PRIVATE PLACEMENT MEMORANDUM DATED SEPTEMBER 16, 2009

Transcription

1 PRIVATE PLACEMENT MEMORANDUM DATED SEPTEMBER 16, 2009 NEW ISSUE BOOK ENTRY ONLY RATINGS: Moody's: Aa2/Aa2 Enhanced (See Ratings herein) In the opinion of Modrall, Sperling, Roehl, Harris & Sisk, P.A., Bond Counsel, based upon an analysis of existing laws, regulations, rulings and court decisions, and assuming, among other matters, the accuracy of certain representations and compliance with certain covenants, the Tax Credit Bonds are qualified school construction bonds within the meaning of Section 54F of the Internal Revenue Code of 1986 (the Code ). Owners of the Tax Credit Certificates, whether held as Tax Credit Strips or part of the Tax Credit Bonds, as of the applicable credit allowance date (defined in Section 54A of the Code) are entitled, subject to the limitations of Code Section 54A, to a federal income tax credit for such taxable year. The amount of the tax credit on the Tax Credit Strip, as defined below, will be treated as interest for federal tax purposes and will be included in gross income for all Owners of Tax Credit Certificates, whether held as Tax Credit Strips or part of the Tax Credit Bonds, in accordance with each Owner's tax status. Bond Counsel expresses no opinion regarding any other tax consequences related to the ownership or disposition of, or the receipt of the tax credit or the accrual or receipt of the deemed interest on the Tax Credit Bonds or the Tax Credit Strips. See FEDERAL TAX CREDITS and GENERAL TAX MATTERS herein. $14,300,000 ALBUQUERQUE MUNICIPAL SCHOOL DISTRICT NO. 12 BERNALILLO AND SANDOVAL COUNTIES, NEW MEXICO GENERAL OBLIGATION QUALIFIED SCHOOL CONSTRUCTION BONDS SERIES 2009C Dated: September 16, 2009 Dated: Date of Delivery Tax Credit Rate: 6.21% Price: 100% Interest Rate: 1.00% Maturity Date: August 1, 2024 CUSIP No.: LN1 This cover page contains certain information for reference only. It is not a summary of this issue. Investors must read the entire Private Placement Memorandum to obtain information essential to the making of an informed investment decision. The General Obligation Qualified School Construction Bonds, Series 2009C (the Tax Credit Bonds or the Bonds ) are being issued by the Board of Education (the Board of Education ) of the Albuquerque Municipal School District No. 12 (the School District or the District ), Bernalillo and Sandoval Counties, New Mexico, as qualified school construction bonds as defined in Section 54F of the Code and are comprised of a principal component (the Principal Component ) and tax credit components (the Tax Credit Components ) evidenced by the Tax Credit Certificates associated with each Tax Credit Bond (the Tax Credit Certificates ). Interest on the Bonds is payable on each February 1 and August 1, commencing February 1, The amount of tax credit on the Tax Credit Strip, as defined below, will be treated as interest for Federal tax purposes. The ownership of the Tax Credit Certificates associated with each Tax Credit Bond may be separated (or stripped ) from the Principal Component, following which, the Tax Credit Certificates would be registered separately from the Principal Component (a Tax Credit Strip ) and the Principal Component would then be registered as a principal strip which includes interest (a Principal Strip ). For Federal income tax purposes, United States taxpayers who own Tax Credit Bonds or a Tax Credit Certificate on the credit allowance dates in each calendar quarter will be entitled to a credit against Federal income tax. See THE TAX CREDIT BONDS - The Tax Credit Program and FEDERAL TAX CREDITS and GENERAL TAX MATTERS herein. The Tax Credit Bonds will be issued in book-entry form only, in denominations of $5,000 and integral multiples thereof. The Tax Credit Bonds will be initially registered in the name of a nominee of The Depository Trust Company ( DTC ). Purchasers will not receive certificates representing their interests in the Tax Credit Bonds. Payments on the Tax Credit Bonds will be made by Wells Fargo Bank, N.A. as Paying Agent, to DTC for subsequent disbursement to DTC Participants who will remit such payments to the beneficial owners of the Tax Credit Bonds. The Tax Credit Bonds are not subject to optional redemption and are subject to mandatory redemption; however, the Tax Credit Bonds are subject to extraordinary mandatory redemption prior to maturity. See THE TAX CREDIT BONDS - Redemption herein. The Tax Credit Bonds will be offered when, as and if issued by the District and received by the Purchaser, subject to the approval of validity by Modrall, Sperling, Roehl, Harris & Sisk, P.A., Bond Counsel. The Tax Credit Bonds, in book-entry form, will be available, for delivery through the facilities of DTC in New York, New York, on or about October 20, 2009.

