Dated: Date of Delivery

Transcription

1 NEW ISSUE - BOOK-ENTRY ONLY RATINGS: (See RATINGS herein) THE INTEREST PORTION OF THE BASIC LEASE PAYMENTS OF THE SERIES 2014-QSCB CERTIFICATES IS NOT EXCLUDABLE FROM GROSS INCOME FOR FEDERAL INCOME TAX PURPOSES. See TAX MATTERS herein for a description of certain other tax consequences to holders of the Certificates. $13,655,000 CERTIFICATES OF PARTICIPATION, SERIES 2014-QSCB (Qualified School Construction Bonds - Federally Taxable - Issuer Subsidy) Evidencing an Undivided Proportionate Interest of the Registered Owners Thereof in Basic Lease Payments to be Made by THE SCHOOL BOARD OF PASCO COUNTY, FLORIDA, as Lessee, Pursuant to a Master Lease Purchase Agreement with the Pasco County School Board Leasing Corporation, as Lessor Dated: Date of Delivery Maturity Date: December 1, 2037 The Certificates of Participation, Series 2014-QSCB (Qualified School Construction Bonds - Federally Taxable - Issuer Subsidy) (the Series 2014QSCB Certificates ) offered hereby evidence undivided proportionate interests in a portion of the Basic Lease Payments to be made by The District School Board of Pasco County, Florida (the School Board ), acting as the governing body of the School District of Pasco County, Florida (the District ), pursuant to a Master Lease Purchase Agreement, dated as of April 1, 1992 (the Master Lease ), between the School Board and Pasco County School Board Leasing Corporation (the Corporation ), as assignee of the Florida School Boards Association, Inc. (the Association ), as supplemented by Schedule No QSCB dated as of December 1, 2014, which together with the Master Lease constitutes the Series 2014-QSCB Lease (the Series 2014QSCB Lease ), providing for the lease purchase financing of certain educational facilities and equipment by the School Board. The School Board has designated the Series 2014-QSCB Lease as a qualified school construction bond, as defined in Section 54F of the Code, and has elected to qualify to receive federal subsidy payments pursuant to Section 6431(f) of the Code (the Issuer Subsidy ). The Issuer Subsidy is payable on each interest payment date for the Series 2014-QSCB Certificates in an amount equal to the lesser of the amount of interest payable with respect to the Series 2014-QSCB Certificates on such date or the amount of interest which would have been payable with respect to the Series 2014-QSCB Certificates if the interest were determined at the applicable tax credit rate for the Series 2014-QSCB Certificates pursuant to Section 54A(b)(3) of the Code, subject to offset and sequestration as described herein. The Series 2014-QSCB Certificates are being issued as fully registered Certificates pursuant to the provisions of the Master Trust Agreement, dated as of April 1, 1992 (the Master Trust ), between the Corporation, as assignee of the Association, and U.S. Bank National Association, Fort Lauderdale, Florida, as successor trustee (the Trustee ), as amended and supplemented, particularly as supplemented by a Series 2014-QSCB Supplemental Trust Agreement dated as of December 1, 2014 (together with the Master Trust, the Trust Agreement ), between the Corporation and the Trustee, for the principal purpose of providing funds to (i) finance a portion of the cost of the acquisition, construction and major renovations to public schools and other eligible projects within the District and (ii) pay certain costs associated with the issuance of the Series 2014-QSCB Certificates. When issued, the Series 2014-QSCB Certificates will be registered in the name of Cede & Co., as registered owner and nominee for The Depository Trust Company, New York, New York ( DTC ). Purchasers of the Series 2014-QSCB Certificates (the Beneficial Owners ) will not receive physical delivery of Series 2014QSCB Certificates. Ownership by the Beneficial Owners of the Series 2014-QSCB Certificates will be evidenced through DTC s book-entry only system of registration. As long as Cede & Co., is the registered owner as nominee of DTC, payment of the principal portion and interest portion, if any, of the Basic Lease Payments represented by the Series 2014-QSCB Certificates, when due, will be made directly to Cede & Co., which will in turn remit such payments to the DTC Participants for subsequent disbursement to the Beneficial Owners. The Series 2014-QSCB Certificates are subject to optional prepayment prior to maturity, and are subject to extraordinary mandatory prepayment as described herein. See THE SERIES 2014-QSCB CERTIFICATES Prepayment herein. The scheduled payment of the principal portion and the interest portion of Basic Lease Payments represented by the Series 2014-QSCB Certificates when due will be guaranteed under a municipal bond insurance policy to be issued by Assured Guaranty Municipal Corp. (the Insurer ) concurrently with the delivery of the Series 2014-QSCB Certificates. See CERTIFICATE INSURANCE herein. THE SCHOOL BOARD IS NOT LEGALLY REQUIRED TO APPROPRIATE MONEYS TO MAKE LEASE PAYMENTS, WHICH CONSIST OF BASIC LEASE PAYMENTS, ADDITIONAL LEASE PAYMENTS, SUPPLEMENTAL PAYMENTS AND ALL OTHER AMOUNTS REQUIRED TO BE PAID BY THE SCHOOL BOARD PURSUANT TO THE TERMS OF A LEASE. LEASE PAYMENTS ARE PAYABLE FROM FUNDS APPROPRIATED BY THE SCHOOL BOARD FOR SUCH PURPOSE FROM CURRENT OR OTHER FUNDS AUTHORIZED BY LAW AND REGULATIONS OF THE STATE OF FLORIDA DEPARTMENT OF EDUCATION. NONE OF THE DISTRICT, THE SCHOOL BOARD, THE STATE OF FLORIDA, OR ANY POLITICAL SUBDIVISION THEREOF IS OBLIGATED TO PAY, EXCEPT FROM THE APPROPRIATED FUNDS, ANY SUM DUE UNDER THE SERIES 2014-QSCB LEASE. THE FULL FAITH AND CREDIT OF THE SCHOOL BOARD AND THE DISTRICT IS NOT PLEDGED FOR PAYMENT OF SUCH SUMS DUE THEREUNDER, AND SUCH SUMS DO NOT CONSTITUTE AN INDEBTEDNESS OF THE SCHOOL BOARD OR THE DISTRICT WITHIN THE MEANING OF ANY CONSTITUTIONAL OR STATUTORY PROVISION OR LIMITATION. NONE OF THE CORPORATION, THE TRUSTEE, OR ANY CERTIFICATE HOLDER MAY COMPEL THE LEVY OF ANY AD VALOREM TAXES BY THE SCHOOL BOARD TO PAY LEASE PAYMENTS DUE UNDER THE SERIES 2014-QSCB LEASE. SEE RISK FACTORS HEREIN. This cover page and the inside cover page contain certain information for quick reference only. They are not, and are not intended to be, a summary of the transaction. Investors must read the entire Offering Statement, including the appendices, to obtain information essential to the making of an informed investment decision. The Series 2014-QSCB Certificates are offered when, as and if delivered and received by the Underwriter, subject to the approving legal opinion of Bryant Miller Olive P.A., Tampa, Florida, Special Counsel, and certain other conditions. Certain legal matters will be passed upon for the School Board by its Counsel, McClain, Alfonso, & Meeker, P.A., Dade City, Florida, and by its Disclosure Counsel, Greenberg Traurig, P.A., Miami, Florida. Broad and Cassel, Orlando, Florida, is serving as Counsel to the Underwriter. Public Financial Management, Inc., Orlando, Florida is acting as Financial Advisor to the School Board. It is expected that the Series 2014-QSCB Certificates will be available for delivery through the facilities of DTC on or about December 4, Dated: November 21, 2014

2 ADDITIONAL INFORMATION The Series 2014-QSCB Certificates are being issued to provide funds sufficient to finance a portion of the acquisition, construction and major renovations to public schools and other eligible projects within the District (the Series 2014-QSCB Facilities ). Proceeds from the sale of the Series 2014-QSCB Certificates shall also be used to pay a portion of the costs associated with the issuance of the Series 2014-QSCB Certificates. See THE SERIES 2014-QSCB FACILITIES and ESTIMATED SOURCES AND USES OF FUNDS. The Series 2014-QSCB Facilities will be lease-purchased by the School Board from the Corporation pursuant to the Series 2014-QSCB Lease. Of the District s 86 total operational schools, there are currently 21 schools and 9 additions to schools and related facilities leased under the Master Lease. Based on the District s full time equivalent enrollment of approximately 70,169 students for Fiscal Year , approximately 31% of the District s students are attending classes in, or otherwise utilizing, the Facilities currently leased under the Master Lease (see THE MASTER LEASED FACILITIES and THE SERIES 2014-QSCB FACILITIES herein). When the School Board appropriates Lease Payments for any of its Facilities leased under the Master Lease, it must appropriate Lease Payments for all other Facilities leased under the Master Lease. Failure to appropriate funds to pay Lease Payments under any such Lease, or an event of default under any such Lease, will result in the termination of all Leases, including the Series 2014-QSCB Lease. Upon any such termination, any proceeds of the disposition of leased Facilities (other than any Designated Equipment, as described herein) will be applied to payment of the related Series of Certificates after payment of the Trustee s expenses, all as further described herein. All of the Series 2014-QSCB Facilities are Designated Equipment which is not subject to such disposition and the owners of the Series 2014-QSCB Certificates have no interest in or right to any proceeds of the disposition of Facilities leased under any lease. Special Counsel will express no opinion as to the effect of securities laws with respect to the Series 2014-QSCB Certificates following a non-appropriation of funds or default under the Master Lease which results in termination of the Series 2014-QSCB Lease. Transfers of the Series 2014-QSCB Certificates may be subject to compliance with the registration provisions of state and federal securities laws following an event of non-appropriation of funds or an event of default under the Master Lease which results in termination of the Lease Term (See RISK FACTORS herein). MATURITY, PRINCIPAL AMOUNT, INTEREST RATE, PRICE AND INITIAL CUSIP NUMBER $13,655,000 Series 2014-QSCB Certificates $13,655,000 Series 2014-QSCB Certificates due December 1, 2037 Interest Rate 5.000%; Price - 100% Initial CUSIP No.: JD3** ** CUSIP is a registered trademark of American Bankers Association. CUSIP data herein is provided by Standard & Poor s CUSIP Service Bureau, a division of The McGraw-Hill Companies, Inc. CUSIP data herein is provided for convenience of reference only. The School Board, the Financial Advisor and the Underwriter and their respective agents take no responsibility for the accuracy of such data.

3 SCHOOL DISTRICT OF PASCO COUNTY, FLORIDA Land O Lakes, Florida BOARD MEMBERS Steve Luikart, Chairman Joanne Hurley, Vice Chairman Cynthia Armstrong Allen Altman Alison Crumbley SUPERINTENDENT OF SCHOOLS AND EX OFFICIO SECRETARY TO THE SCHOOL BOARD Kurt S. Browning CHIEF FINANCE OFFICER Olga B. Swinson, CPA, CGFM COUNSEL TO THE BOARD McClain, Alfonso & Meeker, P.A. Dade City, Florida SPECIAL COUNSEL Bryant Miller Olive P.A. Tampa, Florida DISCLOSURE COUNSEL Greenberg Traurig, P.A. Miami, Florida FINANCIAL ADVISOR Public Financial Management, Inc. Orlando, Florida TRUSTEE U.S. Bank National Association Fort Lauderdale, Florida

4 No dealer, broker, sales representative or other person has been authorized by the School Board or the Underwriter to give any information or to make any representations, other than those contained in this Offering Statement, and if given or made, such other information or representations must not be relied upon as having been authorized by any of the foregoing. This Offering Statement does not constitute an offer to sell or a solicitation of an offer to buy any securities, nor shall there be any sale of the Series 2014-QSCB Certificates by any person in any jurisdiction in which it is unlawful for such person to make such offer, solicitation or sale. The information contained in this Offering Statement has been obtained from the School Board, DTC and other sources that are considered to be reliable and, while not guaranteed as to accuracy or completeness, is believed to be correct. However, such information is not to be construed as a representation of the School Board, the Corporation, the Trustee or the Underwriter with respect to the information provided by DTC. Any statements in this Offering Statement involving estimates, assumptions and matters of opinion, whether or not so expressly stated, are intended as such and not as representations of fact, and the School Board, the Corporation, the Trustee and the Underwriter expressly make no representations that such estimates, assumptions and opinions will be realized or fulfilled. Neither the Auditor General of the State of Florida nor any other independent accountants have compiled, examined, or performed any procedures with respect to any projected, forecasted or estimated financial information contained in this Offering Statement, nor have they expressed any opinion or any other form of assurance on such information or its achievability and assume no responsibility for, and disclaim any association with, any projected or estimated financial information. Any information, estimates, assumptions and matters of opinion contained in this Offering Statement are subject to change without notice, and neither the delivery of this Offering Statement, nor any sale made hereunder, shall under any circumstances create any implication that there has been no change in the affairs of the District or the School Board since the date hereof or, with respect to information set forth herein as of a particular date, the date provided herein. UPON ISSUANCE, THE SERIES 2014-QSCB CERTIFICATES WILL NOT BE REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAW, AND WILL NOT BE LISTED ON ANY STOCK OR OTHER SECURITIES EXCHANGE. NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY OTHER INDEPENDENT FEDERAL, STATE OR GOVERNMENTAL ENTITY OR AGENCY WILL HAVE PASSED UPON THE ACCURACY OR ADEQUACY OF THIS OFFERING STATEMENT OR APPROVED THE SERIES 2014-QSCB CERTIFICATES FOR SALE. CERTAIN STATEMENTS CONTAINED IN THIS OFFERING STATEMENT REFLECT NOT HISTORICAL FACTS BUT FORECASTS AND FORWARD-LOOKING STATEMENTS. IN THIS RESPECT, THE WORDS ESTIMATE, PROJECT, ANTICIPATE, EXPECT, INTEND, BELIEVE AND SIMILAR EXPRESSIONS ARE INTENDED TO IDENTIFY FORWARD- LOOKING STATEMENTS. ALL PROJECTIONS, FORECASTS, ASSUMPTIONS, EXPRESSIONS OF OPINIONS, ESTIMATES AND OTHER FORWARD-LOOKING STATEMENTS ARE EXPRESSLY QUALIFIED IN THEIR ENTIRETY BY THE CAUTIONARY STATEMENTS SET FORTH IN THIS OFFERING STATEMENT. THE UNDERWRITER HAS PROVIDED THE FOLLOWING SENTENCE FOR INCLUSION IN THIS OFFERING STATEMENT. THE UNDERWRITER HAS REVIEWED THE INFORMATION IN THIS OFFERING STATEMENT IN ACCORDANCE WITH, AND AS 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.

5 IN CONNECTION WITH THIS OFFERING, THE UNDERWRITER MAY OVERALLOT OR EFFECT TRANSACTIONS THAT STABILIZE OR MAINTAIN THE MARKET PRICE OF THE SERIES 2014-QSCB CERTIFICATES OFFERED HEREBY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME. THIS OFFERING STATEMENT SHALL NOT CONSTITUTE A CONTRACT BETWEEN THE SCHOOL BOARD, THE CORPORATION OR THE UNDERWRITER AND ANY ONE OR MORE HOLDERS OF THE SERIES 2014-QSCB CERTIFICATES. ASSURED GUARANTY MUNICIPAL CORP. ( AGM ) MAKES NO REPRESENTATION REGARDING THE SERIES 2014-QSCB CERTIFICATES OR THE ADVISABILITY OF INVESTING IN THE SERIES 2014-QSCB CERTIFICATES. IN ADDITION, AGM HAS NOT INDEPENDENTLY VERIFIED, MAKES NO REPRESENTATION REGARDING, AND DOES NOT ACCEPT ANY RESPONSIBILITY FOR THE ACCURACY OR COMPLETENESS OF THIS OFFERING STATEMENT OR ANY INFORMATION OR DISCLOSURE CONTAINED HEREIN, OR OMITTED HEREFROM, OTHER THAN WITH RESPECT TO THE ACCURACY OF THE INFORMATION REGARDING AGM SUPPLIED BY AGM AND PRESENTED UNDER THE HEADING CERTIFICATE INSURANCE AND APPENDIX F - SPECIMEN MUNICIPAL BOND INSURANCE POLICY. THIS OFFERING STATEMENT IS BEING PROVIDED TO PROSPECTIVE PURCHASERS EITHER IN BOUND PRINTED FORM ( ORIGINAL BOUND FORMAT ) OR IN ELECTRONIC FORMAT ON THE FOLLOWING WEBSITE: THIS OFFERING STATEMENT SHOULD BE RELIED UPON ONLY IF IT IS IN ITS ORIGINAL BOUND FORMAT OR AS PRINTED IN ITS ENTIRETY DIRECTLY FROM SUCH WEBSITE.

6 TABLE OF CONTENTS INTRODUCTION... 1 PURPOSE OF THE SERIES 2014-QSCB CERTIFICATES... 4 THE SERIES 2014-QSCB CERTIFICATES... 4 General... 4 Prepayment... 5 Book-Entry Only System... 9 SECURITY FOR THE SERIES 2014-QSCB CERTIFICATES General Lease Payments Limited Obligation of the School Board Additional Leases Additional Certificates; Outstanding Certificates Non-Appropriation Risk Optional Prepayment of Basic Lease Payments No Reserve Account for Series 2014-QSCB Certificates Interest Rate Exchange Agreement CERTIFICATE INSURANCE The Municipal Bond Insurance Policy Assured Guaranty Municipal Corp CERTIFICATE INSURANCE RISK FACTORS THE MASTER LEASED FACILITIES THE SERIES 2014-QSCB FACILITIES THE PRIOR FACILITIES Series 1996 Facilities Series 2004A Facilities Series 2004-QZAB Facilities Series 2005 Facilities Series 2005-QZAB Facilities Series 2007A Facilities Series 2007B Facilities Series 2008-QZAB Facilities Series 2009 Facilities Substitution of Facilities DESIGNATED EQUIPMENT ESTIMATED SOURCES AND USES OF FUNDS ESTIMATED SERIES 2014-QSCB CERTIFICATE BASIC LEASE PAYMENT SCHEDULE (1) AGGREGATE LEASE PAYMENTS ON OUTSTANDING CERTIFICATES OF PARTICIPATION COMBINED CERTIFICATES PAYMENT SCHEDULE THE LEASES Authority Lease Term Termination of Lease Term Effect of Termination for Non-Appropriation or Default Lease Payments Insurance and Condemnation Proceeds Lease Covenants Budget and Appropriation THE CORPORATION THE SCHOOL DISTRICT OF PASCO COUNTY, FLORIDA General The School Board Superintendent of Schools i

7 Administration Academics Historical Growth Employee Relations; Retirement and Other Postemployment Benefit Programs Accounting and Funds Basis of Accounting Budget Process Capital Improvement Program Outstanding Debt Information DISTRICT REVENUES AND CERTAIN FINANCIAL INFORMATION Local Revenue Sources State Revenue Sources Special Revenue Sources Lease Payment Coverage AD VALOREM TAX PROCEDURES General Constitutional Amendments Related to Ad Valorem Taxes Recent Legislative Initiatives and Constitutional Amendments Affecting Ad Valorem Taxes Proposals Affecting Ad Valorem Taxation and District Finances Property Assessment Procedure Procedure for Ad Valorem Tax Collections Assessed Valuation Ad Valorem Tax Levies and Collections Ad Valorem Millage Rates INVESTMENTS RISK FACTORS Investor Considerations with Respect to Issuer Subsidy on Series 2014-QSCB Certificates Annual Right of the School Board to Terminate the Series 2014-QSCB Lease Limitation Upon Disposition Applicability of Securities Laws Interest Rate Exchange Agreement Local Option Millage Levy Revenue State Revenues Additional Indebtedness LITIGATION RATINGS TAX MATTERS DISCLOSURE REQUIRED BY FLORIDA BLUE SKY REGULATIONS CERTAIN LEGAL MATTERS UNDERWRITING FINANCIAL ADVISOR INDEPENDENT AUDITORS FORWARD LOOKING STATEMENTS CONTINUING DISCLOSURE MISCELLANEOUS APPENDICES APPENDIX A GENERAL INFORMATION CONCERNING PASCO COUNTY, FLORIDA APPENDIX B COMPREHENSIVE ANNUAL FINANCIAL REPORT WHICH INCLUDES THE AUDITED FINANCIAL STATEMENTS OF THE DISTRICT SCHOOL BOARD OF PASCO COUNTY, FLORIDA FOR THE FISCAL YEAR ENDED JUNE 30, 2013 ii

8 APPENDIX C CERTAIN LEGAL DOCUMENTS Master Lease Form of Schedule No QSCB Master Trust Agreement Form of Series 2014-QSCB Supplemental Trust Agreement Form of Series 2014-QSCB Assignment Agreement APPENDIX D FORM OF DISCLOSURE DISSEMINATION AGENT AGREEMENT APPENDIX E FORM OF OPINION OF SPECIAL COUNSEL APPENDIX F SPECIMEN MUNICIPAL BOND INSURANCE POLICY iii

9 OFFERING STATEMENT Related to $13,655,000 CERTIFICATES OF PARTICIPATION, SERIES 2014-QSCB (Qualified School Construction Bonds - Federally Taxable - Issuer Subsidy) Evidencing an Undivided Proportionate Interest of the Registered Owners Thereof in Basic Lease Payments to be Made by THE SCHOOL BOARD OF PASCO COUNTY, FLORIDA, as Lessee, Pursuant to a Master Lease Purchase Agreement with the Pasco County School Board Leasing Corporation, as Lessor INTRODUCTION This Offering Statement, including the cover page, inside cover page and appendices hereto, is provided to furnish information in connection with the sale and delivery of $13,655,000 aggregate principal amount of Certificates of Participation, Series 2014-QSCB (Qualified School Construction Bonds Federally Taxable Issuer Subsidy) (the Series 2014-QSCB Certificates ). The School Board is the governing body of the School District of Pasco County, Florida (the District ), and has entered into a Master Lease Purchase Agreement, dated as of April 1, 1992 (the Master Lease ), as lessee, with the Corporation, as assignee of the Association, as lessor, for the purpose of lease purchasing from time to time certain educational facilities and sites (the Facilities ) from the Corporation. Facilities to be lease purchased from time to time are identified on separate lease schedules (each a Schedule ) attached to the Master Lease. Upon execution and delivery thereof, each Schedule, together with the provisions of the Master Lease, will constitute a separate lease agreement (individually a Lease and collectively the Leases ). The Series 2014-QSCB Certificates evidence undivided proportionate interests of the registered owners thereof in the Basic Lease Payments to be made by The District School Board of Pasco County, Florida (the School Board ) under the Master Lease, as supplemented by Schedule No QSCB dated as of December 1, 2014, which together with the Master Lease constitutes the Series 2014-QSCB Lease (the Series 2014-QSCB Lease ), between the School Board and Pasco County School Board Leasing Corporation, a Florida not-for-profit corporation (the Corporation ). The Series 2014-QSCB Certificates are being executed and delivered pursuant to a Master Trust Agreement, dated as of April 1, 1992 (the Master Trust ) between the Corporation, as assignee of Florida School Boards Association, Inc. (the Association ), and U.S. Bank National Association (successor in interest to Wachovia Bank, National Association), as trustee (the Trustee ), as amended and supplemented by a Series 2014-QSCB Supplemental Trust Agreement, dated as of December 1, 2014 (the Series 2014-QSCB Supplemental Trust, and together with the Master Trust, the Trust Agreement ), between the Corporation and the Trustee. 1

10 The following table provides a summary of the Leases that the School Board will be a party to following delivery of the Series 2014-QSCB Certificates, the Facilities financed or refinanced thereby, the final termination date, the related Series of Certificates and the outstanding principal amount of each Series of Certificates. Lease Related Facilities Final Termination Date Related Series of Certificates Principal Amount Outstanding Series 1996 Lease Series 1996 Facilities July 31, 2006 Series 2014B Certificates $75,656,458 Series 2004A Lease Series 2004A Facilities July 31, 2029 Series 2013A Certificates $45,385,000 Series 2004A Certificates $2,050,000 Series 2004-QZAB Lease Series 2004-QZAB July 31, 2020 Series 2004-QZAB Facilities (1) Certificates $4,546,000 Series 2005 Lease Series 2005 Facilities July 31, 2030 Series 2005A Certificates $1,540,000 Series 2005B Certificates $30,500,000 Series 2014A Certificates $30,655,000 Series 2005-QZAB Lease Series 2005-QZAB December 23, Facilities (1) 2020 Series 2005-QZAB Certificates $785,612 Series 2007A Lease Series 2007A Facilities July 31, 2027 Series 2007A Certificates $60,070,000 Series 2007B Lease Series 2007B Facilities August 1, 2032 Series 2008C Certificates $73,050,000 Series 2008-QZAB Lease Series 2008-QZAB September 23, Facilities (1) 2008 Series 2008-QZAB Certificates $585,005 Series 2009 Lease Series 2009 Facilities December 15, 2025 Series 2009-QSCB Certificates $11,000,000 Series 2014-QSCB Lease Series 2014-QSCB Facilities (1) December 1, 2037 Series 2014-QSCB Certificates All of such Facilities constitute Designated Equipment. See DESIGNATED EQUIPMENT herein. (1) $13,655,000 Pursuant to the applicable provisions of Florida law, including particularly Chapters , Florida Statutes, the School Board has, by a Resolution adopted on November 4, 2014, authorized, among other things, the execution and delivery of Schedule No QSCB (together with the Master Lease, the Series 2014-QSCB Lease ). The Series 2014-QSCB Lease has an original term that commences on the date of delivery of the Series 2014-QSCB Certificates, and continues through and including June 30 of the next succeeding calendar with a final Renewal Term of July 1, 2037 through and including December 1, 2037, unless earlier terminated as described herein. The Series 2014-QSCB Certificates will be issued to finance a portion of the costs of the acquisition, construction and major renovations to public schools and other eligible projects including the following facilities: (i) Wesley Chapel High School; (ii) Woodland Elementary School; (iii) San Antonio Elementary School; (iv) T. E. Weightman Middle School; (v) Pineview Middle School; and (vi) Ridgewood High School (the Series 2014-QSCB Facilities ). See THE SERIES 2014-QSCB FACILITIES and THE LEASES herein. Pursuant to the Series 2014-QSCB Assignment Agreement, dated as of December 1, 2014 (the Series 2014-QSCB Assignment ), between the Corporation and the Trustee, the Corporation has 2

11 irrevocably assigned by outright and absolute assignment to the Trustee for the benefit of the owners of the Series 2014-QSCB Certificates, substantially all of its right, title and interest in and to the Series 2014-QSCB Lease, including the right to receive the Basic Lease Payments and all other amounts due under the Series 2014-QSCB Lease, as herein described. See SECURITY FOR THE SERIES QSCB CERTIFICATES. Brief descriptions of the School Board, the District and the Series 2014-QSCB Facilities are included in this Offering Statement together with summaries of certain provisions of the Series QSCB Certificates, the Master Lease, Schedule No QSCB, the Trust Agreement and the Series 2014-QSCB Assignment. Such descriptions and summaries do not purport to be comprehensive or definitive. All references herein to the Master Lease, Schedule No QSCB, the Trust Agreement, and the Series 2014-QSCB Assignment are qualified in their entirety by reference to the respective complete documents. Copies of the documents may be obtained upon written request and payment of the costs of duplication to the Trustee at 500 W. Cypress Creek Road, Suite 560, Fort Lauderdale, Florida 33309, Attention: Corporate Trust Department. Capitalized terms used herein and not otherwise defined will have the meanings given them in APPENDIX C CERTAIN LEGAL DOCUMENTS. The School Board has covenanted and agreed for the benefit of the Series 2014-QSCB Certificate holders to provide certain continuing disclosure information pursuant to Rule 15c2-12 of the Securities and Exchange Commission (the Rule ). See CONTINUING DISCLOSURE. 3

12 PURPOSE OF THE SERIES 2014-QSCB CERTIFICATES The Series 2014-QSCB Certificates are being issued for the principal purpose of providing funds sufficient to (i) finance a portion of the costs of the acquisition, construction and major renovations to public schools and other eligible projects including the following facilities: (a) Wesley Chapel High School; (b) Woodland Elementary School; (c) San Antonio Elementary School; (d) T. E. Weightman Middle School; (e) Pineview Middle School; and (f) Ridgewood High School and (ii) pay certain costs associated with the issuance of the Series 2014-QSCB Certificates. See THE SERIES 2014-QSCB FACILITIES and ESTIMATED SOURCES AND USES OF FUNDS. The Series 2014-QSCB Facilities will be leased-purchased by the School Board from the Corporation pursuant to the Series QSCB Lease. General THE SERIES 2014-QSCB CERTIFICATES The Series 2014-QSCB Certificates will be dated the date of delivery, will mature in the year and principal amount and accrue interest at the interest rate set forth on the inside cover page of this Offering Statement. The Series 2014-QSCB Certificates will be issued exclusively in book-entry form and ownership of one fully registered Series 2014-QSCB Certificate as set forth on the inside cover page, in the aggregate principal amount the Series 2014-QSCB Certificates, will be initially registered in the name of Cede & Co. as nominee of DTC. The principal portion and interest portion of Basic Lease Payments represented by the Series 2014-QSCB Certificates are payable in the manner set forth under THE SERIES 2014-QSCB CERTIFICATES Book-Entry Only System herein. Individual purchases of the Series 2014-QSCB Certificates will be made in increments of $5,000 or integral multiples thereof. The principal portion of Basic Lease Payments represented by the Series 2014-QSCB Certificates payable at maturity or earlier prepayment thereof represents undivided proportionate interests in a portion of the principal portion of the Basic Lease Payments due on the dates set forth in the Series 2014-QSCB Lease, equally and ratably with the Outstanding Series 2014-QSCB Certificates. The interest portion of Basic Lease Payments represented by the Series 2014-QSCB Certificates is payable on each June 1 and December 1, commencing June 1, 2015 (each an Interest Payment Date ). Said interest portion represents undivided proportionate interests in a portion of the interest portion of Basic Lease Payments due under the Series 2014-QSCB Lease in respect of each Interest Payment Date for the Series 2014-QSCB Certificates to and including the maturity or earlier prepayment of the Series 2014-QSCB Certificates. The principal portion of the Basic Lease Payments represented by the Series 2014-QSCB Certificates will accrue interest from and including the date of issuance of the Series 2014-QSCB Certificates and thereafter, each Interest Payment Date for the period commencing on the immediately preceding Interest Payment Date and ending on the day immediately preceding such Interest Payment Date. The interest portion of the Basic Lease Payments represented by the Series 2014-QSCB Certificates will be computed on the basis of a 360-day year based on twelve 30-day months. The School Board has designated the Series 2014-QSCB Lease, an interest in which is represented by the Series 2014-QSCB Certificates, as a qualified school construction bond pursuant to Section 54F of the Code and also has elected to qualify to receive on each Payment Date a refundable credit (the Issuer Subsidy ) from the United States Department of Treasury. The Issuer Subsidy would 4

13 be in an amount equal to the lesser of the amount of interest payable with respect to the Series QSCB Certificates on such Payment Date or the amount of interest which would have been payable with respect to the Series 2014-QSCB Certificates on such Payment Date if such interest were determined at the applicable tax credit rate otherwise applicable to such Series 2014-QSCB Certificates in accordance with the Code. Under the Code, the School Board must use 100% of available project proceeds for one or more qualified purposes within the permitted expenditure period specified in the Code. The term available project proceeds means the proceeds from the sale of the Series 2014-QSCB Certificates plus any investment proceeds thereon, less the issuance costs financed from the proceeds (and the amount of such proceeds spent on issuance costs may not exceed 2% of such sale proceeds). The term qualified purposes includes construction, rehabilitation, or repair of a public school facility, costs of equipment therefor and the acquisition of land on which such a facility is to be constructed with the proceeds of the qualified school construction bond issue. The permitted expenditure period is three years from the date of issuance, unless such period is extended in accordance with the Code. Prepayment Pursuant to the Series 2014-QSCB Supplemental Trust Agreement, in the event the provisions of the "Optional Prepayment With Make-Whole Payment" and "Extraordinary Prepayment Due to the Occurrence of an Extraordinary Event" below are both applicable to the Series 2014-QSCB Certificates, the School Board may, in its sole discretion, elect to prepay the Series 2014-QSCB Certificates pursuant to the provisions of "Extraordinary Prepayment Due to the Occurrence of an Extraordinary Event." Pursuant to the Series 2014-QSCB Supplemental Trust Agreement, in the event the provisions of the "Optional Prepayment at Par" and "Extraordinary Prepayment Due to the Occurrence of an Extraordinary Event" below are both applicable to the Series 2014-QSCB Certificates, the School Board may, in its sole discretion, elect to prepay the Series 2014-QSCB Certificates pursuant to the provisions of "Optional Prepayment at Par." Optional Prepayment With Make-Whole Payment. The Series 2014-QSCB Certificates are subject to prepayment at the option of the School Board in whole or in part on any Business Day prior to December 1, 2024, if the School Board elects to prepay the principal portion of Basic Lease Payments due under the Series 2014-QSCB Lease, and if in part, by lot in such manner as the Trustee may determine, at a Prepayment Price equal to the greater of (1) 100% of the principal portion of Basic Lease Payments represented by the Series 2014-QSCB Certificates to be prepaid and (2) the sum of the present value of the remaining scheduled payments of Basic Lease Payments on the Series 2014-QSCB Certificates to be prepaid, not including any portion of those payments of interest accrued and unpaid as of the date on which the Series 2014-QSCB Certificates are to be prepaid, discounted to the date on which the Series 2014-QSCB Certificates are to be prepaid on a semiannual basis, assuming a 360-day year consisting of twelve 30-day months, at the Treasury Rate plus 30 basis points, plus, in each case, the accrued and unpaid interest portion of Basic Lease Payments represented by the Series 2014-QSCB Certificates to be prepaid on the Prepayment Date. Optional Prepayment at Par. The Series 2014-QSCB Certificates are subject to prepayment in whole or in part on any Business Day on or after December 1, 2024, if the School Board elects to prepay the principal portion of Basic Lease Payments due under the Series 2014-QSCB Lease and if in part, by lot in such manner as the Trustee may determine, at a Prepayment Price equal to the principal portion of Basic Lease Payments represented by the Series 2014-QSCB Certificates or portions thereof to be prepaid, plus the interest accrued to the Prepayment Date. Extraordinary Mandatory Prepayment from Unexpended Proceeds of the Series 2014-QSCB Certificates. The Series 2014-QSCB Certificates are subject to extraordinary mandatory prepayment in 5

14 Authorized Denominations, in whole or in part, on a date designated by the School Board that occurs no later than the ninetieth day following the last day of the three-year period beginning on the date of delivery of the Series 2014-QSCB Certificates, as such period may be extended pursuant to Section 54A(d)(2)(B) of the Code (the "Expenditure Period"), at a Prepayment Price equal to the principal portion of Basic Lease Payments represented by the Series 2014-QSCB Certificates called for prepayment, plus the accrued interest on the principal portion of the Basic Lease Payments represented by the Series 2014-QSCB Certificates in an amount equal to the unexpended proceeds of the sale of the Series 2014-QSCB Certificates held by the Trustee, but only to the extent that the School Board fails to expend all of the available project proceeds (as defined in Section 54A(e)(4) of the Code) of the Series 2014-QSCB Certificates for qualified purposes within the Expenditure Period. Extraordinary Optional Prepayment Due to the Occurrence of an Extraordinary Event. The Series 2014-QSCB Certificates are subject to extraordinary prepayment in Authorized Denominations, in whole or in part, on a date designated by the School Board upon the occurrence of an Extraordinary Event, at a Prepayment Price equal to the greater of: (1) 100% of the principal portion of Basic Lease Payments represented by the Series 2014-QSCB Certificates to be prepaid; and (2) the sum of the present value of the remaining scheduled payments of Basic Lease Payments allocable to the Series 2014-QSCB Certificates to be prepaid to their Maturity Date, not including any portion of those payments of interest accrued and unpaid as of the Prepayment Date, discounted to the Prepayment Date on a semiannual basis, assuming a 360-day year consisting of twelve 30-day months, at the Treasury Rate plus 100 basis points, plus in each case, the interest portion of the Basic Lease Payments represented by the Series 2014-QSCB Certificates to be prepaid to the Prepayment Date. As used in the Series 2014-QSCB Supplemental Trust Agreement, an "Extraordinary Event" will have occurred (a) if the School Board determines that a material adverse change has occurred to Section 54A, 54AA, 54F or 6431 of the Code or (b) there is any guidance published by the Internal Revenue Service or the United States Treasury with respect to such section or sections or (c) any other legislation is enacted which impacts the receipt of the Issuer Subsidy, or (d) any other determination is made by the Internal Revenue Service or the Department of Treasury or any court of competent jurisdiction, which determination is not the result of an act or omission by the School Board which negatively impacts the receipt of the Issuer Subsidy from Department of Treasury, pursuant to which the School Board's Issuer Subsidy payments from the Department of Treasury are reduced or eliminated. As used in the Series 2014-QSCB Supplemental Trust Agreement, "Treasury Rate" means, as of any Prepayment Date, the rate per annum, expressed as a percentage of the principal portion of the Basic Lease Payments represented by the Series 2014-QSCB Certificates to be prepaid, equal to the semiannual equivalent yield to maturity or interpolated maturity of the Comparable Treasury Issue, assuming that the Comparable Treasury Issue is purchased on the Prepayment Date for a price equal to the Comparable Treasury Price, as calculated by the Designated Investment Banker. As used in the Series 2014-QSCB Supplemental Trust Agreement, "Comparable Treasury Issue" means, with respect to any Prepayment Date for a particular Series 2014-QSCB Certificate, the U.S. Treasury security or securities selected by the Designated Investment Banker which has an actual or interpolated maturity comparable to the remaining average life, as of the Prepayment Date, of the Series 2014-QSCB Certificates to be prepaid, and that would be utilized in accordance with customary financial practice in pricing new issues of debt securities of comparable maturity to the remaining average life, as of the Prepayment Date, of the Series 2014-QSCB Certificates to be prepaid. 6

15 As used in the Series 2014-QSCB Supplemental Trust Agreement, "Comparable Treasury Price" means, with respect to any Prepayment Date for a particular Series 2014-QSCB Certificate, (a) if the Designated Investment Banker receives at least four Reference Treasury Dealer Quotations, the average of such quotations for the date on which such Series 2014-QSCB Certificates are to be prepaid, after excluding the highest and the lowest Reference Treasury Dealer Quotations, or (b) if the Designated Investment Banker obtains fewer than four Reference Treasury Dealer Quotations, the average of all such quotations. As used in the Series 2014-QSCB Supplemental Trust Agreement, "Reference Treasury Dealer Quotations" shall mean with respect to each Reference Treasury Dealer and any Prepayment Date for a particular Series 2014-QSCB Certificate, the average, as determined by the Reference Treasury Dealer, of the bid and asked prices for the Comparable Treasury Issue (expressed in each case as a percentage of its principal amount), quoted in writing to the Designated Investment Banker by such Reference Treasury Dealer at 3:30 p.m., New York City time, on the third business day preceding the date on which the Series 2014-QSCB Certificates are to be prepaid. As used in the Series 2014-QSCB Supplemental Trust Agreement, "Designated Investment Banker" means one of the Reference Treasury Dealers designated by the School Board. As used in the Series 2014-QSCB Supplemental Trust Agreement, "Reference Treasury Dealer" means a firm, specified by the School Board from time to time, that is a primary U.S. government securities dealer in the City of New York, New York; provided, however, that if any such firm ceases to be such a primary treasury dealer, the School Board will substitute another primary treasury dealer for such firm. No Extraordinary Mandatory Prepayment from Net Proceeds of Insurance or Condemnation. The Series 2014-QSCB Certificates shall not be subject to extraordinary mandatory prepayment from the net proceeds of insurance or a condemnation award with respect to the Series 2014-QSCB Facilities. See "THE LEASES - Lease Payments" herein for information regarding the permitted use of any such insurance proceeds or condemnation award. Partial Prepayment from Series 2014-QSCB Sinking Fund Account. In the event of a partial prepayment of the Series 2014-QSCB Certificates, amounts on deposit in the Series 2014-QSCB Sinking Fund Account shall be applied to such partial prepayment to the extent that deposits in the Series QSCB Sinking Fund Account otherwise would exceed the funding requirements set forth in Section 54A(d)(4)(C) of the Code that would have applied had the original Principal Component been equal to the Principal Component outstanding after such prepayment. Notice. Notwithstanding anything in the Trust Agreement to the contrary, the School Board shall only be required to provide the Owner of the Series 2014-QSCB Certificates with irrevocable written notice at least fifteen (15) Business Days prior to any prepayment. Such notice shall specify the principal portion of the Basic Lease Payments represented by the Series 2014-QSCB Certificates to be prepaid and the date of such prepayment. Each notice of prepayment shall contain all of the following information: (i) the date of such notice; (ii) the name of the affected Series 2014-QSCB Certificates and the date of issue of the Series 2014-QSCB Certificates; (iii) the Prepayment Date; (iv) the Prepayment Price, if available; (v) the dates of maturity of the Series 2014-QSCB Certificates to be prepaid; (vi) if less than all of the Series QSCB Certificates are to be prepaid, the distinctive numbers of the Series 2014-QSCB Certificates of each maturity to be prepaid; (vii) in the case of Series 2014-QSCB Certificates prepaid in part only, the respective maturities or portions of the principal portion of Basic Lease Payments represented by the 7

16 Series 2014-QSCB Certificates of each maturity to be prepaid; (viii) the CUSIP number, if any, of each maturity of Series 2014-QSCB Certificates to be prepaid; (ix) a statement that such Series 2014-QSCB Certificates must be surrendered by the Owners at the principal corporate trust office of the Trustee, or at such other place or places designated by the Trustee; and (x) any conditions to the prepayment. The actual receipt by any Owner of any Series 2014-QSCB Certificate of notice of such prepayment will not be a condition precedent to prepayment, and failure to receive such notice, or any defect in the notice given, will not affect the validity of the proceedings for the prepayment of such Series 2014-QSCB Certificate. When notice of prepayment has been given, substantially as described above, and when the amount necessary for the payment of the principal portion of and premium, if any, is set aside for such purpose, the Series 2014-QSCB Certificates designated for prepayment will become due and payable on the date fixed for prepayment thereof, and upon presentation and surrender of said Series 2014-QSCB Certificates at the place specified in the notice of prepayment, such Series 2014-QSCB Certificates will be prepaid and paid at the Prepayment Price thereof out of the money provided therefor. As long as a book-entry system is used for determining beneficial ownership of Series QSCB Certificates, notice of prepayment will only be sent by the Trustee to DTC. DTC will be responsible for notifying the DTC Participants, which will in turn be responsible for notifying the Beneficial Owners. Any failure of DTC to notify any DTC Participant, or of any DTC Participant to notify the Beneficial Owner of any such notice, will not affect the validity of the prepayment of the Series 2014-QSCB Certificates. Rescission of Notice of Prepayment. Upon notice from the School Board that the School Board has cured the conditions that caused the Series 2014-QSCB Certificates to be subject to extraordinary mandatory prepayment, the School Board may rescind any such prepayment and notice thereof on any date prior to the date fixed for prepayment by causing written notice of the rescission to be given to the Owners of the Series 2014-QSCB Certificates so called for prepayment. Notice of rescission will be given in the same manner in which notice of prepayment was originally given. The actual receipt of notice of such rescission by such Owner shall not be a condition precedent to rescission and failure to receive such notice or any defect in such notice shall not affect the validity of the rescission. Selection of Series 2014-QSCB Certificates to be Prepaid or Purchased. The Trustee will effect each mandatory prepayment of the Series 2014-QSCB Certificates by prepaying pro rata to each person who is the Owner of a Series 2014-QSCB Certificate to be prepaid on a Prepayment Date, an amount of such Series 2014-QSCB Certificates determined by multiplying the principal portion of Basic Lease Payments represented by the Series 2014-QSCB Certificates to be prepaid on said Prepayment Date by a fraction, the numerator of which is the principal portion of Basic Lease Payments represented by the Series 2014-QSCB Certificates owned by such Owner and the denominator of which is the principal portion of Basic Lease Payments represented by all Series 2014-QSCB Certificates outstanding immediately prior to the date of prepayment, and then rounding the product down to the next lower Authorized Denomination. The Trustee will apply, to the extent possible, any remaining amount of proceeds to prepay such Series 2014-QSCB Certificates in Authorized Denominations and will select, by lot, the units to be prepaid from all such Owners, which selection shall be conclusive. Prepayment shall be effected in Authorized Denominations, so that any Series 2014-QSCB Certificate prepaid in part shall remain in an Authorized Denomination. DTC Procedures. Investors should note that while DTC is the registered owner of the Series 2014-QSCB Certificates, partial prepayments of the Series 2014-QSCB Certificates will be determined in 8

17 accordance with DTC s procedures. The School Board intends that prepayment allocations made by DTC, the DTC Participants or such other intermediaries that may exist between the School Board and the Beneficial Owners of the Series 2014-QSCB Certificates be made in accordance with the method of selection of Series 2014-QSCB Certificates for a partial prepayment described herein. However, the selection of the Series 2014-QSCB Certificates for prepayment in DTC s book-entry only system is subject to DTC s practices and procedures as in effect at the time of any such partial prepayment. The School Board can provide no assurance that DTC or the DTC Participants or any other intermediaries will allocate prepayments among Beneficial Owners in accordance with the method of selection of Series 2014-QSCB Certificates for a partial prepayment described above. Effect of Prepayment. If, on the Prepayment Date, moneys for the payment of the Prepayment Price of the Series 2014-QSCB Certificates or portions thereof to be prepaid are held by the Trustee and available therefor on the Prepayment Date and if notice of prepayment has been given as described above, then from and after the Prepayment Date, the interest portion of the Series 2014-QSCB Certificates or the portion thereof called for prepayment will cease to accrue. If such moneys are not available on the Prepayment Date, the principal portion represented by such Series 2014-QSCB Certificates or portions thereof will continue to bear interest until paid at the same rate as would have accrued had such Series 2014-QSCB Certificates not been called for prepayment. Book-Entry Only System THE INFORMATION IN THIS SECTION CONCERNING DTC AND DTC S BOOK-ENTRY ONLY SYSTEM HAS BEEN OBTAINED FROM SOURCES THAT THE CORPORATION AND THE SCHOOL BOARD BELIEVE TO BE RELIABLE, BUT NEITHER THE CORPORATION NOR THE SCHOOL BOARD TAKE ANY RESPONSIBILITY FOR THE ACCURACY THEREOF. The Depository Trust Company ( DTC ), New York, NY, will act as securities depository for the Series 2014-QSCB Certificates. The Series 2014-QSCB Certificates 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 Series 2014-QSCB Certificate will be issued for each maturity of the Series 2014-QSCB Certificates, as set forth on the inside cover page hereof, in the aggregate amount of such maturity and will be deposited with DTC. DTC, the world s largest depository, is a limited-purpose trust company organized under the New York Banking Law, a banking organization within the meaning of the New York Banking Law, a member of the Federal Reserve System, a clearing corporation within the meaning of the New York Uniform Commercial Code, and a clearing agency registered pursuant to the provisions of Section 17A of the Securities Exchange Act of DTC holds and provides asset servicing for over 3.5 million issues of U.S. and non-u.s. equity, corporate and municipal debt issues, and money market instruments from over 100 countries that DTC s participants ( Direct Participants ) deposit with DTC. DTC also facilitates the post-trade settlement among Direct Participants of sales and other securities transactions in deposited securities through electronic computerized book-entry transfers and pledges between Direct Participants accounts. This eliminates the need for physical movement of securities certificates. Direct Participants include both U.S. and non-u.s. securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations. DTC is a wholly-owned subsidiary of The Depository Trust & Clearing Corporation ( DTCC ). DTCC, is the holding company for DTC, National Securities Clearing Corporation and Fixed Income Clearing Corporation, all of which are registered clearing agencies. DTCC is owned by the users of its regulated subsidiaries. Access to the DTC system is also available to others such as both U.S. and non-u.s. securities brokers and dealers, banks, trust companies, and clearing corporations that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly ( Indirect Participants ). DTC has a Standard and Poor s rating of 9

