$5,730,000 COTATI-ROHNERT PARK UNIFIED SCHOOL DISTRICT (Sonoma County, California) 2013 General Obligation Refunding Bonds

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1 NEW ISSUE -- FULL BOOK-ENTRY RATING: Moody s: A2 See RATING herein. In the opinion of Jones Hall, A Professional Law Corporation, San Francisco, California, Bond Counsel, subject, however to certain qualifications described herein, under existing law, the interest on the Refunding Bonds is excluded from gross income for federal income tax purposes and such interest is not an item of tax preference for purposes of the federal alternative minimum tax imposed on individuals and corporations, although for the purpose of computing the alternative minimum tax imposed on certain corporations, such interest is taken into account in determining certain income and earnings. In the further opinion of Bond Counsel, such interest is exempt from California personal income taxes. See TAX MATTERS. $5,730,000 COTATI-ROHNERT PARK UNIFIED SCHOOL DISTRICT (Sonoma County, California) 2013 General Obligation Refunding Bonds Dated: Date of Delivery Due: August 1, as shown on inside cover Authority. The Cotati-Rohnert Park Unified School District (Sonoma County, California) 2013 General Obligation Refunding Bonds (the Refunding Bonds ) are being issued by the Cotati-Rohnert Park Unified School District (the District ) pursuant to certain provisions of the California Government Code, and a resolution of the Board of Trustees of the District adopted on December 11, 2012 (the Bond Resolution ). The Refunding Bonds are being issued to refund on a current basis the District s 2003 Refunding General Obligation Bonds. See THE REFUNDING BONDS Authority for Issuance and - Refinancing Plan. Security. The Refunding Bonds are general obligations of the District. The Board of Supervisors of Sonoma County has the power and is obligated to annually levy ad valorem taxes upon all property subject to taxation by the District without limitation of rate or amount (except certain personal property which is taxable at limited rates) for the payment of principal of and interest on the Refunding Bonds. There are currently other series of general obligation bonds of the District that are similarly secured by tax levies. All general obligation bonds are issued on a parity basis with one another. See The REFUNDING BONDS - Security for the Refunding Bonds. Redemption. The Refunding Bonds are not subject to redemption prior to maturity. Book-Entry Only. The Refunding Bonds will be issued in book-entry form only, and will be initially issued and registered in the name of Cede & Co. as nominee of The Depository Trust Company, New York, New York ( DTC ). Purchasers will not receive physical certificates representing their interests in the Refunding Bonds. See APPENDIX F - Book-Entry-Only System. Payments. Interest on the Refunding Bonds accrues from the date of delivery and is payable semiannually on February 1 and August 1 of each year, commencing August 1, 2013, by check mailed to the person in whose name the Refunding Bond is registered. Payments of principal and interest on the Refunding Bonds will be paid by The Bank of New York Mellon Trust Company, N.A., as paying agent, to DTC for subsequent disbursement to DTC Participants who will remit such payments to the beneficial owners of the Refunding Bonds. See THE REFUNDING BONDS Description of the Refunding Bonds. MATURITY SCHEDULE (See inside front cover) Cover Page. This cover page contains information for quick reference only. It is not a summary of all the provisions of the Refunding Bonds. Investors must read the entire official statement to obtain information essential in making an informed investment decision. The Refunding Bonds will be offered when, as and if issued and accepted by the Underwriter, subject to the approval as to their legality by Jones Hall, A Professional Law Corporation, San Francisco, California, Bond Counsel. Certain legal matters will be passed upon for the District by Jones Hall as Disclosure Counsel and for the Underwriter by Nossaman LLP, Irvine, California. It is anticipated that the Refunding Bonds in book-entry form will be available for delivery through the facilities of DTC in New York, New York, on or about February 26, Dated: February 7, 2013

2 MATURITY SCHEDULE COTATI-ROHNERT PARK UNIFIED SCHOOL DISTRICT (Sonoma County, California) 2013 General Obligation Refunding Bonds Base CUSIP ( ) : Maturity (August 1) Principal Amount Interest Rate Price Yield CUSIP( ) (221623) 2013 $1,620, % % TW ,615, TX ,675, TY , TZ4 Copyright 2013, American Bankers Association. CUSIP data herein are provided by Standard & Poor's CUSIP Service Bureau, a division of The McGraw-Hill Companies, Inc., and are provided for convenience of reference only. Neither the District nor the Underwriter assumes any responsibility for the accuracy of these CUSIP data.

3 GENERAL INFORMATION ABOUT THIS OFFICIAL STATEMENT Use of Official Statement. This Official Statement is submitted in connection with the sale of the Refunding Bonds referred to herein and may not be reproduced or used, in whole or in part, for any other purpose. This Official Statement is not a contract between any bond owner and the District or the Underwriter. No Offering Except by This Official Statement. No dealer, broker, salesperson or other person has been authorized by the District or the Underwriter to give any information or to make any representations other than those contained in this Official Statement and, if given or made, such other information or representation must not be relied upon as having been authorized by the District or the Underwriter. No Unlawful Offers or Solicitations. This Official Statement does not constitute an offer to sell or the solicitation of an offer to buy nor may there be any sale of the Refunding Bonds by a person in any jurisdiction in which it is unlawful for such person to make such an offer, solicitation or sale. Information in Official Statement. The information set forth in this Official Statement has been furnished by the District and other sources which are believed to be reliable, but it is not guaranteed as to accuracy or completeness. Involvement of Underwriter. The Underwriter has provided the following statement for inclusion in this Official Statement: The Underwriter has reviewed the information in this Official Statement in accordance with, and as a part of, its responsibilities to investors under the Federal Securities Laws as applied to the facts and circumstances of this transaction, but the Underwriter does not guarantee the accuracy or completeness of such information. Document Summaries. All summaries of the Bond Resolution or other documents referred to in this Official Statement are made subject to the provisions of such documents and qualified in their entirety to reference to such documents, and do not purport to be complete statements of any or all of such provisions. No Securities Laws Registration. The Refunding Bonds have not been registered under the Securities Act of 1933, as amended, in reliance upon exceptions therein for the issuance and sale of municipal securities. The Refunding Bonds have not been registered or qualified under the securities laws of any state. Effective Date. This Official Statement speaks only as of its date, and the information and expressions of opinion contained in this Official Statement are subject to change without notice. Neither the delivery of this Official Statement nor any sale of the Refunding Bonds will, under any circumstances, give rise to any implication that there has been no change in the affairs of the District, the County, the other parties described in this Official Statement, or the condition of the property within the District since the date of this Official Statement. The Refunding Bonds have not been registered under the Securities Act of 1933, as amended, in reliance upon an exception from the registration requirements contained in such act. The Refunding Bonds have not been registered or qualified under the securities laws of any state. Website. The District maintains a website. However, the information presented on the website is not a part of this Official Statement and should not be relied upon in making an investment decision with respect to the Refunding Bonds.

4 COTATI-ROHNERT PARK UNIFIED SCHOOL DISTRICT (SONOMA COUNTY, CALIFORNIA) DISTRICT BOARD OF TRUSTEES Marc Orloff, President Andrew Longmire, Clerk Leffler Brown, Member Ed Gilardi, Member Jennifer Wiltermood, Member DISTRICT ADMINISTRATION Robert Haley, Superintendent Anne Barron, Chief Business Official BOND COUNSEL and DISCLOSURE COUNSEL Jones Hall, A Professional Law Corporation San Francisco, California FINANCIAL ADVISOR Isom Advisors, A Division of Urban Futures, Inc. Walnut Creek, California PAYING AGENT, TRANSFER AGENT, BOND REGISTRAR AND ESCROW BANK The Bank of New York Mellon Trust Company, N.A. Los Angeles, California UNDERWRITER S COUNSEL Nossaman LLP Irvine, California VERIFICATION AGENT Causey Demgen & Moore Denver, Colorado

5 TABLE OF CONTENTS INTRODUCTION...1 General...1 The District...1 THE REFUNDING BONDS...1 Authority for Issuance...1 Description of the Refunding Bonds...1 Refinancing Plan...2 Security for the Refunding Bonds...3 Paying Agent...4 No Redemption...4 Registration, Transfer and Exchange of Refunding Bonds...4 Book-Entry-Only System...5 Defeasance...5 DEBT SERVICE SCHEDULES...6 SOURCES AND USES OF FUNDS...8 PROPERTY TAXATION...8 Ad Valorem Property Taxation...8 Assessed Valuations...9 Appeals of Assessed Value...11 Property Tax Collection...12 Largest Property Owners...13 Overlapping Debt Obligations...14 CONTINUING DISCLOSURE...15 VERIFICATION OF MATHEMATICAL ACCURACY...15 CERTAIN LEGAL MATTERS...15 Absence of Material Litigation...15 Legal Opinion...16 TAX MATTERS...16 RATING...17 UNDERWRITING...18 ADDITIONAL INFORMATION...18 APPENDIX A - Audited Financial Statements of the District For Fiscal Year Ending June 30, A-1 APPENDIX B - General and Financial Information About the District... B-1 APPENDIX C - General Information about the Cities of Rohnert Park and Cotati and Sonoma County...C-1 APPENDIX D - Form of Opinion of Bond Counsel...D-1 APPENDIX E - Form of Continuing Disclosure Certificate... E-1 APPENDIX F - Book-Entry Only System... F-1 APPENDIX G - Sonoma County Investment Policy and Quarterly Report for Quarter Ending December 31, G-1 Page -i-

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7 OFFICIAL STATEMENT $5,730,000 COTATI-ROHNERT PARK UNIFIED SCHOOL DISTRICT (Sonoma County, California) 2013 General Obligation Refunding Bonds INTRODUCTION General The purpose of this Official Statement, which includes the cover page and attached appendices, is to set forth certain information concerning the sale and delivery by the Cotati- Rohnert Park Unified School District (the District ) of its 2013 General Obligation Refunding Bonds (the Refunding Bonds ). This Official Statement makes reference to resolutions and to other documents and laws. Such references do not purport to be complete, comprehensive or definitive and are qualified in their entirety by reference to each such document and provision. All capitalized terms used in this Official Statement, unless noted otherwise, have the meanings set forth in the Bond Resolution. The District The District covers approximately 15.4 square miles in the central portion of Sonoma County (the County ). The District currently operates six elementary schools, one middle school, one comprehensive high school, one technology high school, one necessary small continuation high school, and one continuation high school. Enrollment for the school year is approximately 5,764 students. See APPENDIX B General and Financial Information About the District. Authority for Issuance THE REFUNDING BONDS The Refunding Bonds will be issued under the provisions of Articles 9 and 11 of Chapter 3 of Part 1 of Division 2 of Title 5 of the Government Code of the State of California (the Bond Law ), and a resolution adopted by the Board of Trustees of the District on December 11, 2012 (the Bond Resolution ). Description of the Refunding Bonds The Refunding Bonds will be issued in book-entry form only, and will be initially issued and registered in the name of Cede & Co. as nominee for DTC. Purchasers will not receive

8 physical certificates representing their interest in the Refunding Bonds. See "Book-Entry Only System" below and APPENDIX F Book-Entry Only System. The Refunding Bonds will be issued in the denomination of $5,000 principal amount each or any integral multiple thereof. The Refunding Bonds mature on August 1, in the years and amounts set forth on the cover page hereof. Interest on the Refunding Bonds accrues from their Dated Date, and is payable semiannually on February 1 and August 1 of each year (each, an Interest Payment Date ) commencing August 1, Each Refunding Bond will bear interest from the Interest Payment Date next preceding the date of registration and authentication thereof unless (i) it is registered and authenticated as of an Interest Payment Date, in which event it shall bear interest from such date, or (ii) it is registered and authenticated prior to a Interest Payment Date and after the close of business on the 15 th day of the month preceding such Interest Payment Date (each, a Record Date ), in which event it shall bear interest from such Interest Payment Date, or (iii) it is registered and authenticated prior to July 15, 2013, in which event it will bear interest from the date of original delivery; provided, however, that if at the time of authentication of a Refunding Bond, interest is in default thereon, such Refunding Bond will bear interest from the Interest Payment Date to which interest has previously been paid or made available for payment thereon. Interest on the Refunding Bonds, including the final interest payment upon maturity, is payable by check of the Paying Agent (defined below) mailed on the Interest Payment Date by first-class mail to the Owner thereof at such Owner s address as it appears on the bond register maintained by the Paying Agent at the close of business on the preceding Record Date, or at such other address as the Owner may have filed with the Paying Agent for that purpose, or upon written request filed with the Paying Agent as of the Record Date by an Owner of at least $1,000,000 in aggregate principal amount of Refunding Bonds, by wire transfer. Refinancing Plan The Refunding Bonds are being issued by the District to refund the outstanding principal of the Cotati-Rohnert Park Unified School District (Sonoma County, California) 2003 Refunding General Obligation Bonds (the 2003 Refunding Bonds ) on a current basis, as described below. The 2003 Refunding Bonds issued in the original aggregate principal amount of $18,525,000 are currently outstanding in the aggregate principal amount of $5,835,000. The 2003 Refunding Bonds were issued to refund a series of bonds issued by the District in The 2003 Refunding Bonds will be redeemed shortly after closing on the Refunding Bonds at a redemption price equal to the principal amount outstanding, plus accrued interest to the redemption date, without premium. The District will deliver a portion of the proceeds of the Refunding Bonds to The Bank of New York Mellon Trust Company, N.A., as escrow agent (the Escrow Bank ), for deposit in the escrow fund (the "Escrow Fund") established under an Escrow Deposit and Trust Agreement, between the District and the Escrow Bank. Moneys in the Escrow Fund will be used to pay the Refunded Bonds and are not pledged for payment of the Refunding Bonds. -2-

9 Sufficiency of the deposits in the Escrow Fund for those purposes will be verified by Causey Demgen & Moore, certified public accountants, Denver, Colorado (the Verification Agent ). See VERIFICATION OF MATHEMATICAL ACCURACY below. The amounts held and invested by the Escrow Bank in the Escrow Fund are pledged solely to the payment of the Refunded Bonds. Neither the funds deposited in the Escrow Fund nor the interest on the invested funds will be available for the payment of debt service with respect to the Refunding Bonds. Security for the Refunding Bonds The Refunding Bonds are a general obligation of the District. The Board of Supervisors of the County has the power and is obligated to levy ad valorem taxes for the payment of the Refunding Bonds and the interest thereon upon all property within the District subject to taxation by the District without limitation of rate or amount (except certain personal property which is taxable at limited rates). Such taxes are required to be levied annually, in addition to all other taxes, during the period that the Refunding Bonds are outstanding in an amount sufficient to pay the principal and interest on the Refunding Bonds when due. Such taxes, when collected, will be deposited into an interest and sinking fund for the Refunding Bonds (the Debt Service Fund ), which is maintained by the County Treasurer and which is created by statute for the payment of principal of and interest on the Refunding Bonds when due. Although the County is obligated to levy an ad valorem tax for the payment of the Refunding Bonds, the Refunding Bonds are not a debt of the County. The District has other general obligation bonds outstanding which are also secured by the levy of ad valorem taxes in the District. Such general obligation bonds are secured on a parity basis with the Refunding Bonds. See APPENDIX B GENERAL AND FINANCIAL INFORMATION ABOUT THE DISTRICT DISTRICT FINANCIAL INFORMATION Existing Debt Obligations. The moneys in the Debt Service Fund, to the extent necessary to pay the principal and interest on the Refunding Bonds as the same become due and payable, shall be transferred by the County to the Paying Agent (as defined herein) which, in turn, shall pay such moneys to DTC to pay the principal and interest on the Refunding Bonds. DTC will thereupon make payments of principal and interest on the Refunding Bonds to the DTC Participants who will thereupon make payments of principal and interest to the beneficial owners of the Refunding Bonds. The rate of the annual ad valorem tax levied by the County to repay the Refunding Bonds will be determined by the relationship between the assessed valuation of taxable property in the District and the amount of debt service due on the Refunding Bonds. A reduction in the assessed valuation of taxable property in the District caused by economic factors beyond the District's control, such as economic recession, slower growth, or deflation of land values, a relocation out of the District by one or more major property owners, or the complete or partial destruction of such property caused by, among other eventualities, an earthquake, flood or other natural disaster, could cause a reduction in the assessed value of the District and necessitate an unanticipated increase in the annual tax levy. There are currently other series of general obligation bonds that are similarly secured by tax levies. For further information regarding the District's tax base, tax rates, overlapping debt and other matters concerning taxation, see PROPERTY TAXATION. -3-

10 Paying Agent The Bank of New York Mellon Trust Company, N.A., Los Angeles, California (the Paying Agent ), will act as the registrar, transfer agent, and paying agent for the Refunding Bonds. As long as DTC is the registered owner of the Refunding Bonds and DTC's book-entry method is used for the Refunding Bonds, the Paying Agent will send any notice of redemption or other notices to owners only to DTC. Any failure of DTC to advise any DTC Participant, or of any DTC Participant to notify any Beneficial Owner, of any such notice and its content or effect will not affect the validity or sufficiency of the proceedings relating to the redemption of the Refunding Bonds called for redemption or of any other action covered by such notice. The Paying Agent, the District, and the County have no responsibility or liability for any aspects of the records relating to or payments made on account of beneficial ownership, or for maintaining, supervising or reviewing any records relating to beneficial ownership, of interests in the Refunding Bonds. No Redemption The Refunding Bonds are not subject to redemption prior to maturity. Registration, Transfer and Exchange of Refunding Bonds If the book entry system is discontinued, the District shall cause the Paying Agent to maintain and keep at its principal corporate trust office all books and records necessary for the registration, exchange and transfer of the Refunding Bonds. If the book entry system is discontinued, the person in whose name a Refunding Bond is registered on the Bond Register shall be regarded as the absolute owner of that Bond. Payment of the principal of and interest on any Refunding Bond shall be made only to or upon the order of that person; neither the District, the County nor the Paying Agent shall be affected by any notice to the contrary, but the registration may be changed as provided in the Bond Resolution. Refunding Bonds may be exchanged for Refunding Bonds of like tenor, maturity and principal amount upon presentation and surrender at the principal corporate trust office of the Paying Agent in San Francisco, California. Any Refunding Bond may, in accordance with its terms, but only if (i) the District determines to no longer maintain the book entry only status of the Refunding Bonds, (ii) DTC determines to discontinue providing such services and no successor securities depository is named or (iii) DTC requests the District to deliver Bond certificates to particular DTC Participants, be transferred, upon the books required to be kept pursuant to the provisions of the Bond Resolution, by the person in whose name it is registered, in person or by his duly authorized attorney, upon surrender of such Refunding Bond for cancellation at the office of the Paying Agent, accompanied by delivery of a written instrument of transfer in a form approved by the Paying Agent, duly executed. No exchanges of Refunding Bonds shall be required to be made (a) fifteen days prior to an Interest Payment Date or the date established by the Paying Agent for selection of Refunding Bonds for redemption or (b) with respect to a Refunding Bond after such Refunding Bond has been selected for redemption. -4-

11 Book-Entry-Only System The Refunding Bonds will be issued in fully registered form only and, when initially issued, will be registered in the name of Cede & Co., as nominee of DTC. DTC will act as securities depository for the Refunding Bonds. Purchasers of the Refunding Bonds will not receive physical certificates representing their beneficial ownership interests in the Refunding Bonds purchased. Payments of principal and interest on the Refunding Bonds will be paid by the Trustee to DTC, which is obligated in turn to remit such principal and interest to its DTC Participants for subsequent disbursement to the beneficial owners of the Refunding Bonds. See APPENDIX F BOOK-ENTRY ONLY SYSTEM herein. Defeasance The Refunding Bonds may be paid by the District in any of the following ways, provided that the District also pays or causes to be paid any other sums payable under the Resolution by the District: (i) by paying or causing to be paid the principal or redemption price of and interest on such Refunding Bonds, as and when the same become due and payable; (ii) by irrevocably depositing, in trust, at or before maturity, money or securities in the necessary amount (as provided in the Resolution) to pay or redeem such Refunding Bonds; or (iii) by delivering such Refunding Bonds to the Paying Agent for cancellation by it. If the District pays all Outstanding Refunding Bonds and also pays or causes to be paid all other sums payable under the Resolution, then and in that case, at the election of the District, and notwithstanding that any Refunding Bonds shall not have been surrendered for payment, the Resolution and other assets made under the Resolution and all covenants, agreements and other obligations of the District under the Resolution shall cease, terminate, become void and be completely discharged and satisfied. -5-

12 DEBT SERVICE SCHEDULES Refunding Bonds Debt Service. The following table shows the debt service schedule with respect to the Refunding Bonds (assuming no optional redemptions). COTATI-ROHNERT PARK UNIFIED SCHOOL DISTRICT Debt Service Schedule Refunding Bonds Period Ending (August 1) Refunding Bonds Principal Refunding Bonds Interest Refunding Bonds Debt Service 2013 $1,620,000 $77, $1,697, ,615, , ,763, ,675,000 99, ,774, ,000 32, , Total $5,730,000 $358, $6,088, Combined General Obligation Bonds Debt Service Schedules. Other than the 2003 Refunding Bonds, the District has the following series of general obligation bonds outstanding: The Cotati-Rohnert Park Unified School District (Sonoma County, California) Election of 1990, Series I (the 1990 Series I Bonds ), in the aggregate principal amount of $11,005,000, currently outstanding in the aggregate principal amount of $9,460,000. The Cotati-Rohnert Park Unified School District 2005 Refunding General Obligation Bonds, Series A (the 2005 Series A Refunding Bonds ), in the aggregate principal amount of $25,765,000, currently outstanding in the aggregate principal amount of $25,765,000. The Cotati-Rohnert Park Unified School District 2005 Refunding General Obligation Bonds, Series A (the 2005 Series B Refunding Bonds ), in the aggregate principal amount of $6,450,000, currently outstanding in the aggregate principal amount of $5,870,000. The Cotati-Rohnert Park Unified School District 2010 General Obligation Refunding Bonds (the 2010 Refunding Bonds ), in the aggregate principal amount of $16,355,000, currently outstanding in the aggregate principal amount of $13,645,

13 The following table shows the combined debt service schedule with respect to the District s outstanding general obligation bonds listed above (assuming no optional redemption of any such bonds). Period Ending (August 1) COTATI-ROHNERT PARK UNIFIED SCHOOL DISTRICT Combined Debt Service Schedule General Obligation Bonds 2005 Series A Refunding Bonds 2005 Series B Refunding Bonds 2010 Refunding Bonds Total Combined Debt Service 1990 Series I Bonds Refunding Bonds 2013 $735, $1,221, $720, $1,827, $1,697, $6,203, , ,221, , ,653, ,763, ,245, , ,221, , ,667, ,774, ,338, , ,916, ,475, ,658, , ,506, , ,046, ,489, ,647, ,671, , ,173, ,501, ,652, ,876, ,201, ,240, ,643, ,084, ,184, ,923, , ,427, ,261, ,074, , ,650, ,523, ,568, ,010, ,102, ,510, ,661, ,022, ,194, ,201, ,767, ,036, ,005, , ,892, ,719, , , Total $13,419, $36,036, $6,991, $17,346, $6,088, $79,883, For more information on outstanding general obligation bonds of the District, see APPENDIX B - DISTRICT GENERAL AND FINANCIAL INFORMATION Existing Debt Obligations. -7-

14 SOURCES AND USES OF FUNDS The sources and uses of funds with respect to the Refunding Bonds are as follows: Sources of Funds Par Amount of Refunding Bonds $5,730, Original Issue Premium 251, Total Sources $5,981, Uses of Funds Deposit to Escrow Fund $5,859, Costs of Issuance (1) 122, Total Uses $5,981, (1) Costs of Issuance include legal fees, financial advisor fees, underwriter s discount, printing costs, rating agency fees, verification fees and other miscellaneous costs and expenses of issuing the Refunding Bonds. Ad Valorem Property Taxation PROPERTY TAXATION Taxes are levied by the County for each fiscal year on taxable real and personal property which is situated in the District as of the preceding January 1. For assessment and collection purposes, property is classified either as secured or unsecured and is listed accordingly on separate parts of the assessment roll. The secured roll is that part of the assessment roll containing State-assessed public utilities property and real property having a tax lien which is sufficient, in the opinion of the County Assessor, to secure payment of the taxes. Other property is assessed on the unsecured roll. Property taxes on the secured roll are due in two installments, on November 1 and February 1 of each fiscal year. If unpaid, such taxes become delinquent on December 10 and April 10, respectively, and a 10 percent penalty attaches to any delinquent payment. Property on the secured roll with respect to which taxes are delinquent becomes tax defaulted on or about June 30 of the fiscal year. Such property may thereafter be redeemed by payment of a penalty of 1.5 percent per month to the time of redemption, plus costs and a redemption fee. If taxes are unpaid for a period of five years or more, the property is subject to sale by the Treasurer. Property taxes on the unsecured roll are due as of the January 1 lien date and become delinquent, if unpaid, on August 31. A 10 percent penalty attaches to delinquent unsecured taxes. If unsecured taxes are unpaid at 5:00 p.m. on October 31, an additional penalty of 1.5 percent attaches to them on the first day of each month until paid. The taxing authority has four ways of collecting delinquent unsecured personal property taxes: (1) bringing a civil action against the taxpayer; (2) filing a certificate in the office of the County Clerk specifying certain facts in order to obtain a lien on certain property of the taxpayer; (3) filing a certificate of delinquency for record in the County Clerk and County Recorder's office in order to obtain a lien on certain property of the taxpayer; and (4) seizing and selling personal property, improvements, or possessory interests belonging or assessed to the assessee. -8-

15 Assessed Valuations The assessed valuation of property in the District is established by the Sonoma County Assessor, except for public utility property which is assessed by the State Board of Equalization. Assessed valuations are reported at 100 percent of the full value of the property, as defined in Article XIIIA of the California Constitution. Prior to , assessed valuations were reported at 25 percent of the full value of property. For a discussion of how properties currently are assessed, see CONSTITUTIONAL AND STATUTORY PROVISIONS AFFECTING DISTRICT REVENUES AND APPROPRIATIONS. Certain classes of property, such as churches, colleges, not-for-profit hospitals, and charitable institutions, are exempt from property taxation and do not appear on the tax rolls. No reimbursement is made by the State for such exemptions. Property within the District had a net taxable assessed valuation for fiscal year of $4,621,294,104. Shown in the following table are the assessed valuations for the District for the past seven fiscal years. Table No. 1 COTATI-ROHNERT PARK UNIFIED SCHOOL DISTRICT Assessed Valuation Fiscal Year through Fiscal Year Local Secured Utility Unsecured Total $4,771,850,152 $507,751 $206,281,051 $4,978,638, ,180,392, , ,223,947 5,322,124, ,135,956, , ,023,320 5,272,830, ,968,910, , ,859,900 5,109,661, ,688,664, , ,022,419 4,824,580, ,677,080,664 1,277, ,361,918 4,805,720, ,497,705,400 1,277, ,311,015 4,621,294,104 Source: California Municipal Statistics, Inc. -9-