2 Tax Credit Bonds: SUMMARY INFORMATION Maturity Principal Amount Tax Credit Interest Rate CUSIP (1) Rate 8/1/2024 $14,300, % 1.00% LN1 As and after principal is stripped from the associated Tax Credits: Tax Credit Strips: Maturity Principal Strip Amount CUSIP (1) 8/1/2024 $14,300, LP6 Tax Credit Allowance Date Credit Amount CUSIP (1) (013595) Tax Credit Allowance Date Credit Amount CUSIP (1) (013595) 12/15/2009 $ 135, LQ4 9/15/2017 $222, MX8 3/15/ , LR2 12/15/ , MY6 6/15/ , LS0 3/15/ , MZ3 9/15/ , LT8 6/15/ , NA7 12/15/ , LU5 9/15/ , NB5 3/15/ , LV3 12/15/ , NC3 6/15/ , LW1 3/15/ , ND1 9/15/ , LX9 6/15/ , NE9 12/15/ , LY7 9/15/ , NF6 3/15/ , LZ4 12/15/ , NG4 6/15/ , MA8 3/15/ , NH2 9/15/ , MB6 6/15/ , NJ8 12/15/ , MC4 9/15/ , NK5 3/15/ , MD2 12/15/ , NL3 6/15/ , ME0 3/15/ , NM1 9/15/ , MF7 6/15/ , NN9 12/15/ , MG5 9/15/ , NP4 3/15/ , MH3 12/15/ , NQ2 6/15/ , MJ9 3/15/ , NR0 9/15/ , MK6 6/15/ , NS8 12/15/ , ML4 9/15/ , NT6 3/15/ , MM2 12/15/ , NU3 6/15/ , MN0 3/15/ , NV1 9/15/ , MP5 6/15/ , NW9 12/15/ , MQ3 9/15/ , NX7 3/15/ , MR1 12/15/ , NY5 6/15/ , MS9 3/15/ , NZ2 9/15/ , MT7 6/15/ , PA5 12/15/ , MU4 9/15/ , PB3 3/15/ , MV2 6/15/ , MW0 (1) Copyright 2009, American Bankers Association. CUSIP data herein is provided by Standard and Poor's, CUSIP Service Bureau, a division of The McGraw-Hill Companies, Inc. This data is not intended to create a database and does not serve in any way as a substitute for the CUSIP Service. The CUSIP number is provided for convenience of reference only. Neither the District, the Financial Advisor nor the Purchasers take any responsibility for the accuracy of such CUSIP.

3 No dealer, broker, salesperson or other person has been authorized by the District to give any information or to make any representations other than those contained herein and, if given or made, such other information or representation must not be relied upon as having been authorized by the District. This Private Placement Memorandum does not constitute an offer to sell or the solicitation of an offer to buy nor shall there be any sale of the Tax Credit Bonds by a person in any jurisdiction in which it is unlawful for such person to make such an offer, solicitation or sale. This Private Placement Memorandum is not to be construed as a contract with the purchasers of the Tax Credit Bonds. Statements contained in this Private Placement Memorandum which involve estimates, forecasts or matters of opinion, whether or not expressly so described herein, are intended solely as such and are not to be construed as a representation of facts. The information set forth herein has been obtained from official sources that are believed to be reliable but it is not guaranteed as to accuracy or completeness. The information and expression of opinions herein are subject to change without notice, and neither delivery of this Private Placement Memorandum nor any sale made hereunder shall, under any circumstances, create any implication that there has been no change in the affairs of the District since the date hereof. This Private Placement Memorandum is submitted in connection with the sale of the Tax Credit Bonds referred to herein and may not be reproduced or used, in whole or in part, for any other purpose, unless authorized in writing by the District. The Tax Credit Bonds have not been registered under the Securities Act of 1933, as Amended (the Securities Act ), in reliance upon an exemption contained in such Act. The Tax Credit Bonds have not been registered under the securities laws of any state. Certain statements included or incorporated by reference in this Private Placement Memorandum constitute forward-looking statements within the meaning of the United States Private Securities Litigation Reform Act of 1995, Section 21E of the Securities Exchange Act of 1934, as amended (the Exchange Act ), and Section 27A of the United States Securities Act. Such statements are generally identifiable by the terminology used such as plan, expect, estimate, budget or other similar words. The achievement of certain results or other expectations contained in such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause actual results, performance or achievements described to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. The District does not plan to issue any updates or revisions to those forward-looking statements if or when its expectations, or events; conditions or circumstances on which such statements are based occur.

4 TABLE OF CONTENTS Page INTRODUCTION... 7 The District... 7 Purpose of the Tax Credit Bonds... 7 Security and Source of Payment for the Tax Credit Bonds... 8 Description of the Tax Credit Bonds... 8 Tax Matters... 9 Certain Investor Considerations Regarding Tax Credit Bonds... 9 Offering and Delivery of the Tax Credit Bonds Continuing Disclosure Professionals Involved in the Offering New Mexico School District Enhancement Program Other Information PLAN OF FINANCE THE TAX CREDIT BONDS Authority for Issuance General The Tax Credit Program Registration, Transfer and Exchange of Bonds and Tax Credits Disclaimer by the Board of Education Revision of Book Entry Only Transfer System; Replacement of Tax Credit Bonds Paying Agent Agreement Redemption Mandatory Redemption Partial Redemption Notice of Redemption SECURITY AND SOURCES OF PAYMENT Source and Uses of Funds Security and Source of Payment for the Tax Credit Bonds GENERAL INFORMATION CONCERNING THE ALBUQUERQUE MUNICIPAL SCHOOL DISTRICT NO Introduction School District Powers Management Employees and Retirement Plan Retirement Eligibility Funding Policy Pension Plan Statistics Insurance Intergovernmental Agreements School Property Student Enrollment Accreditation FINANCIAL MATTERS District Budget Process Sources of Revenue for General Fund State Equalization Guarantee ii