18 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 Purchases of Series 2014-QSCB Certificates under the DTC system must be made by or through Direct Participants, which will receive a credit for the Series 2014-QSCB Certificates on DTC s records. The ownership interest of each actual purchaser of each Series 2014-QSCB Certificate ( 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 Series 2014-QSCB Certificates 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 Series 2014-QSCB Certificates, except in the event that use of the book-entry system for the Series 2014-QSCB Certificates is discontinued. To facilitate subsequent transfers, all Series 2014-QSCB Certificates 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 Series QSCB Certificates 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 Series 2014-QSCB Certificates; DTC s records reflect only the identity of the Direct Participants to whose accounts such Series 2014-QSCB Certificates are credited, which may or may not be the Beneficial Owners. The Direct and Indirect Participants will remain responsible for keeping account of their holdings on behalf of their customers. Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. Beneficial Owners of the Series 2014-QSCB Certificates may wish to take certain steps to augment transmission to them of notices of significant events with respect to the Series 2014-QSCB Certificates, such as prepayments, defaults, and proposed amendments to the security documents. For example, Beneficial Owners of the Series 2014-QSCB Certificates may wish to ascertain that the nominee holding the Series 2014-QSCB Certificates 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 the notices be provided directly to them. Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to Series 2014-QSCB Certificates unless authorized by a Direct Participant in accordance with DTC s MMI Procedures. Under its usual procedures, DTC mails an Omnibus Proxy to the Corporation 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 Series 2014-QSCB Certificates are credited on the record date (identified in a listing attached to the Omnibus Proxy). Payments on the Series 2014-QSCB Certificates will be made to Cede & Co., or such other nominee, as may be requested by an authorized representative of DTC. DTC s practice is to credit Direct Participants accounts upon DTC s receipt of funds and corresponding detail information from the Trustee, on payable dates 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 10

19 street name, and will be the responsibility of such Participant and not of DTC nor its nominee, the Trustee, the School Board or the Corporation, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of prepayment 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 the Trustee, 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. NONE OF THE CORPORATION, THE SCHOOL BOARD OR THE TRUSTEE WILL HAVE ANY RESPONSIBILITY OR OBLIGATION TO THE BENEFICIAL OWNERS, DIRECT OR INDIRECT PARTICIPANTS OR THE PERSONS FOR WHOM DIRECT OR INDIRECT PARTICIPANTS ACT AS NOMINEES WITH RESPECT TO THE SERIES 2014-QSCB CERTIFICATES, FOR THE ACCURACY OF RECORDS OF DTC, CEDE & CO. OR ANY DIRECT OR INDIRECT PARTICIPANT WITH RESPECT TO THE SERIES 2014-QSCB CERTIFICATES OR THE PROVIDING OF NOTICE OR PAYMENT OF PRINCIPAL, OR INTEREST, OR ANY PREMIUM ON THE SERIES 2014-QSCB CERTIFICATES, TO DIRECT OR INDIRECT PARTICIPANTS OR BENEFICIAL OWNERS, OR THE SELECTION OF SERIES 2014-QSCB CERTIFICATES FOR PREPAYMENT. None of the Corporation, the School Board or the Trustee can give any assurances that DTC, Direct Participants, Indirect Participants or others will distribute payments of principal of, premium, if any, and interest on the Series 2014-QSCB Certificates paid to DTC or its nominee, or any prepayment or other notices, to the Beneficial Owners, or that they will do so on a timely basis or that DTC will serve or act in a manner described in this Offering Statement. For every transfer and exchange of beneficial interests in the Series 2014-QSCB Certificates, the Beneficial Owner may be charged a sum sufficient to cover any tax, fee or other government charge that may be imposed in relation thereto. DTC may discontinue providing its services as securities depository with respect to the Series 2014-QSCB Certificates at any time by giving reasonable notice to the School Board, the Corporation or the Trustee. Under such circumstances, in the event that a successor depository is not obtained, Series 2014-QSCB Certificates are required to be printed and delivered. In addition, the Trustee, at the direction of the School Board, may determine to discontinue the use of book-entry transfers through DTC (or any successor securities depository). Under such circumstances, certificated Series 2014-QSCB Certificates are required to be delivered as described in the Trust Agreement. Payment of Series 2014-QSCB Certificates Upon Discontinuance of Book-Entry Only System. Upon discontinuance of the book-entry only system for the Series 2014-QSCB Certificates, the principal portion or Prepayment Price of the Series 2014-QSCB Certificates will be payable at the designated corporate trust office of the Trustee. Upon such discontinuance, the interest portion represented by the Series 2014-QSCB Certificates will be payable by check or draft of the Trustee, mailed to the registered owner at the address shown on the Series 2014-QSCB Certificate register maintained by the Trustee as of the 15th day of the month preceding the applicable Interest Payment Date (the Record Date ). Such interest portion may be paid by wire transfer within the United States to registered owners of $1,000,000 or more in aggregate principal amount of Series 2014-QSCB Certificates, upon their written request received no later than the Record Date prior to an Interest Payment Date. The Trustee may charge such registered owner a reasonable fee for the cost of the wire transfer. 11

20 SECURITY FOR THE SERIES 2014-QSCB CERTIFICATES General The Series 2014-QSCB Certificates evidence undivided proportionate interests in the Basic Lease Payments to be made by the School Board under the Series 2014-QSCB Lease. The Series 2014-QSCB Certificates are secured by and payable from the Trust Estate established pursuant to the Trust Agreement (the Trust Estate ). The Trust Estate consists of all estate, right, title and interest of the Trustee in and to the Basic Lease Payments under the Series 2014-QSCB Lease and all amounts held in the funds and accounts under the Trust Agreement, as supplemented, for the Series 2014-QSCB Certificates in accordance with the provisions of the Series 2014-QSCB Lease and the Trust Agreement, including investment earnings thereon, and any and all moneys received by the Trustee pursuant to the Trust Agreement which are not required to be remitted to the School Board or the Corporation pursuant to the Master Lease or the Trust Agreement. Neither the School Board nor the Corporation has or will mortgage or grant a security interest in the real and/or personal property comprising the Series 1996 Facilities, the Series 2004A Facilities, the Series 2005 Facilities, the Series 2007A Facilities, the Series 2007B Facilities, or the Series 2009 Facilities, to the Trustee. Upon termination of the Series 1996 Lease, the Series 2004A Lease, the Series 2005 Lease, the Series 2007A Lease, the Series 2007B Lease, or the Series 2009 Lease, in the case of certain events of non-appropriation or default, the Series 1996 Lease, the Series 2004A Lease, the Series 2005 Lease, the Series 2007A Lease and the Series 2007B Lease, or the Series 2009 Lease, each provide that the School Board must surrender possession of the related Facilities (except Designated Equipment, if any), to the Trustee as assignee of the Corporation for disposition by sale or reletting of its leasehold interest in such Facilities, as provided in the Trust Agreement. Any proceeds of any such disposition of such Facilities shall be applied to the Series of Certificates which financed and/or refinanced such Facilities, after payment of the expenses of the Trustee. All of the Series 2004-QZAB Facilities, the Series 2005-QZAB Facilities, the Series 2008-QZAB Facilities, and the Series 2014-QSCB Facilities constitute Designated Equipment and shall not be surrendered to the Trustee under the circumstances described above. See DESIGNATED EQUIPMENT, RISK FACTORS and THE LEASES Effect of Termination for Non-Appropriation or Default. Lease Payments All Lease Payments and all other amounts required to be paid by the School Board under the Series 1996 Lease, the Series 2004A Lease, the Series 2004-QZAB Lease, the Series 2005 Lease, the Series 2005-QZAB Lease, the Series 2007A Lease, the Series 2007B Lease, the Series 2008-QZAB Lease, and the Series 2009 Lease (collectively, the Prior Leases ) and all other Leases will be made only from legally available funds specifically appropriated for such purpose by the School Board. See THE LEASES herein. The Trust Agreement provides for the establishment and maintenance of a Series 2014-QSCB Lease Payment Account for the deposit of Basic Lease Payments appropriated and paid under the Series 2014-QSCB Lease. Unless otherwise provided in a Lease, separate Lease Payment Accounts are established for each Series of Certificates issued under the Trust Agreement. The Trustee will deposit the Basic Lease Payments received from the School Board to the Series 2014-QSCB Lease Payment Account and use such moneys to pay the principal and interest portion of Basic Lease Payments represented by Series 2014-QSCB Certificates due on each Interest Payment Date. The School Board agrees to pay, when due, directly to the party entitled thereto, Additional Lease Payments and to make the Sinking Fund Payments in accordance with the Series 2014-QSCB Lease and 12

21 the Trust Agreement. The Series 2014-QSCB Supplemental Trust Agreement establishes a Series QSCB Sinking Fund Account. The Trustee will deposit the Sinking Fund Payments to the Series QSCB Sinking Fund Account and will transfer such payments to the Series 2014-QSCB Lease Payment Account and use such moneys to pay the principal portion of Basic Lease Payments due on the Maturity Date or on the date of an extraordinary prepayment. Lease Payments due under all Schedules to the Master Lease are subject to annual appropriation by the School Board on an all-or-none basis and are payable on a parity basis solely from legally available funds appropriated by the School Board for such purpose; provided, that Lease Payments with respect to a particular Schedule and Series of Certificates may be additionally and separately secured by a Credit Facility. There is no limit on the number of additional Facilities that may be financed under the Master Lease. Such additional Facilities may be financed through the execution of additional Schedules to the Master Lease ( Additional Leases ) and the sale of additional Series of Certificates under the Trust Agreement. THE SCHOOL BOARD MAY NOT BUDGET AND APPROPRIATE FOR A PORTION OF LEASE PAYMENTS DUE FOR ALL OF THE FACILITIES LEASED UNDER THE MASTER LEASE; IT MUST BUDGET AND APPROPRIATE FOR ALL SUCH LEASE PAYMENTS OR NONE OF THEM. THERE CAN BE NO ASSURANCE THAT SUFFICIENT FUNDS WILL BE APPROPRIATED OR OTHERWISE BE MADE AVAILABLE TO MAKE ALL OF THE LEASE PAYMENTS DUE UNDER THE MASTER LEASE. Limited Obligation of the School Board THE SCHOOL BOARD IS NOT LEGALLY REQUIRED TO APPROPRIATE MONEYS TO MAKE LEASE PAYMENTS, WHICH CONSIST OF BASIC LEASE PAYMENTS, ADDITIONAL LEASE PAYMENTS, SUPPLEMENTAL PAYMENTS AND ALL OTHER AMOUNTS REQUIRED TO BE PAID BY THE SCHOOL BOARD PURSUANT TO THE TERMS OF A LEASE. NONE OF THE SCHOOL BOARD, THE DISTRICT, THE STATE OF FLORIDA, OR ANY POLITICAL SUBDIVISION THEREOF WILL BE OBLIGATED TO PAY, EXCEPT FROM APPROPRIATED FUNDS, ANY SUMS DUE UNDER THE LEASES FROM ANY SOURCE OF TAXATION. THE FULL FAITH AND CREDIT OF THE DISTRICT AND THE SCHOOL BOARD IS NOT PLEDGED FOR PAYMENT OF SUCH SUMS DUE UNDER THE LEASES AND SUCH SUMS DO NOT CONSTITUTE AN INDEBTEDNESS OF THE SCHOOL BOARD OR THE DISTRICT WITHIN THE MEANING OF ANY CONSTITUTIONAL OR STATUTORY PROVISION OR LIMITATION. Additional Leases As noted above, the School Board may enter into Additional Leases under the Master Lease in addition to the Series 2014-QSCB Lease and the Prior Leases. Failure to appropriate funds to make Lease Payments under the Series 2014-QSCB Lease, the Prior Leases or any Additional Lease will, or certain events of default under the Series 2014-QSCB Lease, the Prior Leases or any Additional Lease may, result in the termination of the Lease Term of all Leases, including the Series 2014-QSCB Lease, the Prior Leases and any Additional Leases. Upon any such termination of the Lease Term of all Leases, the School Board must surrender all Facilities (except Designated Equipment, if any) to the Trustee for sale or reletting of the Trustee s interest. The proceeds of any disposition of such Facilities will be applied to the payment of the related Series of Certificates. All of the Series 2004-QZAB Facilities, the Series 2005-QZAB Facilities, the Series 2008-QZAB Facilities and the Series 2014-QSCB Facilities constitute Designated Equipment which is not subject to disposition. In no event will owners of Series 2014-QSCB Certificates have any interest in or right to any proceeds of the disposition of Facilities financed with the proceeds of another Series of Certificates. 13

22 For a discussion of remedies available to the Trustee in the event of non-appropriation of funds to pay Lease Payments, see THE LEASES TERMINATION OF LEASE TERM and Effect of Termination for Non-Appropriation or Default and APPENDIX C CERTAIN LEGAL DOCUMENTS Master Lease Purchase Agreement Events of Defaults and Remedies. Additional Certificates; Outstanding Certificates With respect to any Additional Lease, one or more Series of additional Certificates may be authorized by the Corporation at the request of the School Board and executed and delivered by the Trustee for the purpose of (a) financing the cost of acquisition, construction and equipping of any Facilities or the completion thereof, (b) financing the cost of completing the acquisition, construction, installation and equipping of any Facilities, (c) financing the cost of increasing, improving, modifying, expanding or replacing any Facilities, (d) paying or providing for the payment of the principal portion and interest portion of the Basic Lease Payments with respect to, or the Purchase Option Price of, all or a portion of the Facilities financed from the proceeds of any Series of Certificates previously executed and delivered, (e) funding a Reserve Account in an amount equal to the applicable Reserve Account Requirement, if any, (f) capitalizing all or a portion of the interest portion of Basic Lease Payments during construction, or (g) paying the applicable Costs of Issuance. The aggregate principal amount of additional Certificates which may be executed and delivered under the provisions of the Master Trust is not limited. Unless otherwise set forth in the Supplemental Trust Agreement authorizing the issuance of more than one Series of Certificates, each Certificate within a Series of Certificates executed and delivered pursuant to the Master Trust shall rank pari passu and be equally and ratably secured under the Master Trust with each other Certificate of such Series, but not with any Certificates of any other Series (except for refunding certificates issued in the case of the partial refunding of a Series of Certificates or except for the issuance of completion certificates, respectively), without preference, priority or distinction of any such Certificate over any other such Certificate, except that to the extent that Basic Lease Payments available for payment to all Certificate holders are less than all amounts owed with respect to all Series of Certificates on any Payment Date, such amounts available shall be applied on a pro rata basis to Certificate holders of all Series in accordance with the ratio that the principal balance of each Series of Certificates outstanding bears to the total amount of Certificates outstanding under the Master Trust. Non-Appropriation Risk THE SCHOOL BOARD IS NOT LEGALLY REQUIRED TO APPROPRIATE MONEYS FOR THE PURPOSE OF MAKING LEASE PAYMENTS, WHICH CONSIST OF BASIC LEASE PAYMENTS, ADDITIONAL LEASE PAYMENTS, SUPPLEMENTAL PAYMENTS AND ALL OTHER AMOUNTS REQUIRED TO BE PAID BY THE SCHOOL BOARD PURSUANT TO THE TERMS OF A LEASE. THE SCHOOL BOARD MAY NOT BUDGET AND APPROPRIATE AVAILABLE REVENUES TO PAY LEASE PAYMENTS UNDER A PARTICULAR LEASE, BUT MUST APPROPRIATE SUCH REVENUES FOR ALL LEASES OR NONE. FOR A DISCUSSION OF REMEDIES AVAILABLE TO THE TRUSTEE IN THE EVENT OF THE NON-APPROPRIATION OF FUNDS TO PAY LEASE PAYMENTS, SEE THE LEASES TERMINATION OF LEASE TERM AND EFFECT OF TERMINATION FOR NON-APPROPRIATION OR DEFAULT. THERE CAN BE NO ASSURANCE THAT THE REMEDIES AVAILABLE TO THE TRUSTEE IN THE EVENT OF NON-APPROPRIATION OF FUNDS WILL PRODUCE SUFFICIENT AMOUNTS TO PAY THE SERIES 2014-QSCB CERTIFICATES AND THE THEN OUTSTANDING CERTIFICATES. 14

23 Optional Prepayment of Basic Lease Payments The School Board has the right to prepay all or a portion of the Basic Lease Payments represented by the Series 2014-QSCB Certificates and in connection therewith remove all or a portion of, as the case may be, a portion of the Series 2014-QSCB Facilities from the Series 2014-QSCB Lease by paying the Purchase Option Price for the specific Series 2014-QSCB Facilities being purchased or, to the extent permitted by law, by substituting other facilities for the Series 2014-QSCB Facilities being acquired. In such event the Series 2014-QSCB Certificates representing the prepaid Basic Lease Payments would be prepaid on the next available date for prepaying the Series 2014-QSCB Certificates. The Purchase Option Price, as of each Lease Payment Date, is (i) the Basic Lease Payment then due plus the amount designated in the Series 2014-QSCB Lease, as the Remaining Principal Portion of the Purchase Option Price; (ii) minus any credits pursuant to the provisions of the Series 2014-QSCB Lease; (iii) plus an amount equal to the interest to accrue with respect to the Series 2014-QSCB Certificates to be paid as a result of the release of such Series 2014-QSCB Facilities from the Series 2014-QSCB Lease, as the case may be, from such Lease Payment Date to the next available date for paying the Series 2014-QSCB Certificates (and Outstanding Series 2014-QSCB Certificates); and (iv) plus an amount equal to any other amounts then due and owing under the Series 2014-QSCB Lease, as the case may be, relating to such Series QSCB Facilities. No Reserve Account for Series 2014-QSCB Certificates THERE IS NO RESERVE ACCOUNT ESTABLISHED FOR THE SERIES 2014-QSCB CERTIFICATES. Pursuant to a Supplemental Trust Agreement authorizing the issuance of any Series of Certificates, there may be established and maintained a separate Reserve Account to secure the payment of the principal and/or interest portion of the Basic Lease Payments related to such Series of Certificates. Each such Reserve Account shall secure only the Series of Certificates for which it has been established. See APPENDIX C CERTAIN LEGAL DOCUMENTS Master Trust Agreement herein. Interest Rate Exchange Agreement Series 2008C Swap Agreement. In connection with the issuance of the Series 2008C Certificates, the School Board entered into an interest rate exchange agreement (the 2008C Swap Agreement ) with Bank of America, N.A. (the 2008C Swap Provider ), in order to effectively establish a fixed interest rate with respect to its payment obligations relating to the Series 2008C Certificates. The 2008C Swap Agreement constitutes a Hedge Agreement under the Master Trust and the Series 2007B Lease. The notional amount subject to the 2008C Swap Agreement is equal to the par amount of the Series 2008C Certificates (the Notional Amount ) and the 2008C Swap Agreement will terminate on the final maturity date of the Series 2008C Certificates (August 1, 2032). Pursuant to the terms of the 2008C Swap Agreement, the 2008C Swap Provider is required to make scheduled payments to the School Board that are calculated by applying a variable interest rate based on the SIFMA index to the amortizing Notional Amount. In return, the School Board is required to make scheduled payments to the 2008C Swap Provider that are calculated by applying a fixed interest rate of 3.91% to the amortizing Notional Amount. Under certain circumstances, some within the control and some outside the control of the School Board, the 2008C Swap Agreement may be terminated and the School Board may be obligated to make a termination payment, which, under certain market conditions, could be substantial. Payments made by the School Board under the Interest Rate Exchange Agreement constitute Additional Lease Payments under the Master Lease and are secured by the Series 2007B Lease. If a termination event were to occur under the Interest Rate Exchange Agreement, the School Board may be 15

24 required to make a supplemental appropriation in order to make a termination payment, which could be significant. Such an obligation could have a material adverse effect on the School Board s ability to make Lease Payments, including payments required under the Leases. For additional information on the Interest Rate Exchange Agreement, see APPENDIX B- COMPREHENSIVE ANNUAL FINANCIAL REPORT WHICH INCLUDES THE AUDITED FINANCIAL STATEMENTS OF THE DISTRICT SCHOOL BOARD OF PASCO COUNTY, FLORIDA FOR THE FISCAL YEAR ENDED JUNE 30, 2013 Notes to Financial Statements- Note 7. Derivative Instruments. The Municipal Bond Insurance Policy CERTIFICATE INSURANCE Concurrently with the issuance of the Series 2014-QSCB Certificates, Assured Guaranty Municipal Corp. (the Insurer ) will issue its Municipal Bond Insurance Policy for the Series 2014-QSCB Certificates (the "Policy"). The Policy guarantees the scheduled payment of the principal portion and interest portion of Basic Rent Payments represented by the Series 2014-QSCB Certificates when due as set forth in the form of the Policy included as Appendix F to this Offering Statement. The Policy is not covered by any insurance security or guaranty fund established under New York, California, Connecticut or Florida insurance law. Assured Guaranty Municipal Corp. The Insurer is a New York domiciled financial guaranty insurance company and an indirect subsidiary of Assured Guaranty Ltd. ("AGL"), a Bermuda-based holding company whose shares are publicly traded and are listed on the New York Stock Exchange under the symbol "AGO". AGL, through its operating subsidiaries, provides credit enhancement products to the U.S. and global public finance, infrastructure and structured finance markets. Neither AGL nor any of its shareholders or affiliates, other than the Insurer, is obligated to pay any debts of the Insurer or any claims under any insurance policy issued by the Insurer. The Insurer s financial strength is rated AA (stable outlook) by Standard and Poor s Ratings Services, a Standard & Poor s Financial Services LLC business ( S&P ), AA+ (stable outlook) by Kroll Bond Rating Agency, Inc. ( KBRA ) and A2 (stable outlook) by Moody s Investors Service, Inc. ( Moody s ). Each rating of the Insurer should be evaluated independently. An explanation of the significance of the above ratings may be obtained from the applicable rating agency. The above ratings are not recommendations to buy, sell or hold any security, and such ratings are subject to revision or withdrawal at any time by the rating agencies, including withdrawal initiated at the request of the Insurer in its sole discretion. In addition, the rating agencies may at any time change the Insurer s long-term rating outlooks or place such ratings on a watch list for possible downgrade in the near term. Any downward revision or withdrawal of any of the above ratings, the assignment of a negative outlook to such ratings or the placement of such ratings on a negative watch list may have an adverse effect on the market price of any security guaranteed by the Insurer. The Insurer only guarantees scheduled principal and scheduled interest payments payable by the issuer of Series 2014-QSCB Certificates insured by the Insurer on the date(s) when such amounts were initially scheduled to become due and payable (subject to and in accordance with the terms of the relevant insurance policy), and does not guarantee the market price or liquidity of the securities it insures, nor does it guarantee that the ratings on such securities will not be revised or withdrawn. 16

25 Current Financial Strength Ratings On November 13, 2014, KBRA assigned an insurance financial strength rating of AA+ (stable outlook) to the Insurer. The Insurer can give no assurance as to any further ratings action that KBRA may take. On July 2, 2014, S&P issued a credit rating report in which it affirmed the Insurer s financial strength rating of AA (stable outlook). The Insurer can give no assurance as to any further ratings action that S&P may take. On July 2, 2014, Moody s issued a rating action report stating that it had affirmed the Insurer s insurance financial strength rating of A2 (stable outlook). The Insurer can give no assurance as to any further ratings action that Moody s may take. For more information regarding the Insurer s financial strength ratings and the risks relating thereto, see the AGL s Annual Report on Form 10-K for the fiscal year ended December 31, Capitalization of the Insurer At September 30, 2014, the Insurer s policyholders surplus and contingency reserve were approximately $3,683 million and its net unearned premium reserve was approximately $1,810 million. Such amounts represent the combined surplus, contingency reserve and net unearned premium reserve of the Insurer, of AGM s wholly owned subsidiary Assured Guaranty (Europe) Ltd. and 60.7% of the Insurer s indirect subsidiary Municipal Assurance Corp.; each amount of surplus, contingency reserve and net unearned premium reserve for each company was determined in accordance with statutory accounting principles. Incorporation of Certain Documents by Reference Portions of the following documents filed by AGL with the Securities and Exchange Commission (the SEC ) that relate to the Insurer are incorporated by reference into this Offering Statement and shall be deemed to be a part hereof: (i) (ii) (iii) the Annual Report on Form 10-K for the fiscal year ended December 31, 2013 (filed by AGL with the SEC on February 28, 2014); the Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2014 (filed by AGL with the SEC on May 9, 2014); the Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2014 (filed by AGL with the SEC on August 8, 2014); and (iv) the Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2014 (filed by AGL with the SEC on November 7, 2014). All consolidated financial statements of the Insurer and all other information relating to the Insurer included in, or as exhibits to, documents filed by AGL with the SEC pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, excluding Current Reports or portions thereof furnished under Item 2.02 or Item 7.01 of Form 8-K, after the filing of the last document referred to above and before the termination of the offering of the Series 2014-QSCB Certificates shall be deemed incorporated by reference into this Offering Statement and to be a part hereof from the respective dates of 17

26 filing such documents. Copies of materials incorporated by reference are available over the internet at the SEC s website at at AGL s website at or will be provided upon request to Assured Guaranty Municipal Corp.: 31 West 52nd Street, New York, New York 10019, Attention: Communications Department (telephone (212) ). Except for the information referred to above, no information available on or through AGL s website shall be deemed to be part of or incorporated in this Offering Statement. Any information regarding the Insurer included herein under the caption CERTIFICATE INSURANCE Assured Guaranty Municipal Corp. or included in a document incorporated by reference herein (collectively, the Insurer Information ) shall be modified or superseded to the extent that any subsequently included Insurer Information (either directly or through incorporation by reference) modifies or supersedes such previously included Insurer Information. Any Insurer Information so modified or superseded shall not constitute a part of this Offering Statement, except as so modified or superseded. Miscellaneous Matters The Insurer or one of its affiliates may purchase a portion of the Series 2014-QSCB Certificates offered under this Offering Statement and such purchases may constitute a significant proportion of the Series 2014-QSCB Certificates offered. The Insurer or such affiliate may hold such Series 2014-QSCB Certificates for investment or may sell or otherwise dispose of such Series 2014-QSCB Certificates at any time or from time to time. The Insurer makes no representation regarding the Series 2014-QSCB Certificates or the advisability of investing in the Series 2014-QSCB Certificates. In addition, the Insurer has not independently verified, makes no representation regarding, and does not accept any responsibility for the accuracy or completeness of this Offering Statement or any information or disclosure contained herein, or omitted herefrom, other than with respect to the accuracy of the information regarding the Insurer supplied by the Insurer and presented under the heading CERTIFICATE INSURANCE. CERTIFICATE INSURANCE RISK FACTORS In the event of default of the payment of principal or interest with respect to the Series QSCB Certificates when all or some becomes due, any owner of the Series 2014-QSCB Certificates shall have a claim under the Policy for such payments. However, in the event of any acceleration of the due date of such principal by reason of mandatory or optional redemption or acceleration resulting from default or otherwise, other than any advancement of maturity pursuant to a mandatory sinking fund payment, the payments are to be made in such amounts and at such times as such payments would have been due had there not been any such acceleration. The Policy does not insure against redemption premium, if any. The payment of principal and interest portions in connection with mandatory or optional prepayment of the Series 2014-QSCB Certificates by the School Board which is recovered by the School Board from the Certificate owner as a voidable preference under applicable bankruptcy law is covered by the Policy by the Insurer, however, such payments will be made by the Insurer at such time and in such amounts as would have been due absence such prepayment by the School Board unless the Insurer chooses to pay such amounts at an earlier date. Under most circumstances, default of payment of principal and interest does not obligate acceleration of the obligations of the Insurer without appropriate consent. The Insurer may direct and must consent to any remedies and the Insurer s consent may be required in connection with amendments to any applicable bond documents. 18

27 In the event the Insurer is unable to make payment of principal and interest as such payments become due under the Policy, the Series 2014-QSCB Certificates are payable solely from the moneys received pursuant to the applicable certificate documents. In the event the Insurer becomes obligated to make payments with respect to the Series 2014-QSCB Certificates, no assurance is given that such event will not adversely affect the market price of the Series 2014-QSCB Certificates or the marketability (liquidity) for the Series 2014-QSCB Certificates. The long-term ratings on the Series 2014-QSCB Certificates are dependent in part on the financial strength of the Insurer and its claims paying ability. The Insurer s financial strength and claims paying ability are predicated upon a number of factors which could change over time. No assurance is given that the long-term ratings of the Insurer and of the ratings on the Series 2014-QSCB Certificates insured by the Insurer will not be subject to downgrade and such event could adversely affect the market price of the Series 2014-QSCB Certificates or the marketability (liquidity) for the Series 2014-QSCB Certificates. The obligations of the Insurer are contractual obligations and in an event of default by the Insurer, the remedies available may be limited by applicable bankruptcy law or state law related to insolvency of insurance companies. Neither the School Board nor the Underwriter has made independent investigation into the claims paying ability of the Insurer and no assurance or representation regarding the financial strength or projected financial strength of the Insurer is given. Thus, when making an investment decision, potential investors should carefully consider the ability of the School Board to pay principal and interest on the Series 2014-QSCB Certificates and the claims paying ability of the Insurer, particularly over the life of the investment. THE MASTER LEASED FACILITIES The Series 2014-QSCB Facilities are being financed under the School Board s existing Master Lease as part of the School Board s master lease purchase program (the Master Lease Program ) with the Corporation. The Facilities financed or refinanced by the School Board under the Master Lease Program are subject to annual appropriation on an all or none basis. Of the District s 86 total operational schools, there are currently 21 schools and 9 additions to schools and related facilities leased under the Master Lease. Based on the District s full time equivalent enrollment of approximately 70,169 students for Fiscal Year , approximately 31% of the District s students are attending classes in, or otherwise utilizing, the Facilities currently leased under the Master Lease (see THE MASTER LEASED FACILITIES and THE SERIES 2014-QSCB FACILITIES herein). Under certain conditions set forth in the Master Lease, the School Board may substitute or add components to the Facilities and modify the plans and specifications thereof. For a description of the Facilities under the Master Lease Program see THE SERIES 2014-QSCB FACILITIES and THE PRIOR FACILITIES below. Pursuant to the Master Lease, the School Board does not have the ability to appropriate Basic Lease Payments for one Facility or some combination of Facilities only. The School Board s annual appropriation for Basic Lease Payments must be for all Facilities under the Master Lease Program or it must terminate all Facilities under the Master Lease Program (other than certain Designated Equipment). In the event the School Board decides not to appropriate funds in its annual budget for all financed Facilities, the School Board would, at the Trustee's option, have to surrender such Facilities (except for the Designated Equipment, including the Series 2014-QSCB Facilities) to the Trustee for the benefit of the Owners of the Certificates which financed or refinanced such Facilities. 19

28 THE SERIES 2014-QSCB FACILITIES The Series 2014-QSCB Facilities are being lease-purchased by the School Board from the Corporation pursuant to the Series 2014-QSCB Lease. The Series 2014-QSCB Facilities generally consists of the acquisition, construction and major renovations to public schools and other eligible projects including the following educational facilities within the District: (i) Wesley Chapel High School; (ii) Woodland Elementary School; (iii) San Antonio Elementary; (iv) T. E. Weightman Middle School; (v) Pineview Middle School; and (vi) Ridgewood High School. The entire 2014-QSCB Project constitutes Designated Equipment for purposes of the Series 2014-QSCB Lease. See DESIGNATED EQUIPMENT below for a description of the ownership and rights related to Designated Equipment. Series 1996 Facilities THE PRIOR FACILITIES The Series 1996 Facilities were financed with proceeds of the Series 1996 Certificates and refinanced with proceeds of the Series 2008A Certificates. The Series 1996 Facilities are being leasepurchased by the School Board from the Corporation pursuant to the Series 1996 Lease. The Series 1996 Facilities generally consist of the following: 1. Cotee River Elementary School is located in west Pasco County on approximately 35 acres. The school was designed to accommodate 881 students and was completed at a total cost of approximately $9.85 million. Student occupancy commenced in August Seven Springs Middle School is located in southwest Pasco County on approximately 45 acres. The school was designed to accommodate 1,561 students and was completed at a total cost of approximately $28.06 million. Student occupancy commenced in August Classrooms and food service and administrative facilities at West Zephyrhills Elementary School were completed at a total cost of approximately $4.86 million. Student occupancy commenced in August The classrooms were designed to accommodate 41 additional students. 4. Exceptional student educational suites were completed at Lake Myrtle Elementary School at a total cost of approximately $1.34 million. Student occupancy commenced in August The suites were designed to accommodate 41 additional students. 5. Exceptional student educational suites were completed at Mittye P. Locke Elementary School at a total cost of approximately $1.43 million. Student occupancy commenced in August The suites were designed to accommodate 47 additional students. 6. Exceptional student educational suites were completed at R.B. Stewart Middle School at a total cost of approximately $954,000. Student occupancy commenced in August The suites were designed to accommodate 40 additional students. 7. A media center facility was completed at Hudson Elementary School at a total cost of approximately $1.13 million. Student occupancy commenced in August Sand Pine Elementary School located in the Meadow Pointe housing development on approximately 26 acres. The school was designed to accommodate 633 students and was completed at a total cost of approximately $8.31 million. Student occupancy commenced in August

29 9. Marlowe Elementary School located in west Pasco County on approximately 15 acres. The school was designed to accommodate 746 students and was completed at a total cost of approximately $9.33 million. Student occupancy commenced in August Pine View Elementary School located in central Pasco County on approximately 15 acres. The school was designed to accommodate 749 students and was completed at a total cost of approximately $10.17 million. Student occupancy commenced in August J.W. Mitchell High School located in west Pasco County on approximately 30 acres. The school was designed to accommodate 2,067 students and was completed at a total cost of approximately $28.48 million. Student occupancy commenced in August Wesley Chapel High School located in southeast Pasco County on approximately 30 acres. The school was designed to accommodate 1,573 students and was completed at a total cost of approximately $29.03 million. Student occupancy commenced in August Chasco Elementary School located in west Pasco County on approximately 15 acres. The school was designed to accommodate 746 students and was completed at a total cost of approximately $7.84 million. Student occupancy commenced in August Series 2004A Facilities The Series 2004A Facilities were originally financed with proceeds of the Series 2004A Certificates. The Series 2004A Facilities are being lease-purchased by the School Board from the Corporation pursuant to the Series 2004A Lease. The Series 2004A Facilities generally consist of the following: 1. Paul R. Smith Middle School is located in southwest Pasco County on an approximate 45-acre site owned by the District. The school accommodates 1,351 students and was completed at a total cost of approximately $25 million. Student occupancy began in August Wiregrass Ranch High School is located in south central Pasco County on an approximately 50-acre site owned by the District. The School is designed to accommodate 1,903 students and was completed at a total cost of approximately $42 million. Student occupancy began in August Proceeds of the Series 2004A Certificates were also used to purchase equipment at Odessa Elementary School, as described under the Series 2005 Facilities below. Such equipment constitutes Designated Equipment for purposes of the Series 2004A Lease. Series 2004-QZAB Facilities The Series 2004-QZAB Facilities were financed with proceeds of the Series 2004-QZAB Certificates. The Series 2004-QZAB Facilities are being lease-purchased by the School Board from the Corporation pursuant to the Series 2004-QZAB Lease. The Series 2004-QZAB Facilities consist of the acquisition and construction of certain additions and renovations at various existing educational facilities within the District. 21

30 Series 2005 Facilities The Series 2005 Facilities were financed with the proceeds of the Series 2005A Certificates and the Series 2005B Certificates. The Series 2005 Facilities are being lease-purchased by the School Board from the Corporation pursuant to the Series 2005 Lease. The Series 2005 Facilities generally consist of the following: 1. Gulf Highlands Elementary School located in the Bayonet Point area within the Gulf Highlands area of Pasco County on an approximately 20-acre site owned by the District. The School accommodates 752 students and was completed at a total cost of approximately $18.4 million. Student occupancy began in August Trinity Oaks Elementary School located in the Trinity area of Pasco County on an approximately 20-acre site owned by the District. The school accommodates 752 students and was completed at a total cost of approximately $20 million. Student occupancy began in August Dr. John Long Middle School located in the Wesley Chapel area within the Wiregrass development on an approximately 25-acre site owned by the District. The school is designed to accommodate 1,351 students and was completed at a total cost of approximately $40 million. Student occupancy began in August Odessa Elementary School located in southwest Pasco County on an approximately acre site owned by the District. The school accommodates 762 students and was completed at a cost of approximately $18.5 million. Occupancy began in August Series 2005-QZAB Facilities The Series 2005-QZAB Facilities were financed with proceeds of the Series 2005-QZAB Certificates. The Series 2005-QZAB Facilities are being lease-purchased by the School Board from the Corporation pursuant to the Series 2005-QZAB Lease. The Series 2005-QZAB Facilities consist of the acquisition and construction of certain additions and renovations at various existing educational facilities within the District. Series 2007A Facilities The Series 2007A Facilities were financed with proceeds of the Series 2007A Certificates. The Series 2007A Facilities are being lease-purchased by the School Board from the Corporation pursuant to the Series 2007A Lease. The Series 2007A Facilities generally consist of the following: 1. Charles S. Rushe Middle School EE is located in central Pasco County in the Concord Station development on an approximately 59-acres site shared with Sunlake High School DDD and owned by the District. The school accommodates 1,306 students and student occupancy began in August The estimated total cost of the school was approximately $40.8 million. 2. Gulf Trace Elementary School N is located in western Pasco County in the Gulf Trace area of developments on an approximately 12-acre site owned by the District. The school accommodates 762 students and student occupancy began in August The estimated total cost of the school is approximately $17.4 million. 3. Veterans Elementary School P is located in central Pasco County in the Wesley Chapel (Old CR54 & I75) area of developments on an approximately 12-acre site owned by the District. The 22

31 school is designed to accommodate 762 students and student occupancy began in August The estimated total cost of the school is approximately $18.5 million. Series 2007B Facilities The Series 2007B Facilities were financed with proceeds of the Series 2007B Certificates and refinanced with proceeds of the Series 2008C Certificates. The Series 2007B Facilities are being leasepurchased by the School Board from the Corporation pursuant to the Series 2007B Lease. The Series 2007B Facilities generally consist of the following: 1. Sunlake High School DDD is located in central Pasco County in the Concord Station development on an approximately 59-acre site shared with Charles S. Rushe Middle School EE and owned by the District. The school accommodates 1,814 students and student occupancy began in August The estimated total cost of the school is approximately $37.7 million. 2. New River Elementary School M is located in the New River development within the New River area on an approximately 20-acre site owned by the District. The school accommodates 762 students and student occupancy began in August The estimated total cost of the school is $18.1 million. 3. Ridgewood High School classroom additions included a new classroom building at Ridgewood High School. Student occupancy commenced in February The classroom building is designed to accommodate 150 additional students. The estimated total cost of the classroom additions is $3.2 million. 4. Zephyrhills High School classroom additions included a new classroom building at Zephyrhills High School. Student occupancy commenced in August The classroom building is designed to accommodate 150 additional students. The estimated total cost of the classroom additions is $3.1 million. Series 2008-QZAB Facilities The Series 2008-QZAB Facilities were financed with proceeds of the Series 2008-QZAB Certificates. The Series 2008-QZAB Facilities are being lease-purchased by the School Board from the Corporation pursuant to the Series 2008-QZAB Lease. The Series 2008-QZAB Facilities consist of the acquisition and construction of certain renovations at Pasco High School. Series 2009 Facilities The Series 2009 Facilities were financed with proceeds of the Series 2009 QSCB Certificates. The Series 2009 Facilities are being lease-purchased by the School Board from the Corporation pursuant to the Series 2009 Lease. The Series 2009 Facilities generally consist of the following: 1. The Culinary Arts Academy at Land O Lakes High School includes two teaching kitchens and a dining area as well as the associated support areas needed in order to provide students with a thorough, relevant, and content specific educational and career experiences and the skills necessary to be competitive in a global society. In addition, the building houses the Lakeside Cafe, an onsite cafeteria for District personnel. This building contains approximately 17,500 gross square feet and is designed to accommodate 120 student stations. The estimated total cost of the Culinary Arts Academy is $6.2 million. Student occupancy began in August

32 2. Proceeds from the Series 2009 QSCB Certificates were used for the construction of Classroom Buildings #3, #5 and #6 at Richey Elementary School. Combined, these buildings contain approximately 32,420 gross square feet and are designed to accommodate 552 student stations. Such additions are a part of the Richey Elementary School Campus Redevelopment Project, which has or will remove at least thirteen buildings on the campus and replace them with new facilities to accommodate 762 student stations. The estimated total cost of the additions is $18.9 million. Student occupancy began in August Substitution of Facilities To the extent permitted by law, the School Board may substitute for any Facilities other facilities owned by the School Board, provided such substituted facilities (a) have the same or greater remaining useful life, (b) have a fair market value equal to or greater than the Facilities for which they are substituted, (c) are of substantially equal usefulness as the Facilities to be replaced and provide essential governmental services of the School Board, (d) are free and clear of all liens and encumbrances, except Permitted Encumbrances (as defined in the Master Lease), (e) are approved for substitution by the State Department of Education and (f) are approved by the Credit Facility Issuer, if any. In order to effect such substitution, Facilities to be replaced will be released from the encumbrance of the respective Lease and Ground Lease, if any, and the facilities to be substituted shall be incorporated into the respective Lease and Ground Lease, if any. The affected Lease shall be appropriately amended and the Ground Lease, if any, shall be amended or canceled and replaced to reflect such substitution. DESIGNATED EQUIPMENT Each of the Projects under the Master Lease includes Designated Equipment, title for which is in the name of the School Board upon acquisition thereof. All of the projects constituting the Series QSCB Facilities are Designated Equipment. See The Series 2014-QSCB Facilities above. Upon the occurrence of an Event of Non-Appropriation or an Event of Default, neither the Trustee nor the Owners of the Series 2014-QSCB Certificates (or any other Series of Certificates) will have any right to the disposition of Designated Equipment. Upon termination of the Lease Term for the reasons referred to in (b) or (c) under THE LEASES Termination of Lease Term, the School Board will be under no obligation to transfer possession of and/or title to the Designated Equipment to the Trustee, and the Trustee will have no right under the Lease to involuntarily dispossess the School Board of the use and enjoyment of or title to any of the Designated Equipment. [Remainder of page intentionally left blank] 24

33 ESTIMATED SOURCES AND USES OF FUNDS The proceeds to be received from the sale of the Series 2014-QSCB Certificates are expected to be applied as follows: Sources of Funds: Uses of Funds: Par Amount of Series 2014-QSCB Certificates $ 13,655, Total Sources of Funds $ 13,655, Series 2014-QSCB Acquisition Account $ 13,410, Series 2014-QSCB Costs of Issuance (1) 244, Total Uses of Funds $ 13,655, (1) Includes counsel fees, financial advisor fees, Underwriter s discount, premium to Insurer for the Policy, printing costs, and other costs of issuance. [Remainder of page intentionally left blank] 25

34 ESTIMATED SERIES 2014-QSCB CERTIFICATE BASIC LEASE PAYMENT SCHEDULE (1) The estimated annual payment requirements for the Series 2014-QSCB Certificates are shown on the following table: Period Ended (June 30) Sinking Fund Payments Issuer Interest Portion Annual Net Lease Payments 2015 $(295,403.17) $ 335, $ 40, $593, (600,820.00) 682, , , (600,820.00) 682, , , (600,820.00) 682, , , (600,820.00) 682, , , (600,820.00) 682, , , (600,820.00) 682, , , (600,820.00) 682, , , (600,820.00) 682, , , (600,820.00) 682, , , (600,820.00) 682, , , (600,820.00) 682, , , (600,820.00) 682, , , (600,820.00) 682, , , (600,820.00) 682, , , (600,820.00) 682, , , (600,820.00) 682, , , (600,820.00) 682, , , (600,820.00) 682, , , (600,820.00) 682, , , (600,820.00) 682, , , (600,820.00) 682, , , (600,820.00) 682, , , (300,410.00) 341, , Total $13,655,000 $13,813, $15,697, $15,538, (1) Based on the $13,655,000 principal portion due at maturity, includes sinking fund payments which equal the principal portion due on the Series 2014-QSCB Certificates at maturity. The School Board will receive a credit against sinking fund payments for interest income on amounts on deposit in the Series 2014-QSCB Sinking Fund Account. Interest on the Series 2014-QSCB Certificates is calculated at 5.00%, the stated interest rate on the Series 2014-QSCB Certificates, giving effect to the anticipated Issuer Subsidy. The Issuer Subsidy for FY will be reduced by $21, due to Sequestration. See "RISK FACTORS - Investor Considerations with Respect to Issuer Subsidy on Series 2014-QSCB Certificates" herein. [Remainder of page intentionally left blank] 26

35 AGGREGATE LEASE PAYMENTS ON OUTSTANDING CERTIFICATES OF PARTICIPATION Payment requirements on the Series 2004A Certificates, Series 2004-QZAB Certificates, the Series 2005A Certificates, the Series 2005B Certificates, the Series 2005-QZAB Certificates, the Series 2007A Certificates, the Series 2008C Certificates, the Series 2008-QZAB Certificates, the Series 2009 QSCB Certificates, the Series 2013A Certificates, the Series 2014A Certificates and the Series 2014B Certificates (collectively, the Prior Certificates ) are as follows: The District School Board of Pasco County, Florida Aggregate Lease Payment Schedule Series 2004A Series 2004 QZAB Series 2005A Series 2005B (1) Series 2005 QZAB Series 2007A Series 2008C (2) Series 2008 QZAB Series 2009 (QSCB) (3) Series 2013A Series 2014A Series 2014B Total 6/30/2015 2,082, ,720 1,295,940 1,425,373 52,374 5,740,310 3,365, , ,420 1,880, ,100 1,112,346 18,799,676 6/30/ , ,860 1,425,373 52,374 5,796,098 3,417, , ,420 4,017,775 1,080,986 7,286,459 25,125,021 6/30/ ,720-1,452,784 52,374 5,763,994 3,428, , ,420 4,010,425 1,898,479 7,405,608 25,276,584 6/30/ ,720-1,425,373 52,374 5,910,568 3,486, , ,420 4,007,125 1,898,083 7,388,784 25,433,312 6/30/ ,717-1,425,373 52,374 5,840,403 3,426, , ,420 4,007,125 1,921,420 7,388,284 25,300,400 6/30/ ,425,373 52,374 5,979,788 3,416, ,420 4,006,000 2,273,127 7,353,657 25,278,809 6/30/ ,425,373 52,374 6,001,250 3,429, ,420 4,003,500 2,248,725 7,350,160 25,283,736 6/30/ ,425,373-6,024,000 3,428, ,420 4,004,250 2,272,982 7,341,490 25,268,756 6/30/ ,452,784-5,995,000 3,426, ,420 4,002,875 2,280,377 7,322,493 25,252,054 6/30/ ,425,373-5,972,250 3,481, ,420 4,004,000 2,276,281 7,312,909 25,244,539 6/30/ ,425,373-6,026,750 3,427, ,420 4,002,250 2,270,845 7,292,121 25,217,226 6/30/ ,425,373-6,027,250 3,428, ,220 4,032,175 2,273,918 7,279,872 25,105,179 6/30/ ,425,373-6,053,750 3,428, ,028,959 2,255,651 7,275,282 24,467,622 6/30/ ,224,395-6,011,625 3,418, ,027,819 2,748,592-24,430,979 6/30/ ,203, ,470, ,028,147 2,757,072-24,458,813 6/30/ ,216, ,478, ,029,300 2,758,243-24,482,686 6/30/ ,235, ,492, ,007,885-24,736,363 6/30/ ,918, ,918,873 6/30/ ,933, ,933,150 Current 2,082,031 1,848,598 2,079,800 51,464, ,619 83,143, ,304, ,005 9,134,840 62,092,050 40,803,762 89,109, ,013,779 (1) Estimated: Assumes the Series 2005B Certificates bear interest at an average annual interest rate of 4.622% (includes Broker-Dealer and Auction Agent fees). (2) Estimated: Assumes the Series 2008C Certificates bear an interest cost of 4.44%. Includes Swap Rate (3.91%) and FRN Spread (0.53%). (3) Estimated lease payment schedule, represents sinking fund payments and supplemental coupon payment requirements. Assumes no interest earnings on the sinking fund. 27

