$14,255,000 SHERBURNE-EARLVILLE CENTRAL SCHOOL DISTRICT CHENANGO AND MADISON COUNTIES, NEW YORK GENERAL OBLIGATIONS

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1 NEW AND RENEWAL ISSUES STANDARD & POOR S RATING: OFFICIAL STATEMENT SERIAL BONDS AND BOND ANTICIPATION NOTES RATING: See BOND RATING herein 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 Bonds and Notes is excluded from gross income for federal income tax purposes under Section 103 of the Internal Revenue Code of 1986, as amended (the Code ). In the further opinion of Bond Counsel, interest on the Bonds and 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 Bonds and 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 Bonds and Notes. See TAX MATTERS herein. The Bonds and Notes will not be designated "qualified tax-exempt obligations" pursuant to Section 265(b)(3) of the Code. $14,255,000 SHERBURNE-EARLVILLE CENTRAL SCHOOL DISTRICT CHENANGO AND MADISON COUNTIES, NEW YORK GENERAL OBLIGATIONS $10,030,000 School District (Serial) Bonds, 2015 Dated: June 25, 2015 Due: June 15, MATURITIES** Year Amount Rate Yield CSP Year Amount Rate Yield CSP Year Amount Rate Yield CSP 2016 $ 800,000 % % 2020 $ 875,000 % % 2024 $ 990,000* % % , , ,025,000* , ,000 * ,060,000* , ,000 * (referred to herein as the Bonds ) * The Bonds maturing in the years are subject to redemption prior to maturity as described herein under the heading "Optional Redemption - Bonds." ** Subject to change pursuant to the accompanying Notice of Bond Sale in order to achieve substantially level or declining annual debt service. $4,225,000 Bond Anticipation Notes, 2015 (Renewals) Dated: June 25, 2015 Due: June 24, 2016 (the Notes ) (collectively referred to herein as the Bonds and Notes ) The Bond and Notes are general obligations of the Sherburne-Earlville Central School District, Chenango and Madison Counties, New York, all the taxable real property within which is subject to the levy of ad valorem taxes to pay the Bonds and Notes and interest thereon, without limitation as to rate or amount. See NATURE OF OBLIGATION and TAX INFORMATION - Tax Levy Limitation Law herein. At the option of the purchaser(s), the Bonds will be issued registered in the name of the purchaser and, if so issued, will be registered in the name of Cede & Co., as nominee of The Depository Trust Company, New York, New York, which will act as securities depository for the Bonds. Individual purchases will be made in book-entry form only, in the principal amount of $5,000 or integral multiples thereof. Under this option, purchasers will not receive certificates representing their ownership interest in the Bonds. Interest on the Bonds will be payable on December 15, 2015 and semi-annually thereafter on June 15 and December 15 in each year until maturity. Principal and interest will be paid by the School District to DTC, which will in turn remit such principal and interest to its participants, for subsequent distribution to the beneficial owners of the Bonds, as described herein Proposals for the Bonds shall be for not less than $10,030,000 and accrued interest, if any, on the total principal amount of the Bonds. A good faith deposit will be required. Proposals must be accompanied by a good faith deposit in the form of a wire transfer or certified or cashier s check, payable to the order of the Sherburne-Earlville Central School District, Chenango and Madison Counties, New York, in the amount of $200,600. The Notes will not be subject to redemption prior to maturity and will be registered in the name of the purchaser form in the denominations of $5,000 or multiples thereof, as determined by the successful bidder(s). Principal and interest will be payable in Federal Funds at maturity at such bank(s) or trust company(ies) located and authorized to do business in the State of New York, as may be determined by such successful bidder(s). Paying agent fees, if any will be paid by the successful bidder(s).

2 At the option of the purchaser, the Notes will be registered in the name of the purchaser, and, if so issued, will be registered in the name of Cede & Co. as nominee of The Depository Trust Company ("DTC"), New York, New York, which will act as the securities depository for the Notes. Under this option, noteholders will not receive certificates representing their ownership interest in the Notes purchased. See "Book-Entry-Only-System" herein. Under this option, payment of the principal of and interest on the Notes to the Beneficial Owner of the Notes will be made by DTC Participants and Indirect Participants in accordance with standing instructions and customary practices. Payment will be the responsibility of the DTC, subject to any statutory and regulatory requirements as may be in effect from time to time. See "Book- Entry-Only System" herein. The Bonds and Notes are offered when, as and if issued and received by the Purchaser(s) and subject to the receipt of the respective approving legal opinions as to the validity of the Bonds and Notes of Orrick, Herrington & Sutcliffe LLP, Bond Counsel, of New York City. It is anticipated that the Bonds and Notes will be available for delivery in New York, New York or at such place as may be agreed upon with the Purchaser(s) on or about June 25, ELECTRONIC BIDS for the Bonds and Notes may be submitted via ipreo s PARITY Electronic Bid Submission System ( PARITY ) on June 11, 2015 until 11:30 A.M., Eastern Time, pursuant to the respective official Notices of Sale. No other form of electronic bidding services will be accepted. No bid will be received after the time for receiving bids specified above. Bids may also be submitted by telephone at (315) or facsimile at (315) Once the bids are communicated electronically via Parity or via facsimile to the School District, each bid will constitute an irrevocable offer to purchase the Bonds and Notes pursuant to the terms therein provided. June 3, 2015 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 RESPECTIVE NOTICES OF SALE WITH RESPECT TO THE OBLIGATIONS HEREIN DESCRIBED. FOR A DESCRIPTION OF THE SCHOOL DISTRICT S AGREEMENT TO PROVIDE CONTINUING DISCLOSURE FOR THE BONDS AS DESCRIBED IN THE RULE, SEE "CONTINUING DISCLOSURE UNDERTAKING WITH RESPECT TO THE BONDS HEREIN. THE SCHOOL DISTRICT WILL COVENANT IN AN UNDERTAKING AS TO THE NOTES TO PROVIDE NOTICE OF CERTAIN MATERIAL EVENTS AS DEFINED IN THE RULE. SEE "MATERIAL EVENT NOTICES WITH RESPECT TO THE NOTES" HEREIN.

3 SHERBURNE-EARLVILLE CENTRAL SCHOOL DISTRICT CHENANGO AND MADISON COUNTIES, NEW YORK BOARD OF EDUCATION THOMAS MORRIS President THOMAS CATON Vice President MICHAEL KHOURY SUSAN OSBORNE PATRICK DUNSHEE GREGORY PARKER MICHAEL ULRICH * * * * * ERIC SCHNABL Superintendent of Schools TODD GRIFFIN Assistant Superintendent for Business MICHELE VILLANTE School District Clerk ARLENE WADE School District Treasurer FRANK W. MILLER, ESQ. School District Attorney FISCAL ADVISORS & MARKETING, INC. School District Financial Advisors ORRICK, HERRINGTON & SUTCLIFFE LLP Bond Counsel

4 No person has been authorized by the Sherburne-Earlville 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 Bonds and 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 Sherburne-Earlville Central School District. TABLE OF CONTENTS Page NATURE OF THE OBLIGATION... 5 Description of the Bonds... 6 Optional Redemption - Bonds... 7 Description of the Notes... 7 Optional Redemption - Notes... 7 Book-Entry-Only System... 7 Certificated Bonds... 9 Certificated Notes... 9 Purpose of Issue Bonds... 9 Purpose of Issue Notes... 9 THE SCHOOL DISTRICT... 9 General Information... 9 Population Selected Wealth and Income Indicators Larger Employers Form of School Government Budgetary Procedures Investment Policy State Aid State Aid Revenues School Facilities Enrollment Trends Employees Status and Financing of Employee Pension Benefits Other Post Employee Benefits Unemployment Rate Statistics Other Information Financial Statements The State Comptroller s Fiscal Stress Monitoring System New York State Comptroller Report of Examination Fund Balance for Year Ending June 30, TAX INFORMATION Valuations State Equalization Rates Tax Rates Per $1,000 (Assessed) Tax Collection Procedure Tax Collection Record Real Property Taxes Larger Taxpayers Tax Roll STAR School Tax Exemption Additional Tax Information TAX LEVY LIMITATION LAW STATUS OF INDEBTEDNESS Constitutional Requirements Statutory Procedure Debt Outstanding End of Fiscal Year Details of Outstanding Indebtedness Debt Statement Summary Bonded Debt Service Cash Flow Borrowings Capital Project Financing Estimated Overlapping Indebtedness Debt Ratios Page SPECIAL PROVISIONS AFFECTING REMEDIES UPON DEFAULT CONTINUING DISCLOSURE UNDERTAKING WITH RESPECT TO THE BONDS MATERIAL EVENT NOTICES WITH RESPECT TO THE NOTES MARKET AND RISK FACTORS LITIGATION TAX MATTERS RATING LEGAL MATTERS FINANCIAL ADVISOR 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 GENERAL PURPOSE FINANCIAL STATEMENTS JUNE 30, 2014 APPENDIX D FORM OF BOND COUNSEL S OPINION APPENDIX E FORM OF BOND COUNSEL S OPINION PREPARED WITH THE ASSISTANCE OF FA FISCAL ADVISORS & MARKETING, INC. CORPORATE HEADQUARTERS 120 Walton Street Suite 600 Syracuse NY Ph Fax Internet

5 OFFICIAL STATEMENT of the SHERBURNE-EARLVILLE CENTRAL SCHOOL DISTRICT CHENANGO AND MADISON COUNTIES, NEW YORK Relating To $10,030,000 School District (Serial) Bonds, 2015 and $4,225,000 Bond Anticipation Notes, 2015 (Renewals) This Official Statement, which includes the cover page, has been prepared by the Sherburne-Earlville Central School District, Chenango and Madison Counties, New York (the "School District" or "District", and "State", respectively) in connection with the sale by the School District of $10,030,000 School District (Serial) Bonds, 2015 ( the Bonds ) and $4,225,000 Bond Anticipation Notes, 2015 (Renewals) (the "Notes"). The factors affecting the School District s financial condition and the Bonds and Notes are described throughout this Official Statement. Inasmuch as many of these factors, including economic and demographic factors, are complex and may influence the School 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 School 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 Bonds and Notes and the proceedings of the School District relating thereto are qualified in their entirety by reference to the definitive forms of the Bonds and Notes and such proceedings. NATURE OF THE OBLIGATION Each of the Bonds and Notes when duly issued and paid for will constitute a contract between the School District and the holder thereof. Holders of any series of notes or bonds of the School 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 Bonds and Notes will be general obligations of the School District and will contain a pledge of the faith and credit of the School 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 School District has power and statutory authorization to levy ad valorem taxes on all real property within the School District subject to such taxation by the School District without limitation as to rate or amount. See TAX INFORMATION TAX LEVY LIMITATION LAW herein. 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 ). 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 School District is required to pledge its faith and credit for the payment of the principal of and interest on the Bonds and 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 School 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: 5

6 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. 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. DESCRIPTION OF THE BONDS The Bonds are general obligations of the School District, and will contain a pledge of its faith and credit for the payment of the principal of and interest on the Bonds as required by the Constitution and laws of the State (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 Bonds and interest thereon, without limitation as to rate or amount. See NATURE OF THE OBLIGATION and TAX LEVY LIMITATION LAW herein. The Bonds will be dated June 25, 2015 and will mature in the principal amounts as set forth on the cover page. The Bonds are subject to redemption prior to maturity as described herein under the heading "Optional Redemption - Bonds." The Record Date of the Bonds will be the last business day of the calendar month preceding each such interest payment date The Bonds will be issued as registered bonds and, when issued, will be registered in the name of Cede & Co., as nominee of DTC, which will act as securities depository for the Bonds. Individual purchases will be made in book-entry form only, in the principal amount of $5,000 or integral multiples thereof. Purchasers will not receive certificates representing their ownership interest in the Bonds. Interest on the Bonds will be payable on December 15, 2015 and semi-annually thereafter on June 15 and December 15 in each year until maturity. Principal and interest will be paid by the School District to DTC, which will in turn remit such principal and interest to its Participants, for subsequent distribution to the Beneficial Owners of the Bonds, as described herein. 6