5 Statement of Net Assets Statement of Activities Balance Sheet General Fund Statement of Revenues & Expenditures & Changes in Fund Balances General Fund Debt Service Funds Capital Projects Funds Fiduciary Funds AD VALOREM TAX REVENUES Analysis of Assessed Valuation History of Assessed Valuation Major Taxpayers School Tax Rates Tax Rates Yield Control Limitation Developments Limiting Residential Property Tax Increases Tax Collections Interest on Delinquent Taxes Penalty for Delinquent Taxes Remedies Available for Non-Payment of Taxes BOARD OF EDUCATION DEBT AND OTHER LONG-TERM OBLIGATIONS Outstanding Debt Debt Service Requirements to Maturity Statement of Estimated Direct and Overlapping Debt LITIGATION LEGAL MATTERS Transcript and Closing Documents FEDERAL TAX CREDITS Tax Opinion Amount of Tax Credit Limitation on Tax Credit Carryover of Unused Tax Credit Amount Tax Credit Amount Included in Income as Deemed Interest Tax Credit's Effect on Estimated Income Tax Payments State Income Tax Consequences GENERAL TAX MATTERS Tax Status of the Tax Credit Bonds Original Issue Discount Tax Basis Sale of Tax Credit Bonds Tax Considerations Applicable to Strips Tax Reporting U.S. Federal Information Reporting and Backup Withholding Foreign Investors CONTINUING DISCLOSURE RATING MISCELLANEOUS... 58

6 APPENDIX A - DRAFT OPINION OF BOND COUNSEL... A-1 APPENDIX B AUDITED FINANCIAL REPORTS OF THE BOARD OF EDUCATION Dated June 30, B-1 APPENDIX C - FORM OF TAX CREDIT BOND AND TAX CREDIT CERTIFICATE... C-1 APPENDIX D - REDEMPTION PERCENTAGE VALUES... D-1

7 $14,300,000 ALBUQUERQUE MUNICIPAL SCHOOL DISTRICT NO. 12 BERNALILLO AND SANDOVAL COUNTIES, NEW MEXICO GENERAL OBLIGATION QUALIFIED SCHOOL CONSTRUCTION BONDS SERIES 2009C INTRODUCTION This introduction is not a summary of this Private Placement Memorandum. It is only a brief description of and guide to, and is qualified by more complete and detailed information contained in the entire Private Placement Memorandum, including the cover page and appendices hereto, and the documents summarized or described herein. A full review should be made of the entire Private Placement Memorandum. The offering of the Tax Credit Bonds to potential investors is made only by means of the entire Private Placement Memorandum. This Private Placement Memorandum, which includes the cover and appendices hereto, is provided to furnish information in connection with the sale by the Board of Education (the Board of Education or the Board ) of the Albuquerque Municipal School District No. 12 (the School District or the District ) of its General Obligation Qualified School Construction Bonds, Series 2009C (the Tax Credit Bonds or the Bonds ), in the aggregate principal amount of $14,300,000. The issuance of the Tax Credit Bonds was authorized by a resolution adopted by the Board of Education on September 16, 2009 (the Resolution ). The Tax Credit Bonds have been designated by the District as qualified school construction bonds pursuant to Section 54F of the Internal Revenue Code of 1986, as amended (the Code ). See FEDERAL TAX CREDITS and GENERAL TAX MATTERS below. The District The District is a political subdivision of the State of New Mexico (the "State") organized for the purpose of operating and maintaining an educational program for the school-age children residing within its boundaries. The District encompasses almost all of Bernalillo County and a portion of Sandoval County (collectively the County ). Both counties are centrally located in New Mexico. The District s boundaries encompass all of the City of Albuquerque and the Villages of Tijeras, Los Ranchos and Corrales in Sandoval County. The District's 2009 Preliminary Assessed Valuation is $14,592,436,772. The District had a 40 th day enrollment of 88,570 students for the school year excluding charter schools. Charter schools enrollment for the same time was 7,034. See "GENERAL INFORMATION CONCERNING THE ALBUQUERQUE MUNICIPAL SCHOOL DISTRICT NO. 12." Purpose of the Tax Credit Bonds The District intends to use the proceeds from the sale of the Tax Credit Bonds as approved by the voters of the School District to erect, remodel, made additions to and furnish school buildings within the District, or to purchase or improve school grounds. The Tax Credit Bonds are issued pursuant to Section 54F of the Internal Revenue Code of 1986, as amended, House Bill 928 as passed by the New Mexico State Legislature in the 2009 Session, and the Resolution. See THE TAX CREDIT BONDS - Authority for Issuance. 7