36 COMBINED CERTIFICATES PAYMENT SCHEDULE Fiscal Year Ended (June 30) Total Prior Certificates Series 2014-QSCB Certificates (1) Aggregate Annual Lease Payment Total 2015 $ 18,799,676 $ 40,282 $ 18,839, ,125, ,626 25,800, ,276, ,626 25,952, ,433, ,626 26,108, ,300, ,626 25,976, ,278, ,626 25,954, ,283, ,626 25,959, ,268, ,626 25,944, ,252, ,626 25,927, ,244, ,626 25,920, ,217, ,626 25,892, ,105, ,626 25,780, ,467, ,626 25,143, ,430, ,626 25,106, ,458, ,626 25,134, ,482, ,626 25,158, ,736, ,626 25,411, ,918, ,626 25,594, ,933, ,626 25,608, , , , , , , , , , ,661 Total $ 469,013,779 $15,538,707 $484,552,486 (1) Interest calculated net of a 4.40% Issuer Subsidy. Assumes annual sinking fund deposits beginning December 1, 2015 with no interest earnings. Figures are estimates and subject to change. 28

37 THE LEASES The following is a brief summary of certain provisions of the Series 2014-QSCB Lease and the Prior Leases, and the same is not intended to be definitive. Reference is made to the Series 2014-QSCB Lease and the Prior Leases which are available from the School Board and the Trustee, for the complete text thereof. See also APPENDIX C CERTAIN LEGAL DOCUMENTS. Authority The Series 2014-QSCB Lease and the Prior Leases are entered into pursuant to the authority granted under Sections (2), and (2), Florida Statutes, for the purpose of providing for the acquisition, construction, installation and lease-purchase of the Series 2014-QSCB Facilities and the Prior Facilities, respectively. Lease Term The Series 1996 Lease had an original Lease Term that commenced on December 1, 1996, and ended on June 30, 1997, when it was automatically renewed, and is automatically renewable annually through June 30, 2026, with a final Renewal Term of approximately one month from July 1, 2026 through and including July 31, 2026, unless sooner terminated in accordance with the provisions of the Series 1996 Lease. The Series 2004A Lease had an original Lease Term that commenced on March 1, 2004, and ended on June 30, 2004, when it was automatically renewed, and is automatically renewable annually through June 30, 2029, with a final Renewal Term of approximately one month from July 1, 2029 through and including July 31, 2029, unless sooner terminated in accordance with the provisions of the Series 2004A Lease. The Series 2004-QZAB Lease had an original Lease Term that commenced on June 1, 2004 and ended on June 30, 2005 when it was automatically renewed, and is automatically renewable annually through June 30, 2020, with a final Renewal Term of approximately one month from July 1, 2020 through and including July 31, 2020, unless sooner terminated in accordance with the provisions of the Series 2004-QZAB Lease. The Series 2005 Lease had an original Lease Term that commenced on July 1, 2005, and ended on June 30, 2006, when it was automatically renewed, and is automatically renewable annually through June 30, 2030, with a final Renewal Term of approximately one month from July 1, 2030 through and including July 31, 2030, unless sooner terminated in accordance with the provisions of the Series 2005 Lease. The Series 2005-QZAB Lease had an original Lease Term that commenced on December 23, 2005 and ended on June 30, 2006, when it was automatically renewed, and is automatically renewable annually thereafter through June 30, 2020, with a final Renewal Term of approximately six months from July 1, 2018 through and including December 23, 2020, unless sooner terminated in accordance with the provisions of the Series 2005-QZAB Lease. The Series 2007A Lease had an original Lease Term that commenced on July 1, 2007, and ended on June 30, 2008, when it was automatically renewed, and is automatically renewable annually thereafter through June 30, 2032, with a final Renewal Term of approximately one month from July 1, 2032 through and including July 31, 2032, unless sooner terminated in accordance with the provisions of the Series 2007A Lease. The Series 2007B Lease had an original Lease Term that commenced as of July 1, 2007, and ended on June 30, 2008, when it was automatically renewed, and is automatically renewable annually thereafter through June 30, 2032, with a final Renewal Term of approximately one month from July 1, 2032 through and including July 31, 2032, unless sooner terminated in accordance with the provisions of the Series 2007B Lease. The Series 2008-QZAB Lease had an original Lease Term that commenced on September 23, 2008 and ended on June 30, 2009, when it was automatically renewed, and is automatically renewable annually thereafter through June 30, 2018, with a final Renewal Term of approximately three months from July 1, 2018 through and including September 23, 2018, unless sooner terminated in accordance with the provisions of the Series 2008-QZAB Lease. The Series 2009 Lease had an original Lease Term that commenced the date of delivery of the Series 2009 QSCB Certificates and continued through and including June 30,

38 when it was automatically renewed, and is automatically renewable annually thereafter through June 30, 2026, with a final Renewal Term of approximately six months from July 1, 2026 through and including December 15, 2026, unless sooner terminated in accordance with the provisions of the Series 2009 Lease. Series 2014-QSCB Lease. The Series 2014-QSCB Lease has an original Lease Term that commences on the date of delivery of the Series 2014-QSCB Certificates and ends on June 30, 2015, and continues through and including June 30 of the next succeeding calendar with a final Renewal Term of July 1, 2037 through and including December 1, 2037, unless earlier terminated in accordance with the provisions of the Series 2014-QSCB Lease. Termination of Lease Term As described under SECURITY FOR THE SERIES 2014-QSCB CERTIFICATES Additional Leases, the School Board may enter into Additional Leases. The Lease Term of the Leases, including the Series 2014-QSCB Lease and the Prior Leases and any subsequent Additional Lease, will terminate upon the earliest of any of the following events: (a) All Leases, including the Series 2014-QSCB Lease, will terminate on the latest Lease Payment Date set forth in such Lease (assuming all Lease Payments have been made); (b) All Leases, including the Series 2014-QSCB Lease, will terminate in the event of a nonappropriation of funds for the payment of Lease Payments; (c) All Leases, including the Series 2014-QSCB Lease, will terminate upon a default by the School Board with respect to any Lease and the termination of the Lease Term of all Leases by the Trustee pursuant to the Master Lease; and (d) A particular Lease will terminate upon payment by the School Board of the Purchase Option Price of the particular Facilities leased under such Lease by the School Board or upon provision for such payment pursuant to the Master Lease. Effect of Termination for Non-Appropriation or Default Upon termination of the Lease Term for the reasons referred to in (b) or (c) under THE LEASES Termination of Lease Term above, the School Board is required to immediately surrender its leasehold interest and deliver possession of all the Facilities financed under all Leases to the Trustee in the condition, state of repair and appearance required under the Leases, except for Designated Equipment, which the School Board shall not be required to surrender. All of the Series 2014-QSCB Facilities as well as the Series 2004-QZAB Facilities, the Series 2005-QZAB Facilities, and the Series 2008-QZAB constitute Designated Equipment. Upon such surrender, the Trustee will sell or relet its interest in such Facilities (excluding all Designated Equipment) in such manner and to such person or persons for any lawful purpose as it, in its sole discretion, determines to be appropriate. The proceeds derived from any such sale or reletting of the leasehold interest in such Facilities will be applied, as provided in the Trust Agreement, including to the payment of the Series of Certificates relating to such Facilities and certain other obligations payable from the Trust Estate after payment of the pro-rata portion of the expenses of the Trustee and then shall be applied as described in the Trust Agreement. EXCEPT AS OTHERWISE DESCRIBED ABOVE, IN NO EVENT WILL OWNERS OF A PARTICULAR SERIES OF CERTIFICATES HAVE ANY INTEREST IN OR RIGHT TO ANY PROCEEDS OF THE DISPOSITION OF FACILITIES FINANCED WITH THE PROCEEDS OF ANOTHER SERIES OF CERTIFICATES, EXCEPT FOR CERTIFICATES ISSUED TO REFUND SUCH CERTIFICATES OR CERTIFICATES ISSUED TO COMPLETE A PARTICULAR SET OF FACILITIES OR 30

39 CERTIFICATES ISSUED TOGETHER WITH ANOTHER SERIES OF CERTIFICATES TO FINANCE THE SAME FACILITIES. For a discussion of the remedies available to the Trustee if the School Board refuses or fails to voluntarily deliver possession of such Facilities to the Trustee, see APPENDIX C CERTAIN LEGAL DOCUMENTS Master Lease Purchase Agreement Surrender of Facilities. Upon termination of the Lease Term for the reasons referred to in (b) or (c) under THE LEASES Termination of Lease Term above, the School Board will be under no obligation to transfer possession of and/or title to the Designated Equipment to the Trustee, and the Trustee will have no right under the Lease to involuntarily dispossess the School Board of the use and enjoyment of or title to any of the Designated Equipment. THERE CAN BE NO ASSURANCE THAT THE REMEDIES AVAILABLE TO THE TRUSTEE UPON ANY TERMINATION OF THE LEASE TERM OF ANY LEASES FOR NON- APPROPRIATION OR DEFAULT AND THE DISPOSITION OF THE FACILITIES WILL PRODUCE SUFFICIENT AMOUNTS TO PAY THE OUTSTANDING CERTIFICATES. IN ADDITION, THE FEDERAL INCOME TAX STATUS OF PAYMENTS MADE TO SERIES 2014-QSCB CERTIFICATE HOLDERS AFTER SUCH TERMINATION MAY ALSO BE ADVERSELY AFFECTED. SEE TAX MATTERS HEREIN. FURTHER, AFTER ANY SUCH TERMINATION OF THE LEASE TERM OF ALL LEASES, TRANSFER OF SERIES 2014-QSCB CERTIFICATES MAY BE SUBJECT TO THE REGISTRATION PROVISIONS OF APPLICABLE FEDERAL AND STATE SECURITIES LAWS. SEE RISK FACTORS TAX EFFECT UPON TERMINATION OF LEASES AND APPLICABILITY OF SECURITIES LAW. ACCORDINGLY, THERE IS NO ASSURANCE THAT THE MARKET FOR THE SERIES 2014-QSCB CERTIFICATES WILL NOT BE IMPAIRED FOLLOWING TERMINATION OF THE LEASE TERM OF THE LEASES. SEE RISK FACTORS. Lease Payments Subject to the conditions stated in the Series 2014-QSCB Lease, the School Board has expressed its current intent to pay all Lease Payments due under the Leases, including the Series 2014-QSCB Lease and the Prior Leases; PROVIDED, HOWEVER, THAT THE SCHOOL BOARD IS NOT LEGALLY REQUIRED TO APPROPRIATE MONEYS TO MAKE LEASE PAYMENTS, WHICH CONSIST OF BASIC LEASE PAYMENTS, ADDITIONAL LEASE PAYMENTS, SUPPLEMENTAL PAYMENTS AND ALL OTHER AMOUNTS REQUIRED TO BE PAID BY THE SCHOOL BOARD PURSUANT TO THE TERMS OF A LEASE. LEASE PAYMENTS ARE PAYABLE FROM FUNDS APPROPRIATED BY THE SCHOOL BOARD FOR SUCH PURPOSE FROM CURRENT OR OTHER FUNDS AUTHORIZED BY LAW AND REGULATIONS OF THE STATE OF FLORIDA DEPARTMENT OF EDUCATION. NONE OF THE DISTRICT, THE SCHOOL BOARD, THE STATE OF FLORIDA, OR ANY POLITICAL SUBDIVISION THEREOF IS OBLIGATED TO PAY, EXCEPT FROM THE APPROPRIATED FUNDS, ANY SUM DUE UNDER THE SERIES 2014-QSCB LEASE. THE FULL FAITH AND CREDIT OF THE SCHOOL BOARD AND THE DISTRICT IS NOT PLEDGED FOR PAYMENT OF SUCH SUMS DUE THEREUNDER, AND SUCH SUMS DO NOT CONSTITUTE AN INDEBTEDNESS OF THE SCHOOL BOARD OR THE DISTRICT WITHIN THE MEANING OF ANY CONSTITUTIONAL OR STATUTORY PROVISION OR LIMITATION. NONE OF THE CORPORATION, THE TRUSTEE, OR ANY CERTIFICATE HOLDER MAY COMPEL THE LEVY OF ANY AD VALOREM TAXES BY THE SCHOOL BOARD TO PAY LEASE PAYMENTS DUE UNDER THE SERIES 2014-QSCB LEASE. SEE RISK FACTORS HEREIN. All Lease Payments due under the Leases will be made from current or other funds authorized by law and regulations of the State Department of Education and appropriated for such purpose by the School Board. 31

40 On each Lease Payment Date preceding each Payment Date for the Certificates, the School Board is required to pay to the Trustee the Basic Lease Payment then due on such date, which amount corresponds to the next succeeding payment due on the Series 2014-QSCB Certificates. The School Board is also required to pay, when due, Sinking Fund Payments, Additional Lease Payments, consisting of, among other things, fees and expenses of the Trustee and payments due under its Interest Rate Exchange Agreement. Lease Payments due under a Lease may be reduced, when applicable, by amounts credited as follows: (a) The Trustee will deposit into the applicable Lease Payment Account interest income in accordance with the Trust Agreement and apply such interest income as provided in the Trust Agreement. (b) On completion of the acquisition and construction of the corresponding Facilities and the payment of all Costs of the corresponding Facilities or on Termination of the Lease Term, the amounts, if any, remaining on deposit in the corresponding Acquisition Account will be transferred to the corresponding Lease Payment Account to be applied to Basic Lease Payments next coming due under the corresponding Lease. (c) There will be deposited in the corresponding Lease Payment Account or Prepayment Account, as the case may be, Net Proceeds realized in the event of damage, destruction or condemnation as provided for in the related Lease, to be applied to Basic Lease Payments under such Lease or the Prepayment Price of the related Certificates. Such provision is not applicable to the Series 2014-QSCB Lease or the Series 2014-QSCB Certificates because all of the Series 2014-QSCB Facilities are Designated Equipment. (d) There shall be credited against amounts due by the School Board, the amounts available for the payment of the interest portion of Basic Lease Payments in the Lease Payment Account (including investment earnings thereon). Insurance and Condemnation Proceeds Upon receipt of insurance or condemnation proceeds relating to the Facilities (other than Designated Equipment), the School Board may apply such proceeds to repair, restore or replace such Facilities. Notwithstanding the foregoing, the School Board may elect not to repair, restore or replace the Facilities or any portion thereof which has been destroyed, damaged or lost or condemned, with the Net Proceeds of any insurance or condemnation award. Upon such an election, in the event the School Board does not repair, restore or replace facilities damaged, destroyed or condemned under the provisions of the Master Lease, the School Board will cause the Net Proceeds of any insurance or condemnation award to be deposited to the related Acquisition Account, and to be applied to finance Facilities not then subject to the Master Lease and will cause the applicable Lease to add such Facilities thereto. The Series QSCB Facilities constitute Designated Equipment and are not subject to the foregoing. Lease Covenants Under the Leases, the School Board is responsible for the acquisition, construction and installation of the Facilities pursuant to the specifications of the School Board, including the letting of all contracts for the acquisition, construction and installation of the Facilities. Under the Leases, the School Board covenants that it will (i) maintain the Facilities at all times during the Lease Term in good repair and condition, (ii) pay applicable taxes, assessments, utility charges and other governmental charges, and (iii) provide applicable insurance coverage which may include self-insurance, including property and liability insurance, all in accordance with the terms and provisions relating to these requirements contained in the Leases. 32

41 Budget and Appropriation The cost and expense of the performance by the School Board of its obligations under the Series 2014-QSCB Lease, the Prior Leases and under any Additional Lease and the incurrence of any liabilities of the School Board under the Series 2014-QSCB Lease, the Prior Leases and under any Additional Lease including, without limitation, the payment of all Lease Payments and all other amounts required to be paid by the School Board under all Leases, are subject to and dependent upon appropriations being duly made from time to time by the School Board for such purposes. Under no circumstances will the failure of the School Board to appropriate sufficient funds constitute a default or require payment of a penalty, or in any way limit the right of the School Board to purchase or utilize educational facilities similar in function to those leased under any Lease. Unless the School Board, at a public meeting held prior to the end of the then current Fiscal Year, gives notice of its intent not to appropriate the funds necessary to make the Lease Payments coming due in the following Fiscal Year under all Leases, the Superintendent will include in the Superintendent s tentative budget proposal, as a separate line item, the funds necessary to make such Lease Payments, and all Leases will be automatically renewed on June 30 of the current Fiscal Year, for the following Fiscal Year, subject to appropriation being made by the School Board in the final official budget. If no such appropriation is made in the final adopted budget or if no official budget is adopted as of the last day on which a final budget is required to have been adopted under applicable law and regulations, all Leases will terminate as of the date of adoption of the final official budget or the last date on which a final budget is required to have been adopted, whichever is earlier and under which no appropriation has been made. If the School Board declares its intent at such public meeting prior to the end of the then current Fiscal Year not to appropriate the funds necessary to make Lease Payments under all Leases, no Leases will be automatically renewed for the following Fiscal Year, and all Leases will terminate on June 30 of the current Fiscal Year. The School Board will, however, provide written notice of any non-appropriation of funds, as described above, to the Trustee within three (3) Business Days after declaring its intent not to appropriate the funds necessary to make payments under all Leases. For a discussion of the effect of termination of the Lease Term of the Leases, see THE LEASES Effect of Termination for Non- Appropriation or Default and RISK FACTORS, herein. THE CORPORATION The Pasco County School Board Leasing Corporation (the Corporation ) is a Florida not-forprofit corporation formed in March 2004, for the purpose of acting as lessor under Leases with the School Board. The Corporation is the assignee of the Florida School Boards Association, Inc., which previously had been the lessor of certain Facilities to the School Board under the Master Lease. The sole member of the Corporation is the School Board. Upon dissolution, all of its assets will be distributed to the School Board. The Board of Directors of the Corporation consists of the members of the School Board and its officers are School Board members and employees. There is no litigation currently pending or threatened against the Corporation. Pursuant to the Series 2014-QSCB Assignment Agreement, the Corporation has made an absolute and unconditional assignment of substantially all of its right and interest under the Series 2014-QSCB Lease to the Trustee, retaining its rights to indemnification, and to receive notices under the Master Lease. Title to the Series 2014-QSCB Facilities, all of which are Designated Equipment, is in the name of the School Board and will remain there. In accordance therewith, the Trustee collects directly all of the Basic Lease Payments and the Sinking Fund Payments which are the primary source of and security for the payment of the Series 2014-QSCB Certificates. The credit of the Corporation is not material to any of the 33

42 transactions contemplated in this Offering Statement. Accordingly, no financial information concerning the Corporation has been included herein, nor is it contemplated that any such financial information will be included in any future Offering Statement relating to the sale of any Additional Certificates or other obligations of the School Board or the Corporation. Pursuant to the Prior Leases entered into under the Master Lease, the Corporation also leases to the School Board certain other educational Facilities. See THE MASTER LEASE PROGRAM and MASTER LEASE FACILITIES herein. General THE SCHOOL DISTRICT OF PASCO COUNTY, FLORIDA The School Board is a corporate body existing under the laws of the State and is the governing body of the District. The School Board consists of five members elected for overlapping four-year terms. The District is organized under Section 4, Article IX, of the Constitution of the State of Florida and Chapter 1001 Florida Statutes, as amended. The District covers the same geographic area as Pasco County, Florida, (the County ). Management of the District is independent of the County government and other local governments within the County. The County Tax Collector collects ad valorem taxes for the District but exercises no control over the disposition of the District s tax receipts. For Fiscal Year , the District includes the operation of 86 schools (46 elementary schools, 15 middle schools, 13 senior high schools, four specialized education facilities) one virtual school, one vocational school and six charter schools, which provide public education for 70,169 full-time equivalent ( F.T.E. ) students in kindergarten through grade 12 programs. The School Board The School Board is the governing body of the District. The principal offices of the School Board are located in the City of Land O Lakes, Florida. The School Board is the policy-making body of the District, consisting of five members elected for overlapping four-year terms. Under existing statutes, the School Board s duties and powers include, but are not limited to, the acquisition, maintenance and disposition of school property within the District; the development and adoption of a school program for the District; the establishment, organization and operation of schools, including vocational and evening schools, programs for gifted students, handicapped students and students in residential care facilities; the appointment, compensation, promotion, suspension and dismissal of employees; the establishment of courses of study and the provision for adequate instruction aids; and the establishment of a system to transport students to school or school-related activities. The School Board also has broad financial responsibilities, including approval of the annual budget, adoption of the school tax levy and the establishment of a system of accounting and budgetary controls. The annual budget and accounting reports must be filed with the State Department of Education. The Chairman of the School Board is elected by the members of the School Board annually. The Superintendent of Schools is the ex-officio Secretary of the School Board. The present members of the School Board and the expiration of their respective terms are as follows: 34

43 Name Steve Luikart, Chairman Joanne Hurley, Vice Chairman Cynthia Armstrong Allen Altman Alison Crumbley Term Expiration November 2018 November 2016 November 2018 November 2018 November 2016 Superintendent of Schools The Superintendent of Schools is elected for a four-year term and serves as ex officio Secretary to and administrative officer of the School Board. The Superintendent oversees operations of the school system, makes policy recommendations to the School Board, and performs the duties assigned to him by law and the regulations of the State Department of Education. The Superintendent also prepares the annual budget for approval by the School Board, recommends the tax levy based upon needs illustrated by the budget, recommends debt issuance or borrowing plans of the School Board when necessary, provides recommendations for investment of available funds, and keeps records with respect to all funds and financial transactions of the School Board. Administration Kurt S. Browning was elected Pasco County Superintendent of Schools in November, Prior to being elected, Superintendent Browning was named Florida s Secretary of State by Governor Rick Scott in January He also served as Secretary of State under former Governor Charlie Crist s Administration from December of 2006 until April of Before entering the Department of State, Superintendent Browning served as the Supervisor of Elections for Pasco County for 26 years, where he was involved in Florida s elections community through service as President of the Florida State Association of Supervisors of Elections; as a member of Governor Jeb Bush s Task Force on Election Procedures, Standards and Technology; and as a member of the State Planning Committee for the Help America Vote Act. Superintendent Browning is a native Floridian and received a Bachelor s Degree in Political Science and a Master s Degree in Public Administration from the University of South Florida. Olga B. Swinson was appointed the Chief Finance Officer in November Prior to that, Ms. Swinson was the Director of Finance since July Ms. Swinson was an Internal Auditor during the school years and Supervisor of Finance from June 1993 until July Ms. Swinson worked for the Office of the Florida Auditor General from 1985 to Ms. Swinson earned her Bachelor of Arts in Accounting from the University of South Florida. She is a Certified Public Accountant and a Certified Government Financial Manager. She has been a member of the American Institute of Certified Public Accountants since 1984 and a member of the Florida School Finance Officers Association ( FSFOA ) since 1993 and served as President in Academics The School Board offers students a complete range of instructional services ranging from basic and standard instructional programs to special programs for gifted children, a full complement of vocational educational programs at high schools and exceptional education for children with learning disabilities. The exceptional student education programs are available at different school sites. The District is the 11th largest school district in the State of Florida and the 58th largest in the nation. 35

44 The 46 elementary schools house kindergarten through the 5th grade. The 15 middle schools are comprised of grades 6 through 8. The 13 high schools include grades 9 through 12 as well as the vocational programs. Additionally, there are four specialized education centers, one virtual school and six charter schools in the District. The elementary school program emphasizes basic skills including reading, writing, language arts, and mathematics. Balanced curriculum also includes instruction in science, computer literacy, health, social studies, art, music and physical education. These programs are designed to build a strong foundation and each child is required to attain very specific levels for achievement before promotion to the next grade. The secondary school program begins with middle school curriculum centering on English, math, science, computer literacy, and social studies. Students are encouraged to begin developing their strengths and interests through electives such as art, music, foreign languages, and vocational exploratory programs. High school programs are designed to meet the needs of the college bound as well as vocational students. All of the high schools are fully accredited by the State of Florida and the Southern Association of Colleges and Schools. Students who plan to continue their education into college may take a broad range of college preparatory courses as well as advanced placement and honors courses. The District offers International Baccalaureate curriculums as well as dual enrollment programs for students desiring to begin their college coursework early. In addition to the educational programs offered to K-12 students, the District offers prekindergarten services including: programs for babies of teen parents who are progressing toward achieving high school diplomas; programs for special education for infants and toddlers below the age of three; pre-kindergarten programs for three and four year old disabled students; and programs for eligible low income, at-risk pre-school age children. Historical Growth The following table presents a summary of general statistical data regarding the District. Summary of Statistical Data Seven-Year History Number of Instructional Personnel Net Current Expenditure per FTE Student School Year Number of Schools FTE Enrollment ,169 68,551 7, ,134 67,449 6, ,174 66,505 6, ,268 66,044 6, ,412 66,401 6, ,133 66,521 6, ,261 65,445 7,435 36

45 Growth Projections for Unweighted Full Time Equivalent (F.T.E.) Enrollment The Florida Department of Education has estimated the following F.T.E. Enrollment for School Years through : School Year F.T.E. Enrollment Percentage Change , % , % , % , % , % Employee Relations; Retirement and Other Postemployment Benefit Programs Employee Relations As of June 30, 2013, the professional staff of the District included 5,134 instructional personnel, 217 principals and assistant principals, and 77 administrators and managers. Other personnel include teacher s aides, clerks and secretaries, bus drivers, cafeteria personnel, custodial and maintenance workers, mechanics and warehousemen. The total number of regular personnel for the school year is 9,289. All employees except the administrative group, certain non-bargaining designated employees, managerial, technical and other professional employees, are currently represented by the United School Employees of Pasco (USEP). Accordingly, all instructional personnel and other school related personnel (instructional assistants/paraprofessionals, bus drivers, etc.) are represented by USEP and have contracts in effect through June 30, However, the compensation package for all bargaining units is negotiated each year. The compensation package was ratified on October 1, State and District Retirement Programs All regular employees of the District are covered by the Florida Retirement System ( FRS ), a State-administered cost-sharing multiple-employer defined benefit retirement plan (the DBRP ). Essentially all regular employees of participating employers are eligible and must enroll as members of the FRS. Benefits vest at specified numbers of years of service depending upon the employee s classification. The DBRP also includes an early retirement provision, but imposes a penalty for each year a member retires before the normal retirement age. The DBRP provides retirement, disability and death benefits and annual cost-of-living adjustments, as well as supplements for certain employees to cover social security benefits lost by virtue of retirement system membership. A Deferred Retirement Option Program (the DROP ) was established, effective July 1, It permits employees eligible for normal retirement under the DBRP to defer receipt of monthly benefit payments while continuing employment with a FRS employer. An employee may participate in the DROP for a period not to exceed 60 months after electing to participate. During the period of DROP participation, deferred monthly benefits are held in the FRS Trust Fund and accrue interest. The District s liability for participation in the DBRP is limited to the payment of the required contribution at the rates and frequencies established by law on future payrolls of the District. The District s contributions to the DBRP (including employee contributions) for the Fiscal Years ended June 30, 2011, June 30, 2012 and June 30, 2013, totaled $32,608,437, $23,775,784 and $22,865,903, respectively, which were equal to the required contributions for each Fiscal Year. 37

46 Effective July 1, 2002, the Public Employee Optional Retirement Program (the PEORP ) was implemented as a defined contribution plan alternative available to all FRS members in lieu of the DBRP. Employer contributions are defined by law, but the ultimate benefit depends in part on the performance of investment funds. The PEORP is funded by employer contributions that are based on salary and membership class (Regular Class, Special Risk Class, etc.). Contributions are directed to individual member accounts, and the individual members allocate contributions and account balances among various approved investment choices. Required District contributions made to the program for the Fiscal Years ended June 30, 2011, June 30, 2012 and June 30, 2013, totaled $5,181,595, $3,726,422 and $1,908,701, respectively. As authorized by Section , Florida Statutes, the School Board implemented an Early Retirement Plan (the Plan ), effective July 1, 1983, and amended as of January 1, The Plan is a single-employer defined benefit pension plan. The purpose of the Plan is to provide District employees who elect to retire under the early retirement provisions of the FRS described above, with a monthly benefit equal to the statutory reduction of the normal retirement benefits when early retirement precedes the normal retirement age of 62. Effective July 1, 1997, the amount of early retirement benefits for new participants ages 50 through 54 were reduced to a flat 35% of the FRS benefit, with this reduction phased in over a period of four years. In addition, the plan was amended effective June 1, 2011, to provide a onetime early retirement incentive payment for certain individuals who retired during the month. The payment was equal to 10% of annual salary to a maximum benefit of $5,000. The School Board administers the Plan assets in a pension trust fund and is responsible for their investment. The School Board also acts as administrative agent for the Plan. Total contributions to the Plan for the Fiscal Years ended June 30, 2011, June 30, 2012 and June 30, 2013 totaled $1,380,553, $1,509,443 and $1,578,667 respectively. All contributions are paid by the School Board and are made in accordance with actuarially determined contribution requirements determined through an actuarial valuation performed as of July 1, Costs of administering the Plan are financed through the Plan s resources (employer contributions and investment earnings). All assets in the District s pension trust fund are legally required reserves. The School Board has not designated these assets for any other purpose. Additional information regarding the retirement programs is included in Notes 16 and 17 to the audited financial statements for the Fiscal Year ended June 30, 2013 attached as Appendix B hereto. The School Board is currently contemplating changes to its investment policy related to the Plan. Such changes may impact the assumptions utilized by the Actuary to determine the School Board's liability. The School Board is planning to vote on the new investment plan in December 2014, with an expected effective date of January During its 2011 regular session, the State Legislature adopted legislation that makes significant changes to the Florida Retirement System with respect to employee contributions and employer contributions, among other items. Effective July 1, 2011, all members of the Florida Retirement System were required to contribute 3% of their gross compensation toward their retirement. In addition, the legislation reduced the required employer contribution rates for each membership class and subclass of the Florida Retirement System. For Fiscal Year , contribution rates ranged from 9.85% to 20.92% of annual covered payroll. Under the adopted legislation, employer contribution rates range from 4.91% to 14.10% of annual covered payroll. The savings resulting from such reduced contributions were used to partially offset the reduction in State education funding for Fiscal Year See RISK FACTORS State Revenues herein. Additionally, the legislation eliminated the cost of living adjustment for all Florida Retirement System employees for service earned on or after July 1, 2011, although the legislation does contemplate reinstatement of the adjustment in 2016 under certain conditions. 38

47 Other changes to the Florida Retirement System contained in the legislation only apply to employees who initially enrolled in Florida Retirement System on or after July 1, For personnel entering Florida Retirement System on and after July 1, 2011, the following changes apply: the average final compensation upon which retirement benefits are calculated is based on the eight highest (formerly five highest) fiscal years of compensation prior to retirement, the Deferred Retirement Option Plan (DROP) is maintained but the interest accrual rate was reduced from 6.5% to 1.3%, the normal retirement age is increased from 62 to 65 and the years of creditable service is increased from 30 to 33 and the vesting period is increased to eight years (formerly six). Other Post Employment Benefit Program In addition to its contributions under the State s retirement plan and the School Board s Plan described above, the School Board also pays a portion of the cost of health care, hospitalization and dental care insurance benefits for certain of its retired former employees. For those employees, the School Board contributes the same amount toward the retiree s health insurance premium each year as it does toward the regular employee s premium. This contribution begins upon retirement and continues until the retiree is eligible to receive Medicare benefits. Such benefits are considered part of the other postemployment benefits ( OPEB ) the District provides to its retired employees. At June 30, 2013, benefits were being provided to 617 retired former employees. The cost of benefits provided is recognized as an expense each month as premiums are paid. For the Fiscal Year, the District s premiums totaled $3,263,902 for all post-employment benefits. As with all governmental entities providing similar plans, the District was required to comply with the Governmental Accounting Standard s Board Statement No Accounting and Financial Reporting by Employers for Postemployment Benefit Plans other than Pension Plans ( GASB 45 ) no later than its fiscal year ended June 30, The District implemented GASB 45 prospectively on July 1, The District has historically accounted for its OPEB contributions on a pay as you go basis. GASB 45 applies accounting methodology similar to that used for pension liabilities to OPEB and attempts to more fully reveal the costs of employment by requiring governmental units to include future OPEB costs in their financial statements. While GASB 45 requires recognition and disclosure of the unfunded OPEB liability, there is no requirement that the liability of such plan be funded. In order to comply with GASB 45, the District retained Gabriel Roeder Smith & Company (the Actuary ), to actuarially review the District s OPEB liability and provide the District with a written valuation. The Actuary determined the District s actuarial accrued liability related to OPEB, which approximates the present value of all future expected postretirement life and medical premiums and administrative costs which are attributable to the past service of those retired and active employees, at $109,496,146 as of June 30, Such liability is amortized over 30 years. The Actuary also determined the District s annual required contribution ( ARC ), which is the portion of the total accrued actuarial liability allocated to the current fiscal year needed to pay both normal costs (current and future benefits earned) and to amortize the unfunded accrued liability (past benefits earned, but not previously provided for) to be $11,809,533 for the Fiscal Year ended June 30, The calculation of the accrued actuarial liability and the ARC is, by definition and necessity, based upon a number of assumptions, including interest rates on investments, average retirement age, life expectancy, healthcare costs per employee and insurance premiums, many of which factors are subject to future economic and demographic variations. The District s net, end-of-year OPEB obligation was $41,275,224 as of June 30, 2013, which reflects the District s approximately $5,600,582 contribution toward its OPEB liability during Fiscal Year While the District does not know at this time what its OPEB liabilities will be in connection with GASB 45 compliance in the future or how much of the related ARC s it will need to budget in future 39

48 years, it expects its OPEB liability to be significant, but manageable within its normal budgeting process. Additional information regarding the District s OPEB liabilities is included in Note 18 to the audited financial statements for the Fiscal Year ended June 30, 2013 attached as Appendix B hereto. Accounting and Funds Pursuant to Section 11.45, Florida Statutes, the financial operations of the School Board are subject to annual audit. The School Board may use independent auditors two out of every three fiscal years with the Auditor General s office auditing the financial operations of the School Board once every three fiscal years. Audit responsibilities assigned to the Auditor General and/or an independent auditor include the presentation of an annual report on the School Board s financial statements, assessment of the adequacy of the School Board s control environment, and determination of the School Board s compliance with legal requirements. Accounting policies conform with generally accepted accounting principles applicable to state and local governmental units. The financial statements include fund-basis financial statements and also government-wide financial statements prepared on the accrual basis of accounting that split the District s programs between governmental and business-type activities. The organization of the District s financial statements for Fiscal Year can be found in Note 1 to the audited financial statements of the District for the Fiscal Year ended June 30, 2013 attached hereto as Appendix B. For Fiscal Year , the organization of such financial statements was as follows: Government-wide Financial Statements - Government-wide financial statements, including the statement of net assets and statement of activities, present information about the District as a whole. These statements include the non-fiduciary financial activity of the primary government and its component units. The statements distinguish between governmental activities of the District and those that are considered business- type activities. Government-wide financial statements are prepared using the economic resources measurement focus. The statement of activities presents a comparison between direct expenses and program revenues for each function or program of the District s governmental activities and for each segment of the business-type activities. Direct expenses are those that are specifically associated with a service, program, or department and are thereby clearly identifiable to a particular function. Program revenues include charges paid by the recipient of the goods or services offered by the program, and grants and contributions that are restricted to meeting the operational or capital requirements of a particular program. Revenues that are not classified as program revenues are presented as general revenues. The comparison of direct expenses with program revenues identifies the extent to which each governmental function or business segment is self-financing or draws from the general revenues of the District. Fund Financial Statements - Fund financial statements report detailed information about the District in the governmental, proprietary, and fiduciary funds. The focus of governmental fund financial statements is on major funds rather than reporting funds by type. Each major fund is reported in a separate column. Nonmajor funds are aggregated and reported in a single column. Because the focus of governmental fund financial statements differs from the focus of government-wide financial statements, a reconciliation of the differences is presented with each of the governmental fund financial statements. The District reports the following major governmental funds: 40

49 General Fund - accounts for all financial resources not required to be accounted for in another fund, and for certain revenues from the State that are legally restricted to be expended for specific current operating purposes. Capital Projects - Other Funds - accounts for other miscellaneous funds from various sources which are restricted for capital outlay purposes. The District reports the following proprietary and fiduciary fund types: Nonmajor Enterprise Fund - Pasco Learning and Activity Centers of Enrichment (PLACE) Fund - accounts for the financial resources of the PLACE programs, a before and after school child care program. Internal Service Funds - accounts for the fully insured programs for employee group health; individual self-insurance programs for property, casualty, liability and workers compensation, and pharmacy program; the employee assistance program; graphic services; the energy management center and exclusive agreements administered by the School Board. Pension Trust Fund - accounts for resources used to finance the early retirement program. Private-Purpose Trust Fund - accounts for resources legally held in the Baertschi trust and administered by the District s Student Services Department devoted to providing financial assistance for medical care to students in Pasco County. All resources of the fund, including any earnings on invested resources may be used to support qualifying activities. There is no requirement that any portion of these resources be preserved as capital. Agency Funds - are used to account for resources of the school internal funds which are used to administer moneys collected at the several schools in connection with school, student athletic, class and club activities; and the Assist Believe and Care (ABC) program which is funded by employee and public donations, to assist financially disadvantaged students in the District s schools. Basis of Accounting Basis of accounting refers to when revenues and expenditures or expenses are recognized in the accounts and reported in the basic financial statements. Basis of accounting relates to the timing of the measurement made, regardless of the measurement focus applied. The government-wide financial statements are prepared using the accrual basis of accounting, as are the proprietary funds and fiduciary funds financial statements. Revenues are recognized when earned and expenses are recognized when a liability is incurred, regardless of the timing of the related cash flows. Property taxes are recognized in the year for which they are levied. Revenues from grants, entitlements, and donations are recognized in the fiscal year in which all eligibility requirements imposed by the provider have been satisfied. See APPENDIX B hereto. Budget Process State law requires the School Board to advertise its intent to adopt a tentative budget, including a capital outlay budget, within 29 days following the County Property Appraiser s official certification of taxable property, which usually occurs on or about July 1. The School Board holds a public hearing on the tentative budget and the proposed tax rates within five days of its advertisement and officially adopts the tentative budget and tax rates at the hearing. Thereafter, the County Property Appraiser prepares tax millage notices for property owners within the District. The final budget and tax rate are fixed on or 41

50 before September 18 of each year following a final public hearing. In accordance with such requirements, the School Board adopted the Budget for the Fiscal Year on September 16, The Superintendent of Schools is responsible for preparing the preliminary and tentative budgets for recommendation to the School Board. Florida law requires the School Board to adopt and maintain a balanced budget in which anticipated revenues combined with beginning fund balances equal appropriations. Generally, the final budget is substantially the same as the tentative budget since the School Board s hiring plans and materials purchases have been determined before the final budget is adopted. Capital Improvement Program The School Board requires the development of a continuous five-year Capital Improvement Program (the 5-Year CIP ). In each year, the 5-Year CIP is reviewed and revised as necessary to reflect the District s long range capital construction program, additions to the capital construction program resulting from accelerated student enrollment growth and improvements and additions to non-school sites. An annual update of the 5-Year CIP provides, upon approval by the School Board, a continuous five-year program. In connection with the infrastructure sales surtax referendum described under the immediately succeeding paragraph the School Board developed a 12-year Capital Improvement Plan (as revised from time to time, the 12-Year CIP ) that currently indicates capital improvement needs of approximately $1.4 billion. A portion of such 12-Year CIP ($725.0 million) is expected to be funded from sales tax revenue bonds and certificates of participation, infrastructure sales surtax proceeds, impact fees, other revenues of the District and other additional indebtedness and Certificates. The remainder of the 12-year CIP ($675 million) is currently unfunded. [Remainder of page intentionally left blank] 42

51 General Fund Operations The following table summarizes results of operations for the General Fund for the Fiscal Years ended June 30, 2012, 2013 and 2014, and the adopted budget for the Fiscal Year ending June 30, DISTRICT SCHOOL BOARD OF PASCO COUNTY Statement of Revenues, Expenditures and Changes in General Fund Balances for Fiscal Years and Budgeted Fiscal Year 2015 Audited Unaudited Budget Revenues: FY 2012 FY 2013 FY 2014 FY 2015 Intergovernmental: Federal Direct $468,628 $536,626 $460,154 $685,026 Federal through State 2,252,991 2,261, , ,851 State Sources 284,366, ,980, ,673, ,733,508 Local 144,374, ,911, ,054, ,935,993 Total Revenues $431,480,182 $443,690,228 $474,821,598 $491,054,378 Expenditures: Current Education: Instruction $271,521,509 $275,441,887 $288,344,020 $316,754,293 Pupil Personnel Services 21,583,415 21,523,167 21,952,924 24,409,949 Instructional Media Services 7,035,285 6,707,914 2,284,442 2,720,668 Instruction & Curriculum Development 8,802,783 8,452,383 10,070,907 11,289,000 Instructional Staff Training 6,824,522 6,324,236 2,322,475 2,843,254 Instruction Related Technology 4,536,729 4,433,650 7,320,007 7,018,653 School Board of Education 487, ,772 2,926,656 3,115,991 General Administration 565, , , ,216 School Administration 33,192,320 33,518,619 34,885,019 33,990,348 Facilities Acquisition & Construction 1,787,354 1,796,938 2,425,009 3,181,449 Fiscal Services 1,987,258 2,110,767 2,497,542 3,359,840 Food Services 186, , ,216 - Central Services 5,733,824 5,465,160 6,326,156 8,413,684 Pupil Transportation and Services 26,813,234 26,745,109 27,899,559 28,844,873 Operation of Plant 45,866,178 41,713,297 44,088,032 43,100,839 Maintenance of Plant 10,829,775 10,471,775 11,160,853 12,047,408 Administrative Technology Services 2,863,358 2,907,655 3,377,807 4,927,870 Community Services 540, , , ,904 Fixed Capital Outlay: Facilities Acquisition & Construction 158, , ,483 - Other Capital Outlay Total Expenditures $451,316,247 $449,649,188 $469,876,466 $507,544,239 Excess (Deficit) Revenues Over Expenditures $(19,316247) $(5,958,960) $4,945,152 $(16,489,861) Other Financing Sources (Uses) 7,230,541 5,320,722 2,193,867 1,102,568 Excess (Deficit) Revenues and Other Sources Over (Under) Expenditures and Other Uses $(12,605,524) $(5,958,960) $47, $54,783,642 Beginning Fund Balance 60,888,385 48,282,861 4,945,152 (16,489,861) Ending Fund Balance $48,282,861 $47,644,623 $54,783,642 $39,396,349 Source: District School Board of Pasco County, Florida Comprehensive Annual Financial Report for Fiscal Year ended June 30, Unaudited figures are from the District s Unaudited Financial Statements for the Fiscal Year ended June 30, Budget figures are from the Adopted Budget for Fiscal Year ended June 30,

52 Capital Projects Funds Operations The following table summarizes the results of operations for the Capital Projects Funds for the Fiscal Years ended June 30, 2012, 2013 and 2014, and the adopted budget for the Fiscal Year ending June 30, DISTRICT SCHOOL BOARD OF PASCO COUNTY, FLORIDA Statement of Operations for the Capital Projects Fund for Fiscal Years and Budgeted Fiscal Year 2015 Audited Unaudited Budget FY2012 FY2013 FY 2014 FY 2015 REVENUES: State $992,071 $968,256 $1,298,307 $2,524,446 Local 63,198,087 64,867,732 68,981,390 55,219,844 Total Revenues $64,190, $65,835,988 $70,279,697 $55,219,844 EXPENDITURES: (by object) Library Books $2,901 $60, Audio Visual Materials 21,732 25, Buildings and Fixed Equipment 19,952,029 8,808,365 16,330, ,716,503 Furniture, Fixtures, and Equipment 7,438,578 6,695,504 9,501,596 16,449,952 Motor Vehicles (including buses) 377, ,505 1,386,920 2,100,000 Land 44, ,152 2,265,725 5,352,688 Improvements Other Than Buildings 1,410,726 1,847,882 2,188,785 3,592,651 Remodeling and Renovations 4,785,632 7,963,486 8,315,137 24,386,166 Computer Software 3,770,900 4,854,230 4,635,113 17,571,745 Miscellaneous Expenses 853 1,442 1,507 - Total Expenditures $37,805,735 $31,063,290 $44,625,320 $255,170,105 Excess (Deficiency) of Revenues Over Expenditures $26,384,423 $34,722,698 $25,654,377 $(197,425,815) Other Financing Sources (Uses), Net (47,013,542) (29,566,809) 69,222,559 5,329,003 Excess (Deficiency) of Revenues and Other Sources Over Expenditures and Other Uses $(20,629,119) $(29,566,809) $ 25,654,377 $(197,425,815) Beginning Fund Balance 162,424, ,795, ,001, ,878,569 Ending Fund Balance $ 141,795,744 $147,001,633 $241,878,569 $ 49,781,757 Source: District School Board of Pasco County, Florida Comprehensive Annual Financial Report for Fiscal Year ended June 30, Unaudited figures are from the District s Unaudited Financial Statements for the Fiscal Year ended June 30, Budget figures are from the Adopted Budget for Fiscal Year ended June 30,

53 Outstanding Debt Information The following table shows the general long term debt of the School Board as of July 1, DISTRICT SCHOOL BOARD OF PASCO COUNTY, FLORIDA General Long Term Debt (As of July 1, 2014) General Description Self-Supporting State Bonds: (1) Outstanding Balance Series 2005A $ 70,000 Series 2005B 930,000 Series 2005B, Refunding 2,655,000 Series 2008A 4,400,000 Series 2009A Refunding 720,000 Series 2010A 1,320,000 Series 2011A Series 2014A, Refunding 1,220,000 1,724,000 District Revenue Bonds: Capital Improvement Revenue Bonds, Series ,775,000 Sales Tax Revenue Bonds, Series 2007 (2) 13,525,000 Sales Tax Revenue Bonds, Series ,715,000 Certificates of Participation: Series 2004A 2,050,000 Series 2004-QZAB (3) 4,546,000 Series 2005A 1,540,000 Series 2005B 30,500,000 Series 2005-QZAB (3) 785,612 Series 2007A 60,070,000 Series 2008C 73,050,000 Series 2008-QZAB (3) 585,005 Series 2009-QSCB (3) 11,000,000 Series 2013A, Refunding 45,385,000 Series 2014A, Refunding 30,655,000 Series 2014B, Refunding 75,656,458 Total $461,877,075 (1) (2) (3) Bonds are issued by the State School Board of Education on behalf of the District and are secured by a pledge of the District s portion of the State assessed motor vehicle license tax. The State s full faith and credit is also pledged as security for such Bonds. Fully matured on October 1, 2014 Represents principal portion of Lease Payments represented by the QZAB Certificates and QSCB Certificates due at their respective maturity date. Sinking Fund payments payable by the Board with respect to the QZAB Certificates and QSCB Certificates are paid annually, which amounts are expected to produce funds sufficient to pay the QZAB Certificates and QSCB Certificates at their respective maturity dates. The holders of QZAB Certificates and the Series 2009-QSCB Certificates receive an annual tax credit equal to the applicable tax credit rate on the respective date such Certificates were issued multiplied by the face amount of the applicable Certificates held by the holder thereof on the applicable credit allowance date. 45

