position Net investment in capital assets 11,981 12,018 0% Restricted 2,231 2,042 9% Unrestricted 2,554 1,662 54% Total net position 16,766 15,722 7% Total liabilities, deferred inflows of $ 32,102 $ 30,193 6% Figure A-4 Changes in Net Position Portville Central School District Changes in Net Position from Operating Results (in thousands of Dollars) Governmental Activities and Total District-wide % Change Revenue Program revenue Charges for services $ 814 $ 851-4% Operating grants and contributions 955 1,228-22% General revenue Real property taxes 4,389 4,389 0% Use of money & property % Sale of property & comp for loss % State sources 10,842 10,316 5% Federal sources % Miscellaneous % Total revenue 17,269 17,183 1% Expenses General support 2,683 2,618 2% Instruction 11,318 11,038 3% Transportation 1,433 1,425 1% Debt service - interest % Cost of sales % Total expenses 16,224 15,881 2% Change in net postion $ 1,045 $ 1,302 Figure A-5 Sources of Revenue Portville Central School District Sources of revenue Miscellaneous 1% Charges f or serv ices 5% Federal sources 0% State sources 63% Sale of property 0% Operating grants and contributions 5% Property taxes 26% Use of money and property 0% For the year ended June 30, 2016

51 PORTVILLE CENTRAL SCHOOL DISTRICT MANAGEMENT S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2016 Page 7 Figure A-6 - Expenses Transportation 9% Portville Central School District Expenses Community Services 0% Instruction 69% Debt Service - Interest 2% For the year ended June 30, 2016 Cost of Sales - Food 3% General Support 17% Figure A-7 Expenditures Supported with Program Revenue Porville Central School District Expenditures supported with program revenue (in thousands of dollars) Governmental Activites & Total District Expenditures supported with general revenue (from taxes & other sources) $ 14,455 89% $ 13,802 87% Expenditures supported with program revenue 1,769 11% 2,079 13% Total expenditures related to governmental activities $ 16, % $ 15, % Figure A-8 Net Cost of Governmental Activities Portville Central School District Net Cost of Governmental Activities (in thousands of dollars) Total cost of services Net cost of services Change Change General support $ 2,683 $ 2,618 $ 65 $ 2,683 $ 2,615 $ 68 Instruction 11,318 11, ,557 9, Transportation 1,433 1, Debt service - interest (20) (20) Cost of sales - food (13) Total $ 16,224 $ 15,881 $ 343 $ 14,455 $ 13,802 $ 653 V. Financial Analysis of the School District s Funds It is important to note that variances between years for the governmental fund financial statements (Balance Sheets and Statement of Revenue, Expenditures and Changes in Fund Equity) are not the same as variances between years for the Districtwide financial statements (Statement of Net Position and Statement of Activities). The District s governmental funds are presented on the current financial resources measurement focus and the modified accrual basis of accounting, while the statement of net position is presented on the full accrual method of accounting. Therefore, governmental funds do not include long-term V. Financial Analysis of the School District s Funds (continued) Debt liabilities for the funds projects and capital assets purchased by the funds. Governmental funds will include the proceeds received from the issuance of debt, the current payments for capital assets, and the current payments for debt. Below is a description of the most significant changes to the fund financial statements from that reported in the previous year. General Fund The District s general fund revenue and other sources exceeded its expenditures and other uses by approximately $155,000. The District s general fund unassigned fund balance equated to approximately $1,180,000 as of June 30, The District established many fund balance reserves during the year ended June 30, 2016, and had a total restricted fund balance approximated $2,126,000. The District s total assets decreased approximately $12,000 as of June 30, 2016 primarily as the result of a decrease in due from other funds partially offset by an increase in cash. The District s liabilities decreased approximately $166,000, as a result of a decrease in due to teachers retirement system. Total revenue in the District s general fund increased $318,000, which was primarily related to an increase in State aid. Total expenditures in the District s general fund increased $173,000 primarily as a result of an increase in instructional salaries. Food Service Fund The District s food service fund experienced no change in fund equity during the current fiscal year. Revenue in the District s food service fund was $523,000 during 2016 as compared with $515,000 in Expenditures increased approximately $8,000 as compared to the prior year primarily related to salaries and benefits. Special Aid Fund The District s special aid fund revenue and expenditures decreased approximately $280,000 or 29% which was primarily related to a decrease in the Physical Education Program grant revenue and expenditures. Capital Projects Fund The District had expenditures in the amount of $1,189,000 in capital projects during the year ended June 30, 2016, which was primarily related to costs associated with the District s capital improvement project and bus purchases made during the current fiscal year.

52 PORTVILLE CENTRAL SCHOOL DISTRICT MANAGEMENT S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2016 Page 8 VI. General Fund Budgetary Highlights Over the course of the year, the District makes many budget transfers, which is the common method utilized to manage the budget throughout the year. Actual expenditures were approximately $1,074,000 below the revised budget. The most significant positive variances were in the area of general support, instruction and employee benefits which totaled $256,000, $276,000 and $372,000, respectively, below that budgeted. On the other hand, resources available for appropriations were approximately $490,000 below the final budgeted amount. Significant variance of revenue items consisted of other sources which were approximately $150,000, below that budgeted and state sources which were $313,000 below that budgeted. Figure A-9 Budget vs. Actual Comparison Portville Central School District General Fund - Budget vs Actual Comparison (in thousands of dollars) Revised Budget Actual Difference % Revenue Local sources $ 5,181 $ 5,150 $ (31) -1% State sources 11,155 10,842 (313) -3% Federal sources n/a Other sources (150) -60% Total revenue $ 16,634 $ 16,144 $ (490) -3% VII. Capital Assets and Debt Administration (continued) Long-term Debt As depicted in Figure A-11, as of June 30, 2016, the District had approximately $9,752,000 in bonds, other post-employment benefits liabilities and compensated absences, a decrease of approximately $366,000 as compared with the previous year. The decrease in bonds payable was the result of the District making regularly scheduled payments. The net pension liability related to ERS increased as of June 30, Lastly, the District had an increase in other post-employment benefits as a result of the liability not being funded. Figure A-10 Capital Assets Portville Central School District Capital Assets (net of depreciation) Governmental Activities & Total District-wide Change Land $ 55,292 $ 55,292 0% Buildings 32,288,582 32,288,582 0% Construction in progress 1,492, , % Equipment 5,544,850 5,443,645 2% Accumulated depreciation (18,627,627) (17,504,581) 6% Total Capital Assets, net $ 20,753,230 $ 20,791,067 0% Expenditures General support $ 2,448 $ 2,192 $ % Instruction 7,904 7, % Transportation 1,185 1, % Employee benefits 3,776 3, % Debt service 1,725 1, % Operating transfers % Total expenditures $ 17,064 $ 15,990 $ 1,074 6% VII. Capital Assets and Debt Administration Capital Assets As depicted in Figure A-10, as of June 30, 2016, the District had invested approximately $20,753,000 in a broad range of capital assets, including reconstruction projects, transportation vehicles, computer equipment, and other equipment. Capital additions made during the year ended June 30, 2016, totaled approximately $1,212,000 and consisted primarily of the costs associated with the District s capital improvement project and bus purchases. More detailed information about the District s capital assets is presented in the notes of the financial statements. Figure A-11 Outstanding Long-term Debt Portville Central School District Outstanding Long-Term Debt and Liabilities Governmental Activities & Total District-wide Change Bonds payable $ 6,896,187 $ 8,165,507-16% Net pension liability 1,001, , % Other post-employment benefits 1,333,852 1,200,509 11% Compensated absences 520, ,000-6% Total Long-Term Debt $ 9,751,606 $ 10,117,920-4%

53 PORTVILLE CENTRAL SCHOOL DISTRICT MANAGEMENT S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2016 Page 9 VIII. Factors Bearing on the District s Future At the time these financial statements were prepared and audited, the District was aware of the following existing circumstances that could significantly affect its financial health in the future: The District is cautiously optimistic on the recent cost reductions in fuel cost and the retirement rates for both ERS and TRS. However, these two cost items and Health insurance cost, combined with the rise in Special Education cost cause the District to have a conservative approach to spending. IX. Contacting the District s Financial Management This financial report is designed to provide citizens, taxpayers, customers and investors and creditors with a general overview of the finances of the District and to demonstrate our accountability with the money we receive. If you have any questions about this report or need additional financial information, please contact: Portville Central School District Attention: Ms. Pamela Anderson Business Manager 500 Elm Street Portville, NY 14770

54 PORTVILLE CENTRAL SCHOOL DISTRICT Schedule 1 STATEMENT OF NET POSITION AS OF JUNE 30, 2016 Page Assets Cash Unrestricted $ 2,036,042 $ 2,159,413 Restricted 2,231,507 2,041,989 Receivables State and federal aid 341, ,894 Other receivables 171, ,924 Due from other governments 9,839 10,006 Due from other fiduciary funds 5,003 16,917 Inventories 14,960 6,862 Net pension asset - NYS Teachers' Retirement System 3,433,030 3,734,662 Cash to be used towards capital project 1,414,058 - Capital assets, net 20,753,230 20,791,067 Total assets 30,411,410 29,186,734 Deferred Outflows of Resources Deferred outflows related to pensions 1,691,190 1,006,269 Total assets and deferred outflows of resources $ 32,102,600 $ 30,193,003 Liabilities Current liabilities Accounts payable and retainage payable $ 246,688 $ 118,493 Accrued liabilities 108,274 62,853 Accrued interest 20,000 15,000 Due to other governments 1,660 1,297 Due to retirement systems 795, ,355 Unearned revenue Bond anticipation notes payable 3,112, ,329 Long-term liabilities Portion due or payable within one year Bonds payable 1,295,000 1,250,000 Portion due or payable after one year Bonds payable 5,601,187 6,915,507 Net pension liability - NYS Employees' Retirement System 1,001, ,904 Other post-employment benefit 1,333,852 1,200,509 Compensated absences 520, ,000 Total liabilities 14,036,750 11,908,103 Deferred Inflows of Resources Deferred inflows related to pensions 1,299,440 2,563,272 Total liabilities and deferred inflows of resources 15,336,190 14,471,375 Net Position Net investment in capital assets 11,980,851 12,018,231 Restricted 2,231,507 2,041,989 Unrestricted 2,554,052 1,661,408 Total net position 16,766,410 15,721,628 Total liabilities and net position $ 32,102,600 $ 30,193,003 See accompanying independent auditor s report and notes to financial statements.

55 PORTVILLE CENTRAL SCHOOL DISTRICT Schedule 2 STATEMENT OF ACTIVITIES FOR THE YEAR ENDED JUNE 30, 2016 Page Net (Expense) Net (Expense) Indirect Program Revenues Revenue and Revenue and Expenses Charges for Operating Changes in Changes in Expenses Allocation Services Grants Net Position Net Position Functions/Programs General support $ 2,446,669 $ 236,281 $ - $ - $ (2,682,950) $ (2,614,789) Instruction 10,416, , , ,226 (10,556,768) (9,987,957) Pupil transportation 1,319, , ,469 22,984 (940,383) (890,933) Debt service 249, (249,610) (270,248) Food service program 523,204 17, , ,138 (24,610) (38,212) Depreciation 1,268,770 (1,268,770) Total functions and programs $ 16,223,651 $ - $ 813,982 $ 955,348 (14,454,321) (13,802,139) General Revenues Real property taxes 4,389,423 4,388,814 Use of money and property 5, ,297 Sale of property and compensation for loss 28,569 1,063 Miscellaneous 180, ,235 State sources 10,841,582 10,315,868 Federal sources 53,802 31,301 Total general revenues 15,499,103 15,104,578 Change in net assets 1,044,782 1,302,439 Net position - beginning of year 15,721,628 13,586,506 Prior period adjustments - 832,683 Net position - end of year $ 16,766,410 $ 15,721,628 See accompanying independent auditor s report and notes to financial statements.