8 Security and Source of Payment for the Tax Credit Bonds The Bonds are general obligations of the District and paid from ad valorem taxes that are levied against all taxable property within the District. Neither the State nor the County has any responsibility to pay the debt service on the Bonds. See SECURITY AND SOURCE OF PAYMENT. Description of the Tax Credit Bonds Payment. The principal amount of the Tax Credit Bonds matures on August 1, 2024 as shown under Summary Information. The Tax Credit Bonds will bear interest to be paid by the District. Principal of and interest on the Tax Credit Bonds is payable when due upon surrender of the Tax Credit Bonds or the Principal Strips, if the Tax Credit Components have been stripped at the office of the Paying Agent, being Wells Fargo Bank, N.A., Colorado, New Mexico (the Paying Agent ), who is acting under authority of a Bond Registrar and Paying Agent Agreement, dated as of October 20, 2009 (the Paying Agent Agreement ), by and between the District and the Paying Agent. Principal and premium, if any, on the Tax Credit Bonds will be paid to Cede & Co., or such other nominee of DTC (as defined herein) who will credit Direct Participants' (as defined herein) accounts upon receipt of funds. Disbursement of such payments to beneficial owners of the Tax Credit Bonds will be the responsibility of Direct and Indirect Participants (as defined herein). Tax Credits. The registered owner (an Owner ) of a Tax Credit Bond or a Tax Credit Strip on one or more quarterly credit allowance dates (as defined herein) will be allowed a credit under the Code (the Tax Credits ) against such Owner's Federal income tax liability. The Owners' entitlement to the Tax Credits will be evidenced by certificates (the Tax Credit Certificates ), to be executed and delivered by the District contemporaneously with the issuance and sale and as a part of the Tax Credit Bonds. See THE TAX CREDIT BONDS The Tax Credit Program. See also FEDERAL TAX CREDITS and GENERAL TAX MATTERS below. Transfer of Tax Credits. The Code provides that the entitlement to the Tax Credits may be separated (or stripped ) from the ownership of the Principal Component of the Tax Credit Bonds. Accordingly, the Tax Credit Certificates are transferable. In order for the Owners of the Tax Credit Bonds to transfer the Tax Credit Strips, the District has entered into the Paying Agent Agreement with the Paying Agent. The Paying Agent Agreement provides, inter alia, a mechanism for the registration, transfer and exchange of the Tax Credit Certificates by the Owners of the Tax Credit Strips. The Tax Credit Certificates, if stripped, will be executed and delivered by fully registered form as provided in the Paying Agent Agreement. See THE TAX CREDIT BONDS - Paying Agent Agreement. See also, Certain Investor Considerations Regarding Tax Credit Bonds. Denomination, Registration and Transfer of Bonds and Tax Credits. The Tax Credit Bonds will be issued in fully registered form only, without coupons, in denominations of $5,000 or any integral multiple thereof. The Tax Credit Bonds and, if stripped, the Tax Credit Certificates, will be initially registered in the name of Cede & Co., as nominee of The Depository Trust Company, New York, New York ( DTC ). DTC will act as securities 8

9 depository of the Tax Credit Bonds and, if stripped, the Tax Credit Certificates. Owners will not receive physical certificates representing their ownership interests in the Tax Credit Bonds and, if stripped, the Tax Credit Certificates, except in the event that use of the book-entry system for the Tax Credit Bonds and, if stripped, the Tax Credit Certificates, is discontinued. Purchases of the Tax Credit Bonds, and, if stripped, the Tax Credit Certificates, under the DTC system must be made by or through a DTC participant, and ownership interests in Tax Credit Bonds, and if stripped, Tax Credit Certificates, or any transfer thereof will be recorded as entries on the books of said participants. See THE TAX CREDIT BONDS - General, and Registration, Transfer and Exchange of Bonds and Tax Credits. Redemption. The Tax Credit Bonds are not subject to optional redemption prior to their stated maturities. The Tax Credit Bonds are subject to mandatory and extraordinary mandatory redemption prior to their stated maturity date under certain circumstances, as described under THE TAX CREDIT BONDS - Redemption herein. Tax Matters In the opinion of Modrall, Sperling, Roehl, Harris & Sisk, P.A., Bond Counsel to the District, based upon an analysis of existing laws, regulations, rulings and court decisions, and assuming, among other matters, the accuracy of certain representations and compliance with certain covenants, the Tax Credit Bonds are qualified school construction bonds within the meaning of Section 54F of the Code. Owners of the Tax Credit Certificates, whether held as Tax Credit Strips or as part of the Tax Credit Bonds, as of the applicable credit allowance date (defined in Section 54A of the Code) are entitled, subject to the limitations of Section 54A of the Code, to a Federal income tax credit for such taxable year. The amount of the tax credit will be treated as interest for Federal tax purposes and will be included in gross income for all Owners of Tax Credit Certificates, whether held as Tax Credit Strips or as part of the Tax Credit Bond, in accordance with each Owner's tax status. A complete copy of the proposed form of opinion of Bond Counsel is set forth in APPENDIX A hereto. See FEDERAL TAX CREDITS and GENERAL TAX MATTERS herein. Certain Investor Considerations Regarding Tax Credit Bonds The Tax Credit Bonds and the related Tax Credit Certificates are a new product which derive from the recent passage of the American Recovery and Reinvestment Tax Act of 2009 (the Recovery Act ), and there is currently no secondary market for the Tax Credit Bonds or the Tax Credit Certificates. There can be no assurance that a secondary market will develop, or if a secondary market does develop, that it will provide Owners with liquidity or continue for the full term of the Tax Credit Bonds. Principal strips similar to those described herein for the Tax Credit Bonds generally have exhibited greater price volatility than traditional municipal bonds. The mechanics of transfer and registration and the developing nature of the tax treatment of the Tax Credit Bonds and Tax Credit Certificates may further limit liquidity. The Tax Credits are not refundable tax credits; if an Owner of a Tax Credit Bond or a Tax Credit Strip has gross income tax liability for a given year less than the amount of Tax Credits to which it is entitled for that year, then the Owner would be required to carry forward any excess tax credit to subsequent tax years. See FEDERAL TAX CREDITS below. 9