7 Optional Redemption - Bonds The Bonds maturing on or before June 15, 2021 shall not be subject to redemption prior to maturity. The Bonds maturing on or after June 15, 2022 shall be subject to redemption prior to maturity as a whole or in part (and by lot if less than all of a maturity is to be redeemed) at the option of the School District on June 15, 2021 or on any date thereafter at par (100.0%), plus accrued interest to the date of redemption. If less than all of the Bonds of any maturity are to be redeemed, the particular Bonds of such maturity to be redeemed shall be selected by the School District by lot in any customary manner of selection as determined by the President of the Board of Education. Notice of such call for redemption shall be given by mailing such notice to the registered holders not more than sixty (60) days nor less than thirty (30) days prior to such date. Notice of redemption having been given as aforesaid, the Bonds so called for redemption shall, on the date for redemption set forth in such call for redemption, become due and payable, together with interest to such redemption date, and interest shall cease to be paid thereon after such redemption date. DESCRIPTION OF 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 OBLIGATION and TAX INFORMATION - Tax Levy Limitation Law herein. The Notes are dated June 25, 2015 and mature, without option of prior redemption, on June 24, The Notes will be issued in either (i) bearer form, in denominations of $5,000 each or multiples thereof as may be determined by the successful bidder(s) with principal and interest payable in Federal Funds at such bank(s) or trust company(ies) located and authorized to do business in the State as may be selected by such successful bidder(s); or (ii) at the option of the purchaser(s), as registered notes, and, if so issued, registered in the name of Cede & Co. as nominee of DTC, which will act as the securities depository for the Notes. See "Book-Entry-Only System" herein. Optional Redemption - Notes The Notes are not subject to redemption prior to maturity. Book-Entry-Only System The Depository Trust Company ( DTC ), New York, NY, will act as securities depository for the Bonds and Notes, if issued in registered form. In such case, the Bonds and Notes will be issued as fully-registered Bonds and Notes registered in the name of Cede & Co. (DTC s partnership nominee) or such other name as may be requested by an authorized representative of DTC. One fully-registered note certificate will be issued for each note bearing the same rate of interest and CUSIP number and one fully-registered bond certificate will be issued for each bond bearing the same rate of interest and CUSIP number 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, in turn, is owned by a number of Direct Participants of DTC and Members of the National Securities Clearing Corporation, Government Securities Clearing Corporation, MBS Clearing Corporation, and Emerging Markets Clearing Corporation, (NSCC, GSCC, MBSCC, and EMCC, also subsidiaries of DTCC), as well as by the New York Stock Exchange, Inc., the American Stock Exchange LLC, and the National Association of Securities Dealers, Inc. 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 7

8 Purchases of Bonds and Notes under the DTC system must be made by or through Direct Participants, which will receive a credit for the Bonds and Notes on DTC s records. The ownership interest of each actual purchaser of each Note ( Beneficial Owner ) is in turn to be recorded on the Direct and Indirect Participants records. Beneficial Owners will not receive written confirmation from DTC of their purchase. Beneficial Owners are, however, expected to receive written confirmations providing details of the transaction, as well as periodic statements of their holdings, from the Direct or Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers of ownership interests in the Securities are to be accomplished by entries made on the books of Direct and Indirect Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interests in Bonds and Notes, except in the event that use of the book-entry system for the Bonds and Notes is discontinued. To facilitate subsequent transfers, all Bonds and 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 Bonds and 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 Bonds and Notes; DTC s records reflect only the identity of the Direct Participants to whose accounts such Bonds and 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. 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. Principal and interest payments on the Bonds and 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 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 or the School District, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment, principal and interest to 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 Bonds and 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 transfers through DTC (or a successor securities depository). In that event, note certificates will be printed and delivered. 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 INFORMATION CONTAINED HEREIN CONCERNING DTC AND ITS BOOK-ENTRY 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. 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 BONDS AND NOTES (1) PAYMENTS OF PRINCIPAL OF OR INTEREST OR REDEMPTION PREMIUM ON THE BONDS AND NOTES; (2) CONFIRMATIONS OF THEIR OWNERSHIP INTERESTS IN THE BONDS AND NOTES; OR (3) OTHER NOTICES SENT TO DTC OR CEDE & CO., ITS PARTNERSHIP NOMINEE, AS THE REGISTERED OWNER OF THE BONDS AND 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 BONDS AND 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 BONDS OR BONDS AND NOTES. 8

9 Certificated Bonds DTC may discontinue providing its services with respect to the Bonds 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 transfers through DTC at any time. In the event that such book-entry-only system is discontinued, the following provisions will apply: the Bonds will be issued in fully registered form in denominations of $5,000 each or any integral multiple thereof. Principal of the Bonds when due will be payable upon presentation at the office of a bank or trust company located and authorized to do business in the State as a fiscal agent bank to be named by the School District upon termination of the book-entry-only system. Interest on the Bonds will continue to be payable on December 15, 2015 and semi-annually thereafter on June 15 and December 15 in each year until maturity. Such interest will be payable by check drawn on the fiscal agent and mailed to the registered owner on each interest payment date at the address as shown on the registration books of the fiscal agent as of the last business day of the calendar month preceding each such interest payment date. Bonds may be transferred or exchanged at no cost to the registered owner at any time prior to maturity at the office of the fiscal agent for Bonds of the same or any other authorized denomination or denominations in the same aggregate principal amount upon the terms set forth in the Bond Determinations Certificate of the President of the Board of Education authorizing the sale of the Bonds and fixing the details thereof and in accordance with the Local Finance Law. The fiscal agent shall not be obligated to make any such transfer or exchange of Bonds between the last business day of the calendar month preceding an interest payment date and such interest payment date. 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 or should the purchaser(s) chose to have the Notes initially issued in bearer certificated form, the following provisions will apply: The Notes will be issued in bearer form 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 School District (later bearer conversion) or by the successful bidder(s) (initial bearer form). The Notes will remain not subject to redemption prior to their stated final maturity date. Purposes of Issue - Bonds The Bonds are being issued pursuant to the Constitution and statutes of the State of New York, including among others, the Education Law and the Local Finance Law and a bond resolution adopted by the Board of Education on February 25, 2008, authorizing the issuance of $24,700,000 serial bonds for the reconstruction and renovation, in part, and the construction of improvements to various School District buildings and sites. (See Capital Project Financing Plans herein) The proceeds of the Bonds, together with $920,000 available funds, will retire $10,950,000 of the $15,375,000 bond anticipation notes maturing on June 26, 2015 for the aforementioned purpose. Purpose of Issue - Notes The Notes are being issued pursuant to the Constitution and statutes of the State of New York, including among others, the Education Law and the Local Finance Law and a bond resolution adopted by the Board of Education on February 25, 2008, authorizing the issuance of $24,700,000 serial bonds for the reconstruction and renovation, in part, and the construction of improvements to various School District buildings and sites. (See Capital Project Financing Plans herein) The proceeds of the Notes together with $200,000 in available funds, will renew $4,425,000 of the $15,375,000 bond anticipation notes maturing on June 26, 2015, issued for the above mentioned purpose. General Information THE SCHOOL DISTRICT The Sherburne-Earlville Central School District was formed in 1967 when the former Sherburne Central School District merged with the Earlville Central School District. The District is located in the Towns of Columbus, New Berlin, North Norwich, Otselic, Plymouth, Sherburne and Smyrna in Chenango County and the Towns of Brookfield, Georgetown, Hamilton, and Lebanon in Madison county, and covers approximately 158 square miles. The School District is served by a network of State highways. Bus service is available in the City of Binghamton, while air transportation is available in both Binghamton and Syracuse. 9

10 The School District is rural in nature, with many residents commuting to large industrial firms within the general area. Water and sewer services are provided primarily by the Village of Sherburne, while outlying areas use private wells and septic systems. Electricity is provided by Sherburne Electric Department and New York State Electric and Gas Corporation. Telephone services are provided by Frontier Telecom. Police protection is provided by the County Sheriff s Departments and the New York State Police. Fire protection and ambulance service are provided by volunteer companies within the area. The School District provides public education for grades K-12. Opportunities for higher education are available at Colgate University and at the many colleges and universities in the surrounding area. Commercial and financial services are located in the Villages of Sherburne and Earlville. The District is the home of the New York State Rogers Environmental Education Center, Sherburne Music Theater Society, Sherburne Community Chorus and the Earlville Opera House, all of which provide recreational and cultural activities. Population The School District s current estimated population is 8,442 (2013 U.S. Census 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 Villages of Earlville, Hamilton, New Berlin. Sherburne and Smyrna, Towns of Brookfield, Columbus, Georgetown, Hamilton, Lebanon, New Berlin, North Norwich, Otselic, Plymouth, Sherburne and Smyrna and Counties of Chenango and Madison. The figures set below with respect to such Villages, Towns, and Counties are included for information only. It should not be inferred from the inclusion of such data in the Official Statement that the Villages, Towns or Counties are necessarily representative of the District, or vice versa. Per Capita Income Median Family Income Village of: Earlville $ 11,875 $ 15,383 $ 22,784 $ 31,154 $ 33,654 $ 50,769 Hamilton 10,793 13,203 17,974 45,375 68, ,500 New Berlin 10,482 15,344 20,266 26,131 36,786 48,672 Sherburne 12,138 18,248 24,374 29,000 39,844 51,389 Smyrna 9,514 12,310 15,299 29,000 33,125 49,722 Towns of: Brookfield 9,721 13,719 20,557 27,667 35,915 48,269 Columbus 10,023 13,731 21,274 23,988 31,118 50,898 Georgetown 8,462 11,825 20,807 28,125 38,804 58,000 Hamilton 11,359 15,564 20,302 33,205 50,565 78,125 Lebanon 10,949 15,690 20,740 29,318 39,038 53,125 New Berlin 11,363 16,546 20,266 29,561 40,000 48,672 North Norwich 12,041 17,022 23,799 31,100 42,414 64,881 Otselic 9,521 14,105 21,076 26,705 34,886 51,250 Plymouth 11,009 14,100 20,986 28,851 35,602 63,382 Sherburne 11,903 17,281 20,787 30,240 39,094 49,981 Smyrna 9,441 11,541 20,196 27,800 34,125 57,813 Counties of: Chenango 11,830 16,427 22,097 30,388 39,711 54,395 Madison 12,334 19,105 25,230 33,644 47,889 66,688 State of: New York 16,501 23,389 32,382 39,741 51,691 70,670 Note: The 2013 estimates represent the average characteristics of population and housing between January 2009 and December 2013 and do not represent a single point in time. Source: U.S. Census Bureau, American Community Survey 5-Year Estimates. 10