54 DISTRICT REVENUES AND CERTAIN FINANCIAL INFORMATION The District derives its revenues from certain State and local sources. The major categories of these revenue sources are briefly described under the following sub-headings. See also THE SCHOOL DISTRICT OF PASCO COUNTY, FLORIDA for general financial, statistical and demographic data related to the District, APPENDIX B - COMPREHENSIVE ANNUAL FINANCIAL REPORT WHICH INCLUDES THE AUDITED FINANCIAL STATEMENTS OF THE DISTRICT SCHOOL BOARD OF PASCO COUNTY, FLORIDA FOR THE FISCAL YEAR ENDED JUNE 30, Local Revenue Sources Local revenue for District operating support is derived almost entirely from real and tangible personal property taxes. School districts in the State are permitted to levy ad valorem property taxes separately for (i) operational purposes, (ii) the payment of debt service, and (iii) capital outlays and maintenance of school facilities. The amount of each such levy is subject to various constitutional and statutory limitations. In addition, the District earns interest on cash invested and collects other miscellaneous revenues. The Florida Constitution limits the non-voted millage rate that school boards may levy on an annual basis for operational funds to 10 mills ($10 per $1,000 of taxable real and personal property value). Chapter 1011, Florida Statutes, as amended, further limits the millage levy for operational purposes to an amount set each year by the State appropriations act. Within this operational limit, each school district desiring to participate in the State s allocation of Florida Educational Finance Program ( FEFP ) funds for current operations must levy the millage for required local effort, which is set each year by the State Legislature. In addition to the required local effort, school districts are entitled to levy up to.748 mills as non-voted current operating discretionary millage. In addition to the operating levy limit, current law allows school districts to adopt a millage levy for capital outlay and maintenance of school facilities. See AD VALOREM TAX PROCEDURES Recent Legislative Initiatives and Constitutional Amendments Affecting Ad Valorem Taxation herein. The School Board intends to make Lease Payments on the Leases from moneys derived from a levy of a non-voted, real and tangible personal property tax millage, known as the Local Option Millage Levy, for capital outlay and maintenance purposes. In its 2008 session, the Florida Legislature reduced the maximum amount of the Local Option Millage levy from the 2.0 mills then in effect to 1.75 mills and in its 2009 session, the Florida Legislature further reduced the maximum levy from 1.75 mills to 1.50 mills. Florida law restricts the use of the Local Option Millage Levy for payments on lease purchase agreements for educational facilities and sites to three-fourths (75%) of the millage levied; however in the 2012 Legislative Session, the law was amended to waive the three-fourths limit for lease purchase agreements entered into before June 30, As described below, in 2004, the School Board agreed to reduce the Local Option Millage Levy by 0.50 mills in return for a portion of the proceeds of a one-cent infrastructure sales surtax. Accordingly, the Local Option Millage Levy was 1.50 mills starting in Fiscal Year through Fiscal Year , is budgeted at 1.50 mills for Fiscal Year and, unless further reduced by the Florida legislature, the District anticipates it will remain at that level for the duration of the imposition of the one-cent infrastructure sales surtax (currently scheduled to expire on December 31, 2014). In the November 6, 2012, general election a ten-year extension of the term of the surtax was approved by the voters of the County. As described below, the District has received and will continue to receive proceeds of the sales surtax. Such amounts are not pledged to or presently available to make Lease Payments for the Certificates. The School Board is not required to levy any millage for capital outlay purposes in the future. Since a portion of the revenues from the levy of the Local Option Millage Levy is expected to be used for, but not pledged to, the payment of Lease Payments under the Leases, including the Series 2014-QSCB Lease and the Prior Leases, the failure of the School Board to continue to levy the Local Option Millage Levy at or above current levels would, more likely than not, have an adverse effect on the legally available revenues from which the School Board may appropriate to 46

55 make Lease Payments. In the event that revenues generated from the reduced Local Option Millage Levy are insufficient to make payments under a lease-purchase agreement entered into prior to June 30, 2008, an amount equal to the revenue generated from 0.50 mills of the operating levy may be used to make such Lease Payments. Additionally, pursuant to recently enacted legislation, if the revenue from 1.50 mills is insufficient to make payments under a lease-purchase agreement entered into prior to June 30, 2009 or to meet other critical capital needs, a school board may elect to levy up to 0.25 for capital purposes in lieu of a like amount of discretionary operating millage. The School Board is not required to levy any millage for capital outlay purposes in the future. Since revenues from the levy of the Local Option Millage Levy may be used for, but are not pledged to, the payment of Basic Lease Payments under the Master Lease, the failure of the School Board to levy all or a portion of the Local Option Millage Levy would have an adverse effect on Available Revenues from which the School Board may appropriate funds to make Basic Lease Payments. SEE RECENT LEGISLATIVE INITIATIVES AND CONSTITUTIONAL AMENDMENTS CONCERNING AD VALOREM TAXES FOR INFORMATION CONCERNING RECENT LEGISLATION THAT MAY AFFECT THE DISTRICT S LOCAL OPTION MILLAGE LEVY. For operational purpose, the Florida Legislature annually places requirements on each school district to levy a millage rate that is defined by law to be the district required local effort for those school districts desiring to participate in the allocation of state funds available to school districts. The District s required local effort was mills for Fiscal Year and is budgeted at mills for Fiscal Year , a decrease of mills. School boards are also authorized to levy a discretionary millage for operations, not to exceed an amount established annually by the Legislature. The discretionary millage was mills for Fiscal Year and is budgeted at mills for Fiscal Year SEE RECENT LEGISLATIVE INITIATIVES AND CONSTITUTIONAL AMENDMENTS CONCERNING AD VALOREM TAXES FOR INFORMATION CONCERNING RECENT LEGISLATION THAT MAY AFFECT THE DISTRICT S REQUIRED LOCAL EFFORT. Historical millage rates (tax per $1,000 of assessed value) and the millage rates budgeted for the Fiscal Year are as follows: Required Local Effort Critical Operating Millage Discretionary (1) (1) (1) Total Operating Millage Capital Outlay Total Millage (2) (1) Includes an additional.231 mills supplemental discretionary levy in the Fiscal Year and an additional.241 mills supplemental discretionary levy in the Fiscal Year. For , due to a change in applicable law, the District was not authorized to levy an additional supplemental discretionary levy, but included a like amount (.25 mills) as part of its basic discretionary levy. (2) Excludes millage for general obligation bonds debt service which is explained below. Budgeted revenues from ad valorem taxes are based on applying millage levies to ninety-six percent (96%) of the non-exempt assessed valuation of real and personal property. Historically, the local taxes have been received at less than one hundred percent (100%) of assessed valuation due to the discounts for early payment. The County usually collects approximately 97.5 percent (97.5%) of the 47

56 levied taxes. Ad valorem tax receipts for operating purposes increased from approximately $120,318,952 in the Fiscal Year to approximately $121,429,536 for the Fiscal Year and are budgeted to be approximately $121,520,320 for the Fiscal Year. The School Board also receives educational facilities impact fees which are collected for all new residential construction in the County. The School Board received $6,011,229 in Fiscal Year , $8,711,117 in Fiscal Year and expects to receive approximately $8,750,000 in the Fiscal Year. In addition to the School Board levies, qualified electors, by referendum, may vote an additional millage levy for operational and capital outlay purposes, as prescribed by the Florida Constitution and applicable statutes. Before a school district may issue bonds, qualified electors within the district must approve a millage levy to pay the principal of and interest on such bonds. Currently, the District has no outstanding general obligation bonds. In a 2004 referendum election (the Sales Surtax Referendum a levy of a one cent infrastructure sales surtax within the County was approved. The School Board committed to reduce the Local Option Millage Levy (described herein under Local Revenue Sources above) by 0.50 mills for the duration of the levy of the sales surtax. Pursuant to an Interlocal Agreement among the District, the County and the municipalities in the County, the District is reimbursed an amount of the sales surtax proceeds approximately equal to the proceeds of 0.50 mills for each year and the remaining sales surtax proceeds is distributed to the District, the County and the municipalities, with the District receiving 45%. Imposition of the surtax commenced January 1, 2005 and originally was to expire on December 31, As a result of the reimbursement to the District for reducing the Local Option Millage Levy and allocation to the District of 45% of the remaining sales surtax proceeds, the District estimates that it will receive approximately $240 million in sales surtax moneys during the original 10-year levy of the surtax. Revenues realized from the levy of the infrastructure sales surtax have been pledged to pay the District s Sales Tax Revenue Bonds, Series 2007 (the Sales Tax Bonds ). However, to the extent not needed to pay debt service on the Sales Tax Bonds and in the event the School Board takes subsequent action to allow for such use, the excess sales surtax proceeds would be available to make Lease Payments in respect of the School Board s Certificates of Participation. The District received approximately $25,321,574 in total sales surtax revenues in fiscal year and approximately $27,490,903 in Fiscal Year Sales surtax revenues are estimated to be approximately $28,784,359 for Fiscal Year See the table entitled Anticipated Local Option Millage Levy Required to Cover Certificate Payments under DISTRICT REVENUES AND CERTAIN FINANCIAL INFORMATION Lease Payment Coverage herein. In the November 6, 2012, general election a ten-year extension of the term of the surtax was approved by the voters of the County. State Revenue Sources Florida Education Finance Program. The major portion of State support is distributed under the provisions of the Florida Education Finance Program, which was enacted by the State Legislature in Basic FEFP funds are provided on a weighted full-time equivalent ( FTE ) student basis and through a formula that takes into account: (i) varying program costs; (ii) cost differentials between districts; (iii) differences in per-student costs due to the density of student population; and (iv) the required level of local support. Program cost factors are determined by the State Legislature each year. The amount of FEFP funds disbursed by the State is adjusted four times during each year to reflect changes in FTE and in other variables comprising the formula, as well as to compensate for increases or decreases in ad valorem tax revenue resulting from adjustments to the valuation of non-exempt property in each county. To participate in FEFP funding, the District must levy a minimum millage for operating purposes, which is set by the State Department of Education. The District s general fund receipts from 48

57 the State for FEFP pursuant to the above formula for Fiscal Years and were $229,215,516 and $256,270,767 respectively, and is budgeted at $275,480,805 for Fiscal Year Capital Outlay. State capital outlay revenues represented $968,256 or approximately 1.5% of the District s total capital outlay revenues for Fiscal Year State revenues represented $1,298,307 or approximately 1.8% of the District total capital outlay revenues for Fiscal Year Budgeted State capital outlay revenues available to the District are $2,524,446 or approximately 4.4% of the District s budgeted total capital outlay revenues in the Adopted Budget for Fiscal Year The primary source of State educational funding contributions to the District s capital outlay requirements is the Florida Public Education Capital Outlay program ( PECO ). PECO funds are derived from the gross receipts taxes for utility services levied pursuant to Chapter 203, Florida Statutes, and bonded pursuant to Article XII, Section 9 of the Florida Constitution. The method of allocation of funds to the district school boards is provided by State law based upon a statutory formula, components of which are the number of students in various districts and the proposed uses of the funds by the various districts. The State Commissioner of Education administers the PECO program and allocates or reallocates funds as authorized by law. Under PECO, the State did not distribute funds in both Fiscal Year and PECO funds available to the District are budgeted to be approximately $1,308,354 for Fiscal Year See RISK FACTORS State Revenues herein. The District also receives motor vehicle license revenues, also known as capital outlay and debt service ( CO&DS ) funds. CO&DS funds can be used to make lease-purchase payments, but only if the lease-purchase facility appears on the project priority list (the PPL ) approved by the State Board of Education. In November 2002, Florida voters passed a constitutional amendment (Amendment 9) requiring school class sizes to be capped by the 2010 school year at 18 students in grades kindergarten through third, 22 in grades fourth through eighth and 25 in high schools. In 2003, the legislature created the Classrooms for Kids program and Effort Recognition program and since then has appropriated approximately $2.53 billion statewide for the construction of new student stations to reduce class size. The District received the entire amount of State revenue bond proceeds from the Classrooms for Kids program and Effort Recognition program to which it is entitled for the purpose of constructing new classroom space as provided by law. See DISTRICT REVENUES FOR CAPITAL PROJECTS Legislation Related to Class Size Reduction and Pre-K Programs for information regarding Amendment 9. Under the Act the District may be entitled to receive other state revenues pursuant to other programs if the District achieves certain standards relating to its capital outlay efforts. Some of such revenues may be used to make lease-purchase payments. It is not possible at this time to determine or estimate the amount of such state revenues, if any, that the District may receive in the future. Operating Revenue. The three primary sources of educational funding from the State are (i) basic Florida Educational Finance Program ( FEFP ) receipts, (ii) FEFP categorical program receipts, and (iii) certain other specified revenue sources. The major portion of State support is distributed under the provisions of the FEFP, which was enacted by the Florida Legislature in Basic FEFP funds are provided on a weighted full-time equivalent student ( FTE ) basis using a formula that takes into account (i) varying program cost factors, (ii) cost differentials among districts, (iii) differences in per-student costs due to density of student population and (iv) the required level of local support. The program cost factors which are used to determine the level of each school district s FEFP funding are determined by the Florida Legislature. The 49

58 amount of FEFP funds disbursed by the State is adjusted four times during each year to reflect changes in FTE and in variables comprising the formula. To participate in FEFP funding, the District must levy a minimum millage for operating purposes which is set by the Florida State Department of Education. The FEFP revenues received by the District were $204,656,075 for the Fiscal Year and $229,215,516 for the Fiscal Year. General Fund receipts from FEFP are budgeted to be approximately $275,480,805 for the Fiscal Year. FEFP categorical program receipts are lump sum appropriations from the State intended to supplement local school district revenues to enhance the delivery of educational and support services by each district. Among the categorical programs for which the largest appropriations are made are Class Size Reduction, School Recognition and Lottery Funds. Allocations for these categorical appropriations are based on funding formulae and discretionary State Department of Education grants. The Class Size Reduction program was created in order to implement two amendments to the Florida Constitution approved by the voters of the State of Florida. See DISTRICT REVENUES FOR CAPITAL PROJECTS Legislation Related to Class Size Reduction and Pre-K Programs. The majority of the funds available from these programs require actual appropriation by the School Board for the purposes for which they were provided. Total State categorical aid increased from $76,900,810 for the Fiscal Year to $77,199,387 in the Fiscal Year. FEFP categorical receipts are budgeted to be approximately $78,275,090 for the Fiscal Year. The District also receives State educational funding from a variety of miscellaneous State programs. These sources include State mobile home license tax revenues and the Florida State Lottery. Special Revenue Sources The District also receives certain local, state and federal moneys, substantially all of which are restricted for specific programs. Programs funded with these special revenue sources in the past include school food service operations and programs financed through the Educational Handicapped Act, the Education Consolidation and Improvement Act and other federally financed programs. [Remainder of Page intentionally left blank] 50

59 Lease Payment Coverage The following table sets forth the millage levy that would provide 1.00x coverage of the maximum annual payments represented by the outstanding Prior Certificates and the Series 2014-QSCB Certificates based on current law, assuming a 96% collection of the taxes levied: Anticipated Local Option Millage Levy Required to Cover Lease Payments Represented by the Prior Certificates and the Series 2014-QSCB Certificates Net Taxable Assessed Valuation (FY 2015): $22,408,154,786 Local Option Capital Outlay Millage Assumed Tax Collection Rate 96.0% Millage Levy Required to Satisfy Prior Certificates Lease Payments and the Series 2014-QSCB Certificates Total Revenue Generated by 1.50 mill Levy at 96% collection (FY 2015) $32,267,743 Total Maximum Annual Lease Payments (FY 2018) (1) 26,108,938 Minimum Millage Levy Needed to Satisfy Maximum Annual Lease Payments (2) (1) (2) Assumes that (i) the Series 2005B bear interest at 4.622%, (ii) the Series 2008C bear interest at 4.44%, (iii) the Series 2009 QSCB s represents sinking fund payments and supplemental coupon payment requirements. Assumes no interest earnings on the sinking fund, (iv) the Series 2014-QSCBs interest is calculated net of a 4.40% Issuer Subsidy. Assumes annual level sinking fund deposits beginning December 1, 2015 with no interest earnings. Under current law, the 75% limitation on the use of the Local Option Millage revenues for the payment of lease-purchase agreements is waived for lease-purchase agreements originally entered into prior to June 30, Accordingly, only the Lease Payments with respect to Leases originally entered into after June 30, 2009 are subject to the 75% limitation. As a result, mills would be required to be levied in order to satisfy the Maximum Annual Lease Payments with respect to the Leases still subject to the 75% limitation. Legislation Related to Class Size Reduction and Pre-K Programs Amendment 9 to the State Constitution requires that the State Legislature provide funding for sufficient classrooms so that class sizes can be reduced to certain constitutional class size maximums by the beginning of the 2010 school year. Amendment 9 and Section , Florida Statutes, which implements Amendment 9, collectively, are referred to herein as the Class Size Legislation. The Class Size Legislation established constitutional class size maximums limiting students per class to no more than 18 for pre-kindergarten through 3rd grade, 22 for grades 4 through 8 and 25 for grades 9 through 12. Such legislation generally provided for a phased-in compliance which would be determined on a school-by-school basis through and including Fiscal Year , with final compliance on an individual classroom basis beginning in Fiscal Year In the event a school district was not in compliance with such requirements, the legislation provided that the State would reduce categorical funds due to such school district for operational purposes. The Class Size Legislation further created an Operating Categorical Fund for Class Size Reduction, the Classroom for Kids Program, the District Effort Recognition Grant Program and the 51

60 Class Size Reduction Lottery Revenue Bond Program to provide funding programs for capital outlays and operating expenditures necessary in relation to these mandated class size reductions. The Class Size Legislation requires each school board to consider implementing various policies and methods to meet these constitutional class sizes, including encouraging dual enrollment courses, encouraging the Florida Virtual School, maximizing instructional staff, reducing construction costs, using joint-use facilities, implementing alternative class scheduling, redrawing attendance zones, implementing evening and multiple sessions and implementing year-round and non-traditional calendars. Through Fiscal Year , the District complied with the requirements of the Class Size Legislation which was based on the average class size at each school. Beginning in Fiscal year , the requirements were based on the number of students in each individual classroom. As of the October 2012 Survey, the week during which DOE determines compliance with class size maximums, the District had 100% of the classrooms in compliance. Amendment 8 to the State Constitution provides that every 4-year old child in the State shall be offered a free, high quality pre-kindergarten learning opportunity by the State. Part V of Chapter 1002, Florida Statutes, creates a statewide Voluntary Pre-kindergarten Education Program (the Pre-K Program ). Among other things, the Pre-K Program provides eligibility and enrollment requirements, authorizes parents to enroll their children in a school-year pre-kindergarten ( Pre-K ) program delivered by a private Pre-K provider, a summer program delivered by a public school or private Pre-K provider or, if offered in a school district that meets class-size reduction requirements, a school year Pre-K program delivered by a public school. The Pre-K Program also requires school districts to deliver summer Pre-K programs and permits school districts to deliver school-year Pre-K programs. Additionally, the Pre-K Program appropriates State funds to finance the Pre-K programs and provides the method for calculating the funds allocated to each Pre-K program provider. General The Pre-K Legislation provides State funding for the Pre-K programs. AD VALOREM TAX PROCEDURES Ad valorem taxes may be levied only by counties, school districts, municipalities and certain special districts. No ad valorem taxes may be levied by the State upon real estate or tangible personal property. Real and personal property valuation is determined as of January 1 by the County Property Appraiser. Except as noted immediately below and under Constitutional Amendments Related to Ad Valorem Taxes Save Our Homes Amendment below, all taxable real and tangible personal property must be assessed at 100 percent of fair market value. The following uses of real property are generally exempt from ad valorem taxation: religious, educational, charitable, scientific, literary and governmental. In addition, there are special exemptions for widows, hospitals, homesteads and homes for the aged and disabled veterans. The homestead exemption exempts from taxation the first $25,000 of the assessed valuation of a residence occupied by the owner on a permanent basis, as of January 1 of the year of valuation. Agricultural land, noncommercial recreational land, inventory and livestock are assessed at less than 100 percent of fair market value. Constitutional Amendments Related to Ad Valorem Taxes Save Our Homes Amendment. By voter referendum held on November 2, 1992, Article VII, Section 4 of the Florida Constitution was amended by adding thereto a subsection which, in effect, limits 52

61 the increases in assessed just value of homestead property to the lesser of (1) three percent of the assessment for the prior year or (2) the percentage change in the Consumer Price Index for all urban consumers, U.S. City Average, all items 1967=100, or successor reports for the preceding calendar year as initially reported by the United States Department of Labor, Bureau of Labor Statistics. Further, the amendment provides that (1) no assessment shall exceed just value, (2) after any change of ownership of homestead property or upon termination of homestead status such property shall be reassessed at just value as of January 1 of the year following the year of sale or change of status, (3) new homestead property shall be assessed at just value as of January 1 of the year following the establishment of the homestead, and (4) changes, additions, reductions or improvements to homestead shall initially be assessed as provided for by general law, and thereafter as provided in the amendment. The amendment is known as the Save Our Homes amendment. The effective date of the amendment was January 5, 1993 and, pursuant to a ruling by the Supreme Court of the State of Florida it began to affect homestead property valuations commencing January 1, 1995, with 1994 assessed values being the base year for determining compliance. In the November 7, 2006 general election, the voters of Florida approved amendments to the State Constitution, which provide for an increase in the homestead (ad valorem tax) exemption to $50,000 from $25,000 for certain low-income seniors effective January 1, 2007 and provide a discount from the amount of ad valorem taxes for certain permanently disabled veterans effective December 7, 2006, respectively. Recent Legislative Initiatives and Constitutional Amendments Affecting Ad Valorem Taxes Several amendments to the Florida Constitution affecting Ad Valorem Taxes have been approved by voters in the recent past including the following. Constitutional amendments related to ad valorem exemptions. On January 29, 2008, in a special election held in conjunction with Florida s presidential primary, the requisite number of voters approved amendments to the State Constitution exempting certain portions of a property s assessed value from taxation. The following is a brief summary of certain important provisions contained in such amendments: 1. Provides for an additional exemption for the assessed value of homestead property between $50,000 and $75,000, thus doubling the existing homestead exemption for property with an assessed value equal to or greater than $75,000. See AD VALOREM TAX PROCEDURES - Property Assessment for a description of the homestead exemption. This exemption does not apply to school district taxes. 2. Permits owners of homestead property to transfer their Save Our Homes benefit (up to $500,000) to a new homestead property purchased within two years of the sale of their previous homestead property to which such benefit applied if the just value of the new homestead is greater than or is equal to the just value of the prior homestead. If the just value of the new homestead is less than the just value of the prior homestead, then owners of homestead property may transfer a proportional amount of their Save Our Homes benefit, such proportional amount equaling the just value of the new homestead divided by the just value of the prior homestead multiplied by the assessed value of the prior homestead. As discussed above, the Save Our Homes amendment generally limits annual increases in ad valorem tax assessments for those properties with homestead exemptions to the lesser of three percent (3%) or the annual rate of inflation. This exemption applies to all taxes, including school district taxes. 53

62 3. Exempts from ad valorem taxation $25,000 of the assessed value of property subject to tangible personal property tax. This limitation applies to all taxes, including school district taxes. 4. Limits increases in the assessed value of non-homestead property to 10% per year, subject to certain adjustments. The cap on increases would be in effect for a 10 year period, subject to extension by an affirmative vote of electors. This limitation does not apply to school district taxes. The amendments were effective for the 2008 tax year ( fiscal year for local governments). While certain members of the Florida Legislature publicly indicated that they would seek to replace the ad valorem revenues lost by school districts with other revenue sources, the Florida Legislature approved significant budget cuts for education during recent legislative sessions. However, the State budget does include a slight increase in funding for education. See OPERATING REVENUES OF THE DISTRICT State Sources State Categorical Programs herein. From time to time over the last few years, the Save Our Homes assessment cap and portability provision described above have been subject to legal challenge. The plaintiffs in such cases have generally argued that the Save Our Homes assessment cap constitutes an unlawful residency requirement for tax benefits on substantially similar property, in violation of the State Constitution s Equal Protection provisions and the Privileges and Immunities Clause of the Fourteenth Amendment to the United States Constitution and that the portability provision simply extends the unconstitutionality of the tax shelters granted to long-term homeowners by Save Our Homes. The courts in each case have rejected such constitutional arguments and upheld the constitutionality of such provisions. However, there is no assurance that any future challenges to such provisions will not be successful. Any potential impact on the District or its finances as a result of such challenges cannot be ascertained at this time. Exemption for Deployed Military Personnel. In the November 2010 General Election voters approved a constitutional amendment which provides an additional homestead exemption for deployed military personnel. The exemption equals the percentage of days during the prior calendar year that the military homeowner was deployed outside of the United States in support of military operations designated by the legislature. This constitutional amendment took effect on January 1, Reduction in Local Option Millage Levy. In 2008, Section , Florida Statutes, was amended to reduce the maximum millage rate that school districts could levy for capital outlay and maintenance purposes (referred to in this Offering Statement as the Local Option Millage Levy) from 2.0 mills to 1.75 mills commencing in Fiscal Year In conjunction with such reduction, the State s Commissioner of Education increased the amount of the required local effort for each school district in the State, which resulted in a shift of the millage (and associated tax revenues) from capital outlay and maintenance purposes to operational purposes. However, if the revenues generated from the reduced Local Option Millage Levy are insufficient to make payments under a lease-purchase agreement entered into prior to June 30, 2008, an amount equal to the revenue generated from 0.50 mills of the operating millage levy may be used to make such lease payments. As further discussed in AVAILABLE REVENUES FOR CAPITAL OUTLAY PROJECTS Local Sources the Local Option Millage Levy constitutes the primary source of funds to make Lease Payments with respect to the Series 2014-QSCB Certificates, as well as any other Certificates of Participation issued in connection with the Master Lease. Accordingly, such reduction reduces the funds available to make Lease Payments under the Series QSCB Lease and may adversely impact the District s ability to finance additional educational facilities under the Master Lease in the future. Section , Florida Statutes, was amended in the 2009, 2010 and 2011 legislative sessions to provide for the following: (i) a reduction of the maximum Local Option Millage Levy from 1.75 mills to 1.50 mills; (ii) a waiver of the three-fourths limit on use of proceeds from the Local Option Millage 54

63 Levy for lease-purchase agreements entered into before June 30, 2009, for the Fiscal Year (however, see Legislation Waiving 75% Limitation on Use of Local Option Millage Levy below for information regarding an amendment to this provision); (iii) if the revenue from 1.50 mills is insufficient to make the payments due under a lease-purchase agreement entered into prior to June 30, 2009, or to meet other critical fixed capital outlay needs, authorization for school districts to levy up to 0.25 mills for capital improvement needs in lieu of an equivalent amount of the discretionary mills for operations as provided in the State General Appropriation Act; and (iv) authorization for school boards, by a super majority vote, to levy an optional 0.25 mills for critical capital outlay needs or for critical operating needs. The authorization to levy the millage described in clause (iv) hereof expired on June 30, The reduction of the maximum permitted Local Option Millage Levy will directly reduce the amount of funds available to make Basic Lease Payments with respect to certificates of participation issued in connection with the Master Lease unless action is taken pursuant to clause (iii) to levy an additional 0.25 mills for capital purposes. The School Board is levying mills of discretionary capital outlay millage pursuant to the authority referred to in clause (iii) above. Legislation Waiving 75% Limitation on use of Local Option Millage Levy. During the 2012 regular legislative session, Section , Florida Statutes, was further amended to indefinitely allow a waiver of the three-fourths limit on the use of proceeds from the Local Option Millage Levy for leasepurchase agreements entered into before June 30, Previously, such waiver was only authorized for the Fiscal Year (as described in clause (ii) of the preceding paragraph). Such provision became effective on July 1, Proposals Affecting Ad Valorem Taxation and District Finances Other Proposals Affecting Ad Valorem Taxation. During the 2011 regular legislative session, the legislature passed Senate Joint Resolution 592 ( SJR 592 ). SJR 592 allows totally or partially disabled veterans who were not Florida residents at the time of entering military service to qualify for the combatrelated disabled veteran s ad valorem tax discount on homestead property. The amendment became effective January 1, During the 2012 regular legislative session, the legislature passed House Joint Resolution 93 ( HJR 93 ). HJR 93 allows the State Legislature to provide ad valorem tax relief to the surviving spouse of a veteran who died from service-connected causes while on active duty as a member of the United States Armed Forces and to the surviving spouse of a first responder who died in the line of duty. The amount of tax relief, to be defined by general law, can equal the total amount or a portion of the ad valorem tax otherwise owed on the homestead property. The amendment became effective January 1, Also during the 2012 regular legislative session, the legislature passed House Joint Resolution 169 ( HJR 169 ) allowing the State Legislature by general law to permit counties and municipalities, by ordinance, to grant an additional homestead tax exemption equal to the assessed value of homestead property to certain low income seniors. To be eligible for the additional homestead exemption the county or municipality must have granted the exemption by ordinance; the property must have a just value of less than $250,000; the owner must have title to the property and maintained his or her permanent residence thereon for at least 25 years; the owner must be age 65 years or older; and the owner s annual household income must be less than $27,300. The additional homestead tax exemption authorized by HJR 169 would not apply to school property taxes. Each of the above described proposals was approved by the voters on November 6, At present, the impact of the amendments on the District s finances cannot be accurately ascertained. There can be no assurance that similar or additional legislative or other proposals will not be introduced or 55

64 enacted in the future that would, or might apply to, or have a material adverse effect upon, the District s finances. Other Legislative Proposals Relating to Ad Valorem Taxation. During recent years and in the current legislative session, various other legislative proposals and constitutional amendments relating to ad valorem taxation have been introduced in the State Legislature. Many of these proposals provide for new or increased exemptions to ad valorem taxation, limit increases in assessed valuation of certain types of property or otherwise restrict the ability of local governments in the State to levy ad valorem taxes at recent, historical levels. There can be no assurance that similar or additional legislative or other proposals will not be introduced or enacted in the future that would, or might apply to, or have a material adverse effect upon, the District or its finances. Establishment of the K-12 Public School Facility Funding Task Force. HB 5101 established the K-12 Public School Facility Funding Task Force (the Task Force ). The Task Force convened in the summer of 2012 for the purpose of examining all relevant factors in order to make recommendations to the State Legislature and the Governor for more equitable facility funding for public and charter schools. The issues considered by the Task Force included: (a) charter school facility funding needs; (b) existing funding and revenue sources available for fixed capital outlay needs for charter and public schools; (c) long-term debt for school facilities; (d) class size requirements and the impacts of such requirements of facilities funding needs; and (e) school district facilities utilization. The Task Force considered proposed recommendations to the Governor and State Legislature at its final meeting on November 16, 2012, but was unable to reach a consensus. Among the proposed recommendations considered, but not approved by a majority of the Task Force, were the following: That a stable capital outlay funding source be found for charter schools that is not dependent on annual legislative appropriations, and does not redirect currently available capital outlay funding for public schools, such as the Local Option Millage Levy. If such state funding cannot be identified, the proposed recommendations would require a school district to share a portion of its capital outlay funding with charter schools on a pro rata basis, based on a levy of 0.25 mills. The proposed recommendations also included an increase in the Local Option Millage Levy of 0.50 mills, to a total of 2.0 mills, of which 0.25 mills would be dedicated to compulsory charter school capital outlay funding. A district without charter schools would be allowed to levy up to 1.75 mills. As stated above, the Task Force was unable to reach a consensus or provide recommendations to the Governor and the State Legislature and it is unknown at this time as to whether any of the proposals considered by the Task Force will be adopted by the State Legislature and approved by the Governor in the future. Property Assessment Procedure The laws of the State require that all taxable real and tangible personal property must be assessed at fair market value, with some exceptions. Real and personal property valuations are determined each year as of January 1 by the County Property Appraiser s Office. The County Property Appraiser submits the tax roll to the Florida Department of Revenue for review and determination of, among other things, whether the tax roll meets the requirements of State law regarding just valuation. Each taxpayer is given notice by mail of the proposed property taxes and the assessed property value for the current year, and the dates, times and places at which budget hearings are scheduled to be held. The property owner has the right to file an appeal of the determination of assessed value with the Value Adjustment Board (the Adjustment Board ), which considers petitions relating to assessments and exemptions. The decision of the Adjustment Board may be appealed to the Circuit Court. The Adjustment Board certifies the assessment roll upon completion of the hearing of appeals to it. Millage rates are then computed by the various taxing authorities and certified to the County Property Appraiser, who applies the millage rates to the assessment roll. This procedure creates the tax roll, which is then certified and turned over to the County Tax Collector. 56

65 In 2011, the Florida Legislature created Section , Florida Statutes, which requires that taxpayers appealing the assessed value or assigned classification of their property must make a required partial payment of taxes (generally equal to 75% of the ad valorem taxes due, less the applicable statutory discount, if any) with respect to properties that will have a petition pending on or after the delinquency date (normally April 1). The new statute further provides that a taxpayer s failure to make the required partial payment before the delinquency date (normally April 1) will result in the denial of the taxpayer s petition. Procedure for Ad Valorem Tax Collections All real and tangible personal property taxes are due and payable on November 1 of each year or as soon thereafter as the assessment roll is certified and delivered to the County Tax Collector based on the valuation as of January 1 of such year. On or about November 1 of the year of valuation, the County Tax Collector mails to each property owner on the assessment roll a notice of taxes levied by Pasco County, the District and other taxing authorities. Taxes may be paid upon receipt of such notice with discounts at the rate of four percent (4%) if paid in the month of November, three percent (3%) if paid in the month of December, two percent (2%) if paid in the month of January and one percent (1%) if paid in the month of February. Taxes paid during the month of March are without discount. All unpaid taxes on real and tangible personal property become delinquent on April 1 of the year following the year in which taxes were levied or within sixty (60) days after the mailing of the original tax notice of the final assessment rate, whichever is later. All taxes collected are remitted by the County Tax Collector to the governmental unit levying the taxes. Delinquent real property taxes bear interest at the rate of one and one-half percent (1-1/2%) per month from April 1, or within sixty (60) days after the mailing of the original tax notice of the final assessment rate, whichever is later, until a tax certificate is sold at auction, from which time the interest rate shall be as bid by the buyer of the tax certificate. Delinquent tangible personal property taxes also bear interest at the rate of one and one-half percent (1-1/2%) per month from April 1 until paid. Delinquent personal property taxes must be advertised within forty-five (45) days after delinquency, and after May 1 the property is subject to warrant, levy, seizure and sale. Florida law provides that real property tax liens and personal property tax liens are superior to all other liens, except prior United States Internal Revenue Service liens. The County Tax Collector advertises once each week for four weeks and sells tax certificates to the lowest bidder, based on the interest rate bid, commencing on or about June 1 of each year on substantially all real property with taxes due. Delinquent tax certificates not sold at auction revert to Pasco County. If the owner of real property subject to a tax certificate does not redeem the certificate within two years, the holder of the certificate is entitled to apply for a tax deed of sale. The highest bidder at such sale receives a tax deed for the property subject to the tax certificate. To redeem a tax certificate, the owner of the property must pay all delinquent taxes, the interest that accrued prior to the date of the sale of the tax certificate, charges incurred in connection with the sale of the tax certificate, omitted taxes, if any, and interest at the rate bid on the tax certificate from the date of the sale of the tax certificate to the date of redemption. The interest rate on a tax certificate is a minimum of five percent, unless the interest bid on the certificate is a lower rate. 57

66 Assessed Valuation The following table shows the total net assessed and estimated actual values of taxable property within the District for the last ten Fiscal Years. School District of Pasco County, Florida Net Assessed and Estimated Actual Value of Taxable Property Last Ten Fiscal Years (in thousands) Ratio of Net Assessed Estimated Value Fiscal Year Tax Year Assessed Value (1) Estimated Actual Value $21,275,685 $27,869, % ,945,685 31,053, ,127,467 32,238, ,427,865 35,920, ,694,361 43,265, ,893,993 45,758, ,949,524 40,868, ,263,731 30,519, ,991,326 24,691, ,275,385 21,234, (1) See AD VALOREM TAX PROCEDURES - Recent Legislative Initiatives and Constitutional Amendments Affecting Ad Valorem Taxes for information concerning recently adopted legislation that could impact the taxable assessed valuation. Source: District School Board of Pasco County, Florida Comprehensive Annual Financial Report for the Fiscal Year Ended June 30, 2013; Pasco County Property Appraiser. [Remainder of page intentionally left blank] 58

67 Ad Valorem Tax Levies and Collections The following table sets forth the amounts billed and the percent collected for ad valorem property taxes levied by the District: SCHOOL DISTRICT OF PASCO COUNTY, FLORIDA DISTRICT PROPERTY TAX LEVIES AND COLLECTIONS (IN THOUSANDS) LAST TEN FISCAL YEARS* Taxes Levied for the Fiscal Year Collected within the Fiscal Year of the Levy Collections in Subsequent Years Total Collections to Date Fiscal Year Amount Percentage of Levy Amount Percentage of Levy 2013 $155,364,403 $128,268, % (1) N/A $128,268, % (1) ,034, ,642, (2) 554, ,196, (2) ,353, ,468, , ,492, ,767, ,089, , ,142, ,147, ,271, , ,989, ,038, ,240, , ,701, ,838, ,711, ,675, ,387, ,434, ,217, , ,537, ,207, ,863, ,612, ,476, ,221, ,152, , ,686, *Unaudited. (1) Preliminary receipts by the District from Tax Collector through April 30, (2) Increase in collections is due to sale of tax certificates online. Source: The District School Board of Pasco County, Florida Comprehensive Annual Financial Report for the Fiscal Year ended June 30, [Remainder of page intentionally left blank] 59

68 Ad Valorem Millage Rates Years: The following table sets forth the direct and overlapping property tax rates for the last ten Fiscal Local Required Effort Millage (3) SCHOOL DISTRICT OF PASCO COUNTY, FLORIDA DIRECT AND OVERLAPPING PROPERTY TAX RATES LAST TEN FISCAL YEARS (per $1,000 assessed valuation) Discretionary Local Millage Supplemental Discretionary Millage (1) Capital Improvement Millage Debt Service Millage (2) Total Pasco Schools Fiscal Year Pasco County (1) For Fiscal Year 2010, the State of Florida combined the Supplemental Discretionary and Discretionary Local Millage into one Millage Rate. (2) (3) The voter approved Debt Service Millage expired with the 2008 Fiscal Year. Local Required Effort Millage for the 2011 Fiscal Year includes the millage of for Critical Need. Source: The District School Board of Pasco County, Florida Comprehensive Annual Financial Report for the Fiscal Year ended June 30, Adopted budget for the Fiscal Year ended June 30, [Remainder of page intentionally left blank] 60

69 Taxpayer Dade Energy Center (Florida Power Corporation Withlacoochee River Electric Cooperative Principal Property Taxpayers Current and Ten Years Ago (Unaudited) Taxable Assessed % of Total Taxable % of Total Valuation Assessed Assessed Assessed Rank Valuation Rank Valuation Valuation 1 $278,978, % 1 $259,057, % 2 217,080, ,820, HCA Health Services of Florida 3 180,645, ,946, Verizon Communications Inc ,670, ,832, Shady Hills Power Company 5 105,791, ,309, LLC Goodforest LLC 6 86,900, Florida Gas Transmission 7 80,444, Company LLC Bright House Networks 8 78,757, ,344, Wal-Mart Stores 9 77,857, ,286, Zephyrhills Bottled Water 10 59,692, ,939, Walgreen Co ,236, Gulfview Associates 9 40,691, Total $1,310,819, % $1,099,464, % [Remainder of page intentionally left blank] 61

70 INVESTMENTS At June 30, 2013, the School Board had approximately $6,687,384 invested in the State Board of Administration s Local Government Surplus Funds Trust Fund Investment Pool (Pool). On November 29, 2007, the State Board of Administration implemented a temporary freeze on the assets held in the Pool due to an unprecedented amount of withdrawals from the Pool coupled with the absence of market liquidity for certain securities within the Pool. The significant amount of withdrawals followed reports that the Pool held asset-backed commercial paper that was subject to sub-prime mortgage risk. On December 4, 2007, based on recommendations from an outside financial advisor, the State Board of Administration restructured the Pool into two separate pools. Pool A consisted of all money market appropriate assets, which was approximately $12 billion or 86% of Pool assets. Pool B consisted of assets that either defaulted on a payment, paid more slowly than expected, and/or had any significant credit and liquidity risk, which was approximately $2 billion or 14% of Pool assets. At the time of the restructuring, all current pool participants had their existing balances proportionately allocated into Pool A and Pool B. Currently, Pool A participants may withdraw 37% of their balance or $4 million, whichever is greater, without penalty. Withdrawals from Pool A in excess of the above limit are subject to a 2% redemption fee. New investments in Pool A are not subject to the redemption fee or withdrawal restrictions. Future withdrawal provisions from Pool A will be subject to further evaluation based on the maturities of existing investments and the liquidity requirements of the Pool. On December 21, 2007, Standard and Poor s Ratings Services assigned its AAAM principal stability fund rating to Pool A. Currently, Pool B participants are prohibited from withdrawing any amount from the Pool and a formal withdrawal policy has not yet been developed. Market valuations of the assets held in Pool B are not readily available. In addition, full realization of the principle value of Pool B assets is not readily determinable. The School Board had approximately $1,456,322 and $5,231,062 invested in Pool A and Pool B, respectively, as of June 30, None of the proceeds of the Series 2014-QSCB Certificates or the Prior Certificates will be or are invested in either Pool. Such funds are currently invested in other investments based on the guidelines established in the District s investment policy. RISK FACTORS EACH PURCHASER OF SERIES 2014-QSCB CERTIFICATES IS SUBJECT TO CERTAIN RISKS AND EACH PROSPECTIVE PURCHASER OF SERIES 2014-QSCB CERTIFICATES IS ENCOURAGED TO READ THIS OFFERING STATEMENT IN ITS ENTIRETY, INCLUDING THE APPENDICES HERETO. PARTICULAR ATTENTION SHOULD BE GIVEN TO THE FACTORS DESCRIBED BELOW WHICH, AMONG OTHERS, COULD AFFECT THE MARKET PRICE OF THE SERIES 2014-QSCB CERTIFICATES TO AN EXTENT THAT CANNOT BE DETERMINED. Investor Considerations with Respect to Issuer Subsidy on Series 2014-QSCB Certificates In the event of termination of the Series 2014-QSCB Lease there is no assurance that the Issuer Subsidy with respect to the Series 2014-QSCB Certificates will continue to be made to the School Board. In certain circumstances the Issuer Subsidy may be offset by the federal government for amounts determined to be owed by the School Board to it (or agencies of the federal government). Amounts owing and offset by the federal government may be unrelated to the Series 2014-QSCB Certificates. The amount of any offset is not predictable and the School Board does not currently expect that any 62

71 significant offsets will apply to the payment of the Issuer Subsidy. Any offset does not alter the School Board s obligation to pay principal, premium, if any, and interest represented by the Series 2014-QSCB Certificates. Additionally, the Code imposes certain requirements that the School Board must continue to meet after the Series 2014-QSCB Certificates are issued in order to receive the Issuer Subsidy. These requirements generally involve the use of the proceeds and certain filing requirements with the Internal Revenue Service ( IRS ). If the School Board does not meet these requirements, it is possible that the School Board may irrevocably lose the right to receive the Issuer Subsidy. However, the School Board has agreed in the Series 2014-QSCB Lease that so long as any Series 2014-QSCB Certificates remain Outstanding, it will comply with procedures and requirements set forth in the Code and any applicable regulations promulgated from time to time thereunder and any applicable guidance relating to federal subsidy bonds, which include Qualified School Construction Bonds ( QSCBs ), promulgated by the Department of Treasury or the IRS. Furthermore, the IRS has announced that it will send a compliance check questionnaire to all issuers of Build America Bonds ( BABs ), provisions of which are applicable to QSCBs, and has stated that it intends to audit a significant number of BAB issues depending on the responses it receives to the questionnaires and an examination of post-sale trade data available on the Municipal Securities Rulemaking Board s Electronic Municipal Market Access. This process can result in a reduction of BABs subsidy payments if the IRS believes there has been manipulation of pricing of BABs issues that results in higher subsidy payments. There has been no definitive statement as to the applicability of the foregoing, additional compliance requirements to QSCBs, but since the Issuer Subsidy is calculated in the same manner as the subsidy for BABs, there is no reason not to expect that the IRS and the Department of Treasury will not apply them to QSCBs as well. The Issuer Subsidy does not constitute a full faith and credit guarantee of the United States of America but is required to be paid by the Department of Treasury under the Recovery Act. No assurance can be given that any future legislation, clarification, or amendments to the Code, if enacted into law, or judicial decisions will not potentially reduce or eliminate the Issuer Subsidy expected to be received by the School Board with respect to the Series 2014-QSCB Certificates. In the event of the foregoing or if the School Board determines that a material adverse change has occurred to the applicable provisions of the Code, and the Issuer Subsidy is reduced or eliminated not as a result of an act or omission by the School Board, the School Board will have the right to prepay the Series 2014-QSCB Certificates. See THE SERIES 2014-QSCB CERTIFICATES Prepayment - Extraordinary Prepayment Extraordinary Optional Prepayment Due to the Occurrence of an Extraordinary Event herein. There is no guarantee that the District will receive the full amount of the Issuer Subsidy, even if the District is in compliance with all of the requirements of sections 54FA, 54F and 6431(f) of the Code. The Issuer Subsidy is subject to automatic offsets against certain amounts that may, for unrelated reasons, be owed by the District to the United States of America or an agency thereof. Moreover, the Budget Control Act of 2011 (the 2011 Act ) amended the Gramm-Rudman-Hollings Balanced Budget and Emergency Deficit Control Act of 1985 (the 1985 Act ), thereby implementing automatic reductions (i.e. sequestration ) to discretionary expenditures for fiscal year 2013, beginning January 1, On January 2, 2013, the 1985 Act was further amended by the American Taxpayer Relief Act of 2012 (the 2012 Act ), which, in part, extended the implementation of the automatic spending reductions until March 1, On March 1, 2013, and as required by the amendments to the 1985 Act, President Obama signed the Sequestration Order for Fiscal Year Pursuant to Section 251A of the Balanced Budget and Emergency Deficit Control Act, as Amended (the Order ), which provided that budgetary resources in each non-exempt budget account be reduced by the amount calculated by the Office of Management and Budget in its report to Congress of March 1, Pursuant to Section 251A(7)(A) of the 1985 Act, the Order was effective upon issuance. The OMB Report to the Congress on the Joint Committee Sequestration for Fiscal Year 2013, dated March 1, 2013 (the OB Report ), provides that 63