56 PORTVILLE CENTRAL SCHOOL DISTRICT Schedule 3 COMBINED BALANCE SHEET GOVERNMENTAL FUNDS AS OF JUNE 30, 2016 Page 12 Assets Governmental Funds Special Food Debt Capital (Memo only) (Memo only) General Aid Service Service Projects Total Total Unrestricted cash $ 1,982,549 $ 31,526 $ 22,023 $ - $ - $ 2,036,098 $ 2,094,603 Restricted cash 2,126, ,979 1,414,058 3,645,509 2,106,799 Due from other funds 197,496-20, , ,790 State and federal aid receivable 219, ,344 17, , ,894 Other receivables 165,662-6, , ,924 Due from other governments 9, ,839 10,006 Inventories , ,960 6,862 Total assets $ 4,701,983 $ 135,870 $ 81,465 $ 105,035 $ 1,414,058 $ 6,438,411 $ 5,112,878 Liabilities and Fund Equity Liabilities Accounts payable $ 64,114 $ - $ 5,083 $ - $ 177,491 $ 246,688 $ 118,493 Accrued liabilities 104,129-4, ,274 62,853 Bond anticipation notes payable ,112,739 3,112, ,329 Due to other funds 20, ,573 57, , ,873 Unearned revenue Due to other governments - 1, ,660 1,297 Due to Teachers' Retirement System 729, , ,147 Due to Employees' Retirement System 66, ,522 76,208 Total liabilities 984, ,870 67,760-3,290,250 4,478,405 2,227,056 Fund Equity Fund equity: Nonspendable , ,960 6,862 Restricted 2,126, ,035-2,231,507 2,041,989 Assigned 410, , ,140 Unassigned (deficit) 1,180,178 - (1,255) - (1,876,192) (697,269) 390,831 Total fund equity (deficit) 3,717,458-13, ,035 (1,876,192) 1,960,006 2,885,822 Total liabilities and fund equity $ 4,701,983 $ 135,870 $ 81,465 $ 105,035 $ 1,414,058 $ 6,438,411 $ 5,112,878 See accompanying independent auditor s report and notes to financial statements.

57 PORTVILLE CENTRAL SCHOOL DISTRICT Schedule 4 COMBINED STATEMENT OF REVENUE, EXPENDITURES AND CHANGES IN FUND EQUITY GOVERNMENTAL FUNDS FOR THE YEAR ENDED JUNE 30, 2016 Page 13 Governmental Funds Special Food Debt Capital (Memo only) (Memo only) General Aid Service Service Projects Total Total Revenue Real property taxes $ 4,389,423 $ - $ - $ - $ - $ 4,389,423 $ 4,388,814 Charges for services 570, , ,979 Use of money and property 5, , ,297 Sale of property compensation for loss 9, ,770 3,520 Miscellaneous 175,873-22,106 4, , ,252 State sources 10,841, ,852 9, ,062,170 10,530,182 Federal sources 53, , , ,704 1,022,114 Surplus food , ,858 22,518 Sales (school food service) , , ,285 Total revenue 16,045, , ,776 4,806-17,249,634 17,185,961 Expenditures General support 2,191, , ,385,086 2,364,201 Instruction 7,628, , ,230,193 8,202,691 Pupil transportation 1,031,975 22, ,835 1,259,794 1,262,296 Employee benefits 3,403,601 68,874 54, ,527,392 3,670,123 Debt service Principal 1,451, ,451,925 1,414,766 Interest 263, , ,096 Capital outlay , , ,065 Cost of sales , , ,958 Other expenses , ,842 13,158 Total expenditures 15,971, , ,204-1,188,839 18,377,375 17,825,354 Excess (deficiency) of revenue over expenditures 74,065 (10,345) (7,428) 4,806 (1,188,839) (1,127,741) (639,393) Other sources and uses BANS redeemed from appropriations , , ,766 Operating transfers in 97,971 10,345 7, , ,878 Operating transfers out (18,078) - - (97,971) - (116,049) (130,878) Total other sources (uses) 79,893 10,345 7,428 (97,971) 202, , ,766 Excess (deficiency) of revenue and other sources over expenditures and other uses 153, (93,165) (986,609) (925,816) (444,627) Fund equity (deficit), beginning of year 3,563,500-13, ,200 (889,583) 2,885,822 3,330,449 Fund equity (deficit), end of year $ 3,717,458 $ - $ 13,705 $ 105,035 $ (1,876,192) $ 1,960,006 $ 2,885,822 See accompanying independent auditor s report and notes to financial statements.

58 PORTVILLE CENTRAL SCHOOL DISTRICT Schedule 5 STATEMENT OF FIDUCIARY NET POSITION - FIDUCIARY FUNDS AS OF JUNE 30, 2016 Page 14 Private (Memo only) Purpose Agency Total Total Trusts Funds 06/30/16 06/30/15 Assets Cash $ - $ 156,546 $ 156,546 $ 124,179 Accounts receivable - 2,769 2,769 1,021 Investments 227, , ,093 Due from other funds Total assets $ 227,480 $ 159,315 $ 386,795 $ 362,918 Liabilities Accrued liabilities $ - $ 90,602 $ 90,602 $ 64,357 Due to other funds - 5,003 5,003 17,542 Student extraclassroom activity funds - 63,710 63,710 43,219 Total liabilities - 159, , ,118 Net position Reserved for scholarships 227, , ,800 Total liabilities and net position $ 227,480 $ 159,315 $ 386,795 $ 362,918 See accompanying independent auditor s report and notes to financial statements.

59 PORTVILLE CENTRAL SCHOOL DISTRICT Schedule 6 STATEMENT OF CHANGES IN FIDUCIARY NET POSITION - FIDUCIARY FUNDS FOR THE YEAR ENDED JUNE 30, 2016 Page 15 (Memo only) 06/30/16 06/30/15 Additions Gifts and contributions $ 7,000 $ 3,150 Interest earnings - 2,839 Total additions 7,000 5,989 Deductions Scholarships awarded 17,320 12,473 Change in net position (10,320) (6,484) Net position - beginning of year 237, ,284 Net position - end of year $ 227,480 $ 237,800 See accompanying independent auditor s report and notes to financial statements.

60 PORTVILLE CENTRAL SCHOOL DISTRICT RECONCILIATION OF GOVERNMENTAL FUNDS BALANCE SHEET TO THE STATEMENT OF NET POSITION AS OF JUNE 30, 2016 Total fund balances - governmental funds $ 1,960,006 Amounts reported for governmental activities in the statement of net position are different because: Capital assets used in governmental activities are not financial resources and therefore are not reported as assets in governmental funds. Capital assets consist of the following at year-end: Cost of the assets $ 39,380,857 Accumulated depreciation (18,627,627) 20,753,230 District's proportionate share of the net pension asset is reported on the statement of net position, whereas in the governmental funds pension costs are based on required contributions. 3,433,030 Interest on long-term liabilities is not accrued in governmental funds, but rather is recognized as an expenditure when due. (20,000) Deferred inflows/outflows of resources related to actuarial pension differences are reported on the statement of net position and amortized over the average members' years of service. In the governmental funds pension expense is based on required contributions. 391,750 Long-term liabilities, including bonds payable, are not due and payable in the current period and therefore are not reported as liabilities in the funds. Long-term liabilities at year-end consist of the following: Bonds payable (6,896,187) Net pension liability (1,001,567) Other post-employment benefits (1,333,852) Compensated absences (520,000) (9,751,606) Total net position - governmental activities $ 16,766,410 See accompanying independent auditor s report and notes to financial statements.

61 Schedule 7 Page 16 Assets Total Long-term Long-term Reclassification Statement of Governmental Asset and Outflow Liability and Inflow and Net Funds Transactions Transactions Eliminations Position Cash $ 5,681,607 $ - $ - $ - $ 5,681,607 Due from other funds 218, (213,261) 5,003 State and federal aid receivable 341, ,916 Other receivables 171, ,825 Due from other governments 9, ,839 Inventories 14, ,960 Net pension asset - 3,433, ,433,030 Capital assets, net - 20,753, ,753,230 Total assets 6,438,411 24,186,260 - (213,261) 30,411,410 Deferred Outflows of Resources Deferred outflows related to pensions - 1,691, ,691,190 Total assets and deferred outflows of resources $ 6,438,411 $ 25,877,450 $ - $ (213,261) $ 32,102,600 Liabilities and Fund Equity/Net Position Liabilities Accounts payable $ 246,688 $ - $ - $ - $ 246,688 Accrued liabilities 108, ,274 Accrued interest ,000-20,000 Due to other funds 213, (213,261) - Deferred revenue Due to other governments 1, ,660 Due to retirement systems 795, ,570 Bond anticipation notes payable 3,112, ,112,739 Bonds payable - - 6,896,187-6,896,187 Net pension liability - - 1,001,567-1,001,567 Other post-employment benefits - - 1,333,852-1,333,852 Compensated absences , ,000 Total liabilities 4,478,405-9,771,606 (213,261) 14,036,750 Deferred Inflows of Resources Deferred inflows related to pensions - 1,299, ,299,440 Total liabilities and deferred inflows of resources 4,478,405 1,299,440 9,771,606 (213,261) 15,336,190 Fund equity and net position 1,960,006 24,578,010 (9,771,606) - 16,766,410 Total liabilities, deferred inflows of resources and fund equity/net position $ 6,438,411 $ 25,877,450 $ - $ (213,261) $ 32,102,600

62 PORTVILLE CENTRAL SCHOOL DISTRICT RECONCILIATION OF GOVERNMENTAL FUNDS REVENUE, EXPENDITURES AND CHANGES IN FUND EQUITY TO THE STATEMENT OF ACTIVITIES FOR THE YEAR ENDED JUNE 30, 2016 Total net change in fund balances - governmental funds $ (925,816) Amounts reported for governmental activities in the statement of activities are different because: Capital outlays are reported in governmental funds as expenditures. However, in the statement of activities, the cost of those assets is allocated over their estimated useful lives as depreciation expense. Activity for the current fiscal year ended was as follows: Capital outlays $ 1,212,134 Depreciation expense (1,268,770) (56,636) Proceeds from the sale of assets are reported as revenue in the governmental funds, whereas in the statement of activities a gain or loss on sale is reported. 18,799 Repayment of bond principal, including payment towards the refunding of bonds, capital lease principal and bond anticipation notes principal is an expenditure the governmental funds but the repayment reduces long-term liabilities in the statement of net assets. 1,451,925 Bond anticipation notes redeemed from appropriations is recorded as other sources in the governmental funds, whereas the repayment reduces short-term liabilities in the statement of net assets. (201,925) Interest on long-term debt in the statement of activities differs from the amount reported in the governmental funds because interest is recognized as an expenditure in the funds when it is due, and thus required the use of current financial resources. In the statement of activities, however, interest expense is recognized as the interest accrues, regardless of when it is due. 14,320 District's proportionate share of actuarial calculated pension expense and net amortization of deferred amounts from changes in proportion are recorded in the statement of activities, whereas in the governmental funds pension expense is based on District's required contribution to pension plans. 845,458 In the statement of activities, certain operating expenses - compensated absences and other post-employment benefits - are measured by the amounts earned during the year. In the governmental funds, however, expenditures for these items are measured by the amount of financial resources used (essentially, the amounts actually paid). This year, other post-employment benefits and compensated absences changed by this amount. (101,343) Change in net position of governmental activities $ 1,044,782 See accompanying independent auditor s report and notes to financial statements.