11 Larger Employers Number Name Type Employed Norwich Pharmaceuticals Pharmaceutical 420 Sherburne-Earlville CSD Education 400 New York Central Mutual Insurance Company 200 Frontier Telecom Telephone Service 200 Web & Sons Manufacturer 100 Form of School Government Subject to the provisions of the State Constitution, the School District operates pursuant to the Education Law, the Local Finance Law, other laws generally applicable to the School District, and any special laws applicable to the School District. Under such laws, there is no authority for the School District to have a charter or adopt local laws. The legislative power of the School District is vested in the Board of Education (the "Board"). Generally on the third Tuesday in May of each year an election is held within the School District boundaries to elect one or more members to the Board. The Board consists of seven members serving overlapping three-year terms. During the first 15 days of July of each year, the Board meets for the purpose of reorganization. At that time, an election is held within the Board to elect a President and Vice President and to appoint other School District officials. Pursuant to the Local Finance Law, the President of the Board is the chief fiscal officer of the School District. However, certain of the financial functions of the School District are the responsibility of the Superintendent of Schools and the Assistant Superintendent for Business. Budgetary Procedures 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 fourteen days before the annual District meeting at which it is to be presented. Copies are available upon request to taxpayers within the School District, fourteen 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. 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, the Board of Education, must, 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. Pursuant to the Tax Levy Limitation Laws, 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 the Tax Levy Limitation Law, see TAX LEVY LIMITATION LAW herein. The budget for the fiscal year was approved by the qualified voters on May 21, The District s budget for remained within the Tax cap. The budget for the fiscal year was approved by the qualified voters on May 20, The District s budget for remained within the Tax Cap. The budget for the fiscal year was approved by the qualified voters on May 19, The District s budget for will remain within the Tax Cap. 11

12 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 either a pledge of eligible securities, an eligible surety bond or an eligible letter of credit, as those terms are defined in the law. Consistent with the above statutory limitations, it is the School District's current policy to invest in: (1) savings accounts or money market accounts of designated banks; (2) certificates of deposit issued by a bank or trust company located in and authorized to do business in New York State; (3) demand deposit accounts in a bank or trust company located in and authorized to do business in New York State; obligations of New York State; obligations of the United States Government (U.S. Treasury Bills and Notes); (4) repurchase agreements involving the purchase and sale of direct obligations of the United States; (5) all funds except Reserve Funds may be invested in revenue anticipation notes or tax anticipation notes of other school districts and municipalities, with the approval of the State Comptroller and (6) only reserve funds may be invested in obligations of the School District. State Aid The School District receives financial assistance from the State. In its adopted budget for the fiscal year, approximately 74.58% of the revenues are estimated to be received in the form of State aid. In its adopted budget for the fiscal year, approximately 74.74% 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 School District. No assurance can be given that present State aid levels will be maintained in the future. In view of the State s continuing budget problems, future State aid reductions are likely. State budgetary restrictions, which eliminate or substantially reduce State aid could have a material adverse effect upon the School District requiring either a counterbalancing increase in revenues from other sources to the extent available, or a curtailment of expenditures (See also MARKET AND RISK FACTORS ). A portion of the School 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. In Campaign for Fiscal Equity, Inc. et al. v. State, et al. (Supreme Court, New York County), plaintiffs challenged the State s method of providing funding for New York City public schools. Plaintiffs sought a declaratory judgment that the State s public school financing system violates Article 11, Section 1 of the State Constitution and Title VI of the Federal Civil Rights Act of 1964 and injunctive relief that would require the State to satisfy State Constitutional Standards. State legislative reforms in the wake of the Campaign for Fiscal Equity case include increased accountability for expenditure of State funds and collapsing over 30 categories of school aid into one classroom operating formula referred to as foundation aid. Foundation aid prioritizes funding distribution based upon student need. 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 School 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. The School District may elect to use the highest building aid ratio that has been calculated since the fiscal year. 12

13 The State Budget authorized two competitive grant programs totaling $500 million to encourage school districts to implement innovative approaches to achieve academic gains and management efficiency. As part of a grant process already underway, a total of $150 million in performance grants was awarded in the school year, to be paid over a three year period beginning with $50 million in The State Budget expands this initiative and authorizes an additional $200 million in grants to be paid in the school year, and an additional round of awards for The State Budget maintains the prior year s commitment to provide an $805 million increase in school aid for the school year, with most of the allocated increase provided to high need school districts. Of the total increase, $290 million is provided for general support which is targeted to high need school districts, as well as those school districts that were impacted the most by aid reductions in the school year. Another $265 million supports increased reimbursement in expense-based aid programs (e.g., reimbursement for school construction, pupil transportation expenses, and BOCES) and other miscellaneous aid categories under current law. High need school districts will receive 76% of the allocated increase and 69% of total School Aid. Importantly, $250 million will be used for performance grants. The State Budget links 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 17, The New York State Education Department approved the District s Annual Professional Performance Review Plan (APPR) on October 18, The State Budget provides for school aid of approximately $21.1 billion, which represents an increase of approximately $936.6 million, or 4.4% in total school aid spending from the school year. Most of this approximately $936.6 million increase will be targeted at high-need school districts. The State Budget continues a two-year appropriation methodology established in the budget for the State fiscal year and limits future school aid increases to growth as measured by the total personal income of residents of the State. Such two-year appropriation provides for an approximately 3.3% increase in school aid for the school year based on estimated growth of New York State personal income. The State Budget also continues programs established in the State fiscal year for education performance and efficiency grants, with total of $100.0 million for competitive grants to districts that demonstrate significant performance improvements. The State Budget also provides an additional $75.0 million in grants for New NY Education Reform Commission initiatives such as pre-kindergarten education, extending the school day, community schools, stipends for high performing teachers, and the early college high school program. The School District not does anticipate receiving grant funds during the fiscal year. The Smart Schools Bond Act was passed as part of the Enacted Budget. 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 Gap Elimination Adjustment (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 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. Since the program began, the total GEA and Deficit Reduction Assessment reduction in State aid for the District has amounted to approximately $2.6 million. As a result, the District has been forced to reduce programs, services, and staff accordingly. The Executive Budget contains a school aid increase of $1.1 billion that is tied to changes in the teacher evaluation and tenure process. If the Legislature fails to adopt such changes, the school aid increase would drop to $377 million to basically cover categorical reimbursement aid for transportation, BOCES and building aid. At this time it is not possible to know whether the Legislature will approve the Executive Budget in its current form. 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 School 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. 13

14 State Aid Revenues The following table illustrates the percentage of total revenues of the District for each of the last eight completed fiscal years as well as budgeted figures for the and fiscal years comprised of State aid. Percentage of Total Revenues General Fund Consisting of Fiscal Year Revenues Total State Aid State Aid $ 23,281,829 $ 16,658, % ,365,515 19,645, % ,540,889 20,730, % ,131,636 20,390, % ,893,147 19,319, % ,937,305 20,704, % ,073,982 20,562, % ,241,573 21,603, % (Budgeted) 30,287,341 22,636, % (Budgeted) 31,687,405 23,633, % School Facilities Name Grades Capacity Year(s) Built Sherburne-Earlville Elementary K , 2008 Middle School , 1993, 2008 High School , 1998, 2003, 2008 Enrollment Trends Projected School Year Enrollment School Year Enrollment , , , , , , , , , ,285 Note: For the District had a large kindergarten class which has stabilized the enrollment over the past couple of years. Employees The School District employs 308 full-time employees. The number of members, the collective bargaining units which represent them and their current contract expiration dates are as follows: Number of Contract Members Union Expiration Date 129 Sherburne-Earlville Central School District 6/30/16 Chenango County Local 809 (CSEA) 163 Sherburne-Earlville Teacher s 6/30/15 (1) Association (SETA) 9 Sherburne-Earlville Central Office (SECO) 6/30/17 7 Sherburne-Earlville Administrators Assoc. (SEAA) 6/30/16 (1) Currently under negotiation. 14

15 Status and Financing of Employee Pension Benefits Substantially all employees of the School 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 System 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, 1976 and before April 2, All members working less than ten years must contribute 3% of gross annual salary towards the cost of retirement programs. On December 12, 2009, a new Tier V was signed into law. The legislation creates a new Tier V pension level, at the time, 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. Additionally, on March 16, 2012, the Governor signed into law a 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%, 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 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 contributions throughout employment. The District is required to contribute to an actuarially determined rate. Since fiscal year the District s contributions to the Systems were as follows: Year ERS TRS $ 335,212 $ 805, , , , , , , , , ,692 1,121, ,946 1,133, ,505 1,651, (Actual) 569,559 1,656, (Budgeted) 727,000 1,941,200 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 School District does not currently have any early retirement incentive programs. 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. 15

16 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 School District is not amortizing any pension payments nor has the intent to do so in the foreseeable future. Stable Rate Pension Contribution Option: The State Budget includes a provision that would provide local governments and school districts, including the School 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 rates would be 12% for ERS and 12.5% for TRS. The pension contribution rates under this program would reduce near-term payments for employers, but will require higher than normal contributions in later years. The School District is not participating in the Stable Rate Pension Contribution Option nor has the intent to do so in the foreseeable future. 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 (2010 to 2015) is shown below: Year ERS TRS % 6.19% The investment of monies and assumptions underlying same, of the Retirement Systems covering the School District s employees is not subject to the direction of the School 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 School 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. While the School District is aware of the potential negative impact on its budget and will take the appropriate steps to budget accordingly for the increase, there can be no assurance that its financial position will not be negatively impacted. The investment of monies and assumptions underlying same, of the Retirement Systems covering the School District s employees is not subject to the direction of the School 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 School 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. While the School District is aware of the potential negative impact on its budget and will take the appropriate steps to budget accordingly for the increase, there can be no assurance that its financial position will not be negatively impacted. 16

17 Other Post Employee Benefits It should also be noted that the School District provides post-retirement 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 requires governmental entities, such as the District, to account for post-retirement 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 Education Services, unlike other municipal units of government in the State, have been prohibited from reducing retiree health benefits or increasing health care contributions received or 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 This protection from unilateral reduction of benefits has been extended annually by the New York State Legislature until recently when legislation was enacted to make permanent these health insurance benefit protections for retirees. 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. OPEB refers to "other post-employment benefits, meaning other than pension 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. The District contracted with an actuarial firm, to calculate its OPEB in accordance with GASB 45. Based on the most recent actuarial valuation dated June 30, 2014 and financial data as of June 30, 2014 and 2013, the following tables show 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 for the fiscal years ending June 30, 2014 and 2013: Annual OPEB Cost and Net OPEB Obligation: Annual required contribution (ARC) $ 4,722,218 $ 4,662,356 Interest on net OPEB obligation 232, ,949 Adjustment to ARC (445,198) (310,481) Annual OPEB cost (expense) 3,590,007 4,511,824 Contributions made (657,506) (587,015) Increase in net OPEB obligation 2,932,501 3,924,809 Net OPEB obligation - beginning of year 10,589,334 6,664,525 Net OPEB obligation - end of year $ 13,521,835 $ 10,589,334 Percentage of annual OPEB cost contributed 14% 13% Funding Status: Actuarial Accrued Liability (AAL) $ 46,837,041 $ 46,837,041 Actuarial Value of Assets 0 0 Unfunded Actuarial Accrued Liability (UAAL) $ 46,837,041 $ 46,837,041 Funded Ratio (Assets as a Percentage of AAL) 0.0% 0.0% 17