16 The assessed valuation of parcels in the District is comprised primarily of parcels used for residential uses, with 92.22% of assessed valuation attributable to residential uses, and 7.78% attributable to non-residential use. In addition, of all of the parcels within the District, 70.91% are used for single-family residential. The following table summarizes secured assessed valuation of parcels by land use in the District for the fiscal year. Table No. 2 COTATI-ROHNERT PARK UNIFIED SCHOOL DISTRICT Assessed Valuation and Parcels by Land Use Fiscal Year % of No. of % of Assessed Valuation (1) Total Parcels Total Non-Residential: Agricultural $ 70,458, % % Commercial 460,806, Vacant Commercial 34,544, Industrial 283,359, Vacant Industrial 26,867, Recreational 28,748, Government/Social/Institutional 12,751, Miscellaneous 1,581, Subtotal Non-Residential $919,118, % 1, % Residential: Single Family Residence $2,536,850, , Condominium/Townhouse 313,006, , Rural Residential 156,286, Hotel/Motel 39,981, Mobile Home 853, Mobile Home Park 38,414, Residential Units 91,640, Residential Units/Apartments 368,933, Miscellaneous Residential 3,553, Vacant Residential 29,066, Subtotal Residential $3,578,586, % 14, % Total $4,497,705, % 15, % (1) Local Secured Assessed Valuation; excluding tax-exempt property. Source: California Municipal Statistics, Inc. -10-

17 The greatest number of single-family residential parcels in the District have a value between $250,000 and $274,999, representing 11.70% of the single-family assessed valuation, as set forth on the following table. Table No. 3 COTATI-ROHNERT PARK UNIFIED SCHOOL DISTRICT Per Parcel Assessed Valuation of Single-Family Homes Fiscal Year No. of Average Median Parcels Assessed Valuation Assessed Valuation Assessed Valuation Single Family Residential 10,819 $2,536,850,946 $234,481 $234, No. of % of Cumulative Total % of Cumulative Assessed Valuation Parcels (1) Total % of Total Valuation Total % of Total $0 - $24, % 0.009% $ 17, % 0.001% $25,000 - $49, ,572, $50,000 - $74, ,830, $75,000 - $99, ,679, $100,000 - $124, ,075, $125,000 - $149, ,263, $150,000 - $174, ,054, $175,000 - $199, ,034, $200,000 - $224,999 1, ,470, $225,000 - $249,999 1, ,737, $250,000 - $274,999 1, ,902, $275,000 - $299, ,364, $300,000 - $324, ,997, $325,000 - $349, ,710, $350,000 - $374, ,558, $375,000 - $399, ,449, $400,000 -$424, ,068, $425,000 - $449, ,568, $450,000 - $474, ,606, $475,000 - $499, ,560, $500,000 and greater ,326, Total 10, % $2,536,850, % (1) Improved single family residential parcels. Excludes condominiums and parcels with multiple family units. Source: California Municipal Statistics, Inc. Appeals of Assessed Value There are two types of appeals of assessed values that could adversely impact property tax revenues within the District. Appeals may be based on Proposition 8 of November 1978, which requires that for each January 1 lien date, the taxable value of real property must be the lesser of its base year value, annually adjusted by the inflation factor pursuant to Article XIIIA of the State Constitution, or its full cash value, taking into account reductions in value due to damage, destruction, depreciation, obsolescence, removal of property or other factors causing a decline in value. See LIMITATIONS ON TAX REVENUES in Appendix B. Under California law, property owners may apply for a reduction of their property tax assessment by filing a written application, in form prescribed by the State Board of Equalization, with the County board of equalization or assessment appeals board. In most cases, the appeal -11-

18 is filed because the applicant believes that present market conditions (such as residential home prices) cause the property to be worth less than its current assessed value. Proposition 8 reductions may also be unilaterally applied by the County Assessor. Any reduction in the assessment ultimately granted as a result of such appeal applies to the year for which application is made and during which the written application was filed. These reductions are subject to yearly reappraisals and are adjusted back to their original values when market conditions improve. Once the property has regained its prior value, adjusted for inflation, it once again is subject to the annual inflationary factor growth rate allowed under Article XIIIA. See LIMITATIONS ON TAX REVENUES in Appendix B. A second type of assessment appeal involves a challenge to the base year value of an assessed property. Appeals for reduction in the base year value of an assessment, if successful, reduce the assessment for the year in which the appeal is taken and prospectively thereafter. The base year is determined by the completion date of new construction or the date of change of ownership. Any base year appeal must be made within four years of the change of ownership or new construction date. The District consists of approximately 15.4 square miles located in Sonoma County, and includes areas in the City of Cotati and the City of Rohnert Park. Under Proposition 8, for the tax year, the County Assessor lowered the assessments on some 37,000 properties within the County, which contributed to the 1.33% decrease in the assessment roll to roughly $67.68 billion. For the tax year, the County Assessor s office reassessed over 45,000 properties within the County due to the continuing declining residential real estate market. In addition, the Assessor s office processed over 18,000 changes in ownership and new construction events that occurred during the 2009 calendar year. The Assessment Roll dropped by $1.5 billion to a net taxable roll of $66.1 billion. In addition, the State had a negative Consumer Price Index for the first time since 1978, when voters passed Proposition 13, which governs property taxes. Normally under Proposition 13, assessed property values increase up to 2% per year, except when the inflation index is lower than that. For the tax year, every property in the State received at least a 0.237% reduction in assessed value, in line with the Consumer Price Index decline. In , the Assessment Roll decreased by $3.7 billion, or 5.3%. In , the Assessment Roll decreased by $170 million or 0.26%. No assurance can be given that Proposition 8 reductions and/or property tax appeals in the future will not significantly reduce the assessed valuation of property within the District. Property Tax Collections The Board of Supervisors of the County adopted the Alternative Method of Distribution of Tax Levies and Collections and of Tax Sale Proceeds (the "Teeter Plan"), as provided for in Section 4701 et seq. of the State Revenue and Taxation Code. Pursuant to the Teeter Plan, the County establishes a tax losses reserve fund and a tax resources account and each entity levying property taxes in the County may draw on the amount of uncollected taxes and assessments credited to its fund, in the same manner as if the amount credited had been collected. -12-

19 The County is responsible for determining the amount of the tax levy on each parcel in the taxing entity, which is entered onto the secured real property tax roll. Upon completion of the secured real property tax roll, the County's Auditor-Controller determines the total amount of taxes and assessments actually extended on the roll for each fund for which a tax levy has been included, and apportions 100% of the tax and assessment levies to that fund's credit. Such moneys may thereafter be drawn against by the taxing agency in the same manner as if the amount credited had been collected. So long as the Teeter Plan remains in effect, the District s receipt of revenues with respect to the levy of ad valorem property taxes will not be dependent upon actual collections of the ad valorem property taxes by the County. However, under the statute creating the Teeter Plan, the Board of Supervisors could under certain circumstances terminate the Teeter Plan in its entirety and, in addition, the Board of Supervisors could terminate the Teeter Plan if the delinquency rate for all ad valorem property taxes levied within the District in any year exceeds 3%. In the event that the Teeter Plan were terminated, the amount of the levy of ad valorem property taxes in the District would depend upon the collections of the ad valorem property taxes and delinquency rates experienced with respect to the parcels within the District. Largest Property Owners The following table shows the 20 largest owners of taxable property in the District as determined by secured assessed valuation in fiscal year , which represent 11.60% of the secured tax base. Table No. 4 COTATI-ROHNERT PARK UNIFIED SCHOOL DISTRICT Largest Local Secured Taxpayers Fiscal Year % of Property Owner Primary Land Use Assessed Valuation Total (1) 1. Sonoma Mountain Village LLC Industrial $47,931, % 2. Steven J. Scarpa Apartments 45,319, % 3. Ernest M. Kotlier Apartments 39,998, % 4. CLPF - Oak View at Sonoma Hills LP Apartments 35,500, % 5. Columbia Redwood Creek LLC Apartments 33,090, % 6. Crossbrook Apartments LP Apartments 31,253, % 7. Codding Enterprises Shopping Center 27,708, % 8. Knickerbocker Properties Inc XXXVIII Apartments 27,141, % Snyder Lane LLC Apartments 26,560, % 10. Santa Rosa Press Democrat Inc. Newspaper 24,216, % 11. El Capitan Investments LLC Movie theater 22,930, % 12. Costco Wholesale Corp. Commercial 22,203, % 13. RLH Partnership Hotel 20,321, % 14. State Farm Mutual Automobile Insurance Co. Office Building 18,785, % 15. Lowes HIW Inc. Commercial 18,783, % 16. Caltex Equities Series LLC Shopping Center 18,037, % 17. Pine Creek Properties Apartments 16,030, % 18. Mountain Shadows Investors LLC Shopping Center 15,685, % 19. Rancho Grande Manufactured Home CommunityMobile Home Park 15,356, % 20. Expressway Partners LLC Commercial 14,820, % $521,675, % (1) Local Secured Assessed Valuation: $4,497,705,400. Source: California Municipal Statistics, Inc. -13-

20 Overlapping Debt Obligations Set forth below is a direct and overlapping debt report (the Debt Report ) prepared by California Municipal Statistics, Inc. and dated December 1, The Debt Report is included for general information purposes only. The District has not reviewed the Debt Report for completeness or accuracy and makes no representation in connection therewith. The Debt Report generally includes long-term obligations sold in the public credit markets by public agencies whose boundaries overlap the boundaries of the District in whole or in part. Such long-term obligations generally are not payable from revenues of the District (except as indicated) nor are they necessarily obligations secured by land within the District. In many cases, long-term obligations issued by a public agency are payable only from the general fund or other revenues of such public agency. Table No. 5 COTATI-ROHNERT PARK UNIFIED SCHOOL DISTRICT Statement of Direct and Overlapping Bonded Debt Dated as of December 1, Assessed Valuation: $4,621,294,104 DIRECT AND OVERLAPPING TAX AND ASSESSMENT DEBT: % Applicable Debt 12/1/12 Sonoma County Joint Community College District 7.009% $13,596,779 Cotati-Rohnert Park Unified School District ,575,000 (1) Sonoma County Canon Manor Assessment District ,005,000 City 1915 Act Bonds ,075,000 TOTAL DIRECT AND OVERLAPPING TAX AND ASSESSMENT DEBT $83,251,779 OVERLAPPING GENERAL FUND DEBT: Sonoma County General Fund Obligations 7.082% $ 2,243,399 Sonoma County Pension Obligations ,427,018 Sonoma County Office of Education Certificates of Participation ,411 Sonoma County Joint Community College District General Fund Obligations ,667 City of Rohnert Park General Fund Obligations ,648,997 TOTAL OVERLAPPING GENERAL FUND DEBT $44,592,492 OVERLAPPING TAX INCREMENT DEBT: Cotati Redevelopment Agency % $10,570,000 Rohnert Park Redevelopment Agency ,378,724 TOTAL OVERLAPPING TAX INCREMENT DEBT $78,948,724 COMBINED TOTAL DEBT $206,792,995 (2) (1) Excludes Refunding Bonds. (2) Excludes tax and revenue anticipation notes, enterprise revenue, mortgage revenue and non-bonded capital lease obligations. Ratios to Assessed Valuation: Direct Debt ($60,575,000) % Total Direct and Overlapping Tax and Assessment Debt % Combined Total Debt % Ratios to Redevelopment Incremental Valuation ($1,529,604,951): Combined Total Debt % Source: California Municipal Statistics, Inc. -14-

21 CONTINUING DISCLOSURE The District has covenanted, for the benefit of holders and beneficial owners of the Refunding Bonds to provide certain financial information and operating data (an Annual Report ) relating to the District to the Municipal Securities Rulemaking Board (the MSRB ) not later than nine months after the end of the District s fiscal year (which currently would be March 31), commencing March 31, 2013 with the report for the Fiscal Year (provided that the first Annual Report shall consist solely of this Official Statement), and to provide notices of the occurrence of certain enumerated events, if material. The notices of material events will be filed by the District with the MSRB. The specific nature of the information to be contained in an Annual Report or the notices of material events is set forth below under the caption APPENDIX E - Form of Continuing Disclosure Certificate. These covenants have been made in order to assist the Underwriter in complying with S.E.C. Rule 15c2-12(b)(5) (the Rule ). The District has never failed to comply in all material respects with any previous undertakings with regard to said Rule to provide annual reports or notices of material events. The County is not obligated to undertake any continuing disclosure in connection with the Refunding Bonds. VERIFICATION OF MATHEMATICAL ACCURACY The Verification Agent, upon delivery of the Refunding Bonds, will deliver a report of the mathematical accuracy of certain computations, contained in schedules provided to them on behalf of the District, relating to (a) the sufficiency of the anticipated amount of proceeds of the Refunding Bonds and other funds available to pay, when due, the principal, whether at maturity or upon prior redemption, interest and redemption premium requirements of the Refunded Bonds and (b) the yields on the amount of proceeds held and invested prior to redemption of the Refunded Bonds and on the Refunding Bonds considered by Bond Counsel in connection with the opinion rendered by Bond Counsel that the Refunding Bonds are not arbitrage bonds within the meaning of Section 148 of the Internal Revenue Code of 1986, as amended. The report of the Verification Agent will include the statement that the scope of their engagement is limited to verifying mathematical accuracy of the computations contained in such schedules provided to them, and that they have no obligation to update their report because of events occurring, or data or information coming to their attention, subsequent to the date of their report. Absence of Material Litigation CERTAIN LEGAL MATTERS No litigation is pending or threatened concerning the validity of the Refunding Bonds, and a certificate to that effect, executed by an authorized officer of the District, will be furnished to purchasers at the time of the original delivery of the Refunding Bonds. The District is not aware of any litigation pending or threatened that (i) questions the political existence of the District, (ii) contests the District's ability to receive ad valorem taxes or to collect other revenues or (iii) contests the District's ability to issue and retire the Refunding Bonds. -15-

22 Legal Opinion The proceedings in connection with the issuance of the Refunding Bonds are subject to the approval as to their legality of Jones Hall, A Professional Law Corporation, San Francisco, California, Bond Counsel for the District ( Bond Counsel ). The opinion of Bond Counsel with respect to the Refunding Bonds will be delivered in substantially the form attached hereto as Appendix D. Certain legal matters will also be passed upon for the District by Jones Hall as Disclosure Counsel ( Disclosure Counsel ). The fees of Bond Counsel and Disclosure Counsel are contingent upon the issuance and delivery of the Refunding Bonds. TAX MATTERS Federal Tax Status. In the opinion of Jones Hall, A Professional Law Corporation, San Francisco, California, Bond Counsel, subject, however to the qualifications set forth below, under existing law, the interest on the Refunding Bonds is excluded from gross income for federal income tax purposes and such interest is not an item of tax preference for purposes of the federal alternative minimum tax imposed on individuals and corporations, although for the purpose of computing the alternative minimum tax imposed on certain corporations, such interest is taken into account in determining certain income and earnings. The opinions set forth in the preceding paragraph are subject to the condition that the District comply with all requirements of the Internal Revenue Code of 1986 (the Tax Code ) that must be satisfied subsequent to the issuance of the Refunding Bonds. The District has covenanted to comply with each such requirement. Failure to comply with certain of such requirements may cause the inclusion of such interest in gross income for federal income tax purposes to be retroactive to the date of issuance of the Refunding Bonds. We express no opinion regarding other federal tax consequences arising with respect to the Refunding Bonds. Tax Treatment of Original Issue Discount and Premium. If the initial offering price to the public (excluding bond houses and brokers) at which a Bond is sold is less than the amount payable at maturity thereof, then such difference constitutes original issue discount for purposes of federal income taxes and State of California personal income taxes. If the initial offering price to the public (excluding bond houses and brokers) at which each Bond is sold is greater than the amount payable at maturity thereof, then such difference constitutes original issue premium for purposes of federal income taxes and State of California personal income taxes. De minimis original issue discount and original issue premium is disregarded. Under the Tax Code, original issue discount is treated as interest excluded from federal gross income and exempt from State of California personal income taxes to the extent properly allocable to each owner thereof subject to the limitations described in the first paragraph of this section. The original issue discount accrues over the term to maturity of the Refunding Bond on the basis of a constant interest rate compounded on each interest or principal payment date (with straight-line interpolations between compounding dates). The amount of original issue discount accruing during each period is added to the adjusted basis of such Bonds to determine taxable gain upon disposition (including sale, redemption, or payment on maturity) of such Bond. The Tax Code contains certain provisions relating to the accrual of original issue discount in the case of purchasers of the Refunding Bonds who purchase the Refunding Bonds after the initial offering of a substantial amount of such maturity. Owners of such Bonds should consult their own tax advisors with respect to the tax consequences of ownership of Bonds with -16-

23 original issue discount, including the treatment of purchasers who do not purchase in the original offering, the allowance of a deduction for any loss on a sale or other disposition, and the treatment of accrued original issue discount on such Bonds under federal individual and corporate alternative minimum taxes. Under the Tax Code, original issue premium is amortized on an annual basis over the term of the Refunding Bond (said term being the shorter of the Refunding Bond's maturity date or its call date). The amount of original issue premium amortized each year reduces the adjusted basis of the owner of the Refunding Bond for purposes of determining taxable gain or loss upon disposition. The amount of original issue premium on a Bond is amortized each year over the term to maturity of the Refunding Bond on the basis of a constant interest rate compounded on each interest or principal payment date (with straight-line interpolations between compounding dates). Amortized Bond premium is not deductible for federal income tax purposes. Owners of premium Bonds, including purchasers who do not purchase in the original offering, should consult their own tax advisors with respect to State of California personal income tax and federal income tax consequences of owning such Bonds. California Tax Status. In the further opinion of Bond Counsel, interest on the Refunding Bonds is exempt from California personal income taxes. Other Tax Considerations. Owners of the Refunding Bonds should also be aware that the ownership or disposition of, or the accrual or receipt of interest on, the Refunding Bonds may have federal or state tax consequences other than as described above. Bond Counsel expresses no opinion regarding any federal or state tax consequences arising with respect to the Refunding Bonds other than as expressly described above. Form of Opinion. A copy of the proposed form of opinion of Bond Counsel with respect to the Refunding Bonds is attached hereto as Appendix D. Future legislation, if enacted into law, or clarification of the Tax Code may cause interest on the Bonds to be subject, directly or indirectly, to federal income taxation, or otherwise prevent owners of the Bonds from realizing the full current benefit of the tax status of such interest. The introduction or enactment of any such future legislation or clarification of the Tax Code may also affect the market price for, or marketability of, the Bonds. Prospective purchasers of the Bonds should consult their own tax advisors regarding any pending or proposed federal tax legislation, as to which Bond Counsel expresses no opinion. RATING Moody s Investors Services ("Moody s") has assigned its municipal bond rating of A2 (negative outlook) to the Refunding Bonds. Such rating reflects only the views of Moody s and an explanation of the significance of such rating may be obtained only from Moody s. There is no assurance that such rating will continue for any given period of time or that it will not be revised downward or withdrawn entirely by Moody s, if in the judgment of the rating agency, circumstances so warrant. Any such downward revision or withdrawal of such rating may have an adverse effect on the market price of the Refunding Bonds. -17-

24 UNDERWRITING E. J. De La Rosa & Co., Inc. (the Underwriter ) has agreed in a bond purchase contract to purchase (the Purchase Contract ) the Refunding Bonds at a purchase price of $5,946, (which is equal to the initial principal amount of the Refunding Bonds plus a net original issue premium of $251,586.15, less Underwriter's discount of $35,000.00). The Purchase Contract provides that the Underwriter will purchase all of the Refunding Bonds (if any are purchased), and provides that the Underwriter's obligation to purchase is subject to certain terms and conditions, including the approval of certain legal matters by counsel. The Underwriter intends to offer the Refunding Bonds to the public at the offering prices set forth on the inside cover page of this Official Statement. The Underwriter may offer and sell to certain dealers and others at a price lower than the offering prices stated on the inside cover page of this Official Statement. The offering price may be changed from time to time by the Underwriter. ADDITIONAL INFORMATION The discussions herein about the Bond Resolution and the Continuing Disclosure Certificate are brief outlines of certain provisions thereof. Such outlines do not purport to be complete and for full and complete statements of such provisions reference is made to such documents. Copies of these documents mentioned are available from the Underwriter and following delivery of the Refunding Bonds will be on file at the offices of the Paying Agent in Los Angeles, California. References are also made herein to certain documents and reports relating to the District; such references are brief summaries and do not purport to be complete or definitive. Copies of such documents are available upon written request to the District. Any statements in this Official Statement involving matters of opinion, whether or not expressly so stated, are intended as such and not as representations of fact. This Official Statement is not to be construed as a contract or agreement between the District and the purchasers or Owners of any of the Refunding Bonds. The execution and delivery of this Official Statement have been duly authorized by the District. COTATI-ROHNERT PARK UNIFIED SCHOOL DISTRICT By: /s/ Robert Haley Superintendent -18-

25 APPENDIX A AUDITED FINANCIAL STATEMENTS OF THE DISTRICT FOR FISCAL YEAR ENDING JUNE 30, 2012 A-1

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27 COTATI-ROHNERT PARK UNIFIED SCHOOL DISTRICT COUNTY OF SONOMA ROHNERT PARK, CALIFORNIA AUDIT REPORT JUNE 30, 2012 CHAVAN & ASSOCIATES, LLP CERTIFIED PUBLIC ACCOUNTANTS 1475 SARATOGA AVE., SUITE 180 SAN JOSE, CA 95129

28 Cotati-Rohnert Park Unified School District County of Sonoma Table of Contents TITLE PAGE FINANCIAL SECTION: Independent Auditor s Report Management s Discussion and Analysis Basic Financial Statements: Government-Wide Financial Statements: Statement of Net Assets Statement of Activities Fund Financial Statements: Governmental Funds Balance Sheet Reconciliation of the Governmental Funds Balance Sheet to the Statement of Net Assets Governmental Funds Statement of Revenues, Expenditures, and Changes in Fund Balances Reconciliation of the Governmental Funds Statement of Revenues, Expenditures, and Changes in Fund Balances to the Statement of Activities Statement of Fiduciary Assets and Liabilities Notes to the Basic Financial Statements REQUIRED SUPPLEMENTARY INFORMATION: Schedule of Revenue, Expenditures and Changes in Fund Balances - Budget and Actual (GAAP) - General Fund SUPPLEMENTARY INFORMATION: Combining Statements - Nonmajor Funds: Nonmajor Governmental Funds - Combining Balance Sheet Nonmajor Governmental Funds - Combining Schedule of Revenues, Expenditures and Changes in Fund Balances. 41 State and Federal Award Compliance Section: Organization Schedule of Average Daily Attendance Schedule of Instructional Time Offered Schedule of Charter Schools Schedule of Financial Trends and Analysis Schedule of Expenditures Federal Awards Reconciliation of the Annual Financial Budget Report (SACS) to the Audited Financial Statements Schedule of Excess Sick Leave Notes to State and Federal Award Compliance Sections

29 Cotati-Rohnert Park Unified School District County of Sonoma Table of Contents OTHER INDEPENDENT AUDITOR S REPORTS: 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 Independent Auditor s Report on Compliance with Requirements that Could Have a Direct and Material Effect on Each Major Program and on Internal Control over Compliance in Accordance with OMB Circular A Independent Auditor s Report on Compliance with Requirements that Could Have a Direct and Material Effect on State Programs FINDINGS AND RECOMMENDATIONS: Schedule of Findings and Questioned Costs Status of Prior Year Findings and Recommendations... 60

30 FINANCIAL SECTION

31 The Honorable Board of Trustees Cotati-Rohnert Park Unified School District Rohnert Park, California INDEPENDENT AUDITOR S REPORT We have audited the accompanying financial statements of the governmental activities, each major fund and the aggregate remaining fund information of the Cotati-Rohnert Park Unified School District (the "District"), as of and for the year ended June 30, 2012, which collectively comprise the District s basic financial statements, as listed in the table of contents. These financial statements are the responsibility of the District s management. Our responsibility is to express an opinion 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, and Standards and Procedures for Audits of California K-12 Local Educational Agencies (K-12 Audit Guide), prescribed by the California State Controller s Office. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the governmental activities, each major fund and the aggregate remaining fund information of the District at June 30, 2012, and the respective changes in financial position for the year then ended in conformity with accounting principles generally accepted in the United States of America. As discussed in Note 7 of the basic financial statements, the State of California continues to suffer the effects of a recessionary economy, which directly impacts the funding capability of the State of California to the K12 educational community. The accompanying financial statements have been prepared assuming that the District will continue as a going concern. As discussed in Note 7 of the basic financial statements, the District continues to experience significant declining enrollment and significant deficit spending that has been partially mitigated by the use of one-time revenues and non-traditional funding sources that may no longer be available to the District in the future. As a result, deficit spending is expected to accelerate, resulting in inadequate cash flows and lower reserve levels, which raises substantial doubt about the District's ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 7. In accordance with Government Auditing Standards, we have also issued a report dated November 1, 2012 on our consideration of the District s internal control over financial reporting and our tests of its compliance with certain provisions of laws, regulations, contracts, grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over 1475 Saratoga Ave, Suite 180, San Jose, CA Tel: E-Fax: info@cnallp.com

32 financial reporting and compliance and the results of that testing, and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be read in conjunction with this report in considering the results of our audit. Accounting principles generally accepted in the United States of America require that the management s discussion and analysis and budgetary comparison information on pages 3 through 9 and 39 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. Our audit was conducted for the purpose of forming an opinion on the financial statements that collectively comprise District s basic financial statements. The combining and individual fund financial statements and other schedules listed in the supplementary section of the table of contents are presented for purposes of additional analysis and are not a required part of the basic financial statements of the District. These statements are the responsibility of management and were derived from and relate directly to the underlying accounting and other records used to prepare the financial statements. The accompanying 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 not a required part of the basic financial statements of the District. This information has been subjected to the auditing procedures applied in the audit of the financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the financial statements or to the 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 financial statements as a whole. November 1, 2012 San Jose, California 1475 Saratoga Ave, Suite 180, San Jose, CA Tel: E-Fax: info@cnallp.com

33 Management s Discussion and Analysis

34 Cotati-Rohnert Park Unified School District Management s Discussion and Analysis For the Fiscal Year Ended June 30, 2012 The discussion and analysis of the financial performance of the Cotati-Rohnert Park Unified School District provides an overall review of the organization s financial activities for the fiscal year ended June 30, The intent of this discussion and analysis is to look at the district s financial performance as a whole. Readers should also review the notes to the basic financial statements and financial statements to enhance their understanding of the district s financial performance. Financial Highlights Key financial highlights for the fiscal year are as follows: Total assets decreased by $506,722 from June 30, 2011 to June 30, General revenues accounted for $42,850,352, which is 80% of all revenues. The District had $53,131,724 in expenses offset by program specific revenues of $10,522,472. Total fund balance in the governmental funds decreased by $883,643 or 4.96% from June 30, 2011 to June 30, The District exceeds the State required minimum reserve for economic uncertainty of 3% of general fund expenditure, transfers out and other uses (total outgo). Using the Annual Report This annual report consists of a series of basic financial statements and notes to those statements. These statements are organized to assist the reader in understanding the Cotati-Rohnert Park Unified School District as a financial whole, an entire operating entity. The statements then proceed to provide an increasingly detailed look at specific financial activities. The Statement of Net Assets and Statement of Activities comprise the district-wide financial statements and provide information about the activities of the whole district, presenting both an aggregate view of the organization s finances and a longer-term view of those finances. Fund financial statements provide the next level of detail. For governmental funds, these statements tell how services were financed in the shortterm as well as what remains for future spending. The fund financial statements also look at the district s most significant fund, the General Fund, with all other (non-major) funds presented in total in one column. The basic financial statements also include notes that explain some of the information in the financial statements and provide more detailed data. 3