10 The Tax Credits to which an Owner is entitled on a particular credit allowance date (each, a Tax Credit Allowance Date ) are not transferable after such Tax Credit Allowance Date; investors should be aware that to the extent that the investor is not a potential taxpayer (either now or in the future) and owns a Tax Credit Bond or a Tax Credit Strip on a Tax Credit Allowance Date, the Tax Credit cannot be utilized. Moreover, there can be no assurance that such an investor would be able to sell a Tax Credit Bond or a Tax Credit Strip prior to the Tax Credit Allowance Date. Because of the developing nature of practices designed to implement the qualified school construction bond provisions of the Recovery Act, it may be necessary following the date of delivery of the Tax Credit Bonds for the District to make certain adjustments to the mechanisms outlined in the Paying Agent Agreement as additional guidance from the IRS is provided, particularly as it concerns the stripping of the Tax Credits and the mechanisms related thereto. Offering and Delivery of the Tax Credit Bonds The Tax Credit Bonds are offered when, as and if issued, subject to approval as to their validity by Bond Counsel. It is anticipated that the Tax Credit Bonds in book-entry form will be available for delivery through the facilities of DTC in New York, New York, on or about October 20, Continuing Disclosure The District has covenanted for the benefit of the Owners (including beneficial owners of the Tax Credit Bonds) to provide certain financial information and operating data as required by Securities and Exchange Commission Rule 15c2-12. See CONTINUING DISCLOSURE. Professionals Involved in the Offering Modrall, Sperling, Roehl, Harris & Sisk, P.A., Albuquerque, New Mexico, is acting as Bond Counsel to the District with respect to the Tax Credit Bonds. Wells Fargo Bank, N.A. will act as the initial registrar, transfer agent, authentication agent and paying agent with respect to the Tax Credit Bonds. RBC Capital Markets Corporation ( RBC CM ) is employed as Financial Advisor to the District in connection with the issuance of the Bonds. The Financial Advisor s fee for services rendered with respect to the sale of the Bonds is contingent upon the issuance and delivery of the Bonds. The Financial Advisor is not obligated to undertake, and has not undertaken to make, an independent verification of or to assume responsibility for the accuracy, completeness, or fairness of the information in this Private Placement Memorandum. A contribution in support of the 2006 Bond Election was made by RBC CM. 10

11 New Mexico School District Enhancement Program The New Mexico legislature amended NMSA 1978, et. seq. in the first session of 2003 by adding which became effective July 1, Section was further amended in 2007 and provides that, if the District s Paying Agent notifies the New Mexico Department of Finance and Administration ( NMDFA ) on or prior to the business day immediately prior to the payment date that a bond payment has not been received, the NMDFA shall forward the amount in immediately available funds necessary to make the payment due on the bonds to the Paying Agent from the current fiscal year s undistributed State Equalization Guarantee distribution to the District. Such amount will be withheld by the NMDFA from the District s monthly State Equalization Guarantee. If the amount of the next succeeding distribution is insufficient, the NMDFA shall withhold amounts from each succeeding payment of the State Equalization Guarantee distribution, including payments to be made in succeeding fiscal years but not more than twelve consecutive months of payments, until the total amount of principal and interest is withheld. Withholding of the State Equalization Guarantee distribution may affect the District s ability to continue to operate. In July 2003, Moody s Investors Service assigned an initial Aa2 rating to New Mexico s School District Enhancement Program ( NMSDEP ). On May 15, 2007, Moody s Investors Service placed the NMSDEP on Watchlist for possible downgrade, affecting 31 school districts and 61 enhanced ratings. This rating action was linked to changes in New Mexico state law that have significantly affected the NMSDEP. As mentioned in the previous paragraph, Section was further amended when the 2007 New Mexico Legislature enacted HB1226 to modify the statute governing the NMSDEP. The new statute was signed by the Governor on March 30, 2007 and became effective immediately. Under the new law, the State cannot immediately advance more than the remaining undistributed State Equalization Guarantee payments for the fiscal year of default. As a result, those districts with principal and interest payments that fall in the latter part of the fiscal year or that are significant in amount relative to the district s total annual State Equalization Guarantee distribution may not have sufficient undistributed State Equalization Guarantee payments to cover debt service payments in the event of a default. On May 4, 2008, Moody s Investors Service removed the programmatic rating on the NMSDEP Pre-March 30, 2007 from Watchlist and has confirmed the Aa2 rating on the program. In addition, Moody s Investors Service has assigned a programmatic rating of Aa2 to the NMSDEP Post-March 30, The programmatic rating is one notch below the State of New Mexico s general obligation rating of Aa1 and carries the stable outlook that is currently assigned to the State s general obligation rating. The confirmation of the Aa2 is based on Moody s assessment of program level criteria related to state commitment and program history as well as program mechanics, as set forth in detail in Moody s recently released Rating Methodology for State Aid Intercept Programs and Financings. While Moody s has confirmed the NMSDEP Pre-March 30, 2007 programmatic rating of Aa2 with a stable outlook and assigned a programmatic rating of Aa2 with a stable outlook to the NMSDEP Post-March 30, 2007 program, rating actions on specific credits that benefit from the intercept program will depend on evaluation of each according to the additional rating factors for individual intercept financings, including the sufficiency of interceptable revenues as determined by specific coverage tests, the timing of the State s fiscal year as it relates to scheduled debt service payment dates and transaction structure, which will consider the role of the independent 11