18 Percentage of Fiscal Annual Annual OPEB Net OPEB Year Ended OPEB Cost Cost Contributed Obligation 2014 $ 2,932, % $ 13,521, ,511, ,589, ,620, ,664,525 Note: The above tables are not audited. The aforementioned liability and ARC are recognized and will be disclosed in accordance with GASB 45 standards in the 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 funds 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. 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. Unemployment Rate Statistics Unemployment statistics are not available for the School District as such. The smallest area for which such statistics are available (which includes the School District) are the Counties of Chenango and Madison. The information set forth below with respect to the Counties of Chenango and Madison is included for information purposes only. It should not be implied from the inclusion of such data in this Official Statement that the Counties of Chenango and Madison are necessarily representative of the School District, or vice versa. Year Average Chenango County 5.0% 6.4% 9.0% 9.1% 8.4% 8.3% 7.1% 6.2% Madison County 4.7% 5.7% 8.2% 8.3% 8.3% 8.6% 7.8% 6.4% New York State 4.6% 5.4% 8.3% 8.6% 8.2% 8.5% 7.7% 6.3% 2015 Monthly Figures Jan Feb Mar Apr May Jun Chenango County 7.1% 6.9% 6.5% 5.7% N/A N/A Madison County 7.3% 7.1% 6.5% 5.8% N/A N/A New York State 6.5% 6.4% 5.8% 5.5% N/A N/A Source: Department of Labor, State of New York. Figures not seasonally adjusted. Other Information The statutory authority for the power to spend money for the objects or purposes, or to accomplish the objects or purposes, for which the Bonds and Notes are to be issued is the Education Law and the Local Finance Law. The School District is in compliance with the procedure for the validation of the Bonds and Notes as provided in Title 6 of Article 2 of the Local Finance Law. No principal or interest upon any obligation of the School District is past due. The fiscal year of the School District is July 1 to June 30. This Official Statement does not include the financial data of any political subdivision having power to levy taxes within the School District. 18

19 Financial Statements The financial accounts of the District are maintained in accordance with the New York State Uniform System of Accounts for School Districts. The District retains an outside independent auditor and is audited annually. The last audited report covers the period ending June 30, 2014 and may be found attached hereto as appendices to this Official Statement. Certain financial information of the School District is included in the Appendices to this Official Statement. The School District complies with the Uniform System of Accounts as prescribed by the State Comptroller for school districts in New York State. Except for the accounting for fixed assets, this system conforms to generally accepted accounting principles as prescribed by the American Institute of Certified Public Accounts' Industry 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 School District is required to issue 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. The School District is in compliance with Statement No. 34. 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 to 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 most current applicable report of the State Comptroller designates the District as No Designation (Fiscal Score: 0.0%). Source: Website of the Office of the New York State Comptroller. Note: Reference to website implies no warranty of accuracy of information therein. New York State Comptroller Report of Examination State Comptroller's office, i.e., the Department of Audit and Control, periodically performs a compliance review to ascertain whether the School 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. There are no recent State Comptrollers audits of the District or any that are currently in progress. Fund Balance for Year Ending June 30, 2015 The District realized savings in ERS and TRS and various other line items in the budget which will allow the District to replenish the $1.1 million fund balance appropriation and have break even appropriations. The District estimates using $ 269,382 of the $ 1,100,000 appropriated fund balance for year ending June 30, The District estimates $3,786,001 in unappropriated fund balance and $8,183,312 of total fund balance at the end of the current fiscal year. Note: These are estimated results and actual results may vary hereto. 19

20 Valuations TAX INFORMATION Years Ending June 30: Assessed Valuation Towns of: Brookfield $ 1,245,883 $ 1,245,849 $ 1,279,457 $ 1,269,358 $ 1,276,154 Columbus 18,788,401 18,789,284 18,951,378 19,023,031 20,072,906 Georgetown 493, , , , ,509 Hamilton 39,121,024 (1) 53,374,945 53,498,436 53,541,203 53,108,042 Lebanon 35,512,204 34,063,447 37,121,219 35,279,413 34,276,149 New Berlin 227,370 (1) 316, , , ,094 North Norwich 29,687,033 30,069,312 30,330,539 30,572,090 30,682,579 Otselic 349, , , , ,806 Plymouth 4,355,863 4,480,801 4,585,932 4,740,882 4,732,750 Sherburne 122,585, ,812, ,795, ,823, ,380,084 Smyrna 51,171,690 52,025,961 50,606,078 47,571,914 45,576,623 Totals $ 303,537,733 $ 327,053,390 $ 329,367,344 $ 325,995,647 $ 326,263,696 (1) Significant change from previous year due to town-wide revaluation. State Equalization Rate Towns of: Brookfield % % % % % Columbus % % % % % Georgetown % % % % % Hamilton 85.00% (1) % % % 98.00% Lebanon % % % % % New Berlin 86.00% (1) % % % % North Norwich 63.00% 66.00% 65.00% 68.00% 60.50% Otselic 46.00% 48.10% 48.00% 48.24% 44.20% Plymouth 53.50% 55.00% 55.00% 56.80% 55.00% Sherburne 81.50% 82.50% 78.00% 83.00% 77.00% Smyrna 62.00% 65.00% 65.00% 68.00% 64.00% Taxable Full Valuation $ 391,298,858 $ 401,649,465 $ 414,292,949 $ 393,993,038 $ 417,791,603 (1) Significant change from previous year due to town-wide revaluation. Tax Rate Per $1,000 (Assessed) Years Ending June 30: Towns of: Brookfield $ $ $ $ $ Columbus Georgetown Hamilton (1) Lebanon New Berlin (1) North Norwich Otselic Plymouth Sherburne Smyrna (1) Significant change from previous year due to town-wide revaluation. 20

21 Tax Collection Procedure Taxes are due on October 1 st. If paid by October 1 st, no penalty is imposed. There is a 2% penalty imposed if paid between October 1 st and November 1 st. Unpaid taxed are turned over to the County Treasurers on November 1 th for re-levy on County/Town tax rolls. The District is reimbursed by the Counties for all unpaid taxes the first week in April of each year and is thus assured of 100% collection of its annual levy. Tax Collection Record Fiscal Years Ending June 30: Total Tax Levy $ 6,500,419 $ 6,623,927 $ 6,749,782 $ 6,844,279 $ 6,953,787 Amount Uncollected (1) 738,693 1,065,161 1,096, ,824 N/A % Uncollected 11.36% 16.08% 20.05% 14.82% N/A (1) See "Tax collection Procedure". Real Property Taxes The following table illustrates the percentage of total revenues of the District for each of the last nine completed fiscal years as well as budgeted figures for the and fiscal years comprised of Real Property Taxes. Percentage of Total Revenues General Fund Total Consisting of Fiscal Year Revenues Real Property Taxes Real Property Taxes $ 21,792,702 $ 5,542, % ,281,829 5,795, % ,365,515 6,020, % ,540,889 6,263, % ,131,636 6,404, % ,893,147 6,556, % ,937,305 5,217, % ,073,982 5,323, % ,241,573 6,919, % (Budgeted) 31,387,341 6,844, % (Budgeted) Larger Taxpayers Tax Roll Name Type Assessed Valuation New York State Electric & Gas Utility $ 9,715,283 State of New York Public 6,494,475 Emkey Resources, LLC Gas 5,757,780 Baillie Lumber Co. Manufacturer 2,669,300 Webb, James I. Properties 1,732,900 Citizens Communications Utility 1,441,084 Westcott 3 LLC Apartments 1,410,300 Sherburne Meadows Association Apartments 1,300,000 Citizens Telecom Co of NY Utility 1,168,987 Hub Properties Trust Properties 1,093,018 The ten larger taxpayers listed above have an approximate assessed valuation of $32,783,127 which represents 10% of the tax base of the School District. Source: School District Tax Rolls. Note: *Norse Energy Corp, has filed for Chapter 11. In the Larger Taxpayer Tax Roll, Norse Energy Corp was listed as the top taxpayer with an assessed valuation of $9,244,

22 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. See State Aid regarding delays in reimbursement. Homeowners over 65 years of age with household incomes not exceeding $79,050 (amount is adjusted annually) are eligible to receive a full value exemption of $63,300. Other homeowners with a combined income of less than $500,000 are eligible to receive a full value exemption of $30,000 on their primary residence. Beginning in the fiscal year the maximum STAR savings cannot exceed more than 2% of the prior year maximum savings. $1,311,892 of the District s $6,749,782 school tax levy was exempted by the STAR Program. The District received full reimbursement of such exempt taxes from the State in January, $1,306,940 of the District s $6,844,279 school tax levy was exempted by the STAR Program. The District received full reimbursement of such exempt taxes from the State in January, The District anticipates that approximately $1,307,312 of the school tax levy will be exempted by the STAR Program. Additional Tax Information Real property located in the School District is assessed by the towns. Veterans' and senior citizens' exemptions are offered to those who qualify. Total assessed valuation of the School District is estimated to be categorized as follows: Agricultural- 7.5%, Residential- 61.6%, State Land- 2.3% and Commercial- 28.6%. The estimated annual school district property tax bill of a $100,000 market value residential property located in the School District is approximately $1,712. 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.) 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 now 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, 2016 unless other legislation is 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 would be 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 could 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. 22

23 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. 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 this is an exclusion from the tax levy limitation applicable to these financings. On February 20, 2013, the New York State United Teachers ( NYSUT ) organization filed a lawsuit against the State challenging the Tax Levy Limitation Law as applied to school districts on multiple federal and state constitutional grounds. 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. After the ruling, NYSUT released a statement which indicated that it is very likely that NYSUT will continue its challenge to the constitutionality of the Tax Levy Limitation Law. On March 16, 2015, the New York State Supreme Court dismissed the latest complaint. The NYSUT is planning to appeal, and the ultimate outcome of this litigation cannot be determined at this time. For the District voters approved a budget with a 1.6% tax increase. The District is within the tax cap which would have allowed a maximum of 1.94% tax increase. Constitutional Requirements STATUS OF INDEBTEDNESS The New York State Constitution limits the power of the School 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 School District include the following: Purpose and Pledge. The School 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 School District may contract indebtedness only for a School 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 and utilized, no installment may be more than fifty percent in excess of the smallest prior installment. The School 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. 23

24 Statutory Procedure In general, the State Legislature has, by the enactment of the Local Finance Law, authorized the powers and procedure for the School 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 School District is generally required by such laws to submit propositions for the expenditure of money for capital purposes to the qualified electors of the School 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. No down payment is required in connection with the issuance of School District obligations. Debt Limit. The School District has the power to contract indebtedness for any School 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 School District and subject to certain enumerated deductions such as State aid for building purposes. The statutory method for determining full valuation is by taking assessed valuation of taxable real estate for the last completed assessment roll and applying thereto the ratio (equalization rate) which such assessed valuation bears to the full valuation; such ratio is determined by the State Board of Equalization and Assessment. The Legislature prescribes the manner by which such ratio 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 School 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. The School District has complied with the procedure with respect to the Bonds and Notes. The Board of Education, as the finance board of the School 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 School District, pursuant to the Local Finance Law. The School 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 School District to levy taxes on real estate for the payment of interest on or principal of indebtedness theretofore contracted. See Tax Levy Limitation Law. Debt Outstanding End of Fiscal Year Bonds $ 12,795,000 $ 10,965,000 $ 9,915,000 $ 8,690,000 $ 9,745,000 Bond Anticipation Note 2,446,874 20,130,000 20,010,000 18,860,000 15,375,000 Other Debt Total Debt Outstanding $ 15,241,874 $ 31,095,000 $ 29,925,000 $ 27,550,000 $ 25,120,000 Details of Outstanding Indebtedness The following table sets forth the indebtedness of the School District evidenced by bonds and notes as of May 27, Maturity Amount Bonds $ 12,045,000 Bond Anticipation Notes June 26, ,375,000 (1) (1) Total Indebtedness $ 27,420,000 The proceeds of the Bonds, together with $920,000 available funds, will retire the $10,095,000 of the $15,375,000 bond anticipation notes maturing on June 26, 2015 and the proceeds of the Notes, together with $200,000 available funds, will renew $4,425,000 of the $15,375,000 bond anticipation notes maturing on June 26,