35 Overview of the Financial Statements Cotati-Rohnert Park Unified School District Management s Discussion and Analysis For the Fiscal Year Ended June 30, 2012 Government-wide Financial Statements - Statement of Net Assets and the Statement of Activities While this document contains the nine funds used by the Cotati-Rohnert Park Unified School District to provide programs and activities, it provides a view of the district as a whole, looks at all financial transactions and asks the question, How did we do financially during ? The Statement of Net Assets and the Statement of Activities answer this question. These statements include all assets and liabilities using the accrual basis of accounting similar to the accounting used by most private-sector companies. This basis of accounting takes into account all of the current year s revenues and expenditures, regardless of when cash is received or paid. These two statements report the district s net assets and changes in those assets. This change in net assets is important because it tells the reader whether the financial position of Cotati-Rohnert Park Unified School District as a whole has improved or diminished. The causes of the change may be the result of many factors, some financial, and some not. Non-financial factors include the district s property tax base, current property tax laws in California restricting revenue growth, facility condition, required educational programs and other factors. In the Statement of Net Assets and the Statement of Activities, the district reports governmental activities. Governmental activities are the activities in which most of the district s programs and services are reported including, but not limited to, instruction, support services, operation and maintenance of plant, pupil transportation, and extracurricular activities. Reporting the Cotati-Rohnert Park Unified School District s Most Significant Funds Fund Financial Statements Fund financial reports provide detailed information about the district s major funds. The district uses many funds to account for a multitude of financial transactions. However, these fund financial statements focus on the district s most significant funds and not the organization as a whole. Governmental Funds Most of the district s activities are reported in governmental funds, which focus on how money flows into and out of those funds and the balances left at year-end available for spending in the future periods. These funds are reported using an accounting method called modified accrual accounting, which measures cash and all other financial assets that can readily be converted to cash. The governmental fund statements provide a detailed short-term view of the district s general government operations and the basic services it provides. Governmental fund information helps to determine whether there are more or fewer financial resources that can be spent in the near future to finance educational programs. The relationship (or differences) between governmental activities (reported in the Statement of Net Assets and the Statement of Activities) and governmental funds is reconciled in the financial statements. The Cotati-Rohnert Park Unified School District s most significant governmental fund is the General Fund. 4

36 Cotati-Rohnert Park Unified School District Management s Discussion and Analysis For the Fiscal Year Ended June 30, 2012 The Cotati-Rohnert Park Unified School District as a Whole Recall that the Statement of Net Assets provides the perspective of the District as a whole. Table 1 provides a summary that compares the district s net assets in and : Table 1 - Summary of Statement of Net Assets Percentage Change Change Assets Current Assets $ 24,424,144 $ 22,489,626 $ 1,934, % Noncurrent Assets 65,846,912 68,288,202 (2,441,290) -3.57% Total Assets $ 90,271,056 $ 90,777,828 $ (506,772) -0.56% Liabilities Current Liabilities $ 8,673,622 $ 5,896,338 $ 2,777, % Long-term Liabilities 63,415,791 66,940,947 (3,525,156) -5.27% Total Liabilities $ 72,089,413 $ 72,837,285 $ (747,872) -1.03% Net Assets Invested in Capital Assets, Net of Debt $ 3,730,427 $ 2,894,012 $ 836, % Restricted 7,366,706 8,407,572 (1,040,866) % Unrestricted 7,084,510 6,638, , % Total Net Assets $ 18,181,643 $ 17,940,543 $ 241, % 5

37 Cotati-Rohnert Park Unified School District Management s Discussion and Analysis For the Fiscal Year Ended June 30, 2012 Table 2 shows the changes in net assets for fiscal year and Table 2 - Summary of Changes in Statement of Activities Percentage Change Change Revenues Program revenues $ 10,522,472 $ 9,649,191 $ 873, % General revenues: Property taxes 23,900,072 21,677,522 2,222, % Grants and entitlements - unrestricted 17,936,559 21,348,014 (3,411,455) % Other 1,013,721 1,038,620 (24,899) -2.40% Total Revenues 53,372,824 53,713,347 (340,523) -0.63% Program Expenses Instruction 32,027,358 34,090,609 (2,063,251) -6.05% Instruction-related services 4,223,065 4,730,881 (507,816) % Pupil services 4,774,278 4,932,581 (158,303) -3.21% General administration 2,662,535 2,588,265 74, % Plant services 4,521,901 4,792,677 (270,776) -5.65% Ancillary services 305, ,349 53, % Community services 25,455 19,551 5, % Transfers to other agencies 1,312,967 1,316,862 (3,895) -0.30% Interest on long-term debt 3,279,165 3,365,158 (85,993) -2.56% Total Expenses 53,131,724 56,087,933 (2,956,209) -5.27% Change in Net Assets 241,100 (2,374,586) 2,615, % Beginning Net Assets 17,940,543 19,468,263 (1,527,720) -7.85% Prior Period Adjustment - 846,866 (846,866) % Ending Net Assets $ 18,181,643 $ 17,940,543 $ 241, % 6

38 Cotati-Rohnert Park Unified School District Management s Discussion and Analysis For the Fiscal Year Ended June 30, 2012 Governmental Activities The Statement of Activities shows the cost of program services and the grants and charges to school districts offsetting those services. Table 3 shows the net cost of services. That is, it identifies the cost of these services supported by unrestricted State entitlements, tax revenue, and other unrestricted local revenue. Table 3 shows a summary of the net cost of services for fiscal year and Table 3 - Net Cost of Services Percentage Change Change Instruction $ 25,536,383 $ 28,056,360 $ (2,519,977) -8.98% Instruction-related services 3,978,661 4,313,097 (334,436) -7.75% Pupil services 1,519,281 2,208,540 (689,259) % General administration 2,521,950 2,483,299 38, % Plant services 4,444,729 4,646,877 (202,148) -4.35% Ancillary services 255, ,559 26, % Community services 25,379 19,551 5, % Transfers to other agencies 1,048,376 1,117,301 (68,925) -6.17% Interest on long-term debt 3,279,165 3,365,158 (85,993) -2.56% Total Net Cost of Services $ 42,609,252 $ 46,438,742 $ (3,829,490) -8.25% Instruction expenditures include activities directly dealing with the teaching of pupils. The large reduction from to reflects the five-day reduction in the instructional year and additional salary and benefit concessions from the district employee groups. Instruction-related services include the activities involved with assisting staff with the content and process of educating students. Pupil services include guidance and counseling, psychological, health, speech and testing services, as well as preparing, delivering, and serving meals to students. General administration reflects expenditures associated with the administrative and financial supervision of the School District. Typical functions would include the Board of Trustees and Superintendent, Human Resources, Data Processing and Business Services. Plant services involve keeping the school grounds, buildings, and equipment in effective working condition. Ancillary services represent the expenditures associated with athletic and co-curricular programs for students of the district. Community services include paid overtime or extra time for custodial services performed entirely as a result of community services activities. Other outgo includes tuition and transfers of resources between Cotati-Rohnert Park Unified School District and other educational agencies for services provided to Cotati-Rohnert Park students, including transportation. 7

39 Cotati-Rohnert Park Unified School District Management s Discussion and Analysis For the Fiscal Year Ended June 30, 2012 The Cotati-Rohnert Park Unified School District s Funds The district s governmental funds reported a combined fund balance of $16,915,136, which is $883,643 less than last year s total of $17,798,779. Table 4 provides an analysis of the fund balances and the total change in fund balances from the prior year. Table 4 - Summary of Fund Balances Percentage Change Change General $ 4,595,507 $ 3,787,803 $ 807, % Cafeteria Fund 416, ,092 (8,734) -2.05% Deferred Maintenance Fund 104, ,042 (12,302) % Building Fund 3,785,325 4,131,415 (346,090) -8.38% Capital Facilities Fund 758, ,100 (156,837) % County Schools Facilities Fund 5,126 5, % Special Reserve Fund for Capital Outlay Projects 15,380 78,749 (63,369) % Bond Interest and Redemption Fund 7,234,437 8,338,497 (1,104,060) % Total Fund Balances $ 16,915,136 $ 17,798,779 $ (883,643) -4.96% Capital Assets Table 5 shows fiscal year balances compared to Table 5 - Summary of Capital Assets Net of Depreciation Percentage Change Change Land $ 9,482,482 $ 9,482,482 $ % Work-in-Progress 11, ,917 (469,127) % Site Improvements 729, ,152 (108,331) % Buildings and Improvements 54,464,170 56,258,089 (1,793,919) -3.19% Equipment 309, ,192 36, % Total Capital Assets - Net $ 64,997,694 $ 67,332,832 $ (2,335,138) -3.47% Long Term Debt Table 6 summarizes the District s outstanding debt for the last two fiscal years. Table 6 - Summary of Long-term Liabilities Percentage Change Change General Obligation Bonds $ 61,261,633 $ 64,417,449 $ (3,155,816) -4.90% Capital Leases 5,634 21,371 (15,737) % Early Retirement Incentive 1,074,549 1,248,423 (173,874) % Annual Net OPEB Obligation 918,855 1,057,449 (138,594) % Compensated Absences 155, ,255 (41,135) % Total Long-term Liabilities $ 63,415,791 $ 66,940,947 $ (3,525,156) -5.27% 8

40 Factors Bearing on the District s Future Cotati-Rohnert Park Unified School District Management s Discussion and Analysis For the Fiscal Year Ended June 30, 2012 The District is planning for continued declining enrollment for the foreseeable future, but with smaller decreases than in the recent past. Initial projections indicate annual enrollment declines of less than 2% at least through the school year. The District is undertaking various initiatives in an effort to increase student enrollment, but it is not possible to predict how soon these efforts will result in increased enrollment. By the time of publication of this report, California voters had passed Proposition 30, avoiding the trigger cuts provided in the State Budget Act. While passage doesn t provide any new funds for District programs, it avoids the necessity for significant spending cuts in fiscal and ongoing. Passage of Proposition 30 significantly reduces the State s revenue deferrals from to , so the District expects to be able to borrow sufficient funds to pay its obligations through the school year and to continue as a going concern. There is currently a great deal of uncertainty regarding future levels of State funding, but it appears that the District may need to make significant spending reductions in and future years. Contacting the District s Financial Management This financial report is designed to provide our citizens, taxpayers, parents, investors, and creditors with a general overview of the District's finances and to show the District's accountability for the money it receives. If you have questions regarding this report or need additional financial information, contact the District Office, Cotati-Rohnert Park Unified School District, 7165 Burton Ave., Rohnert Park, CA

41 Basic Financial Statements

42 Cotati-Rohnert Park Unified School District Statement of Net Assets June 30, 2012 Governmental Activities Assets Current assets: Cash and investments $ 13,856,797 Accounts receivable 10,534,821 Prepaid expenses 32,526 Total current assets 24,424,144 Noncurrent assets: Unamortized discounts and issuance costs 849,218 Capital assets, net of depreciation 64,997,694 Total noncurrent assets 65,846,912 Total Assets $ 90,271,056 Liabilities Current liabilities: Accounts payable $ 7,409,387 Deferred revenue 99,621 Accrued interest 1,164,614 Total current liabilities 8,673,622 Long-term liabilities: Due within one year 3,485,302 Due after one year 59,930,489 Total long-term liabilities 63,415,791 Total Liabilities $ 72,089,413 Net Assets Invested in capital assets, net of related debt $ 3,730,427 Restricted for: Educational programs 827,693 Debt service 6,069,823 Cafeteria programs 416,158 Capital projects 3,800,705 Other purposes (expendable) 5,126 Other purposes (nonexpendable) 32,526 Total restricted 11,152,031 Unrestricted 3,299,185 Total Net Assets $ 18,181,643 The notes to the financial statements are an integral part of this statement. 10

43 Governmental activities: Program Revenues Net (Expense) Operating Revenue and Charges for Grants and Changes in Expenses Services Contributions Net Assets Instruction $ 32,027,358 $ 81,824 $ 6,409,151 $ (25,536,383) Instruction-related services: Supervision of instruction 701,678 2, ,898 (491,344) Instructional library, media and technology 170, ,421 (161,214) School site administration 3,350, ,332 (3,326,103) Pupil services: Food services 2,437,224 1,238,235 1,151,773 (47,216) All other pupil services 2,337,054 8, ,837 (1,472,065) General administration: Cotati-Rohnert Park Unified School District Statement of Activities For the Fiscal Year Ended June 30, 2012 Data processing 585, (585,552) All other general administration 2,076,983 28, ,717 (1,936,398) Plant services 4,521,901 35,077 42,095 (4,444,729) Ancillary services 305, ,771 (255,328) Community services 25, (25,379) Transfers to other agencies 1,312,967 3, ,964 (1,048,376) Interest on long-term debt 3,279, (3,279,165) Total governmental activities $ 53,131,724 $ 1,399,437 $ 9,123,035 (42,609,252) General revenues: Taxes and subventions: Taxes levied for general purposes 18,420,925 Taxes levied for debt service 5,055,308 Taxes levied for other specific purposes 423,839 Federal and state aid not restricted to specific purposes 17,936,559 Interest and investment earnings 308,897 Miscellaneous 704,824 Total general revenues and special items 42,850,352 Change in net assets 241,100 Net assets beginning 17,940,543 Net assets ending $ 18,181,643 The notes to the financial statements are an integral part of this statement. 11

44 Cotati-Rohnert Park Unified School District Governmental Funds Balance Sheet June 30, 2012 Bond Interest Other and Nonmajor Total General Building Redemption Governmental Governmental Fund Fund Fund Funds Funds Assets Cash and investments $ 4,382,977 $ 766,043 $ 7,234,437 $ 1,473,340 $ 13,856,797 Accounts receivable 10,422, ,276 10,534,821 Due from other funds 87,139 3,031, ,118,498 Prepaid expenditures 32, ,526 Total Assets $ 14,925,187 $ 3,797,402 $ 7,234,437 $ 1,585,616 $ 27,542,642 Liabilities and Fund Balances Liabilities: Accounts payable $ 7,198,700 $ 12,077 $ - $ 198,610 $ 7,409,387 Due to other funds 3,031, ,139 3,118,498 Deferred revenue 99, ,621 Total Liabilities 10,329,680 12, ,749 10,627,506 Fund balances: Nonspendable: Revolving fund 5, ,200 Prepaid expenditures 32, ,526 Restricted for: Educational programs 827, ,693 Debt service - - 7,234,437-7,234,437 Miscellaneous programs ,126 5,126 Cafeteria programs , ,158 Capital projects - 3,785,325-15,380 3,800,705 Site and departments 185, ,222 Program support 600, ,000 Deferred maintenance projects , ,740 Capital facilities projects , ,263 Unassigned: Economic uncertainties 2,945, ,945,066 Total Fund Balances 4,595,507 3,785,325 7,234,437 1,299,867 16,915,136 Total Liabilities and Fund Balances $ 14,925,187 $ 3,797,402 $ 7,234,437 $ 1,585,616 $ 27,542,642 The notes to the financial statements are an integral part of this statement. 12

45 Cotati-Rohnert Park Unified School District Reconciliation of the Governmental Funds Balance Sheet to the Statement of Net Assets June 30, 2012 Total fund balances - governmental funds $ 16,915,136 Amounts reported in the Statement of Net Assets are different because: Capital assets used in governmental activities are not financial resources and therefore are not reported as assets in governmental funds. Capital assets at cost $ 115,604,145 Accumulated depreciation (50,606,451) 64,997,694 Interest payable on long-term debt does not require the use of current financial resources and, therefore, is not reported in the governmental funds. (1,164,614) Issuance costs, discounts and premiums related to bond issues are recorded as other financing sources and uses in the fund financial statements but are recorded as assets or liabilities and amortized over the life of the bond in the statement of net assets: Issuance costs $ 849, ,218 Long-term liabilities are not due and payable in the current period and therefore are not reported as liabilities in the funds. Long-term liabilities at year-end consist of: General obligation bonds $ 63,970,000 Loss on early retirement of long-term debt (4,283,747) Bond premiums 1,575,380 Capital lease 5,634 Early retirement incentives 1,074,549 Annual net OPEB obligation 918,855 Compensated absences (vacation) 155,120 (63,415,791) Total net assets - governmental activities $ 18,181,643 The notes to the financial statements are an integral part of this statement. 13

46 Cotati-Rohnert Park Unified School District Governmental Funds Statement of Revenues, Expenditures and Changes in Fund Balances For the Fiscal Year Ended June 30, 2012 Bond Interest Other and Nonmajor Total General Building Redemption Governmental Governmental Fund Fund Fund Funds Funds Revenues: Revenue limit sources $ 31,450,600 $ - $ - $ - $ 31,450,600 Federal revenue 3,626, ,095,872 4,722,175 Other state 6,252, ,246 6,354,582 Other local 3,761,185 29,423 5,101,990 1,800,074 10,692,672 Total revenues 45,090,424 29,423 5,101,990 2,998,192 53,220,029 Expenditures: Current Instruction 30,395, ,395,512 Instruction-related services: Supervision of instruction 660, ,071 Instructional library, media and technology 160, ,726 School site administration 3,133, ,133,826 Pupil services: Food services 35, ,398,314 2,433,859 All other pupil services 2,211, ,211,993 General administration: Data processing 556, ,538 All other general administration 1,853, ,058 1,956,278 Plant services 4,132,450 50,633-93,438 4,276,521 Facilities acquisition and construction - 324, , ,278 Ancillary services 272, , ,000 Community services 25, ,455 Transfers to other agencies 1,312, ,312,967 Debt service: Principal 15,737-3,360,000-3,375,737 Interest and fees 10,861-2,846,050-2,856,911 Total expenditures 44,777, ,513 6,206,050 2,744,389 54,103,672 Excess (deficiency) of revenues over (under) expenditures 312,704 (346,090) (1,104,060) 253,803 (883,643) Other financing sources (uses): Transfers in 495, ,000 Transfers out (495,000) (495,000) Total other financing sources (uses) 495, (495,000) - Net changes in fund balances 807,704 (346,090) (1,104,060) (241,197) (883,643) Fund balances beginning 3,787,803 4,131,415 8,338,497 1,541,064 17,798,779 Fund balances ending $ 4,595,507 $ 3,785,325 $ 7,234,437 $ 1,299,867 $ 16,915,136 The notes to the financial statements are an integral part of this statement. 14

47 Cotati-Rohnert Park Unified School District Reconciliation of the Governmental Funds Statement of Revenues and Expenditures and Changes in Fund Balances to the Statement of Activities For the Fiscal Year Ended June 30, 2012 Total net change in fund balances - governmental funds $ (883,643) Capital outlays are reported in governmental funds as expenditures. However, in the statement of activities, the cost of those assets is allocated over their estimated useful lives as depreciation expense. Capital asset additions $ 465,036 Depreciation expense (2,800,174) (2,335,138) The governmental funds report debt proceeds as an other financing source, while repayment of debt principal is reported as an expenditure. Interest is recognized as an expenditure in the governmental funds when it is due. The net effect of these differences in the treatment of long-term debt and related items is as follows: Repayment of bond principal $ 3,360,000 Repayment of lease obligations 15,737 3,375,737 Issuance costs, discounts and premiums related to bond issues are recorded as other financing sources and uses in the fund financial statements but are recorded as assets or liabilities and amortized over the life of the bond in the statement of net assets: Amortization of deferred loss $ (356,979) Amortization of bond premiums 152,795 Amortization of discounts and issuance cost (106,152) (310,336) In the statement of activities, compensated absences are measured by the amount earned during the year. In governmental funds, however, expenditures for those items are measured by the amount of financial resources used (essentially the amounts paid). This year vacation used exceeded the amounts earned due to negotiated reductions in vacation compensation during the year. 41,135 In the statement of activities, the net postemployment benefit obligation is the amount by which the contributions toward the OPEB plan were less than the annual required contribution as actuarially determined. The net postemployment benefit obligation is not recorded in the governmental fund statements. The change in the net OPEB obligation was recorded in the statement of activities in the amount of: 138,594 In the statement of activities, obligations for early retirement incentives are recorded because of their long-term nature, but are not required to be recorded in the governmental fund statements. The change in early retirement incentives reported in the statement of activities was: 173,874 Interest on long-term debt in the statement of activities differs from the amount reported in the governmental funds because interest is recognized as an expenditure in the funds when it is due and thus requires the use of current financial resources. In the statement of activities, however, interest expense is recognized as the interest accrues, regardless of when it is due. 40,877 Changes in net assets of governmental activities $ 241,100 The notes to the financial statements are an integral part of this statement. 15

48 Cotati-Rohnert Park Unified School District Fiduciary Funds Statement of Fiduciary Net Assets and Liabilities June 30, 2012 Student Body Agency Fund Total Assets Cash on hand and in banks $ 233,596 Total Assets $ 233,596 Liabilities and Net Assets Due to student groups $ 233,596 Total Liabilities and Net Assets $ 233,596 The notes to the financial statements are an integral part of this statement. 16

49 Notes to the Basic Financial Statements

50 1. SIGNIFICANT ACCOUNTING POLICIES A. Accounting Principles Cotati-Rohnert Park Unified School District Notes to Basic Financial Statements For the Year Ended June 30, 2012 Cotati-Rohnert Park Unified School District (the "District") accounts for its financial transactions in accordance with the policies and procedures of the Department of Education s California School Accounting Manual. The accounting policies of the District conform to accounting principles generally accepted in the United States of America as prescribed by the U. S. Governmental Accounting Standards Board ("GASB") and the American Institute of Certified Public Accountants ("AICPA"). B. Reporting Entity The District is the level of government primarily accountable for activities related to public education. The governing authority consists of five elected officials who, together, constitute the Board of Trustees. The District s combined financial statements include the accounts of all its operations. The District evaluated whether any other entity should be included in these financial statements using the criteria established by GASB. C. Basis of Presentation Government-wide Financial Statements: The government-wide financial statements (i.e., the statement of net assets and the statement of activities) report information on all of the non-fiduciary activities of the District. Eliminations have been made to minimize the effect of interfund activities. The government-wide statements are prepared using the economic resources measurement focus. This is the same approach used in the preparation of the proprietary fund and fiduciary fund financial statements but differs from the manner in which governmental fund financial statements are prepared. Governmental fund financial statements, therefore, include a reconciliation with brief explanations to better identify the relationship between the government-wide statements and the statements for the governmental funds. The government-wide statement of activities presents a comparison between direct expenses and program revenues for each function or program of the District s governmental activities. Direct expenses are those that are specifically associated with a service, program, or department and are therefore clearly identifiable to a particular function. The District does not allocate indirect expenses to functions in the statement of activities. Program revenues include charges paid by the recipients of goods or services offered by a program, as well as grants and contributions that are restricted to meeting the operational or capital requirements of a particular program. Revenues that are not classified as program revenues are presented as general revenues of the District, with certain exceptions. The comparison of direct expenses with program revenues identifies the extent to which each governmental function is self-financing or draws from the general revenues of the District. Fund Financial Statements: Fund financial statements report detailed information about the District. The focus of governmental fund financial statements is on major funds rather than reporting funds by type. Each major governmental fund is presented in a separate column, and all non-major funds are aggregated into one column. Fiduciary funds are reported by fund type. 17

51 Cotati-Rohnert Park Unified School District Notes to Basic Financial Statements For the Year Ended June 30, 2012 The accounting and financial treatment applied to a fund is determined by its measurement focus. All governmental funds are accounted for using a flow of current financial resources measurement focus. With this measurement focus, only current assets and current liabilities are generally included on the balance sheet. The Statement of Revenues, Expenditures, and Changes in Fund Balances for these funds present increases (i.e., revenues and other financing sources) and decreases (i.e., expenditures and other financing uses) in net current assets. Fiduciary funds are reported using the economic resources measurement focus. D. Basis of Accounting Basis of accounting refers to when revenues and expenditures are recognized in the accounts and reported in the financial statements. Government-wide financial statements are prepared using the accrual basis of accounting. Governmental funds use the modified accrual basis of accounting. Fiduciary funds use the accrual basis of accounting. Revenues - Exchange and Non-exchange Transactions: Revenue resulting from exchange transactions, in which each party gives and receives essentially equal value, is recorded under the accrual basis when the exchange takes place. On a modified accrual basis, revenue is recorded in the fiscal year in which the resources are measurable and become available. Available means the resources will be collected within the current fiscal year or are expected to be collected soon enough thereafter to be used to pay liabilities of the current fiscal year. For the District, available means collectible within the current period or within 90 days after year-end. Non-exchange transactions, in which the District receives value without directly giving equal value in return, include property taxes, grants, and entitlements. Under the accrual basis, revenue from property taxes is recognized in the fiscal year for which the taxes are levied. Revenue from grants and entitlements is recognized in the fiscal year in which all eligibility requirements have been satisfied. Eligibility requirements include timing requirements, which specify the year when the resources are to be used or the fiscal year when use is first permitted; matching requirements, in which the District must provide local resources to be used for a specific purpose; and expenditure requirements, in which the resources are provided to the District on a reimbursement basis. Under the modified accrual basis, revenue from non-exchange transactions must also be available before it can be recognized. Unearned/Deferred Revenue: Unearned/Deferred Revenue arises when assets are received before revenue recognition criteria have been satisfied. Grants and entitlements received before eligibility requirements are met are recorded as deferred revenue. On governmental fund financial statements, receivables associated with non-exchange transactions that will not be collected within the availability period have also been recorded as deferred revenue. Expenses/Expenditures: Using the accrual basis of accounting, expenses are recognized at the time a liability is incurred. On the modified accrual basis of accounting, expenditures are generally recognized in the accounting period in which the related fund liability is incurred, as under the accrual basis of accounting. However, under the modified accrual basis of accounting, debt service expenditures, as well as expenditures related to 18

52 Cotati-Rohnert Park Unified School District Notes to Basic Financial Statements For the Year Ended June 30, 2012 compensated absences and claims and judgments, are recorded only when payment is due. Allocations of cost, such as depreciation and amortization, are not recognized in the governmental funds. When both restricted and unrestricted resources are available for use, it is the District s policy to use restricted resources first, then unrestricted resources as they are needed. E. Fund Accounting The accounts of the District are organized on the basis of funds, each of which is considered to be a separate accounting entity. The operations of each fund are accounted for with a separate set of selfbalancing accounts that comprise its assets, liabilities, fund equity or retained earnings, revenues, and expenditures or expenses, as appropriate. The District resources are allocated to and accounted for in individual funds based upon the purpose for which they are to be spent and the means by which spending activities are controlled. The District s accounts are organized into major, non-major, and fiduciary funds as follows: Major Governmental Funds: The General Fund is the general operating fund of the District. It is used to account for all financial resources except those required to be accounted for in another fund. The Building Fund is used to account for the acquisition of major governmental capital facilities and buildings from the sale of bond proceeds. The Bond Interest and Redemption Fund is used to account for taxes received and expended on interest and the redemption of principal of general obligation bonds. Non-major Governmental Funds: Special Revenue Funds are used to account for the proceeds of specific revenue sources that are restricted or committed for purposes other than debt service or capital projects. The restricted or committed resources need to comprise a substantial portion of the inflows reported in the special revenue fund. The District maintains two nonmajor special revenue funds: The Cafeteria Fund is used to account for revenues received and expenditures made to operate the District s food service programs. The Deferred Maintenance Fund is used for the purpose of major repair or replacement of District property. Capital Projects Funds are used to account for resources restricted, committed or assigned for capital outlays. The District maintains three nonmajor capital projects fund: The Capital Facilities Fund is used to account for resources received from developer impact fees committed to acquire temporary or permanent facilities. The County School Facilities Fund is used to account for State facilities grants. 19