12 fiduciary and reserve fund. By request, Moody s will assign the Aa2 rating to school district bonds upon verification of a requirement in the authorizing bond resolution that an independent, third-party paying agent will be appointed and maintained. The District expects to qualify the Bonds under Moody s School District Enhancement Program. Other Information This Private Placement Memorandum speaks only as of its date, and the information contained herein is subject to change. Copies of documents referred to herein and information concerning the Tax Credit Bonds are available from the Albuquerque Municipal School District No. 12, 6400 Uptown Blvd. NE, 6 East, Albuquerque, New Mexico 87110, Attention: Chief Financial Officer. The District may impose a charge for copying, handling and mailing such requested documents. PLAN OF FINANCE The District will use the proceeds of the Tax Credit Bonds as approved by the voters of the School District to erect, remodel, make additions to and furnish school buildings within the District, or to purchase or improve school grounds. Because the Tax Credit Bonds are designated as qualified school construction bonds under Section 54F of the Code ( Section 54F ), their proceeds may be applied only for qualified expenditures under the Recovery Act. Section 54F requires that the proceeds of qualified school construction bonds, such as the Tax Credit Bonds, be applied solely to the construction, rehabilitation or repair of a public school facility, or the acquisition of land on which such a facility is to be constructed and to payment of costs of issuance not in excess of 2% of the issue price of said bonds. IRS Notice , released April 3, 2009, which specified the allocations for Qualified School Construction Bonds, also provided that bond proceeds may be expended for costs of acquisition of equipment to be used in such portion or portions of the public school facility that is being constructed, rehabilitated or repaired with the proceeds of the related Qualified School Construction Bonds. The District expects to expend the proceeds of the sale of the Tax Credit Bonds within eighteen months following their date of delivery. The District, in the Resolution authorizing issuance of Tax Credit Bonds, permits creation and funding of a debt service fund. The District has covenanted to provide notice of its final expenditure of the proceeds of the Tax Credit Bonds as a Notice of Material Event under its Continuing Disclosure Certificate. 12

13 THE TAX CREDIT BONDS Authority for Issuance The Tax Credit Bonds are issued pursuant to Sections 22-18C-1 to 22-18C-4 NMSA, 1978, Section 54F of the Code and other applicable law, and pursuant to the Resolution. Wells Fargo Bank, N.A. will act as paying agent, transfer agent and registrar for the Tax Credit Bonds (the Paying Agent ). The District has designated the Tax Credit Bonds as qualified school construction bonds under the Code. General The Tax Credit Bonds will be issued in fully registered form only, with coupons, coming due on August 1, 2024 subject to mandatory redemption beginning on August 1, The Bonds do bear interest to be paid by the District, and include a Tax Credit Component (as described below). The Tax Credit Bonds will be initially registered in the name of Cede & Co., as nominee of DTC. DTC will act as securities depository of the Tax Credit Bonds. The principal of and interest on the Tax Credit Bonds is payable in lawful money of the United States of America. Principal is payable when due upon surrender of the Tax Credit Bonds at the office of the Paying Agent. Principal and premium, if any, on the Tax Credit Bonds will be paid to Cede & Co., or such other nominee of DTC (as defined herein) who will credit Direct Participants' (as defined herein) accounts upon receipt of funds. Disbursement of such payments to beneficial owners of the Tax Credit Bonds will be the responsibility of Direct and Indirect Participants (as defined herein). The Tax Credit Program Under the Code, Tax Credits are allowed to the Owners of qualified tax credit bonds (the Tax Credit Program ), and the Tax Credit Bonds have been designated by the District as qualified school construction bonds under the Tax Credit Program. Each Tax Credit Bond is comprised of a principal component (the Principal Component ) and a tax credit component (a Tax Credit Component ) evidenced by the Tax Credit Certificates (each, a Tax Credit Certificate ) associated with each Tax Credit Bond. Pursuant to the Code, the ownership of the Tax Credit Certificates related to such Tax Credit Bond may be separated (or stripped ) from the Principal Component (a Tax Credit Strip ) following which, the Tax Credit Certificates would be separately registered and the Principal Component would be registered as a principal strip (a Principal Strip ) by the Paying Agent. The Owner of a Tax Credit Bond or a Tax Credit Certificate on March 15, June 15, September 15 or December 15 of any tax year (each, a credit allowance date ) will be allowed a Tax Credit against the Owner's Federal income tax liability. The amount of each Tax Credit is calculated under the Tax Credit Program and is represented by each Tax Credit Certificate. The amount of the Tax Credit is the amount equal to the product of the published credit rate for the date on which the Tax Credit Bonds were sold by the District (being 6.21% per annum), times the outstanding principal amount of the Tax Credit Bonds on the relevant credit allowance date, divided by four. The Tax Credit allowed for the first credit allowance date of December 15, 2009, is the ratable portion of the tax credit otherwise allowed on such date based on an initial issuance date of October 20, If a Tax Credit 13