25 Debt Statement Summary Summary of Indebtedness, Debt Limit and Net Debt-Contracting Margin as of May 27, 2015: Full Valuation of Taxable Real Property... $ 417,791,603 Debt Limit 10% thereof... 41,779,160 Inclusions: Bonds... $ 9,745,000 Bond Anticipation Notes... 1,120,000 Principal of this Issue Notes... 4,225,000 Principal of this Issue - Bonds... 10,030,000 Total Inclusions... $ 25,120,000 Exclusions: State Building Aid (1)... $ 0 Total Exclusions... $ 0 Total Net Indebtedness... $ 25,120,000 Net Debt-Contracting Margin... $ 16,659,160 The percent of debt contracting power exhausted is % (1) The District receives New York State building aid in an amount approximating 92.6% of the debt service on its indebtedness incurred for building projects. 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 School District. Bonded Debt Service A schedule of Bonded Debt Service may be found in APPENDIX - B to this Official Statement. Cash Flow Borrowings The School District has no revenue anticipation notes or tax anticipation notes outstanding and has not issued them in recent years nor do they reasonably expect to issue such notes in the current fiscal year or in the foreseeable future. Capital Project Financing On February 25, 2008, the School District authorized the issuance of $24,700,000 serial bonds for the reconstruction and renovation, in part, and the construction of improvements to various School District buildings and sites. The School District issued $2,446,874 on June 30, 2009 as the first borrowing against said authorization. Bond anticipation notes were renewed on June 30, 2010 in the amount of $2,446,874. The School District issued $2,220,000 Qualified Zone Academy Bonds on April 29, 2010 as a second series financing against said authorization. On August 19, 2010, $13,578,126 bond anticipation notes were issued as the third borrowing against said authorization. The School District renewed $16,025,000 bond anticipation notes on June 29, 2011, along with $45,704 available funds, and issued an additional $4,150,704 as new monies as the fourth borrowing against said authorization. In June 2013 the School District used $1,120,000 available funds to renew $20,130,000 bond anticipation notes maturing on June 29, 2012 and provide $1,000,000 new monies as the fifth borrowing against said authorization. On June 28, 2013, $18,860,000 bond anticipation notes, along with $1,150,000 in available funds renewed $20,010,000 bond anticipation notes outstanding. On June 26, 2014, the District issued $2,185,000 serial bonds, and along with $85,000 in available funds, retired $2,270,000 of the $18,860,000 bond anticipation notes outstanding. On June 26, 2014, the District also issued $15,375,000 bond anticipation notes, and together with $1,215,000 available funds, renewed $16,590,000 of the $18,860,000 bond anticipation notes outstanding. The proceeds of the Bonds, together with $920,000 available funds, will retire $10,950,000 of the $15,375,000 bond anticipation notes maturing on June 26, 2015 for the aforementioned purpose. The proceeds of the Notes together with $200,000 in available funds, will renew $4,425,000 of the $15,375,000 bond anticipation notes maturing on June 26, 2015, issued for the above mentioned purpose. The School District has no other projects authorized or contemplated at this time. 25

26 Estimated Overlapping Indebtedness In addition to the School District, the following political subdivisions have the power to issue obligations and to levy taxes or cause taxes to be levied on taxable real property in the School District. Estimated bonds and bond anticipation notes are listed as of the close of the last fiscal year of the respective municipalities. % Within Applicable Outstanding Net School Net Unit Indebtedness (1) (2) (3) Exclusions Indebtedness District Indebtedness Counties of: Chenango $ 0 $ 0 $ % $ 0 Madison 12,120, ,120, % 431,472 Towns of Columbus 40, , % 11,312 New Berlin 913, , , % 240 North Norwich % 0 Otselic % 0 Plymouth 44, , % 3,709 Sherburne % 0 Smyrna % 0 Brookfield 121, , % 0 Georgetown 8, , % 94 Hamilton % 0 Lebanon 103, , % 45,372 Village of: Earlville 3,137,000 2,913, , % 224,000 New Berlin 18, , % 18,000 Sherburne 4,500,970 4,148, , % 352,500 Smyrna % 0 Hamilton 4,325,000 3,657, , % 668,000 (1) (2) (3) Total $ 1,754,699 Bonds and bond anticipation notes, as of close of last respective fiscal year adjusted to include subsequent bond sales, if any. Pursuant to the Local Finance Law, this indebtedness is excluded from the constitutional debt limit. Sewer and Water indebtedness. Debt Ratios The following table sets forth certain ratios relating to the District s indebtedness as of May 27, 2015: Percentage of Amount Per Capita (a) Full Value (b) Gross Indebtedness (see Computation of Debt Limit )... $ 25,120,000 $ 2, % Gross Indebtedness Plus Net Overlapping Indebtedness (c)... 26,874,699 3, % (a) The current estimated population of the District 8,442. (b) The District s full value of taxable real estate for is $417,791,153. (c) Estimated net overlapping indebtedness is $1,754,699. See Estimated Overlapping Indebtedness. Note: State building aid for capital projects is not included above. The District anticipates 93.1% of debt service will be paid for with State building aid. 26

27 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 Bonds, 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 Bonds. 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 Bond and 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 Bonds in the event of a default in the payment of the principal of and interest on the Bonds. 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 counties, cities, and villages, 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. State Debt Moratorium Law. There are separate State law provisions regarding debt service moratoriums enacted into law in

28 At the Extraordinary Session of the State Legislature held in November, 1975, legislation was enacted which purported to suspend the right to commerce or continue an action in any court to collect or enforce certain short-term obligations of The City of New York. The effect of such act was to create a three-year moratorium on actions to enforce the payment of such obligations. On November 19, 1976, the Court of Appeals, the State s highest court, declared such act to be invalid on the ground that it violates the provisions of the State Constitution requiring a pledge by such City of its faith and credit for the payment of obligations. As a result of the Court of Appeals decision in Flushing National Bank v. Municipal Assistance Corporation for the City of New York, 40 N.Y.2d 731 (1976), the constitutionality of that portion of Title 6-A of Article 2 of the Local Finance Law described below, enacted at the 1975 Extraordinary Session of the State legislature authorizing any county, city, town or village with respect to which the State has declared a financial emergency to petition the State Supreme Court to stay the enforcement against such municipality of any claim for payment relating to any contract, debt or obligation of the municipality during the emergency period, is subject to doubt. In any event, no such emergency has been declared with respect to the School District. Right of Municipality or State to Declare a Municipal Financial Emergency and Stay Claims Under State Debt Moratorium Law. The State Legislature is authorized to declare by special act that a state of financial emergency exists in any county, city, town or village. (The provision does not by its terms apply to school districts or fire districts.) In addition, the State Legislature may authorize by special act establishment of an emergency financial control board for any county, city, town or village upon determination that such a state of financial emergency exists. Thereafter, unless such special act provides otherwise, a voluntary petition to stay claims may be filed by any such municipality (or by its emergency financial control board in the event said board requests the municipality to petition and the municipality fails to do so within five days thereafter). A petition filed in supreme court in county in which the municipality is located in accordance with the requirements of Title 6-A of the Local Finance Law ( Title 6-A ) effectively prohibits the doing of any act for ninety days in the payment of claims, against the municipality including payment of debt service on outstanding indebtedness. This includes staying the commencement or continuation of any court proceedings seeking payment of debt service due, the assessment, levy or collection of taxes by or for the municipality or the application of any funds, property, receivables or revenues of the municipality to the payment of debt service. The stay can be vacated under certain circumstances with provisions for the payment of amounts due or overdue upon a demand for payment in accordance with the statutory provisions set forth therein. The filing of a petition may be accompanied with a proposed repayment plan which upon court order approving the plan, may extend any stay in the payment of claims against the municipality for such additional period of time as is required to carry out fully all the terms and provisions of the plan with respect to those creditors who accept the plan or any benefits thereunder. Court approval is conditioned, after a hearing, upon certain findings as provided in Title 6-A. A proposed plan can be modified prior to court approval or disapproval. After approval, modification is not permissible without court order after a hearing. If not approved, the proposed plan must be amended within ten days or else the stay is vacated and claims including debt service due or overdue must be paid. It is at the discretion of the court to permit additional filings of amended plans and continuation of any stay during such time. A stay may be vacated or modified by the court upon motion of any creditor if the court finds after a hearing, that the municipality has failed to comply with a material provision of an accepted repayment plan or that due to a material change in circumstances the repayment plan is no longer in compliance with statutory requirements. Once an approved repayment plan has been completed, the court, after a hearing upon motion of any creditor, or a motion of the municipality or its emergency financial control board, will enter an order vacating any stay then in effect and enjoining of creditors who accepted the plan or any benefits thereunder from commencing or continuing any court action, proceeding or other act described in Title 6-A relating to any debt included in the plan. Title 6-A requires notice to all creditors of each material step in the proceedings. Court determinations adverse to the municipality or its financial emergency control board are appealable as of right to the appellate division in the judicial department in which the court is located and thereafter, if necessary, to the Court of Appeals. Such appeals stay the judgment or appealed from and all other actions, special proceedings or acts within the scope of Section of Title 6-A pending the hearing and determination of the appeals. Whether Title 6-A is valid under the Constitutional provisions regarding the payment of debt service is not known. However, based upon the decision in the Flushing National Bank case described above, its validity is subject to doubt. While the State Legislature has from time to time adopted legislation in response to a municipal fiscal emergency and established public benefit corporations with a broad range of financial control and oversight powers to oversee such municipalities, generally such legislation has provided that the provisions of Title 6-A are not applicable during any period of time that such a public benefit corporation has outstanding indebtedness issued on behalf of such municipality. 28

29 Fiscal Stress and State Emergency Financial Control Boards. Pursuant to Article IX Section 2(b)(2) of the State Constitution, any local government in the State may request the intervention of the State in its property, affairs and government by a two-thirds vote of the total membership of its legislative body or on request of its chief executive officer concurred in by a majority of such membership. This has resulted in the adoption of special acts for the establishment of public benefit corporations with varying degrees of authority to control the finances (including debt issuance) of the cities of Buffalo, Troy and Yonkers and the County of Nassau. The specific authority, powers and composition of the financial control boards established by these acts varies based upon circumstances and needs. Generally, the State legislature has granted such boards the power to approve or disapprove budget and financial plans and to issue debt on behalf of the municipality, as well as to impose wage and/or hiring freezes and approve collective bargaining agreements in certain cases. Implementation is left to the discretion of the board of the public benefit corporation. Such a State financial control board was first established for New York City in In addition, on a certificate of necessity of the governor reciting facts which in the judgment of governor constitute an emergency requiring enactment of such laws, with the concurrences of two-thirds of the members elected in each house of the State legislature the State is authorized to intervene in the property, affairs and governments of local government units. This occurred in the case of the County of Erie in The authority of the State to intervene in the financial affairs of local government is further supported by Article VIII, Section 12 of the Constitution which declares it to be the duty of the State legislature to restrict, subject to other provisions of the Constitution, the power of taxation, assessment, borrowing money and contracting indebtedness and loaning the credit of counties, cities, towns and villages so as to prevent abuses in taxation and assessment and in contracting indebtedness by them. In 2013, the State established a new state advisory board to assist counties, cities, towns and villages in financial distress. The Financial Restructuring Board for Local Governments (the FRB ), is authorized to conduct a comprehensive review of the finances and operations of any such municipality deemed by the FRB to be fiscally eligible for its services upon request by resolution of the municipal legislative body and concurrence of its chief executive. The FRB is authorized to make recommendations for, but cannot compel improvement of fiscal stability, management and delivery of municipal services, including shared services opportunities and is authorized to offer grants and/or loans of up to $5,000,000 through a Local Government Performance and Efficiency Program to undertake certain recommendations. If a municipality agrees to undertake the FRB recommendations, it will be automatically bound to fulfill the terms in order to receive the aid. The FRB is also authorized to serve as an alternative arbitration panel for binding arbitration. Although from time to time, there have been proposals for the creation of a statewide financial control board with broad authority over local governments in the State, the FRB does not have emergency financial control board powers to intervene such as the public benefit corporations established by special acts as described above. Several municipalities in the State are presently working with the FRB. The School District has not requested FRB assistance nor does it reasonably expect to do so in the foreseeable future. School districts and fire districts are not eligible for FRB assistance. 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 crisises 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. See Nature of Obligation and State Debt Moratorium Law herein. 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. 29