53 Cotati-Rohnert Park Unified School District Notes to Basic Financial Statements For the Year Ended June 30, 2012 The Special Reserve Fund for Capital Outlay Projects exists primarily to account for redevelopment funds received under contracts with the cities of Rohnert Park and Cotati. Fiduciary Funds: Agency Funds are used to account for assets of others for which the District acts as an agent. The District maintains an agency fund for the student body accounts. The student body funds are used to account for the raising and expending of money to promote the general welfare, morale, and educational experience of the student body. F. Budgets and Budgetary Accounting Annual budgets are adopted on a basis consistent with generally accepted accounting principles for all governmental funds. By state law, the District s governing board must adopt a final budget no later than July 1. A public hearing must be conducted to receive comments prior to adoption. The District s governing board satisfied these requirements. These budgets are revised by the District s governing board during the year to give consideration to unanticipated income and expenditures. The original and final revised budgets for the General Fund and major special revenue funds are presented as Required Supplementary Information. Formal budgetary integration was employed as a management control device during the year for all budgeted funds. The District employs budget control by minor object and by individual appropriation accounts. Expenditures cannot, and did not, legally exceed appropriations by major object account. G. Encumbrances Encumbrance accounting is used in all budgeted funds to reserve portions of applicable appropriations for which commitments have been made. Encumbrances are recorded for purchase orders, contracts, and other commitments when they are written. Encumbrances are liquidated when the commitments are paid. All encumbrances are liquidated on June 30. H. Assets, Liabilities, and Equity a) Cash and Investments Cash balances held in banks and in revolving funds are insured to $250,000 by the Federal Deposit Insurance Corporation except for non-interest bearing accounts which are completely insured. In accordance with Education Code Section 41001, the District maintains substantially all of its cash in the County Treasury. The county pools these funds with those of other districts in the county and invests the cash. These pooled funds are carried at cost, which approximates market value. Interest earned is deposited quarterly into participating funds. Any investment losses are proportionately shared by all funds in the pool. All District-directed investments are governed by Government Code Section and Treasury investment guidelines. The guidelines limit specific investments to government securities, domestic chartered financial securities, domestic corporate issues, and California municipal securities. The District s securities portfolio is held by the County Treasurer. Interest earned on investments is recorded as revenue of the fund from which the investment was made. 20

54 Cotati-Rohnert Park Unified School District Notes to Basic Financial Statements For the Year Ended June 30, 2012 b) Stores Inventories and Prepaid Expenditures Stores Inventories Stores inventories are recorded using the purchases method, in that inventory acquisitions are recorded as expenditures. Prepaid expenditures The District has the option of reporting expenditures in governmental funds for prepaid items either when purchased or during the benefiting period. The District has chosen to report the expenditure during the benefiting period, thus recording a prepaid expenditure in the Statement of Net Assets. c) Capital Assets Capital assets are those purchased or acquired with an original cost of $5,000 or more and are reported at historical cost or estimated historical cost. Contributed assets are reported at fair market value as of the date received. Additions, improvements, and other capital outlays that significantly extend the useful life of an asset are capitalized. The costs of normal maintenance and repairs that do not add to the value of the assets or materially extend the asset s lives are not capitalized, but are expensed as incurred. Depreciation on all capital assets is computed using a straight-line basis over the following estimated useful lives: d) Deferred Revenue Assets Years Improvement of sites Buildings 40 Portable buildings Building improvements Furniture and fixtures 5-15 Playground equipment Food services equipment 5-15 Transportation equipment 5-15 Telephone system 5-15 Vehicles 5 Computer system and equipment 5 Office equipment 5 Cash received for federal and state special projects and programs is recognized as revenue to the extent that qualified expenditures have been incurred and timing requirements have been met. Unearned revenue is recorded to the extent that cash received on specific projects and programs exceeds qualified expenditures. Deferred revenue in the funds is recorded for grant and entitlement receivables that are not available within ninety days of year end and for cash receipts from grants and entitlements for which the District has not met the eligibility requirements for recognizing revenue. 21

55 e) Compensated Absences Cotati-Rohnert Park Unified School District Notes to Basic Financial Statements For the Year Ended June 30, 2012 All vacation pay is accrued when incurred in the government-wide financial statements. A liability for these amounts is reported in the governmental funds only if they have matured, for example, as a result of employee resignations and retirements. Accumulated sick leave benefits are not recognized as liabilities of the District. The District s policy is to record sick leave as an operating expense in the period taken, since such benefits do not vest, nor is payment probable; however, unused sick leave is added to the creditable service period for calculation of retirement benefits when the employee retires. f) Long-Term Liabilities In the government-wide financial statements, long-term debt and other long-term obligations are reported as liabilities in the Statement of Net Assets. Bond premiums and discounts as well as issuance costs, when applicable, are deferred and amortized over the life of the bonds. In the fund financial statements, governmental funds recognize bond premiums and discounts as well as bond issuance costs during the current period. The face amount of the debt issued, premiums, or discounts is reported as other financing sources or uses. g) Fund Balance Classifications The District is committed to maintaining a prudent level of financial resources to protect against the need to reduce service levels because of temporary revenue shortfalls or unpredicted expenditures. The District s minimum fund balance policy requires a reserve for economic uncertainties, consisting of unassigned amounts, of 4 percent of general fund operating expenditures and other financing uses. In accordance with Government Accounting Standards Board 54, Fund Balance Reporting and Governmental Fund Type Definitions, the District classifies governmental fund balances as follows: Non-spendable includes fund balance that cannot be spent either because it is not in spendable form or because of legal or contractual constraints. Restricted includes fund balance amounts that are constrained for specific purposes which are externally imposed by providers, such as creditors or amounts constrained due to constitutional provisions or enabling legislation. Committed includes fund balance amounts that are constrained for specific purposes that are internally imposed by the government through formal action of the highest level of decision making authority and does not lapse at year-end. Committed fund balances are imposed by the District s board of education. Assigned includes fund balance amounts that are intended to be used for specific purposes that are neither considered restricted or committed. Fund balance may be assigned by the Chief Business Official. Unassigned includes positive fund balance within the general fund which has not been classified within the above mentioned categories and negative fund balances in other governmental funds. 22

56 Cotati-Rohnert Park Unified School District Notes to Basic Financial Statements For the Year Ended June 30, 2012 The District uses restricted/committed amounts when both restricted and unrestricted fund balance is available unless there are legal documents/contracts that prohibit doing this, such as a grant agreement requiring dollar for dollar spending. Additionally, the District would first use committed, then assigned, and lastly unassigned amounts of unrestricted fund balance when expenditures are made. h) Net Assets Net assets represent the difference between assets and liabilities. Net assets invested in capital assets net of related debt consists of capital assets, net of accumulated depreciation, reduced by the outstanding balances of any borrowings used for the acquisition, construction or improvement of those assets. Net assets are reported as restricted when there are limitations imposed on their use either through the enabling legislation adopted by the District or through external restrictions imposed by creditors, grantors, laws or regulations of other governments. The District applies restricted resources when an expense is incurred for purposes for which both restricted and unrestricted net assets are available. Educational Program restrictions reflect the amounts to be expended on specific school programs funded by federal and state resources and from locally funded programs with stipulated uses. Debt service restrictions reflect the cash balances in the debt service funds that are restricted for debt service payments by debt covenants. Cafeteria program restrictions reflect the cash balance in the cafeteria fund that is restricted for food services and child nutrition programs. Capital projects restrictions will be used for the acquisition and construction of capital facilities. Unrestricted net assets reflect net assets that are not subject to any donor-imposed restrictions. This class also includes restricted gifts whose donor-imposed restrictions were met during the fiscal year. i) Revenue Limit/Property Tax The District s revenue limit is received from a combination of local property taxes, state apportionments, and other local sources. The county is responsible for assessing, collecting, and apportioning property taxes. Taxes are levied for each fiscal year on taxable real and personal property in the county. The levy is based on the assessed values as of the preceding January 1, which is also the lien date. Property taxes on the secured roll are due on November 1 and February 1, and taxes become delinquent after December 10 and April 10, respectively. Property taxes on the unsecured roll are due on the lien date (January 1), and become delinquent if unpaid by August 31. Secured property taxes are recorded as revenue when apportioned, in the fiscal year of the levy. The county apportions secured property tax revenue in accordance with the alternate method of distribution prescribed by Section 4705 of the California Revenue and Taxation Code. This alternate method provides for crediting each applicable fund with its total secured taxes upon completion of the secured tax roll - approximately October 1 of each year. 23

57 Cotati-Rohnert Park Unified School District Notes to Basic Financial Statements For the Year Ended June 30, 2012 The County Auditor reports the amount of the District s allocated property tax revenue to the California Department of Education. Property taxes are recorded as local revenue limit sources by the District. The California Department of Education reduces the District s entitlement by the District s local property tax revenue. The balance is paid from the state General Fund, and is known as the State Apportionment. The District s base revenue limit is the amount of general purpose tax revenue, per unit of average daily attendance (ADA), that the District is entitled to by law. This amount is multiplied by the second period ADA to derive the District s total entitlement. j) Risk Management The District is exposed to various risks of loss related to torts, theft of, damage to, and destruction of assets, errors and omissions, injuries to employees, and natural disasters. The District pools its risks with other school districts in the County as a part of public entity risk pools. The District pays annual premiums for its property and casualty, workers compensation, and liability insurance coverage. The Joint Powers Agreements provide that the pools will be self-sustaining through member premiums and will reinsure through commercial companies for claims in excess of selfinsured levels. The District is also a part of a risk pool which provides medical, dental and vision coverage. See Note 8 for further disclosure. There were no significant reductions in insurance coverage from coverage in the prior year and no insurance settlements exceeding insurance coverage. k) Interfund Transactions Interfund transactions are reported as either loans, services provided, reimbursements, or transfers. Loans are reported as interfund receivables and payables, as appropriate, and are subject to elimination upon consolidation. Services provided, deemed to be at market or near market rates, are treated as revenues and expenditures/expenses. Reimbursements occur when one fund incurs a cost, charges the appropriate benefiting fund, and reduces its related cost as a reimbursement. All other interfund transactions are treated as transfers. Transfers among governmental funds are eliminated as part of the reconciliation to the government-wide financial statements. l) Accounting Estimates The presentation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts reported in the financial statements and accompanying notes. Actual results may differ from those estimates. 24

58 I. New Accounting Pronouncements Cotati-Rohnert Park Unified School District Notes to Basic Financial Statements For the Year Ended June 30, 2012 Summary of Statement No. 64, Derivative Instruments: Application of Hedge Accounting Termination Provisions an amendment of GASB Statement No. 5 (Issued 06/11). The objective of this Statement is to clarify whether an effective hedging relationship continues after the replacement of a swap counterparty or a swap counterparty s credit support provider. This Statement sets forth criteria that establish when the effective hedging relationship continues and hedge accounting should continue to be applied. The provisions of this Statement were implemented as of June 30, 2012 and did not have a significant impact on the District s financial statements. J. Upcoming Accounting and Reporting Changes Summary of Statement No. 62, Codification of Accounting and Financial Reporting Guidance Contained in Pre-November 30, 1989 FASB and AICPA Pronouncements (Issued 12/10). The objective of this Statement is to incorporate into the GASB s authoritative literature certain accounting and financial reporting guidance that is included in the following pronouncements issued on or before November 30, 1989, which does not conflict with or contradict GASB pronouncements: 1. Financial Accounting Standards Board (FASB) Statements and Interpretations 2. Accounting Principles Board Opinions 3. Accounting Research Bulletins of the American Institute of Certified Public Accountants (AICPA) Committee on Accounting Procedure. This Statement also supersedes Statement No. 20, Accounting and Financial Reporting for Proprietary Funds and Other Governmental Entities That Use Proprietary Fund Accounting, thereby eliminating the election provided in paragraph 7 of that Statement for enterprise funds and business-type activities to apply post-november 30, 1989 FASB Statements and Interpretations that do not conflict with or contradict GASB pronouncements. The requirements of this Statement are effective for financial statements for periods beginning after December 15, The implementation of this standard will not have a significant impact on the District s financial statements. Summary of Statement No. 63 Financial Reporting of Deferred Outflows of Resources, Deferred Inflows of Resources, and Net Position (Issued 06/11). This Statement provides financial reporting guidance for deferred outflows of resources and deferred inflows of resources. Concepts Statement No. 4, Elements of Financial Statements, introduced and defined those elements as a consumption of net assets by the government that is applicable to a future reporting period, and an acquisition of net assets by the government that is applicable to a future reporting period, respectively. Previous financial reporting standards do not include guidance for reporting those financial statement elements, which are distinct from assets and liabilities. Concepts Statement 4 also identifies net position as the residual of all other elements presented in a statement of financial position. This Statement amends the net asset reporting requirements in Statement No. 34, Basic Financial Statements-and Management s Discussion and Analysis for State and Local Governments, and other pronouncements by incorporating deferred outflows of resources and deferred inflows of resources into the definitions of the required components of the residual measure and by renaming that measure as net position, rather than net assets. The provisions of this Statement are effective for financial statements for periods beginning after December 15, The implementation of this standard will not have a significant impact on the District s financial statements. 25

59 Cotati-Rohnert Park Unified School District Notes to Basic Financial Statements For the Year Ended June 30, 2012 Summary of Statement No. 65 Items Previously Reported as Assets and Liabilities (Issued 03/12). This Statement establishes accounting and financial reporting standards that reclassify, as deferred outflows of resources or deferred inflows of resources, certain items that were previously reported as assets and liabilities and recognizes, as outflows of resources or inflows of resources, certain items that were previously reported as assets and liabilities. This Statement amends the financial statement element classification of certain items previously reported as assets and liabilities to be consistent with the definitions in Concepts Statement 4. The provisions of this Statement are effective for financial statements for periods beginning after December 15, Earlier application is encouraged. The implementation of this standard will not have a significant impact on the District s financial statements. Summary of Statement No. 67 Financial Reporting for Pension Plans - an amendment of GASB Statement No. 25 (Issued 06/12). This Statement replaces the requirements of Statements No. 25, Financial Reporting for Defined Benefit Pension Plans and Note Disclosures for Defined Contribution Plans, and No. 50, Pension Disclosures, as they relate to pension plans that are administered through trusts or equivalent arrangements (hereafter jointly referred to as trusts) that meet certain criteria. This Statement establishes a definition of a pension plan that reflects the primary activities associated with the pension arrangement determining pensions, accumulating and managing assets dedicated for pensions, and paying benefits to plan members as they come due. This Statement also details the note disclosure requirements for defined contribution pension plans administered through trusts that meet the identified criteria. This Statement is effective for financial statements for fiscal years beginning after June 15, Earlier application is encouraged. The determination of the impact on the District s financial statements from the implementation of this standard is pending as of the issuance date of this report. Summary of Statement No. 68 Accounting and Financial Reporting for Pensions - an amendment of GASB Statement No. 27 (Issued 06/12). The primary objective of this Statement is to improve accounting and financial reporting by state and local governments for pensions. It also improves information provided by state and local governmental employers about financial support for pensions that is provided by other entities. This Statement replaces the requirements of Statement No. 27, Accounting for Pensions by State and Local Governmental Employers, as well as the requirements of Statement No. 50, Pension Disclosures, as they relate to pensions that are provided through pension plans administered as trusts or equivalent arrangements (hereafter jointly referred to as trusts) that meet certain criteria. This Statement establishes a definition of a pension plan that reflects the primary activities associated with the pension arrangement-determining pensions, accumulating and managing assets dedicated for pensions, and paying benefits to plan members as they come due. This Statement is effective for fiscal years beginning after June 15, Earlier application is encouraged. The determination of the impact on the District s financial statements from the implementation of this standard is pending as of the issuance date of this report. 26

60 2. CASH AND INVESTMENTS Cotati-Rohnert Park Unified School District Notes to Basic Financial Statements For the Year Ended June 30, 2012 A summary of cash and investments as of June 30, 2012 is as follows: Carrying Fair Investment Deposit or Investment Amount Value Rating Government-Wide Statements: Cash in county treasury investment pool $ 13,657,705 $ 13,678,328 AA Cash in banks 15,572 15,572 n/a Cash in revolving fund 5,200 5,200 n/a Cash awaiting deposit 178, ,320 n/a Total Government-Wide Cash and Investments 13,856,797 13,877,420 Fiduciary Funds: Cash in banks 233, ,596 n/a Total Cash and Investments $ 14,090,393 $ 14,111,016 Cash in Banks and in Revolving Funds Interest bearing cash balances in banks and revolving funds are insured up to $250,000 by the Federal Deposit Insurance Corporation ("FDIC"). These accounts are held within various financial institutions. As of June 30, 2012, the bank balance of the District s accounts with banks was $239,781, which was fully insured by FDIC. Cash in County Treasury The District is considered to be an involuntary participant in an external investment pool as the District is required to maintain substantially all of its cash with the County Treasurer in accordance with Education Code Section The fair value of the District s investment in the pool is reported in the accounting financial statements at amounts based upon the District s pro rata share of the fair value provided by the County Treasurer for the entire portfolio (in relation to the amortized cost of that portfolio). The balance available for withdrawal is based on the accounting records maintained by the County Treasurer, which is recorded on the amortized cost basis. Policies and Practices The District is authorized under California Government Code Section to make direct investments in local agency bonds, notes, or warrants within the State; U.S. Treasury instruments; registered State warrants or treasury notes; securities of the U.S. Government, or its agencies; bankers acceptances; commercial paper; certificates of deposit placed with commercial banks and/or savings and loan companies; repurchase or reverse repurchase agreements; medium term corporate notes; shares of beneficial interest issued by diversified management companies, certificates of participation, obligations with first priority security; and collateralized mortgage obligations. Interest Rate Risk Interest rate risk is the risk that changes in market interest rates will adversely affect the fair value of an investment. Generally, the longer the maturity of an investment, the greater the sensitivity of its fair value to the changes in market interest rates. The District manages its exposure to interest rate risk by investing in the County Treasury. The District maintains cash with the County of Sonoma Investment Pool. The pool 27

61 Cotati-Rohnert Park Unified School District Notes to Basic Financial Statements For the Year Ended June 30, 2012 has a fair value of approximately $1.65 million and an amortized book value of $1.648 million. The average maturity of the pool was 1,176 days and the pool holds no derivative products. Credit Risk Credit risk is the risk of loss due to the failure of the security issuer. This is measured by the assignment of a rating by a nationally recognized statistical rating organization. The investment with the County of Sonoma Investment Pool is governed by the County s general investment policy. The investment with the County of Sonoma Investment Pool is rated at least Aa1 by Moody s Investor Service. Custodial Credit Risk - Deposits Custodial credit risk is the risk that in the event of a bank failure, the District s deposits may not be returned to it. The District does not have a policy for custodial credit risk for deposits. However, the California Government code requires that a financial institution secure deposits made by State or local governmental units by pledging securities in an undivided collateral pool held by a depository regulated under State law (unless so waived by the governmental unit). The market value of the pledged securities in the collateral pool must equal at least 110 percent of the total amount deposited by the public agencies. California law also allows financial institutions to secure public deposits by pledging first trust deed mortgage notes having a value of 150 percent of the secured public deposits and letters of credit issued by the Federal Home Loan Bank of San Francisco having a value of 105 percent of the secured deposits. Concentration of Credit Risk The investment policy of the District contains no limitations on the amount that can be invested in any one issuer beyond the amount stipulated by the California Government code. District investments that are greater than 5 percent of total investments are in either an external investment pool or mutual funds and are therefore exempt. 3. ACCOUNTS RECEIVABLE Accounts receivable consisted of the following as of June 30, 2012: General Nonmajor Receivables Fund Funds Total Federal Government: Special Ed., IDEA, Local Assistance $ 604,955 $ - $ 604,955 Child Nutrition - 112, ,276 Title I 67,107-67,107 State Government Special Education 1,944,487-1,944,487 Lottery 399, ,240 ASES 33,750-33,750 Other Resources 7,373,006-7,373,006 Total Accounts Receivable $ 10,422,545 $ 112,276 $ 10,534,821 28

62 4. CAPITAL ASSETS AND DEPRECIATION Cotati-Rohnert Park Unified School District Notes to Basic Financial Statements For the Year Ended June 30, 2012 Capital asset activities for the year ended June 30, 2012 were as follows: Balance Adjustments & Balance Capital Assets July 01, 2011 Additions Deletions June 30, 2012 Land - not depreciable $ 9,482,482 $ - $ - $ 9,482,482 Work-in-progress - not depreciable 480,917 11, ,917 11,790 Site improvements 6,355, ,355,197 Buildings and improvements 96,864, ,448-97,630,235 Furniture and equipment 1,955, ,715-2,124,441 Total capital assets 115,139, , , ,604,145 Less accumulated depreciation for: Site improvements 5,517, ,331-5,625,376 Buildings and improvements 40,606,698 2,559,367-43,166,065 Furniture and equipment 1,682, ,476-1,815,010 Total accumulated depreciation 47,806,277 2,800,174-50,606,451 Total capital assets - net depreciation $ 67,332,832 $ (1,854,221) $ 480,917 $ 64,997,694 Depreciation expense was charged to governmental activities as follows: Depreciation expense was charged to governmental activities as follows: Instruction $ 1,985,449 Supervision of instruction 41,607 Instructional library, media and technology 10,046 School site administration 216,789 Food services 3,365 All other pupil services 125,061 Data processing services 29,014 All other general administration 120,705 Plant services 268,138 Total depreciation expense $ 2,800,174 29

63 5. INTERFUND TRANSACTIONS Cotati-Rohnert Park Unified School District Notes to Basic Financial Statements For the Year Ended June 30, 2012 Interfund transactions are reported as either loans, services provided, reimbursements, or transfers. Loans are reported as interfund receivables and payables (Due From/To), as appropriate, and are subject to elimination upon consolidation. Services provided, deemed to be at market or near market rates, are treated as revenues and expenditures/expenses. Reimbursements occur when one fund incurs a cost, charges the appropriate benefiting fund, and reduces its related cost as a reimbursement. All other interfund transactions are treated as transfers. Transfers among governmental funds are netted as part of the reconciliation to the government-wide financial statements. Interfund Receivables/Payables (Due From/Due To) Interfund receivables and payables consisted of the following as of June 30, 2012: Interfund Transfers Due From (Payable In) General Nonmajor Total Due To (Receivable In) Fund Funds Due To General Fund $ - $ 87,139 $ 87,139 Building Fund 3,031,359-3,031,359 Total Due From $ 3,031,359 $ 87,139 $ 3,118,498 Interfund transfers consisted of the following for the fiscal year ended June 30, 2012: Fund Receiving Transfers Fund Making Transfers Amount General Fund Special Reserve Fund for Capital Projects $ 495, Transfer for contribution to routine restricted maintenance account 30

64 Cotati-Rohnert Park Unified School District Notes to Basic Financial Statements For the Year Ended June 30, LONG-TERM DEBT Schedule of Changes in Long-term Debt A schedule of changes in long-term debt for the fiscal year ended June 30, 2012, is shown below: Balance Balance Due Within Long-term Debt July 01, 2011 Additions Deletions June 30, 2012 One Year General obligation bonds $ 67,330,000 $ - $ 3,360,000 $ 63,970,000 $ 3,360,000 Unamortized bond premium 1,728, ,795 1,575, ,795 Loss on early retirement of long-term debt (4,640,726) - (356,979) (4,283,747) (356,979) Subtotal general obligation bonds 64,417,449-3,155,816 61,261,633 3,155,816 Capital leases 21,371-15,737 5,634 - Early retirement incentives 1,248, ,874 1,074, ,450 Annual net OPEB obligation 1,057,449 1,071,694 1,210, ,855 - Compensated absences 196,255-41, , ,120 Total Long-term Debt $ 66,940,947 $ 1,071,694 $ 4,596,850 $ 63,415,791 $ 3,900,386 Payments on the general obligation bonds were made from the Bond Interest and Redemption Fund using local revenues. Compensated absences were paid by the fund for which the employee worked. Early retirement incentives and net OPEB obligations were paid from the General Fund. Capital leases were paid from the General Fund. General Obligation Bonds Payable The following summarizes the general obligation bonds outstanding as of June 30, 2012: Bonds Bonds Issue Maturity Interest Original Outstanding Issued Outstanding Bond Date Date Rate Issue July 01, 2011 (Redeemed) June 30, Refunding GOB % $ 18,525,000 $ 8,855,000 $ (1,480,000) $ 7,375, Refunding GOB (Series A) % 25,765,000 25,765,000-25,765, Refunding GOB (Series B) % 6,450,000 6,380,000 (190,000) 6,190,000 Election of 1990, Series % 11,005,000 9,975,000 (245,000) 9,730, Refunding GOB % 16,355,000 16,355,000 (1,445,000) 14,910,000 Total General Obligation Bonds $ 67,330,000 $ (3,360,000) $ 63,970,000 In 2011, the District issued $16,355,000 in General Obligation Bonds to advance refund $16,270,000 of outstanding 1997 Series H and 2001 Series A bonds. The net proceeds of $16,556,393 (after payment of $379,473 in underwriting fees, insurance, and other issuance costs) were used to purchase U.S. government securities. Those securities were deposited in an irrevocable trust with an escrow agent to provide for all future debt service payments on the refunded debt. As a result, the 1997 Series H and 2001 Series A bonds are considered to be defeased and the liability for those bonds has been removed from the government-wide statement of net assets. The advance refunding resulted in a difference between the reacquisition price and the net carrying amount of the old debt of $1,088,265. This difference, reported in the accompanying financial statements as a deduction from bonds payable, is being charged to operations through the year 2025 using the straight line method. The District completed the advance refunding decreasing its total debt service payments over the 31

65 Cotati-Rohnert Park Unified School District Notes to Basic Financial Statements For the Year Ended June 30, 2012 next 14 years by $1,374,658, and realized an economic gain (difference between the present values of the old and new debt service payments) of $731,000. The annual debt service requirements of the District s general obligation bonds are as follows: Early Retirement Incentives Year Ending June 30 Principal Interest Total 2013 $ 3,395,000 $ 2,728,736 $ 6,123, ,655,000 2,594,504 6,249, ,780,000 2,450,834 6,230, ,025,000 2,296,345 6,321, ,320,000 2,139,394 6,459, ,755,000 7,301,497 35,056, ,040,000 1,463,508 18,503,508 Total Debt Service $ 63,970,000 $ 20,974,818 $ 84,944,818 Under the District's collective bargaining agreements, certain eligible employees under age 63 are entitled to early retirement incentive payments of a stipulated amount for a set number of years depending on their age at retirement. In and , the District offered an early retirement incentive to members of its certificated bargaining unit in the form of a supplementary retirement plan administered by Public Agency Retirement Services (PARS). The plan provides a supplemental benefit to STRS and payments are fixed at retirement and do not increase thereafter (no COLA). Payouts are made based on the option determined by the participants and may or may not include payments to their beneficiary depending on the option chosen. The District entered into a multi-year annuity to make contributions to the PARS Supplementary Retirement Plan. Future estimated payments required under these programs are as follows: Early Retirement PARS Year Ending June 30 Incentive Supplementary Total 2013 $ 21,174 $ 568,276 $ 589, , , , ,087-12, ,087-12, ,087-12, ,044-18,044 Total Debt Service $ 93,610 $ 980,939 $ 1,074,549 32