63 Schedule 8 Page 17 Total Long-term Long-term Reclassification Statement of Governmental Asset and Outflow Liability and Inflow and Activities Funds Transactions Transactions Eliminations Totals Revenue Real property taxes $ 4,389,423 $ - $ - $ - $ 4,389,423 Charges for services 570, (570,350) - Use of money and property 5, ,328 Sale of property compensation for loss 9,770 18, ,569 Miscellaneous 202, (22,106) 180,399 State sources 11,062, (220,588) 10,841,582 Federal sources 759, (705,902) 53,802 Surplus food 28, (28,858) - Sales (school food service) 221, (221,526) - Total revenue 17,249,634 18,799 - (1,769,330) 15,499,103 Expenditures General support 2,385, ,985-80,879 2,682,950 Instruction 8,230, , ,343 1,327,419 10,556,768 Pupil transportation 1,259,794 (91,334) - (228,077) 940,383 Employee benefits 3,527,392 - (845,458) (2,681,934) - Debt service 1,715,855 - (1,466,245) - 249,610 Capital outlay 984,004 (984,004) Cost of sales 260,209 17,176 - (252,775) 24,610 Other expenses 14, (14,842) - Total expenditures 18,377,375 56,636 (2,210,360) (1,769,330) 14,454,321 Excess (deficiency) of revenue over expenditures (1,127,741) (37,837) 2,210,360-1,044,782 Other sources and uses BANs redeemed from appropriations 201,925 - (201,925) - - Operating transfers in 116, (116,049) - Operating transfers out (116,049) ,049 - Total other sources (uses) 201,925 - (201,925) - - Net change for year $ (925,816) $ (37,837) $ 2,008,435 $ - $ 1,044,782

64 PORTVILLE CENTRAL SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2016 Page 18 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES I. Significant Accounting Policies The accompanying financial statements of the Portville Central School District have been prepared in conformity with generally accepted accounting principles (GAAP) for governments as prescribed by the Governmental Accounting Standards Board (GASB) which is the standard setting body for establishing governmental accounting and financial reporting principles. A. Reporting Entity The financial statements include all funds and account groups of the School District as well as the component units and other organizational entities determined to be includable in the School District's financial reporting entity. The decision to include a potential component unit in the School District's reporting entity is based on several criteria including legal standing, fiscal dependency, and financial accountability. Based on the application of these criteria, the following is a brief review of certain entities included in the School District's reporting entity: 1. The Extraclassroom Activity Funds The extraclassroom activity funds of the Portville Central School District represent funds of the students of the School District. The Board of Education exercises general oversight of these funds. The extraclassroom activity funds are independent of the School District with respect to its financial transactions, and the designation of student management. The cash and investment balances are reported in the Agency Fund of the District. The audited financial statements (cash basis) of the extraclassroom activity funds are included as supplementary information to these audited financial statements, located on pages of this report. B. Joint Venture The Portville Central School District is one of 22 component school districts in the Cattaraugus- Allegany Board of Cooperative Educational Services (BOCES). A BOCES is a voluntary, cooperative association of school districts in a geographic area that share planning, services, and programs which provide educational and support activities. NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) B. Joint Venture (continued) BOCES are organized under Section 1950 of the Education Law. A BOCES Board is considered a corporate body. All BOCES property is held by the BOCES Board as a corporation (Section 1950(6)). In addition, BOCES Boards also are considered municipal corporations to permit them to contract with other municipalities on a cooperative basis under Section 119-n(a) of the General Municipal Law. A BOCES budget is comprised of separate budgets for administrative, program, and capital costs. Each component school district's share of the administrative and capital cost is determined by resident public school district enrollment as defined in Education Law, Section 1950(4)(b)(7). There is no authority or process by which a school district can terminate its status as a BOCES component. In addition, component school districts pay tuition or a service fee for programs in which its students participate. Members of a BOCES Board are nominated and elected by their component member boards in accordance with provisions of Section 1950 of the Education Law. During the year, the District was billed approximately $2,445,000 for BOCES administration and program costs. The District s share of BOCES aid and refunds amounted to $1,409,000 for the year ended June 30, Financial statements for the Cattaraugus- Allegany BOCES are available at the BOCES administrative offices in Olean, New York. C. Basis of Presentation 1. District-wide Statements The Statement of Net Position and the Statement of Activities present financial information about the District s governmental activities. These statements include the financial activities of the overall government in its entirety, except those that are fiduciary. Eliminations have been made to minimize double counting of internal transactions. Governmental activities generally are financed through taxes, state aid, intergovernmental revenues, and other exchange and non-exchange transactions. Operating grants include operating-specific and discretionary (either operating or capital) grants.

65 PORTVILLE CENTRAL SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2016 Page 19 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) C. Basis of Presentation (continued) 1. District-wide Statements (continued) The Statement of Activities presents a comparison between direct expenses and program revenues for each function of the District s governmental activities. Direct expenses are those that are specifically associated with and are clearly identifiable to a particular function. Program revenues include charges paid by the recipients of goods or services offered by the programs, and grants and contributions that are restricted to meeting the operational or capital requirements of a particular program. Revenues that are not classified as program revenues, including all taxes, are presented as general revenues. 2. Fund Financial Statements The fund statements provide information about the District s funds, including fiduciary funds. Separate statements for each fund category (governmental and fiduciary) are presented. The emphasis of fund financial statements is on major governmental funds, each displayed in a separate column. The District reports the following major governmental funds: General - is the general operating fund and is used to account for all financial transactions except those required to be accounted for in another fund. Special Aid - is used to account for the proceeds of specific revenue sources such as Federal and State grants, that are legally restricted to expenditures for specified purposes, whose funds are restricted as to use. These legal restrictions may be imposed by either governments that provide the funds or outside parties. Food Service is used to account for all revenue and expenditures pertaining to the cafeteria operations. Capital Projects - is used to account for the financial resources used for acquisition, construction, or major repair of capital facilities. NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) C. Basis of Presentation (continued) 2. Fund Financial Statements (continued) Fiduciary Fund Types - This fund is used to account for fiduciary activities. Fiduciary activities are those in which the District acts as trustee or agent for resources that belong to others. These activities are not included in the District-wide financial statements, because their resources do not belong to the District, and are not available to be used. Included in the Fiduciary Fund are Private Purpose Trust Funds and Agency Funds. Agency Funds are custodial in nature (assets equal liabilities) and generally are accounted for on the cash basis which approximates the modified accrual basis of accounting. Private Purpose Trust Funds are accounted for on the accrual basis of accounting. D. Measurement Focus and Basis of Accounting The District-wide and fiduciary fund financial statements are reported using the economic resources measurement focus and the accrual basis of accounting. Revenues are recorded when earned and expenses are recorded at the time liabilities are incurred, regardless of when the related cash transaction takes place. Non-exchange transactions, in which the District gives or receives value without directly receiving or giving equal value in exchange, include property taxes, grants and donations. On an accrual basis, revenue from property taxes is recognized in the fiscal year for which the taxes are levied. Revenue from grants and donations is recognized in the fiscal year in which all eligibility requirements have been satisfied. The governmental fund statements are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Under this method, revenues are recognized when measurable and available. The District considers all revenues reported in the governmental funds to be available if the revenues are collected within the current period or soon enough thereafter to be used to pay liabilities of the current period. Nonexpendable trust funds are accounted for on the accrual basis of accounting, whereby revenue is recognized when earned and expenses are recorded when incurred. Debt Service - is used to account for the accumulation of resources and the payment of general long-term debt principal and interest.

66 PORTVILLE CENTRAL SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2016 Page 20 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) D. Measurement Focus and Basis of Accounting (continued) Expenditures are recorded when the related fund liability is incurred, except for principal and interest on general long-term debt, claims and judgments, and compensated absences, which are recognized as expenditures to the extent they have matured. General capital asset acquisitions are reported as expenditures in governmental funds. Proceeds of general long-term debt and acquisitions under capital leases are reported as other financing sources. E. Cash and Cash Equivalents For financial statement purposes, all highly liquid investments of three months or less are considered as cash equivalents. New York State law governs the District s investment policies. Resources must be deposited in FDIC-insured commercial banks or trust companies located within the State. Permissible investments include obligations of the United States Treasury, United States Agencies, repurchase agreements and obligations of New York State or its localities. Collateral is required for demand and time deposits and certificates of deposit not covered by FDIC insurance. F. Inventory Inventories of food in the School Food Service Fund are recorded at cost on a first-in, first-out basis or in the case of surplus food, at stated value which approximates market. Purchases of inventoriable items in other funds are recorded as expenditures at the time of purchase. G. Investments Investments are stated at current market value. H. Capital Assets Capital assets are reported at actual cost for acquisitions subsequent to June 30, For assets acquired to June 30, 2015, estimated historical costs, based on appraisals conducted by independent thirdparty professionals was used. Donated assets are reported at estimated fair market value at the time received. NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) H. Capital Assets (continued) Capitalization thresholds (the dollar value above which asset acquisitions are added to the capital asset accounts), depreciation methods, and estimated useful lives of capital assets reported in the Districtwide statements as follows: Capitalization Threshold Depreciation Method Estimated Useful Life Buildings $ 2,500 Straight-line 40 years Land improvements $ 2,500 Straight-line years Furniture and equipment $ 2,500 Straight-line 5-20 years Transportation vehicles $ 2,500 Straight-line 8 years I. Due To/From Other Funds The amounts reported on the Statement of Net Position for due to and from other funds represents amounts due between different fund types (governmental activities, and fiduciary funds). Eliminations have been made for amounts due to and due from within the same fund type. A detailed description of the individual fund balances at year-end is provided subsequently in these notes. J. Compensated Absences Sick leave and Retirement Incentive Pay - certain of the District's employee groups have negotiated retirement incentive benefits payable based on accumulated unused sick days. Generally the employee must have accumulated minimum years of service with the District and must be eligible for retirement under the provisions of either the teacher or employee retirement systems. The District has recorded an estimated liability in the District-wide financial statement amounting to $520,000 to recognize the cost of the incentive benefits for those employees eligible to receive such a benefit. Payment of these benefits is dependent on many factors, therefore, the timing of future payments is not readily determinable. The District believes sufficient resources and budgetary appropriations will be available as the benefits become payable in future years. The liability for compensated absences is calculated at rates in effect as of the balance sheet date and is recorded in the governmental funds.

67 PORTVILLE CENTRAL SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2016 Page 21 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) K. Unearned Revenue Unearned revenue is reported on the District's combined balance sheet. Unearned revenue arises when potential revenue does not meet both the measurable and available criteria for recognition in the current period. Unearned revenue also arises when resources are received by the District before it has a legal claim to them, as when grant monies are received prior to the incurrence of qualifying expenditures. In subsequent periods, when both recognition criteria are met, or when the District has legal claim to the resources, the liability for deferred revenue is removed and revenue is recognized. Unearned revenues recorded in the governmental funds are not recorded in the District-wide statements. L. Deferred Inflows and Outflows of Resources The District reports decreases in net assets that relate In addition to assets, the Statement of Net Position will sometimes report a separate section for deferred outflows of resources. This separate financial statement element, deferred outflows of resources, represents a consumption of net position that applies to a future period and so will not be recognized as an outflow of resources (expense/expenditure) until then. The government has two items that qualify for reporting in this category. The first item is related to pensions reported in the district-wide Statement of Net Position. This represents the effect of the net change in the District s proportion of the collective net pension asset or liability and difference during the measurement period between the District s contributions and its proportion share of total contributions to the pension systems not included in pension expense. The second item is the District contributions to the pension systems (TRS and ERS Systems) subsequent to the measurement date. In addition to liabilities, the statement of net position will sometimes report a separate section for deferred inflows of resources. This separate financial statement element, deferred inflows of resources, represents an acquisition of net position that applies to a future period(s) and so will not be recognized as an inflow of resources (revenue) until that time. The District has one item that qualify for reporting in this category and is related to pensions reported in the district-wide Statement of Net Position. This represents the effect of the net change in the District s proportion of the collective net pension liability (ERS System) and difference during the measurement periods between the District s contributions and its proportion share of total contributions to the pension systems not included in pension expense. NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) M. Post-Employment Benefits In addition to the retirement benefits described in Note 3, the District provides post-employment health insurance coverage to its retired employees and their survivors in accordance with the provisions of the employment contracts negotiated between the School District and its employee groups. Substantially all of these employees, upon reaching normal retirement age while working for the District, will have the District pay their health insurance premiums from their retirement incentive benefits (until exhausted) in accordance with their respective employment contract. In certain cases, the District is 100% responsible for this post-employment benefit, such as teachers who retire at age 55 (until they reach age 65), and full time non-teaching employees (hired prior to July 1, 1981). N. Fund Equity 1. Governmental Funds The Governmental Accounting Standards Board (GASB) has issued Statement No. 54, Fund Balance Reporting and Governmental Fund Type Definitions (GASB 54). This Statement defines the different types of fund balances that a governmental entity must use for financial reporting purposes GASB 54 requires the fund balance amounts to be reported within one of the fund balance categories listed below: A. Nonspendable Fund balance associated with assets that are inherently nonspendable in the current period because of their form or because they must be maintained intact, including inventories, prepaids, long-term loans and notes receivable, and property held for relate (unless the proceeds are restricted, committed, or assigned). Nonspendable Fund Balance includes the following category: 1. Inventory Reserve This reserve is used to limit the investment in inventory and to restrict that portion of fund balance which is unavailable for appropriation. This reserve is accounted for in the School Food Service Fund. B. Restricted Fund balance amounts that can be spent only for specific purposes stipulated by constitutional, external resource providers including creditors, grantors, contributors, etc., or through enabling legislation. Restricted Fund Balance includes the following categories:

68 PORTVILLE CENTRAL SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2016 Page 22 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) N. Fund Equity (continued) 1. Governmental Funds (continued) B. Restricted (continued) 1. Unemployment Reserve This reserve is used to accumulate funds to pay the cost of reimbursement to the New York State Unemployment Insurance Fund for payments made to claimants. The reserve may be established by Board action and is funded by budgetary appropriations and such other funds as may be legally appropriated. Within sixty days after the end of any fiscal year, excess amounts may be either transferred to another reserve or the excess applied to the appropriations next fiscal year s budget. If the District elects to convert to tax basis, excess resources in the fund over the sum sufficient to pay pending claims may be transferred to any other reserve fund. This reserve is recorded in the General Fund. 2. Employee Retirement Contribution Reserve This reserve is used to accumulate funds for employee retirement system contributions. The reserve may be established by a majority vote of the Board of Education and is accounted for in the General Fund. 3. Reserve for Employee Benefits The purpose of this reserve is to reserve funds for the payment of any accrued employee benefit due an employee upon termination of service. This reserve fund may be established by a majority vote of the board of education and is funded by budgetary appropriations and such other reserves and funds that may be legally appropriated. This reserve is accounted for in the General Fund. 4. Debt Service Reserve This reserve is used to account for proceeds from the sale of property that was financed by obligations still outstanding, interest and earnings on outstanding obligations, and remaining bond proceeds not to be utilized for the intended purpose. These reserves are accounted for in the Debt Service Fund. NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) N. Fund Equity (continued) 1. Governmental Funds (continued) B. Restricted (continued) 5. Tax Certiorari Reserve Tax Certiorari Reserve is used to establish a reserve fund for tax certiorari and to expend from the fund without voter approval. The monies held in the reserve shall not exceed the amounts which might reasonably be deemed necessary to meet anticipated judgments and claims arising out of tax certiorari proceedings Any resources deposited to the reserve which are not expended for tax certiorari proceeding in the year such monies are deposited must be returned to the General Fund on or before the first day of the fourth fiscal year after deposit of these monies. This reserve is accounted for in the General Fund. 6. Workers Compensation Reserve This reserve is used to accumulate funds for the purpose of paying for compensation benefits and other expenditures authorized under Article 2 of the New York State Workers Compensation Law, and for payment of expenditures of administering this self-insurance program. Excess reserve amounts may be either transferred to another reserve or applied to the appropriations for the next fiscal year s budget. The reserve is accounted for in the General Fund. 7. Endowment Scholarships Reserve C. Committed This reserve is used to account for endowments, scholarships and other funds held in trust by the School District. These monies and earnings must be used for the specific purpose of the original contribution. Fund balance amounts that can be used only for specific purposes determined by a formal action of the District s Board of Education, which is the District s highest level of decision-making authority. The District did not have any committed fund balance as of June 30, 2016.

69 PORTVILLE CENTRAL SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2016 Page 23 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) N. Fund Equity (continued) 1. Governmental Funds (continued) D. Assigned Fund balance intended to be used by the District for specific purposes but does not meet the criteria to be restricted or committed. Along with the District s Board of Education, the Business Manager and Treasurer has been authorized to assign fund balance amounts for specific purposes through the establishment of an encumbrance. 1. Encumbrance Accounting Encumbrance accounting, under which purchase orders, contracts, and other commitments of the expenditure of monies are recorded in order to reserve that portion of the applicable appropriation, is used in the General Fund, Special Revenue Funds, and Capital Projects Fund. If resources have already been restricted or committed for encumbrances, the encumbered amounts will be included with restricted or committed resources. If resources have not already been restricted or committed, amounts encumbered are considered assigned for the purpose of the expected expenditure. Reserve for encumbrances as of June 30, 2016 totaled $1, Appropriated Fund Equity General Fund - The amount of $400,000 has been designated as the amount estimated to be appropriated to reduce taxes for the year ending June 30, 2017 as allowed by Section 1318 of the Real Property Tax Law. 3. Reserve for Insurance Recoveries This reserve contains the difference between the insurance recovery received for the destruction of District property and the cost of replacement. As of June 30, 2016 this reserve totaled $8,930. E. Unassigned The residual classification of the general fund and includes all spendable amounts not contained in the other classifications. NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) N. Fund Equity (continued) 2. Government-wide financial statements A. Invested in Capital Assets, Net of Related Debt This designation of net position is used to accumulate the capital asset balance in the statement of net position less accumulated depreciation and outstanding balances of any bonds, mortgages, notes, or other borrowings that are attributable to the acquisition, construction, or improvement of those assets. B. Restricted This category represents amounts that can be spent only for specific purposes stipulated by constitutional, external resource providers including creditors, grantors, contributors, etc., or through enabling legislation. C. Unrestricted This category represents net position of the District not restricted for any other purpose. 3. Order of Fund Balance Spending Policy When more than one classification of fund balance of the District are eligible to be utilized for an expenditure of the District, the order in which the fund balance classifications will be utilized will be as follows: a. Restricted fund balance for which action has been taken by the Board of Education, a designated school official, or by the voters of the District, specifically designating funds to the expenditure; b. Committed fund balance for which action has been taken by the Board of Education, a designated school official, or by the voters of the District, specifically designating funds to the expenditure; c. Assigned fund balance created specifically for the expenditure (encumbered fund balance); d. Assigned fund balance within funds other than the General Fund of the District to which the expenditure relates; e. Unassigned fund balance.

70 PORTVILLE CENTRAL SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2016 Page 24 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) O. Budgetary Procedures and Budgetary Accounting 1. Budget Policies The budget policies are as follows: a) The School District administration prepares a proposed budget for approval by the Board of Education for the General Fund. b) The proposed appropriations budget is approved by the voters within the District. c) Appropriations are adopted at the program level. d) Appropriations established by adoption of the budget constitute a limitation on expenditures and encumbrances which may be incurred. Appropriations lapse at the fiscal year end. Supplemental appropriations may occur subject to legal restrictions, if the Board approves them because of a need which exists which was not determined at the time the budget was adopted. During the fiscal year ended June 30, 2016, the District did not have any supplemental appropriations. 2. Budget Basis for Accounting Budgets are adopted annually on a basis consistent with the fund financial statements and the modified accrual basis of accounting. Appropriations authorized for the current year are increased by the amount of encumbrances carried forward from the prior year. The budget and actual comparison for the Food Service Fund reflects budgeted and actual amounts for funds with legally authorized (appropriated) budgets. Budgetary controls for the special revenue and capital funds are established in accordance with the applicable grant agreement or authorized project limit which may cover a period other than the District's fiscal year. Consequently, the budgets for such funds have been excluded from the combined schedule of revenue, expenditures and changes in fund equity - budget and actual. NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) P. Property Taxes 1. Calendar Real property taxes are levied annually by the Board of Education no later than September 1 and become a lien on October Enforcement Uncollected real property taxes are subsequently enforced by the Counties, in which the School District resident is located. An amount representing uncollected real property taxes transmitted to the County for enforcement is paid by the County to the School District no later than the forthcoming April 1. Q. Interfund Transfers The operations of the School District give rise to certain transactions between funds, including transfers to provide services and construct assets. R. Deferred Compensation Plan Portville Central School District offers its employees a deferred compensation plan created in accordance with Internal Revenue Code Section 403(b) - Tax Sheltered Annuities (TSA). The plan is available to all school employees and permits them to defer taxation on a portion of their salary until future years. The deferred portion is withheld by the District and disbursed to the employees TSA plan administrator. The TSA plans are owned by the individuals and held in trust by the plan administrator. The School District has a fiduciary responsibility for funds withheld and remittance to trustees. S. Estimates Management uses estimates and assumptions in preparing financial statements. Those estimates and assumptions affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities and the reported revenues and expenses. T. Reclassifications Certain prior year amounts have been reclassified to conform with the current year presentation.

71 PORTVILLE CENTRAL SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2016 Page 25 NOTE 2 - EXPLANATION OF CERTAIN DIFFERENCES BETWEEN GOVERNMENTAL FUND STATEMENTS AND DISTRICT-WIDE STATEMENTS Due to the differences in the measurement focus and basis of accounting used in the governmental fund statements and the District-wide statements, certain financial transactions are treated differently. The basic financial statements contain a full reconciliation of these items. The differences result primarily from the economic focus of the Statement of Activities, compared with the current financial resources focus of the governmental funds. A. Total Fund Balances of Governmental Funds vs. Net Position of Governmental Activities Total fund balances of the District s governmental funds differs from net position of governmental activities reported in the Statement of Net Position. This difference primarily results from the additional long-term economic focus of the Statement of Net Position versus the solely current financial resources focus of the governmental fund Balance Sheet. B. Statement of Revenues, Expenditures and Changes in Fund Balance vs. Statement of Activities Differences between the governmental funds Statement of Revenues, Expenditures and Changes in Fund Balance and the Statement of Activities fall into one of three broad categories. The amounts shown below represent: 1. Long-term Revenue Differences Long-term revenue differences arise because governmental funds report revenues only when they are considered available, whereas the Statement of Activities reports revenues when earned. Differences in long-term expenses arise because governmental funds report on a modified accrual basis, whereas the accrual basis of accounting is used on the Statement of Activities. 2. Capital Related Differences Capital related differences include the difference between proceeds for the sale of capital assets reported on governmental fund statements and the gain or loss on the sale of assets as reported on the Statement of Activities, and the difference between recording an expenditure for the purchase of capital items in the governmental fund statements and depreciation expense on those items as recorded in the Statement of Activities. NOTE 2 - EXPLANATION OF CERTAIN DIFFERENCES BETWEEN GOVERNMENTAL FUND STATEMENTS AND DISTRICT-WIDE STATEMENTS (continued) 3. Long-term Debt Transaction Differences Long-term debt transaction differences occur because both interest and principal payments are recorded as expenditures in the governmental fund statements, whereas interest payments are recorded in the Statement of Activities as incurred, and principal payments are recorded as a reduction of liabilities in the Statement of Net Position. NOTE 3 - DETAIL NOTES ON ALL FUNDS I. Cash The Portville Central School District s investment policies are governed by State statutes. School District monies must be deposited in FDIC-insured commercial banks or trust companies located within the State. The District treasurer is authorized to use demand accounts and certificates of deposits. Permissible investments include obligations of the U.S. Treasury and U.S. Agencies, repurchase agreements, and obligations of New York State or its localities. Collateral is required for demand and time deposits and certificates of deposit not covered by Federal Deposit Insurance. Obligations that may be pledged as collateral are obligations of the United States and its agencies and obligations of the state and its municipalities and School Districts. Custodial credit risk is the risk that in the event of a bank failure the District s deposits may not be returned to it. While the District does not have a specific policy with regards to custodial credit risk, New York State statutes govern the District s investment policies. At June 30, 2016, the District s bank deposits were fully collateralized. A. Deposits Deposits are valued at cost or cost plus interest and are categorized as either: (1) Insured through the Federal Deposit Insurance Corporation or collateralized with securities held by the entity or by its agent in the entity's name; (2) Collateralized with securities held by the pledging financial institution's trust department or agency in the entity's name; or (3) Uncollateralized