72 account Payment to Issuer of Qualified School Construction Bonds is subject to a sequester percentage (i.e. reduction) of 5.1% (for fiscal year 2013, the annualized percentage is 8.7%). Subsequent to the issuance of the Order, the IRS posted information on its website regarding the Effect of Sequestration on Certain State & Local Government Filers of Form 8038-CP, noting that the automatic reductions would take place as of March 1, 2013 and the sequestration reduction rate of 8.7% will be applied until September 31, 2013 or intervening Congressional action. For payments to issuers of Direct-Pay Bonds during federal fiscal year 2014, which ended September 30, 2014, the annual sequester rate was reduced to 7.2%. Subject to clarification and the possibility of Congressional action, issuers of Direct-Pay Bonds face reductions of up to 7.3% for payments during federal fiscal year 2015, which ends September 30, Unless otherwise resolved, sequestration may continue through the end of federal fiscal year 2024, with reductions in subsidy payments expected to vary between 5.5% and 7.3% of what would otherwise be received. For its Fiscal Year , the School Board anticipates its QSCB Issuer Subsidy to be reduced by 7.3% (which equates to a $21, reduction), resulting in a corresponding increase in interest costs for the District that must be paid from other revenue sources. See THE SERIES 2014-QSCB CERTIFICATES Prepayment herein for information concerning optional prepayment of the Series 2014-QSCB Certificates upon the occurrence of an extraordinary event (generally being the occurrence of an event that results in the loss of the right or opportunity of the District to receive all or part of the Issuer Subsidy). Annual Right of the School Board to Terminate the Series 2014-QSCB Lease Although the School Board has determined that the Series 2014-QSCB Facilities and the Prior Facilities are necessary to its operations and currently intends to continue the Series 2014-QSCB Lease in force and effect for the maximum Lease Term and has covenanted in the Series 2014-QSCB Lease that the Superintendent will include a sufficient amount in the tentative budget to enable the School Board to make the corresponding Lease Payments due in each Fiscal Year, the School Board is not required to appropriate funds for Basic Lease Payments. If for any Fiscal Year the School Board does not approve a final budget which appropriates sufficient funds from legally available revenues, or if no final budget is adopted as of the last day upon which a final budget is required to have been adopted under State law for payment of its obligations under the Series 2014-QSCB Lease, or any other Lease under the Master Lease, each respective Lease shall terminate as of the date of adoption of the final official budget, or such last day, whichever is earlier. THE LIKELIHOOD THAT THE MASTER LEASE WILL BE TERMINATED AS THE RESULT OF AN EVENT OF NON-APPROPRIATION IS DEPENDENT UPON CERTAIN FACTORS THAT ARE BEYOND THE CONTROL OF THE SERIES 2014-QSCB CERTIFICATE HOLDERS, INCLUDING THE CONTINUING FUTURE UTILITY OF THE SERIES 2014-QSCB FACILITIES, AND OTHER FACILITIES OF THE SCHOOL BOARD AND CHANGES IN POPULATION OR DEMOGRAPHICS WITHIN THE COUNTY. Limitation Upon Disposition Under the terms of the Series 2014-QSCB Lease as well as the Series 2004-QZAB Lease, Series 2005-QZAB Lease and Series 2008-QZAB Lease, the School Board may not be dispossessed of the Series 2014-QSCB Facilities, Series 2004-QZAB Facilities, Series 2005-QZAB Facilities and Series 2008-QZAB Facilities, respectively, or any personal property financed or refinanced, in whole or in part with the proceeds of the Series 2014-QSCB Certificates, Series 2004-QZAB Certificates, Series QZAB Certificates and Series 2008-QZAB Certificates, respectively, all of which constitutes Designated Equipment. 64

73 Applicability of Securities Laws After termination of the Series 2014-QSCB Lease, the transfer of a Series 2014-QSCB Certificate may be subject to or conditioned upon compliance with the registration provisions of applicable federal and state securities laws. Accordingly, there is no assurance that liquidity of the Series 2014-QSCB Certificates (and, consequently, the market price thereof) will not be impaired following termination of the Series 2014-QSCB Lease. Interest Rate Exchange Agreement The School Board entered into an interest rate exchange agreement in connection with the issuance of the Series 2008C Certificates (the Interest Rate Exchange Agreement). The School Board is subject to the risk that the provider of the Interest Rate Exchange Agreement could default on its obligations under the Swap Agreement. Payments made by the School Board under the Interest Rate Exchange Agreement constitute Additional Lease Payments under the Master Lease and are secured by the Series 2007B Lease. If a termination event were to occur under the Interest Rate Exchange Agreement, the School Board may be required to make a supplemental appropriation in order to make a termination payment, which could be significant. Such an obligation could have a material adverse effect on the School Board s ability to make Lease Payments, including payments required under the Series 2014-QSCB Lease. For additional information on the Interest Rate Exchange Agreement, see APPENDIX B COMPREHENSIVE ANNUAL FINANCIAL REPORT WHICH INCLUDES THE AUDITED FINANCIAL STATEMENTS OF THE DISTRICT SCHOOL BOARD OF PASCO COUNTY, FLORIDA, FOR THE FISCAL YEAR ENDED JUNE 30, 2013 Notes to the Financial Statements Note 7. Derivative Instruments herein. See SECURITY FOR THE SERIES 2014-QSCB CERTIFICATES Interest Rate Exchange Agreement herein. Local Option Millage Levy Revenue The amount which can be realized by the District derived from the levy of the Local Option Millage Levy, the District s primary source of repayment of the Series 2014-QSCB Certificates and a funding source for the District s Capital Improvement Plan, can be affected by a variety of factors not within the School Board s control including, without limitation, fluctuations in the assessed valuation of the property within the District and the amount of general business activity, growth and new construction which occurs within the District. There can therefore be no assurances that such revenues will not decrease in the event that such growth and new construction, for whatever reason, decreases or ceases altogether within Pasco County. Moreover, the School Board is not legally required to impose the Local Option Millage. See SECURITY FOR THE SERIES 2014-QSCB CERTIFICATES Limited Obligation of the School Board and DISTRICT REVENUES AND CERTAIN FINANCIAL INFORMATION Local Sources herein. The maximum Local Option Millage Levy is also subject to change pursuant to changes in applicable law. See AD VALOREM TAX PROCEDURES Recent Legislative Initiatives and Constitutional Amendments Affecting Ad Valorem Taxes herein for information regarding legislation that reduced the maximum Local Option Millage levy. State Revenues A large portion of the District s funding is derived from State sources. A significantly large percentage of such State revenues is generated from the levy of the State sales tax. The amounts budgeted for distribution from the State to the District are subject to change in the event that projected revenues are not realized. The State has experienced some significant shortfalls in sales tax revenues in 65

74 recent years which have resulted in cuts to school budgets. See DISTRICT REVENUES AND CERTAIN FINANCIAL INFORMATION State Revenue Sources State Categorical Programs and AD VALOREM TAX PROCEDURES Recent Legislative Initiatives and Constitutional Amendments Affecting Ad Valorem Taxes herein. On March 9, 2012, the Florida Legislature passed the State Budget for Fiscal Year Included in the adopted budget is a $597 million increase in State education funding compared to Fiscal Year , including an increase of $104 per student in the base student allocation component of FEFP. Such funding increase of approximately $23,511,908, when combined with the current increase in student enrollment in the District of approximately 500 unweighted full-time equivalent ( FTE ), is expected to result in an additional increase in overall student funding for Fiscal Year See DISTRICT REVENUES AND CERTAIN FINANCIAL INFORMATION Local Sources for information relating to the required local effort millage. On May 3, 2013, the Florida Legislature passed the State budget for Fiscal Year The adopted State budget provides for an approximately $1.05 billion increase in State funding for K-12 education, including a $480 million increase in salaries for school personnel, retirement rate increases and growth. As a result of the enacted budget, funding in the State is estimated to increase by approximately $400 per student or 6.5% over the Fiscal Year The District received a net increase of approximately $23,966,452 (of this amount $11,691,972 was earmarked for instructional salary increases) in State revenues for Fiscal Year as compared to Fiscal Year On May 2, 2014, the Florida Legislature passed the State budget for Fiscal Year The adopted State budget provides for an approximately $175 million increase in State funding for K-12 education. As a result of the enacted budget, funding in the State is estimated to increase by approximately $176 per student or 2.6% over the Fiscal Year The District estimates a net increase of approximately $17,346,117 in total State revenues for Fiscal Year as compared to Fiscal Year Additional Indebtedness The School Board has in the past, and may in the future, issue additional indebtedness other than in connection with the Master Lease secured by or payable from revenues which would otherwise be available to make Lease Payments without the consent of the Series 2014-QSCB Certificate holders. The incurrence of such additional indebtedness by the School Board may adversely affect the School Board s ability to make Basic Lease Payments under the Series 2014-QSCB Lease. LITIGATION There is no litigation now pending or threatened (i) to restrain or enjoin the issuance or sale of the Series 2014-QSCB Certificates, (ii) questioning or affecting the validity of the Series 2014-QSCB Lease or the obligation of the School Board to make Lease Payments, (iii) questioning or affecting the validity of any of the proceedings for the authorization, sale, execution or delivery of the Series 2014-QSCB Certificates or (iv) challenging the existence of the School Board or the District or the powers of the several offices of the officials of the School Board or the District or the titles of the officials holding their respective offices. Various suits and claims arising in the ordinary course of School Board operations are pending against the District. While the ultimate effect of such litigation cannot be ascertained at this time, in the opinion of the School Board Attorney, the liabilities that may arise from such actions would not result in 66

75 losses that would materially affect the financial position of the District or the School Board or the results of its operations. RATINGS Standard and Poor s Rating Services ( S&P ) and Moody s Investors Service ( Moody s ) have assigned ratings of AA (Stable Outlook) and "A2" (Stable Outlook), respectively, to the Series QSCB Certificates with the understanding that such ratings will be based on the Policy issued by AGM. In addition, Moody s has assigned a rating of A1 to the Series 2014-QSCB Certificates without regard to the Policy. An explanation concerning the significance of the ratings given by S&P and Moody s may be obtained from the following addresses: S&P at 25 Broadway, New York, New York and Moody s at 7 World Trade Center, 250 Greenwich Street, 23rd Floor, New York, New York (212) Certain information and materials concerning the Series 2014-QSCB Certificates, the School Board and the District were furnished to S&P and Moody s by the School Board. Any of the rating services may raise, lower or withdraw its ratings or change its outlook at any time. If a downward change or withdrawal should occur, it could have an adverse effect on the resale price of the Series 2014-QSCB Certificates. TAX MATTERS THE INTEREST PORTION OF THE BASIC LEASE PAYMENTS OF THE SERIES QSCB CERTIFICATES IS NOT EXCLUDED FROM GROSS INCOME FOR FEDERAL INCOME TAX PURPOSES. Except as described herein, Special Counsel will express no opinion as to any other tax consequences regarding the Series 2014-QSCB Certificates. Holders of the Series QSCB Certificates should consult their tax advisors with respect to the inclusion of the interest portion of the Basic Lease Payments of the Series 2014-QSCB Certificates in gross income for federal income tax purposes. The District has designated the Series 2014-QSCB Certificates as "qualified school construction bonds" within the meaning of Section 54F of the Code. Pursuant to Section 6431 of the Code, the District has elected to receive Federal Subsidy Payments in connection with the Series QSCB Certificates in lieu of any credit otherwise available to the owners of the Series 2014-QSCB Certificates under Section 54A of the Code. The owners of the Series 2014-QSCB Certificates will not receive a tax credit as a result of holding the Series 2014-QSCB Certificates. The following is a summary of certain anticipated United States federal income tax consequences of the purchase, ownership and disposition of the Series 2014-QSCB Certificates by certain persons. The summary is based upon provisions of the Code, the regulations promulgated thereunder and rulings and court decisions now in effect, all of which are subject to change. This summary is intended as a general explanatory discussion of the consequences of holding the Series 2014-QSCB Certificates, limited to those persons who hold the Series 2014-QSCB Certificates as capital assets within the meaning of Section 1221 of the Code. This summary does not purport to address all aspects of federal income taxation that may affect particular investors in light of their individual circumstances or certain types of investors subject to special treatment under the federal income tax laws, including but not limited to financial institutions, insurance companies, dealers in securities or currencies, persons holding the Series 2014-QSCB Certificates as a hedge against currency risks or as a position in a straddle for tax purposes, foreign investors or persons whose functional currency is not the U.S. dollar. This summary does not address alternative minimum tax issues or the indirect consequences to a holder of an equity interest in a holder of the Series QSCB Certificates. Potential purchasers of the Series 2014-QSCB Certificates should consult their 67

76 own tax advisors in determining the federal, state or local tax consequences to them of the purchase, ownership and disposition of the Series 2014-QSCB Certificates. As stated above, the interest portion of the Basic Lease Payments of the Series 2014-QSCB Certificates is not excluded from gross income for federal income tax purposes. Purchasers other than those who purchase the Series 2014-QSCB Certificates in the initial offering at their principal amounts will be subject to federal income tax accounting rules affecting the timing and/or characterization of payments received with respect to such Series 2014-QSCB Certificates. Generally, the interest portion of the Basic Lease Payments paid on the Series 2014-QSCB Certificates and recovery of accrued original issue and market discount, if any, will be treated as ordinary income to the Certificate holder, and, after adjustment for the foregoing, the principal portion of the Basic Lease Payments will be treated as a return of capital. Market Discount. If a Certificate holder purchases the Series 2014-QSCB Certificates in the secondary market for an amount that is less than the adjusted issue price of the Series 2014-QSCB Certificates, and such difference is not considered to be de minimis, then such discount will represent market discount. Absent an election to accrue market discount currently, upon a sale, exchange or other disposition of the Series 2014-QSCB Certificates, a portion of any gain will be ordinary income to the extent it represents the amount of any such market discount that was accrued through the date of the sale. In addition, absent an election to accrue market discount currently, the portion of any interest expense intended to carry a market discount bond is limited. Such Series 2014-QSCB Certificate holders should consult their own tax advisors with respect to whether or not they should elect to accrue market discount currently, the determination and treatment of market discount for federal income tax purposes and the state and local tax consequences of owning such Series 2014-QSCB Certificates. Tax Treatment of Bond Premium for the Series 2014-QSCB Certificates. If a Series QSCB Certificate holder purchases a Series 2014-QSCB Certificate at a cost greater than its principal amount, the Series 2014-QSCB Certificate holder may elect to treat such excess as amortizable bond premium. As the tax accounting treatment of bond premium is complex, such Series 2014-QSCB Certificate holders should consult their own tax advisors with respect to whether or not they should elect to amortize such premium under Section 171 of the Code. Sale, Exchange or Redemption. Upon a sale, exchange or redemption of the Series QSCB Certificates, Series 2014-QSCB Certificate holders will generally realize a capital gain or loss on the Series 2014-QSCB Certificates equal to the difference between the amount realized on the sale, exchange or retirement (less any accrued qualified stated interest which will be taxable as such) and the Series 2014-QSCB Certificate holder s adjusted tax basis on the Series 2014-QSCB Certificates. The Series 2014-QSCB Certificate holder s adjusted tax basis for the Series 2014-QSCB Certificates is the price such owner pays for the Series 2014-QSCB Certificates plus the amount of any original issue discount and market discount previously included in income, reduced on account of any payments received (other than qualified periodic interest payments) and any amortized bond premium. The legal defeasance of the Series 2014-QSCB Certificates may result in a deemed sale or exchange of such Series 2014-QSCB Certificate under certain circumstances, in which event an owner of the Series 2014-QSCB Certificates will also recognize taxable gain or loss as described above. Owners of such Series 2014-QSCB Certificates should consult their tax advisors as to the federal income tax consequences of such an event. Information Reporting and Backup Withholding. The Code subjects certain non-corporate owners of Series 2014-QSCB Certificates, under certain circumstances, to "backup withholding" at the rate specified in the Code with respect to payments on the Series 2014-QSCB Certificates and proceeds from the sale of Series 2014-QSCB Certificates. Any amount so withheld would be refunded or allowed as a credit 68

77 against the federal income tax of such owner of Series 2014-QSCB Certificates. This withholding generally applies if the owner of Series 2014-QSCB Certificates (i) fails to furnish the payor such owner's social security number or other taxpayer identification number ("TIN"), (ii) furnished the payor an incorrect TIN, (iii) fails to properly report interest, dividends, or other "reportable payments" as defined in the Code, or (iv) under certain circumstances, fails to provide the payor or such owner's securities broker with a certified statement, signed under penalty of perjury, that the TIN provided is correct and that such owner is not subject to backup withholding. Prospective purchasers of the Series 2014-QSCB Certificates may also wish to consult with their tax advisors with respect to the need to furnish certain taxpayer information in order to avoid backup withholding. Nonresidents. Under the Code, interest and original issue discount income with respect to the Series 2014-QSCB Certificates held by nonresident alien individuals, foreign corporations and other non-united States persons ( Nonresidents ) may not be subject to withholding. Payments on the Series 2014-QSCB Certificates to a Nonresident that has no connection with the United States other than holding the Series 2014-QSCB Certificates will generally be made free of withholding tax, as long as such holder has complied with certain tax identification and certification requirements. Nonresidents should consult their own tax advisors in determining the federal, state or local tax consequences to them of the purchase, ownership and disposition of the Series 2014-QSCB Certificates. DISCLOSURE REQUIRED BY FLORIDA BLUE SKY REGULATIONS Section , Florida Statutes, and the regulations promulgated thereunder require that the District make a full and fair disclosure of any bonds or other debt obligations of such entity that have been in default as to principal or interest at any time after December 31, 1975, as provided by rule of the Florida Department of Banking and Finance (the Department ). Pursuant to Rule 69W , Florida Administrative Code, the Department has required the disclosure of the amounts and types of defaults, any legal proceedings resulting from such defaults, whether a trustee or receiver has been appointed over the assets of the District, and certain additional financial information, unless the District believes in good faith that such information would not be considered material by a reasonable investor. The District is not and has not been in default on any bond issued since December 31, 1975 which would be considered material by a reasonable investor. CERTAIN LEGAL MATTERS Certain legal matters in connection with the authorization, execution, delivery and sale of the Series 2014-QSCB Certificates are subject to the approving legal opinion of Bryant Miller Olive P.A., Tampa, Florida, Special Counsel. The proposed form of such opinion is included as APPENDIX E Form of Opinion of Special Counsel herein. Special Counsel s opinion is based on existing law, which is subject to change. Such opinion is further based on factual representations made to Special Counsel as of the date thereof. Special Counsel assumes no duty to update or supplement its opinion to reflect any facts or circumstances that may thereafter come to Special Counsel s attention, or to reflect any changes in law that may thereafter occur or become effective. Moreover, Special Counsel s opinion is not a guarantee of a particular result, and is not binding on the IRS or the courts; rather, such opinion represents Special Counsel s professional judgment based on its review of existing law, and in reliance on the representations and covenants that it deems relevant to such opinion. Certain legal matters relating to disclosure will be passed upon for the School Board by Greenberg Traurig, P.A., Miami, Florida, Disclosure Counsel. Certain legal matters will be passed upon by McClain, Alfonso & Meeker, P.A., School Board Attorney. 69

78 UNDERWRITING The Series 2014-QSCB Certificates are being purchased by Raymond James & Associates, Inc. (the Underwriter ) at an aggregate purchase price of $13,576, (which represents the $13,655, principal amount of the Series 2014-QSCB Certificates minus an underwriting discount of $78,951.95). The offer of the Underwriter to purchase the Series 2014-QSCB Certificates provides for the purchase of all of the Series 2014-QSCB Certificates if any are purchased. The Series 2014-QSCB Certificates may be reoffered and sold by the Underwriter to bond houses, brokers or similar persons or organizations acting in the capacity of underwriters or wholesalers at prices that are lower than the stated public offering price. After the initial public offering, the offering price may change from time to time by the Underwriter. FINANCIAL ADVISOR Public Financial Management, Inc., Orlando, Florida, is serving as financial advisor to the School Board with respect to the issuance and sale of the Series 2014-QSCB Certificates. The financial advisor has advised the School Board in matters relating to the planning, structuring and issuance of the Series 2014-QSCB Certificates. The financial advisor is not obligated to undertake and has not undertaken to make an independent verification or to assume responsibility for the accuracy, completeness or fairness of the information contained in this Offering Statement. Public Financial Management, Inc. is an independent advisory firm and is not engaged in the business of underwriting, trading or distributing municipal or other public securities. INDEPENDENT AUDITORS The Financial Statements of the School Board as of and for the year ended June 30, 2013 included in this Offering Statement have been audited by Moore Stephens Lovelace, P.A., independent auditors, as stated in their report appearing in APPENDIX B COMPREHENSIVE ANNUAL FINANCIAL REPORT WHICH INCLUDES THE AUDITED FINANCIAL STATEMENTS OF THE DISTRICT SCHOOL BOARD OF PASCO COUNTY, FLORIDA FOR THE FISCAL YEAR ENDED JUNE 30, 2013 herein. Such financial statements are the most recently audited financial statements of the District. The independent auditors did not audit the financial statements of the discretely presented component units. Those financial statements were audited by other auditors whose reports thereon have been furnished to the independent auditor and the independent auditor s opinion, insofar as it relates to the amounts included for discretely presented component units, is based solely on the reports of other auditors. Moore Stephens Lovelace, P.A. has not participated in the offering of the Series 2014-QSCB Certificates. FORWARD LOOKING STATEMENTS This offering statement contains certain forward-looking statements concerning the School Board s or the District s operations, performance and financial condition, including its future economic performance, plans and objectives and the likelihood of success in developing and expanding. These statements are based upon a number of assumptions and estimates which are subject to significant uncertainties, many of which are beyond the control of the School Board or District. The words may, would, could, will, expect, anticipate, believe, intend, plan, estimate and similar expressions are meant to identify these forward-looking statements. Actual results may differ materially from those expressed or implied by these forward-looking statements. 70

79 CONTINUING DISCLOSURE Pursuant to the Disclosure Dissemination Agent Agreement, the School Board has agreed and undertaken for the benefit of Series 2014-QSCB Certificate holders and in order to assist the Underwriter in complying with the continuing disclosure requirements of Rule 15c2-12 of the Securities Exchange Commission (the Rule ) to provide certain financial information and operating data relating to the School Board and the Series 2014-QSCB Certificates in each year (the Annual Report ), and to provide timely notices of the occurrence of certain enumerated material events within ten (10) business days thereafter. Such undertaking shall only apply so long as the Series 2014-QSCB Certificates remain outstanding under the Trust Agreement. The Annual Report and audited financial statements and notices of material events will be filed annually or otherwise with the Municipal Securities Rulemaking Board ( MSRB ) via its Electronic Municipal Market Access ( EMMA ) system. The specific nature of the information to be contained in the Annual Report and the notices of material events are described in APPENDIX D - Form of Disclosure Dissemination Agent Agreement attached hereto. The Disclosure Dissemination Agent Agreement shall be executed by the School Board and Digital Assurance Certification, L.L.C. ( DAC ), as Dissemination Agent thereunder, prior to the issuance of the Series 2014-QSCB Certificates. With respect to the Series 2014-QSCB Certificates, no party other than the School Board is obligated to provide, nor is expected to provide, any continuing disclosure information with respect to the aforementioned Rule. In the past five years, the School Board has not failed to comply in any material respect with its continuing disclosure obligations relating to its Annual Reports. However, in the last five years, the School Board failed to provide a number of notices of rating changes by Moody s, Fitch and Standard & Poor s Ratings Services with respect to the providers of credit enhancement on certain of its Certificates and in 2010, a change in the ratings on the School Board s Certificates and sales tax revenue bonds. The School Board and DAC have now filed all required notices, and have implemented procedures to ensure the timely filing of all future material event notices. MISCELLANEOUS The information contained herein is subject to change without notice and no implication is to be derived therefrom or from the sale of the Series 2014-QSCB Certificates that there has been no change in the affairs of the School Board or the District from the date hereof. The references, excerpts and summaries of all documents and resolutions referenced herein do not purport to be complete statements of the provisions of such documents and resolutions, and reference is directed to all such documents, agreements and resolutions for full and complete statements of all matters of fact relating to the Series 2014-QSCB Certificates, the security for and the repayment of the Series 2014-QSCB Certificates and the rights and obligations of the holders thereof. Complete copies of such documents and resolutions may be obtained by request to Olga Swinson, Chief Finance Officer, School District of Pasco County, Florida, 7227 Land O Lakes Boulevard, Land O Lakes, Florida (Phone: or Fax: ) or during the offering period for the Series 2014-QSCB Certificates, from the Financial Advisor: Public Financial Management, Inc., 300 S. Orange Avenue, Suite 1170, Orlando, Florida (Phone: or Fax: ). This Offering Statement is submitted in connection with the sale of the securities referred to herein and may not be reproduced or used, as a whole or in part, for any other purpose. Any statements in this Offering Statement involving matters of opinion or of estimates, whether or not expressly so stated are intended as such and not as representations of fact. No representation is made that any such statements will be realized. Neither this Offering Statement nor any statement which may have been 71

80 made orally or in writing is to be construed as a contract or agreement between the School Board and the purchasers or the holders of any of the Series 2014-QSCB Certificates. This Offering Statement has been duly executed and delivered on behalf of the District by the authority of the School Board. THE DISTRICT SCHOOL BOARD OF PASCO COUNTY, FLORIDA By: /s/ Steve Luikart Chairman, The District School Board of Pasco County, Florida 72

81 APPENDIX A GENERAL INFORMATION CONCERNING PASCO COUNTY, FLORIDA

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83 GENERAL INFORMATION CONCERNING PASCO COUNTY, FLORIDA The following information concerning Pasco County, Florida (the County ), is included only for purposes of supplying general information regarding the area. Location, Area and Climate The County is a 745 square mile area located centrally on the west coast of Florida, 200 miles south of the state capitol of Tallahassee, 300 miles northwest of Miami and 50 miles west of Orlando. The County is approximately 25 miles northwest of the City of Tampa, and approximately 45 miles north of the City of St. Petersburg. Pasco County was established in 1887 and had a population of approximately 470,391 persons in Within its borders are six municipalities: the Cities of San Antonio, St. Leo, Zephyrhills, Port Richey, Dade City and New Port Richey, with Dade City being the County Seat. There are also several smaller unincorporated communities such as Darby, Holiday, Hudson, Wesley Chapel and Land O Lakes. The County is primarily a retirement and tourist area but construction, retail trade, service industries, agriculture and manufacturing play an increasingly active part in the community s financial status. Age is an important characteristic of the County s population, with nearly onefourth of its residents at 65 years of age or older. The County s per capita personal income for 2013 is estimated at $23,895. Per capita personal income in the State of Florida is estimated at $39,636 for the same period. The County s climate is one of the primary attributes that attracts its tourists and retirees. Average January temperatures are 71 degrees for the high and 48 degrees for the low. Average July temperatures are 92 degrees for the high and 72 degrees for the low. Average annual rainfall is 53 inches. County Government The County has a 5-member Board of County Commissioners (the County Board ) elected for staggered terms of 4 years. The Chairman and the Vice Chairman are elected by the County Board. The County Board apportions and levies County taxes and controls the expenditure off all County funds, except for schools, which are controlled by the District School Board of Pasco County. The budget year of the County runs from October 1 to the following September 30. Operating revenue is raised mainly from ad valorem real and personal property taxes, with supplements from state and federal sources for county roads, welfare and health. The County Board operates the county road system and has the power to establish, build, maintain, repair, protect and preserve these facilities. The County may issue bonds for all lawful purposes. The County Board correlates and is responsible for various types of elections in the County. Other elected officials serving county-wide are the 5-member School Board, a Superintendent of Schools, a Property Appraiser, a Tax Collector, a Supervisor of Elections, a Sheriff and a Clerk of the Circuit Court who is also ex officio Clerk of the County Board. The County Board appoints a County Administrator who serves at its pleasure. A-1

84 Population The primary factor influencing population growth in the County is migration from within the State as well as out of State. The concentration of population within the County is weighted toward the western coastal areas which are typified by suburban residential neighborhoods. The eastern portion of the County is more rural, with farming and ranching being more representative, although development is increasing. By 2020 the County s population is expected to increase to approximately 570,600 with the planned development of tens of thousands of homes over the next several years. The age distribution in the County is similar to that of Florida, but differs significantly with that of the nation. Both the County and Florida have a considerably larger proportion of persons 65 years and older than does the rest of the nation, but this age group has begun to gradually decrease in the County as more families with young children are attracted to the area. PASCO COUNTY, FLORIDA Population Estimates Pasco County (1) Florida (2) Year Population % Change Population % Change , ,259, , ,121, , ,940, , ,826, , ,711, , ,807, , ,680, , ,349, , ,918, , ,516, (1) Source: District School Board of Pasco County, Florida, Comprehensive Annual Financial Report for Fiscal Year ended June 30, (2) Source: Florida Research and Economic Database. Agriculture Farming has always been important to the economy of the County. Farming is diversified largely because of the variety of suitable soils. The number of farms has decreased during recent years as development has increased. Income and Labor Force In 2013 the County s labor force consisted of an estimated 193,456 persons. The average unemployment rate for the year was 9.9%. The County s economy is driven by retirees with more than half of the workforce employed in the retail trade and service industries. A-2

85 Taxpayer Dade Energy Center (Florida Power Corporation Withlacoochee River Electric Cooperative Principal Property Taxpayers Current and Ten Years Ago (Unaudited) Taxable % of Total Taxable % of Total Assessed Assessed Assessed Assessed Rank Valuation Valuation Rank Valuation Valuation 1 $278,978, % 1 $259,057, % 2 217,080, ,820, HCA Health Services of Florida 3 180,645, ,946, Verizon Communications Inc ,670, ,832, Shady Hills Power Company LLC 5 105,791, ,309, Goodforest LLC 6 86,900, Florida Gas Transmission Company 7 80,444, LLC Bright House Networks 8 78,757, ,344, Wal-Mart Stores 9 77,857, ,286, Zephyrhills Bottled Water 10 59,692, ,939, Walgreen Co ,236, Gulfview Associates 9 40,691, Total $1,310,819, % $1,099,464, % A-3

86 PASCO COUNTY, FLORIDA Principal Employers Current and 9 Years Ago Employer Rank Employees Percentage of Total County Employment Rank Employees Percentage of Total County Employment District School Board of Pasco County 1 8, % 1 7, % Wal-Mart 2 2, HCA Healthcare 3 2, Physicians Injury Medical Center, LLC 4 2, Pasco County Government 5 2, , Pasco County Sherriff 6 1, , State of Florida Government 7 1, , Florida Medical Clinic 8 1, Florida Hospital Zephyrhills 9 1, Morton Plan North Bay Hospital/Recovery Center Community Hospital of New Port Richey 5 1, Regional Medical Center Bayonet Point 6 1, Pasco Beverage, Inc Saddlebrook Resort US Postal Service Total 23, % 19, % Source: District School Board of Pasco County, Florida Comprehensive Annual Financial Report for the Fiscal Year ended June 30, A-4

87 PASCO COUNTY, FLORIDA Labor Force Estimates Calendar Year Labor Force Employed Unemployed Number Rate , ,788 8, , ,954 7, , ,374 7, , ,277 9, , ,030 14, , ,063 22, , ,775 24, , ,038 23, , ,383 19, , ,388 15, Source: Florida Research and Economic Database. PASCO COUNTY, FLORIDA Per Capita Personal Income Pasco County Florida Year Dollars % of Florida % of U.S. Dollars % of U.S. U.S , , , , , , , , , , , , , , , , , , , , , , , , , , ,693 Source: Florida Research and Economic Database. A-5

88 PASCO COUNTY, FLORIDA Property Tax Rates Direct and Overlapping Governments Last Ten Fiscal Years (Unaudited) MILLAGE* FISCAL YEAR COUNTY SCHOOLS TOTAL *Millage rate per $1,000 of assessed taxable property value. Source: District School Board of Pasco County, Florida Comprehensive Annual Financial Report for the Fiscal Year ended June 30, A-6

89 PASCO COUNTY, FLORIDA Property Tax Levies and Collections Last Ten Fiscal Years (Unaudited) Taxes Levied Collected within the Fiscal Year of the Levy Collections Total Collections to Date Fiscal Year for the Fiscal Year Amount (A) Percentage of Levy in Subsequent Years Total Amount (A) Percentage of Levy 2013 $156,192,206 $151,072, % $142,954 $151,215, % ,034, ,642, , ,196, ,353, ,468, , ,492, ,767, ,089, , ,142, ,147, ,271, , ,989, ,038, ,240, , ,701, ,838, ,711, ,675, ,387, ,434, ,217, , ,537, ,207, ,863, ,612, ,476, ,221, ,152, , ,686, NOTE: Property Taxes become due and payable on November 1 st of each year. A four percent (4%) discount is allowed if the taxes are paid in November, with the discount declining by one percent (1%) each month thereafter. Accordingly, taxes collected will never be 100% of the tax levy. Taxes become delinquent on April 1 st of each year and tax certificates for the full amount of any unpaid taxes and assessments must be sold not later than June 1 st of each year. (A) Net of allowable discounts Source: District School Board of Pasco County, Florida Comprehensive Annual Financial Report for the Fiscal Year ended 30, A-7

90 Transportation Facilities or sea. The County has a variety of convenient and efficient transportation methods by land, air Land. US 301 and 98 serve east Pasco County; Interstate 75, the Suncoast Parkway (SR589) and US 41 serve central Pasco County; and US 19 serves west Pasco County. State Roads 52 and 54 are the major east/west routes. Each of these routes can provide easy access to the regional and statewide transportation network that links the Tampa Bay Region to the rest of the nation. Interstate 75 leads to Tampa in the south and directly to Atlanta in the north, then on through the Midwest to Michigan. Interstate 4 links the area with Orlando and continues to Daytona Beach, where it connects with Interstate 95 to reach the entire United States Atlantic coast. Interstate 75 intersects with Interstate 10 just south of the Georgia Border providing direct access to the Western United States. CSX Railway, which provides rail service in Central and East Pasco County, provides long-haul Class I mainline rail service for manufacturing, mining and agricultural companies throughout the Tampa Bay area. Four short-line railroads provide linkages to CSX mainline track. CSX Intermodal, a CSX subsidiary, provides intermodal stacktrain service from Tampa, which reaches all major East, West and Gulf coast ports. Air. South of the County, Tampa International Airport is conveniently located just 30 minutes from most areas of Pasco County, serving approximately 17 million passengers in fiscal year 2012 with an average of 212 daily departures via 21 carriers. Tampa International Airport is also served by three air cargo carriers, and in fiscal year over 88.5 tons of air cargo passed through Tampa International Airport. The County has the Zephyrhills Municipal Airport with a 5,067-foot runway in the eastern portion of the county. There are also several small, privately operated airports in the County for private or business use. Sea. The 12 th largest cargo port in the nation, the Port of Tampa can be accessed directly from the Suncoast Parkway (SR589) and Interstate 75. The Port of Tampa has the largest dockside cold storage facility in North America. More tonnage is moved through the port than all other ports in Florida combined. The port accommodates approximately 50 million tons of containerized general cargo and bulk cargo per year. The Port of Tampa has a main shipping channel depth of 43 feet, and is the closest full service U.S. port to the Panama Canal. With several home ported passenger vessels, the Port of Tampa is becoming a major cruise port. A-8

91 APPENDIX B COMPREHENSIVE ANNUAL FINANCIAL REPORT WHICH INCLUDES THE AUDITED FINANCIAL STATEMENTS OF THE DISTRICT SCHOOL BOARD OF PASCO COUNTY, FLORIDA FOR THE FISCAL YEAR ENDED JUNE 30, 2013

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94 Comprehensive Annual Financial Report of the District School Board of Pasco County Land O Lakes, Florida for the Fiscal Year Ended June 30, 2013 B-2 Issued by: Finance Services Department

95 B-3 District School Board of Pasco County Comprehensive Annual Financial Report For the Fiscal Year Ended June 30, 2013 Table of Contents Introductory Section: Letter of Transmittal Certificate of Achievement for Excellence in Financial Reporting Certificate of Excellence in Financial Reporting List of Principal Officials Organizational Chart Financial Section: Exhibit, Schedule or Table Page No(s). Independent Auditor s Report 1-4 Management s Discussion and Analysis 5-20 Basic Financial Statements Government-wide Financial Statements Statement of Net Position A 21 Statement of Activities B Fund Financial Statements Balance Sheet-Governmental Funds C 24 Reconciliation of the Governmental Funds Balance Sheet to the Statement of Net Position D 25 Statement of Revenues, Expenditures, and Changes in Fund Balances- Governmental Funds E Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances for Governmental Funds to the Statement of Activities F 28 Statement of Revenues, Expenditures, and Changes in Fund Balances- Budget and Actual-General Fund G Statement of Revenues, Expenditures, and Changes in Fund Balances- Budget and Actual- Special Revenue-Other Federal Programs Fund H Statement of Revenues, Expenditures, and Changes in Fund Balances- Budget and Actual- Special Revenue-Federal Economic Stimulus I Programs Fund Statement of Fund Net Position-Proprietary Funds J 38 Statement of Revenues, Expenses, and Changes in Fund Net Position- Proprietary Funds K 39 Statement of Cash Flows-Proprietary Funds L 40 Statement of Fiduciary Net Position-Fiduciary Funds M 41 Statement of Changes in Fiduciary Net Position-Fiduciary Funds N 42 Notes to Financial Statements Other Required Supplementary Information i-vi vii viii ix x Combining and Individual Fund Financial Statements and Schedules: Exhibit, Schedule or Table Page No. Combining Schedules of Nonmajor Governmental Funds Combining Balance Sheet-Nonmajor Governmental Funds A Combining Schedule of Revenues, Expenditures, and Changes in Fund Balances-Nonmajor Governmental Funds B Schedules of Revenues, Expenditures, and Changes in Fund Balances- Budget and Actual-Governmental Funds Special Revenue-Food and Nutrition Services Fund C1 98 Debt Service-State Board of Education Bonds Fund C2 99 Debt Service-District Revenue Bonds Fund C3 100 Debt Service-Certificates of Participation Fund C4 101 Capital Projects-Public Education Capital Outlay Fund C5 102 Capital Projects-Other Fund C6 103 Capital Projects-State Board of Education Bonds Fund C7 104 Capital Projects-Capital Outlay and Debt Service Fund C8 105 Capital Projects-Local Optional Millage Levy Fund C9 106 Combining Statements of Internal Service Funds Combining Statement of Fund Net Position-Internal Service Funds D Combining Statement of Revenues, Expenses, and Changes in Fund Net Position-Internal Service Funds E Combining Statement of Cash Flows-Internal Service Funds F Combining Statements of Agency Funds Combining Statement of Assets and Liabilities-Agency Funds G 116 Combining Statement of Changes in Assets and Liabilities-Agency Funds H Combining Statements of Component Units Combining Statement of Net Position-Component Units I Combining Statement of Activities-Component Units J Statistical Section: Introduction Net Position by Component-Government-Wide Changes in Net Position-Primary Government Fund Balances-Governmental Funds Changes in Fund Balances-Governmental Funds and Debt Service Ratios Assessed and Estimated Actual Value of Taxable Property General Governmental Tax Revenues by Source Property Tax Levies and Collections (Continued) (Continued)

96 Exhibit, Schedule Page or Table No. Statistical Section (continued): Direct and Overlapping Property Tax Rates Principal Property Taxpayers Ratios of Outstanding Debt by Type Ratio of Net General Bonded Debt Outstanding Direct and Overlapping Governmental Activities Debt Legal Debt Margin Information Demographic and Economic Statistics Principal Employers Number of Personnel Teacher Base Salaries Operating Statistics School Building Information B-4 Single Audit Report: Independent Auditor s Report on Internal Control over Financial Reporting and on Compliance and Other Matters Based on an Audit of the Financial Statements Performed in Accordance with Government Auditing Standards Independent Auditor s Report on Compliance for Each Major Federal Program and Report on Internal Control over Compliance Schedule of Expenditures of Federal Awards Schedule of Findings and Questioned Costs Summary Schedule of Prior Audit Findings Federal Awards 173 Exhibit A Management s Response

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98 B-6 December 20, 2013 Dear Chairman, Members of the School Board and Citizens of Pasco County: State law requires that all local governments publish after the close of each fiscal year, a complete set of financial statements presented in conformity with accounting principles generally accepted in the United States of America (GAAP), and audited in accordance with auditing standards generally accepted in the United States of America. Pursuant to that requirement, we hereby issue the Comprehensive Annual Financial Report (CAFR) of the District School Board of Pasco County, Florida (District) for the fiscal year ended June 30, This report consists of management s representation concerning the finances of the District. Consequently, management assumes full responsibility for the completeness and reliability of all the information presented in this report. To provide a reasonable basis for making these representations, management of the District has established a comprehensive internal control framework that is designed both to protect the District s assets from loss, theft or misuse and to compile sufficient reliable information for the preparation of the District s financial statements in conformity with GAAP. Because the cost of internal controls should not outweigh their benefits, the District s comprehensive framework of internal controls has been designed to provide reasonable, rather than absolute, assurance that the financial statements will be free from material misstatement. As management, we assert that, to the best of our knowledge and belief, this financial report is complete and reliable in all material respects. The Florida Auditor General has audited the District s financial statements. The goal of the independent audit is to provide reasonable assurance that the financial statements of the District for the fiscal year ended June 30, 2013, are free of material misstatement. The independent audit involved examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements; assessing the accounting principles used and significant estimates made by management; and evaluating the overall financial statement presentation. The independent auditor concluded that there was a reasonable basis for rendering an unmodified opinion that the District s basic financial statements for the fiscal year ended June 30, 2013, are fairly presented in conformity with GAAP. The independent auditor s report is presented as the first component of the financial section of this report. The independent audit of the financial statements of the District was a part of a broader, Federally mandated Single Audit designed to meet the special needs of Federal grantor agencies. The District is required to undergo an annual single audit in conformity with the provisions of the Single Audit Act of 1996 and the United States Office of Management and Budget (OMB) Circular A-133, Audits of States, Local governments and Non-Profit Organizations. The standards governing the Single Audit engagement require the independent auditor to report not only on the fair presentation of the financial statements, but also on the audited government s internal controls and compliance with legal requirements, with special emphasis on internal controls and legal requirements involving the administration of Federal awards. Information related to this single audit, including the Schedule of Expenditures of Federal Awards, findings and questioned costs, summary of prior audit findings, and the independent auditor s reports on the system of internal control and the compliance with applicable requirements, are included in the Single Audit section. GAAP requires that management provide a narrative introduction, overview, and analysis to accompany the basic financial statements in the form of the Management s Discussion and Analysis report (MD&A). This letter of transmittal is designed to complement the MD&A and should be read in conjunction with it. The District s MD&A can be found immediately following the report of the independent auditors. Profile of the School District The District and its governing body were created pursuant to Section 4, Article IX of the Constitution of the State of Florida. The District is an independent taxing and reporting entity managed, controlled, operated, administered, and supervised by the District School Board in accordance with Chapter , Florida Statutes. The District School Board consists of five elected officials responsible for the adoption of policies, which govern the operation of public schools in Pasco County. The elected Superintendent of Schools is the executive officer of the Board and is responsible for the administration and management of the schools within the applicable parameters of Florida Statutes, State Board of Education Rules, and School Board policies. Section , Florida Statutes, requires each school district to prepare and maintain financial records and accounts as prescribed by law and rules of the State Board of Education. The geographic boundaries of the District are those of Pasco County. During the fiscal year, the District operated 79 schools, including 46 elementary schools, 15 middle schools, 13 high schools, Pasco eschool and 4 specialized schools; sponsored 5 charter schools; and the average age of the permanent structures for the District is 21 years. The District reported serving 66,417 unweighted full-time equivalent students for the fiscal year and projects it will enroll 65,769 students for the school year. The District receives the majority of its operating funds through a State funding formula that is intended to equalize funding received from the State and local property tax between districts within the State. Charter schools operating through a contract with the District are provided with their proportionate share of these funds, based upon the number of full-time equivalent students enrolled at the charter school. The District serves students from infants through adults. Students in the District represent a diverse community of learners, including a variety of ethnic and cultural backgrounds. The student population is predominately White (67 percent). Other ethnicities include: Hispanic (20 percent), Black (6 percent), and Asian/American Indian/Pacific Islander/Alaskan Native/Other (7 percent). In addition to the educational programs offered to K-12 students, the District offers pre-kindergarten services including: programs for babies of teen parents who are progressing toward achieving high school diplomas; programs for special education for infants and toddlers below the age of three; pre-kindergarten programs for three and four year old disabled students; and programs for eligible low income, at-risk preschool age students. The District also offers programs for adults to learn the necessary skills in order to enter the workforce or increase opportunities for advancement in current positions. Also, students who do not demonstrate proficiency with English as a second language have the opportunity to learn communication skills through the District s English Language Learners (ELL) programs, and all citizens can take fee-supported courses to increase personal development in various subjects such as computers, photography and personal financial planning. District Wide Accreditation Southern Association of Colleges and Schools i ii

99 B-7 This report includes all funds of the District, the Pasco County School Board Leasing Corporation (the Leasing Corporation ), five charter schools and the Pasco Education Foundation, Inc. (the Foundation ), which comprise the reporting entity. The Leasing Corporation was formed to facilitate financing for the acquisition of educational facilities and equipment. Charter schools are public schools operating under performance contracts with the District. The Foundation is a separate not-for-profit corporation organized and operated as a direct-support organization. The Foundation s purpose is exclusively educational and charitable for the constituents of Pasco County. The charter schools and Foundation are included in the CAFR as discretely presented component units. Economic Condition and Outlook Pasco County is a 745 square mile area located centrally on the west coast of Florida, 200 miles south of the State capital of Tallahassee and 300 miles northwest of Miami. The County is approximately 30 miles northwest of the City of Tampa, and approximately 45 miles north of the City of St. Petersburg. It is part of a nine county region referred to as the Nature Coast and contains a mix of suburban and rural communities. The County was established in Within its borders there are six municipalities: the cities of San Antonio, St. Leo, Zephyrhills, Port Richey, Dade City, and New Port Richey. There are also several smaller unincorporated communities such as Darby, Holiday, Hudson, Land O' Lakes, Trinity, and Wesley Chapel. The County is primarily a retirement and tourist area but construction, retail trade, service industries, agriculture, and manufacturing play active parts in the community s financial status. Since calendar year 2004, the population of Pasco County increased percent to an estimated 470,391 in calendar year For the calendar year 2012, the Florida Price Level Index for School Personnel, which is prepared by the Bureau of Economic and Business Research at the University of Florida under the direction of the Florida Department of Education, ranked Pasco County 20th of 67 counties in the State with a value of The Florida Price Level Index for School Personnel is used to represent the cost of hiring equally qualified personnel across Florida school districts and takes into account the cost of goods and services, access to lakes or sandy beaches, the range of available cultural and recreational opportunities, and the mix of public services and taxes that affect standards of living for a county. A value of 100 represents the weighted average cost to hire and retain qualified personnel. In essence, the District s value of implies that it cost the District less than the average school district to attract and retain equally qualified personnel. Surrounding counties such as, Hillsborough (101.37) and Pinellas (100.11), which had higher values will need to provide greater compensation to hire and retain equally qualified personnel. The District recognizes that continued enhancement of the local economy is of mutual benefit to both the District and Pasco County. An excellent system of public education is a significant factor in improving the standard of living in Pasco County. As the area s largest employer, employing 8,760 full and part-time employees, the District endeavors to improve its education system by focusing on the following major initiatives. Financial Information The District maintains budgetary controls, the objective of which is to ensure compliance with legal provisions embodied in the annual appropriated budget approved by the District School Board. Activities of all governmental fund types are included in the annual appropriated budget. The level of budgetary control (that is, the level at which expenditures cannot exceed the appropriated amount) is established at the fund-function-object level for all funds. Budgetary information is integrated into the accounting system. To facilitate budgetary control, budget balances are encumbered when purchase orders are issued. Appropriations lapse at year-end and outstanding encumbrances are honored in the subsequent year s appropriations. In order to provide budgetary control for salaries, the District utilizes a centralized position control system. On an annual basis, the District adopts a District staffing plan that establishes teaching positions based generally on student populations served. Additionally, support and administrative positions are created based on established criteria. The District has a policy that states that in order to ensure the financial strength, maintain a favorable bond rating, and the stability of the District, the District s operating fund shall budget for and maintain a reasonable unrestricted fund balance. Accordingly, the unrestricted fund balance (assigned and unassigned fund balance) at June 30, 2013, for the in the general fund is $40,907,033 or 9.10 percent of total general fund expenditures. The District has appropriated $4,391,846 of this amount for spending in the fiscal year budget. The District has an investment policy in place for investments of temporarily idle funds. The purpose of the policy is to outline the responsibility, authority, and general guidelines for the investment management of the District s cash reserves and to ensure compliance with Florida Statutes. The District is self-insured up to specified limits for Worker s compensation, automobile liability, general liability, and employee group health insurance. Additional information on the District s risk management can be found in the notes to the financial statements. The District s capital asset policy specifies the categories of capital assets and the dollar thresholds for capitalizing purchases. It also specifies the length of depreciation for each asset category. On March 9, 2004, a referendum election Sales Tax Referendum was held to determine whether the County could levy a one cent infrastructure sales surtax within the County. A majority of the voters of the county voting in the Sales Tax Referendum approved the levy of the sales surtax. The sales surtax proceeds are distributed to the District, the County and the municipalities, with the District receiving 45 percent. Imposition of the surtax commenced January 1, 2005, and will expire December 31, Its purpose is to build new schools and to renovate existing facilities. The District established the Penny for Pasco Oversight Committee to help monitor the needs and allocation of funding. On November 6, 2012, voters signaled their approval for the continuation of the tax for another 10 years, beginning in January Major Initiatives Class Size Reduction Amendment In November 2002, the voters of the State of Florida amended the State Constitution to limit class size. By the beginning of the fiscal year, the amendment established the maximum number of students in core-curricula courses assigned to a teacher in each of the following three grade groupings: (1) prekindergarten through grade 3, 18 students; (2) grades 4 through 8, 22 students; and (3) grades 9 through 12, 25 students. iii iv