66 7. COMMITMENTS AND CONTINGENCIES A. Litigation Cotati-Rohnert Park Unified School District Notes to Basic Financial Statements For the Year Ended June 30, 2012 Various claims involving the District are currently outstanding. However, management believes, based on consultation with legal counsel, that the ultimate resolution of these matters will not have a material adverse effect on the District s financial position or results of operations. B. Operating Leases The District has entered into various operating leases for equipment with lease terms in excess of one year. The District's payments for operating leases during totaled $64,883. C. Federal and State Allowances, Awards, and Grants The District has received federal and state funds for specific purposes that are subject to review and audit by the grantor agencies. Although such audits could generate expenditure disallowances under terms of the grants, it is believed that any required reimbursement will not be material. The State of California continues to suffer the effects of a recessionary economy. California school districts are reliant on the State of California to appropriate the funding necessary to continue the level of services expected by the State constituency. During the past few years, the State of California has been reducing the amount of State funding allocated to school districts and/or deferring a portion of the State funding to the subsequent year. This has created significant cash flow management issues for the districts, in addition to requiring substantial budget reductions, which ultimately impacts the ability of California school districts to meet their goals for educational services. D. County Advances During the year ended June 30, 2012, the District entered into an agreement with the County allowing it to borrow up to $7.5 million for operating shortfalls in the General Fund. Under state law, advances are to be repaid by the last Monday in April each year and interest is payable at the same rate earned by the County pool, which was.874% as of June 30, The County Pool rate is not expected to exceed 2%. The District also borrowed $2 million from the Sonoma County Office of Education on June 12, which was repaid on June 26, E. Going Concern The severe reductions in funding from the State have had a substantial adverse impact on the District s financial status. Significant declining enrollment over many years has compounded this impact. The District filed a negative certification in the Second Interim Report. State deferrals have resulted in inadequate cash flows, although the passage of Proposition 30 is expected to reduce deferrals in and beyond. The District plans to seek a waiver from the June 2013 state apportionment deferral and/or to borrow funds to meet its financial obligations for fiscal year These factors create uncertainty about the District s ability to continue as a going concern. 33

67 Cotati-Rohnert Park Unified School District Notes to Basic Financial Statements For the Year Ended June 30, 2012 Management's Plan: A new leadership team took over District management beginning July 1, At that time the team identified two main goals to begin to turn the District s course: increase student achievement and increase enrollment. During , the District initiated steps toward achieving these goals, including reconfiguring schools and implementing new instructional tools. These efforts were very well received by the community, leading to the successful passage of Measure D, a five-year tax of $89 per parcel that is projected to raise $1,150,000 annually beginning in This work continues in the school year. The District has hired additional teachers to reduce class size to 24:1 in kindergarten through second grade and has launched a year-round track at one elementary school. The District is increasing academic rigor and using better student assessment tools, while taking advantage of online learning support in all grades and investing heavily in professional development for teachers. The District is still walking a financial tightrope in its efforts to provide the best possible education to the children in the community while remaining solvent. State funding for education is expected to increase very slowly over the next five years as the economy slowly recovers, so the District will have to balance the costs of the new instructional initiatives with the available funding. The ability of the District to continue as a going concern depends on the success of these efforts. The financial statements do not include any adjustments that might be necessary if the District is unable to continue as a going concern. 8. JOINT POWERS AGREEMENTS The District participates in two joint ventures under joint powers agreements (JPAs) with the Redwood Empire Schools' Insurance Group (RESIG) for property and liability, and workers' compensation coverage, and the West County Transportation Agency for pupil transportation. The relationships between the District and the JPAs are such that the JPAs are not component units of the District for financial reporting purposes. The JPAs arrange for and/or provide coverage or services for their members. The JPAs are governed by boards consisting of a representative from each member district. The board controls the operations of the JPAs, including the selection of management and approval of operating budgets independent of any influence by the member districts beyond their representation on the Board. Each member district pays a premium commensurate with the level of coverage requested and shares surpluses and deficits proportionately to their participation in the JPAs. The following is a summary of each JPA s most recent financial statement information: WCTA RESIG June 30, 2012 June 30, 2011 Total Assets $ 9,389,556 $ 46,834,249 Total Liabilities 3,136,044 37,988,153 Total Equity 6,253,512 8,846,096 Total Revenues 8,131,858 15,129,113 Total Expenditures 8,385,119 14,888,019 34

68 9. EMPLOYEE RETIREMENT SYSTEMS Cotati-Rohnert Park Unified School District Notes to Basic Financial Statements For the Year Ended June 30, 2012 Qualified employees are covered under multiple-employer defined benefit pension plans maintained by agencies of the State of California. Certificated employees are members of the State Teachers Retirement System ("STRS"), and classified employees are members of the Public Employees Retirement System ("PERS"). State Teachers Retirement System a) Plan Description The District contributes to the STRS, a cost-sharing multiple-employer public employee retirement system defined benefit pension plan administered by STRS. The plan provides retirement, disability, and survivor benefits to beneficiaries. Benefit provisions are established by state statues, as legislatively amended, within the State Teachers Retirement Law. STRS issues a separate comprehensive annual financial report that includes financial statements and required supplementary information. Copies of the STRS annual financial report may be obtained from the STRS, 7667 Folsom Boulevard, Sacramento, California b) Funding Policy Active plan members are required to contribute 8.0% of their salary and the District is required to contribute an actuarially determined rate. The actuarial methods and assumptions used for determining the rate are those adopted by the STRS Teachers Retirement Board. The required employer contribution rate for fiscal year 2012 was 8.25% of annual payroll. The contribution requirements of the plan members are established by state statute. The District s contributions to STRS for the fiscal year ended June 30, 2012, 2011, and 2010 were $1,499,563, $1,617,479, and $1,743,353, respectively, and equal 100% of the required contributions for each year. Public Employees Retirement System a) Plan Description The District contributes to PERS, a cost-sharing multiple-employer public employee retirement system defined benefit pension plan administered by PERS. The plan provides retirement and disability benefits, annual cost-of-living adjustments, and death benefits to plan members and beneficiaries. Benefit provisions are established by state statutes, as legislatively amended, within the Public Employee s Retirement Law. PERS issues a separate comprehensive annual financial report that includes financial statements and required supplementary information. Copies of the PERS annual financial report may be obtained from the PERS Executive Office, 400 P Street, Sacramento, CA b) Funding Policy Active plan members are required to contribute 7.0% of their salary, and the District is required to contribute an actuarially determined rate. The actuarial methods and assumptions used for determining the rate are those adopted by the PERS Board of Administration. The required employer contribution rate for fiscal year 2012 was % of annual payroll. The contribution requirements of the plan members are established by state statute. The District s contribution to PERS for the fiscal year ended June 30, 2012, 2011, and 2010 were $529,619, $567,073, and $554,740, respectively, and equal 100% of the required contributions for each year. 35

69 Cotati-Rohnert Park Unified School District Notes to Basic Financial Statements For the Year Ended June 30, POSTEMPLOYMENT BENEFITS OTHER THAN PENSION BENEFITS Plan Description. The District s Postemployment Healthcare Plan (PHP) is a single-employer defined benefit healthcare plan including medical benefits for the participating groups of employees. One retired employee received medical, dental and vision benefits. Eligibility for retiree health benefits is based on age and service of the employee. Although all participants are enrolled in either the State Teachers' Retirement System (STRS) or California Public Employees' Retirement System (PERS), receipt of pension benefits is not required for retiree health and welfare eligibility. The District has two welfare benefits groups: (1) RPCEA (Certificated) and Non-represented Management and Supervisors - full-time employees retiring from active status with the District with a minimum age of 55 and 10 years of service are eligible for District subsidized retiree medical coverage until the age of 65, except the duration of District subsidy for those retiring with less than 15 years of service is limited to five years); (2) CSEA and SEIU (Classified) and Non-represented Confidential - full-time employees retiring from active status with the District with a minimum age of 50 and 15 years of service are eligible for District subsidized retiree medical coverage up to age 65 or 10 years, whichever comes first. The District fully subsidizes up to the single retiree premium rate for either (1) the retirees' "home plan," for those retired prior to the District's transition to California's Valued Trust (CVT) on October 1, 2008, or (2) CVT's Kaiser Plan 4, for those retiring on or after October 1, CVT's Kaiser Plan 4 became the "home plan" for those enrolled in Kaiser, CVT's PacifiCare Plan 3B became the "home plan" for CSEA retirees enrolled in Health Net or out-of-area plans, and CVT's PacifiCare 4W became the "home plan" for non- CSEA retirees enrolled in Health Net or out-of-area plans. Retirees electing less expensive coverage simply have no self-pay requirements: they are not reimbursed for the difference in premiums. Likewise, those choosing more expensive coverage must self-pay the difference between that plan's premiums and the District's subsidy cap. Retirees may cover their spouse/dependent by self-paying their full premiums. Dental and/or vision coverage may also be purchased through CVT by self-paying 100% of those premiums. Eligible dependents must be a legal spouse, domestic partner, or unmarried child under age 26. There is no coverage available (self-paid or otherwise) to surviving spouses and dependents of actives or retirees other than COBRA. There are no special benefits or eligibility provisions for disabled retirees. Retirees do not receive the District's health subsidy if they retire on STRS or PERS disability. All contracts with District employees will be renegotiated at various times in the future and, thus, costs and benefits are subject to change. Benefits and contribution requirements (both employee and employer) for the OPEB Plan are established by various labor agreements. For the District, OPEB benefits are administered by District personnel. No separate financial statements are issued. Funding Policy. The District currently pays for post-employment healthcare benefits on a pay-as-you-go basis. Although the District is studying the establishment of a trust to accumulate and invest assets necessary to pay for the accumulated liability, these financial statements assume that pay-as-you-go funding will continue. Annual OPEB Cost and Net OPEB Obligation. The District s annual other postemployment benefit (OPEB) cost (expense) is calculated based on the annual required contribution of the employer (ARC), an amount actuarially determined in accordance with the parameters of GASB Statement 45. The ARC represents a 36

70 Cotati-Rohnert Park Unified School District Notes to Basic Financial Statements For the Year Ended June 30, 2012 The following table shows the components of the District s annual OPEB cost for the year, the amount actually contributed to the plan, and changes in the District s net OPEB obligation: Annual required contribution $ 1,087,611 Interest on net OPEB obligation 52,872 Adjustment to annual required contribution (68,789) Annual OPEB cost (expense) 1,071,694 Contributions made (1,210,288) Change in net OPEB obligation (138,594) Net OPEB obligation - beginning of year 1,057,449 Net OPEB obligation - end of year $ 918,855 The District s annual OPEB cost, the percentage of annual OPEB cost contributed to the plan, and the net OPEB obligation for 2012 was as follows: Fiscal Percentage of Net Year Annual Annual OPEB OPEB Ended OPEB Cost Cost Contributed Obligation 6/30/2010 $ 1,203, % $ 905,700 6/30/2011 1,194, % 1,057,449 6/30/2012 1,071, % 918,855 Actuarial Methods and Assumptions. In the Projected Unit Credit Method, the cost of each individual s OPEB benefits is amortized on a straight-line basis over his/her working career. For each employee, a normal cost is computed, the amount which, if accumulated during each year of employment, will at retirement be sufficient to fund the expected benefits for that individual. The sum of all the individual normal costs for all employees is called the Normal Cost. The accumulated value of all normal costs attributed to prior years, including the full value of benefits for all currently retired employees, is called the Actuarial Accrued Liability. The unfunded Actuarial Accrued Liability is amortized over a period of future years. The longest amortization period permitted under GASB 45 is 30 years. The ARC is the sum of the Normal Cost and the amortization of the unfunded Actuarial Accrued Liability. The remaining amortization period at June 30, 2012, was twenty-nine years. The actuarial assumptions included a discount rate of 3.75% per year and an annual healthcare cost trend rate of 5%. The discount rate is the interest rate at which future benefit obligations are discounted back to the present time. GASB 45 requires that the discount rate reflect the expected investment return on the District s investments. 37

71 Cotati-Rohnert Park Unified School District Notes to Basic Financial Statements For the Year Ended June 30, 2012 Required Supplementary Information (OPEB Schedule of Funding Progress) Schedule of Funding Progress - Postemployment Healthcare Plan: Actuarial Accrued UAAL as Actuarial Liability Unfunded a Percentage Actuarial Value of (AAL) AAL Funded Covered of Covered Valuation Assets Entry Age (UAAL) Ratio Payroll Payroll Date (a) (b) (b-a) (a/b) (c) ((b-a/c)) 6/30/2007 $ - $ 13,313,900 $ 13,313, % $ 25,349, % 6/30/ ,495,000 12,495, % 26,858, % 6/30/2011-9,659,415 9,659, % 26,858, % 11. LONG - TERM FACILITY LEASE The District has entered into a joint facility use agreement with the California State University-Sonoma Campus for 15,000 square feet of space to be utilized for the Technology High School. The lease runs through June 30, 2024, but all payments have already been made. The District will receive no sublease rental revenues nor pay any contingent rentals for this property. 12. SUBSEQUENT EVENT In August of 2012, the District signed a lease for computer equipment with total payments of $438,900. Payments begin on September 1, 2012 and the final payment is due on August 31,

72 REQUIRED SUPPLEMENTARY INFORMATION

73 Cotati-Rohnert Park Unified School District Schedule of Revenues, Expenditures and Changes in Fund Balance Budget to Actual (GAAP) General Fund For the Fiscal Year Ended June 30, 2012 Budgeted Amounts Variance with Final Budget Actual Positive - Original Final (GAAP Basis) (Negative) Revenues: Revenue limit sources $ 31,919,266 $ 31,437,019 $ 31,450,600 $ 13,581 Federal revenues 3,591,598 3,703,825 3,626,303 (77,522) Other state 5,762,846 6,090,901 6,252, ,435 Other local 3,194,518 3,733,069 3,761,185 28,116 Total revenues 44,468,228 44,964,814 45,090, ,610 Expenditures: Certificated salaries 17,899,726 18,472,287 18,387,427 84,860 Classified salaries 4,734,203 4,827,869 4,805,127 22,742 Employee benefits 10,648,938 10,649,984 10,730,521 (80,537) Books and supplies 798,391 1,484, , ,063 Services and other operating expenditures 9,104,448 9,329,485 8,615, ,365 Capital outlay 20,000 23,930 22,759 1,171 Other outgo 1,386,624 1,262,938 1,259,109 3,829 Total expenditures 44,592,330 46,051,213 44,777,720 1,273,493 Excess (deficiency) of revenues over (under) expenditures (124,102) (1,086,399) 312,704 1,399,103 Other financing sources (uses): Transfers in 495, , ,000 - Transfers out Total other financing sources (uses) 495, , ,000 - Change in fund balance 370,898 (591,399) 807,704 1,399,103 Fund balances beginning 3,787,803 3,787,803 3,787,803 - Fund balances ending $ 4,158,701 $ 3,196,404 $ 4,595,507 $ 1,399,103 39

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75 APPENDIX B GENERAL AND FINANCIAL INFORMATION ABOUT THE DISTRICT The information in this and other sections concerning the District's operations and operating budget is provided as supplementary information only, and it should not be inferred from the inclusion of this information in this Official Statement that the principal of or interest on the Refunding Bonds is payable from the General Fund of the District. The Refunding Bonds are payable from the proceeds of an ad valorem tax required to be levied by the County in an amount sufficient for the payment thereof. See "THE REFUNDING BONDS Security for the Refunding Bonds" in the front half of the Official Statement. General Information The District covers approximately 15.4 square miles in the central portion of Sonoma County (the County ). The District currently operates six elementary schools, one middle schools, one comprehensive high school, one technology high school, one necessary small continuation high school, and one continuation high school. Enrollment for the school year is estimated to be 5,764 students. Administration Board of Trustees. The District is governed by a five-member Board of Trustees, each member of which is elected to a four-year term. Elections for positions to the Board of Trustees are held every two years, alternating between two and three available positions. Current members of the Board of Trustees, together with their office and the date their term expires, are listed below. Name Position Term Expires Marc Orloff President December 2014 Andrew Longmire Clerk December 2014 Leffler Brown Member December 2014 Ed Gilardi Member December 2016 Jennifer Wiltermood Member December 2016 Superintendent. The Superintendent of the District, appointed by the Board, is responsible for management of the day-to-day operations and supervises the work of other District administrators. Robert Haley currently serves as Superintendent. Recent Enrollment Trends The following table shows enrollment history for the District for the last seven fiscal years, with estimated enrollment figures for B-1

76 COTATI-ROHNERT PARK UNIFIED SCHOOL DISTRICT Annual Enrollment Fiscal Years through ( estimated) School Year Enrollment % Change , ,847 (2.5%) ,655 (2.8%) ,429 (3.4%) ,206 (3.5%) ,003 (3.3%) ,907 (1.5%) (1) 5,764 (3.1%) (1) District estimate. Source: California Department of Education, Educational Demographics Unit; The District. The District has experienced declining enrollment and will be funded on prior year ADA in The District projects that enrollment will continue to decline. Employee Relations The District has approximately full-time equivalent ( FTE ) certificated employees, FTE classified employees and 27.9 FTE management and confidential employees. There are three formal bargaining units operating in the District, described in the following table. Labor Organization No. of Employees Contract Expires Rohnert Park Cotati Educators Association June 30, 2014 California School Employees Association 82.6 June 30, 2014 Service Employees International Union 50.2 June 30, 2014 District Retirement Systems Qualified employees are covered under multiple-employer defined benefit pension plans maintained by agencies of the State of California. Certificated employees are members of the State Teachers' Retirement System ( STRS ) and classified employees are members of the Public Employees' Retirement System ( PERS ). All full-time certificated employees participate in STRS, a cost-sharing, multipleemployer contributory public employee retirement system. The plan provides retirement and disability benefits and survivor benefits to beneficiaries. Benefit provisions are established by State statutes, as legislatively amended, within the State Teacher s Retirement Law. Active plan members are required to contribute 8.0% of their salary and the District is required to contribute an actuarially determined rate. The required employer contribution rate for fiscal year and was 8.25% of annual payroll. The District s contribution to STRS for fiscal year was $1,743,353, for fiscal year was $1,617,479, for fiscal year was $1,499,563, and for fiscal year is budgeted to be $1,574,805 (as of the 1 st Interim Report). All full-time and some part-time classified employees participate in PERS, an agent multiple-employer contributory public employee retirement system that acts as a common investment and administrative agent for participating public entities within the State of California. B-2

77 The District is part of a "cost-sharing" pool within PERS. Active plan members are required to contribute 7.0% of their salary and the District is required to contribute an actuarially determined rate. One actuarial valuation is performed for those employers participating in the pool, and the same contribution rate applies to each participant. The required employer contribution rate for fiscal year was % and for is % of annual payroll. The District s contribution to PERS for fiscal year was $554,740, for fiscal year was $567,073, for fiscal year was $529,619, and for fiscal year is budgeted to be $549,602 (as of the 1 st Interim Report). On September 12, 2012, Governor Brown signed into law the California Public Employees Pension Reform Act of 2013 ( PEPRA ), which will, among other things, increase the retirement age for government employees, cap pension benefit payouts under PERS and STRS and require certain government employees to make at least half of the contributions to PERS. For a more detailed description of PEPRA and the impact to employees and employers, see District Financing Information State Funding of Education and Recent State Budgets State Budget Pension Reform Act of 2013 (Assembly Bill 340) below. Early Retirement Incentives Under the District s collective bargaining agreements, certain eligible employees under age 63 are entitled to early retirement incentive payments of a stipulated amount for a set number of years depending on their age at retirement. In and , the District offered an early retirement incentive to members of its certificated bargaining unit in the form of a supplementary retirement plan administered by Public Agency Retirement Services ( PARS ). The plan provides a supplemental benefit to STRS and payments are fixed at retirement and do not increase thereafter (no COLA). Payouts are made based on the option determined by the participants and may or may not include payments to their beneficiary depending on the option chosen. The District entered into a multi-year annuity to make contributions to the PARS Supplementary Retirement Plan. Other Post-Employment Retirement Benefits GASB 45. In June 2004, the Governmental Accounting Standards Board ( GASB ) issued Statement No. 45, Accounting and Financial Reporting by Employers for Post Employment Benefits Other Than Pensions ( GASB 45 ). The pronouncement requires employers providing healthcare benefits to retirees to recognize and account for the costs for providing these benefits on an accrual basis and provide footnote disclosure on the progress toward funding the benefits. The implementation date for this pronouncement was staggered in three phases based upon the entity s annual revenues, similar to the implementation for GASB Statement No. 34 and 35. GASB 45 was effective for the District for the fiscal year ending June 30, GASB 45 provides that school districts should establish a reserve fund and annually transfer sufficient funds to this reserve in order to pay for retiree employment benefits other than pensions for the period of time agreed in union contracts. Plan Description. The District s Postemployment Healthcare Plan (the OPEB Plan ) is a single-employer defined benefit healthcare plan including medical benefits for the participating groups of employees. One retired employee received medical, dental and vision benefits. Eligibility for retiree health benefits is based on age and service of the employee. Although all participants are enrolled in either STRS or PERS, receipt of pension benefits is not required for retiree health and welfare eligibility. B-3

78 The District has two welfare benefits groups; (1) RPCEA (Certificated) and Nonrepresented Management and Supervisors - full-time employees retiring from active status with the District with a minimum age of 55 and 10 years of service are eligible for District subsidized retiree medical coverage until the age of 65 (except the duration of District subsidy for those retiring with less than 15 years of service is limited to five years), (2) CSEA and SEIU (Classified) and Non-represented Confidential - full-time employees retiring from active status with the District with a minimum age of 50 and 15 years of service are eligible for District subsidized retiree medical coverage up to age 65 or 10 years, whichever comes first. Benefits and contribution requirements (both employee and employer) for the OPEB Plan are established by various labor agreements. Funding Policy. The District currently finances benefits for the OPEB Plan on a pay-asyou-go basis. The District is studying the establishment of a trust to accumulate and invest assets necessary to pay for the accumulated liability. Annual OPEB Cost and Net OPEB Obligation. The District's annual OPEB cost is calculated based on the annual required contribution of the employer ( ARC ), an amount actuarially determined in accordance with the parameters of GASB 45. GASB 45 requires local government employers who provide OPEB as part of the compensation offered to employees to recognize the expense and related liabilities and assets in their financial statements. The ARC represents a level of funding that, if paid on an ongoing basis, is projected to cover normal cost each year and amortize any unfunded actuarial accrued liabilities ( UAAL ) over a period not to exceed thirty years. The following table shows the components of the District s annual OPEB cost for the fiscal year, the amount actually contributed to the OPEB Plan and changes in the District s net OPEB obligation. Annual required contribution $1,087,611 Interest on net OPEB obligation 52,872 Adjustment to annual required contribution (68,789) Annual OPEB cost 1,071,694 Contributions made (1,210,288) Increase (decrease) in net OPEB obligation (138,594) Net pension obligation beginning of year 1,057,449 Net pension asset end of year $918,855 Percent of annual OPEB cost contributed % The District s annual OPEB cost, the percentage of annual OPEB cost contributed to the OPEB Plan and the net OPEB obligation for was as follows: Fiscal Year Ended Annual OPEB Cost % of Annual OPEB Cost Contributed Net OPEB Obligation 6/30/2009 $1,374, % $572,414 6/30/2010 1,203, ,700 6/30/2011 1,194, ,057,449 6/30/2012 1,071, ,855 B-4

79 Accounting Practices The accounting practices of the District conform to generally accepted accounting principles in accordance with policies and procedures of the California School Accounting Manual. This manual, according to Section of the California Education Code, is to be followed by all California school districts. District accounting is organized on the basis of funds, with each group consisting of a separate accounting entity. The major fund classification is the general fund which accounts for all financial resources not requiring a special fund placement. The District's fiscal year begins on July 1 and ends on June 30. For more information on the District s basis of accounting and fund accounting, see APPENDIX A Audited Financial Statements of the District for the Year ending June 30, 2012 Note 1 Significant Accounting Policies herein. The Governmental Accounting Standards Board ( GASB ) Statement No. 34 Basic Financial Statements and Management s Discussion and Analysis for State and Local Governments was adopted on June 30, Statement No. 34 provides guidelines to auditors, state and local governments and special purpose governments such as school districts and public utilities, on new requirements for financial reporting for all governmental agencies in the United States. The District implemented Statement No. 34 for the fiscal year audited financial statement. Financial Statements General. The District's general fund finances the legally authorized activities of the District for which restricted funds are not provided. General fund revenues are derived from such sources as State school fund apportionments, taxes, use of money and property, and aid from other governmental agencies. The District's June 30, 2012 Audited Financial Statements were prepared by Chavan & Associates, LLP, San Jose, California (the Auditor ). Audited financial statements for the District for the fiscal year ended June 30, 2012, and prior fiscal years are on file with the District and available for public inspection at the Business Services Office of the District, 7615 Burton Avenue, Rohnert Park, California 94928, Phone: (707) See Appendix A hereto for the June 30, 2012 Audited Financial Statements. Copies of such financial statements will be mailed to prospective investors and their representatives upon written request to the District. The District has not requested nor did the District obtain permission from the Auditor to include the audited financial statements as an appendix to this Official Statement. Accordingly, the Auditor has not performed any post-audit review of the financial condition or operations of the District. General Fund Revenues, Expenditures and Changes in Fund Balance. The following table shows the audited general fund income and expense statements for the District for the fiscal years through B-5

80 COTATI-ROHNERT PARK UNIFIED SCHOOL DISTRICT General Fund Revenues, Expenditures and Changes in Fund Balance Fiscal Years through (Audited) Audited Audited Audited Revenues Revenue Limit $32,470,484 $32,445,480 $31,450,600 Federal Revenue 4,031,752 3,267,048 3,626,303 Other State Revenue 6,858,907 6,168,681 6,252,336 Other Local Revenue 3,888,828 3,842,042 3,761,185 Total Revenue 47,249,971 45,723,251 45,090,424 Expenditures Instruction 33,930,969 32,161,396 30,395,512 Supervision of instruction 751, , ,071 Instructional library and technology 181, , ,726 School site administration 3,915,086 3,630,678 3,133,826 Home-to-school transportation 1,691,979 6,968 - Food services 60,765 60,627 35,545 Other pupil services 2,258,530 2,404,863 2,211,993 Data processing services 523, , ,538 Other general administration 1,938,179 1,846,163 1,853,220 Plant services 4,704,914 4,327,248 4,132,450 Facilities acquisition and construction Ancillary services 217, , ,819 Community services 22,428 19,551 25,455 Debt service- principal 53,358 56,472 15,737 Debt service- interest, issuance costs 70,009 8,674 10,861 Transfers to other agencies 14,411 1,316,862 1,312,967 Total Expenditures $50,335,044 47,434,384 44,777,720 Excess (deficiency) of revenues over (under) expenditures (3,085,073) (1,711,133) 312,704 Other Financing Sources (Uses) Operating transfers in 1.677,924 1,261, ,000 Operating transfers out (111,842) (831,272) - Other sources 24, Total Other Financing Sources 1,590, , ,000 Net change in fund balance (1,494,769) 1,281, ,704 Beginning Balance 6,563,705 5,068,936 3,787,803 Ending Balance $5,068,936 $3,787,803 $4,595,507 Source: The District s Audited Financial Statements. The following table shows the budgeted and 1 st Interim Report General Fund income and expense statements for the District for fiscal year The District s adopted budgets and interim reports are not prepared in compliance with GASB Statement No. 34 requirements. Totals may not foot due to rounding. B-6