72 PORTVILLE CENTRAL SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2016 Page 26 NOTE 3 - DETAIL NOTES ON ALL FUNDS (continued) II. A. Deposits (continued) Total financial institution (bank) balances at June 30, 2016 per the bank were approximately $5,919,000. Deposits are categorized as follows: Carrying Category 1 Category 2 Category 3 Value $727,000 $ 5,192,000 $ - $5,919,000 B. Investments Investments are stated at current market value and are categorized as either: (1) Insured or registered, or investments are held by the School District or by the School District's agent in the School District's name, (2) Uninsured and unregistered, with the investments held by the financial institutions trust department in the District's name, Market Value Mutual Funds $ 227,480 These investments are held in the School District s name. As of June 30, 2016, the cost of the District s investments approximated market value. The market value of the investments as of June 30, 2016 is based on unadjusted quoted prices in active markets for identical assets and liabilities. Interfund Transactions Interfund balances and transactions as of and during the year ended June 30, 2016 are as follows: Interfund Receivable Interfund Payable General Fund $ 197,496 $ 20,712 Food Service Fund 20,712 57,956 Special Aid Fund - 134,573 Debt Service Fund 56 - Capital Fund - 20 Fiduciary Funds - 5,003 Total $ 218,264 $ 218,264 Interfund Revenue Interfund Expenditures Special Aid Fund $ 10,345 $ - Food Service Fund 7,428 - Debt Service Fund - 97,971 Capital Projects Fund General Fund 97,971 18,078 Total $ 116,049 $ 116,049 NOTE 3 - DETAIL NOTES ON ALL FUNDS (continued) II. Interfund Transactions (continued) During the year ended June 30, 2016, the District transferred $10,345 from the general fund to the special aid fund to cover the local portions of grant expenses incurred in the current year. In addition, $305 was transferred from the general fund to the capital project fund to pay for costs associated with bus purchases. Lastly, the District transferred $7,428 from the general fund to the food service fund to subsidize current year losses from operations in the cafeteria. III. Receivables Receivables at June 30, 2016 consisted of the following and management has deemed the amounts to be fully collectible. Fund Description Amount Special Aid State and Federal Aid $ 104,344 Food Service State and Federal Aid 17,607 Food Service Other Receivables 6,163 General State and Federal Aid 219,965 General Due from Other Governments 9,839 General Other Receivables 165,662 $ 523,580 IV. Capital Assets Capital asset balances and activity for the year ended June 30, 2016 were as follows: Beginning Balance 06/30/15 Net change Ending Balance 06/30/16 Governmental activities: Capital assets that are not depreciated: Land $ 55,292 $ - $ 55,292 Construction-inprogress 508, ,004 1,492,133 Capital assets that are depreciated: Buildings and improvements 32,288,582-32,288,582 Furniture and equipment 5,443, ,205 5,544,850 Total depreciable historical cost 37,732, ,205 37,833,432 Less accumulated depreciation: Buildings and improvements 13,273, ,556 14,130,849 Furniture and equipment 4,231, ,490 4,496,778 Total accumulated depreciation 17,504,581 $1,123,046 18,627,627 Total net book value $20,791,067 $20,753,230

73 PORTVILLE CENTRAL SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2016 Page 27 NOTE 3 - DETAIL NOTES ON ALL FUNDS (continued) IV. Capital Assets (continued) Depreciation expense was charged to governmental functions during the current year as follows: General support $ 236,281 Instruction 901,812 Pupil transportation 113,501 Food Service Program 17,176 $ 1,268,770 The District had capital additions in the amount of $1,212,134. V. Liabilities A. Pension Plans 1. Plan Descriptions and Benefits Provided a. Teachers Retirement System (ERS) The District participates in the New York State Teachers Retirement System (TRS). This is a cost- sharing multiple-employer retirement system. The System provides retirement benefits as well as, death and disability benefits to plan members and beneficiaries as authorized by the Education Law and the Retirement and Social Security Law of the State of New York. The System is governed by a 10 member Board of Trustees. System benefits are established under New York State Law. Membership is mandatory and automatic for all full-time teachers, teaching assistants, guidance counselors and administrators employed in New York Public Schools and BOCES who elected to participate in TRS. Once a public employer elects to participate in the System, the election is irrevocable. The New York State Constitution provides that pension membership is a contractual relationship and plan benefits cannot be diminished or impaired. Benefits can be changed for future members only by enactment of a State statute. Additional information regarding the System, may be obtained by writing to the New York State Teachers Retirement System, 10 Corporate Woods Drive, Albany, NY or by referring to the NYSSTR Comprehensive Annual Financial report which can be found on the System s website at NOTE 3 DETAIL NOTES ON ALL FUNDS (continued) V. Liabilities (continued) A. Pension Plans (continued) 1. Plan Descriptions and Benefits Provided (continued) b. Employees Retirement System (ERS) The District participates in the New York State and Local Employees Retirement System (ERS). This is a cost-sharing multiple-employer retirement system. The System provides retirement benefits as well as death and disability benefits. The net position of the System is held in the New York State Common Retirement Fund (the Fund), which was established to hold all net assets and record changes in plan net position allocated to the System. The Comptroller of the State of New York serves as the trustee of the Fund and is the administrative head of the System. System benefits are established under the provisions of the New York State Retirement and Social Security Law (RSSL). Once a public employer elects to participate in the System, the election is irrevocable. The New York State Constitution provides that pension membership is a contractual relationship and plan benefits cannot be diminished or impaired. Benefits can be changed for future members only by enactment of a State statute. The District also participates in the Public Employees Group Life Insurance Plan (GLIP), which provides death benefits in the form of life insurance. The System is included in the State s financial report as a pension trust fund. That report, including information with regard to benefits provided, may be found at or by writing to the NYS and Local Retirement System, 110 State Street, Albany, NY Contributions The Systems are noncontributory except for employees who joined after July 27, 1976, who contribute 3 percent of their salary for the first ten years of membership, and employees who joined on or after January 1, 2010 who generally contribute 3.0 to 3.5 percent of their salary for their entire length of service. In addition, employee contribution rates under ERS tier VI vary based on a sliding salary scale. For ERS, the Comptroller annually certifies the actuarially determined rates expressly used in computing the employers contributions based on salaries paid during the Systems fiscal year ending March 31. For TRS, contribution rates are established annually by the NYS Teachers Retirement Board pursuant to Article 11 of the Education law.

74 PORTVILLE CENTRAL SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2016 Page 28 NOTE 3 - DETAIL NOTES ON ALL FUNDS (continued) V. Liabilities (continued) A. Pension Plans (continued) 2. Contributions (continued) Contributions for the current year and two preceding years were equal to 100 percent of the contributions required, and were as follows: Year TRS ERS 2016 $ 853,000 $ 275, , , , ,000 ERS has provided additional disclosures through entities that elected to participate in Chapter 260, 57, and 105. Since 1989, the TRS billings have been based on Chapter 62 of the Laws of 1989 of the State of New York. This legislation requires participating employers to make payments on a current basis. Over the years, State Legislature authorized local governments to make available retirement incentive programs to qualifying employees. The District had no expenditures incurred or liability accrued related to the retirement incentive liabilities as of and for the year ended June 30, ERS has provided additional disclosures through entities that elected to participate in Chapter 260, 57, and 105. NOTE 3 - DETAIL NOTES ON ALL FUNDS (continued) V. Liabilities (continued) A. Pension Plans (continued) 3. Pension Liabilities, Pension Expense, and Deferred Outflows of Resources and Deferred Inflows of Resources Related to Pensions At June 30, 2016, the District reported the following asset/(liability) for its proportionate share of the net pension asset /(liability) for each of the Systems. The net pension asset/(liability) was measured as of March 31, 2016 for ERS and June 30, 2015 for TRS. The total pension asset/(liability) used to calculate the net pension asset/(liability) was determined by an actuarial valuation. The District s proportion of the net pension asset/(liability) was based on a projection of the District s long-term share of contributions to the Systems relative to the projected contributions of all participating members, actuarially determined. This information was provided by the ERS and TRS Systems in reports provided to the District. ERS TRS Actuarial valuation date 3/31/16 6/30/15 Net pension asset/(liability) $ (1,001,567) $ 3,433,030 District's portion of the Plan's total net pension asset/(liability) % % For the year ended June 30, 2016, the District recognized pension expense of $368,420 for ERS and the actuarial value ($227,105) for TRS. At June 30, 2016 the District s reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources: Deferred Outflows of Resources Deferred Inflows of Resources ERS TRS ERS TRS Differences between expected and actual experience $ 5,061 $ - $ 118,719 $ 95,144 Changes of assumptions 267, Net difference between projected and actual earnings on pension plan investments 594, ,085,199 Changes in proportion and differences between the Districts contributions and proportionate share of contributions 40,278 14, District s contributions subsequent to the measurement date 66, , Total $ 973,134 $ 718,056 $ 118,719 $ 1,180,721

75 PORTVILLE CENTRAL SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2016 Page 29 NOTE 3 - DETAIL NOTES ON ALL FUNDS (continued) V. Liabilities (continued) A. Pension Plans (continued) 3. Pension Liabilities, Pension Expense, and Deferred Outflows of Resources and Deferred Inflows of Resources Related to Pensions (continued) District contributions subsequent to the measurement date which will be recognized as a reduction of the net pension liability/asset in the year ended June 30, Other amounts reported as deferred outflows of resources and deferred inflows of resources related to pensions, along with contributions subsequent to the measurement date, will be recognized in pension expense as follows: ERS TRS Year ended: 2016 $ 266,188 $ 267, ,666 (436,051) ,666 (436,051) , , (10,207) Thereafter - (29,655) 4. Actuarial Assumptions The total pension liability as of the measurement date was determined by using an actuarial valuation as noted in the table below, with update procedures used to roll forward the total pension liability to the measurement date. The actuarial valuations used the following actuarial assumptions: Significant actuarial assumptions used in the valuations were as follows: ERS TRS Measurement date 3/31/16 6/30/15 Actuarial valuation date 4/1/15 6/30/14 Interest rate 7% 8% Salary scale 3.8% average 4.01% % Decrement tables 4/1/10 3/31/15 System s Experience 7/1/05 6/30/10 System s Experience Inflation rate 2.5% 3% NOTE 3 - DETAIL NOTES ON ALL FUNDS (continued) V. Liabilities (continued) A. Pension Plans (continued) 4. Actuarial Assumptions (continued) For ERS, annuitant mortality rates are based on April 1, 2010 March 31, 2015 System s experience with adjustments for mortality improvements based on MP For TRS, annuitant mortality rates are based on member experience with adjustments for mortality improvements based on Society of Actuaries Scale AA. For ERS, the actuarial assumptions used in the April 1, 2015 valuation are based on the results of an actuarial experience study for the period April 1, 2010 March 31, For TRS, the actuarial assumptions used in the June 30, 2014 valuation are based on the results of an actuarial experience study for the period July 1, 2005 June 30, The long term rate of return on pension 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 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 each the target asset allocation percentage and by adding expected inflation. Best estimates of the arithmetic real rates of return for each major asset class included in the target asset allocation are summarized below: ERS TRS Measurement date 3/31/16 6/30/15 Asset Type: Domestic Equity 38% 37% International Equity 13% 18% Private Equity 10% -% Real Estate 8% 10% Other investments 9% 7% Domestic fixed income securities -% 17% Global fixed income securities -% 2% Bonds and Mortgages 18% 8% Cash and short-term 2% 1% Inflation-indexed bonds 2% -% Total: 100% 100%