30 CONTINUING DISCLOSURE UNDERTAKING WITH RESPECT TO THE BONDS In accordance with the requirements 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 ), the School District has agreed to provide, or cause to be provided, (i) (ii) 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, during each fiscal year in which the Bonds are outstanding, (i) certain annual financial information and operating data for the preceding fiscal year in a form generally consistent with the information contained or cross-referenced in the final Official Statement dated June 11, 2015 of the School District relating to the Bonds under the headings THE SCHOOL DISTRICT, TAX INFORMATION, STATUS OF INDEBTEDNESS, LITIGATION and all Appendices (other than those related to bond insurance) by the end of the sixth month following the end of each succeeding fiscal year, commencing with the fiscal year ending June 30, 2015, and (ii) a copy of the audited financial statement, if any, (prepared in accordance with accounting principles generally accepted in the United States of America in effect at the time of the audit) for the preceding fiscal year, commencing with the fiscal year ending June 30, 2015; such audit, if any, will be so provided on or prior to the later of either the end of the sixth month of each such succeeding fiscal year or, if an audited financial statement is not available at that time, within sixty days following receipt by the School District of its audited financial statement for the preceding fiscal year, but, in any event, not later than the last business day of each such succeeding fiscal year; and provided further, in the event that the audited financial statement for any fiscal year is not available by the end of the sixth month following the end of any such succeeding fiscal year, unaudited financial statements in the form provided to the State, if available, will be provided no later than said date; provided however, that provision of unaudited financial statements in any year shall be further conditioned upon a determination by the School District of whether such provision is compliant with the requirements of federal securities laws including Rule 10b-5 of the Securities Exchange Act of 1934 and Rule 17(a)(2) of the Securities Act of 1933; in a timely manner not in excess of ten (10) business days after the occurrence of the event, notice of the occurrence of any of the following events with respect to the Bonds, to EMMA or any other entity designated or authorized by the SEC to receive reports pursuant to the Rule: (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 Bonds, 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 Bonds modifications to rights of Bond holders, if material Bond calls, if material and tender offers defeasances release, substitution, or sale of property securing repayment of the Bonds 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 30

31 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 Bonds. 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 Bonds. For the purposes of the event identified in (l) of this section, the event is considered to occur when any of the following occur: The appointment of a receiver, fiscal agent or similar officer for an obligated person in a proceeding under the U.S. Bankruptcy Code or in any other proceeding under state or federal law in which a court or governmental authority has assumed jurisdiction over substantially all of the assets or business of the obligated person, 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 obligated person. 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 Bonds; 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. (iii) in a timely manner to EMMA or any other entity designated or authorized by the SEC to receive reports pursuant to the Rule, notice of its failure to provide the aforedescribed annual financial information and operating data and such audited financial statement, if any, on or before the date specified. The School District reserves the right to terminate its obligations to provide the aforedescribed annual financial information and operating data and such audited financial statement, if any, and notices of material events, as set forth above, if and when the School District no longer remains an obligated person with respect to the Bonds 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 Bonds (including holders of beneficial interests in the Bonds). The right of holders of the Bonds 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 continuing disclosure 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 Bonds nor entitle any holder of the Bonds 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. A Continuing Disclosure Undertaking Certificate to this effect shall be provided to the purchaser at closing. The School District is in compliance with all prior undertakings pursuant to the Rule for the past five years. MATERIAL EVENT NOTICES WITH RESPECT TO THE NOTES 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 "Commission") 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 Note is 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 Commission 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) 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 Notes, unscheduled draws on credit enhancements reflecting financial difficulties 31

32 (e) (f) (g) (h) (i) (j) (k) (l) (m) (n) 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 Notes, or other material events affecting the tax status of the Notes 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 Notes. 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 securities. 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 Notes; 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. 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 Notes 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 Notes (including holders of beneficial interests in the Notes). The right of holders of the Notes 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 Notes nor entitle any holder of the Notes 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. The School District is in compliance with all prior undertakings pursuant to the Rule for the past five years. 32

33 MARKET AND RISK FACTORS The financial and economic condition of the School District as well as the market for the Bonds and 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 and in other jurisdictions, 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 Bonds and Notes. If a significant default or other financial crisis should occur in the affairs of the State or another jurisdiction 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 Bonds and 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 and revenues 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 "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 Bonds and Notes. See TAX INFORMATION - Tax Levy Limitation Law herein. LITIGATION The School District is subject to a number of lawsuits in the ordinary conduct of its affairs. The School 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 School District. 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 School District, threatened against or affecting the School District to restrain or enjoin sale or delivery of the Bonds and Notes or the levy and collection of taxes or assessments to pay same, or in any way contesting or affecting the validity of the Bonds and Notes or any proceedings or authority of the School District taken with respect to the authorization, issuance or sale of the Bonds and Notes or contesting the corporate existence or boundaries of the School District. 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 Bonds and 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 Bonds and 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 forms of opinions of Bond Counsel is set forth in APPENDICIES D & E. 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 Bonds and Notes. The School District has covenanted to comply with certain restrictions designed to insure that interest on the Bonds and 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 Bonds and Notes being included in gross income for federal income tax purposes possibly from the date of original issuance of the Bonds and 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 Bonds and Notes may adversely affect the value of, or the tax status of interest on, the Bonds and 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 Bonds and Notes. 33

34 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 Bonds and 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 Bonds and 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 Bonds and 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 Bonds and 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 Bonds and 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. Certain recent legislative proposals, generally would limit the exclusion from gross income of interest on obligations like the Bonds and 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 Bonds and Notes. The introduction or enactment of any such legislative proposals, clarification of the Code or court decisions may also affect, perhaps significantly, the market price for, or marketability of, the Bonds and Notes. Prospective purchasers of the Bonds and Notes should consult their own tax advisors regarding any pending or proposed federal or state tax legislation, regulations or litigation, and regarding the impact of future legislation, regulations or litigation, as to which Bond Counsel expresses no opinion. The Notes are not rated. RATING S & P has assigned an underlying rating of to the Bonds. No application was made to any other rating agency for the purpose of obtaining an additional rating on the Bonds. A rating reflects only the view of the rating agency assigning such rating and an explanation of the significance of such rating may be obtained from such rating agency. 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 rating will continue for any given period of time or that it will not be revised downward or withdrawn entirely by such rating agency if, in its judgment, circumstances so warrant. Any downward revision or withdrawal of the rating of the Bonds may have an adverse effect on the market price of the Bonds. LEGAL MATTERS Legal matters incident to the authorization, issuance and sale of the Bonds and Notes are subject to the respective approving legal opinions of Orrick, Herrington & Sutcliffe, LLP, Bond Counsel. Bond Counsel s opinions will be in substantially the forms attached hereto as APPENDICIES D & E. FINANCIAL ADVISOR Fiscal Advisors & Marketing, Inc. (the "Financial Advisor"), is a Municipal Advisor, registered with the Securities and Exchange Commission and the Municipal Securities Rulemaking Board. The Financial Advisor serves as independent financial advisor to the School District on matters relating to debt management. The Financial Advisor is a financial advisory and consulting organization and is not engaged in the business of underwriting, marketing, or trading municipal securities or any other negotiated instruments. The Financial Advisor has provided advice as to the plan of financing and the structuring of the Bonds and 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 Bonds and Notes was based on materials provided by the School District and other sources of information believed to be reliable. The Financial Advisor has not audited, authenticated, or otherwise verified the information provided by the School District or the information set forth in this Official Statement or any other information available to the School 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 Financial Advisor respecting the accuracy and completeness of or any other matter related to such information and this Official Statement. 34

35 MISCELLANEOUS 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 School 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 School 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 School District also assumes no liability or responsibility for any errors or omissions or for any updates to dated website information. If the purchaser(s) requests the Note to be issued in registered form, the School District will act as Paying Agent for the Bonds and Notes. If the purchaser(s) requests the Note to be issued in bearer from, the purchaser(s) will act as Paying Agent for the Bonds and Notes. Statements in the Official Statement, and the documents included by specific reference, that are not historical facts are forward-looking statements, within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and as defined in the Private Securities Litigation Reform Act of 1995, which involve a number of risks and uncertainties, and which are based on the Sherburne-Earlville Central School District management s beliefs as well as assumptions made by, and information currently available to, the Cattaraugus-Little Valley Central School 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 Sherburne-Earlville Central School District s files with the repositories. When used in Sherburne-Earlville Central School District documents or oral presentation, the words anticipate, believe, intend, plan, foresee, likely, estimate, expect, objective, projection, forecast, goal, will, or should, or similar words or phrases 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 Bonds and Notes. Orrick, Herrington & Sutcliffe LLP, New York, New York, Bond Counsel to the Sherburne-Earlville Central School District, expresses no opinion as to the accuracy or completeness of information in any documents prepared by or on behalf of the Sherburne-Earlville Central School District for use in connection with the offer and sale of the Bonds and 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 Bonds and Notes, the Sherburne-Earlville Central School 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 limitation as to information in the Official Statement obtained from sources other than the Sherburne-Earlville Central School District, as to which no representation can be made. The Official Statement is submitted only in connection with the sale of the Bonds and Notes by the Sherburne-Earlville Central School District and may not be reproduced or used in whole or in part for any other purpose. The Sherburne-Earlville Central School 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. If the purchaser(s) requests the Note to be issued in registered form, the Sherburne-Earlville Central School District will act as Paying Agent for the Notes. If the purchaser(s) requests the Notes to be issued in bearer from, the purchaser(s) will act as or name the Paying Agent for the Notes. Information pertaining to the Final Official Statement may be obtained upon request after the date of the Final Official Statement from the Business Office. The Sherburne-Earlville Central School District s contact information is as follows: Mr. 35

36 Todd Griffin, Assistant Superintendent for Business, 15 School Street, Sherburne, New York 13460, Phone (607) , Fax (607) , This Official Statement has been duly executed and delivered by the President of the Board of Education of the Sherburne- Earlville Central School District, on behalf thereof. SHERBURNE-EARLVILLE CENTRAL SCHOOL DISTRICT Dated: June 3, 2015 THOMAS MORRIS PRESIDENT OF THE BOARD OF EDUCATION AND CHIEF FISCAL OFFICER 36

37 APPENDIX - A Sherburne-Earlville CSD GENERAL FUND Balance Sheets Fiscal Year Ending June 30: ASSETS Unrestricted Cash $ 5,734,962 $ 4,751,386 $ 5,819,972 $ 5,945,896 $ 6,487,611 Restricted Cash 1,074,344 2,817,870 2,817,870 2,817,870 2,914,812 Due from Other Funds 1,207,811 1,320,523 1,091,081 1,870, ,183 Due from Other Governments 1,981,024 1,553,560 1,520, ,596 1,535,515 Other Assests ,499 58,707 TOTAL ASSETS $ 9,998,141 $ 10,443,339 $ 11,249,417 $ 11,521,352 $ 11,848,828 LIABILITIES AND FUND EQUITY Accounts Payable $ 7,148 $ 60,285 $ 28,727 $ 60,218 $ 3,806 Accrued Liabilities 580, , , , ,464 Due to Other Funds 18,530 29,029 18,012 18,023 18,023 Due to Other Governments - 643,311 45,718 1,571 - Due to Teachers' Retirement System 710, ,715 1,175,633 1,261,855 1,728,696 Due to Employees' Retirement System 99, , , , ,024 Deferred Revenue 1,324,084 1,078, ,046 1,298, ,121 TOTAL LIABILITIES 2,740,703 3,448,112 2,777,550 3,073,558 3,396,134 FUND EQUITY Reserved $ 3,210,524 $ 2,817,870 $ 2,817,870 $ 2,821,369 $ 2,915,943 Unreserved: Appropriated 900,000 1,260, ,294 1,647,909 1,481,368 Unappropriated 3,147,187 2,916,853 4,725,077 3,978,516 4,055,383 TOTAL FUND EQUITY 7,257,711 6,995,227 8,473,241 8,447,794 8,452,694 TOTAL LIABILITIES and FUND EQUITY $ 9,998,414 $ 10,443,339 $ 11,250,791 $ 11,521,352 $ 11,848,828 Source: Audited financial reports of the School District. This Appendix is not itself audited.