81 COTATI-ROHNERT PARK UNIFIED SCHOOL DISTRICT General Fund Revenues, Expenditures and Changes in Fund Balance Fiscal Year (Budgeted) Fiscal Year (First Interim Report) Adopted Budget First Interim REVENUES Revenue Limit Sources $31,230,031 $31,060,773 Federal 2,668,850 2,710,448 Other State 6,226,115 6,591,740 Other Local 3,135,742 4,592,839 Total Revenues 43,260,738 44,955,800 EXPENDITURES Certificated Salaries 18,553,369 19,284,661 Classified Salaries 4,591,321 4,678,622 Employee Benefits 10,115,431 10,810,921 Books and Supplies 859,018 1,777,565 Services, Other Operating Expenses 9,940,115 10,086,931 Capital Outlay - 19,643 Other Outgo (Excl. Indirect Costs) 1,493,682 1,588,380 Indirect/Direct Support Costs (55,042) (55,042) Total Expenditures (45,497,894) 48,191,681 Revenues Over (Under) Expends (2,237,156) (3,235,881) OTHER FINANCING SOURCES (USES) Operating Transfers In 430, ,000 Operating Transfers Out - - Net Financing Sources (Uses) - - Contributions - - Total Other Sources/Uses 430, ,000 Net Change in Fund Balance (1,807,156) (2,805,881) Fund Balance, July 1 (Audited) 4,595,507 4,595,507 Fund Balance, June 30 $2,788,351 $1,789,626 Source: The District Adopted Budget Assumptions; Parcel Tax; First Interim Report. The District s adopted budget reflected continued declining enrollment and a reduced instructional year of 175 days. The budget did not reflect the potential trigger cuts of $441 per ADA had Proposition 30 not been approved by the voters at the November 6, 2012 election. On June 5, 2012, voters in the District approved Measure D, which authorizes an $89 parcel tax for five years. It is estimated that the parcel tax will generate $5.3 million during the five years it is in effect. The results of the election had not been certified prior to adoption, therefore the Budget did not reflect the additional $1.1 million of annual parcel tax revenue. The District s 1 st Interim Report anticipates that enrollment will continue to decline. While the budget meets the required 3% economic uncertainty reserve in , it is not projected to meet the reserve requirement in the two subsequent years, meaning that the District certified its 1 st Interim Report as negative. With restoration of compensation reductions B-7

82 in under current contract language, the general fund will have a negative balance of nearly $5 million by the end of District Budget and Interim Financial Reporting Budgeting - Education Code Requirements. The District is required by provisions of the State Education Code to maintain a balanced budget each year, in which the sum of expenditures and the ending fund balance cannot exceed the sum of revenues and the carryover fund balance from the previous year. The State Department of Education imposes a uniform budgeting and accounting format for school districts. The budget process for school districts was substantially amended by Assembly Bill 1200 ( AB 1200 ), which became State law on October 14, Portions of AB 1200 are summarized below. School districts must adopt a budget on or before July 1 of each year. The budget must be submitted to the county superintendent within five days of adoption or by July 1, whichever occurs first. A district may be on either a dual or single budget cycle. The dual budget option requires a revised and readopted budget by September 1 that is subject to State-mandated standards and criteria. The revised budget must reflect changes in projected income and expenses subsequent to July 1. The single budget is only readopted if it is disapproved by the county office of education, or as needed. The District is on a single budget cycle and adopts its budget on or before July 1. The District adopted its Budget on June 26,2012. For both dual and single budgets submitted on July 1, the county superintendent will examine the adopted budget for compliance with the standards and criteria adopted by the State Board of Education and identify technical corrections necessary to bring the budget into compliance, will determine if the budget allows the district to meet its current obligations and will determine if the budget is consistent with a financial plan that will enable the district to meet its multi-year financial commitments. On or before August 15, the county superintendent will approve or disapprove the adopted budget for each school district. Budgets will be disapproved if they fail the above standards. The district board must be notified by August 15 of the county superintendent's recommendations for revision and reasons for the recommendations. The county superintendent may assign a fiscal advisor or appoint a committee to examine and comment on the superintendent's recommendations. The committee must report its findings no later than August 20. Any recommendations made by the county superintendent must be made available by the district for public inspection. The law does not provide for conditional approvals; budgets must be either approved or disapproved. No later than August 20, the county superintendent must notify the Superintendent of Public Instruction of all school districts whose budget has been disapproved. For all dual budget options and for single and dual budget option districts whose budgets have been disapproved, the district must revise and readopt its budget by September 8, reflecting changes in projected income and expense since July 1, including responding to the county superintendent's recommendations. The county superintendent must determine if the budget conforms with the standards and criteria applicable to final district budgets and not later than October 8, will approve or disapprove the revised budgets. If the budget is disapproved, the county superintendent will call for the formation of a budget review committee pursuant to Education Code Section Until a district's budget is approved, the district will operate on the lesser of its proposed budget for the current fiscal year or the last budget adopted and reviewed for the prior fiscal year. B-8

83 Interim Certifications Regarding Ability to Meet Financial Obligations. Under the provisions of AB 1200, each school district is required to file interim certifications (positive, negative or qualified) with the county office of education as to its ability to meet its financial obligations for the remainder of the then-current fiscal year and, based on current forecasts, for the subsequent two fiscal years. The county office of education reviews the District s certification and either affirms the certification or changes it. A positive certification is assigned to any school district that will meet its financial obligations for the current fiscal year and subsequent two fiscal years. A negative certification is assigned to any school district that will be unable to meet its financial obligations for the remainder of the fiscal year or subsequent fiscal year. A qualified certification is assigned to any school district that may not meet its financial obligations for the current fiscal year or subsequent two fiscal years. Under California law, any school district and office of education that has a qualified or negative certification in any fiscal year may not issue, in that fiscal year or in the next succeeding fiscal year, certificates of participation, tax anticipation notes, revenue bonds or any other debt instruments that do not require the approval of the voters of the district, unless the applicable county superintendent of schools determines that the district s repayment of indebtedness is probable. District s Budget Approval/Disapproval and Certification History. The District selfcertified negative certifications on its nd Interim Report, its st Interim Report and 2 nd Interim Report, its st Interim Report and 2 nd Interim Reports and its st Interim Report, based on projections of ongoing revenues and expenses for the succeeding fiscal year and beyond. In the County Office of Education assigned a fiscal advisor to the District to assist the District in the development of sustainable budgets. The District has made significant budget cuts, including increasing class sizes, closing and consolidating schools, and reducing the work year for all employees. Copies of the District s budget, interim reports and certifications may be obtained upon request from the District Office at 7615 Burton Avenue, Rohnert Park 94928, Phone: (707) The District may impose charges for copying, mailing and handling. State Funding of Education and Revenue Limitations Annual State apportionments of basic and equalization aid to school districts for general purposes are computed up to a revenue limit per unit of average daily attendance ( ADA ). Such apportionments will, generally speaking, amount to the difference between the District's revenue limit and the District's local property tax allocation. Revenue limit calculations are adjusted annually in accordance with a number of factors designed primarily to provide cost of living increases and to equalize revenues among California school districts. In the event that a school district's property tax revenue exceeds its calculated revenue limit entitlement, that school district retains all of its property tax revenue, and State apportionments to that district are limited to the minimum basic aid amount of $120 per ADA set forth in the Constitution. Currently the State allocates basic aid funding to categorical entitlements that would have been received in any event. Such districts are commonly known as Basic Aid Districts. The District is not a Basic Aid district. A schedule of the District's ADA and funded revenue limit during the past seven years, as well as a projection for , is shown below. B-9

84 COTATI-ROHNERT PARK UNIFIED SCHOOL DISTRICT Average Daily Attendance and Funded Revenue Limit Fiscal Years through Funded Revenue Limit per Unit of Average Average Daily Fiscal Year Daily Attendance Attendance $5,014 6, ,589 6, ,779 6, ,629 6, ,948 5, ,205 5, ,488 5, (1) 6,700 5,701 (1) Budgeted. Source: Cotati-Rohnert Park Unified School District. California school districts receive a significant portion of their funding from State appropriations. As a result, decreases in State revenues may affect appropriations made by the Legislature to school districts. Revenue Sources The District categorizes its general fund revenues into four sources: COTATI-ROHNERT PARK UNIFIED SCHOOL DISTRICT District Revenue Sources Percentage of Total District General Fund Revenues Revenue Source (1) Revenue limit sources 70.9% 70.9% 72.2% Federal revenues Other State revenues Other local revenues (1) Budgeted. Source: Cotati-Rohnert Park Unified School District. Revenue Limit Sources. Since fiscal year , California school districts have operated under general purpose revenue limits established by the State Legislature. In general, revenue limits are calculated for each school district by multiplying (1) the average daily attendance for such district by (2) a base revenue limit per unit of ADA. The revenue limit calculations are adjusted annually in accordance with a number of factors designated primarily to provide cost of living increases and to equalize revenues among all California school districts of the same type. Funding of the District's revenue limit is provided by a mix of (1) local property taxes and (2) State apportionments of basic and equalization aid. Generally, the State apportionments will amount to the difference between the District's revenue limit and its local property tax revenues. Beginning in , Proposition 13 and its implementing legislation provided for each county B-10

85 to levy and collect all property taxes, and prescribed how levies on county-wide property values are to be shared with local taxing entities within each county. Federal Revenues. The federal government provides funding for several District programs, including special education programs under the Individuals with Disabilities Education Act, programs under No Child Left Behind, and specialized programs such as Vocational Education. Other State Revenues. As discussed above, the District receives State apportionment of basic and equalization aid in an amount equal to the difference between the District's revenue limit and its property tax revenues. In addition to such apportionment revenue, the District receives substantial other State revenues. These other State revenues are primarily restricted revenues funding items such as Special Education, Economic Impact Aid, and mandated cost reimbursements. The District receives State funding from the California State Lottery (the "Lottery"), which was established by a constitutional amendment approved in the November 1984 general election. Lottery revenues must be used for the education of students and cannot be used for non-instructional purposes such as real property acquisition, facility construction, or the financing of research. Moreover, State Proposition 20, approved in March 2000, requires that 50% of the increase in lottery revenues over levels must be restricted to use on instructional materials. Lottery revenues generally comprise approximately 2% of general fund revenues. Other Local Revenues. In addition to property taxes, the District receives additional local revenues from items such as interest earnings and other local sources. Existing Debt Obligations Long-Term Facility Lease. The District has entered into a joint facility use agreement with the California State University-Sonoma Campus for 15,000 square feet of space to be utilized for the Technology High School. The lease runs through June 30, 2024, but all payments have already been made. The District will receive no sublease rental revenues nor pay any contingent rentals for this property. General Obligation Bonds. All bonds that have been authorized in prior elections have been issued. The District currently (prior to this refunding) has $60,575,000 aggregate principal amount of outstanding general obligation bonds, For the remaining debt service payments due on the District s outstanding general obligation bonds, see DEBT SERVICE SCHEDULES herein. Investment of District Funds In accordance with Government Code Section et seq., the Sonoma County Treasurer manages funds deposited with it by the District. The County is required to invest such funds in accordance with California Government Code Sections et seq. In addition, counties are required to establish their own investment policies which may impose limitations beyond those required by the Government Code. See APPENDIX G - SONOMA COUNTY INVESTMENT POLICY AND QUARTERLY REPORT FOR QUARTER ENDING DECEMBER 31, B-11

86 Moneys deposited in the Escrow Fund to be used for refunding the Refunded Bonds described herein will be held and invested by the Escrow Bank. See THE REFUNDING BONDS Refinancing Plan. Effect of State Budget on Revenues Public school districts in California are dependent on revenues from the State for a large portion of their operating budgets. California school districts generally receive the majority of their operating revenues from various State sources. The primary source of funding for school districts is the revenue limit, which is a combination of State funds and local property taxes (see State Funding of Education and Revenue Limitations above). State funds typically make up the majority of a district s revenue limit. School districts also receive substantial funding from the State for various categorical programs. The availability of State funds for public education is a function of constitutional provisions affecting school district revenues and expenditures (see CONSTITUTIONAL AND STATUTORY LIMITATIONS ON TAXES AND APPROPRIATIONS ), the condition of the State economy (which affects total revenue available to the State general fund), and the annual State budget process. State Funding of Education and Recent State Budgets General. The State requires that from all State revenues there first shall be set apart the moneys to be applied for support of the public school system and public institutions of higher education. Public school districts in California are dependent on revenues from the State for a large portion of their operating budgets. California school districts receive an average of about 55% of their operating revenues from various State sources. The primary source of funding for school districts is the revenue limit, which is a combination of State funds and local property taxes (see State Funding of Education and Revenue Limitations above). State funds typically make up the majority of a district s revenue limit. School districts also receive substantial funding from the State for various categorical programs. The availability of State funds for public education is a function of constitutional provisions affecting school district revenues and expenditures (see CONSTITUTIONAL AND STATUTORY PROVISIONS AFFECTING DISTRICT REVENUES AND APPROPRIATIONS ), the condition of the State economy (which affects total revenue available to the State general fund), and the annual State budget process. Decreases in State revenues may significantly affect appropriations made by the legislature to school districts. The following information concerning the State s budgets for the current and most recent preceding years has been compiled from publicly-available information provided by the State. Neither the District, the County, nor the Underwriter is responsible for the information relating to the State s budgets provided in this section. Further information is available from the Public Finance Division of the State Treasurer s Office. The Budget Process. The State s fiscal year begins on July 1 and ends on June 30. The annual budget is proposed by the Governor by January 10 of each year for the next fiscal year (the Governor s Budget ). Under State law, the annual proposed Governor s Budget cannot provide for projected expenditures in excess of projected revenues and balances B-12

87 available from prior fiscal years. Legislature takes up the proposal. Following the submission of the Governor s Budget, the Under the State Constitution, money may be drawn from the State Treasury only through an appropriation made by law. The primary source of the annual expenditure authorizations is the Budget Act as approved by the Legislature and signed by the Governor. The Budget Act must be approved by a two-thirds majority vote of each House of the Legislature. The Governor may reduce or eliminate specific line items in the Budget Act or any other appropriations bill without vetoing the entire bill. Such individual line-item vetoes are subject to override by a twothirds vote of each House of the Legislature. Appropriations also may be included in legislation other than the Budget Act. Bills containing appropriations (except for K-14 education) must be approved by a two-thirds vote in each House of the Legislature and be signed by the Governor. Bills containing K-14 education appropriations only require a simple majority vote. Continuing appropriations, available without regard to fiscal year, may also be provided by statute or the State Constitution. Funds necessary to meet an appropriation need not be in the State Treasury at the time such appropriation is enacted; revenues may be appropriated in anticipation of their receipt. Recent State Budgets. Certain information about the State budgeting process and the State Budget is available through several State of California sources. A convenient source of information is the State s website, where recent official statements for State bonds are posted. The references to Internet websites shown below are shown for reference and convenience only, the information contained within the websites may not be current and has not been reviewed by the District and is not incorporated in this Official Statement by reference. The California State Treasurer Internet home page at under the heading Bond Information, posts various State of California Official Statements, many of which contain a summary of the current State Budget, past State Budgets, and the impact of those budgets on school districts in the State. The California State Treasurer s Office Internet home page at under the heading Financial Information, posts the State s audited financial statements. In addition, the Financial Information section includes the State s Rule 15c2-12 filings for State bond issues. The Financial Information section also includes the Overview of the State Economy and Government, State Finances, State Indebtedness, Litigation from the State s most current Official Statement, which discusses the State budget and its impact on school districts. The California Department of Finance s Internet home page at under the heading California Budget, includes the text of proposed and adopted State Budgets. The State Legislative Analyst s Office (the LAO ) prepares analyses of the proposed and adopted State budgets. The analyses are accessible on the Legislative Analyst s Internet home page at under the heading Subject Area Budget (State). B-13

88 State IOUs and Deferrals of Education Funding. In recent years, fiscal stress and difficulties in achieving a balanced State budget have resulted in actions which include the State issuing IOUs (defined below) to its creditors, and the deferral of school funding. On July 2, 2009, as a result of declines in State revenues commencing in fiscal years , the State Controller began to issue registered warrants (or IOUs ) for certain lower priority State obligations in lieu of warrants (checks) which could be immediately cashed. The registered warrants, the issuance of which did not require the consent of recipients, bore interest. With enactment of an amended budget in late July, 2009, the State was able to call all its outstanding registered warrants for redemption on September 4, The issuance of state registered warrants in 2009 was only the second time the State has issued state registered warrants to such types of state creditors since the 1930s. Furthermore, commencing in fiscal year , to better manage its cash flow in light of declining revenues, the State has enacted several statutes deferring amounts owed to public schools, until a later date in the fiscal year, or even into the following fiscal year, in order to more closely align the State s revenues with its expenditures. This technique has been used several times through the enactment of budget bills in fiscal years through Some of these statutory deferrals were made permanent, and others were implemented only for one fiscal year. Fiscal stress and cash pressures currently facing the State may continue or become more difficult, and continuing declines in State tax receipts or other results of the current economic recession may materially adversely affect the financial condition of the State. The Department of Finance has projected that multi-billion dollar budget gaps will occur annually for several years in the future, although the Budget described below includes measures which are intended to address these budgetary difficulties. Information on State Economic Challenges, Prior Year State Budgets and Related Events. The State s financial condition and budget policies affect communities, local public agencies and school districts throughout California. The State is experiencing significant financial and budgetary stress. Exacerbating the State s challenges, as the State entered recession in 2008, annual revenues generally were less than annual expenses, creating a structural budget deficit. This structural deficit is due in part to overreliance on temporary budgetary remedies in prior State Budget years, including one-time revenues, internal borrowing, payment deferrals, accounting shifts and expenditure reduction proposals that have not materialized. In recent years, the State Budget was repeatedly not passed and signed in a timely manner. Delays in the delivery of State budgets cause an element of uncertainty for the District. Delayed payments from the State to the District, which are more common during periods in which the State faces economic challenges, also subject the District to additional risk. In recent years, Governor Brown has employed a strategy of proposing revenue raising measures coupled with automatic expenditure and service cuts, which cuts go into effect if the revenue raising measures are not approved by the State Legislature or State voters, into his State budget packages. The State s Budget (the Budget ) relied on $4 billion of additional tax revenue, which when not realized, automatically triggered nearly $1 billion of further cuts to universities, welfare, courts and schools (the Trigger Cuts ). On January 1, 2012, Trigger Cuts to funding for University of California, California State University, community colleges, developmental services, local libraries and state-subsidized childcare and K-12 school B-14

89 transportation funding, among others, became effective. On February 1, 2012, Trigger Cuts to general revenue limit funding for K-12 school districts totaling $79.6 million were implemented. The Budget was also premised on $2.8 billion in deferrals to K-12 schools and community colleges and $1.7 billion to be directed from State redevelopment agency funds pursuant to ABx1 26 and ABx1 27, which restricted redevelopment agency actions from creating new debt and then dissolved them. On December 29, 2011, the State Supreme Court ruled that ABx1 26 and ABx1 27 were constitutional. Other challenges or delays relating to the implementation of these statutes cannot be predicted at this time. Moreover, the Budget included a $1.1 billion decrease in Proposition 98 funding to schools from the prior year. The Budget also made a significant one-time modification to State budgeting requirements for school districts, requiring them to project the same level of revenue per student in as in , as well as to maintain staffing and program levels commensurate with such level of funding. A related provision of the Budget provided that school districts would only be required to budget for the current year, and would not be required to demonstrate that they can meet their financial obligations for the subsequent two fiscal years ( and ). Finally, the Budget included (i) an additional apportionment deferral of $1.2 billion in education spending, (ii) a decrease of $62.3 million to part-day preschool spending, and (iii) a decrease of $180.4 million to child care and development programs State Budget State Budget and Proposition 30. On June 15, 2012, the Legislature passed a $92 billion General Fund State Budget that closed the State s then-remaining $15.7 billion deficit and rebuilt a $1 billion General Fund reserve. The State Budget relied heavily on passage of the Schools and Local Public Safety Protection Act, a $6.9 billion tax increase approved by California voters at a regular election in November 2012 ( Proposition 30 ). Proposition 30 enacted temporary increases on high-income earners, raising income taxes by up to three percent on the wealthiest Californians for seven years, increased the state sales tax by one-quarter of one cent for four years, and averted $5.9 billion of planned Trigger Cuts that would have affected public education funding in the State (with $5.4 billion of Trigger Cuts affecting future Proposition 98 funding, and the University of California and Cal State systems each experiencing $250 million in Trigger Cuts). The Budget also contains reductions in expenditures from prior years spending totaling $8.1 billion, including reductions caused by elimination of the Healthy Families program and by reforms relating to the CalWORKs, Medi- Cal, Judiciary and Cal Grant programs. The Budget expects $1.5 billion in savings will be generated as the result of the transfer of cash assets previously held by redevelopment agencies to cities, counties and special districts to fund core public services and to schools to offset State General Fund costs. An additional $1.9 billion in savings will arise due to prepayment of the State s Proposition 98 funding as required by a court settlement. Governor Brown signed the Budget on June 27, The execution of Budget may be affected by numerous factors, including but not limited to: (i) national, State and international economic conditions, (ii) litigation risk associated with proposed spending reductions, (iii) failure to generate expected savings as a result of the transfer of cash assets previously held by redevelopment agencies and (iv) other factors, all or any of which could cause the revenue and spending projections made in Budget to be unattainable. The District cannot predict the impact that the Budget, or B-15

90 subsequent budgets, will have on its own finances and operations. Additionally, the District cannot predict the accuracy of any projections made in the State s Budget, or the accuracy of its attempts to project and budget for past and future Trigger Cuts that may affect it. Pension Reform Act of 2013 (Assembly Bill 340). On September 12, 2012, Governor Brown signed AB 340, a bill that will enact the California Public Employees Pension Reform Act of 2013 ( PEPRA ) and that will also amend various sections of the California Education and Government Codes. AB 340 (i) increases the retirement age for new State, school, and city and local agency employees depending on job function, (ii) caps the annual PERS and STRS pension benefit payouts, (iii) addresses numerous abuses of the system, and (iv) requires State, school, and certain city and local agency employees to pay at least half of the costs of their PERS pension benefits. PEPRA will apply to all public employers except the University of California, charter cities and charter counties (except to the extent they contract with PERS). The provisions of AB 340 will go into effect on January 1, 2013 with respect to new State, school, and city and local agency employees hired on that date and after; existing employees who are members of employee associations, including employee associations of the District, will have a five-year window to negotiate compliance with AB 340 through collective bargaining. If no deal is reached by January 1, 2018, a city, public agency or school district could force employees to pay their half of the costs of PERS pension benefits, up to 8 percent of pay for civil workers and 11 percent or 12 percent for public safety workers. PERS has predicted that the impact of AB 340 on employers, including the District and other employers in the PERS system, and employees will vary, based on each employer s current level of benefits. To the extent that the new formulas lower retirement benefits, employer contribution rates could decrease over time as current employees retire and employees subject to the new formulas make up a larger percentage of the workforce. This change would, in some circumstances, result in a lower retirement benefit for employees than they currently earn. Additionally, PERS has noted that changes arising from AB 340 could ultimately have an adverse impact on public sector recruitment in areas that have historically experienced recruitment challenges due to higher pay for similar jobs in the private sector. More information about AB 340 can be accessed through the PERS website at pca=st and through the STRS website at AB340_detailed_impact_analysis.pdf. The references to these Internet websites are shown for reference and convenience only; the information contained within the websites may not be current and has not been reviewed by the District and is not incorporated herein by reference. The District is unable to predict what the amount of PERS and STRS liabilities will be in the future or the amount of the PERS and STRS contributions which the District may be required to make, all as a result of the implementation of AB 340, and as a result of negotiations with its employee associations Proposed State Budget On January 14, 2013, Governor Brown released a $97.6 billion General Fund Proposed State Budget (the Proposed Budget ). The Proposed Budget reflects a significant improvement in the State s finances, due to the economic recovery, prior budgetary restraint, and voters approval of temporary tax increases. Specifically, the Governor proposes $138.6 billion in General Fund and special fund spending in , up 4.5% from B-16

91 The administration forecasts that the State s General Fund budgetary balance will be $1 billion at the end of under the Proposed Budget. The Proposed Budget contains major proposals in education, including a new formula for funding schools and additional resources for the public university systems, and presents alternatives for implementing the federal health care reform. Information about the State budget is regularly available at various State-maintained websites. The fiscal year State Budget may be found at the website of the Department of Finance, under the heading California Budget. Additionally, an impartial analysis of the budget is posted by the Office of the Legislative Analyst at The information referred to is prepared by the respective State agency maintaining each website and not by the District, and the District takes no responsibility for the continued accuracy of the Internet addresses or for the accuracy, completeness or timeliness of information posted there, and such information is not incorporated herein by these references. Uncertainty Regarding Future State Budgets. The District cannot predict what actions will be taken in future years by the State Legislature and the Governor to address the State s current or future budget deficits. Future State budgets will be affected by national and state economic conditions and other factors over which the District has no control. The District cannot predict what impact any future budget proposals will have on the financial condition of the District. To the extent that the State budget process results in reduced revenues to the District, the District will be required to make adjustments to its budgets. The State has not entered into any contractual commitment with the District, the County, or the Owners of the 2012 Refunding Bonds to provide State budget information to the District or the owners of the 2012 Refunding Bonds. Although they believe the State sources of information listed above are reliable, neither the District nor the Underwriter assumes any responsibility for the accuracy of the State Budget information set forth or referred to in this Official Statement or incorporated herein. However, the 2012 Refunding Bonds are secured by ad valorem taxes levied and collected on taxable property in the District, without limit as to rate or amount, and are not secured by a pledge of revenues of the District or its general fund. Legal Challenges to State Funding of Education The application of Proposition 98 and other statutory regulations has been the subject of various legal challenges in recent years, and is likely to be further challenged in the future. For a discussion of how the provisions of Proposition 98 have been applied to school funding see - State Funding of Education" and "-Recent State Budgets above Robles-Wong Litigation. On May 20, 2010, a plaintiff class of numerous current California public school students and several school districts, together with the California Congress of Parents, Teachers & Students, the Association of California School Administrators and the California School Boards Association filed suit in Alameda County Superior Court challenging the system of financing for public schools in California as unconstitutional. In Maya Robles-Wong, et al. v. State of California, plaintiffs seek declaratory and injunctive relief, including a permanent injunction compelling the State to abandon the existing system of public school finance. On July 16, 2010, the California Teachers Association filed a Complaint in Intervention, making the same allegations and seeking the same declaratory and injunctive relief. On January 14, 2011, the court dismissed certain of the causes of action, including causes of action that alleged a constitutional right to a particular level of education funding and violations of equal protection of the law, based on certain State constitutional provisions. On B-17