76 PORTVILLE CENTRAL SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2016 Page 30 NOTE 3 - DETAIL NOTES ON ALL FUNDS (continued) V. Liabilities (continued) A. Pension Plans (continued) 5. Discount Rate The discount rate used to calculate the total pension liability was 7% for ERS and 8% for TRS. The projection of cash flows used to determine the discount rate assumes that contributions from plan members will be made at the current contribution rates and that contributions from employers will be made at statutorily required rates, actuarially. Based upon the assumptions, the Systems fiduciary net position was projected to be available to make all projected future benefit payments of current plan members. Therefore the long term expected rate of return on pension plan investments was applied to all periods of projected benefit payments to determine the total pension liability. 6. Sensitivity of the Proportionate Share of the Net Pension Liability to the Discount Rate Assumption The following presents the District s proportionate share of the net pension liability calculated using the discount rate of 7% for ERS and 8% for TRS, as well as what the District s proportionate share of the net pension asset/(liability) would be if it were calculated using a discount rate that is 1-percentage point lower (6% for ERS and 7% for TRS) or 1-percentage point higher (8% for ERS and 9% for TRS) than the current rate: ERS 1% Decrease (6%) Current Assumption (7%) 1% Increase (8%) Employer s proportionate share of the net pension asset (liability) $ (2,258,462) $ (1,001,567) $ 60,455 TRS 1% Decrease (7%) Current Assumption (8%) 1% Increase (9%) Employer s proportionate share of the net pension asset (liability) $ (234,177) $ 3,433,030 $ 6,560,387 NOTE 3 - DETAIL NOTES ON ALL FUNDS (continued) V. Liabilities (continued) A. Pension Plans (continued) 7. Pension Plan Fiduciary Net Position The components of the current-year net pension asset/(liability) of the employers as of the respective valuation dates, were as follows: (Dollars in Thousands) ERS TRS Valuation date 3/31/16 6/30/15 Employers total pension liability $ 172,303,544 $ 99,332,104 Plan net position $ 156,253,265 $ 109,718,917 Employers net pension asset/(liability) $ (16,050,279) $ 10,386,813 Ratio of plan net position to be Employers total pension asset/(liability) 90.7% % 8. Payables to the Pension Plan For ERS, employer contributions are paid annually based on the System s fiscal year which ends on March 31st. Accrued retirement contributions as of June 30, 2016 represent the projected employer contribution for the period of April 1, 2016 through June 30, 2016 based on paid ERS wages multiplied by the employer s contribution rate, by tier. Accrued retirement contributions as of June 30, 2016 amounted to $66,522. For TRS, employer and employee contributions for the fiscal year ended June 30, 2016 are paid to the System in September, October and November 2016 through a state aid intercept. Accrued retirement contributions as of June 30, 2016 represent employee and employer contributions for the fiscal year ended June 30, 2016 based on paid TRS wages multiplied by the employer s contribution rate, by tier and employee contributions for the fiscal year as reported to the TRS System. Accrued retirement contributions as of June 30, 2016 amounted to $729,048 (employer contribution $703,224 and employee contributions of $25,824).

77 PORTVILLE CENTRAL SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2016 Page 31 NOTE 3 - DETAIL NOTES ON ALL FUNDS (continued) V. Liabilities (continued) B. Other Post-Employment Benefits Plan Description The District maintains a single-employer defined benefit healthcare plan (the Plan). The Plan provides medical and vision insurance benefits to eligible retires and their spouses. Benefit provisions are based on bargaining agreements as negotiated from time to time. The Plan does not issue a publicly available financial report. Eligibility for the Plan is established by the District and specified in the District s employment contracts. Funding Policy The required contribution is based on projected payas-you-go financing requirements, with no current funding of actuarially determined liabilities. Annual OPEB Cost and Net OPEB Obligation The District s annual other post-employment benefit (OPEB) expense is calculated based on the annual required contribution of the District (ARC), an amount actuarially determined in accordance with GASB 45. The ARC represents a level funding that, if paid on an ongoing basis, is projected to cover the normal cost each year and to amortize unfunded actuarial liabilities over 15 years. The following table summarizes the District s annual OPEB cost for 2016, the amount actually contributed to the Plan, and changes in the District s net OPEB obligation: Normal Cost $ 147,461 Amortization of unfunded actuarial accrued liability 497,040 Amortization on adjustment (89,381) Interest adjustment 29,003 Annual required contribution adjustment 54, ,146 Contributions made (504,803) Increase in net OPEB obligation 133,343 Net OPEB obligation beginning of year 1,200,509 Net OPEB obligation - end of year $ 1,333,852 NOTE 3 - DETAIL NOTES ON ALL FUNDS (continued) V. Liabilities (continued) B. Other Post-Employment Benefits (continued) The District s annual OPEB cost, the percentage of annual OPEB cost contributed to the plan, and the net OPEB obligation for 2016, 2015 and 2014 are as follows: Fiscal Year Ended Annual OPEB Cost Annual OPEB Cost Contributed Net OPEB Obligation 6/30/16 $638, % $1,333,852 6/30/15 684, % 1,200,509 6/30/14 826, % 1,108,598 Funding Status and Funding Progress As of June 30, 2016, the actuarial accrued liability for benefits was $6,976,305 all of which was unfunded. The covered payroll (annual payroll of active employees covered under the plan) was $6,376,905 and the ratio of unfunded actuarial liability to the covered payroll was 109.4%. Funding Status and Funding Progress (continued) Actuarial valuations of an ongoing plan involve estimates of the value of reported amounts and assumptions about the probability of occurrence of events into the future. Examples include assumptions about future employment, mortality, and the healthcare cost trend. Amounts determined regarding the funded status of the Plan and the annual ARC of the District are subject to continual revision as actual results compared with past expectations and new estimates are made about the future. The schedule of funding progress presents multi-year trend information that shows whether the actuarial value of plan assets are increasing or decreasing over time relative to the actuarial accrued liabilities of benefits. Actuarial Methods and Assumptions Projection of benefits for financial reporting purposes are based on the Plan as understood by the District and Plan members and include the types of benefits provided at the time of each valuation and the historical pattern of sharing benefit costs between the District and Plan members. The actuarial methods and assumptions used included techniques that are designed to reduce the effects of short-term volatility in actuarial accrued liabilities and the actuarial value of assets, consistent with the long-term perspective of the calculations. Valuation assumptions are as follows:

78 PORTVILLE CENTRAL SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2016 Page 32 NOTE 3 - DETAIL NOTES ON ALL FUNDS (continued) V. Liabilities (continued) B. Other Post-Employment Benefits (continued) Retirement age for active employees based on the historical average retirement age for the covered group. Marital status Based on actual health coverage election for active employees and retirees, with male spouses assumed to be three years older than female spouses. Marital status of members at the calculation date was assumed to continue throughout retirement. Mortality Life expectancies were based on the RP Combined Mortality Table projected to 2010 using Scale AA. Turnover Assumed.5% annually to retirement eligibility. Healthcare cost trend rate The initial trend rate was selected based on a combination of employer history, national trend surveys, and professional judgment. The ultimate trend rate was selected based on historical medical CPI information. A rate of 9% initially, reduced to an ultimate rate of 5% after nine years, was used. Health insurance premiums 2015 health insurance premiums are used as the basis for calculation of the present value of total benefits to be paid. Discount rate and cost method - Based on the historical and expected returns of the District s general assets, a discount rate of 4.5% was used. In addition, the projected unit credit actuarial cost method with linear prorating to decrement was used. Amortization The unfunded actuarial accrued liability is being amortized as a level dollar amount on an open basis over fifteen years. C. Indebtedness 1. Short-Term Debt a. Bond Anticipation Notes NOTE 3 - DETAIL NOTES ON ALL FUNDS (continued) C. Indebtedness (continued) 1. Short-Term Debt (continued) a. Bond Anticipation Notes (continued) On September 18, 2014, the District issued bond anticipation notes in the amount of $607,329. The notes carried an interest rate of.89% and matured on September 18, On September 17, 2015, the District issued bond anticipation notes in the amount of $612,739. These notes were used to pay down $405,404 on the retired bond anticipation notes (with $201,925 redeemed from appropriations) and provide $207,335 in additional capital to purchase transportation vehicles. The new notes carry an interest rate of 1.08% and are scheduled to mature on September 17, On April 7, 2016, the District issued bond anticipation notes in the amount of $2,500,000. The notes carry an interest rate of 1.5% and mature on August 12, The bond anticipation notes were issued to pay for current capital project expenditures. b. Short-Term Debt Interest The District had $5,405 of short-term interest for the year ended June 30, Long-Term Debt a. Debt Limit At June 30, 2016, the total indebtedness represents approximately 46% of its debt limit. Notes issued in anticipation of proceeds from the subsequent sale of bonds is recorded as a current liability of the fund that will actually receive the proceeds from the issuance of the bonds. Such notes may be classified as part of the financial statements when (1) the intention is to refinance the debt on a longterm basis and (2) the intention can be substantiated through a post balance sheet issuance of long-term debt or by an acceptable financing agreement. State law requires that bond anticipation notes issued for capital purposes be converted to longterm financing within five years after the original issue date.

79 PORTVILLE CENTRAL SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2016 Page 33 NOTE 3 - DETAIL NOTES ON ALL FUNDS (continued) V. Liabilities (continued) C. Indebtedness (continued) 1. Long-Term Debt (continued) b. Serial Bonds The District borrows money in order to acquire or construct buildings and improvements. This enables the cost of these capital assets to be borne by the present and future taxpayers receiving the benefit of capital assets. These long-term liabilities, which are full faith and credit debt of the District, are recorded in the Statement of Net Position. The provisions to be made in future budgets for capital indebtedness represents the amount, exclusive of interest, authorized to be collected in future years from taxpayers and others for liquidation of the long-term liabilities. On October 5, 2000 Portville Central School District issued serial bonds in the amount of $4,500,000. The bonds carried interest at rate of four and eighty hundredths percent (4.80%) per annum and were set to mature on June 15, During the fiscal year ended June 30, 2003, the District refunded these bonds in the amount of $5,035,000 with a $78,986 bond premium. On March 15, 2002 the District issued serial bonds in the amount of $9,728,793 carrying interest at a rate of three and seventy-five hundredths percent (3.75%) per annum and were set to mature on June 15, During the fiscal year ended June 30, 2011, the District refunded these bonds. NOTE 3 - DETAIL NOTES ON ALL FUNDS (continued) V. Liabilities (continued) C. Indebtedness (continued) 2. Long-Term Debt (continued) b. Serial Bonds (continued) On June 25, 2009, the District issued serial bonds in the amount of $2,755,000 with rates ranging from three and one-eighth per centum (3.18%) to four and one-eighth per centum (4.18%). The bonds mature on June 15, On June 27, 2012, the District issued serial bonds in the amount of $5,600,000 with rates ranging from two percent (2.00%) to three and seventy-five hundredths percent (3.75%). The bonds mature on June 15, c. Changes The changes in the School District's indebtedness during the year ended June 30, 2016 and 2015 are summarized as follows: Balance June 30, 2016 Balance June 30, Serial Bonds $ 1,620,000 $ 1,800, Serial Bonds refunding, net 792,236 1,559, Serial Bonds 4,483,951 4,806,427 Other postemployment benefits 1,333,852 1,200,509 Net pension liability 1,001, ,904 Compensated absences 520, ,000 $ 9,751,606 $ 10,117,920

80 PORTVILLE CENTRAL SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2016 Page 34 NOTE 3 - DETAIL NOTES ON ALL FUNDS (continued) V. Liabilities (continued) C. Indebtedness (continued) 2. Long-Term Debt (continued) c. Changes (continued) During the year, the District made principal payments on its serial bonds in the amount of $1,250,000 and had amortization on bond premiums in the amount of $19,320. The net change in compensated absences was a net decrease of $32,000 during the fiscal year ended June 30, The net change in other post-employment benefits was an increase of $133,343 during the fiscal year ended June 30, The net pension liability increased $801,663 during the current year. d. Maturity 1. The following is a summary of serial bonds indebtedness: 2. Outstanding at Description of Issue June 30, 2016 Serial Bonds, issued in 2009 with a maturity date of 2024, with interest rates ranging from 3.18% %. $ 1,620,000 Serial Bonds, issued in 2010 with a maturity date of 2017, with interest rates ranging from 2%-4%. Proceeds used to refund Serial Bonds ,000 Plus: Costs of refunding, net of premiums on bonds 12, ,236 Serial Bonds, issued in 2012 with a maturity date of 2032, with interest rates ranging from 2%- 3.75%. 4,380,000 Plus: Costs of issuing, net of premiums on bonds 103,951 4,483,951 $ 6,896,187 NOTE 3 - DETAIL NOTES ON ALL FUNDS (continued) V. Liabilities (continued) C. Indebtedness (continued) 2. Long-Term Debt (continued) d. Maturity (continued) 2. The following is a summary of maturing debt service requirements for serial bonds and retirees health insurance: Serial Bonds 2012 Construction Bond Year Principal Interest 2017 $ 325,000 $ 133, , , , , , , ,000 92, ,995, , ,000 62, ,000 2,250 Total $ 4,380,000 $ 924,057 Serial Bonds 2010 Construction Bond Year Principal Interest 2017 $ 780,000 $ 23,400 Total $ 780,000 $ 23,400 Serial Bonds 2009 Construction Bond Year Principal Interest 2017 $ 190,000 $ 66, ,000 58, ,000 50, ,000 42, ,000 33, ,000 45,376 Total $ 1,620,000 $ 298,446 e. Long-Term Debt Interest Interest expense on long-term debt amounted to $258,525 for the year ended June 30, 2016.