38 APPENDIX - A1 Sherburne-Earlville CSD GENERAL FUND Revenues, Expenditures and Changes in Fund Balance Fiscal Years Ending June 30: REVENUES Real Property Taxes $ 4,563,118 $ 4,812,309 $ 5,098,299 $ 5,217,695 $ 5,323,710 Other Real Property Tax Items 1,700,371 1,635,505 1,458,614 1,442,798 1,470,175 Charges for Services ,172 Use of Money & Property 94,075 35,905 37,213 99,648 19,952 Sale of Property and Compensation for Loss 6,088 10,777 13,283 7,149 16,182 Miscellaneous 162, , , , ,238 Revenues from State Sources 20,730,947 20,390,455 19,319,379 20,704,800 20,562,176 Revenue from Federal Sources 284, , ,141 74, ,549 Total Revenues $ 27,540,889 $ 28,131,636 # $ 26,893,147 $ 27,937,305 $ 28,073,982 Other Sources: Interfund Transfers Total Revenues and Other Sources 27,540,889 28,131,636 26,893,147 27,937,305 28,073,982 EXPENDITURES General Support $ 3,908,882 $ 3,854,131 $ 3,599,791 $ 3,733,397 $ 3,609,175 Instruction 14,292,010 14,394,079 14,260,549 13,636,246 13,953,237 Pupil Transportation 1,328,185 1,332,907 1,237,814 1,256,697 1,254,635 Community Services 13,960 18,760 13,960 13,960 13,960 Employee Benefits 4,725,086 5,118,379 5,770,526 5,993,937 6,404,762 Debt Service 2,094,458 2,129,778 2,399,387 1,786,118 2,829,053 Total Expenditures $ 26,362,581 $ 26,848,034 $ 27,282,027 $ 26,420,355 $ 28,064,822 Other Uses: Interfund Transfers 34,995 34,346 34,006 38,935 34,607 Total Expenditures and Other Uses 26,397,576 26,882,380 27,316,033 26,459,290 28,099,429 Excess (Deficit) Revenues Over Expenditures 1,143,313 1,249,256 (422,886) 1,478,015 (25,447) FUND BALANCE Fund Balance - Beginning of Year 4,865,143 6,008,455 7,257,711 6,995,226 8,473,241 Prior Period Adjustments (net) , Fund Balance - End of Year $ 6,008,456 $ 7,257,711 $ 6,995,227 $ 8,473,241 $ 8,447,794 Source: Audited financial reports of the School District. This Appendix is not itself audited.

39 APPENDIX - A2 Sherburne-Earlville 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 & Items $ 6,749,782 $ 5,437,890 $ 5,433,280 $ 6,844,279 $ 6,953,787 Other Real Property Tax Items 150,000 1,461,892 1,486, Charges for Services 5,000 5, Use of Money & Property 35,000 35,000 13, Premium Obligations , Sale of Property and Compensation for Loss , Miscellaneous 75,000 75, , , ,000 Revenues from State Sources 21,332,664 21,332,664 21,603,041 22,636,319 23,633,618 Revenues from Federal Sources 80,000 80, , Total Revenues $ 28,427,446 $ 28,427,446 $ 29,241,573 $ 29,787,341 $ 31,187,405 Other Sources: Interfund Transfers 400, , , ,000 Total Revenues and Other Sources 28,827,446 29,269,148 29,241,573 30,287,341 31,687,405 EXPENDITURES General Support $ 4,383,590 $ 4,533,140 $ 4,141,390 $ 4,975,733 $ 5,032,520 Instruction 14,778,774 14,675,424 13,873,672 13,909,494 15,090,098 Pupil Transportation 1,530,162 1,442,862 1,121,504 1,751,039 1,783,600 Community Services 22,180 22,180 13,960 - Employee Benefits 7,705,648 6,955,648 6,762,421 8,276,075 8,367,187 Debt Service 2,155,000 2,905,000 2,841,013 2,475,000 2,914,000 Total Expenditures $ 30,575,354 $ 30,534,254 $ 28,753,960 $ 31,387,341 $ 33,187,405 Other Uses: Interfund Transfers - 482, , Total Expenditures and Other Uses 30,575,354 31,017,056 29,236,673 31,387,341 33,187,405 Excess (Deficit) Revenues Over Expenditures (1,747,908) (1,747,908) 4,900 (1,100,000) (1,500,000) FUND BALANCE Fund Balance - Beginning of Year 1,747,908 1,747,908 8,447,794 1,100,000 1,500,000 Prior Period Adjustments (net) Fund Balance - End of Year $ - $ - $ 8,452,694 $ - $ - Source: Audited financial report and budgets of the School District. This Appendix is not itself audited.

40 APPENDIX - B Sherburne-Earlville CSD BONDED DEBT SERVICE Fiscal Year Ending Principal of Total Principal June 30th Principal Interest Total This Issue All Issues 2015 $ 1,320,000 $ 248, $ 1,568, $ - $ 1,320, ,345, , ,563, ,000 2,145, ,385, , ,571, ,000 2,195, ,430, , ,582, ,000 2,260, , , , ,000 1,595, ,000 96, , ,000 1,640, ,000 74, , ,000 1,700, ,000 50, , ,000 1,755, ,000 25, , ,000 1,315, ,000 19, , ,000 1,350, ,000 12, , ,025,000 1,230, ,000 6, , ,060,000 1,270,000 TOTALS $ 9,745,000 $ 1,207, $ 10,952, $ 10,030,000 $ 19,775,000

41 APPENDIX - B1 Sherburne-Earlville CSD CURRENT DEBT OUTSTANDING Fiscal Year Ending Refunding of 2003 Serial Bonds Buildings June 30th Principal Interest Total Principal Interest Total 2015 $ 650,000 $ 53, $ 703, $ 355,000 $ 128, $ 483, ,000 40, , , , , ,000 27, , , , , ,000 14, , ,000 86, , ,000 70, , ,000 54, , ,000 36, , ,000 18, , TOTALS $ 2,685,000 $ 135, $ 2,820, $ 3,265,000 $ 610, $ 3,875, Fiscal Year Ending Buildings - QZAB Buildings June 30th Principal Interest Total Principal Interest Total 2015 $ 155,000 $ 12, $ 167, $ 160,000 $ 52, $ 212, ,000 11, , ,000 51, , ,000 10, , ,000 47, , ,000 9, , ,000 43, , ,000 7, , ,000 39, , ,000 6, , ,000 35, , ,000 5, , ,000 31, , ,000 3, , ,000 27, , ,000 2, , ,000 22, , ,000 1, , ,000 17, , ,000 12, , ,000 6, , TOTALS $ 1,610,000 $ 71, $ 1,681, $ 2,185,000 $ 389, $ 2,574,398.32

42 APPENDIX - C SHERBURNE-EARLVILLE CENTRAL SCHOOL DISTRICT FINANCIAL STATEMENTS AND OTHER FINANCIAL INFORMATION JUNE 30, 2014 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 SHERBURNE-EARLVILLE CENTRAL SCHOOL DISTRICT TABLE OF CONTENTS Page INDEPENDENT AUDITOR S REPORT 1-2 MANAGEMENT S DISCUSSION AND ANALYSIS 3-12 BASIC FINANCIAL STATEMENTS District-Wide Financial Statements Statement of Net Position 13 Statement of Activities 14 Fund Financial Statements Balance Sheet Governmental Funds 15 Reconciliation of the Governmental Funds Balance to the Statement of Net Position 16 Statement of Revenues, Expenditures, and Changes in Fund Balances All Governmental Funds 17 Reconciliation of the Statement of Revenues and Expenditures of the Governmental Funds to the Statement of Activities 18 Fiduciary Fund Financial Statements Statement of Fiduciary Net Position 19 Statement of Changes in Fiduciary Net Position 20 Notes to Basic Financial Statements REQUIRED SUPPLEMENTARY INFORMATION OTHER THAN MANAGEMENT S DISCUSSION AND ANALYSIS Schedule of Revenues, Expenditures, and Changes in Fund Balance Budget and Actual General Fund 40 Schedules of Funding Progress of the Other Postemployment Benefits 41 OTHER SUPPLEMENTARY INFORMATION Schedules of Change from Original Budget to Revised Budget and Section 1318 of Real Property Tax Limit Calculation 42 Schedule of Project Expenditures Capital Projects Fund 43 Net Investment in Capital Assets 44 SINGLE AUDIT REPORTS AND SCHEDULES 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 45 Independent Auditor s Report on Compliance for Each Major Program and on Internal Control Over Compliance Required by OMB Circular A Schedule of Expenditures of Federal Awards 48 Notes to Schedule of Expenditures of Federal Awards 49 Schedule of Findings and Questioned Costs Federal Compliance Requirements 50 Status of Prior Year s Findings and Questioned Costs Federal Compliance Requirements 51

44 Independent Auditor's Report Board of Education Sherburne-Earlville Central School District Report on the Financial Statements We have audited the accompanying financial statements of the governmental activities, each major fund, and the aggregate remaining fund information of the Sherburne-Earlville Central School District, as of and for the year ended June 30, 2014, and the related notes to the financial statements, which collectively comprise the School District s basic financial statements as listed in the table of contents. Management s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. 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 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 District 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 District 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, each major fund, and the aggregate remaining fund information of the Sherburne-Earlville Central School District, as of June 30, 2014, and the respective changes in financial position, for the year then ended, in accordance with accounting principles generally accepted in the United States of America. 1

45 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, and schedules of funding progress of the other postemployment benefits, as listed in the table of contents, 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 Sherburne- Earlville Central School District s basic financial statements. The other supplementary information on pages 42 through 44 is presented for purposes of additional analysis as required by the New York State Education Department and is not a required part of the basic financial statements. The Schedule of Expenditures of Federal Awards is presented for purposes of additional analysis as required by U.S. Office of Management and Budget Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations, and is also not a required part of the basic financial statements. The Schedule of Expenditures of Federal Awards and other supplementary information 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 information is fairly stated in all material respects in relation to the basic financial statements as a whole. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated October 14, 2014 on our consideration of the Sherburne-Earlville Central School District s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering Sherburne-Earlville Central School District s internal control over financial reporting and compliance. S October 14, 2014 Rome, New York 2