92 July 26, 2011, the Superior Court rejected the plaintiff s amended complaint as not stating an equal protection claim. On January 25, 2012, the plaintiffs filed an appeal in the 1st Appellate District. The District cannot predict the ultimate outcome of the Robles-Wong litigation. However, if successful, the lawsuit could result in changes to the implementation of school finance in the State of California CSBA Litigation. The California School Boards Association, the Association of California School Administrators, the Los Angeles Unified School District, the San Francisco Unified School District and the Turlock Unified School District announced on August 28, 2011 that they were filing a lawsuit (the CSBA Lawsuit ) in the Superior County of the City and County of San Francisco, seeking to restore more than $2 billion that had been designated to California public schools under Proposition 98, but was cut from the State Budget. The Superior Court has rejected the CSBA Lawsuit; however, the plaintiffs may appeal the decision. CONSTITUTIONAL AND STATUTORY PROVISIONS AFFECTING DISTRICT REVENUES AND APPROPRIATIONS Principal of and interest on the Refunding Bonds are payable from the proceeds of an ad valorem tax levied by the County for the payment thereof. Articles XIIIA, XIIIB, XIIIC, and XIIID of the State Constitution, Propositions 62, 98, 111, 187 and 218, and certain other provisions of law discussed below, are included in this section to describe the potential effect of these Constitutional and statutory measures on the ability of the District to levy taxes and spend tax proceeds for operating and other purposes, and it should not be inferred from the inclusion of such materials that these laws impose any limitation on the ability of the District to levy taxes for payment of the Refunding Bonds. The tax levied by the County for payment of the Refunding Bonds was approved by the District's voters in compliance with Article XIIIA and all applicable laws. Article XIIIA of the California Constitution Basic Property Tax Levy. On June 6, 1978, California voters approved Proposition 13 ("Proposition 13"), which added Article XIIIA to the State Constitution ("Article XIIIA"). Article XIIIA limits the amount of any ad valorem tax on real property to 1% of the full cash value thereof, except that additional ad valorem taxes may be levied to pay debt service on (i) indebtedness approved by the voters prior to July 1, 1978, (ii) (as a result of an amendment to Article XIIIA approved by State voters on June 3, 1986) on bonded indebtedness for the acquisition or improvement of real property which has been approved on or after July 1, 1978 by two-thirds of the voters on such indebtedness, and (iii) bonded indebtedness incurred by a school district or community college district for the construction, reconstruction, rehabilitation or replacement of school facilities or the acquisition or lease of real property for school facilities, approved by 55% of the voters of the district, but only if certain accountability measures are included in the proposition. Article XIIIA defines full cash value to mean "the county assessor s valuation of real property as shown on the tax bill under full cash value, or thereafter, the appraised value of real property when purchased, newly constructed, or a change in ownership have occurred after the 1975 assessment." This full cash value may be increased at a rate not to exceed 2% per year to account for inflation. Article XIIIA has subsequently been amended to permit reduction of the "full cash value" base in the event of declining property values caused by damage, destruction or other factors, to provide that there would be no increase in the "full cash value" base in the event of B-18

93 reconstruction of property damaged or destroyed in a disaster and in other minor or technical ways. Both the United States Supreme Court and the California State Supreme Court have upheld the general validity of Article XIIIA. Legislation Implementing Article XIIIA. Legislation has been enacted and amended a number of times since 1978 to implement Article XIIIA. Under current law, local agencies are no longer permitted to levy directly any property tax (except to pay voter-approved indebtedness). The 1% property tax is automatically levied by the county and distributed according to a formula among taxing agencies. The formula apportions the tax roughly in proportion to the relative shares of taxes levied prior to Increases of assessed valuation resulting from reappraisals of property due to new construction, change in ownership or from the annual adjustment not to exceed 2% are allocated among the various jurisdictions in the taxing area based upon their respective situs. Any such allocation made to a local agency continues as part of its allocation in future years. Inflationary Adjustment of Assessed Valuation. As described above, the assessed value of a property may be increased at a rate not to exceed 2% per year to account for inflation. On December 27, 2001, the Orange County Superior Court, in County of Orange v. Orange County Assessment Appeals Board No. 3, held that where a home s taxable value did not increase for two years, due to a flat real estate market, the Orange County assessor violated the 2% inflation adjustment provision of Article XIIIA, when the assessor tried to "recapture" the tax value of the property by increasing its assessed value by 4% in a single year. The assessors in most California counties, including the County, use a similar methodology in raising the taxable values of property beyond 2% in a single year. The State Board of Equalization has approved this methodology for increasing assessed values. On appeal, the Appellate Court held that the trial court erred in ruling that assessments are always limited to no more than 2% of the previous year s assessment. On May 10, 2004 a petition for review was filed with the California Supreme Court. The petition has been denied by the California Supreme Court. As a result of this litigation, the recapture provision described above may continue to employed in determining the full cash value of property for property tax purposes. Unitary Property Some amount of property tax revenue of the District is derived from utility property which is considered part of a utility system with components located in many taxing jurisdictions ( unitary property ). Under the State Constitution, such property is assessed by the State Board of Equalization ( SBE ) as part of a going concern rather than as individual pieces of real or personal property. State-assessed unitary and certain other property is allocated to the counties by SBE, taxed at special county-wide rates, and the tax revenues distributed to taxing jurisdictions (including the District) according to statutory formulae generally based on the distribution of taxes in the prior year. Constitutional Appropriations Limitation Article XIIIB ( Article XIIIB ) of the State Constitution, as subsequently amended by Propositions 98 and 111, respectively, limits the annual appropriations of the State and of any city, county, school district, authority or other political subdivision of the State to the level of appropriations of the particular governmental entity for the prior fiscal year, as adjusted for B-19

94 changes in the cost of living and in population and for transfers in the financial responsibility for providing services and for certain declared emergencies. For fiscal years beginning on or after July 1, 1990, the appropriations limit of each entity of government shall be the appropriations limit for the fiscal year adjusted for the changes made from that fiscal year under the provisions of Article XIIIB, as amended. The appropriations of an entity of local government subject to Article XIIIB limitations include the proceeds of taxes levied by or for that entity and the proceeds of certain state subventions to that entity. Proceeds of taxes include, but are not limited to, all tax revenues and the proceeds to the entity from (a) regulatory licenses, user charges and user fees (but only to the extent that these proceeds exceed the reasonable costs in providing the regulation, product or service), and (b) the investment of tax revenues. Appropriations subject to limitation do not include (a) refunds of taxes, (b) appropriations for debt service, (c) appropriations required to comply with certain mandates of the courts or the federal government, (d) appropriations of certain special districts, (e) appropriations for all qualified capital outlay projects as defined by the legislature, (f) appropriations derived from certain fuel and vehicle taxes and (g) appropriations derived from certain taxes on tobacco products. Article XIIIB includes a requirement that all revenues received by an entity of government other than the State in a fiscal year and in the fiscal year immediately following it in excess of the amount permitted to be appropriated during that fiscal year and the fiscal year immediately following it shall be returned by a revision of tax rates or fee schedules within the next two subsequent fiscal years. Article XIIIB also includes a requirement that 50% of all revenues received by the State in a fiscal year and in the fiscal year immediately following it in excess of the amount permitted to be appropriated during that fiscal year and the fiscal year immediately following it shall be transferred and allocated to the State School Fund under Section 8.5 of Article XVI of the State Constitution. Article XIIIC and Article XIIID of the California Constitution On November 5, 1996, the voters of the State of California approved Proposition 218, popularly known as the Right to Vote on Taxes Act. Proposition 218 added to the California Constitution Articles XIIIC and XIIID (respectively, Article XIIIC and Article XIIID ), which contain a number of provisions affecting the ability of local agencies, including school districts, to levy and collect both existing and future taxes, assessments, fees and charges. According to the Title and Summary of Proposition 218 prepared by the California Attorney General, Proposition 218 limits the authority of local governments to impose taxes and property-related assessments, fees and charges. Among other things, Article XIIIC establishes that every tax is either a general tax (imposed for general governmental purposes) or a special tax (imposed for specific purposes), prohibits special purpose government agencies such as school districts from levying general taxes, and prohibits any local agency from imposing, extending or increasing any special tax beyond its maximum authorized rate without a two-thirds vote; and also provides that the initiative power will not be limited in matters of reducing or repealing local taxes, assessments, fees and charges. Article XIIIC further provides that no tax may be assessed on property other than ad valorem property taxes imposed in accordance with Articles XIII and XIIIA of the California Constitution and special taxes approved B-20

95 by a two-thirds vote under Article XIIIA, Section 4. Article XIIID deals with assessments and property-related fees and charges, and explicitly provides that nothing in Article XIIIC or XIIID will be construed to affect existing laws relating to the imposition of fees or charges as a condition of property development. Proposition 218 does not affect the ad valorem property taxes to be levied by the County to pay debt service on the Refunding Bonds. Proposition 62 A statutory initiative ( Proposition 62 ) was adopted by the voters at the November 4, 1986, general election which (a) requires that any new or higher taxes for general governmental purposes imposed by local governmental entities such as the District be approved by a twothirds vote of the governmental entity s legislative body and by a majority vote of the voters of the governmental entity voting in an election on the tax, (b) requires that any special tax (defined as taxes levied for other than general governmental purposes) imposed by a local governmental entity be approved by a two-thirds vote of the voters of the governmental entity voting in an election on the tax, (c) restricts the use of revenues from a special tax to the purposes or for the service for which the special tax was imposed, (d) prohibits the imposition of ad valorem taxes on real property by local governmental entities except as permitted by Article XIIIA, (e) prohibits the imposition of transaction taxes and sales taxes on the sale of real property by local governmental entities, and (f) requires that any tax imposed by a local governmental entity on or after August 1, 1985, be ratified by a majority vote of the voters voting in an election on the tax within two years of the adoption of the initiative or be terminated by November 15, California appellate court cases have overturned the provisions of Proposition 62 pertaining to the imposition of taxes for general government purposes. However, the California Supreme Court upheld Proposition 62 in its decision on August 28, 1995, in Fresno County Transportation Authority v. Guardino. This decision reaffirmed the constitutionality of Proposition 62. Certain matters regarding Proposition 62 were not addressed in the Supreme Court s decision, such as what remedies exist for taxpayers subject to a tax not in compliance with Proposition 62, and whether the decision applies to charter cities. The District has not experienced any substantive adverse financial impact as a result of the passage of this initiative. Proposition 98 On November 8, 1988, California voters approved Proposition 98, a combined initiative constitutional amendment and statute called the Classroom Instructional Improvement and Accountability Act (the Accountability Act ). Certain provisions of the Accountability Act have, however, been modified by Proposition 111, discussed below, the provisions of which became effective on July 1, The Accountability Act changes State funding of public education below the university level and the operation of the State s appropriations limit. The Accountability Act guarantees State funding for K-12 school districts and community college districts (hereinafter referred to collectively as K-14 school districts ) at a level equal to the greater of (a) the same percentage of general fund revenues as the percentage appropriated to such districts in , and (b) the amount actually appropriated to such districts from the general fund in the previous fiscal year, adjusted for increases in enrollment and changes in the cost of living. The Accountability Act permits the Legislature to suspend this formula for a oneyear period. B-21

96 The Accountability Act also changes how tax revenues in excess of the State appropriations limit are distributed. Any excess State tax revenues up to a specified amount would, instead of being returned to taxpayers, be transferred to K-14 school districts. Any such transfer to K-14 school districts would be excluded from the appropriations limit for K-14 school districts and the K-14 school district appropriations limit for the next year would automatically be increased by the amount of such transfer. These additional moneys would enter the base funding calculation for K-14 school districts for subsequent years, creating further pressure on other portions of the State budget, particularly if revenues decline in a year following an Article XIIIB surplus. The maximum amount of excess tax revenues which could be transferred to K 14 school districts is 4% of the minimum State spending for education mandated by the Accountability Act. Proposition 111 On June 5, 1990, the voters approved Proposition 111 (Senate Constitutional Amendment No. 1) called the Traffic Congestion Relief and Spending Limit Act of 1990 ( Proposition 111 ) which further modified Article XIIIB and Sections 8 and 8.5 of Article XVI of the State Constitution with respect to appropriations limitations and school funding priority and allocation. The most significant provisions of Proposition 111 are summarized as follows: Annual Adjustments to Spending Limit. The annual adjustments to the Article XIIIB spending limit were liberalized to be more closely linked to the rate of economic growth. Instead of being tied to the Consumer Price Index, the change in the cost of living is now measured by the change in California per capita personal income. The definition of change in population specifies that a portion of the State s spending limit is to be adjusted to reflect changes in school attendance. Treatment of Excess Tax Revenues. Excess tax revenues with respect to Article XIIIB are now determined based on a two-year cycle, so that the State can avoid having to return to taxpayers excess tax revenues in one year if its appropriations in the next fiscal year are under its limit. In addition, the Proposition 98 provision regarding excess tax revenues was modified. After any two-year period, if there are excess State tax revenues, 50% of the excess are to be transferred to K-14 school districts with the balance returned to taxpayers; under prior law, 100% of excess State tax revenues went to K-14 school districts, but only up to a maximum of 4% of the schools minimum funding level. Also, reversing prior law, any excess State tax revenues transferred to K-14 school districts are not built into the school districts base expenditures for calculating their entitlement for State aid in the next year, and the State s appropriations limit is not to be increased by this amount. Exclusions from Spending Limit. Two exceptions were added to the calculation of appropriations which are subject to the Article XIIIB spending limit. First, there are excluded all appropriations for qualified capital outlay projects as defined by the Legislature. Second, there are excluded any increases in gasoline taxes above the 1990 level (then nine cents per gallon), sales and use taxes on such increment in gasoline taxes, and increases in receipts from vehicle weight fees above the levels in effect on January 1, These latter provisions were necessary to make effective the transportation funding package approved by the Legislature and the Governor, which expected to raise over $15 billion in additional taxes from 1990 through 2000 to fund transportation programs. B-22

97 Recalculation of Appropriations Limit. The Article XIIIB appropriations limit for each unit of government, including the State, is to be recalculated beginning in fiscal year It is based on the actual limit for fiscal year , adjusted forward to as if Proposition 111 had been in effect. School Funding Guarantee. There is a complex adjustment in the formula enacted in Proposition 98 which guarantees K-14 school districts a certain amount of State general fund revenues. Under prior law, K-14 school districts were guaranteed the greater of (1) 40.9% of State general fund revenues (the first test ) or (2) the amount appropriated in the prior year adjusted for changes in the cost of living (measured as in Article XIIIB by reference to per capita personal income) and enrollment (the second test ). Under Proposition 111, schools will receive the greater of (1) the first test, (2) the second test, or (3) a third test, which will replace the second test in any year when growth in per capita State general fund revenues from the prior year is less than the annual growth in California per capita personal income. Under the third test, schools will receive the amount appropriated in the prior year adjusted for change in enrollment and per capita State general fund revenues, plus an additional small adjustment factor. If the third test is used in any year, the difference between the third test and the second test will become a credit to schools which will be paid in future years when State general fund revenue growth exceeds personal income growth. Proposition 1A and Proposition 22 On November 2, 2004, California voters approved Proposition 1A, which amended the State constitution to significantly reduce the State's authority over major local government revenue sources. Under Proposition 1A, the State cannot (i) reduce local sales tax rates or alter the method of allocating the revenue generated by such taxes, (ii) shift property taxes from local governments to schools or community colleges, (iii) change how property tax revenues are shared among local governments without two-thirds approval of both houses of the State Legislature or (iv) decrease Vehicle License Fee revenues without providing local governments with equal replacement funding. Under Proposition 1A, beginning in , the State may shift to schools and community colleges a limited amount of local government property tax revenue if certain conditions are met, including: (i) a proclamation by the Governor that the shift is needed due to severe financial hardship of the State, and (ii) approval of the shift by the State Legislature with a two-thirds vote of both houses. Under such a shift, the State must repay local governments for their property tax losses, with interest, within three years. Proposition 1A does allow the State to approve voluntary exchanges of local sales tax and property tax revenues among local governments within a county. Proposition 1A also amended the State Constitution to require the State to suspend certain State laws creating mandates in any year that the State does not fully reimburse local governments for their costs to comply with the mandates. This provision does not apply to mandates relating to schools or community colleges or to those mandates relating to employee rights. Proposition 22, a constitutional initiative entitled the Local Taxpayer, Public Safety, and Transportation Protection Act of 2010, approved on November 2, 2010, superseded many of the provisions of Proposition 1A. This initiative amends the State constitution to prohibit the legislature from diverting or shifting revenues that are dedicated to funding services provided by local government or funds dedicated to transportation improvement projects and services. Under this proposition, the State is not allowed to take revenue derived from locally imposed taxes, such as hotel taxes, parcel taxes, utility taxes and sales taxes, and local public transit and transportation funds. Further, in the event that a local governmental agency sues the State alleging a violation of these provisions and wins, then the State must automatically appropriate B-23

98 the funds needed to pay that local government. This Proposition was intended to, among other things, stabilize local government revenue sources by restricting the State s control over local property taxes. Because Proposition 22 reduces the State s authority to use or reallocate certain revenue sources, fees and taxes for State general fund purposes, the State will have to take other actions to balance its budget, such as reducing State spending or increasing State taxes, and school and college districts that receive Proposition 98 or other funding from the State will be more directly dependent upon the State s general fund. In California Redevelopment Assoc. v. Motosantos, the State Supreme Court ruled that the Legislature s dissolution of redevelopment agencies under ABx1 26 was constitutional and did not violate Proposition 22, but the compromise legislation of ABx1 27 violated Proposition 22 because the Legislature cannot require a local agency to make payments in order to continue operations. Future Initiatives Article XIIIA, Article XIIIB, Article XIIIC and Article XIIID of the California Constitution and Propositions 98 and 111 were each adopted as measures that qualified for the ballot under the State s initiative process. From time to time other initiative measures could be adopted further affecting District revenues or the District s ability to expend revenues. The nature and impact of these measures cannot be anticipated by the District. B-24

99 APPENDIX C GENERAL INFORMATION ABOUT THE CITIES OF ROHNERT PARK AND COTATI AND SONOMA COUNTY The following information concerning the County and the cities listed above is included only for the purpose of supplying general information regarding the area of the District. The Refunding Bonds are not a debt of the County, listed cities, the State or any of its political subdivisions, and neither the said County, the listed cities, said State nor any of its political subdivisions is liable therefor. Location Rohnert Park and Cotati are located in southern Sonoma County, along Highway 101 approximately 8 miles south of Santa Rosa and approximately 50 miles north of San Francisco. The County covers approximately 1,580 square miles. Varied terrain in the County includes Pacific coastline, the Russian River, vineyards, and old growth redwoods. Sonoma County is the original home of wine production in northern California and still the largest producer of quality wine. Population The historic population estimates of the towns and cities that are in the County, as of January 1 of the past five years are shown in the following table. SONOMA COUNTY Population 2008 through Cloverdale 8,512 8,569 8,636 8,665 8,629 Cotati 7,388 7,418 7,476 7,308 7,276 Healdsburg 11,668 11,800 11,931 11,475 11,442 Petaluma 57,241 57,817 58,401 58,319 58,165 Rohnert Park 42,922 43,081 43,398 41,194 40,846 Santa Rosa 159, , , , ,841 Sebastopol 7,687 7,745 7,943 7,423 7,405 Sonoma 9,911 9,984 10,078 10,711 10,665 Windsor 26,471 26,714 26,955 26,936 27,003 Unincorporated 151, , , , ,739 County Total 482, , , , ,011 Source: California State Department of Finance, Demographic Research Unit C-1

100 Employment The City of Rohnert Park's major employers are set forth below. CITY OF ROHNERT PARK Major Employers (As of 2011) Employer Number of Employees Percentage of Total City Employment Sonoma State University % Cotati-Rohnert Park USD Wal-Mart Home Depot Costco DC Power Systems Target Safeway Double Tree Hotel City of Rohnert Park Total 2, % Total City Employment (1) 22,700 (1) Total City Employment provided by EDD Labor Force data. Source: City of Rohnert Park, Comprehensive Annual Financial Report for the Fiscal Year ended June 30, C-2

101 The County s major employers are set forth below. COUNTY OF SONOMA Major Employers (As of March 2012) Employer Name Location Industry Alcatel-Lucent Petaluma Telephone & Telegraph Apparatus (Mfrs) Amy s Kitchen Inc Santa Rosa Frozen Food Processors (Mfrs) Army National Guard Recruiter Santa Rosa State Government-National Security Arterial Vascular Engineering Santa Rosa Medical Supplies Clover Stornetta Farms Inc Petaluma Dairy Products-Wholesale Fairmont-Sonoma Mission Sonoma Hotels & Motels Friedman Brothers Hardware Not Available Hardware Stores Ghilotti Construction Co Santa Rosa Contractors-Engineering General JDS Uniphase Santa Rosa Optical Instruments & Lenses (Mfrs) Korbel Champagne Cellars Guerneville Wineries (Mfrs) Medtronic Vascular Santa Rosa Physicians & Surgeons Equip & Supls-Mfrs North Bay Construction Inc Petaluma General Contractors Petaluma City Clerk Petaluma City Government-Executive Offices Petaluma Valley Hospital Petaluma Hospitals Santa Rosa Memorial Hospital Santa Rosa Hospitals Santa Rosa Police Dept Santa Rosa Police Departments Sonoma County Fire & Emergency Santa Rosa Government Offices-County Sonoma County of Education Santa Rosa County Government-Education Programs Sonoma County Radio Mntnc Shop Santa Rosa Government Offices-County Sonoma County Sheriff Dept Santa Rosa Sheriff Sonoma Developmental Ctr Eldridge Cognitive Disability-Dev Disability Svcs US Coast Guard Petaluma Federal Government-Public Order & Safety Walmart Windsor Department Stores Walmart Rohnert Park Department Stores Source: California Employment Development Department, extracted from The America s Labor Market Information System (ALMIS) Employer Database, st Edition. C-3

102 The unemployment rate in Sonoma County was 7.7% in November 2012, up from a revised 7.6% in October 2012, and below the year-ago estimate of 9.1%. This compares with an unadjusted unemployment rate of 9.6% for California and 7.4% for the nation during the same period. The table below shows average annual employment by industry group in the County from 2007 through COUNTY OF SONOMA Civilian Labor Force, Employment and Unemployment, Unemployment by Industry (Annual Averages ) Civilian Labor Force (1) 258, , ,100 N/A 257,300 Employment 247, , ,000 N/A 232,100 Unemployment 11,200 14,900 25,100 N/A 25,100 Unemployment Rate 4.3% 5.7% 9.7% N/A 9.8% Wage and Salary Employment (2) Agriculture 5,800 5,800 5,800 5,700 5,700 Mining and Logging Construction 14,400 12,800 9,800 8,900 8,400 Manufacturing 22,000 22,000 20,200 19,900 20,500 Wholesale Trade 7,800 7,700 6,800 6,600 6,600 Retail Trade 24,000 23,000 21,400 21,500 21,600 Transportation, Warehousing and Utilities 4,500 4,400 4,000 3,900 3,800 Information 3,000 2,800 2,600 2,500 2,400 Finance and Insurance 6,500 5,600 5,100 4,900 4,700 Professional and Business Services 23,100 22,900 19,700 20,800 21,100 Educational and Health Services 23,500 24,200 24,100 24,100 24,200 Leisure and Hospitality 21,000 21,000 20,100 20,100 20,000 Other Services 6,400 6,400 6,100 5,900 5,900 Federal Government 1,800 1,700 1,700 1,800 1,500 State Government 5,200 5,000 5,000 4,700 4,700 Local Government 24,100 23,700 22,600 20,300 21,000 Total, All Industries (3) 196, , , , ,100 (1) Labor force data is by place of residence; includes self-employed individuals, unpaid family workers, household domestic workers, and workers on strike. (2) Industry employment is by place of work; excludes self-employed individuals, unpaid family workers, household domestic workers, and workers on strike. (3) Totals may not add due to rounding. Source: State of California Employment Development Department. Effective Buying Income Effective buying income ( EBI ) is a classification developed exclusively by Sales & Marketing Management magazine to distinguish it from other sources reporting income statistics. EBI is defined as money income less personal tax and non-tax payments - a number often referred to as disposable or after tax income. Money income is the aggregate of wages and salaries, net farm and non-farm self employment income, interest, dividends, net rental and royalty income, Social Security and railroad retirement income, other retirement and disability income, public assistance income, unemployment compensation, Veterans Administration Payments, alimony and child support, military family allotments, net winnings from gambling and other periodic income. Money income does not include money received C-4

103 from the sale of property (unless the recipient is engaged in the business of selling property); the value of in-kind income such as food stamps, public housing subsidies, medical care, employer contributions for persons, etc.; withdrawal of bank deposits; money borrowed; tax refunds; exchange of money between relatives living in the same household; gifts and lumpsum inheritances, insurance payments, and other types of lump-sum receipts. EBI is computed by deducting from money income all personal income taxes (federal, state and local), personal contributions to social insurance (Social Security and federal retirement payroll deductions), and taxes on owner-occupied non-business real estate. The following table summarizes the total effective buying income for the City of Cotati, the City of Rohnert Park, the County of Sonoma, the State of California and the United States for the period 2007 through CITY OF COTATI, CITY OF ROHNERT PARK, COUNTY OF SONOMA, STATE OF CALIFORNIA & UNITED STATES Effective Buying Income 2007 through 2011 Total Effective Median Household Buying Income Effective Buying Year Area (000 s Omitted) Income 2007 City of Cotati $179,225 $51,752 City of Rohnert Park 948,078 50,945 Sonoma County 11,753,533 52,027 California 814,894,438 48,203 United States 6,300,794,040 41, City of Cotati $178,045 $51,775 City of Rohnert Park 942,383 51,144 Sonoma County 11,763,448 52,146 California 832,531,445 48,952 United States 6,443,994,426 42, City of Cotati $171,605 $51,070 City of Rohnert Park 944,393 51,920 Sonoma County 11,867,810 52,992 California 844,823,319 49,736 United States 6,571,536,768 43, City of Cotati $174,483 $49,193 City of Rohnert Park 882,970 49,262 Sonoma County 11,482,273 50,323 California 801,393,028 47,177 United States 6,365,020,076 41, City of Cotati $178,340 $48,932 City of Rohnert Park 904,138 48,551 Sonoma County 12,044,560 50,113 California 814,578,458 47,062 United States 6,438,704,664 41,253 Source: The Nielsen Company (US), Inc. C-5