81 PORTVILLE CENTRAL SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2016 Page 35 NOTE 3 - DETAIL NOTES ON ALL FUNDS (continued) V. Liabilities (continued) C. Indebtedness (continued) 3. Refunding of Long-Term Debt In prior years, the District defeased other general obligations and other bonds by placing the proceeds of new bonds in an irrevocable trust to provide for future debt service payments on the old bonds. Accordingly, the trust account assets and liability for the defeased bonds are not included in the District s financial statements. 4. Debt Issuance Costs, Premium and Amortization Net premiums resulting from bond and other debt refinancing are being amortized over the life of the relating debt using the interest method. These premiums are accordingly included in the outstanding principal balances for the bonds. Debt issuance costs related to the bonds are expensed in accordance with GASB 65. VI. Fund Equity A. Fund Equity The District s fund equity is comprised of various components. Balance Category/Fund Description June 30, 2016 Nonspendable: Food Service Inventory $ 14,960 Restricted: General Reserve for employee benefits $ 995,526 Reserve for retirement system contributions 549,535 Unemployment insurance reserve 200,000 Capital reserve 350,000 Reserve for workers compensation 31,411 $ 2,126,472 Debt Service Reserve for debt service $ 105,035 Trust and Agency Reserve for endowment scholarships $ 227,480 Assigned: General Reserve for encumbrances $ 1,878 Reserve for insurance recoveries 8,930 Appropriated fund balance 400,000 $ 410,808 NOTE 3 - DETAIL NOTES ON ALL FUNDS (continued) VI. Fund Equity (continued) B. Accumulated Deficit The District s capital project fund had an accumulated deficit in the amount of $1,876,192 as of June 30, It is not uncommon for school districts to have deficit fund balances in the capital project funds as a result of short-term debt being recorded as liabilities until they are converted to long-term debt (serial bonds) or redeemed at which time such proceeds are recorded as other financing sources revenue. C. District-wide Net Position Net position of the District includes restricted net position of $2,231,507 which represent restricted amounts in the general and debt service funds as presented above. VII. Commitments and Contingencies A. Risk Financing and Related Insurance 1. General Information The Portville Central School District is exposed to various risks of loss related to torts, theft of, damage to, and destruction of assets; errors and omissions; natural disasters, etc. These risks are covered by commercial insurance purchased from independent third parties. Settled claims from these risks have not exceeded commercial insurance coverage for the past two years. 3. Risk Sharing Pools For its employee health and accident coverage, Portville Central School District is a participant in the Cattaraugus-Allegany Regional Medical Plan, a public entity risk pool operated for the benefit of 23 individual governmental units located within Allegany and Cattaraugus Counties. The School District pays monthly premiums to the Plan for this health coverage. The Plan is authorized to assess supplemental premiums to the participating districts. The Plan provides coverage for its members up to $100,000 per insured event. The Cattaraugus- Allegany Regional Medical Plan obtains independent coverage for insured events in excess of this amount.

82 PORTVILLE CENTRAL SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2016 Page 36 NOTE 3 - DETAIL NOTES ON ALL FUNDS (continued) VII. Commitments and Contingencies (continued) A. Risk Financing and Related Insurance (continued) 4. Risk Sharing Pools (continued) The Portville Central School District also participates in a risk sharing pool, Cattaraugus- Allegany BOCES, to insure Workers' Compensation claims. This is a public entity risk pool created under Article 5, Workers' Compensation Law, to finance liability and risks related to Workers' Compensation claims. Administrators of the Plan have indicated that the Plan s reserves are believed to be in excess of estimated unbilled and open claims. B. Federal and State Grants The District has received grants reported in the special aid fund which are subject to audit by agencies of the state and federal government. Such audits may result in disallowances and a request for a return of funds. Based on past audits and no known significant areas of non-compliance, the District believes disallowances, if any, will not be material. C. Compensated Absences The District does not accrue a liability for accumulating, non-vesting sick leave, since payment is based on an uncontrollable future event (sickness). In accordance with the provisions of Governmental Accounting Standards Board Statement No. 16, the value for accumulating, non-vesting sick leave is considered a contingent liability. The District reports approximately $470,000 as of June 30, 2016 for accumulating non-vesting sick leave. D. Contingencies The District in the normal course of its operations is involved in litigation and arbitration cases. During the current year a lawsuit was filed against the District. This matter has been referred to the District s insurance company and the District is vigorously defending this action. This case is in the discovery phase and the District feels any loss resulting from this matter would be fully covered by its insurance coverage. NOTE 4 - CAPITAL PROJECTS On May 20, 2014, the voters of the District authorized a new capital project in the amount of $4,041,920. The project includes general reconstruction to its school buildings and bus garage, roof replacement, along with an energy efficiency project. Total expenditures incurred during the year ended June 30, 2016 and 2015, were $984,004 and $349,976, respectively. During the fiscal year ended June 30, 2016, the District purchased transportation vehicles in the amount of $204,835 which was recorded in the capital projects fund. NOTE 5 PRIOR PERIOD ADJUSTMENTS For the fiscal year ended June 30, 2015, the District implemented GASB Statement No. 68 Accounting and Financial Reporting for Pensions Amendment to GASB Statement No. 27. The implementation of Statement No. 68 resulted in the reporting of an asset, deferred outflow of resources, liability and deferred inflow of resources related to the District s participation in the New York State Teachers and Employees retirement systems. The District s net position has been restated as follow Net position beginning of year, as previously stated $ 13,586,506 GASB Statement No. 68 implementation Beginning System asset - Teachers' Retirement System 220,213 Beginning System liability - Employees' Retirement System (267,399) Beginning deferred outflow of resources for contributions subsequent to the measurement date Teachers' Retirement System 804,769 Employees' Retirement System 75,100 Total prior period adjustments 832,683 Net position beginning of year, as restated $ 14,419,189 NOTE 6 SUBSEQUENT EVENTS Subsequent events were evaluated though September 20, 2016, which is the date the financial statements were available to be issued.

83 SUPPLEMENTARY INFORMATION

84 PORTVILLE CENTRAL SCHOOL DISTRICT COMBINING SCHEDULE OF REVENUE AND EXPENDITURES AND CHANGES IN FUND EQUITY - BUDGET AND ACTUAL - GOVERNMENTAL FUNDS FOR THE YEAR ENDED JUNE 30, 2016 Revenues Current Over (Under) Original Final Year's Revised Budget Budget Revenue Budget Local Sources: Real property taxes and tax items $ 4,383,288 $ 4,383,288 $ 4,377,277 $ (6,011) Real property tax items 10,000 10,000 12,146 2,146 Charges for services 577, , ,350 (6,829) Use of money and property 15,742 15,742 5,042 (10,700) Sale of property and compensation for loss 22,500 22,500 9,770 (12,730) Miscellaneous 172, , ,873 3,873 State Sources: Basic formula 9,638,613 9,638,613 9,482,133 (156,480) BOCES 1,430,253 1,430,253 1,273,219 (157,034) Textbooks 46,209 46,209 46,018 (191) All other aid 40,336 40,336 40,212 (124) Federal Sources: Medicaid reimbursement 50,000 50,000 53,802 3,802 Total revenue 16,386,120 16,386,120 16,045,842 (340,278) Other Sources Operating transfer in 247, ,971 97,971 (150,000) Total revenue and other sources 16,634,091 16,634,091 $ 16,143,813 $ (490,278) Appropriated fund equity and carryover encumbrances 400, ,634 Total revenue, other sources and appropriated fund equity $ 17,034,091 $ 17,063,725 See accompanying independent auditor s report.

85 Schedule SS1 Page 37 Expenditures Current Original Final Year's Unencumbered Budget Budget Expenditures Encumbrances Balances General Support: Board of education $ 10,075 $ 15,957 $ 15,673 $ - $ 284 Central administration 192, , , Finance 277, , ,011 1,611 5,009 Staff 283, , ,920-45,667 Central services 1,364,586 1,404,276 1,216, ,939 Special items 264, , ,309-15,040 Instructional: Instruction, administration and improvement 533, , ,837-12,040 Teaching - regular school 4,463,212 4,383,647 4,201, ,971 Programs for children with handicapping conditions 1,189,523 1,229,995 1,201,373-28,622 Teaching - special schools Occupational education 571, , ,944-1,020 Instructional media 449, , ,514-35,051 Pupil services 683, , ,309-16,272 Pupil Transportation 1,174,992 1,185,317 1,031, ,232 Employee Benefits 3,825,248 3,776,067 3,403, ,466 Debt Service: Debt service principal 1,460,925 1,460,607 1,451,925-8,682 Debt service interest 263, , , Total expenditures 17,008,805 17,038,121 15,971,777 1,878 1,064,466 Other Uses: Transfer to other funds 25,286 25,604 18,078-7,526 Total other uses 25,286 25,604 18,078-7,526 Total expenditures and other uses $ 17,034,091 $ 17,063,725 15,989,855 $ 1,878 $ 1,071,992 Excess of revenue and other sources over expenditures and other uses $ 153,958 See accompanying independent auditor s report.

86 PORTVILLE CENTRAL SCHOOL DISTRICT Schedule SS1A COMBINING SCHEDULE OF REVENUE AND EXPENDITURES AND CHANGES IN FUND EQUITY - BUDGET AND ACTUAL - GOVERNMENTAL FUNDS FOR THE YEAR ENDED JUNE 30, 2016 Page 38 School Food Service Fund Budget Variance (Amended) Actual Fav. (Unf.) Revenue State sources $ 53,580 $ 9,736 $ (43,844) Federal sources 205, ,544 28,544 Sales 231, ,526 (9,474) Miscellaneous 18,000 22,106 4,106 Surplus food 22,000 28,858 6,858 Use of money and property (94) Total revenue 529, ,776 (13,904) Expenditures General support 200, ,236 6,764 Employee benefits 54,181 54,917 (736) Cost of sales 280, ,209 20,282 Other expenses 15,008 14, Total expenditures 549, ,204 26,476 Excess (deficiency) of revenue over expenditures (20,000) (7,428) 12,572 Other sources (uses) Transfer from general fund 20,000 7,428 (12,572) Excess of revenue over expenditures $ - - $ - Fund equity, beginning of year 13,705 Fund equity, end of year $ 13,705 See accompanying independent auditor s report.

87 PORTVILLE CENTRAL SCHOOL DISTRICT Schedule SS2 SCHEDULE OF CHANGE FROM ADOPTED BUDGET TO FINAL BUDGET AND THE REAL PROPERTY TAX LIMIT FOR THE YEAR ENDED JUNE 30, 2016 Page 39 CHANGE FROM ADOPTED BUDGET TO FINAL BUDGET Adopted budget $ 17,034,091 Additions: Prior year encumbrances 29,634 Original Budget 17,063,725 Budget Revisions: Supplement Supplemental appropriation - Emergency capital project - Final budget $ 17,063,725 SECTION 1318 OF REAL PROPERTY TAX LAW LIMIT CALCULATION voter-approved expenditure budget $ 17,607,466 Maximum allowed (4% of budget) 704,299 General Fund Fund Balance Subject to Section 1318 of Real Property Tax Law*: Unrestricted fund balance: Committed fund balance $ - Assigned fund balance 410,808 Unassigned fund balance 1,180,178 Total unrestricted fund balance 1,590,986 Less: Appropriated fund balance 400,000 Insurance recovery reserve 8,930 Enumbrances included in committed and assigned fund balance 1,878 Total adjustments 410,808 General Fund Fund Balance Subject to Section 1318 of Real Property Tax Law $ 1,180,178 Actual percentage 6.7% * Per Office of State Comptroller's "Fund Balance Reporting and Governmental Type Definitions", Updated April 2011 (Orginally Issued November 2010), the portion of the General Fund fund balance subject to Section 1318 of the Real Property Tax Law is: unrestricted fund balance (i.e., the total of the committed, assigned, and unassigned classifications), minus appropriated fund balance, amounts reserved for insurance recovery, amounts reserved for tax reduction, and encumbrances included in committed and assigned fund balance. See accompanying independent auditor s report.