100 B-8 For the fiscal year, the District continued its efforts to meet the constitutional maximums for the three grade groupings at classroom level. Based on the annual review by the Department of Education, the District complied with the constitutional maximums at all schools. Accomplishments The District School Board of Pasco County continues to build upon its rich tradition of academic achievement, with the District earning a total of 488 points under the Florida school grading system this year. This equates to an overall District-wide grade of C (525 points is an A), which is a decrease from the total number of points earned by the District last school year. The District has 39 percent of the elementary and middle schools in Pasco earning an outstanding grade of A or B this year. As the District continues to strive for improvement, it is noted that 56 percent of Pasco elementary and middle schools maintained or improved their school grade and there were no F-graded schools. This sustained improvement is directly attributable to the entire team s collective efforts an unwavering commitment to ensure that all children reach their highest potential. These accomplishments are remarkable given the extreme financial adversity the District has faced over the last four years. High school grades have not yet been released due to the State s new criteria for calculating high school grades. However, the State has released the total number of points earned by each high school through the Florida Comprehensive Assessment Tests. These preliminary data indicate that high schools in Pasco continue to make tremendous progress, with 75 percent maintaining or increasing the total number of points earned for this section. The District will continue to analyze these data to make decisions about the needs of students and schools as it allocates resources and provides support as necessary. With current grades expected in mid-december, the most recent grades for high schools are from the school year. During that school year, twelve out of thirteen (92 percent) earned an outstanding grade of A or B. On other measures of student achievement, such as the District s graduation rate and drop-out rate, Pasco continues to soar above the State average. Graduation rates are also released by the State in mid- December. Last year, under the Florida Calculation rate, Pasco achieved a 76.6 percent graduation rate and a drop-out rate of 1.0 percent. While the State is using a new formula this year that excludes students earning their GED and special needs students from the overall graduation rate, early numbers indicate that the District will still surpass state averages. This achievement is a reflection of Pasco s aggressive efforts to ensure that all students graduate prepared for success in the global economy. Reporting Achievement The Government Finance Officers Association of the United States and Canada (the GFOA ) awarded a Certificate of Achievement for Excellence in Financial Reporting and the Association of School Business Officials International (the ASBO ) awarded its Certificate of Excellence in Financial Reporting to the District for its comprehensive annual financial report (CAFR) for the fiscal year ended June 30, This was the twelfth consecutive year that the District has received these prestigious awards. In order to be awarded the Certificate of Achievement for Excellence in Financial Reporting and the Certificate of Excellence in Financial Reporting, the District must publish an easily readable and efficiently organized CAFR. This report satisfied both GAAP and applicable legal requirements. A Certificate of Achievement and Certificate of Excellence are valid for a period of one year only. These awards are granted only after an intensive review of financial reports by an expert panel of certified public accountants and practicing school business officials. It is the belief of management that our current CAFR continues to meet the Certificate of Achievement Program s requirements, as well as the Certificate of Excellence Program s requirements. We are submitting this CAFR to GFOA and ASBO to determine its eligibility for another certificate. Acknowledgements The preparation of this report on a timely basis was made possible by the dedicated service of the entire staff of the District s Finance Services Department. Each member of the Department has our sincere appreciation for the contributions made in the preparation of this report. In closing, we would like to thank the members of the School Board for their leadership and support in planning and conducting the financial operations of the District. Respectfully submitted, Studies clearly indicate that student success is linked to teacher quality. The District School Board of Pasco County has demonstrated a commitment to recruiting and retaining the brightest individuals to work with our children. In , nearly 31.3 percent of teachers in Pasco had earned a Master s Degree or higher and we expect that trend to continue in Notably, 192 teachers have earned prestigious designation as a National Board Certified Teacher for Additionally, the District has embarked upon a new comprehensive teacher evaluation system that is based upon an evaluation of the teacher s use of research-based best professional practices (50 percent) and student achievement data (50 percent). This will provide a more thorough evaluation of how a teacher performs and will allow the District to provide targeted staff development in areas of need. The District s goal is to help each teacher and student reach their highest potential. Mr. Kurt Browning Superintendent of Schools Ms. Joanne Millovitsch Director of Finance Services Ms. Olga Swinson, CPA, CGFM Chief Finance Officer v vi

101 Association of School Business Officials International B-9 The Certificate of Excellence in Financial Reporting Award is presented to District School Board of Pasco County For Its Comprehensive Annual Financial Report (CAFR) For the Fiscal Year Ended June 30, 2012 The CAFR has been reviewed and met or exceeded ASBO International s Certificate of Excellence standards Ron McCulley, CPPB, RSBO President John D. Musso, CAE, RSBA Executive Director vii viii

102 List of Principal Officials As of June 30, 2013 Principal Officials Elected B-10 Mr. Kurt Browning, Superintendent of Schools Present Term Expires November 2016 Ms. Cynthia Armstrong, Chairwoman, Member from District 3 Present Term Expires November 2014 Ms. Alison Crumbley, Vice-Chairman, Member from District 4 Present Term Expires November 2016 Ms. Joanne Hurley, Member from District 2 Present Term Expires November 2016 Mr. Allen Altman, Member from District 1 Present Term Expires November 2014 Mr. Steve Luikart, Member from District 5 Present Term Expires November 2014 Principal Officials Appointed ADMINISTRATORS Olga Swinson, CPA, CGFM Chief Finance Officer Ray Gadd, Assistant Superintendent for Support Services Amelia Van Name Larson, Assistant Superintendent for Student Achievement Kevin Shibley, Esq., Executive Director for Administration Ray Bonti, Executive Director for Support Services Beth Brown, Learning Community Executive Director-Southwest Dr. Dave Scanga, Learning Community Executive Director-Central Todd Cluff, Learning Community Executive Director-Northwest Dr. Monica Ilse, Learning Community Executive Director-East [THIS PAGE INTENTIONALLY LEFT BLANK] ix

103 Citizens of Pasco County Mr. Allen Ms. Alison Ms. Cynthia Ms. Joanne Mr. Steve Altman Crumbley Armstrong Hurley Luikart McCLain & Alfonso Mr. Kurt S. Browning Superintendent of Schools Mr. Dennis Alfonso Board Attorney Assistant Superintendent for Student Achievement Pasco Education Foundation Assistant Superintendent for Administration and Operations Internal Audit TBD Communications Linda Cobbe Ms. Amelia Van Name Larson Mr. Ray Gadd Learning Community Executive Director for PreK-12 CENTRAL Dr. Dave Scanga Office for Teaching and Learning (OTL) Vanessa Hilton Chief Finance Officer (CFO) Olga Swinson Executive Director for Administration (EDA) Kevin Shibley, Esq. Executive Director for Support Services (EDSS) Ray Bonti Safety and Security Officer (SSO) Lt. James Law School Principals (21) Curriculum Assessment and Instruction (CAI) Rayann Mitchell Finance Services (FINS) Joanne Millovitsch Employee Relations (ER) Betsy Kuhn, Esq. Athletics Office (AO) Phil Bell Learning Community Executive Director for PreK-12 EAST Dr. Monica Ilse Enriched Innovative Programs (EIP) Darrell Huling Employee Benefits Assistance and Risk Management (EBARM) Construction Services (CSCC) John Petrashek Mary Tillman School Principals (22) District State and Federal Programs (DSFP) Tammy Rabon Food and Nutrition Services (FNS) Julia Hedine Learning Community Executive Director for PreK-12 NW Todd Cluff Educational Choice (EC) TBD Human Resources and Educator Quality (HREQ) Christine Pejot, Esq. Distribution Services Bill Amon School Principals (19) Charter Schools Nancy Scowcroft Technology and Information Services (TIS) John Simon, Jr. Mail Services Rick Bartz Learning Community Executive Director for PreK-12 SW Beth Brown Office for Professional Development and School Support (PDSS) Chris Christoff ERP System Ann Altman Plant Operations School Principals (17) Office for Accountability Research and Measurement (ARM) Dr. Peggy Jones Maintenance Services (MFS) Mark Fox Office for Career and Technical Education (CTE) Rob Aguis Conservation and Recycling John Soler & Tony Bartenope PLACE Planning Services (PLAN) Mary Grey Chris Williams Office for Student Support Programs and Services (SSPS) Melissa Musselwhite Purchasing Services (PUR) Mike Woodall Early Childhood Programs (ECP) Transportation Services (TRAN) Angela Porterfield Gary Sawyer x [THIS PAGE INTENTIONALLY LEFT BLANK] B-11

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105 B-13 INDEPENDENT AUDITOR S REPORT ON FINANCIAL STATEMENTS

106 B-14 DAVID W. MARTIN, CPA AUDITOR GENERAL The President of the Senate, the Speaker of the House of Representatives, and the Legislative Auditing Committee Report on the Financial Statements AUDITOR GENERAL STATE OF FLORIDA G74 Claude Pepper Building 111 West Madison Street Tallahassee, Florida INDEPENDENT AUDITOR S REPORT PHONE: FAX: We have audited the accompanying financial statements of the governmental activities, the business-type activities, the aggregate discretely presented component units, each major fund, and the aggregate remaining fund information of the Pasco County District School Board, as of and for the fiscal year ended June 30, 2013, which collectively comprise the District s basic financial statements as listed in the table of contents. Management s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor s Responsibility Our responsibility is to express opinions on these financial statements based on our audit. We did not audit the financial statements of the aggregate discretely presented component units, as described in note 1 to the financial statements, which represents 100 percent of the transactions and account balances of the aggregate discretely presented component units columns. Those financial statements were audited by other auditors whose reports thereon have been furnished to us, and our opinion, insofar as it relates to the aggregate discretely presented component units, is based solely on the reports of the other auditors. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor s judgment, including the assessment of the risks of 1 material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions. Opinions In our opinion, based on our audit and the reports of the other auditors, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, the business-type activities, the aggregate discretely presented component units, each major fund, and the aggregate remaining fund information for the Pasco County District School Board as of June 30, 2013, and the respective changes in financial position and, where applicable, cash flows thereof, and the budgetary comparison for the general fund and each major special revenue fund for the fiscal year then ended in accordance with accounting principles generally accepted in the United States of America. Emphasis of Matter As discussed in Note 1 to the basic financial statements, the District adopted new accounting guidance Governmental Accounting Standards Board Statement No. 63, Financial Reporting of Deferred Outflows of Resources, Deferred Inflows of Resources, and Net Position. This statement requires separate reporting of deferred outflows of resources and deferred inflows of resources, affecting the comparability of the fiscal year financial statements with the fiscal year financial statements. Our opinion is not modified with respect to this matter. Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that MANAGEMENT S DISCUSSION AND ANALYSIS and OTHER REQUIRED SUPPLEMENTARY INFORMATION, as listed in the table of contents, be presented to supplement the basic financial statements. Such information, although not a required 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. Supplementary and Other Information Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the District s basic financial statements. The combining and individual fund financial statements and schedules, and the introductory and statistical sections, as listed in the table of contents, are presented for purposes of additional analysis and are not a required part of the basic financial statements. Also, the accompanying SCHEDULE OF 2

107 B-15 EXPENDITURES OF FEDERAL AWARDS is presented for purposes of additional analysis as required by the United States 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. The combining and individual fund financial statements and schedules, and SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS, are the responsibility of management and were derived from and relate directly to the underlying accounting and other records used to prepare the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the combining and individual fund financial statements and schedules, and SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS, are fairly stated in all material respects in relation to the basic financial statements as a whole. The introductory and statistical sections have not been subjected to the auditing procedures applied in the audit of the basic financial statements and, accordingly, we do not express an opinion or provide any assurance on them. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued a report on our consideration of the Pasco County District School Board s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, rules, regulations, contracts, and grant agreements and other matters included under the heading INDEPENDENT AUDITOR S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF THE FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the District s internal control over financial reporting and compliance. Respectfully submitted, This page was intentionally left blank. David W. Martin, CPA Tallahassee, Florida December 20, 2013 Audit Report No

108 B-16 MANAGEMENT S DISCUSSION AND ANALYSIS

109 B-17 District School Board of Pasco County Management s Discussion and Analysis June 30, 2013 The management of the District School Board of Pasco County (the District) has prepared the following discussion and analysis to (a) assist the reader in focusing on significant financial issues; (b) provide an overview and analysis of the District s financial activities; (c) identify changes in the District s financial position; (d) identify material deviations from the approved budget; and (e) highlight significant issues in individual funds. Because the information contained in the Management s Discussion and Analysis (MD&A) is intended to highlight significant transactions, events and conditions, it should be considered in conjunction with the District s basic financial statements and notes to financial statements. Financial Highlights Key financial highlights for the fiscal year is as follows: The assets and deferred outflows of the District exceeded its liabilities and deferred inflows at June 30, 2013, by $794,548,252. Of this amount, $31,379,589 may be used to meet the government s ongoing obligations to citizens and creditors. The District s total net position decreased by $6,256,437. This decrease is primarily attributable to expenses exceeding revenues for the second year in a row primarily because of an increase in instructional costs in an effort to meet the Class Size initiative. Total revenues of $595,387,156 were comprised of general revenues in the amount of $527,106,207 or percent, and program specific revenues from charges for services, grants and contributions in the amount of $68,280,949 or percent. For the year ended June 30, 2013, the District had $601,643,593 in expenses related to governmental and business-type activities; $68,280,949 of which were offset by program specific charges or services, grants and other sources. General revenues (primarily taxes and state funding programs) of $527,106,207 were sufficient to provide the District s programs. The Business-type activities had total revenues of $8,596,399 prior to the transfer of $3,000,000 which exceeded total expenses by $654,889. In order to help reduce the funding shortage in the Governmental activities, there was a transfer of $3,000,000 in funds from the Enterprise fund to the General Fund for operations. As of the close of the current fiscal year, the District s governmental funds reported combined ending fund balances of $219,971,428, a decrease of $60,896 in comparison with the prior fiscal year. Approximately percent of this total amount, $40,907,033, is available for spending at the District s discretion for the purposes defined for each governmental fund (assigned and unassigned fund balance). At the end of the fiscal year, unassigned fund balance for the General Fund was $23,499,528, or 5.23 percent of total General Fund expenditures. The District s total bonded debt (Bonds Payable and Certificates of Participation) decreased by $25,701,103, or 6.21 percent, during the current fiscal year. 5 The primary government financial overview for the and fiscal years is shown below: (in millions) $1,400 $1,200 $1,000 $800 $600 $400 $200 $- Assets & Deferred Outflows Primary Government Financial Overview Liabilities & Deferred Inflows Net Position 6 Program Revenues General Revenues Overview of the Financial Statements Expenses The financial section consists of three parts: Independent Auditor s Report on Financial Statements, MD&A (this section), and Basic Financial Statements. The MD&A is intended to serve as an introduction to the District s basic financial statements and presents other supplementary information in addition to the basic financial statements themselves. The District s basic financial statements are comprised of three components: 1) government-wide financial statements; 2) fund financial statements; and 3) notes to financial statements. The government-wide financial statements provide both long-term and short-term information about the District s overall financial status. The fund financial statements focus on individual parts of the District and provide greater detail of the District s operations than the government-wide statements. The basic financial statements also include notes, which explain some of the information in the statements and provide more detailed data

110 The illustration below shows how the various parts of the financial section are arranged and relate to one another. Organization of the Financial Section The government-wide statements present the District s activities in three categories: Governmental Activities This represents most of the District s services, including its educational programs: basic, vocational, adult, and exceptional education. Support functions, such as operation and maintenance of plant, pupil transportation, and administration, are also included. Local property taxes and the State s education finance program provide most of the resources that support these activities. Report of Independent Auditors Management's Discussion and Analysis Government-wide Financial Statements Basic Financial Statements Fund Financial Statements Notes to Financial Statements Business-Type Activity The District charges fees to cover the cost of certain services it provides. The Pasco Learning and Activity Centers of Enrichment (the PLACE ), a before and after-school child care program, is reported as a business-type activity. Component Units The District presents five charter schools (Academy at the Farm, Inc.; Athenian Academy of Pasco County, Inc.; Countryside Montessori Charter School, Inc.; Dayspring Academy for Education and the Arts; and Imagine School at Land O Lakes LLC.) and the Pasco Education Foundation, Inc. (the Foundation ) as separate legal entities in this report. Although legally separate organizations, the component units are included in this report because they meet the criteria for inclusion provided by accounting principles generally accepted in the United States ( GAAP ). B-18 Summary The basic financial statements consist of three components: Detail The Pasco County School Board Leasing Corporation (the Leasing Corporation ), a legally separate entity, was formed to facilitate financing for the acquisition of facilities and equipment for the District. Due to the substantive economic relationship between the District and the Leasing Corporation, the Leasing Corporation has been included as an integral part of the primary government. Government-wide financial statements. Fund Financial Statements Fund financial statements. Notes to financial statements. Government-Wide Financial Statements The government-wide financial statements provide both short-term and long-term information about the District s overall financial condition in a manner similar to those of a private-sector business. The statements include a statement of net position and a statement of activities that are designed to provide consolidated financial information about the governmental and business-type activities of the primary government presented on the accrual basis of accounting. The statement of net position provides information about the government s financial position, its assets, deferred outflows, liabilities and deferred inflows, using an economic resources measurement focus. The difference between the assets and deferred outflows and liabilities and deferred inflows is the net position which is a measurement of the financial health of the District. The statement of activities presents information about the change in the District s net position and the results of its operations, during the fiscal year. An increase or decrease in net position is an indication of whether the District s financial health is improving or deteriorating. 7 Fund financial statements are one of the components of the basic financial statements. A fund is a grouping of related accounts that is used to maintain control over resources that have been segregated for specific activities or objectives. The District uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements and prudent fiscal management. Certain funds are established by law while others are created by legal agreements, such as bond covenants. Fund financial statements provide more detailed information about the District s financial activities, focusing on its most significant or major funds rather than fund types. This is in contrast to the entity-wide perspective contained in the government-wide statements. All of the District s funds may be classified within one of three broad categories: Governmental Funds Governmental funds are used to account for essentially the same functions reported as governmental activities in the government-wide financial statements. However, the governmental funds utilize a spendable financial resources measurement focus rather than the economic resources measurement focus found in the government-wide financial statements. The financial resources measurement focus allows the governmental fund statements to provide information on near-term inflows and outflows of spendable resources, as well as balances of spendable resources available at the end of the fiscal year. 8

111 B-19 The governmental fund statements provide a detailed short-term view that may be used to evaluate the District s near-term financing requirements. This short-term view is useful when compared to the long-term view presented as governmental activities in the government-wide financial statements. To facilitate this comparison, both the governmental funds balance sheet and the governmental funds statement of revenues, expenditures, and changes in fund balances provide a reconciliation of governmental funds to governmental activities. The governmental funds balance sheet and statement of revenues, expenditures, and changes in fund balances provide detailed information about the District s most significant funds. The District s major funds are the General Fund, Special Revenue Other Fund, Special Revenue Federal Economic Stimulus Fund and Capital Projects - Other Fund. Data from the other governmental funds are combined into a single, aggregated presentation. Proprietary Funds Proprietary funds may be established to account for activities in which a fee is charged for services. Two types of proprietary funds are maintained: Enterprise funds are used to report the same functions as business-type activities in the government-wide financial statements. The District uses an enterprise fund to account for its before and after-school child care program. Internal service funds are used to report activities that provide goods and services to support the District s other programs and functions through user charges. The District uses internal service funds to account for its fully insured employee s life, property/casualty and athletics insurance programs; individual self-insurance programs for liability, auto, workers compensation, medical, pharmacy and behavioral health programs; the employee assistance program; the energy management program; and exclusive agreements administered by the School Board. Since these services predominantly benefit governmental rather than business-type functions, the internal service funds have been included within governmental activities in the government-wide financial statements. Proprietary funds provide the same type of information as the government-wide financial statements, only in more detail, for those enterprise funds determined to be major. Conversely, the internal service funds are combined into a single, aggregated column in the proprietary fund financial statements. Fiduciary Funds Fiduciary funds are used to report assets held in a trustee or fiduciary capacity for the benefit of external parties, such as student activity funds. Fiduciary funds are not reflected in the government-wide statements because the resources are not available to support the District s own programs. In its fiduciary capacity, the District is responsible for ensuring that the assets reported in these funds are used only for their intended purposes. The District uses a private-purpose trust fund to account for scholarship funds established by private donors. The District uses a pension trust fund to account for resources used to finance its early retirement program. The District uses agency funds to account for resources held for student activities and groups. Other Information Required Supplementary Information is included to provide schedules of funding progress for the Early Retirement Program and the Other Post-Employment Benefits. Government-Wide Financial Analysis Net position may serve over time as a useful indicator of the government s financial position. In the case of the District, assets and deferred outflows exceeded liabilities and deferred inflows by $794,548,252 at June 30, Net Position, End of Year Governmental Business-Type Total Activities Activities Percentage 6/30/2013 6/30/2012 6/30/2013 6/30/2012 6/30/2013 6/30/2012 Change Current and Other Assets $ 319,122,672 $ 325,814,303 $ 4,343,253 $ 6,519,516 $ 323,465,925 $ 332,333,819 Capital Assets 979,360,802 1,000,509, , , ,527,139 1,000,646,814 Deferred Outflows 19,996,415 33,137, ,996,415 33,137,907 Total Assets and Deferred Outflows 1,318,479,889 1,359,461,276 4,509,590 6,657,264 1,322,989,479 1,366,118, % Long-Term Liabilities 440,251, ,627, , , ,933, ,206,599 Defered Inflows 19,977, ,977,527 - Other Liabilities 66,882,890 73,554, , ,873 67,530,132 74,107,252 Total Liabilities and Deferred Inflows 527,111, ,181,939 1,329,349 1,131, ,441, ,313, % Net Position: Net Investment in Capital Assets 590,932, ,895, , , ,098, ,033,103 Restricted 172,069, ,850, ,069, ,850,787 Unrestricted 28,365,685 29,533,195 3,013,904 5,387,604 31,379,589 34,920,799 Total Net Position $ 791,368,011 $ 795,279,337 $ 3,180,241 $ 5,525,352 $ 794,548,252 $ 800,804, % The largest portion of the District s net position (74.39 percent) reflects its net investment in capital assets (e.g. land, buildings, furniture and equipment, motor vehicles, software). The District uses these capital assets to provide services to students; consequently, these assets are not available for future spending. The restricted portion of the District s net position (21.66 percent) represents resources, which are subject to external restrictions on how they may be used. The unrestricted net position (3.95 percent) may be used to meet the government s ongoing obligations to students, employees and creditors. At the end of the current fiscal year, the District reported positive balances in all categories of net position, both for the District as a whole, as well as for its separate governmental and business-type activities. Notes to Financial Statements The notes provide additional information that is essential for a full understanding of the data provided in the government-wide and fund financial statements

112 B-20 The key elements of the changes in the District s net position for the fiscal year ended June 30, 2013, and June 30, 2012 are as follows: Operating Results for the Year Governmental Business-type Total Activities Activity School District % Change Revenues: Program Revenues: Charges for Services $ 12,956,232 $ 14,356,418 $ 8,562,722 $ 8,495,164 $ 21,518,954 $ 22,851, % Operating Grants and Contributions 37,633,087 21,417, ,633,087 21,417, % Capital Grants and Contributions 9,128,908 8,198, ,128,908 8,198, % General Revenues: Property Taxes, Levied for Operational Purposes 120,318, ,136, ,318, ,136, % Property Taxes, Levied for Capital Projects 30,896,444 32,505,792 30,896,444 32,505, % Local Sales Taxes 27,490,903 25,321, ,490,903 25,321, % Florida Education Finance Program 229,215, ,656, ,215, ,656, % Grants and Contributions not Restricted to Specific Programs 109,694, ,273, ,694, ,273, % Unrestricted Investment Earnings 1,326, ,374 33,677 13,223 1,360, , % Miscellaneous 8,129,246 9,702,528-5,907 8,129,246 9,708, % Transfers 3,000,000 - (3,000,000) % Total Revenues and Transfers 589,790, ,116,690 5,596,399 8,514, ,387, ,630, % Program Expenses: Instruction 343,554, ,933, ,554, ,933, % Pupil Personnel Services 25,331,587 25,200, ,331,587 25,200, % Instructional Media Services 6,917,067 7,354, ,917,067 7,354, % Inst. and Curriculum Development Services 11,764,667 13,400, ,764,667 13,400, % Instructional Staff Training 11,073,276 10,971, ,073,276 10,971, % Instructional Related Technology 4,892,506 4,847,994 4,892,506 4,847, % Board of Education 610, , , , % General Administration 1,632,018 1,259, ,632,018 1,259, % School Administration 34,289,049 34,008, ,289,049 34,008, % Facilities Acquisition and Construction 14,195,220 12,736, ,195,220 12,736, % Fiscal Services 2,281,430 2,199, ,281,430 2,199, % Food Services 31,884,356 30,476, ,884,356 30,476, % Central Services 4,024,807 1,734, ,024,807 1,734, % Pupil Transportation Services 27,623,111 27,912, ,623,111 27,912, % Operation of Plant 42,208,748 46,432, ,208,748 46,432, % Maintenance of Plant 10,903,885 11,012, ,903,885 11,012, % Administrative Technology Services 3,146,509 3,084,540 3,146,509 3,084, % Community Services 688, ,337 7,941,510 7,753,564 8,630,362 8,371, % Interest on Long-term Liabilities 16,680,024 17,827, ,680,024 17,827, % Total Expenses 593,702, ,679,111 7,941,510 7,753, ,643, ,432, % Grants and Contributions Not Restricted to Specific Programs 18.60% Florida Education Finance Program 38.86% Grants and Contributions Not Restricted to Specific Programs 21.37% Revenue by Source Statement of Activities Unrestricted Investment Earnings 0.22% Unrestricted Investment Earnings 0.10% Miscellaneous 1.38% 2013 Charges for Transfers Services 0.51% 2.20% 2012 Miscellaneous 1.70% Operating Grants and Contributions 6.38% Local Sales Taxes 4.66% Capital Grants and Contributions 1.55% Property Taxes, Levied for Operational Purposes 20.40% Property Taxes, Levied for Capital Projects 5.24% Operating Grants Charges for and Capital Grants Services 2.51% Contributions 3.74% and Contributions 1.43% Property Taxes, Levied for Operational Purposes 23.27% Change in Net Position (3,911,326) (14,562,421) (2,345,111) 760,730 (6,256,437) (13,801,691) % Net Position, Beginning 795,279, ,841,758 5,525,352 4,764, ,804, ,606, % Net Position, Ending $ 791,368,011 $ 795,279,337 $ 3,180,241 $ 5,525,352 $ 794,548,252 $ 800,804, % Florida Education Finance Program 35.77% Local Sales Taxes 4.43% Property Taxes, Levied for Capital Projects 5.68% 11 12

113 B-21 Food Services 5.37% Fiscal Services 0.38% Facilities Acquisition and Construction 2.39% School Administration 5.78% General Administration 0.27% Board of Education 0.10% Instructional Related Technology 0.82% Instructional Staff Training 1.87% Fiscal Services 0.37% Facilities Acquisition and Construction 2.17% School Administration 5.80% General Administration 0.21% Board of Education 0.11% Instructional Related Technology 0.83% Pupil Transportation Services 4.65% Expenses by Function Statement of Activities Central Services 0.68% Pupil Transportation Services 4.76% Central Services 0.30% Food Services 5.19% Instructional Staff Training 1.87% Inst. and Curriculum Development Services 2.28% Maintenance of Plant 1.84% Operation of Plant 7.11% Pupil Personnel Services 4.27% Instructional Media Services 1.17% Inst. and Curriculum Development Services 1.98% Maintenance of Plant Operation of Plant 1.88% 7.91% Instructional Media Services 1.25% Pupil Personnel Services 4.30% 2013 Administrative Technology Services 0.53% Community Services 0.12% Interest on Long-term Liabilities 2.81% Administrative Technology Services 0.53% Community Services 0.11% Interest on Long-term Liabilities 3.04% Instruction 57.87% Instruction 57.09% Total revenues increased by $14,756,172, primarily due to an increase in Florida Education Finance Program revenues received during the fiscal year. This increase was related to an increase in State funding per student and an increase in student FTE. Total expenses increased by $7,210,918, primarily due to increase in instructional costs during the fiscal year. This increase was related to the District s efforts to meet the Class Size initiative. The Business-type activities had total revenues of $8,596,399 prior to the transfer of $3,000,000 which exceeded total expenses by $654,889. In order to help reduce the funding shortage in the Governmental activities, there was a transfer of $3,000,000 in funds from the Enterprise fund to the General Fund for operations. Financial Analysis of the Government Funds As noted earlier, the District uses fund accounting to ensure and demonstrate compliance with financerelated legal requirements. Governmental Funds. The focus of the District s governmental funds is to provide information on nearterm inflows, outflows and balances of spendable resources. Such information is useful in assessing the District s financing requirements. In particular, unassigned fund balance may serve as a useful measure of a government s net resources available for spending at the end of the fiscal year. As of the end of the fiscal year, the District s governmental funds reported combined ending fund balances of $219,971,428, a decrease of $60,896 in comparison with the prior fiscal year. Approximately percent of this total amount ($40,907,033) constitutes total assigned and unassigned fund balances, which are available for spending at the government s discretion within the purpose of each fund. The following schedule indicates the fund balances and the total changes in fund balances by major fund and other governmental (non-major) funds as reported in the basic financial statements for the fiscal years ended June 30, 2013 and June 30, Increase Percentage Fund Balance (Decrease) Change Major Governmental Funds: General Fund $ 47,644,623 $ 48,282,861 $ (638,238) -1.32% Capital Projects - Other Funds 112,498, ,391,429 2,106, % Special Revenue - Other Funds % Special Revenue - Economic Stimulas Funds % Other Governmental Funds (nonmajor) 59,828,503 61,358,034 (1,529,531) -2.49% Total Fund Balances $ 219,971,428 $ 220,032,324 $ (60,896) -0.03% The General Fund is the chief operating fund of the District. At the end of the fiscal year, the unassigned fund balance of the General Fund was $23,499,528, while total fund balance reached $47,644,623. As a measure of the General Fund s liquidity, it may be useful to compare both unassigned fund balance and total fund balance to total expenditures. Unassigned fund balance represents 5.23 percent of total General Fund expenditures, while total fund balance represents percent of that same amount. Fund balance of the District s General Fund decreased by $638,238 during the fiscal year. 14

114 The following schedule shows the changes in General Fund revenues and other financing sources for the fiscal years ended June 30, 2013 and June 30, 2012: The following schedule shows the changes in General Fund expenditures by function for the fiscal years ended June 30, 2013 and June 30, 2012: B-22 Increase Percentage General Fund Revenues and Other Financing Sources (Decrease) Change Federal Direct Sources: Reserve Officers Training Corps (ROTC) $ 536,626 $ 486,628 $ 49, % Federal Through State Sources: Other Federal Through State Sources 2,261,737 2,252,991 8, % State Sources Florida Education Finance Program (FEFP) 229,215, ,656,075 24,559, % Other Restricted State Sources 81,765,238 79,710,212 2,055, % Local Sources: Ad Valorem Taxes 120,318, ,136,587 (12,817,635) -9.63% Interest Income 196, ,338 73, % Other Local Sources 9,396,088 11,115,351 (1,719,263) % Other Financing Sources 5,320,722 7,230,541 (1,909,819) % Total General Fund Revenues and Other Financing Sources $ 449,010,950 $ 438,710,723 $ 10,300, % During the fiscal year, Revenues and Other Financing Sources increased by $10,300,227, or 2.35 percent. The major impacts to funding were the State Legislature increase in Base Student Allocation and the increase in the number of unweighted full-time equivalent students on the fourth calculation. The following schedule shows the changes in General Fund expenditures by object for the fiscal years ended June 30, 2013 and June 30, 2012: Increase Percent General Fund - Expenditures by Object 6/30/2013 6/30/2012 (Decrease) Change Salaries $ 291,608,061 $ 288,576,915 $ 3,031, % Employee Benefits 85,450,682 85,708,834 (258,152) -0.30% Purchased Services 39,728,576 40,978,456 (1,249,880) -3.05% Energy Services 14,477,268 16,555,302 (2,078,034) % Materials and Supplies 11,965,545 13,206,388 (1,240,843) -9.40% Capital Outlay 1,964,124 1,963, % Other Expenditures 4,454,932 4,326, , % Totals General Fund Expenditures $ 449,649,188 $ 451,316,247 $ (1,667,059) -0.37% General Fund expenditures decreased by $1,667,059 or negative 0.37 percent. The following are some of the highlights: Salaries increased by $3,031,146 related to instructional costs for the Class Size initiative Purchased Services decreased by $1,249,880 partly because of decreases in self-insurance costs for Worker s Compensation and Property and Liability coverage Energy services charges decreased by $2,078,034, including savings in electricity expenses Materials and supplies costs decreased $1,240,843 from cost-cutting initiatives Increase Percentage General Fund Expenditures by Function (Decrease) Change Instruction 275,441, ,521,509 3,920, % Pupil Personnel Services 21,523,167 21,583,415 (60,248) -0.28% Instructional Media Services 6,707,914 7,035,285 (327,371) -4.65% Inst. and Curriculum Development Services 8,452,383 8,802,783 (350,400) -3.98% Instructional Staff Training Services 6,324,236 6,824,522 (500,286) -7.33% Instructional Related Technology 4,433,650 4,536,729 (103,079) -2.27% Board of Education 468, ,161 (18,389) -3.77% General Administration 553, ,560 (11,585) -2.05% School Administration 33,518,619 33,192, , % Facilities Acquisition and Construction 1,796,938 1,787,354 9, % Fiscal Services 2,110,767 1,987, , % Food Services 171, ,688 (14,783) -7.92% Central Services 5,465,160 5,733,824 (268,664) -4.69% Pupil Transportation Services 26,745,109 26,813,234 (68,125) -0.25% Operation of Plant 41,713,297 45,866,178 (4,152,881) -9.05% Maintenance of Plant 10,471,775 10,829,775 (358,000) -3.31% Administrative Technology Services 2,907,655 2,863,358 44, % Community Services 566, ,353 26, % Capital Outlay 275, , , % Total General Fund Expenditures 449,649, ,316,247 (1,667,059) -0.37% The Capital Projects Fund Other, which is used to account for capital project activity funded sources such as Certificates of Participation, Sales Tax and Impact Fees, has a total fund balance of $112,498,302, all of which is restricted for specific capital projects. The net increase in fund balance during the current year in the Capital Projects Fund Other was $2,106,873 and resulted primarily from an increase in revenue receipts related to sales tax and impact fee collections. It should also be noted that $7,374,932 of the total fund balance has been encumbered under specific engineering and construction contracts for projects in progress at year-end. The Special Revenue Federal Economic Stimulus Programs Fund does not report fund balances because revenues are reported to the extent of expenditures. Revenues and expenditures decreased by $24,080 from the previous fiscal year. This decrease was primarily due to the reduction of staffing expenditures. The Special Revenue Other Federal Programs Fund - These Federal grant funds do not report fund balances because revenues are reported to the extent of expenditures. Revenues and expenditures increased by $166,766 from the previous fiscal year due to an increase in the grant awards

115 General Fund Budgetary Highlights During the fiscal year, the District revised its budget and brought monthly amendments to the Board for approval. The following schedule shows the changes in the General Fund Budget revenues and actual: Final -Original Actual - Budget Final Budget General Fund Revenues and Other Financing Sources Original Budget Final Budget Actual 2013 Inc (Dec) Inc (Dec) Federal Direct Sources: Reserve Officers Training Corps (ROTC) $ 577,715 $ 672,091 $ 536,626 $ 94,376 $ (135,465) Federal Through State Sources: Other Federal Through State Sources 1,750,000 2,300,000 2,261, ,000 (38,263) State Sources Florida Education Finance Program (FEFP) 230,799, ,898, ,215,516 4,098,439 (5,682,822) Other Restricted State Sources 81,031,068 79,395,997 81,765,238 (1,635,071) 2,369,241 Local Sources: Ad Valorem Taxes 118,673, ,751, ,318,952 78,096 1,567,086 Interest Income 400, , ,071 - (203,929) Other Local Sources 6,959,986 9,284,829 9,396,088 2,324, ,259 Other Financing Sources 14,997,998 14,598,671 5,320,722 (399,327) (9,277,949) Total General Fund Revenues and Other Financing Sources $ 455,190,436 $ 460,301,792 $ 449,010,950 $ 5,111,356 $ (11,290,842) there were major reductions in utilities expenditures. In addition to the teaching positions, there were staff cuts across all departments which provided further reductions in payroll, benefits and all other expenditures. The General Fund final budget appropriations increase of $2,802,525 over the original budget is related to the higher anticipated enrollment. Capital Asset and Debt Administration Capital Assets The District s investment in capital assets as of June 30, 2013, amounts to $979,527,139. This investment in capital assets includes land, construction in progress, improvements other than buildings, buildings and fixed equipment, furniture, fixtures and equipment, motor vehicles, audio visual materials, and computer software. Major capital asset events during the current fiscal year ended June 30, 2013, included continuing progress in the renovation of several elementary schools and planning for the District Office Complex, which were included in Construction in Progress totals at fiscal year end. The following is a summary of the District s capital assets as of June 30, 2013: B-23 The General Fund actual revenues were less than the final budgeted revenues excluding Other Financing Sources by $2,012,893. This difference was attributed to less students being enrolled than anticipated. The General Fund final budget revenues increased by $5,510,683 over the original budget because we anticipated more students, and there was an actual increase in Other Local Sources. The following schedule shows the changes in the General Fund Budget appropriations and actual: Final -Original Actual - Budget Final Budget General Fund Expenditures by Function Original Budget Final Budget Actual 2013 Inc (Dec) Inc (Dec) Instruction $ 282,723,489 $ 280,354,977 $ 275,441,887 $ (2,368,512) $ (4,913,090) Pupil Personnel Services 20,432,191 22,065,795 21,523,167 1,633,604 (542,628) Instructional Media Services 6,836,211 7,089,979 6,707, ,768 (382,065) Inst. and Curriculum Development Services 9,921,149 9,878,824 8,452,383 (42,325) (1,426,441) Instructional Staff Training Services 5,852,730 7,739,669 6,324,236 1,886,939 (1,415,433) Instructional Related Technology 4,255,469 4,541,714 4,433, ,245 (108,064) Board of Education 3,388, , ,772 (2,846,993) (72,454) General Administration 673, , ,975 35,532 (155,124) School Administration 33,050,430 33,714,902 33,518, ,472 (196,283) Facilities Acquisition and Construction 2,042,317 2,342,652 1,796, ,335 (545,714) Fiscal Services 2,215,975 2,267,170 2,110,767 51,195 (156,403) Food Services 181, , ,041 (9,136) Central Services 6,104,796 6,145,968 5,465,160 41,172 (680,808) Pupil Transportation Services 27,688,691 29,595,181 26,745,109 1,906,490 (2,850,072) Operation of Plant 42,332,573 42,715,657 41,713, ,084 (1,002,360) Maintenance of Plant 11,264,372 11,279,607 10,471,775 15,235 (807,832) Administrative Technology Services 3,266,248 3,265,985 2,907,655 (263) (358,330) Community Services 461, , , ,133 (40,637) Capital Outlay 275, , ,373 - Total General Fund Expenditures $ 462,509,537 $ 465,312,062 $ 449,649,188 $ 2,802,525 $ (15,662,874) Capital Assets (net of depreciation) Governmental Business-type Total Activities Activity School District % Change Land $ 77,260,741 $ 77,162,319 $ - $ - $ 77,260,741 $ 77,162, % Construction in Progress 32,729,213 21,195,305 32,729,213 21,195, % Improvements Other Than Buildings 19,742,643 19,753,958 12,069 9,182 19,754,712 19,763, % Buildings and Fixed Equipment 807,661, ,149,203 19,493 21, ,681, ,170, % Furniture, Fixtures and Equipment 26,329,643 26,446, , ,572 26,459,831 26,549, % Motor Vehicles 10,396,039 12,283,754 10,396,039 12,283, % Audio Visual Materials 39,556 41,883 39,556 41, % Computer Software 5,201,114 3,475,891 4,587 4,945 5,205,701 3,480, % Total $ 979,360,802 $ 1,000,509,066 $ 166,337 $ 137,748 $ 979,527,139 $ 1,000,646, % Additional information on the District s capital assets can be found in the notes to the financial statements in Note 5 - Changes in Capital Assets on pages 58 and 59. Long-term Debt As of June 30, 2013, the District has total long-term debt outstanding of $388,428,248. This amount is comprised of $45,582,325 of bonds payable and $342,845,923 of certificates of participation. The General Fund actual expenditures were less than the final budgeted appropriations by $15,662,874. There were many approved but unfilled teaching positions, diesel fuel was $2.6 million below budget and 17 18

116 The following is a summary of the District s long-term debt as of June 30, 2013: Outstanding Long-Term Debt Total School District Percentange Change SBE Bonds $ 15,498,519 $ 18,633, % District Revenue Bonds 2,829,773 2,917, % Sales Tax Revenue Bonds 27,254,033 40,030, % Certificates of Participation 342,845, ,547, % Total $ 388,428,248 $ 414,129, % B-24 The District received ratings of A1 from Moody s and A+ from Fitch on its Certificates of Participation. The underlying rating for the Sales Tax Revenue Bonds, Series 2007 is A and A+ from Standard & Poor s and Fitch, respectively. Additional information on the District s long-term debt can be found in the notes to the financial statements in Note 11 Changes in Long Term Liabilities on pages 69. Other Matters of Significance This is the sixth consecutive year of multi-million dollar budget reductions in expenditures. Next year, in the budget, the District is faced with a budget shortfall of $23 million. To balance the budget, management has identified possible expenditures cuts, including further staff reductions and school consolidations. In addition to non-recurring funding, the shortfall is due to increased costs associated with an increase in the Florida Retirement System (FRS) employer contribution rates, increases in fixed costs (utilities, gas and diesel) as well as earmarks requiring new expenditures. In order to address this budget deficit, some permanent cost cutting measures were put in place, including reduction of positions and closing two (2) schools. In the midst of these significant economic challenges, the District continues to prioritize classroom spending. The District had the lowest administrative cost to total expenditure ratio of Florida s 67 school districts in the fiscal year and we expect that trend continued in During the current fiscal year, fund balance in the General Fund decreased to $47,644,623. The District has appropriated $4,391,846 of this amount for spending in the fiscal year budget. It is intended that the use of available fund balance will be replenished through vacant positions and unspent appropriations. Requests for Information These financial statements are designed to provide the District s citizens, taxpayers, customers, investors, and creditors with a general overview of the District s finances and to demonstrate the District s accountability for the money it receives. Questions concerning any of the information provided or requests for additional financial information should be addressed to: Director of Finance Services District School Board of Pasco County 7227 Land O Lakes Boulevard Land O Lakes, Florida This page was intentionally left blank

117 B-25 BASIC FINANCIAL STATEMENTS

118 Exhibit A District School Board of Pasco County Statement of Net Position June 30, 2013 B-26 Primary Government Governmental Business-type Component Activities Activity Total Units ASSETS: Cash 63,007,091 $ - $ 63,007,091 $ $ 1,130,507 - Cash with Fiscal Agent 1,015,663 13,393 1,029,056 Investments 215,513,691 4,218, ,732,438 1,808,057 Accounts Receivable 2,600, ,080 2,703,244 35,816 Accrued Interest Receivable 135,852 8, ,885 - Deposits Receivable ,000 Due From Other Agencies 14,825,624-14,825, ,021 Inventories 4,798,251-4,798, Prepaid Items 37,931-37,931 1,954,948 Deferred Charges 13,068,784-13,068,784 18,950 Capital Credits Receivable 4,119,621-4,119,621 - Capital Assets (net of accumulated depreciation): Land 77,260,741-77,260,741 1,038,662 Construction in Progress 32,729,213-32,729,213 44,303 Improvements Other Than Buildings 19,742,643 12,069 19,754, ,845 Leasehold Property and Improvements ,709 Buildings and Fixed Equipment 807,661,853 19, ,681,346 2,150,488 Furniture, Fixtures, and Equipment 26,329, ,188 26,459, ,709 Motor Vehicles 10,396,039-10,396,039 97,744 Audio Visual Materials 39,556-39,556 - Computer Software 5,201,114 4,587 5,205,701 46,840 Total Assets 1,298,483,474 4,509,590 1,302,993,064 9,357,122 DEFERRED OUTFLOWS OF RESOURCES Accumulated Decrease in Fa r Value of Hedging Derivatives 19,996,415-19,996,415 - TOTAL ASSETS AND DEFERRED OUTFLOWS $ 1,318,479,889 $ 4,509,590 $ 1,322,989,479 $ 9,357,122 LIABILITIES: Salaries and Benefits Payable 13,992,456 $ 9,466 $ 14,001,922 $ $ 515,144 - Payroll Deductions and Withholdings Payable 2,165,326 9,642 2,174,968 Accounts Payable 16,969, ,185 17,107, ,571 Construction Contracts Payable 261, ,427 - Construction Contracts Payable-Retainage 295, ,776 - Arbitrage Rebate Payable 71,938-71,938 - Due to Other Agencies ,518 Sales Tax Payable 3,863-3,863 - Deposits Payable 75,834-75,834 - Accrued Interest Payable 3,381,641-3,381,641 - Unearned Revenue 1,028,058 74,169 1,102,227 7,250 Non-Current Liabilities Due Within One Year: Notes Payable ,236 Bonds Payable 15,249,177-15,249,177 - Certificates of Participation Payable 10,066,925-10,066,925 - Estimated Insurance Claims Payable 2,311,000-2,311,000 - Compensated Absences Payable 1,010, ,780 1,426,047 82,973 Long-Term Debt and Liabilities: Notes Payable ,656,165 Bonds Payable 30,333,148-30,333,148 - Certificates of Participation Payable 332,778, ,778,998 - Estimated Insurance Claims Payable 4,202,000-4,202,000 - Compensated Absences Payable 32,344,200-32,344,200 - Other Postemployment Benefits Obligation 40,593, ,107 41,275,222 - Total Liabilities 507,134,351 1,329, ,463,700 3,003,857 DEFERRED INFLOWS OF RESOURCES Derivatives Swap Liability 19,977,527-19,977,527 - TOTAL LIABILITIES AND DEFERRED INFLOWS OF RESOURCES 527,111,878 1,329, ,441,227 3,003,857 [THIS PAGE INTENTIONALLY LEFT BLANK] NET POSITION: Net Investment in Capital Assets 590,932, , ,098,891 2,179,849 Restricted for: State Categorical Programs 3,124,608-3,124,608 - Debt Service 13,620,167-13,620,167 - Capital Projects 147,001, ,001,633 - Special Revenue-Food Service 8,323,364-8,323,364 - Other Purposes ,830,649 Non-expendable-Permanent Endowment ,906,568 Unrestricted 28,365,685 3,013,904 31,379, ,199 Total Net Position 791,368,011 3,180, ,548,252 6,353,265 TOTAL LIABILITIES, DEFERRED INFLOWS OF RESOURCES AND NET POSITION $ 1,318,479,889 $ 4,509,590 $ 1,322,989,479 $ 9,357,122 The accompanying notes to financial statements are an integral part of this statement. 21