14 Bond or, if stripped, a Tax Credit Certificate, is redeemed on a date other than March 15, June 15, September 15 or December 15, the redemption date will be deemed to be a credit allowance date for such Tax Credit Bond or, if stripped, a Tax Credit Certificate, and the amount of the associated Tax Credit will be a ratable portion of the tax credit otherwise allowed based on the redemption date. Owners of Tax Credit Certificates, whether held as Tax Credit Strips or as part of the Tax Credit Bonds, as of the applicable credit allowance date, will receive the Tax Credit. Generally, a taxpayer who owns a Tax Credit Bond or, if stripped, a Tax Credit Certificate, will recognize the amount of the Tax Credit as a credit against its Federal income tax liability on a given credit allowance date, including estimated tax payments, if any. Tax Credits will be treated by the Internal Revenue Service ( IRS ) similar to the way withheld taxes are treated for Federal income tax purposes and will reduce the amount of either a taxpayer's subsequent estimated tax payments, if any, or its final tax liability, as reflected on its tax return for the related tax year. The District expresses no opinion as to the utility of Tax Credits for any particular Owner or subsequent purchaser of a Tax Credit Bond or, if stripped, a Tax Credit Certificate, and prospective purchasers of the Tax Credit Bonds or Tax Credit Strips should consult with their own tax advisors concerning the purchase of Tax Credit Bonds or Tax Credit Certificates. See FEDERAL TAX CREDITS and GENERAL TAX MATTERS. Registration, Transfer and Exchange of Bonds and Tax Credits The Tax Credit Bonds will be issued in book-entry only form, initially registered in the name Cede & Co., as nominee of DTC. Purchases of the Tax Credit Bonds and, if stripped, the Tax Credit Certificates, under the DTC system must be made by or through a DTC participant, and ownership interest in Tax Credit Bonds and, if stripped, the Tax Credit Certificates, or any transfer thereof will be recorded as entries on the books of said participants. Registered ownership of the Tax Credit Bonds, or any portion thereof, may not thereafter be transferred, except as provided in the Paying Agent Agreement: (i) to any successor of Cede & Co., as nominee of DTC, or its nominee, or to any designated substitute depository, (ii) to any substitute depository not objected to by the District upon (1) the resignation of DTC or its successor from its function as depository, or (2) because DTC or its successor is no longer able to carry out its function as depository; or (iii) to any person as provided in the Paying Agent Agreement upon (1) the resignation of DTC or its successor from its function as depository, or (2) a determination by the District to remove DTC or its successor from its function as depository. Any Tax Credit Bond may be exchanged for a like aggregate principal amount of Tax Credit Bonds of other authorized denominations of the same series, maturity and principal amount upon presentation and surrender at the principal corporate trust office of the Paying Agent, together with a request for exchange signed by the Owner or by a person legally empowered to do so in a form satisfactory to the Paying Agent. Owners of book entry interests in the Tax Credit Bonds will not receive or have the right to receive physical delivery of the Tax Credit Bonds and will not be or be considered to be, and will not have any rights as, registered owners ( Holders ) of Tax Credit Bonds. The following information on the Book Entry Only System applicable to the Tax Credit 14

15 Bonds has been supplied by The Depository Trust Company, New York, New York, and none of the Board of Education or Bond Counsel make any representations, warranties or guarantees with respect to its accuracy or completeness. The Depository Trust Company ( DTC ), New York, New York, will act as securities depository for the Tax Credit Bonds. The Tax Credit Bonds will be issued as securities registered in the name of Cede & Co. (DTC s partnership nominee). One fully-registered bond certificate for each maturity will be issued in the aggregate principal amount of the Tax Credit Bonds and will be deposited with DTC. DTC, the world's largest securities depository, is a limited-purpose trust company organized under 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 1934, as amended. DTC holds and provides asset servicing for over 3.5 million issues of the 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 deposit securities through electronic, computerized book-entry transfers and pledges between Direct Participants accounts, thereby eliminating the need for physical movement of securities certificates. Direct Participants include 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 owned by a number of Direct Participants of DTC and Members of the National Securities Clearing Corporation, Fixed Income Clearing Corporation and Emerging Markets Clearing Corporation (also subsidiaries of DTCC) and by The New York Stock Exchange, Inc., the American Stock Exchange LLC, and the National Association of Securities Dealers, Inc. Access to the DTC system is also available to others, such as both U.S. and non-u.s. securities brokers and dealers, banks, trust companies and clearing corporations that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly ( Indirect Participants ). DTC has S&P s highest rating: AAA. The Rules applicable to DTC and Direct and Indirect Participants are on file with the Securities and Exchange Commission. More information about DTC can be found at Purchases of the Tax Credit Bonds under the DTC system must be made by or through Direct Participants, which will receive a credit for the Tax Credit Bonds on DTC s records. The ownership interest of each actual purchaser of each of the Tax Credit Bonds (the 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 purchases, but Beneficial Owners are expected to receive written confirmations providing details of the transactions, as well as periodic statements of their holdings, from the Direct or Indirect Participants through which the Beneficial Owners entered into the transaction. Transfers of ownership interests in the Tax Credit Bonds are to be accomplished by entries made on the books of Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interests in Tax Credit Bonds, except in the event that use of the Book Entry Only System for the Tax Credit Bonds is discontinued. 15