88 PORTVILLE CENTRAL SCHOOL DISTRICT Schedule SS3 SCHEDULE OF PROJECT EXPENDITURES - CAPITAL PROJECTS FUND FOR THE YEAR ENDED JUNE 30, 2016 Page 40 Expenditures Unexpended Methods of financing Fund Original Revised Prior Current (Overexpended) Proceeds of State Local Balance Project Title Appropriation Appropriation Years Year Total Balance Obligations Sources Sources Total June 30, 2016 Renovation project #2 $ 5,900,000 $ 5,900,000 $ 5,760,034 $ - $ 5,760,034 $ 139,966 $ 5,720,000 $ 104,845 $ - $ 5,824,845 $ 64,811 Capital Project $4M 4,041,920 4,041, , ,368 1,321,433 2,720,487 2,500, ,500,000 1,178,567 Buses , , , ,326 (2,529) 205,797-2, ,326 - Buses , , , ,471 (6,684) 207, ,640 (6,831) $ 10,355,199 $ 10,355,504 $ 6,315,425 $ 1,188,839 $ 7,504,264 $ 2,851,240 $ 8,633,132 $ 104,845 $ 2,834 $ 8,740,811 1,236,547 Less: Bond anticipation notes outstanding (3,112,739) Ending fund equity (deficit) balance as of June 30, 2016 $ (1,876,192) See accompanying independent auditor s report.

89 PORTVILLE CENTRAL SCHOOL DISTRICT Schedule SS4A BUDGET COMPARISON STATEMENT FOR STATE AND OTHER GRANT PROGRAMS - SPECIAL AID AND FOOD SERVICE FUNDS FOR THE YEAR ENDED JUNE 30, 2016 Page 41 Award/ Grantors Grant Program Total Total Grant Title Project No. Period Budget Revenue Expenditures Summer school * N/A 2016 N/A $ 41,380 $ 41,380 Universal Pre-kindergarten , , ,472 School breakfast programs N/A 2016 N/A 2,281 2,281 School lunch programs N/A 2016 N/A 7,455 7,455 $ 169,472 $ 220,588 $ 220,588 See accompanying independent auditor s report.

90 PORTVILLE CENTRAL SCHOOL DISTRICT NOTES TO THE SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS FOR THE YEAR ENDED JUNE 30, 2016 Schedule SS4B Note 1 - Basis of Presentation The accompanying Schedule of Expenditures of Federal Awards includes the federal grant activity of the Portville Central School District and is presented on the modified accrual basis of accounting. The information in the schedule is presented in accordance with the requirements of Uniform Guidance, Audits of States, Local Government and Non-Profit Organizations. Therefore, some amounts presented in the schedule may differ from amounts presented in, or used in the preparation of the basic financial statements. Note 2 - Non-monetary Federal Program The accompanying Portville Central School District is the recipient of a non-monetary federal award program. During the year ended June 30, 2016, the District reported in the Schedule of Federal Awards $28,858 of donated commodities at fair market value received and disbursed. See accompanying independent auditor s report.

91 PORTVILLE CENTRAL SCHOOL DISTRICT Schedule SS4C SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS FOR THE YEAR ENDED JUNE 30, 2016 Page 42 Federal Agency or Program or CFDA Pass-through Award Federal Program Title Number Number Amount Revenue Expenditures US Department of Education: Direct Program: Physical Education Program * F Q215F $ 562,586 $ 65,554 $ 65,554 US Department of Education: Passed through NYS Department of Education: Title I A , , ,757 Title II, Part A A ,266 51,266 51,266 IDEA Part B, Section 611 ** A , , ,303 IDEA Part B, Section 619 ** A ,478 10,478 10,478 US Department of Agriculture: Passed through NYS Department of Education: National School Breakfast Program *** N/A N/A 43,472 43,472 National School Lunch Program *** N/A N/A 190, ,072 Passed through NYS Office of General Services: National School Lunch Program *** Noncash assistance (commodities) N/A N/A 28,858 28,858 Total expenditures and revenue $ 734,760 $ 734,760 * Represents Direct Funding ** Constitutes a cluster of Federal programs *** Constitutes a cluster of Federal programs Total expenditures of Federal Awards did not exceed $750,000 and therefore the District was not subjected to a single audit under the Uniform Guidance. See accompanying independent auditor s report.

92 PORTVILLE CENTRAL SCHOOL DISTRICT Schedule SS5 SCHEDULE OF CERTAIN REVENUE AND EXPENDITURES COMPARED TO ST-3 DATA GENERAL FUND FOR THE YEAR ENDED JUNE 30, 2016 Page 43 Account ST-3 Audited Code Amount Amount Revenues Property taxes A-1001 $ 4,389,423 $ 4,389,423 Non-property taxes AT State aid AT ,841,582 10,841,582 Federal aid AT ,802 53,802 Total revenue AT ,143,813 16,143,813 Expenditures General support AT ,191,850 2,191,850 Pupil transportation AT ,031,975 1,031,975 Debt service - principal AT ,451,925 1,451,925 Debt service - interest AT , ,930 Total expenditures AT-9999 $ 15,989,855 $ 15,989,855 See accompanying independent auditor s report.

93 PORTVILLE CENTRAL SCHOOL DISTRICT Schedule SS6 SCHEDULE OF CAPITAL ASSETS NET OF RELATED DEBT AS OF JUNE 30, 2016 Page 44 Capital Assets $ 20,753,230 Less: Serial bonds (6,896,187) Bond anticipation notes (3,112,739) BAN proceeds less capital expenditures 1,236,547 Investment in capital assets, net of related debt $ 11,980,851 See accompanying independent auditor s report.

94 PORTVILLE CENTRAL SCHOOL DISTRICT Schedule SS7 SCHEDULE OF FUNDING PROGRESS AS OF JUNE 30, 2009 THROUGH JUNE 30, 2016 Page 45 Unfunded Ratio of Actuarial Actuarial UAAL to Actuarial Actuarial Accrued Accrued Budgeted Budgeted Valuation Value of Liability Liability Funded Covered Covered Date Assets ("AAL") ("UAAL") Ratio Payroll Payroll June 30, 2016 $ - $ 6,976,305 $ 6,976,305 0% $ 6,376, % June 30, 2015 $ - $ 7,570,482 $ 7,570,482 0% $ 6,161, % June 30, 2014 $ - $ 8,947,241 $ 8,947,241 0% $ 6,310, % June 30, 2013 $ - $ 9,292,555 $ 9,292,555 0% $ 6,097, % June 30, 2012 $ - $ 8,255,564 $ 8,255,564 0% $ 6,396, % June 30, 2011 $ - $ 8,314,931 $ 8,314,931 0% $ 6,180, % June 30, 2010 $ - $ 8,608,874 $ 8,608,874 0% $ 4,452, % June 30, 2009 $ - $ 7,971,031 $ 7,971,031 0% $ 4,301, % See accompanying independent auditor s report.

95 PORTVILLE CENTRAL SCHOOL DISTRICT Schedule SS8 SCHEDULE OF DISTRICT CONTRIBUTIONS NYSTRS AND NYSLERS SHARE OF NET PENSION LIABILITY Page 46 New York State Teachers' Retirement System For the year ended June 30, Contractually required contributions $ 729,048 $ 870,335 $ 804,767 $ 580,195 Contributions in relation to the contractually required contribution (729,048) (870,335) (804,767) (580,195) Contribution deficiency (excess) $ - $ - $ - $ - District's covered-employee payroll $ 5,498,100 $ 4,964,832 $ 4,952,412 $ 4,900,296 Contributions as a percentage of District's covered-employee payroll 13.26% 17.53% 16.25% 11.84% New York State Local Employees' Retirement System For the year ended March 31, Contractually required contributions $ 304,833 $ 300,400 $ 304,391 $ 250,150 Contributions in relation to the contractually required contribution (304,833) (300,400) (304,391) (250,150) Contribution deficiency (excess) $ - $ - $ - $ - District's covered-employee payroll $ 1,744,148 $ 1,701,606 $ 1,669,547 $ 1,660,922 Contributions as a percentage of District's covered-employee payroll 17.48% 17.65% 18.23% 15.06% See accompanying independent auditor s report.

96 PORTVILLE CENTRAL SCHOOL DISTRICT Schedule SS9 SCHEDULE OF DISTRICTS PROPORTIONATE SHARE OF THE NET PENSION ASSET NYSTRS AND PROPORTIONATE SHARE OF NET PENSION LIABILITY - NYSLERS Page 47 New York State Teachers' Retirement System - Net Pension Asset As of the measurement date of June 30, District's proportion of the net pension asset n/a % % % District's proportionate share of the net pension asset n/a $ 3,433,030 $ 3,734,662 $ 220,212 District's covered-employee payroll n/a $ 4,964,832 $ 4,952,412 $ 4,900,296 District's proportionate share of the net pension asset as a percentage of its covered employee payroll n/a 69.15% 75.41% 4.49% Plan fiduciary net position as a percentage of the total pension liability n/a % % % New York State Local Employees' Retirement System - Net Pension Liability As of the measurement date of March 31, District's proportion of the net pension liability % % n/a n/a District's proportionate share of the net pension liability $ 1,001,567 $ 199,904 $ 267,399 n/a District's covered-employee payroll $ 1,744,148 $ 1,701,606 $ 1,669,547 $ 1,660,922 District's proportionate share of the net pension liability as a percentage of its covered employee payroll 57.42% 11.75% 16.02% n/a Plan fiduciary net position as a percentage of the total pension liability 90.70% 97.90% n/a n/a n/a - information is not available See accompanying independent auditor s report.

97 INDEPENDENT AUDITOR S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH "GOVERNMENT AUDITING STANDARDS" To the President and Members of the Board of Education Portville Central School District Portville, New York We have audited in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States, the financial statements of the governmental activities and each major fund of Portville Central School District as of and for the year ended June 30, 2016, and the related notes to the financial statements, which collectively comprise Portville Central School District s basic financial statements and have issued our report thereon dated September 20, Internal Control Over Financial Reporting In planning and performing our audit of the financial statements, we considered Portville Central School District s internal control over financial reporting (internal control) to determine the audit procedures that are appropriate in the circumstances for the purpose of expressing our opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of Portville Central School District s internal control. Accordingly, we do not express an opinion on the effectiveness of Portville Central School District internal control. Our consideration of internal control over financial reporting was for the limited purpose described in the preceding paragraph and was not designed to identify all deficiencies in internal control over financial reporting that might be material weaknesses or significant deficiencies and therefore, material weaknesses or significant deficiencies may exit that were not identified. However, as discussed below, we identified one deficiency in internal control over financial reporting that we consider to be a material weakness. A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent or detect and correct misstatements on a timely basis. A material weakness is a deficiency, or combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of the District s financial statements will not be prevented, or detected and corrected on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance. We consider the deficiency in the District s internal control described in the accompanying schedule of findings and questioned costs as item II.A to be a material weakness. Compliance and Other Matters As part of obtaining reasonable assurance about whether Portville Central School District s financial statements are free of material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit and, accordingly, we do not express such an opinion. The results of our tests disclosed one instance of noncompliance that is required to be reported under Government Auditing Standards which is described in the accompanying schedule of findings and questioned costs as item II.B We noted other matters that we have reported to management of Portville Central School District in a separate letter dated September 20, Member of American Institute of Certified Public Accountants Private Companies Practice Section