119 B-27 Program Revenues Operating Charges for Grants and Functions/Programs: Expenses Services Contributions Primary Government Governmental Activities: Instruction $ 343,554,241 $ 522,095 $ - Pupil Personnel Services 25,331, Instructional Media Services 6,917, Instruction and Curriculum Development Services 11,764, Instructional Staff Training Services 11,073, Instruction Related Technology 4,892, Board of Education 610, General Administration 1,632, School Administration 34,289, Facilities Acquisition and Construction 14,195, Fiscal Services 2,281, Food Services 31,884,356 11,441,922 22,561,599 Central Services 4,024, Pupil Transportation Services 27,623, ,215 15,071,488 Operation of Plant 42,208, Maintenance of Plant 10,903, Administrative Technology Services 3,146, Community Services 688, Interest on Long-term Liabilities 16,680, Total Governmental Activities 593,702,083 12,956,232 37,633,087 Business-Type Activities: District School Board of Pasco County Statement of Activities For the Fiscal Year Ended June 30, 2013 PLACE Program 7,941,510 8,562,722 - Total Primary Government $ 601,643,593 $ 21,518,954 $ 37,633,087 Exhibit B Net (Expense) Revenue and Changes in Net Position Capital Grants and Governmental Primary Government Business-type Component Contributions Activities Activities Total Units $ - $ (343,032,146) $ - $ (343,032,146) $ - - (25,331,587) - (25,331,587) - - (6,917,067) - (6,917,067) - - (11,764,667) - (11,764,667) - - (11,073,276) - (11,073,276) - - (4,892,506) - (4,892,506) - - (610,730) - (610,730) - - (1,632,018) - (1,632,018) - - (34,289,049) - (34,289,049) - 6,677,520 (7,517,700) - (7,517,700) - - (2,281,430) - (2,281,430) - - 2,119,165-2,119, (4,024,807) - (4,024,807) - - (11,559,408) - (11,559,408) - - (42,208,748) - (42,208,748) - - (10,903,885) - (10,903,885) - - (3,146,509) - (3,146,509) - - (688,852) - (688,852) - 2,451,388 (14,228,636) - (14,228,636) - 9,128,908 (533,983,856) - (533,983,856) , ,212 - $ 9,128,908 (533,983,856) 621,212 (533,362,644) - Exhibit B Component Units: Educational Foundation/Charter Schools $ 15,773,454 $ 72,659 $ 56,945 General Revenues: Property Taxes, Levied for Operational Purposes Property Taxes, Levied for Capital Projects Local Sales Taxes Grants and Contributions not Restricted to Specific Programs Unrestricted Investment Earnings Miscellaneous Transfers Total General Revenues and Transfers Change in Net Position Net Position, July 1, 2012 Net Position, June 30, 2013 $ 798, (14,844,988) 120,318, ,318,952-30,896,444-30,896,444-27,490,903-27,490, ,910, ,910,337 15,545,508 1,326,648 33,677 1,360,325-8,129,246-8,129,246-3,000,000 (3,000,000) ,072,530 (2,966,323) 527,106,207 15,545,508 (3,911,326) (2,345,111) (6,256,437) 700, ,279,337 5,525, ,804,689 5,652,745 $ 791,368,011 $ 3,180,241 $ 794,548,252 $ 6,353,265 The accompanying notes to financial statements are an integral part of this statement

120 Exhibit C District School Board of Pasco County Balance Sheet Governmental Funds June 30, 2013 District School Board of Pasco County Reconciliation of the Governmental Funds Balance Sheet to the Statement of Net Position June 30, 2013 Exhibit D B-28 Major Funds General Capital Projects Special Revenue Special Revenue Primary Federal Economic Nonmajor Total Operating Other Other Federal Stimulus Programs Governmental Governmental Fund Funds Programs Fund Fund Funds Funds ASSETS: Cash $ 23,664,468 $ 11,247,977 $ 30,198 $ - $ 10,718,037 $ 45,660,680 Cash with Fiscal Agent 92, , ,480 Investments 33,765,516 95,586, ,031, ,383,444 Accounts Receivable 1,337, ,690 1,360,023 Accrued Interest Receivable 55, ,457 94,958 Due from Other Funds 2,179, ,179,229 Due from Other Agencies 1,694,071 6,574,394 3,140, ,829 2,849,775 14,825,624 Inventories 3,575, ,223,200 4,798,251 Prepaid Items 37, ,931 TOTAL ASSETS $ 66,401,634 $ 113,408,587 $ 3,170,753 $ 566,829 $ 63,739,817 $ 247,287,620 LIABILITIES AND FUND BALANCES: Liabilities: Salaries and Benefits Payable $ 12,940,769 $ - $ 627,168 $ 4,955 $ 400,392 $ 13,973,284 Payroll Deductions and Withholdings Payable 2,139,610-15,262 1,311 4,070 2,160,253 Accounts Payable 3,576, , ,745 25,912 2,150,652 7,274,826 Construction Contracts Payable - 85, , ,427 Construction Contracts Payable-Retainage - 187, , ,776 Arbitrage Rebate Payable ,938 71,938 Due to Other Funds g - - 1,644, ,651-2,179,229 Sales Tax Payable 3, ,863 Deposits Payable 75, ,834 Unearned Revenue 20, ,762 1,019,762 Total Liabilities 18,757, ,285 3,170, ,829 3,911,314 27,316,192 Fund Balances: Nonspendable: Inventories: General Fund 3,575, ,575,051 Special Revenues-Food Service ,223,200 1,223,200 Prepaid Items: General Fund 37, ,931 Restricted: Categorical Programs 3,124, ,124,608 Special Revenues-Food Service ,100,164 7,100,164 Debt Service ,001,808 17,001,808 Capital Projects - 112,498, ,503, ,001,633 Assigned: School Operations: School and Local Programs 13,015, ,015,659 Next Year Budget Deficit 4,391, ,391,846 Unassigned Fund Balance 23,499, ,499,528 Total Fund Balances 47,644, ,498, ,828, ,971,428 TOTAL LIABILITIES AND FUND BALANCES $ 66,401,634 $ 113,408,587 $ 3,170,753 $ 566,829 $ 63,739,817 $ 247,287,620 The accompanying notes to financial statements are an integral part of this statement. Total fund balances for total governmental funds (page 24). Amounts reported for governmental activities in the statement of net position (page 21) are different because: $ 219,971,428 Deferred outflows of resources are reported as a result of changes in fair value of hedging derivative instruments in the statement of net position 19,996,415 Capital assets, net of depreciation, used in governmental activities are not financial resources and, therefore, are not reported as assets in the governmental funds. 979,360,802 Capital credits to be received in future years are not available to liquidate liabilities in governmental funds, but are accrued in the government-wide statements. 4,119,621 Debt issuance costs and underwriter's discounts are not expended in the government-wide statements but are reported as deferred charges, and amortized over the life of the debt. 13,068,784 Long-tern liabilities are not due and payable in the current period, therefore, are not reported in the governmental funds. Long-term liabilities at year-end consist of: Bonds Payable $ (45,582,325) Certificates of Participation Payable (342,845,923) Compensated Absences Payable (33,354,467) Other Postemployment Benefits Obligation (40,593,115) (462,375,830) Deferred inflows of resources are reported as a result of changes in fair value of hedging derivative instruments in the statement of net position (19,977,527) Interest on long-term debt is accrued as a liability in the government-wide statements, but is not recognized in the governmental funds until due. (3,381,641) Internal service funds are used by management to charge the costs of certain activities, such as insurance, to individual funds. The assets and liabilities of the internal service funds are included in governmental activities in the statement of net position. 40,585,959 Net Position - Governmental Activities $ 791,368,011 The accompanying notes to financial statements are an integral part of this statement

121 26 District School Board of Pasco County Statement of Revenues, Expenditures, and Changes in Fund Balances Governmental Funds For the Fiscal Year Ended June 30, 2013 Major Funds General Capital Projects Special Revenue Special Revenue Primary Federal Economic Nonmajor Total Operating Other Other Federal Stimulus Programs Governmental Governmental Fund Funds Programs Fund Fund Funds Funds Revenues: Federal Sources: Federal Direct $ 536,626 $ - $ 6,970,692 $ - $ - $ 7,507,318 Federal Through State 2,261,737-30,886,433 1,886,145 22,141,725 57,176,040 State Sources: Florida Education Finance Program 229,215, ,215,516 Public Education Capital Outlay , ,291 Food Services , ,874 SBE/COBI Bond Interest ,377 10,377 CO & DS Withheld for State Education Bonds ,375,234 2,375,234 CO & DS Interest ,394 25,394 CO & DS Distributed , ,571 Racing Commission Funds , ,250 State Grants and Other 81,765, ,765,238 Local Sources: Property Taxes 120,318, ,896, ,215,396 Local Sales Taxes - 27,490, ,490,903 Impact Fees - 6,011, ,011,229 Food Services ,441,922 11,441,922 Investment Earnings 196,071 (386,354) - - 1,458,032 1,267,749 Local Grants and Other 9,396, ,620 9,434,708 Total Revenues 443,690,228 33,115,778 37,857,125 1,886,145 69,973, ,523,010 Expenditures: Current-Education: Instruction 275,441,887-23,412, , ,761,436 Pupil Personnel Services 21,523,167-3,508, ,031,281 Instructional Media Services 6,707,914-56, ,763,983 Inst. and Curriculum Development Services 8,452,383-3,101, ,895-11,701,933 Instructional Staff Training Services 6,324,236-4,300, ,459-10,981,833 Instruction Related Technology 4,433, ,568 51,483-4,864,701 Board of Education 468, ,772 General Administration 553, ,529 41,633-1,512,137 Exhibit E 27 Major Funds General Capital Projects Special Revenue Special Revenue Primary Federal Economic Nonmajor Total Operating Other Other Federal Stimulus Programs Governmental Governmental Fund Funds Programs Fund Fund Funds Funds Expenditures (continued): School Administration 33,518,619-57, ,484-33,759,267 Facilities Acquisition and Construction 1,796,938 1,291, ,745,559 4,833,626 Fiscal Services 2,110, , ,228,720 Food Services 171,905-70,958-31,355,848 31,598,711 Central Services 5,465, ,790 12,813-5,643,763 Pupil Transportation Services 26,745, ,437 1,310-27,052,856 Operation of Plant 41,713, , ,856,266 Maintenance of Plant 10,471, , ,586,881 Administrative Technology Services 2,907, , ,118,929 Community Services 566, , ,873 Capital Outlay: Facilities Acquisition and Construction 12,950 10,688,424 4,945-17,336,736 28,043,055 Other Capital Outlay 262, , ,701-1,334,131 Debt Service: Principal ,557,001 23,557,001 Interest ,110,854 16,110,854 Fiscal Charges , ,328 Total Expenditures 449,649,188 11,979,553 37,857,125 1,886,145 90,766, ,138,337 Excess (Deficiency) of Revenues Over Expenditures (5,958,960) 21,136, (20,792,592) (5,615,327) Other Financing Sources (Uses): Proceeds from the Sale of Capital Assets Transfers In Transfers Out Total Other Financing Sources (Uses) Net Change in Fund Balances Fund Balances, July 1, 2012 Fund Balances, June 30, 2013 The accompanying notes to financial statements are an integral part of this statement. 8, ,346 5,312,376 1, ,756,122 42,070,126 - (19,030,980) - - (17,493,061) (36,524,041) 5,320,722 (19,029,352) ,263,061 5,554,431 (638,238) 2,106, (1,529,531) (60,896) 48,282, ,391, ,358, ,032,324 $ 47,644,623 $ 112,498,302 $ - $ - $ 59,828,503 $ 219,971,428 Exhibit E B-29

122 District School Board of Pasco County Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances for Governmental Funds to the Statement of Activities For the Fiscal Year Ended June 30, 2013 Exhibit F Exhibit G District School Board of Pasco County Statement of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual General Fund For the Fiscal Year Ended June 30, 2013 B-30 Net Change in Fund Balances - Governmental Funds (page 27) Amounts reported for governmental activities on the statement of activities (pages 22 & 23) are different because: $ (60,896) Capital outlays are reported in the 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. This is the amount by which depreciation exceeded capital outlays in the current period. Expenditures for capital assets $ 29,597,922 Less current year depreciation (50,113,755) (20,515,833) Capital assets donated to the District increase net assets on the statement of activities. However, they do not provide current financial resources and are not reported as revenues in the governmental funds. 56,641 The undepreciated cost of capital assets disposed of during the period is reported in the statement of activities. In the governmental funds, the cost of these assets was recognized as an expenditure in the year purchased. Thus, the change in net position differs from the change in fund balance by the undepreciated cost of the assets disposed of. (687,540) Deferred outflows of resources are reported as a result of changes in fair value of hedging derivative instruments in the statement of net position. This is the change in fair value for the current year. (13,141,492) Repayment of long-term debt is an expenditure in the governmental funds, but the repayment reduces long-term liabilities in the statement of net position. Additionally, governmental funds report the effect of issuance costs, premiums, discounts, and similar items when debt is first issued, whereas these amounts are deferred and amortized over the life of the debt in the statement of activities. Principal payments $ 24,992,001 Changes in fair value of investment derivatives 13,203,391 Net decrease in deferred charges (2,334,871) Net decrease in premiums and discounts 709,101 36,569,622 Capital credits to be received in future years are accrued in the government-wide statements, but the credits do not provide current financial resources and are not recognized in the governmental funds. This is the net amount of capital credits earned in excess of the 150,739 amount paid in the current period. In the statement of activities, the cost of compensated absences is measured by the amounts earned during the year, while in the governmental funds expenditures are not recognized based on the amounts actually paid for compensated absences. This is the net amount of compensated absences paid in excess of the amount earned in the current period. 360,695 Interest on long-term debt is recognized as an expenditure in the governmental funds when due, but is recognized as interest accrues in the statement of activities. This is the net decrease in accrued interest payable. 281,927 The net change in liability for postemployment health care benefits is reported in the government-wide statements, but not in the governmental fund statements. (6,105,883) Internal service funds are used by management to charge the cost of certain activities, such as insurance, to individual funds. The net expense of internal service funds, excluding depreciation expense of $18,212, is reported with governmental activities. (819,306) Change in Net Position - Governmental Activities (pages 22 & 23). $ (3,911,326) Revenues: Intergovernmental: Federal Sources: Federal Direct Federal Through State State Sources: Florida Education Finance Program State Grants and Other Local Sources: Property Taxes Investment Earnings Local Grants and Other Total Revenues Expenditures: Current-Education: Instruction Salaries Employee Benefits Purchased Services Materials and Supplies Capital Outlay Other Expenses Pupil Personnel Services Salaries Employee Benefits Purchased Services Materials and Supplies Capital Outlay Other Expenses Instructional Media Services Salaries Employee Benefits Purchased Services Materials and Supplies Capital Outlay Other Expenses Instruction and Curriculum Development Services Salaries Employee Benefits Purchased Services Materials and Supplies Capital Outlay Other Expenses Variance with Budgeted Amounts Final Budget - Positive Original Final Actual Amounts (Negative) $ 577,715 $ 672,091 $ 536,626 $ (135,465) 1,750,000 2,300,000 2,261,737 (38,263) 230,799, ,898, ,215,516 (5,682,822) 81,031,068 79,395,997 81,765,238 2,369, ,873, ,751, ,318,952 1,567, , , ,071 (203,929) 6,759,986 9,284,829 9,396, , ,192, ,703, ,690,228 (2,012,893) $ 192,340,695 $ 193,039,406 $ 191,373,737 $ 1,665,669 49,953,600 54,030,619 53,151, ,847 25,838,499 20,307,942 19,277,930 1,030,012 11,905,614 9,300,856 8,252,262 1,048,594 58, , , ,128 2,626,738 3,064,766 3,030,926 33,840 14,212,644 15,118,200 14,939, ,071 4,050,347 4,545,340 4,507,706 37,634 1,959,531 1,997,797 1,866, , , , ,033 80,922 12, ,094 11, ,810 8,409 57,409 52,593 4,816 3,923,065 3,988,724 3,848, ,476 1,082,141 1,169,813 1,166,389 3, , , ,185 19, , , ,229 29,604 1,349,662 1,302,546 1,115, ,751 11,572 9,795 7,068 2,727 7,031,312 7,382,201 6,493, ,020 1,800,544 1,728,472 1,691,296 37, , , , , , ,694 50, ,603 9,415 11,305 4,271 7,034 46,654 53,906 30,527 23,379 The accompanying notes to financial statements are an integral part of this statement

123 Exhibit G District School Board of Pasco County Statement of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual General Fund For the Fiscal Year Ended June 30, 2013 Exhibit G District School Board of Pasco County Statement of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual General Fund For the Fiscal Year Ended June 30, 2013 B-31 Expenditures (continued): Instructional Staff Training Services Salaries Employee Benefits Purchased Services Materials and Supplies Capital Outlay Other Expenses Instruction Related Technology Salaries Employee Benefits Materials and Supplies School Board Salaries Employee Benefits Purchased Services Materials and Supplies Other Expenses General Administration Salaries Employee Benefits Purchased Services Materials and Supplies Capital Outlay Other Expenses School Administration Salaries Employee Benefits Purchased Services Materials and Supplies Capital Outlay Other Expenses Facilities Services Salaries Employee Benefits Purchased Services Materials and Supplies Capital Outlay Other Expenses Variance with Budgeted Amounts Final Budget - Positive Original Final Actual Amounts (Negative) 4,559,856 5,452,221 4,815, ,287 1,116,334 1,373,799 1,242, , , ,204 72, ,633 51, , , ,357 2,120 7,864 5,964 1,900 9,600 47,724 20,383 27,341 3,323,034 3,493,944 3,399,217 94, ,285 1,029,338 1,016,001 13, ,432 18, , , ,343 29,977 2,972,324 88,565 74,718 13, , , ,304 7,246 1,510 1, ,203 31,066 48,281 28,100 20, , , ,673 11,493 73,642 76,642 75,590 1, , ,074 97, ,506 14,342 14,217 8,095 6,122 3,550 3, ,258 34,252 30,450 21,757 8,693 24,000,070 24,150,075 24,131,169 18,906 6,620,192 7,162,339 7,135,211 27,128 1,163,388 1,133,755 1,083,102 50, , , ,874 54, , , ,782 5, , , ,481 39, , , ,307 5, , , , , , ,626 80,646 11,025 11,295 5,652 5, , ,389 3, ,342 7,157 7, ,578 Expenditures (continued): Fiscal Services Salaries Employee Benefits Purchased Services Materials and Supplies Capital Outlay Other Expenses Variance with Budgeted Amounts Final Budget - Positive Original Final Actual Amounts (Negative) 1,478,156 1,478,906 1,443,178 35, , , ,930 20, , , ,668 29,615 35,650 34,642 19,612 15,030 2,165 2,375 1, ,821 93,861 38,523 55,338 Food Services Salaries - 166, ,339 7,201 Employee Benefits - 14,091 12,156 1,935 Purchased Services Central Services Salaries Employee Benefits Purchased Services Materials and Supplies Capital Outlay Other Expenses Pupil Transportation Services Salaries Employee Benefits Purchased Services Energy Services Materials and Supplies Capital Outlay Other Expenses Operation of Plant Salaries Employee Benefits Purchased Services Energy Services Materials and Supplies Capital Outlay Other Expenses Maintenance of Plant Salaries Employee Benefits Purchased Services Materials and Supplies Capital Outlay Other Expenses 3,544,937 3,544,448 3,391, ,646 1,003,141 1,052,835 1,029,125 23,710 1,065,844 1,062, , ,339 70,273 53,470 35,817 17,653 15,387 20,187 6,127 14, , , ,618 24,400 13,865,876 14,266,843 14,037, ,861 6,147,824 6,147,898 5,998, , ,612 1,037, , ,926 5,455,000 6,689,208 4,459,496 2,229,712 1,217,100 1,337,475 1,316,946 20,529 3,900 3, ,073 9, ,879 98,922 13,957 14,673,660 14,839,514 14,593, ,441 5,471,407 5,584,430 5,539,444 44,986 10,027,973 10,601,519 10,561,592 39,927 11,289,005 10,479,005 10,017, , ,845 1,055, , ,710 26,858 39,254 24,389 14,865 2, , ,441 8,198 6,331,669 6,031,669 5,484, ,974 1,765,910 1,765,910 1,647, ,666 2,783,105 3,108,340 3,076,648 31, , , ,788 97,482 11,795 10,795 7,878 2,917 17,623 17,623 7,522 10,

124 B-32 Exhibit G District School Board of Pasco County Statement of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual General Fund For the Fiscal Year Ended June 30, 2013 Expenditures (continued): Administrative Technology Services Salaries Employee Benefits Purchased Services Materials and Supplies Capital Outlay Other Expenses Community Services Salaries Employee Benefits Purchased Services Materials and Supplies Capital Outlay Other Expenses Capital Outlay: Facilities Acquisition and Construction Other Capital Outlay Total Expenditures Excess (Deficiency) of Revenues Over Expenditures Variance with Budgeted Amounts Final Budget - Positive Original Final Actual Amounts (Negative) 2,098,229 2,098,229 1,968, , , , ,540 15, , , , ,802 38,350 38,323 12,767 25,556 3,500 3,864 2,152 1,712 10,557 10, , , , ,096 6,802 39,081 85,428 78,315 7, , , ,823 8,819 13,925 28,796 21,554 7,242 9,210 13,738 10,916 2,822 68,829 91,741 83,902 7,839-12,950 12, , , ,509, ,312, ,649,188 15,662,874 (22,317,099) (19,608,941) (5,958,960) 13,649,981 Other Financing Sources (Uses): Proceeds from the Sale of Capital Assets 150, ,000 8,346 (141,654) Transfers In 14,847,998 14,448,671 5,312,376 (9,136,295) Total Other Financing Sources (Uses) 14,997,998 14,598,671 5,320,722 (9,277,949) Net Change in Fund Balance Fund Balance, July 1, 2012 Fund Balance, June 30, 2013 The accompanying notes to financial statements are an integral part of this statement. (7,319,101) (5,010,270) (638,238) 4,372,032 48,282,861 48,282,861 48,282,861 - $ 40,963,760 $ 43,272,591 $ 47,644,623 $ 4,372,032 District School Board of Pasco County Statement of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual Special Revenue - Other Federal Programs Fund For the Fiscal Year Ended June 30, 2013 Exhibit H Variance with Budgeted Amounts Final Budget - Positive Original Final Actual Amounts (Negative) Revenues: Federal Sources: Federal Direct $ 6,501,421 $ 8,123,686 $ 6,970,692 $ (1,152,994) Federal Through State 34,594,082 48,584,072 30,886,433 (17,697,639) Total Revenues 41,095,503 56,707,758 37,857,125 (18,850,633) Expenditures: Current-Education: Instruction Salaries 13,613,595 15,289,990 12,467,915 2,822,075 Employee Benefits 4,971,034 6,806,364 4,635,190 2,171,174 Purchased Services 3,896,104 5,084,262 3,303,098 1,781,164 Materials and Supplies 1,933,120 5,505,224 1,027,203 4,478,021 Capital Outlay 791,461 1,276, , ,237 Other Expenses 701,740 1,451,464 1,115, ,394 Pupil Personnel Services Salaries 2,573,277 2,615,137 2,413, ,016 Employee Benefits 880, , , ,983 Purchased Services 209, , ,258 82,840 Materials and Supplies 147, , ,069 30,837 Capital Outlay - 9,405 9, Other Expenses 9,400 14,951 12,077 2,874 Instructional Media Services Salaries 51,363 43,495 43,495 - Employee Benefits 15,867 11,553 11, Capital Outlay - 1,687 1, Instruction and Curriculum Development Services Salaries 2,373,745 2,513,973 2,225, ,185 Employee Benefits 662, , , ,420 Purchased Services 231, , , ,211 Materials and Supplies 103,689 1,549,435 60,221 1,489,214 Capital Outlay 41, ,342 18, ,318 Other Expenses 15,086 43,187 35,405 7,782 Instructional Staff Training Services Salaries Employee Benefits Purchased Services Materials and Supplies Capital Outlay Other Expenses Instruction Related Technology Salaries Employee Benefits Purchased Services Materials and Supplies Capital Outlay 2,204,962 3,050,065 2,243, , , , , , ,338 1,860,870 1,173, , , , ,591 97,192 36, ,270 7, , ,514 42,621 26,645 15, , , ,824 17,662 60,936 74,016 67,334 6,682 54,288 78,243 55,768 22,475 37,033 2,881 2,

125 B-33 District School Board of Pasco County Statement of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual Special Revenue - Other Federal Programs Fund For the Fiscal Year Ended June 30, 2013 Exhibit H Variance with Budgeted Amounts Final Budget - Positive Original Final Actual Amounts (Negative) Expenditures (continued): Board Other Expenses 518, , ,514 General Administration Other Expenses 1,200,220 1,453, , ,950 School Administration Salaries 8,673 62,458 44,188 18,270 Employee Benefits 4,197 16,587 12,580 4,007 Purchased Services 1, Capital Outlay - 7,000-7,000 Capital Outlay Other Capital Outlay 15, , ,836 Fiscal Services Salaries 95, ,752 91,737 73,015 Employee Benefits 30,591 49,362 25,760 23,602 Purchased Services Materials and Supplies 189,778 19, ,391 Capital Outlay 524 1, ,412 Food Services Employee Benefits Purchased Services 39,140 41,076 40, Materials and Supplies - 15,218 11,610 3,608 Capital Outlay - 1,811 1,811 - Other Expenses - 16,852 16, Central Services Salaries 125, , ,339 7,244 Employee Benefits 24,559 37,817 35,235 2,582 Capital Outlay Other Expenses 5,000 10,216 10,216 - Pupil Transportation Services Salaries 62,496 81,199 66,722 14,477 Employee Benefits 20,750 24,017 18,119 5,898 Purchased Services 327, , , ,694 Capital Outlay 1, Operation of Plant Purchased Services 43,000 39,856 27,812 12,044 Energy Services 167, , ,249 23,332 Materials and Supplies 8,300 8,300 3,908 4,392 Capital Outlay 9,778 10,751-10,751 Maintenance of Plant Purchased Services 43, , ,106 2,243 Capital Outlay 117, , ,960 Administrative Technology Services Salaries 185, , ,572 26,393 Employee Benefits 44,468 50,016 37,530 12,486 Purchased Services 1,000 1, District School Board of Pasco County Statement of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual Special Revenue - Other Federal Programs Fund For the Fiscal Year Ended June 30, 2013 Exhibit H Variance with Budgeted Amounts Final Budget - Positive Original Final Actual Amounts (Negative) Expenditures (continued): Community Services Salaries - 52,857 39,770 13,087 Employee Benefits - 11,914 10,129 1,785 Purchased Services - 22,186 19,698 2,488 Materials and Supplies - 29,966 25,222 4,744 Capital Outlay ,198 (2,299) Other Expenses - 7,848 3,250 4,598 Capital Outlay: Facilities Acquisition and Construction - 4,945 4,945 - Other Capital Outlay - 889, ,007 - Total Expenditures 41,095,503 56,707,758 37,857,125 18,850,633 Net Change in Fund Balance Fund Balances, Beginning Fund Balances, Ending $ - $ - $ - $ - The accompanying notes to financial statements are an integral part of this statement

126 B-34 Exhibit I District School Board of Pasco County Statement of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual Federal Economic Stimulus Programs Fund For the Fiscal Year Ended June 30, 2013 Variance with Budgeted Amounts Final Budget - Positive Original Final Actual Amounts (Negative) Revenues: Federal Sources: Federal Through State $ 3,080,582 $ 3,284,723 $ 1,886,145 $ (1,398,578) Total Revenues 3,080,582 3,284,723 1,886,145 (1,398,578) Expenditures: Current-Education: Instruction Salaries Employee Benefits Purchased Services Materials and Supplies Capital Outlay Other Expenses Instructional and Curriculum Development Services Salaries Employee Benefits Purchased Services Materials and Supplies Capital Outlay Instructional Staff Training Services Salaries Employee Benefits Purchased Services Materials and Supplies 1,216, , , , , , ,239 37, ,625 25,735 25, ,018 53, ,000 32,669 4,898 27, , , , , ,937 84,968 29,259 55,709 1,000 31, ,502 2, , , ,634 69,981 41,653 19,985 14,622 8,942 5, , , , ,512 16,000 54,826 4,666 50,160 Other Expenses 6,500 35,494 20,627 14,867 Instruction Related Technology Salaries 56, , ,300 Employee Benefits 16,582 40,938-40,938 Purchased Services 170, ,000 51, ,517 General Administration Other Expenses 97, ,900 41,633 78,267 School Administration Salaries 112, , , ,750 Employee Benefits 20,644 59,990 38,266 21,724 Purchased Services 5,000 7, ,369 Central Services Salaries 62,350 62,350-62,350 Employee Benefits 17,650 17,650-17,650 Purchased Services 25,626 25,626 12,813 12,813 Capital Outlay 20,000 20,000-20,000 Purchased Services 182,662 26,383 1,310 25,073 Exhibit I District School Board of Pasco County Statement of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual Federal Economic Stimulus Programs Fund For the Fiscal Year Ended June 30, 2013 Variance with Budgeted Amounts Final Budget - Positive Original Final Actual Amounts (Negative) Expenditures (continued): Capital Outlay: Other Capital Outlay - 182, ,701 - Total Expenditures 3,080,582 3,284,723 1,886,145 1,398,578 Net Change in Fund Balance Fund Balances, Beginning Fund Balances, Ending $ - $ - $ - $ - The accompanying notes to financial statements are an integral part of this statement

127 District School Board of Pasco County Statement of Fund Net Position Proprietary Funds June 30, 2013 Exhibit J District School Board of Pasco County Statement of Revenues, Expenses, and Changes in Fund Net Position Proprietary Funds For the Fiscal Year Ended June 30, 2013 Exhibit K B-35 Business-Type Activity Nonmajor Enterprise Fund ASSETS: Current Assets: Cash - Governmental Activities Internal Service Funds $ $ 17,346,411 Cash with Fiscal Agent 13,393 68,183 Investments 4,218,747 38,130,247 Accounts Receivable 103,080 1,240,141 Accrued Interest Receivable 8,033 40,894 Total Current Assets 4,343,253 56,825,876 Noncurrent Assets: Improvements Other Than Buildings, Net 12,069 - Buildings and Fixed Equipment, Net 19,493 - Furniture, Fixtures, and Equipment, Net 130,188 19,900 Computer Software, Net 4,587 - Total Noncurrent Assets 166,337 19,900 TOTAL ASSETS 4,509,590 56,845,776 LIABILITIES: Current Liabilities: Salaries and Benefits Payable $ 9,466 $ 19,172 Payroll Deductions and Withholdings Payable 9,642 5,073 Accounts Payable 138,185 9,694,376 Unearned Revenues 74,169 8,296 Current portion of long-term liabilities: Compensated Absences Payable 415,780 29,598 Estimated Insurance Claims Payable - 2,311,000 Total Current Liabilities 647,242 12,067,515 Noncurrent Liabilities: Compensated Absences Payable - 247,129 Estimated Insurance Claims Payable - 4,202,000 Other Postemployment Benefits Obligation 682,107 - Total Noncurrent Liabilities 682,107 4,449,129 Total Liabilities 1,329,349 16,516,644 NET POSITION: Investment in Capital Assets 166,337 19,900 Unrestricted 3,013,904 40,309,232 Total Net Position 3,180,241 40,329,132 TOTAL LIABILITIES AND NET POSITION $ 4,509,590 $ 56,845,776 The accompanying notes to financial statements are an integral part of this statement. Business-Type Activity Nonmajor Enterprise Fund Governmental Activities Internal Service Funds Operating Revenues: Charges for Services Provided $ 8,562,722 $ 8,342,252 Insurance Premiums: Board Contributions - 64,029,897 Employees - 6,635,361 Retirees - 4,013,792 Other Operating Revenues - 554,235 Total Operating Revenues 8,562,722 83,575,537 Operating Expenses: Salaries $ 4,712,826 $ 898,286 Employee Benefits 1,733, ,785 Purchased Services 389,580 3,864,661 Insurance Premiums - 18,019,407 Energy Services 417,829 10,630,043 Materials and Supplies 371,405 15,473 Capital Outlay 32,287 1,666 Insurance Claims - 48,567,552 Other 252,109 58,808 Depreciation 31,155 18,212 Total Operating Expenses 7,940,303 82,311,893 Operating Income 622,419 1,263,644 Nonoperating Revenues: Investment Earnings 33, ,747 Gifts, Grants, and Bequests - 275,547 Insurance Loss Recoveries - 52,161 Loss on Disposition of Assets (1,207) (1,532) Total Nonoperating Revenues 32, ,923 Income Before Transfers 654,889 1,708,567 Transfers In - 4,100,000 Transfers Out (3,000,000) (6,646,085) Change in Net Position (2,345,111) (837,518) Total Net Position, July 1, ,525,352 41,166,650 Total Net Position, June 30, 2013 $ 3,180,241 $ 40,329,132 The accompanying notes to financial statements are an integral part of this statement

128 B-36 CASH FLOWS FROM OPERATING ACTIVITIES: Cash Received from Services Cash Received from Premiums Cash Received from Other Operating Revenues Cash Payments to Suppliers for Goods and Services Cash Payments to Employees for Services Cash Payments for Insurance Claims Net Cash Provided (Used) by Operating Activities District School Board of Pasco County Statement of Cash Flows Proprietary Funds For the Fiscal Year Ended June 30, 2013 Business-Type Activity Nonmajor Enterprise Fund Governmental Activities Internal Service Funds Exhibit L $ 8,541,678 $ 8,342,252-74,471, ,235 (1,370,497) (39,520,773) (6,325,757) (1,176,720) - (49,537,432) 845,424 (6,866,559) CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES: Insurance Loss Recoveries - 52,161 Gifts, Grants and Bequests - 275,547 Transfers In - 4,100,000 Transfers Out (3,000,000) (6,646,085) Net Cash (Used) by Noncapital Financing Activities (3,000,000) (2,218,377) CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES: Acquisition and Construction of Capital Assets (60,951) - Net Cash (Used) by Capital and Related Financing Activities (60,951) - CASH FLOWS FROM INVESTING ACTIVITIES: Investment Earnings 44, ,827 Proceeds from Sales and Maturity of Investments 700,641 3,224,227 Net Cash Provided by Investing Activities 745,272 3,403,054 Net Decrease in Cash (1,470,255) (5,681,882) Cash, Beginning 1,483,648 23,096,476 Cash, Ending $ 13,393 $ 17,414,594 Reconciliation of Operating Income to Net Cash Provided (Used) by Operating Activities: Operating Income $ 622,419 $ 1,263,644 Adjustments to Reconcile Operating Income to Net Cash Provided by Operating Activities: Depreciation 31,155 18,212 Change in Assets and Liabilities: Decrease in Accounts Receivable (5,587) (215,467) Increase (Decrease) in Accounts Payable 92,714 (6,930,715) Decrease Salaries and Benefits Payable (605) (39,946) Decrease in Payroll Deductions and With oldings Payable (1,084) (809) Increase (Decrease) in Unearned Revenues (15,457) 8,296 Increase in Compensated Absences Payable 18, Increase in Other Postemployment Benefits Obligation 103,068 - Decrease in Estimated Insurance Claims Payable - (969,880) Total Adjustments 223,005 (8,130,203) Net Cash Provided (Used) by Operating Activities $ 845,424 $ (6,866,559) The accompanying notes to financial statements are an integral part of this statement. District School Board of Pasco County Statement of Fiduciary Net Position Fiduciary Funds June 30, 2013 Exhibit M Pension Private-Purpose Trust Trust Agency ASSETS: Cash and Cash Equivalents $ 945,292 $ - $ 7,163,373 Collateralized Mortgage Obligations 2,262, Corporate Bonds 450, Government and Municipal Bonds 7,225, Mutual Fund - Government Securities 1,200, Government Sponsored Enterprise Securities 3,664,827 55,723 64,582 Accounts Receivable - - 5,331 Interest Receivable 149, Inventories ,791 TOTAL ASSETS $ 15,899,032 $ 55,723 $ 7,267,077 LIABILITIES: Accounts Payable $ 44,054 $ - $ 786,965 Payroll Payable 1, Internal Accounts Payable - - 6,415,530 ABC Program Payable ,582 Total Liabilities 45,670 - $ 7,267,077 NET POSITION: Net Position Held in Trust for Pension Benefits 15,853,362 - Net Position Held in Trust for Medical Benefits - 26,907 Net Position Held in Trust for Educational Support - 28,816 Total Net Position TOTAL LIABILITIES AND NET POSITION The accompanying notes to financial statements are an integral part of this statement. 15,853,362 55,723 $ 15,899,032 $ 55,

129 B-37 District School Board of Pasco County Statement of Changes in Fiduciary Net Position Fiduciary Funds For the Fiscal Year Ended June 30, 2013 Pension Private-Purpose Trust Trust ADDITIONS: Contributions: Employer $ 1,578,667 $ - Total Contributions 1,578,667 - Investment Earnings: Interest, Dividends and Other 263,323 (261) Net Investment Income 263,323 (261) Total Additions 1,841,990 (261) DEDUCTIONS: Benefits Paid to Participants Purchased Services Other 899,541 3,984 1,600 - Total Deductions 901,141 3,984 Change in Net Position Net Position, July 1, 2012 Net Position, June 30, 2013 The accompanying notes to financial statements are an integral part of this statement. 940,849 (4,245) 14,912,513 59,968 $ 15,853,362 $ 55,723 Exhibit N DISTRICT SCHOOL BOARD OF PASCO COUNTY NOTES TO FINANCIAL STATEMENTS JUNE 30, SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Reporting Entity The District School Board has direct responsibility for operation, control, and supervision of District schools and is considered a primary government for financial reporting. The Pasco County School District is considered part of the Florida system of public education. The governing body of the school district is the Pasco County District School Board which is composed of five elected members. The elected Superintendent of Schools is the executive officer of the School Board. Geographic boundaries of the District correspond with those of Pasco County. Criteria for determining if other entities are potential component units that should be reported within the District's basic financial statements are identified and described in the Governmental Accounting Standards Board's (GASB) Statement No. 61. The GASB issued Statement No. 61, The Financial Reporting Entity: Omnibus, an amendment of GASB Statements No. 14 and No. 34, (GASB 61) effective for reporting periods after June 15, The statement establishes new criteria for reporting component units. Pursuant to Section (17), Florida Statutes, students enrolled in a charter school shall be funded the same as students enrolled in other public schools in the school district. Accordingly, charter schools full-time equivalent (FTE) student enrollment is the basis for school districts to provide funding to charter schools. Funding is provided to the charter schools by the District. Furthermore, Article IX, Section 4(b) of the Florida Constitution states that, The school board shall operate, control and supervise all free public schools within the school district and determine the rate of school district taxes within the limits prescribed herein. Because the District is financially accountable for charter schools, and charter schools create a financial burden on school districts, charter schools are considered component units of the school districts. The implementation of GASB Statement No. 61 did not result in any changes in composition of component units. Based on the application of these criteria, the following component units are included within the District School Board's reporting entity: Blended Component Unit. The Pasco County School Board Leasing Corporation, Inc. (Leasing Corporation), was formed to facilitate financing for the acquisition of facilities and equipment as further discussed in Note 7. Due to the substantive economic relationship between the Pasco County District School Board and the Leasing Corporation, the financial activities of the Leasing Corporation are included in the accompanying basic financial statements. Separate financial statements for the Leasing Corporation are not published. Discretely Presented Component Units. The component unit columns in the government-wide financial statements include the financial data of the District s other component units. For financial reporting purposes, five charter schools are included in the financial statements of the District as discretely presented 42 43

130 DISTRICT SCHOOL BOARD OF PASCO COUNTY NOTES TO FINANCIAL STATEMENTS JUNE 30, 2013 DISTRICT SCHOOL BOARD OF PASCO COUNTY NOTES TO FINANCIAL STATEMENTS JUNE 30, 2013 B-38 component units. These schools operate under a charter approved by their sponsor, the Board, and are considered to be component units of the District since they impose a financial burden on the District. The component units are as follows: Academy at the Farm focuses on creatively integrating equestrian, horticultural, and farm animal components into an interactive, inclusive learning environment. Athenian Academy of Pasco County is a K through 8 th grade school offering students a program that incorporates the Greek language and culture. Countryside Montessori Charter School programs focus on providing an alternative elementary education program. Dayspring Academy for Education and the Arts emphasizes the fine arts, offering students specialized instruction in dance, music, and art. Imagine School at Land O Lakes is a K through 7 th grade school providing an alternative education program. The Board is responsible for the prudent use of the public funds received for providing an appropriate educational program for its targeted enrollment. The financial data reported on the accompanying statements was derived from the charter schools audited financial statements for the fiscal year ended June 30, The Pasco Education Foundation is a separate not-for-profit corporation organized and operated as a direct-support organization under Section , Florida Statutes, to receive, hold, invest, and administer property and to make expenditures to or for the benefit of the District. Because of the nature and significance of its relationship with the District, the foundation is considered a component unit. The financial data reported on the accompanying statements was derived from the foundation s audited financial statements for the fiscal year ended June 30, Audits of the charter schools and foundation for the fiscal year ended June 30, 2013, were conducted by independent certified public accountants and are filed at the District s administrative office at 7227 Land O Lakes Boulevard, Land O Lakes, Florida Basis of Presentation The basic financial statements include the government-wide financial statements and fund financial statements. Government-wide Financial Statements - Government-wide financial statements, including the statement of net position and the statement of activities, present information about the District as a whole. These statements include the non-fiduciary financial activity of the primary government and its component units. Government-wide financial statements are prepared using the economic resources measurement focus. The 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 thereby clearly identifiable to a particular function. Depreciation expenses are allocated to functions/programs of the primary government. Program revenues include charges paid by the recipient of the goods or services offered by the program, and grants and contributions that are restricted to meeting the operational or capital requirements of a particular program. Revenues that are not classified as program revenues are presented as general revenues, 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 Fund of the District. The effects of interfund balances and activities have been eliminated from the government-wide financial statements. Interfund transactions, consisting of transactions involving the internal service funds, were eliminated by allocating the change in net position of internal service funds in direct proportion as they were charged as expenses to the various functions. Fund Financial Statements - Fund financial statements report detailed information about the District in the governmental, proprietary, and fiduciary funds. The focus of governmental fund financial statements is on major funds rather than reporting funds by type. Each major fund is reported in a separate column. Nonmajor funds are aggregated and reported in a single column. Because the focus of governmental fund financial statements differs from the focus of government-wide financial statements, a reconciliation is presented with each of the governmental fund financial statements. The District reports the following major governmental funds: General Fund to account for all financial resources not required to be accounted for in another fund, and for certain revenues from the State that are legally restricted to be expended for specific current operating purposes

131 DISTRICT SCHOOL BOARD OF PASCO COUNTY NOTES TO FINANCIAL STATEMENTS JUNE 30, 2013 DISTRICT SCHOOL BOARD OF PASCO COUNTY NOTES TO FINANCIAL STATEMENTS JUNE 30, 2013 B-39 Special Revenue Other Federal Programs Fund to account for and report on activities of various programs of different sources according to the specifications and requirements of each funding source. Special Revenue Federal Economic Stimulus Programs Fund to account for certain Federal grant program resources related to the American Recovery and Reinvestment Act. Capital Projects Other Fund to account for the financial resources such as sales tax proceeds, impact fees and certificates of participation which are used for capital outlay needs. Additionally, the District reports the following proprietary and fiduciary fund types: Enterprise Fund Pasco Learning and Activity Centers of Enrichment (PLACE) Fund to account for the financial resources of the District s PLACE program, a before and after-school child care program. Internal Service Funds to account for the District's fully-insured programs for employees life insurance, and property/casualty/athletics; individual selfinsurance programs for liability, auto, workers compensation, medical, pharmacy and behavioral health programs; the employee assistance program; the energy management program; and exclusive agreements administered by the School Board. Pension Trust Fund to account for resources used to finance the early retirement program. Private-Purpose Trust Fund to account for resources legally held by the District in a trustee capacity or as an agent for individuals or private organizations. Agency Funds to account for resources held by the District in a trustee capacity, primarily for the benefit of various schools and their activity funds. Basis of Accounting Basis of accounting refers to when revenues and expenditures, or expenses, are recognized in the accounts and reported in the financial statements. Basis of accounting relates to the timing of the measurements made, regardless of the measurement focus applied. The government-wide financial statements are prepared using the accrual basis of accounting, as are the proprietary funds and fiduciary funds financial statements. Revenues are recognized when earned and expenses are recognized when a liability is incurred, regardless of the timing of the related cash flows. Property taxes are recognized in the year for which they are levied. Revenues from grants, entitlements, and donations are recognized in the fiscal year in which all eligibility requirements imposed by the provider have been satisfied. Governmental fund financial statements are prepared using the modified accrual basis of accounting. Revenues, except for certain grant revenues, are recognized when they become measurable and available. Revenues are considered to be available when they are collectible within the current period or soon enough thereafter to pay liabilities of the current period. Significant revenues susceptible to accrual include ad valorem taxes, reimbursable-type grants and interest on investments. The District considers revenues to be available if they are collected within 60 days of the end of the current fiscal year. When grant terms provide that the expenditure of resources is the prime factor for determining eligibility for Federal, State, and other grant resources, revenue is recognized at the time the expenditure is made. Under the modified accrual basis of accounting, expenditures are generally recognized when the related fund liability is incurred, except for principal and interest on long-term debt, claims and judgments, other postemployment healthcare benefits and compensated absences, which are recognized when due. Allocations of cost, such as depreciation, are not recognized in governmental funds. Proprietary funds distinguish operating revenues and expenses from non-operating items. Operating revenues and expenses generally result from providing services and producing and delivering goods in connection with the proprietary funds principal ongoing operations. The principal operating revenues of the District s enterprise and internal service funds are from services provided for before and after-school child care and charges for employee health insurance premiums. The principal operating expenses for the enterprise and internal service funds include salaries and benefits, administrative expenses, claims, energy services and insurance premiums for excess coverage. All revenues and expenses not meeting this definition are reported as nonoperating revenues and expenses. 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. The charter schools are accounted for as governmental organizations and follow the same accounting model as the District s governmental activities. The Pasco Education Foundation, Inc., is accounted for under the not-for-profit basis of accounting and uses the accrual basis of accounting whereby revenues are recognized when earned and expenses are recognized when incurred. Recently Issued and Adopted Pronouncements The District adopted new accounting guidance GASB Statement No. 63, Financial Reporting of Deferred Outflows of Resources, Deferred Inflows of Resources, and New Position, and GASB Concepts Statement No. 4, Elements of Financial Statements. These statements incorporated deferred outflows of resources and deferred inflows of resources into the definitions of the required components of the 46 47