16 To facilitate subsequent transfers, all Tax Credit Bonds deposited by Participants with DTC are registered in the name of DTC s partnership nominee, Cede & Co. The deposit of the Tax Credit Bonds with DTC and their registration in the name of Cede & Co. effect no change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the Tax Credit Bonds; DTC s records reflect only the identity of the Direct Participants to whose accounts such Tax Credit Bonds are credited, which may or may not be the Beneficial Owners. The Participants will remain responsible for keeping account of their holdings on behalf of their customers. Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. Neither DTC nor Cede & Co. will consent or vote with respect to the Tax Credit Bonds. Under its usual procedures, DTC mails an Omnibus Proxy to the Board of Education 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 the Tax Credit Bonds are credited on the record date (identified in a listing attached to the Omnibus Proxy). Principal payments on the Tax Credit Bonds will be made to DTC. DTC s practice is to credit Direct Participants accounts on the payable date in accordance with their respective holdings shown on DTC s records unless DTC has reason to believe that it will not receive payment on the payable date. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered in street name, and will be the responsibility of such Participant and not of DTC or the Board of Education, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of principal to DTC is the responsibility of the District, disbursement of such payments to Direct Participants shall be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners shall be the responsibility of Direct and Indirect Participants. Disclaimer by the Board of Education The Board of Education does not have any responsibility or liability for any aspect of the records relating to, or payments made on account of book entry interest ownership, or for maintaining, supervising or reviewing any records relating to that ownership. The Board of Education cannot and does not give any assurances that DTC, DTC Participants or others will distribute to the Beneficial Owners (i) payments of bond service charges on the Tax Credit Bonds paid or (ii) redemption or other notices sent to DTC as the Holder or that they will do so on a timely basis, or that DTC or DTC Participants will serve and act in the manner described in this Private Placement Memorandum. The Board of Education has been advised by DTC that the current Rules applicable to DTC and its Participants are on file with the Securities and Exchange Commission and that the current Procedures of DTC to be followed in dealing with DTC Participants are on file with DTC. 16

17 Revision of Book Entry Only Transfer System; Replacement of Tax Credit Bonds The Resolution, which authorizes the issuance of the Tax Credit Bonds, will provide for issuance of fully registered replacement Tax Credit Bonds ( Replacement Tax Credit Bonds ) directly to persons other than DTC or its nominee only in the event that DTC determines not to continue to act as securities depository for the Tax Credit Bonds or the Board of Education determines that continuation of the book entry only system with DTC is not in the best interests of the Board of Education or the best interests of the Beneficial Owners. Upon a discontinuance of the book entry only system with DTC, the Board of Education may in its discretion attempt to have established a securities depository/book entry only relationship with another qualified securities depository. If the Board of Education is unable to do so, or desires not to do so, and after the Trustee has made provisions for notification of the Beneficial Owners of the Tax Credit Bonds by appropriate notice to DTC, the Board of Education and the Trustee shall authenticate and deliver Replacement Tax Credit Bonds in the denomination of $5,000 any integral multiple thereof to or at the direction of, and, if the event is not the result of Board of Education action or inaction, at the expense (including printing costs), of DTC s assigns. Principal, interest and premium, if any, on Replacement Tax Credit Bonds will be payable when due without deduction for the services of the Paying Agent. Principal of and interest on any Replacement Tax Credit Bonds will be payable to the registered owner thereof upon presentation and surrender thereof at the principal corporate trust office of the Trustee. Paying Agent Agreement Tax Credit Stripping Permitted. The District has caused the Tax Credit Bonds to be issued in a form that permits the separation, under the Tax Credit Program, of the ownership of the Principal Component and the Tax Credit Component of each Tax Credit Bond. At any time, the Owner of a Tax Credit Bond may, by written request to the Paying Agent, direct the Paying Agent to authenticate and deliver the Tax Credit Certificates separated from such Tax Credit Bond and endorse and renumber the Principal Strip of such Bond. Any Owner of a Tax Credit Bond after such exchange may elect to transfer all or a portion of the Tax Credits evidenced by the associated Tax Credit Certificates. Tax Credit Certificates may be delivered evidencing ownership of Tax Credits for each Tax Credit Allowance Date for the related Tax Credit Bond in notional amounts equal to authorized denominations and aggregating an amount equal to the principal amount of the related Tax Credit Bond. Upon the receipt of a request to strip the Tax Credits, the Paying Agent will (i) authenticate and deliver to the Owner so requesting, Tax Credit Certificates in accordance with the Paying Agent Agreement, in a notional amount equal to the principal amount of the related Tax Credit Bond, and (ii) contemporaneously with the delivery thereof, the Paying Agent will (x) evidence the Principal Component by executing the legend, entitled Principal Strip Legend, that appears on the Paying Agent's authentication page for such related Tax Credit Bond and (y) assign a new identification number (as set forth on the inside cover hereof) to the Principal Component of such Tax Credit Bond that is distinct from the identification number for the original combined Tax Credit Bond. 17