46 SHERBURNE-EARLVILLE CENTRAL SCHOOL DISTRICT MANAGEMENT S DISCUSSION AND ANALYSIS For the Year Ended June 30, 2014 The Sherburne-Earlville Central School District s discussion and analysis of financial performance provides an overall review of the District s financial activities for the fiscal years ended June 30, 2014 and The intent of this discussion and analysis is to look at the District s financial performance as a whole. This should be read in conjunction with the financial statements, which immediately follow this section. 1. FINANCIAL HIGHLIGHTS Key financial highlights for fiscal year 2014, are as follows: The District s total net position, as reflected in the District-wide financial statements, decreased by $2,864,857. This decrease is primarily due to the current year addition to the other postemployment benefit liability of $2,932,501 recorded in the District-wide financial statements. The District s expenses for the year, as reflected in the District-wide financial statements, totaled $33,878,696. Of this amount, $239,662 was offset by program charges for services and $1,898,490 by operating grants to support instructional and food service programs. General revenues of $28,875,687 amounted to 93.1% of total revenues. These revenues covered a portion of program expenses, leaving a deficit of $2,864,857. The General Fund s total fund balance, as reflected in the fund financial statements on pages 15 and 17, increased by $4,900 to $8,452,694. This was due to an excess of revenues over expenditures based on the modified accrual basis of accounting. State and federal revenue increased by 0.7% to $21,399,513 in 2014 from $21,258,668 in 2013 due to a reduction in the State s GAP Elimination Adjustment. 2. OVERVIEW OF THE FINANCIAL STATEMENTS This annual report consists of four parts Management s Discussion and Analysis (MD&A), the basic financial statements, required supplementary information, and other supplementary information. The basic financial statements consist of district-wide financial statements, fund financial statements, and notes to the financial statements. A graphic display of the relationship of these statements follows: BASIC FINANCIAL STATEMENT MATRIX Management s Discussion and Analysis Basic Financial Statements Required Supplementary Information Other Supplementary Information District-wide Financial Statements Fund Financial Statements Notes to Financial Statements 3

47 SHERBURNE-EARLVILLE CENTRAL SCHOOL DISTRICT MANAGEMENT S DISCUSSION AND ANALYSIS For the Year Ended June 30, 2014 (Continued) A. District-wide Financial Statements The District-wide financial statements present the governmental activities of the District and are organized to provide an understanding of the fiscal performance of the District as a whole in a manner similar to a private sector business. There are two District-wide financial statements - the Statement of Net Position and the Statement of Activities. These statements provide both an aggregate and long-term view of the District s finances. These statements utilize the accrual basis of accounting. This basis of accounting recognizes the financial effects of events when they occur, without regard to the timing of cash flows related to the events. The Statement of Net Position The Statement of Net Position presents information on all of the District s assets, deferred outflows of resoruces and liabilities, with the difference reported as net position. Increases or decreases in net position may serve as a useful indicator of whether the financial position of the District is improving or deteriorating, respectively. The Statement of Activities The Statement of Activities presents information showing the change in net assets during the fiscal year. All changes in net position are recorded at the time the underlying financial event occurs. Therefore, revenues and expenses are reported in the statement for some items that will result in cash flow in future fiscal periods. B. Fund Financial Statements The fund financial statements provide more detailed information about the District s funds, not the District as a whole. A fund is a grouping of related accounts that is used to maintain control over resources that have been segregated for specific activities or objectives. The District also uses fund accounting to ensure compliance with finance-related legal requirements. The funds of the District are reported in the governmental funds and the fiduciary funds. These statements utilize the modified accrual basis of accounting. This basis of accounting recognizes revenues in the period that they become measurable and available. It recognizes expenditures in the period that they become measurable, funded through available resources and payable within a current period. Governmental Funds Governmental funds are used to account for essentially the same functions reported as governmental activities in the Districtwide financial statements. However, the governmental fund financial statements focus on shorter term inflows and outflows of spendable resources, as well as on balances of spendable resources available at the end of the fiscal year for spending in future years. Consequently, the governmental fund statements provide a detailed short-term view of the District s operations and the services it provides. Because the focus of governmental funds is narrower than that of District-wide financial statements, it is useful to compare the information presented for governmental funds with similar information presented for governmental activities in the Districtwide financial statements. By doing so, you may better understand the long-term impact of the District s near-term financing decisions. Both the governmental fund Balance Sheet and the governmental fund Statement of Revenues, Expenditures, and Changes in Fund Balance provide a reconciliation to facilitate this comparison between governmental funds and governmental activities. The District maintains five individual governmental funds, General Fund, School Lunch Fund, Special Aid Fund, Debt Service Fund, and Capital Projects Fund, each of which is considered to be a major fund and is presented separately in the fund financial statements. Fiduciary Funds Fiduciary funds are used to account for assets held by the District in its capacity as agent or trustee. All of the District s fiduciary activities are reported in a separate Statement of Fiduciary Net Position. The fiduciary activities have been excluded from the District s District-wide financial statements because the District cannot use these assets to finance its operations. 4

48 SHERBURNE-EARLVILLE CENTRAL SCHOOL DISTRICT MANAGEMENT S DISCUSSION AND ANALYSIS For the Year Ended June 30, 2014 (Continued) 3. FINANCIAL ANALYSIS OF THE DISTRICT AS A WHOLE A. Net Position The District s total net position decreased $2,864,857 between fiscal year 2014 and A summary of the District s Statement of Net Position for June 30, 2014 and 2013, is as follows: Restated Increase Percentage (Decrease) Change Current and Other Assets $ 12,688,582 $ 12,804,827 $ (116,245) (0.9%) Capital Assets, (Net of Accumulated Depreciation) 46,930,966 48,376,268 (1,445,302) (3.0%) Total Assets $ 59,619,548 $ 61,181,095 $ (1,561,547) (2.6%) Deferred Outflows of Resources $ 65,713 $ 82,142 $ (16,429) (20.0%) Non-Current Liabilities $ 24,989,758 $ 20,892,250 $ 4,097, % Other Liabilities 17,894,674 20,705,301 (2,810,627) (13.6%) Total Liabilities $ 42,884,432 $ 41,597,551 $ 1,286, % Net Position Net Investment in Capital Assets $ 20,706,434 $ 20,094,097 $ 612, % Restricted 4,929,443 4,830,234 99, % Unrestricted (Deficit) (8,835,048) (5,258,645) (3,576,403) (68.0%) Total Net Position $ 16,800,829 $ 19,665,686 $ (2,864,857) (14.6%) Current and other assets decreased by $116,245, as compared to the prior year. The decrease is primarily due to a decrease in the District s receivable balances. Capital assets (net of accumulated depreciation) decreased by $1,445,302, as compared to the prior year. This decrease is primarily due to the District selling all of its buses and a prior period adjustment for correction of an error related to accumulated depreciation. Note 6 and Note 17 to the Financial Statements provide additional information. Deferred outflows of resources decreased by $16,429, which is equal to the current year amortization amount associated with the refunding of 2012 debt. Note 8 to the Financial Statements provides additional information. Non-current liabilities increased by $4,097,508, as compared to the prior year. This increase is primarily the result of the recording of bond payments less the addition to the other postemployment benefits liability for $2,932,501 and an additional bond issuance in the amount of $2,185,000. Other liabilities decreased by $2,810,627 as compared to the prior year. This decrease is primarily a result of the pay down of Bond Anticipation Notes in the Capital Projects Fund of $3,485,000 offset by an increase in the amount due to Teachers Retirement System and an increase in accrued liabilities due to additional accrued retirement payouts. The net investment in capital assets is calculated by subtracting the amount of outstanding debt used for construction from the total cost of all asset acquisitions, net of accumulated depreciation. The total cost of these acquisitions includes expenditures to purchase land, construct and improve buildings and purchase vehicles, equipment and furniture to support District operations. 5

49 SHERBURNE-EARLVILLE CENTRAL SCHOOL DISTRICT MANAGEMENT S DISCUSSION AND ANALYSIS For the Year Ended June 30, 2014 (Continued) The restricted net position at June 30, 2014 of $4,929,443 consisted of the reserves in the General Fund and amounts restricted in the capital projects and debt service funds. The unrestricted net position at June 30, 2014, is a deficit of $8,835,048, which represents the amount by which the District s liabilities exceeded assets, excluding the net amount invested in capital assets and restricted net position. B. Changes in Net Position The results of this year s operations as a whole are reported in the Statement of Activities in a programmatic format in the accompanying financial statements. In the accompanying financial statements STAR (school tax relief) revenue is included in the other tax items line. However, in this MD&A, STAR revenue has been combined with property taxes. A summary of this statement for the years ended June 30, 2014 and 2013 is as follows: Increase Percentage Revenues (Decrease) Change Program Revenues Charges for Services $ 239,662 $ 274,139 $ (34,477) (12.6%) Operating Grants 1,898,490 1,895,415 3, % General Revenues Property Taxes and STAR 6,919,495 6,793, , % State and Federal Sources 21,399,513 21,258, , % Other 556, , , % Total Revenues 31,013,839 30,605, , % Expenses General Support 5,436,130 5,099, , % Instruction 24,194,320 25,280,450 (1,086,130) (4.3%) Pupil Transportation 2,823,753 2,442, , % Community Service 13,960 13, % Debt Service-Unallocated Interest 421, ,008 (59,502) (12.4%) Food Service Program 989,027 1,074,180 (85,153) (7.9%) Total Expenses 33,878,696 34,392,159 (513,463) (1.5%) Total Change in Net Position $ (2,864,857) $ (3,786,590) $ 921,733 The District s revenues increased by 1.3% in 2014 or $408,270. The major factors that contributed to the increase were: Property taxes and STAR revenues increased by $125,610. State and federal aid increased by $140,845 due to a reduction in the State s GAP Elimination Adjustment. Other revenue increased by $173,217 primarily due to an increase in the amount refunded from BOCES for prior year services. The District s expenditures for the year decreased by $513,463 or 1.5% primarily due to decreased expenditures in instruction for salaries, benefits, and allocated depreciation. 6

50 SHERBURNE-EARLVILLE CENTRAL SCHOOL DISTRICT MANAGEMENT S DISCUSSION AND ANALYSIS For the Year Ended June 30, 2014 (Continued) A graphic display of the distribution of revenues for the two years follows: For the Year Ended June 30, 2014 State and Federal Sources 69.00% Property Taxes and STAR 22.3% Operating Grants 6.12% Charges for Services 0.77% Other 1.79% For the Year Ended June 30, 2013 State and Federal Sources 69.46% Property Taxes and STAR 22.20% Operating Grants 6.19% Charges for Services 0.90% Other 1.25% 7

51 SHERBURNE-EARLVILLE CENTRAL SCHOOL DISTRICT MANAGEMENT S DISCUSSION AND ANALYSIS For the Year Ended June 30, 2014 (Continued) A graphic display of the distribution of expenses for the two years follows: For the Year Ended June 30, 2014 Community Service 0.04% Debt Service- Unallocated Interest 1.25% Food Service Program 2.92% Pupil Transportation 8.33% General Support 16.05% Instruction 71.41% For the Year Ended June 30, 2013 Pupil Transportation 7.10% Community Service 0.04% Debt Service- Unallocated Interest 1.40% Food Service Program 3.12% General Support 14.83% Instruction 73.51% 8