104 Commercial Activity Total taxable transactions in the City of Cotati during the first quarter of calendar year 2011 were reported to be $35,526,000, a 14.6% increase over the total taxable sales of $31,005,000 that were reported during the first quarter of calendar year A summary of historic taxable sales within the City of Cotati is shown in the following table. Annual figures are not yet available for CITY OF COTATI Taxable Retail Sales Number of Permits and Valuation of Taxable Transactions (shown in thousands of dollars) Calendar Years 2006 through 2010 Retail Stores Total All Outlets Number of Permits Taxable Transactions Number of Permits Taxable Transactions $122, $183, , , , , (1) , , (1) , ,128 (1) Not comparable to prior years. Retail category now includes Food Services. Source: State of California, Board of Equalization. Total taxable transactions in the City of Rohnert Park during the first quarter of calendar year 2011 were reported to be $125,634,000, a 0.6% decrease from the total taxable sales of $126,411,000 that were reported during the first quarter of calendar year A summary of historic taxable sales within the City is shown in the following table. Annual figures are not yet available for CITY OF ROHNERT PARK Taxable Retail Sales Number of Permits and Valuation of Taxable Transactions (shown in thousands of dollars) Calendar Years 2006 through 2010 Retail Stores Total All Outlets Number of Permits Taxable Transactions Number of Permits Taxable Transactions $601, $700, , , , , (1) , , (1) , ,557 (1) Not comparable to prior years. Retail category now includes Food Services. Source: State of California, Board of Equalization. C-6

105 Total taxable sales in the County during the first quarter of calendar year 2011 were reported to be $1,504,107,000, a 5.6% increase over the total taxable sales of $1,424,157,000 reported during the first quarter of calendar year The valuations of taxable transactions in the County are presented in the following table. Annual figures are not yet available for COUNTY OF SONOMA Taxable Transactions (Figures in Thousands) Calendar Years 2006 through 2010 Retail Stores Taxable Transactions Total Outlets Taxable Transactions Year Retail Permits on July 1 Total Permits on July ,532 $5,500,588 17,612 $7,894, ,352 5,404,597 17,638 7,877, ,581 5,009,164 17,764 7,369, (1) 10,645 4,413,001 16,810 6,263, (1) 10,559 4,583,802 16,715 6,485,949 (1) Not comparable to prior years. Retail category now includes Food Services. Source: State of California, Board of Equalization. Construction Activity Building activity for the years 2006 through 2010 in the City of Cotati is shown in the following table. CITY OF COTATI Total Building Permit Valuations (Figures in Thousands) Permit Valuation New Single-family $8,415.9 $540.6 $647.4 $0.0 $0.0 New Multi-family Res. Alterations/Additions Total Residential 9, New Commercial New Industrial 3, New Other Com. Alterations/Additions 1, Total Nonresidential $5,305.1 $661.3 $510.8 $731.0 $857.0 New Dwelling Units Single Family Multiple Family TOTAL Source: Construction Industry Research Board, Building Permit Summary. C-7

106 Building activity for the years 2006 through 2010 in the City of Rohnert Park is shown in the following table. CITY OF ROHNERT PARK Total Building Permit Valuations (Figures in Thousands) Permit Valuation New Single-family $0.0 $0.0 $0.0 $0.0 $0.0 New Multi-family 0.0 3, Res. Alterations/Additions 2, , , , ,795.2 Total Residential 2, , , , ,795.2 New Commercial 10, , New Industrial New Other , Com. Alterations/Additions 5, , , , ,899.8 Total Nonresidential $16,124.4 $13,308.6 $4,381.4 $3,007.9 $3,562.8 New Dwelling Units Single Family Multiple Family TOTAL Source: Construction Industry Research Board, Building Permit Summary. table: Building activity for the years 2006 through 2010 in the County is shown in the following SONOMA COUNTY Total Building Permit Valuations (Figures in Thousands) 2006 through Permit Valuation New Single-family $328,693.2 $219,642.1 $142,928.4 $ 93,260.5 $68,353.1 New Multi-family 65, , , , ,869.4 Res. Alterations/Additions 93, , , , ,555.7 Total Residential 487, , , , ,778.3 New Commercial 64, , , , ,482.3 New Industrial 8, , , , New Other 52, , , , ,433.4 Com. Alterations/Additions 102, , , , ,119.6 Total Nonresidential $228,088.8 $217,550.1 $$180,381.4 $68,579.3 $90,035.2 New Dwelling Units Single Family 1, Multiple Family TOTAL 1,962 1, Source: Construction Industry Research Board, Building Permit Summary. C-8

107 Transportation All modes of commercial transportation are available in the County. The Petaluma River is capable of handling water barge freight from the San Francisco Bay to Petaluma. Northwestern Pacific Railroad provides rail transportation with the County with connections to major rail interchanges. The Sonoma County Airport, located just outside the City of Santa Rosa, handles commercial and private air traffic, with Horizon-Alaska Airlines providing regional air transportation. Seven private airfields serve the County as well. In addition, highways bisect the County; the major freeway is U.S. Highway 101, which runs from Marin and San Francisco Counties in the south to Mendocino County in the north. State Highway 12 is the major eastwest thoroughfare, running from Bodega Bay on the western coastline to Sonoma on the east. C-9

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109 APPENDIX D FORM OF OPINION OF BOND COUNSEL February 26, 2013 Board of Trustees Cotati-Rohnert Park Unified School District 7615 Burton Avenue Rohnert Park, CA OPINION: $5,730,000 Cotati-Rohnert Park Unified School District (Sonoma County, California) 2013 General Obligation Refunding Bonds Members of the Board of Trustees: We have acted as bond counsel to the Cotati-Rohnert Park Unified School District (the District ) in connection with the issuance by the District of its Cotati-Rohnert Park Unified School District (Sonoma County, California) 2013 General Obligation Refunding Bonds in the aggregate principal amount of $5,730,000 (the Bonds ), under Articles 9 and 11 of Chapter 3 of Part 1 of Division 2 of Title 5 of the California Government Code, commencing with Section of said Code (the Bond Law ) and under a resolution of the Board of Trustees of the District adopted on December 11, 2012 (the Bond Resolution ). We have examined the law and such certified proceedings and other papers as we have deemed necessary to render this opinion. As to questions of fact material to our opinion, we have relied upon representations of the Board contained in the Bond Resolution and in the certified proceedings and certifications of public officials and others furnished to us without undertaking to verify the same by independent investigation. Based upon the foregoing, we are of the opinion, under existing law, as follows: 1. The District is duly established and validly existing as a unified school district with the power to issue the Bonds and to perform its obligations under the Bond Resolution. 2. The Bond Resolution has been duly adopted by the Board of Trustees of the District and constitutes the valid and binding obligation of the District enforceable against the District in accordance with its terms. 3. The Bonds have been duly issued and sold by the District and are valid and binding general obligations of the District, and the County of Sonoma is obligated to levy ad valorem taxes for the payment of the Bonds and the interest thereon upon all property within the District subject to taxation by the District, without limitation as to rate or amount. D-1

110 4. Interest on the Bonds is excluded from gross income for federal income tax purposes and is not an item of tax preference for purposes of the federal alternative minimum tax imposed on individuals and corporations, although for the purpose of computing the alternative minimum tax imposed on certain corporations, such interest is taken into account in determining certain income and earnings. The opinions set forth in the preceding sentence are subject to the condition that the District comply with all requirements of the Internal Revenue Code of 1986, as amended, that must be satisfied subsequent to the issuance of the Bonds in order that interest thereon be, or continue to be, excluded from gross income for federal income tax purposes. The District has covenanted to comply with each such requirement. Failure to comply with certain of such requirements may cause the inclusion of interest on the Bonds in gross income for federal income tax purposes to be retroactive to the date of issuance of the Bonds. We express no opinion regarding other federal tax consequences arising with respect to the Bonds. 5. The interest on the Bonds is exempt from personal income taxation imposed by the State of California. The rights of the owners of the Bonds and the enforceability of the Bonds and the Bond Resolution may be subject to bankruptcy, insolvency, reorganization, moratorium and other similar laws affecting creditors' rights heretofore or hereafter enacted and may also be subject to the exercise of judicial discretion in appropriate cases. Respectfully submitted, A Professional Law Corporation D-2

111 APPENDIX E FORM OF CONTINUING DISCLOSURE CERTIFICATE $5,730,000 COTATI-ROHNERT PARK UNIFIED SCHOOL DISTRICT (Sonoma County, California) 2013 General Obligation Refunding Bonds CONTINUING DISCLOSURE CERTIFICATE This Continuing Disclosure Certificate (this Disclosure Certificate ) is executed and delivered by the Cotati-Rohnert Park Unified School District (the District ) in connection with the issuance of $5,730,000 aggregate principal amount of Cotati-Rohnert Park Unified School District (Sonoma County, California) 2013 General Obligation Refunding Bonds (the Bonds ). The Bonds are being issued under a Resolution adopted by the Board of Trustees of the District on December 11, 2012 (the Resolution ). The District covenants and agrees as follows: Section 1. Purpose of the Disclosure Certificate. This Disclosure Certificate is being executed and delivered by the District for the benefit of the holders and beneficial owners of the Bonds and in order to assist the Participating Underwriter in complying with S.E.C. Rule 15c2-12(b)(5). Section 2. Definitions. In addition to the definitions set forth in the Resolution, which apply to any capitalized term used in this Disclosure Certificate unless otherwise defined in this Section, the following capitalized terms have the following meanings: Annual Report means any Annual Report provided by the District under and as described in Sections 3 and 4. Annual Report Date means the date that is nine months after the end of the District s fiscal year (currently March 31 based on the District s fiscal year end of June 30). Dissemination Agent means the District or any successor Dissemination Agent designated in writing by the District and which has filed with the District a written acceptance of such designation. Listed Events means any of the events listed in Section 5(a). MSRB means the Municipal Securities Rulemaking Board, which has been designated by the Securities and Exchange Commission as the sole repository of disclosure information for purposes of the Rule. Participating Underwriter means E. J. De La Rosa & Co., Inc., the original underwriter of the Bonds required to comply with the Rule in connection with offering of the Bonds. Rule means Rule 15c2-12(b)(5) adopted by the Securities and Exchange Commission under the Securities Exchange Act of 1934, as the same may be amended from time to time. E-1

112 Section 3. Provision of Annual Reports. (a) The District shall, or shall cause the Dissemination Agent to provide, not later than nine months after the end of the District s fiscal year (which currently would be March 31), commencing no later than March 31, 2013 with the report for the Fiscal Year, provide to the MSRB, in an electronic format as prescribed by the MSRB, an Annual Report that is consistent with the requirements of Section 4; provided, however that the first Annual Report shall consist solely of the Official Statement. Not later than 15 Business Days prior to the Annual Report Date, the District shall provide the Annual Report to the Dissemination Agent (if other than the District). If by 15 Business Days prior to the Annual Report Date the Dissemination Agent (if other than the District) has not received a copy of the Annual Report, the Dissemination Agent shall contact the District to determine if the District is in compliance with the previous sentence. The Annual Report may be submitted as a single document or as separate documents comprising a package, and may include by reference other information as provided in Section 4 of this Disclosure Certificate; provided that the audited financial statements of the District may be submitted separately from the balance of the Annual Report, and later than the Annual Report Date, if not available by that date. If the District s fiscal year changes, it shall give notice of such change in the same manner as for a Listed Event under Section 5(c). The District shall provide a written certification with each Annual Report furnished to the Dissemination Agent to the effect that such Annual Report constitutes the Annual Report required to be furnished by the District hereunder. (b) If the District does not provide (or cause the Dissemination Agent to provide) an Annual Report by the Annual Report Date, the District shall provide (or cause the Dissemination Agent to provide) to the MSRB, in an electronic format as prescribed by the MSRB, a notice in substantially the form attached as Exhibit A. (c) With respect to the Annual Report, the Dissemination Agent shall: (i) determine each year prior to the Annual Report Date the then-applicable rules and electronic format prescribed by the MSRB for the filing of annual continuing disclosure reports; and (ii) if the Dissemination Agent is other than the District, file a report with the District certifying that the Annual Report has been provided pursuant to this Disclosure Certificate, and stating the date it was provided. Section 4. Content of Annual Reports. The Annual Report shall contain or incorporate by reference the following: (a) Audited financial statements prepared in accordance with generally accepted accounting principles as promulgated to apply to governmental entities from time to time by the Governmental Accounting Standards Board. If the District s audited financial statements are not available by the Annual Report Date, the Annual Report shall contain unaudited financial statements in a format similar to the financial statements contained in the final Official Statement, and the audited financial statements shall be filed in the same manner as the Annual Report when they become available. (b) Unless otherwise provided in the audited financial statements filed on or before the Annual Report Date, financial information and operating data with respect to the District for the preceding fiscal year, substantially similar to that provided in the corresponding tables in the Official Statement: E-2

113 (i) the average daily attendance in District schools on an aggregate basis for the preceding fiscal year; (ii) pension plan contributions made by the District for the preceding fiscal year; (iii) aggregate principal amount of short-term borrowings, lease obligations and other long-term borrowings of the District as of the end of the preceding fiscal year; (iv) description of amount of general fund revenues and expenditures which have been budgeted for the current fiscal year, together with audited actual budget figures for the preceding fiscal year; (v) (vi) the District s total revenue limit for the preceding fiscal year; and current fiscal year assessed valuation of taxable properties in the District. (c) In addition to any of the information expressly required to be provided under paragraphs (a) and (b) of this Section, the District shall provide such further information, if any, as may be necessary to make the specifically required statements, in the light of the circumstances under which they are made, not misleading. (d) Any or all of the items listed above may be included by specific reference to other documents, including official statements of debt issues of the District or related public entities, which are available to the public on the MSRB s Internet website or filed with the Securities and Exchange Commission. Section 5. Reporting of Significant Events. (a) The District shall give, or cause to be given, notice of the occurrence of any of the following events with respect to the Bonds: (1) Principal and interest payment delinquencies. (2) Non-payment related defaults, if material. (3) Unscheduled draws on debt service reserves reflecting financial difficulties. (4) Unscheduled draws on credit enhancements reflecting financial difficulties. (5) Substitution of credit or liquidity providers, or their failure to perform. (6) Adverse tax opinions, the issuance by the Internal Revenue Service of proposed or final determinations of taxability, Notices of Proposed Issue (IRS Form 5701-TEB) or other material notices or determinations with respect to the tax status of the security, or other material events affecting the tax status of the security. (7) Modifications to rights of security holders, if material. E-3

114 (8) Bond calls, if material, and tender offers. (9) Defeasances. (10) Release, substitution, or sale of property securing repayment of the securities, if material. (11) Rating changes. (12) Bankruptcy, insolvency, receivership or similar event of the District or other obligated person. (13) The consummation of a merger, consolidation, or acquisition involving the District or an obligated person, or the sale of all or substantially all of the assets of the District or an obligated person (other than in the ordinary course of business), the entry into a definitive agreement to undertake such an action, or the termination of a definitive agreement relating to any such actions, other than pursuant to its terms, if material. (14) Appointment of a successor or additional trustee or the change of name of a trustee, if material. (b) Whenever the District obtains knowledge of the occurrence of a Listed Event, the District shall, or shall cause the Dissemination Agent (if not the District) to, file a notice of such occurrence with the MSRB, in an electronic format as prescribed by the MSRB, in a timely manner not in excess of 10 business days after the occurrence of the Listed Event. Notwithstanding the foregoing, notice of Listed Events described in subsections (a)(8) and (9) above need not be given under this subsection any earlier than the notice (if any) of the underlying event is given to holders of affected Bonds under the Resolution. (c) The District acknowledges that the events described in subparagraphs (a)(2), (a)(7), (a)(8) (if the event is a bond call), (a)(10), (a)(13), and (a)(14) of this Section 5 contain the qualifier if material. The District shall cause a notice to be filed as set forth in paragraph (b) above with respect to any such event only to the extent that the District determines the event s occurrence is material for purposes of U.S. federal securities law. (d) For purposes of this Disclosure Certificate, any event described in paragraph (a)(12) above is considered to occur when any of the following occur: the appointment of a receiver, fiscal agent, or similar officer for the District in a proceeding under the United States 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 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 District. Section 6. Identifying Information for Filings with the MSRB. All documents provided to the MSRB under this Disclosure Certificate shall be accompanied by identifying information as prescribed by the MSRB. E-4

115 Section 7. Termination of Reporting Obligation. The District s obligations under this Disclosure Certificate shall terminate upon the legal defeasance, prior redemption or payment in full of all of the Bonds. If such termination occurs prior to the final maturity of the Bonds, the District shall give notice of such termination in the same manner as for a Listed Event under Section 5(c). Section 8. Dissemination Agent. The District may, from time to time, appoint or engage a Dissemination Agent to assist it in carrying out its obligations under this Disclosure Certificate, and may discharge any such Agent, with or without appointing a successor Dissemination Agent. Section 9. Amendment; Waiver. Notwithstanding any other provision hereof, the District may amend this Disclosure Certificate, and any provision of this Disclosure Certificate may be waived, provided that the following conditions are satisfied: (a) (b) (c) if the amendment or waiver relates to the provisions of Sections 3(a), 4 or 5(a), it may only be made in connection with a change in circumstances that arises from a change in legal requirements, change in law, or change in the identity, nature, or status of an obligated person with respect to the Bonds, or type of business conducted; the undertakings herein, as proposed to be amended or waived, would, in the opinion of nationally recognized bond counsel, have complied with the requirements of the Rule at the time of the primary offering of the Bonds, after taking into account any amendments or interpretations of the Rule, as well as any change in circumstances; and the proposed amendment or waiver either (i) is approved by holders of the Bonds in the manner provided in the Resolution for amendments to the Resolution with the consent of holders, or (ii) does not, in the opinion of nationally recognized bond counsel, materially impair the interests of the holders or beneficial owners of the Bonds. If the annual financial information or operating data to be provided in the Annual Report is amended under the provisions hereof, the first annual financial information filed pursuant hereto containing the amended operating data or financial information shall explain, in narrative form, the reasons for the amendment and the impact of the change in the type of operating data or financial information being provided. If an amendment is made to the undertaking specifying the accounting principles to be followed in preparing financial statements, the annual financial information for the year in which the change is made shall present a comparison between the financial statements or information prepared on the basis of the new accounting principles and those prepared on the basis of the former accounting principles. The comparison shall include a qualitative discussion of the differences in the accounting principles and the impact of the change in the accounting principles on the presentation of the financial information, in order to provide information to investors to enable them to evaluate the ability of the District to meet its obligations. To the extent reasonably feasible, the comparison shall be quantitative. A notice of the change in the accounting principles shall be filed in the same manner as for a Listed Event under Section 5(c). E-5

116 Section 10. Additional Information. Nothing in this Disclosure Certificate prevents the District from disseminating any other information, using the means of dissemination set forth in this Disclosure Certificate or any other means of communication, or including any other information in any Annual Report or notice of occurrence of a Listed Event, in addition to that which is required by this Disclosure Certificate. If the District chooses to include any information in any Annual Report or notice of occurrence of a Listed Event in addition to that which is specifically required by this Disclosure Certificate, the District has no obligation hereunder this Disclosure Certificate to update such information or include it in any future Annual Report or notice of occurrence of a Listed Event. Section 11. Default. If the District fails to comply with any provision of this Disclosure Certificate, any holder or beneficial owner of the Bonds may take such actions as may be necessary and appropriate, including seeking mandate or specific performance by court order, to cause the District to comply with its obligations under this Disclosure Certificate. A default under this Disclosure Certificate shall not be deemed an Event of Default under the Resolution, and the sole remedy under this Disclosure Certificate in the event of any failure of the District to comply with this Disclosure Certificate shall be an action to compel performance. Section 12. Duties, Immunities and Liabilities of Dissemination Agent. The Dissemination Agent shall have only such duties as are specifically set forth in this Disclosure Certificate, and the District agrees to indemnify and save the Dissemination Agent, its officers, directors, employees and agents, harmless against any loss, expense and liabilities which it may incur arising out of or in the exercise or performance of its powers and duties hereunder, including the costs and expenses (including attorneys fees) of defending against any claim of liability, but excluding liabilities due to the Dissemination Agent s negligence or willful misconduct. The obligations of the District under this Section shall survive resignation or removal of the Dissemination Agent and payment of the Bonds. Section 13. Beneficiaries. This Disclosure Certificate shall inure solely to the benefit of the District, the Dissemination Agent, the Participating Underwriter and holders and beneficial owners from time to time of the Bonds, and shall create no rights in any other person or entity. Date: February 26, 2013 COTATI-ROHNERT PARK UNIFIED SCHOOL DISTRICT By: Superintendent E-6

117 EXHIBIT A NOTICE OF FAILURE TO FILE ANNUAL REPORT Name of Obligor: Cotati-Rohnert Park Unified School District Name of Bond Issue: Date of Issuance: February 26, 2013 $5,730,000 aggregate principal amount of Cotati-Rohnert Park Unified School District (Sonoma County, California) 2013 General Obligation Refunding Bonds NOTICE IS HEREBY GIVEN that the District has not provided an Annual Report with respect to the above-named Bonds as required by the resolution adopted by the Board of Trustees of the District authorizing the issuance of the Bonds. The District anticipates that the Annual Report will be filed by. Dated: COTATI-ROHNERT PARK UNIFIED SCHOOL DISTRICT By: Authorized Officer E-7

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119 APPENDIX F BOOK-ENTRY ONLY SYSTEM The following description of the Depository Trust Company ( DTC ), the procedures and record keeping with respect to beneficial ownership interests in the Bonds, payment of principal, interest and other payments on the Bonds to DTC Participants or Beneficial Owners, confirmation and transfer of beneficial ownership interest in the Bonds and other related transactions by and between DTC, the DTC Participants and the Beneficial Owners is based solely on information provided by DTC. Accordingly, no representations can be made concerning these matters and neither the DTC Participants nor the Beneficial Owners should rely on the foregoing information with respect to such matters, but should instead confirm the same with DTC or the DTC Participants, as the case may be. Neither the issuer of the Bonds (the Issuer ) nor the trustee, fiscal agent or paying agent appointed with respect to the Bonds (the Agent ) take any responsibility for the information contained in this Appendix. No assurances can be given that DTC, DTC Participants or Indirect Participants will distribute to the Beneficial Owners (a) payments of interest, principal or premium, if any, with respect to the Bonds, (b) certificates representing ownership interest in or other confirmation or ownership interest in the Bonds, or (c) redemption or other notices sent to DTC or Cede & Co., its nominee, as the registered owner of the Bonds, or that they will so do on a timely basis, or that DTC, DTC Participants or DTC Indirect Participants will act in the manner described in this Appendix. The current Rules applicable to DTC are on file with the Securities and Exchange Commission and the current Procedures of DTC to be followed in dealing with DTC Participants are on file with DTC. 1. The Depository Trust Company ( DTC ), New York, NY, will act as securities depository for the securities (the Securities ). The Securities will be issued as fully-registered securities registered in the name of Cede & Co. (DTC s partnership nominee) or such other name as may be requested by an authorized representative of DTC. One fully-registered Security certificate will be issued for each issue of the Securities, each in the aggregate principal amount of such issue, and will be deposited with DTC. If, however, the aggregate principal amount of any issue exceeds $500 million, one certificate will be issued with respect to each $500 million of principal amount, and an additional certificate will be issued with respect to any remaining principal amount of such issue. 2. DTC, the world s largest securities depository, is a limited-purpose trust company organized under the New York Banking Law, a banking organization within the meaning of the New York Banking Law, a member of the Federal Reserve System, a clearing corporation within the meaning of the New York Uniform Commercial Code, and a clearing agency registered pursuant to the provisions of Section 17A of the Securities Exchange Act of DTC holds and provides asset servicing for over 3.5 million issues of U.S. and non-u.s. equity issues, corporate and municipal debt issues, and money market instruments (from over 100 countries) that DTC s participants ( Direct Participants ) deposit with DTC. DTC also facilitates the post-trade settlement among Direct Participants of sales and other securities transactions in deposited securities, through electronic computerized book-entry transfers and pledges between Direct Participants accounts. This eliminates the need for physical movement of F-1

120 securities certificates. Direct Participants include both U.S. and non-u.s. securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations. DTC is a wholly-owned subsidiary of The Depository Trust & Clearing Corporation ( DTCC ). DTCC is the holding company for DTC, National Securities Clearing Corporation and Fixed Income Clearing Corporation, all of which are registered clearing agencies. DTCC is owned by the users of its regulated subsidiaries. Access to the DTC system is also available to others such as both U.S. and non-u.s. securities brokers and dealers, banks, trust companies, and clearing corporations that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly ( Indirect Participants ). On August 8, 2011, Standard & Poor s downgraded its rating of DTC from AAA to AA+. The DTC Rules applicable to its Participants are on file with the Securities and Exchange Commission. More information about DTC can be found at and The information contained on this Internet site is not incorporated herein by reference. 3. Purchases of Securities under the DTC system must be made by or through Direct Participants, which will receive a credit for the Securities on DTC s records. The ownership interest of each actual purchaser of each Security ( 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 Securities, except in the event that use of the book-entry system for the Securities is discontinued. 4. To facilitate subsequent transfers, all Securities 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 Securities 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 Securities; DTC s records reflect only the identity of the Direct Participants to whose accounts such Securities 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. 5. Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. Beneficial Owners of Securities may wish to take certain steps to augment the transmission to them of notices of significant events with respect to the Securities, such as redemptions, tenders, defaults, and proposed amendments to the Security documents. For example, Beneficial Owners of Securities may wish to ascertain that the nominee holding the Securities for their benefit has agreed to obtain and transmit notices to Beneficial Owners. In the alternative, Beneficial Owners may wish to provide their names and addresses to the registrar and request that copies of notices be provided directly to them. F-2

121 6. Redemption notices shall be sent to DTC. If less than all of the Securities within an issue are being redeemed, DTC s practice is to determine by lot the amount of the interest of each Direct Participant in such issue to be redeemed. 7. Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to Securities unless authorized by a Direct Participant in accordance with DTC s MMI Procedures. Under its usual procedures, DTC mails an Omnibus Proxy to Issuer as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co. s consenting or voting rights to those Direct Participants to whose accounts Securities are credited on the record date (identified in a listing attached to the Omnibus Proxy). 8. Redemption proceeds, distributions, and dividend payments on the Securities will be made to Cede & Co., or such other nominee as may be requested by an authorized representative of DTC. DTC s practice is to credit Direct Participants accounts upon DTC s receipt of funds and corresponding detail information from Issuer or Agent, on payable date in accordance with their respective holdings shown on DTC s records. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered in street name, and will be the responsibility of such Participant and not of DTC, Agent, or Issuer, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of redemption proceeds, distributions, and dividend payments to Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) is the responsibility of Issuer or Agent, disbursement of such payments to Direct Participants will be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners will be the responsibility of Direct and Indirect Participants. 9. DTC may discontinue providing its services as depository with respect to the Securities at any time by giving reasonable notice to Issuer or Agent. Under such circumstances, in the event that a successor depository is not obtained, Security certificates are required to be printed and delivered. 10. Issuer may decide to discontinue use of the system of book-entry-only transfers through DTC (or a successor securities depository). In that event, Security certificates will be printed and delivered to DTC. 11. The information in this section concerning DTC and DTC s book-entry system has been obtained from sources that Issuer believes to be reliable, but Issuer takes no responsibility for the accuracy thereof. F-3

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123 APPENDIX G SONOMA COUNTY INVESTMENT POLICY AND QUARTERLY REPORT FOR QUARTER ENDING DECEMBER 31, 2012 G-1

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125 COUNTY OF SONOMA STATEMENT OF INVESTMENT POLICY