132 DISTRICT SCHOOL BOARD OF PASCO COUNTY NOTES TO FINANCIAL STATEMENTS JUNE 30, 2013 DISTRICT SCHOOL BOARD OF PASCO COUNTY NOTES TO FINANCIAL STATEMENTS JUNE 30, 2013 B-40 residual measure and renamed that measure as net position, rather than net assets, affecting the comparability of the fiscal year financial statements to the fiscal year financial statements. Deposits and Investments Cash deposits are held by banks qualified as public depositories under Florida law. All deposits are insured by Federal Depository Insurance Corporation and/or collateralized with securities held in Florida's multiple financial institution collateral pool as required by Chapter 280, Florida Statutes. For the enterprise and internal service funds the statement of cash flows considers cash and cash equivalents as those accounts used as demand deposit accounts and amounts held by fiscal agent. Investments consist of amounts placed in the SBA debt service accounts for investment of debt service moneys with SBA for participation in the Florida PRIME, and Fund B Surplus Trust Fund (Fund B) investment pools created by Sections and , Florida Statutes; and those made locally. The investment pools operate under investment guidelines established by Section , Florida Statutes. The District s investments in Florida PRIME, which the SBA indicates is a Securities and Exchange Commission Rule 2a7-like external investment pool, as of June 30, 2013, are similar to money market funds in which shares are owned in the fund rather than the underlying investments. These amounts are reported at fair value, which is amortized cost. The District s investments in Fund B are accounted for as a fluctuating net asset value pool, with a Fair Value factor of at June 30, Fund B is not subject to participant withdrawal requests. Distributions from Fund B, as determined by the SBA, are effected by transferring eligible cash or securities to Florida PRIME, consistent with the pro rata allocation of pool shareholders of record at the creation date of Fund B. One hundred percent of such distributions from Fund B are available as liquid balance within Florida PRIME. Investments made locally consist of United States Treasury Securities and Federal Agency Securities, money market and bond mutual funds, corporate debt obligations, commercial paper and collateralized mortgage obligations and are reported at fair value. Types and amounts of investments held at fiscal year-end are described in a subsequent note on investments. Inventories and Prepaid Items Inventories consist of expendable supplies held for consumption in the course of District operations. The valuation of the inventories is based on various methods and is presented at cost. Warehouse (including purchased foods and supplies used by the District s Food and Nutrition Services Department), maintenance, and transportation items are based on a weighted average. Telecommunications inventory items are stated at last invoice price, which approximates the first-in, firstout basis. The United States Department of Agriculture surplus donated foods are stated at their fair value as determined at the time of donation to the District s food service program by the Florida Department of Agriculture and Consumer Services, Bureau of Food Distribution. The costs of inventories are recorded as expenditures when used rather than purchased. Certain payments to vendors reflect costs applicable to future accounting periods and are recorded as prepaid items in both government-wide and fund financial statements. The purchase method is used to account for prepaid items. Capital Assets Expenditures for capital assets acquired or constructed for general District purposes are reported in the governmental fund that financed the acquisition or construction. The capital assets so acquired are reported in the government-wide statement of net position but are not reported in the governmental fund financial statements. Capital assets are defined by the District as those costing more than $750. Such assets are recorded at historical cost or estimated historical cost if purchased or constructed. Donated assets are recorded at fair value at the date of donation. Land and buildings acquired or constructed prior to July 1, 1972, are stated at estimated historical cost using price levels at the time of acquisition and, as a result, $1,348,251 of stated land values and $15,047,877 of stated building values are based on these estimates. The cost of normal maintenance and repairs that do not add to the value of the asset or materially extend the assets lives are not capitalized. Interest costs incurred during construction of capital assets are not considered material and are not capitalized as part of the costs of construction. Capital assets are depreciated using the straight-line method over the following estimated useful lives: Description Improvements Other than Buildings Buildings and Fixed Equipment Furniture, Fixtures, and Equipment Motor Vehicles Audio Visual Materials and Computer Software Changes in capital assets for the current year are further described in Note 5. Estimated Lives 15 years years 6 years 5 years 5 years 48 49

133 DISTRICT SCHOOL BOARD OF PASCO COUNTY NOTES TO FINANCIAL STATEMENTS JUNE 30, 2013 DISTRICT SCHOOL BOARD OF PASCO COUNTY NOTES TO FINANCIAL STATEMENTS JUNE 30, 2013 B-41 Compensated Absences Vacation benefits are accrued as a liability as the benefits are earned if the employee s right to receive compensation is attributable to services already rendered and it is probable that the District will compensate the employees for the benefits through paid time off. Sick leave benefits are accrued as a liability using the vesting method. The liability is based on the sick leave accumulated at June 30 by those employees who are currently eligible to receive termination payments and those employees to whom it is probable that they will become eligible to receive termination benefits in the future. The criteria for determining the vacation and sick leave liability is derived from Board policy, negotiated agreements, and State law. The entire compensated absence liability is reported on the government-wide financial statements. For governmental fund financial statements, only the amount payable to employees who terminated their employment as of the end of the fiscal year is reported. The liability at year-end includes salary-related payments such as Social Security, Medicare and Florida Retirement System contributions. Changes in compensated absences liability for the current year are further described in Note 11. Long-Term Liabilities Long-term obligations that will be financed from resources to be received in the future by governmental funds are reported as liabilities in the government-wide statement of net position. Bond and certificates of participation premiums and discounts, as well as issuance costs, are deferred and amortized over the life of the bonds and certificates of participation using the effective interest method. Bonds and certificates of participation payable are reported net of the applicable premium or discount. In the governmental fund financial statements, bonds and other long-term obligations are not recognized as liabilities until due. Governmental fund types recognize bond and certificates of participation premiums and discounts, as well as bond issuance costs, during the current period. The face amount of debt issued is reported as other financing sources, while premiums and discounts on debt issuances are reported as other financing sources and uses. Issuance costs, whether or not withheld from the actual debt proceeds received, are reported as debt service expenditures. Changes in long-term debt obligations for the current year are further described in Note 11. Deferred Outflows/Inflows of Resources In addition to assets, the statements of financial position reports a separate section for deferred outflows of resources. This separate financial statement element, deferred outflows of resources, represents a consumption of net position that applies to a future period(s) and so will not be recognized as an outflow of resources (expense/expenditure) until that time. The government only has one item that qualifies for reporting in this category. It is the accumulated decrease in the fair value of hedging derivatives in the government-wide statement of net position. In addition to liabilities, the statement of financial position reports a separate section for deferred inflows of resources. This separate financial statement element, deferred inflows of resources, represents an acquisition of net position that applies to a future period(s) and so will not be recognized as an inflow of resources (revenue) until that time. The government has only one type of item that qualifies for reporting in this category. It is the derivatives swap liability. Net Position Flow Assumption The District occasionally funds outlays for a particular purpose from both restricted (e.g., restricted bond or grant proceeds) and unrestricted resources. To calculate the amounts to report as restricted net position and unrestricted net position in the government-wide and proprietary fund financial statements, a flow assumption must be made about the order in which the resources are considered to be applied. Consequently, it is the District s policy to consider restricted net position to have been depleted before unrestricted net position is applied. Fund Balance Flow Assumptions The District may fund outlays for a particular purpose from both restricted and unrestricted resources (the total of committed, assigned and unassigned fund balance). To calculate the amounts to report as restricted, committed, assigned and unassigned fund balance in the governmental fund financial statements a flow assumption must be made about the order in which the resources are considered to be applied. It is the District s policy to consider restricted fund balance to have been depleted before using any of the components of unrestricted fund balance. Further, when components of unrestricted fund balance can be used for the same purpose, committed fund balance is depleted first, followed by assigned fund balance. Unassigned fund balance is applied last. State Revenue Sources Revenues from State sources for current operations are primarily from the Florida Education Finance Program administered by the Florida Department of Education (Department) under the provisions of Section , Florida Statutes. In accordance with this law, the District determines and reports the number of full-time equivalent (FTE) students and related data to the Department. The Department 50 51

134 DISTRICT SCHOOL BOARD OF PASCO COUNTY NOTES TO FINANCIAL STATEMENTS JUNE 30, 2013 DISTRICT SCHOOL BOARD OF PASCO COUNTY NOTES TO FINANCIAL STATEMENTS JUNE 30, 2013 B-42 performs certain edit checks on the reported number of FTE and related data, and calculates the allocation of funds to the District. The District is permitted to amend its original reporting for a period of five months following the date of the original reporting. Such amendments may impact funding allocations for subsequent years. The Department may also adjust subsequent fiscal period allocations based upon an audit of the District's compliance in determining and reporting FTE and related data. Normally, such adjustments are treated as reductions or additions of revenue in the year when the adjustments are made. The State provides financial assistance to administer certain educational programs. State Board of Education rules require that revenue earmarked for certain programs be expended only for the program for which the money is provided, and require that the money not expended as of the close of the fiscal year be carried forward into the following year to be expended for the same educational programs. The Department generally requires that these educational program revenues be accounted for in the General Fund. A portion of the fund balance of the General Fund is restricted in the governmental fund financial statements for the unencumbered balance of categorical and earmarked educational program resources. A schedule of revenue from State sources for the current year is further described in Note 14. District Property Taxes The School Board is authorized by State law to levy property taxes for district school operations, capital improvements, and debt service. Property taxes consist of ad valorem taxes on real and personal property within the District. The Pasco County Property Appraiser determines the real and personal property values within the District. The Pasco County Tax Collector then collects the taxes and remits them to the District. The School Board adopted the 2012 tax levy on September 18, Tax bills are mailed in October and taxes are payable between November 1 of the year assessed and March 31 of the following year at discounts of up to 4 percent for early payment. Taxes become a lien on the property on January 1, and are delinquent on April 1 of the year following the year of assessment. State law provides for enforcement of collection of personal property taxes by seizure of the property to satisfy unpaid taxes, and for enforcement of collection of real property taxes by the sale of interestbearing tax certificates to satisfy unpaid taxes. The procedures result in the collection of essentially all taxes prior to June 30 of the year following the year of assessment. Property tax revenues are recognized in the government-wide financial statements when the Board adopts the tax levy. Property tax revenues are recognized in the governmental fund financial statements when taxes are received by the District, except that revenue is accrued for taxes collected by the Pasco County Tax Collector at fiscal year-end but not yet remitted to the District. Millage rates and taxes levied for the current year are further described in Note 15. School Capital Outlay Surtax (Local Sales Tax) The citizens of Pasco County on March 9, 2004, approved a one-cent sales tax authorized under Section (6), Florida Statutes. The Board receives 45% of the one-cent sales tax. The surtax levy commenced on January 1, 2005, and remained in effect for a period of 10 years through December 31, On November 6, 2012, voters signaled their approval for the continuation of the tax for another 10 years, beginning in January Federal Revenue Sources The District receives Federal awards for the enhancement of various educational programs. Federal awards are generally received based on applications submitted to, and approved by, various granting agencies. For Federal awards in which a claim to these grant proceeds is based on incurring eligible expenditures, revenue is recognized to the extent that eligible expenditures have been incurred. 2. BUDGETARY COMPLIANCE AND ACCOUNTABILITY The Board follows procedures established by State statutes and State Board of Education rules in establishing budget balances for governmental funds, as described below: Budgets are prepared, public hearings are held, and original budgets are adopted annually for all governmental fund types in accordance with procedures and time intervals prescribed by law and State Board of Education rules. Appropriations are controlled at the object level (e.g., salaries, purchased services, and capital outlay) within each activity (e.g., instruction, pupil personnel services, and school administration) and may be amended by resolution at any School Board meeting prior to the due date for the annual financial report. Budgets are prepared using the same modified accrual basis as is used to account for governmental funds. Budgetary information is integrated into the accounting system and, to facilitate budget control, budget balances are encumbered when purchase orders are issued. Appropriations lapse at fiscal year-end and encumbrances outstanding are honored from the subsequent year's appropriations. The reported budgetary data consists of the original budget as well as the final appropriated budget after amendments approved by the Board

135 DISTRICT SCHOOL BOARD OF PASCO COUNTY NOTES TO FINANCIAL STATEMENTS JUNE 30, 2013 DISTRICT SCHOOL BOARD OF PASCO COUNTY NOTES TO FINANCIAL STATEMENTS JUNE 30, 2013 B INVESTMENTS Investments at June 30, 2013, are shown below: Investments (1) Maturities Fair Value State Board of Administration (SBA) Florida PRIME 40 Day Average $ 4,718,696 Fund B Surplus Funds Trust Fund (Fund B) 3.98 Years Average 3,334,054 Debt Service Account 6 Months 399,698 Money Market Funds: Morgan Stanley - Institutional Liquidity Funds 26 Day Average 10,280 PFM Funds - Prime Series 47 Day Average 20,580,726 AIM Fund 37 Day Average 1,005,509 Commercial Paper 128 Days Average 2,198,107 Wells Fargo Advantage Funds 27 Day Average 5,438,850 Wertz York Short-term Government Bond Mutual Fund 1.30 Years Average 82,865,373 Florida Fixed Income Trust 176 Day Average 25,102,180 United States Treasury Securities 2.12 Year Average 34,622,764 Government Sponsored Enterprise Securities (2) 1.60 Year Average 39,576,506 Total Investments, Reporting Entity $ 219,852,743 (1) Pension Trust Fund investments are separately disclosed in Note 17. (2) Amount includes $120,305 held in the Fudiciary Funds. Interest Rate Risk Interest rate risk is the risk that changes in interest rates that will adversely affect the fair value of an investment. The District s investment policy limits investments of operating funds to a maximum of eighteen months as a means of managing its exposure to fair value losses arising from increase interest rates. Investments of reserves, project funds, debt proceeds and other non-operating funds are limited to a maximum of five years with the average duration of all these funds as a whole not to exceed three years. Due to the nature of the securities in Fund B, the interest rate risk information required by Governmental Accounting Standards Board Statement No. 40 (i.e., specific identification, duration, weighted average maturity, segmented time distribution, or simulation model) is not available. An estimate of the weighted life (WAL) is available. In the calculation of the WAL, the time at which an expected principal amount is to be received, measured in years, is weighted by the principal amount received at that time divided by the sum of all expected principal payments. The principals amounts used in the WAL calculation are not discounted to present value as they would be in a weighted average duration calculation. The WAL based on expected future cash flows, of Fund B at June 30, 2013, is estimated at 3.98 years. However, because Fund B consists of restructured or defaulted securities, there is considerable uncertainty regarding the WAL. Participation in Fund B is involuntary. Florida PRIME had weighted average days to maturity (WAM) of 40 days at June 30, A portfolio s WAM reflects the average maturity in days based on final maturity or reset date, in the case of floating rate instruments. WAM measures the sensitivity of the portfolio to interest rate changes. Credit Risk The District s investment policy authorizes the following investments which are limited to credit quality ratings from nationally recognized rating agencies as follows: Florida PRIME when rated at least AAm by Standard & Poor s or the equivalent by another Nationally Recognized Statistical Rating Organizations (NRSRO) United States Government Securities United States Government Agencies Federal Instrumentalities (United States Government Sponsored Enterprise ( GSE )) limited to the Federal Farm Credit Bank (FFCB), Federal Home Loan Bank or its District banks (FHLB), Federal National Mortgage Association (FNMA) and the Federal Home Loan Mortgage Corporation (Freddie-Mac) including Federal Home Loan Mortgage Corporation participation certificates Interest Bearing Time Deposit or Savings Accounts Repurchase Agreements Commercial Paper of any United States company that is rated, at the time of purchase, Prime 1 by Moody s and A-1 by Standards & Poor s (prime commercial paper) Corporate Notes issued by corporations organized and operating with the United States or by depository institutions licensed by the United States that have a long term debt rating, at the time of purchase, at a minimum single A category by any two NRSROs State and/or Local Government Taxable and/or Tax-Exempt Debt, general obligation and/or revenue bonds, rated at the time of purchase, at a minimum single A category by any two NRSROs for long-term debt, or rated at least MIG-1 by Moody s or SP-1 by Standard & Poor s for short term debt Money Market Mutual Funds rated AAm by Standard & Poor s or the equivalent by another NRSRO Short Term Bonds rated AAA or better by Standards & Poor s or the equivalent by another NRSRO 54 55

136 DISTRICT SCHOOL BOARD OF PASCO COUNTY NOTES TO FINANCIAL STATEMENTS JUNE 30, 2013 DISTRICT SCHOOL BOARD OF PASCO COUNTY NOTES TO FINANCIAL STATEMENTS JUNE 30, 2013 B-44 Intergovernmental Investment Pools rated AAAm by Standard & Poor s or the equivalent by another NRSRO The District s investments in the State Board of Administration Debt Service Accounts are to provide for debt service payments on bond debt issued by the State Board of Education for the benefit of the District. The District relies on policies developed by the SBA for managing credit risk for this account. As of June 30, 2013, the District s investment in Florida PRIME was rated AAAm by Standard & Poor s. Fund B is unrated. The State Board of Education Bond Investment Funds and the Fund B Surplus Funds Trust Fund (Fund B) were unrated. The District s investment in the Wertz York Short-term Government Bond Mutual Fund (Core Fund) was rated Aaa-bf by Standard & Poor s. Investment in the Morgan Stanley Institutional Liquidity Fund Government and Agency was rated AAAm by Standard & Poor s and Aaa-mf by Moody s. Investment in the AIM Fund Government Agency and Corporate was rated AAAm by Standard & Poor s and Aaa-mf by Moody s. The District s investments in Commercial Paper included commercial paper from two companies which were rated A-1 and A-1+ by Standard & Poor s and P-1 by Moody s. The District s investments in Florida Fixed Income Trust 90 Day Plus is a fund of funds investment portfolio which contained 12 underlying funds in the portfolio that were all rated AAA/Aaa by Standard & Poor s and Moody s, respectively, or not rated. The District s investment in PFM Funds Prime Series was rated AAAm by Standard & Poor s. The District s investment in Government Sponsored Enterprise Securities was rated AA+ and Aaa by Standard & Poor s and Moody s, respectively. Custodial Credit Risk Custodial credit risk for investments is the risk that, in the event of the failure of the counterparty to a transaction, the District will not be able to recover the value of investment or collateral securities that are in the possession of an outside party. Section (18), Florida Statutes, requires the District to earmark all investments and 1) if registered with the issuer or its agents, the investment must be immediately placed for safekeeping in a location that protects the governing body s interest in the security; 2) if in book entry form, the investment must be held for the credit of the governing body by a depository chartered by the Federal Government, the State, or any other state or territory of the United States which has a branch or principal place of business in this State, or by a national association organized and existing under the laws of the United States which is authorized to accept and execute trusts and which is doing business in this State, and must be kept by the depository in an account separate and apart from the assets of the financial institution; or 3) if physically issued to the holder but not registered with the issuer or its agents, must be immediately placed for safekeeping in a secured vault. The District s investment policy requires that all investment securities purchased by the District shall be held by third party custodians and be properly designated as an asset of the District. All investments, except for investments in money market funds and the SBA, were held in third-party custodial accounts in the District s name. Concentration of Credit Risk The District s investment policy has established permitted investment sectors which are designed to reduce concentration of credit risk of District s investment portfolio. More than 5 percent of the District s investments are in Government Sponsored Enterprise Securities. The percent of total investment by fund that these securities represent are detailed in the table that follows: Total Investments General Fund Capital Projects - Other Fund Non-Major Governmental Funds Internal Service Funds Fiduciary Funds Business Type Activity Federal National Mortgage Assn. 9.07% 9.12% 9.41% 9.41% 9.41% 49.20% 9.41% Federal Home Loan Banks 3.44% 3.47% 3.58% 3.58% 3.58% 18.69% 3.58% Federal Home Loan Mortgage Corp. 5.92% 5.95% 6.14% 6.14% 6.14% 32.10% 6.14% Total Investment by Fund 39,576,509 6,260,252 6,812,894 18,282,908 7,293, , ,926 Percent of Total Investment 18.43% 18.54% 19.13% 19.13% 19.13% % 19.13% Foreign Currency Risk The District s investment policy does not allow for investments in foreign currency. Therefore, the District has no exposure to foreign currency risk. 4. RECEIVABLES AND DEFERRALS The majority of receivables are due from other governmental agencies. These receivables and the remaining accounts receivables are considered to be fully collectible. As such, no allowance for uncollectible is accrued. Governmental funds report unearned revenue in connection with receivables for revenues that are not considered to be available to liquidate liabilities on the current period. Governmental funds also defer revenue recognition in connection with resources that have been received, but not yet earned. As of June 30, 2013, the various components of unearned revenue reported in the governmental funds were as follows: General Operating - Unearned Revenue $ 20,000 Food & Nutrition - Unearned Revenue 999,762 Total Unearned Revenue for Government Funds $ 1,019,

137 DISTRICT SCHOOL BOARD OF PASCO COUNTY NOTES TO FINANCIAL STATEMENTS JUNE 30, 2013 DISTRICT SCHOOL BOARD OF PASCO COUNTY NOTES TO FINANCIAL STATEMENTS JUNE 30, CHANGES IN CAPITAL ASSETS Changes in capital assets, as of June 30, 2013, are presented in the table below: Depreciation expense was charged to functions as follows: Function Amount B-45 GOVERNMENTAL ACTIVITIES Balance Balance 7/1/2012 Additions Deletions 6/30/2013 Capital Assets Not Being Depreciated: Land $ 77,162,319 $ 319,158 $ 220,736 $ 77,260,741 Construction in Progress 21,195,305 12,616,014 1,082,106 32,729,213 Total Capital Assets Not Being Depreciated 98,357,624 12,935,172 1,302, ,989,954 Capital Assets Being Depreciated: Improvements Other Than Buildings 46,658,705 1,736,086-48,394,791 Buildings and Fixed Equipment 1,205,704,965 5,501,651-1,211,206,616 Furniture, Fixtures, and Equipment (1) 83,232,579 7,107,648 4,340,552 85,999,675 Motor Vehicles 36,568, ,505-37,058,379 Audio Visual Materials 300,318 1, ,224 Computer Software 10,251,577 2,963,169-13,214,746 Total Capital Assets Being Depreciated 1,382,717,018 17,799,965 4,340,552 1,396,176,431 Less Accumulated Depreciation for: Improvements Other Than Buildings 26,904,747 1,747,401-28,652,148 Buildings and Fixed Equipment 365,555,762 37,989, ,544,763 Furniture, Fixtures, and Equipment (1) 56,785,826 6,757,954 3,873,748 59,670,032 Motor Vehicles 24,285,120 2,377,220-26,662,340 Audio Visual Materials 258,435 4, ,668 Computer Software 6,775,686 1,237,946-8,013,632 Total Accumulated Depreciation 480,565,576 50,113,755 3,873, ,805,583 Total Capital Assets Being Depreciated, Net 902,151,442 (32,313,790) 466, ,370,848 Governmental Activities Capital Assets, Net $ 1,000,509,066 $ (19,378,618) $ 1,769,646 $ 979,360,802 Note (1) Includes Internal Service Fund assets of $181,818 and $161,918 of accumulated depreciation. BUSINESS-TYPE ACTIVITIES Capital Assets Being Depreciated: Improvements Other Than Buildings $ 12,809 $ 3,770 $ - $ 16,579 Buildings and Fixed Equipment 34, ,575 Furniture, Fixtures, and Equipment 388,472 57,181 12, ,586 Computer Software 39, ,899 Total Capital Assets Being Depreciated 475,755 60,951 12, ,639 Less Accumulated Depreciation for: Improvements Other Than Buildings 3, ,510 Buildings and Fixed Equipment 13,526 1,556 15,082 Furniture, Fixtures, and Equipment 285,900 28,358 10, ,398 Computer Software 34, ,312 Total Accumulated Depreciation 338,007 31,155 10, ,302 Business Type Activities Capital Assets, Net $ 137,748 $ 29,796 $ 1,207 $ 166, CURRENT LIABILITIES GOVERNMENTAL ACTIVITIES Instruction $ 40,029,446 Pupil Personnel Services 31,764 Instructional Media Services 131,123 Instruction and Curriculum Dev Services 18,640 Instructional Staff Training Services 25,428 Instructional Related Technology 6,252 School Administration 20,885 Facilities Services 9,331,316 Food Services 16,772 Central Services 29,609 Pupil Transportation Services 302,976 Operation of Plant 10,346 Maintenance of Plant 154,972 Community Services 4,226 Total Depreciation Expense - Governmental Activities $ 50,113,755 BUSINESS - TYPE ACTIVITIES PLACE Program $ 31,155 Accounts payable and other current liabilities at June 30, 2013, are shown below: Salary and Benefits Payable $ 13,992,456 Payroll and Deductions and Withholdings Payable 2,165,326 Accounts Payable 16,969,202 Construction Contracts Payable 261,427 Construction Contracts Payable-Retainage 295,776 Arbitrage Rebate Payable 71,938 Sales Tax Payable 3,863 Deposits Payable 75,834 Accrued Interest Payable 3,381,641 Unearned Revenue $ 1,028,058 38,245,

138 DISTRICT SCHOOL BOARD OF PASCO COUNTY NOTES TO FINANCIAL STATEMENTS JUNE 30, 2013 DISTRICT SCHOOL BOARD OF PASCO COUNTY NOTES TO FINANCIAL STATEMENTS JUNE 30, 2013 B CERTIFICATES OF PARTICIPATION The District entered into a financing arrangement on April 1, 1992, which was characterized as a lease-purchase agreement, with the Florida School Boards Association and supplemental arrangements dated December 1, 1996, March 1, 2004, September 15, 2004, July 1, 2005, December 23, 2005, July 1, 2007, May 1, 2008, June 1, 2008, September 23, 2008, and December 16, 2009, with the Pasco County School Board Leasing Corporation (Leasing Corporation), whereby the District secured financing of various educational facilities in the total amount of $106,770,000, $63,970,000, $4,546,000, $66,415,000, $785,612, $76,045,000, $88,515,000 and $74,115,000, $1,170,010, and $11,000,000, respectively. The financing was accomplished through the issuance of Certificates of Participation to be repaid from the proceeds of rents paid by the District. On March 1, 2004, the financing agreements with the Florida School Boards Association were assigned to the Leasing Corporation. Certificates of Participation payable at June 30, 2013, are as follows: Amount Amount Remaining Annual Issued Outstanding Interest Rates Maturity (Percent) To Certificates of Participation Series 2004 $ 63,970,000 $ 49,765, Series QZAB 4,546,000 4,546, Series 2005A 35,915,000 31,355, Series 2005B (1) 30,500,000 30,500,000 Weekly ARS 2030 Series QZAB 785, , Series 2007A 76,045,000 62,885, Series 2008A (2) 88,515,000 75,875,000 Weekly 2026 Series 2008C (3) 74,115,000 73,235,000 Weekly 2033 Series QZAB 1,170, , Series QSCB 11,000,000 11,000, (2) On May 29, 2008, the School Board caused the issuance of the Certificates of Participation, Series 2008A in the aggregate principal amount of $88,515,000 for the principal purpose of refunding, on a current basis, a portion of the outstanding Series 1996 Certificates, which were also issued, in part, to provide the funds necessary to advance refund the Series 1992A Certificates of Participation and refinance the Series 1992 facilities which the School Board acquired, constructed, and installed from the proceeds of the Series 1992A. On February 21, 2012, the School Board entered into a separate Basis Swap with PNC Bank, N.A., where the School Board pays PNC a floating rate equal to SIFMA and in return receives from ONC a floating rate equal to 70 percent of one month LIBOR. Effectively, the Basis Swap converts the floating rate on the Fixed-Payer Swap from SIFMA to 70 percent of one-month LIBOR until June 1, 2014, to match the interest rate in the FRN note. On May 23, 2011 the School Board remarketed the Series 2008A Certificates to PNC Bank in a Direct Placement Floating Rate Note (FRN) interest mode. In the FRN mode, the Certificates of Participation, Series 2008A pay interest on 70 percent of one month LIBOR plus a fixed interest rate spread. (3) On June 5, 2008, the School Board caused the issuance of the Certificates of Participation, Series 2008C in the aggregate principal amount of $74,115,000 for the principal purpose of refunding, on a current basis, all of the outstanding Series 2007B Certificates. The Certificates of Participation, Series 2008C pay interest at a Weekly Rate determined by the Remarketing Agent. The interest rate for June 30, 2013 was 0.09 percent. Total Certificates of Participation $ 386,561,622 $ 340,648,618 Note: (1) The Series 2005B Certificates of Participation were initially issued as auction rate securities and bear interest at Auction Rates for generally successive 7-day Auction Periods. The principal portion of the Basic Lease Payments represented by the Series 2005B Certificates is payable on August 1, The interest rate for the 7-day Auction Period, including June 30, 2013, was 1.10 percent

139 DISTRICT SCHOOL BOARD OF PASCO COUNTY NOTES TO FINANCIAL STATEMENTS JUNE 30, 2013 DISTRICT SCHOOL BOARD OF PASCO COUNTY NOTES TO FINANCIAL STATEMENTS JUNE 30, 2013 B-47 As a condition of the financing arrangement, the District has given a ground lease on District property to the Leasing Corporation with a rental fee of $1 per year. The District has the following ground leases as of June 30, 2013: Ground Lease Commencement Date Run Through Certificates of Participation Series 2004 March 1, 2004 August 1, 2029 Series QZAB September 15, 2004 September 15, 2018 Series 2005A July 1, 2005 August 1, 2030 Series 2005B July 1, 2005 August 1, 2030 Series QZAB December 23, 2005 December 23, 2020 Series 2007A July 1, 2007 August 1, 2032 Series 2008A December 1, 1996 August 1, 2026 Series 2008C July 1, 2007 August 1, 2032 Series QZAB September 23, 2008 September 23, 2018 Series QSCB December 16, 2009 December 15, 2025 The District properties included in the ground lease agreements are as follows: Certificates of Participation, Series 1992-A Certificates of Participation, Series 1996 Certificates of Participation, Series 2004 Cotee River Elementary School Sand Pine Elementary School Paul R. Smith Middle School Seven Springs Middle School Chasco Elementary School Wiregrass Ranch High School Hudson Elementary School Media Center Addition Wesley Chapel High School, Phases I and II Odessa Elementary School Equipment Mittye P. Locke Elementary School ESE Addition James M. Marlowe Elementary School R. B. Stewart Middle School ESE Addition J. W. Mitchell High School Lake Myrtle Elementary School ESE Addition Pine View Elementary School West Zephyrhills Elementary School Addition Certificates of Participation, Series 2005-QZAB Certificates of Participation, Series 2005-A and B Certificates of Participation, Series 2004-QZAB Additions and Renovations for the following facilities: Gulf Highlands Elementary School Additions and Renovations for the following facilities: Fox Hollow Elementary School Trinity Oaks Elementary School Bayonet Point Middle School Dr. Mary Giella Elementary School Dr. John Long Middle School Chasco Middle School Moore Mickens Education Center Odessa Elementary School Cypress Elementary School Hudson Elementary School Gulf High School Calusa Elementary School Gulf Middle School Hudson High School Certificates of Participation, Series 2007-A and B Certificates of Participation, Series 2008-QZAB Mittye P. Locke Elementary School Sunlake High School Renovations for Pasco High School Lacoochee Elementary School New River Elementary School Pasco High School Veterans Elementary School Rodney B. Cox Elementary School Ridgewood High School Classroom Additions Ridgewood High School Charles S. Rushe Middle School Certificates of Participation, Series 2009 QSCB Sanders Memorial Elementary School Gulf Trace Elementary School Culinary Arts Academy at Land O Lakes High School Woodland Elementary School Zephyrhills High School Classroom Additions Renovations for Richey Elementary School T. E. Weightman Middle School Zephyrhills High School The lease payments for the Series 2004-A, Series 2005-A, and Series 2007-A Certificates are payable by the District, semiannually, on August 1 st and February 1 st at interest rate ranging from 3.00 to 5.00 percent, to 5.00 percent, and 4.00 to 5.00 percent respectively for the others. Interest payments for the Series 2005-B Certificates are payable weekly at auction interest rates set weekly until the final maturity date. Interest payments for the Series 2008-A and 2008-C Certificates are payable monthly at a rate determined by the Remarketing Agent. The lease payments for the Series 2004-QZAB Certificates are payable by the District, semiannually, on September 15 th and March 15 th at an interest rate of 1.10 percent. The lease payments for the Series 2005-QZAB and the Series 2008-QZAB are payable by the District, annually, on December 23 rd and September 23 rd respectively. Interest payments for the Series 2009-QSCB are payable by the District, quarterly, on September 15 th, December 15 th, March 15 th and June 15 th. The following is a schedule by years of future minimum lease payments under the lease agreements together with the present value of minimum lease payments as of June : Total Principal Interest Fiscal Year Ending June 30: ,703,461 9,927,001 14,776, ,732,637 10,337,001 14,395, ,748,434 10,787,001 13,961, ,769,354 11,257,001 13,512, ,925,547 11,952,001 12,973, ,491,844 74,728,613 55,763, ,660,838 98,865,000 36,795, ,737, ,795,000 11,942,282 Sub-Total 514,769, ,648, ,120,779 Add: Unamortized Premium on Debt 2,197,305 2,197,305 - Total Minimum Lease Payments $ 516,966,702 $ 342,845,923 $ 174,120,

140 DISTRICT SCHOOL BOARD OF PASCO COUNTY NOTES TO FINANCIAL STATEMENTS JUNE 30, 2013 DISTRICT SCHOOL BOARD OF PASCO COUNTY NOTES TO FINANCIAL STATEMENTS JUNE 30, 2013 B DERIVATIVE INSTRUMENTS Objectives On May 29, 2008, the District issued Certificates of Participation, Series 2008A in the aggregate principal amount of $88,515,000. The Certificates of Participation, Series 2008A pay interest at a weekly rate determined by the Remarketing Agent and mature on August 1, On June 5, 2008, the District issued Certificates of Participation, Series 2008C in the aggregate principal amount of $74,115,000. The Certificates of Participation, Series 2008C pay interest at a weekly rate determined by the Remarketing Agent and mature on August 1, The District entered into a pay-fixed, receive-variable interest rate swap agreement in order to protect against the potential of rising interest rates. The intention of the swap agreements was to effectively change the District s variable interest rate on the certificates of participation to a synthetically fixed rate. These interest rate swaps qualify for hedge accounting under Government Accounting Standards Board Statement No. 53; therefore, there is no impact on the Statement of Net Position. On February 21, 2012, the School Board entered into a separate Basis Swap with PNC Bank, N.A., where the School Board pays PNC a floating rate equal to Securities Industry and Financial Markets Association (SIMFA) and in return receives from PNC a floating rate equal to 70 percent of one-month London InterBank Offered Rate (LIBOR). Effectively, the Basis Swap converts the floating rate on the Fixed-Payer Swap from SIFMA to 70 percent of one-month LIBOR until June 1, 2014, to match the interest rate in the Floating-Rate Note (FRN) mode. The interest rate swap is reported as an investment derivative instrument because it does not meet the criteria for effectiveness. Accordingly, the change in the fair value of the swap was reported within the investment earnings classification for the year ended June 30, The fair value balances and notional amounts of derivatives instruments outstanding at June 30, 2013 and the changes in fair values of such derivative instruments for the year ended are as follows: Changes In Fair Value Fair Value at June 30, 2013 Classification Amount Classification Amount Notional Governmental activities Fair value hedges: Pay-fixed interest rate swaps Deferred outflow $ 4,235,315 Debt $ (8,439,917) $ 75,875,000 Pay-fixed interest rate swaps Deferred outflow $ 8,906,177 Debt $ (11,556,498) $ 73,235,000 Investment Derivatives: Pay-fixed interest rate swaps Interest Revenue $ 61,899 Debt $ 18,888 $ 75,875,000 Terms The Certificates of Participation, Series 2008A and related swap agreement mature on August 1, The swap s notional amount of $88,515,000 matches the $88,515,000 variablerate certificates of participation. The swap agreement was entered into at the same time the Series 2008A Certificates of Participation were issued. The notional value of the swap declines in direct relationship to the certificates of participation principal payments. Under the swap agreement, the District pays the trustee, U.S. Bank, a fixed payment of 3.58 percent and Wells Fargo Bank, N.A. pays the trustee the variable interest payment for the certificates of participation, which is based on USD-SIFMA Municipal Swap Index. The Certificates of Participation, Series 2008C and related swap agreement mature on August 1, The swap s notional amount of $74,115,000 matches the $74,115,000 variablerate certificates of participation. The swap agreement was entered into at the same time the Series 2008C Certificates of Participation were issued. The notional value of the swap declines in direct relationship to the certificates of participation principal payments. Under the swap agreement, the District pays the trustee, U.S. Bank, a fixed payment of 3.91 percent and Bank of America, N.A. pays the trustee the variable interest payment for the certificates of participation, which is based on USD-SIFMA Municipal Swap Index. Fair Value Because interest rates have declined since inception of these swaps, these swaps have a fair value of negative $8,439,917 and negative $11,556,498 for the Certificates of Participation, Series 2008A and 2008C, respectively, and a positive $18,888 for the investment derivative as of June 30, Wells Fargo Bank, N.A. and PNC Bank, N.A. estimated the fair value of the Certificates of Participation, Series 2008A related swap agreement and the investment derivative, respectively, using a mathematical approximation of market value derived from both proprietary models as of a given date based on certain assumptions regarding from past, present and future market conditions and certain financial information from sources believed to be reliable. Bank of America, N.A. estimated the fair value of the Certificates of Participation, Series 2008C related swap agreement using estimated prices or spread levels at which the bank, in its capacity as an agent for the customer, might find liquidity for a round lot transaction within the relevant market. Credit Risk The District is exposed to credit risk when a swap has a positive fair value. All the swap agreements contain a collateral agreement with the Counterparty. A Counterparty s credit rating from either Standard & Poor s (S&P) and/or Moody s Investors Service must be A+ or A1, respectively. If the Counterparty or guarantor s long term unsecured rating falls below Baa3 or BBB- by either Moody s or S&P, a replacement counterparty or guarantor, meeting the rating requirements above, shall be required. Termination Risk In the event the swap terminated, the District could be exposed to higher interest rate payments on the Certificate. Also, if at the time of termination, the swap has a negative fair value, the District would be liable to the Counterparty for payment equal to the swap s fair value. Under certain circumstances, some within the control and some outside the control of the School Board, the 2008A swap agreement and/or the 2008C swap agreement may be terminated and the School Board may be obligated to make a termination payment, which under certain market conditions, could be substantial

141 DISTRICT SCHOOL BOARD OF PASCO COUNTY NOTES TO FINANCIAL STATEMENTS JUNE 30, 2013 DISTRICT SCHOOL BOARD OF PASCO COUNTY NOTES TO FINANCIAL STATEMENTS JUNE 30, 2013 B BONDS PAYABLE Bonds payable at June 30, 2013, are as follows: Interest Range of Amount Original Rates Final Maturity Bond Type Outstanding Amount (Percent) Dates State School Bonds: Series 2004-A 1,105,000 1,445, Series 2005-A 1,025,000 8,910, Series 2005-B 1,105,000 1,740, Series 2005-B, Refunding 3,460,000 8,910, Series 2008-A 4,545,000 5,295, Series 2009-A, Refunding 840,000 1,300, Series 2010A 1,355,000 1,450, Series 2011A 1,510,000 1,710, District Revenue Bonds: Series 2003, Refunding 2,870,000 3,660, Series 2007, Sales Tax 26,410,000 88,590, Subtotal 44,225,000 Unamortized Premium on Debt 1,397,552 Unamortized Discount on Debt (40,227) Total Bonds Payable $ 45,582, The various bonds were issued to finance capital outlay projects of the District. The following is a description of the bonded debt issues: State School Bonds These bonds are issued by the State Board of Education on behalf of the District. The bonds mature serially, and are secured by a pledge of the District's portion of the State assessed motor vehicle license tax. The State's full faith and credit is also pledged as security for these bonds. Principal and interest payments, investment of Debt Service Fund resources, and compliance with reserve requirements are administered by the State Board of Education and the State Board of Administration. District Revenue Bonds District Revenue Bonds, Refunding Series These bonds are authorized by Chapter and , Special Acts of 1979, Laws of Florida, which provides that the bonds be secured from the pari-mutuel tax proceeds distributed annually to Pasco County from the State s Pari-Mutuel Tax Collection Trust Fund pursuant to Chapter 550, Florida Statutes (effective July 1, 2000, tax proceeds are distributed pursuant to Section (6)(d)7.a., Florida Statutes). The approximate amount of pari-mutuel tax proceeds pledged is $4,421,705, which represents the total amount of principal and interest still due, and the remaining period of the pledge is 20 years. The annual distribution is remitted by the Florida Department of Financial Services to the District. The District pledged 100 percent of these revenues for the Series 2003 bond issue until repaid. The Series 2003 bonds were issued to provide funds, together with other available funds, sufficient to (1) refund all refunded bonds, (2) finance the cost of the 2003 project, and (3) pay issuance costs of the 2003 Series bonds. As required by the bond resolution, the District has established the sinking fund and reserve account and has accumulated and maintained adequate resources in the sinking fund and reserve account. For the fiscal year, the District recognized $223,250 in pledged revenue and paid $219,935 of principal and interest. Sales Tax Revenue Bonds, Series 2007 These bonds are authorized by the Constitution and Laws of the State of Florida, particularly Chapter 1001, Florida Statutes, Chapter 212, Part I, Florida Statutes, Chapter , Laws of Florida, and other applicable provisions of law. The bonds are secured by a pledge of the proceeds received pursuant to an Interlocal Agreement from the levy by the County and collection by the Florida Department of Revenue of a one cent local infrastructure sales surtax. The approximate amount of local infrastructure sales surtax pledged is $27,746,500, which represents the total amount of principal and interest still due, and the remaining period of the pledge is two years. The District pledged approximately 90 percent of the total sales tax revenue until the bonds were repaid. These bonds were issued for the purpose of providing funds, together with other available funds of the District, to finance the acquisition and construction of elementary, middle, and high schools within the District. For the fiscal year, the District recognized $27,490,903 in pledged revenue and paid $13,897,250 principal and interest. 67

142 DISTRICT SCHOOL BOARD OF PASCO COUNTY NOTES TO FINANCIAL STATEMENTS JUNE 30, 2013 DISTRICT SCHOOL BOARD OF PASCO COUNTY NOTES TO FINANCIAL STATEMENTS JUNE 30, 2013 B-50 Annual requirements to amortize all bonded debt outstanding as of June 30, 2013, are as follows: Total Principal Interest State School Bonds: ,408,781 1,700, , ,236,606 1,610, , ,271,806 1,725, , ,221,306 1,760, , ,314, , , ,223,179 3,950,000 1,273, ,482,031 3,025, , , ,000 14,200 Total State School Bonds 19,407,015 14,945,000 4,462,015 District Revenue Bonds: ,105,250 12,980,000 1,125, ,081,675 13,620, , , , , , , , , , , ,109, , , ,105, , , ,102, , ,825 Total District Revenue Bonds 32,168,205 29,280,000 2,888,205 Subtotal 51,575,220 44,225,000 7,350,220 Unamortized Premium on Debt 1,397,552 1,397,552 - Unamortized Discount on Debt (40,227) (40,227) - Total $ 52,932,545 $ 45,582,325 $ 7,350, ESTIMATED ARBITRAGE REBATE The District had an interim cumulative arbitrage rebate liability of $71,938 for the $30,500,000 Certificates of Participation, Series 2005B as of June 30, Ninety percent (90 percent) of the cumulative rebate liability is required to be re-bated to the United States no later than 60 days after July 19, 2015 (the end of the tenth Bond Year). 11. CHANGES IN LONG-TERM LIABILITIES The following is a summary of changes in long-term liabilities: Description Balance Additions Deductions Balance Due in 7/1/2012 6/30/2013 One Year GOVERNMENTAL ACTIVITIES Certificates of Participation Payable $ 350,210,619 $ - $ 9,562,001 $ 340,648,618 $ 9,927,001 Add: Unamortized Premium on Debt 2,337, ,924 2,197, ,924 Total Certificates of Participation Payable 352,547,848-9,701, ,845,923 10,066,925 Bonds Payable 59,655,000-15,430,000 44,225,000 14,680,000 Add: Unamortized Premium (Discount) on Debt 1,926, ,178 1,357, ,177 Total Bonds Payable 61,581,503-15,999,178 45,582,325 15,249,177 Estimated Insurance Claims Payable 7,482,880 1,440,176 2,410,056 6,513,000 2,311,000 Other Postemployment Benefits 34,487,232 11,613,492 5,507,609 40,593,115 - Compensated Absences Payable (1) 33,715,056 25,595,430 25,956,019 33,354,467 1,010,267 Derivatives Swap Liability 33,180,918-13,203,391 19,977,527 - Total Governmental Activities $ 522,995,437 $ 38,649,098 $ 72,778,178 $ 488,866,357 $ 28,637,369 BUSINESS - TYPE ACTIVITY Other Postemployment Benefits $ 579,039 $ 196,038 $ 92,970 $ 682,107 $ - Compensated Absences Payable 396, , , , ,780 Total Business - Type Activity $ 976,018 $ 800,207 $ 678,338 $ 1,097,887 $ 415,780 Note (1) includes balances at June , of the Internal Service Funds of $276,727 with $29,598 due in one year, and additions and deductions of $105,991 and $105,885, respectively. For the governmental activities, compensated absences and other postemployment benefits are generally liquidated with resources of the General Fund. The estimated insurance claims are generally liquidated with resources of the Internal Service Fund, as discussed in Note

143 DISTRICT SCHOOL BOARD OF PASCO COUNTY NOTES TO FINANCIAL STATEMENTS JUNE 30, 2013 DISTRICT SCHOOL BOARD OF PASCO COUNTY NOTES TO FINANCIAL STATEMENTS JUNE 30, 2013 B FUND BALANCE REPORTING There are two major types of fund balances, nonspendable and spendable. Nonspendable fund balances are balances that cannot be spent because they are not expected to be converted to cash or they are legally or contractually required to remain intact. Examples of this classification are prepaid items and inventories, and principal (corpus) of an endowment fund. The District has inventories totaling $4,798,251 and prepaid assets totaling $37,931 that are considered nonspendable. The District does not have nonspendable funds related to endowments. Spendable fund balances are classified based on a hierarchy of spending constraints. The District has classified the spendable fund balances as Restricted, Assigned, and Unassigned and considers each to have been spent when expenditures are incurred. 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. When committed, assigned, and unassigned resources are available for use in governmental fund financial statements, it is the District s policy to use committed resources first, followed by assigned resources, and the unassigned resources as they are needed. Restricted: The portion of fund balance on which constrains have been placed by creditors, grantors, contributors, laws or regulations or other governments, constitutional provisions, or enabling legislation. Restricted fund balance places the most binding level of constrains on the use of fund balance. The District classifies most of its fund balances other than General Fund as restricted, as well as unspent State categorical and earmarked education funding that are legally or otherwise restricted. The District s restricted fund balance total is $174,228,213 and represents $3,124,608 in State categorical programs, $7,100,164 in food service, $17,001,808 in debt service and $147,001,633 in capital projects. Committed: The portion of fund balance that can only be used for specific purposes pursuant to constraints imposed by formal action of the highest level of decision-making authority (i.e., the Board). Amounts are committed upon a majority vote of the Board at a public meeting. These amounts cannot be used for any other purpose unless the Board removes or changes the specified use by taking the same action if employed to previously commit the amounts. The District does not report any committed fund balance. Assigned: The portion of fund balance that is intended to be used for specific purposes, but neither is restricted nor committed. Assigned amounts include those that have been set aside for a specific purpose by an authorized government body or official, but the constraint imposed does not satisfy the criteria to be classified as restricted or committed. This category includes any remaining positive amounts, for governmental funds other than General Fund, not classified as nonspendable, restricted, or committed. The Board has adopted Policy 6220, which authorizes the superintendent to assign amounts in fund balance to a specific purpose. At fiscal year-end, assigned fund balances were $17,407,505 of which $13,015,659 was assigned for State and Local programs and $4,391,846 was assigned to eliminate a deficit in next year s budget. Unassigned: The unassigned fund balance for the General Fund is $23,499,528. Major Funds Description General Funds Capital Projects Other Total Other Funds Governmental Governmental Funds Funds Fund Balances: Nonspendable: Inventories: General Fund $ 3,575,051 $ - $ - $ 3,575,051 Special Revenues - Food Service - - 1,223,200 1,223,200 Prepaid Items: General Fund 37, ,931 Restricted: Categorical Programs 3,124, ,124,608 Special Revenues - - 7,100,164 7,100,164 Debt Service ,001,808 17,001,808 Capital Projects - 112,498,302 34,503, ,001,633 Assigned: School Operations State and Local Programs 13,015, ,015,659 Next Year's Budget Deficit 4,391, ,391,846 Unassigned: 23,499, ,499,528 $47,644,623 $112,498,302 $59,828,503 $219,971,428 The Board has not adopted a stabilization arrangement or a minimum fund balance policy. Instead, the Board has adopted Policy 6220 which states that to ensure the financial strength, maintain a favorable bond rating, and the stability of the District, the adopted annual operating budget shall include a reasonable unassigned fund balance to cover unforeseen events (e.g. revenue shortfalls, student enrollment under projections, etc.). At the end of the fiscal year, the unassigned General Fund balance was $23,499,528 or 5.23 percent of General Fund total expenditures

144 DISTRICT SCHOOL BOARD OF PASCO COUNTY NOTES TO FINANCIAL STATEMENTS JUNE 30, 2013 DISTRICT SCHOOL BOARD OF PASCO COUNTY NOTES TO FINANCIAL STATEMENTS JUNE 30, 2013 B INTERFUND RECEIVABLES, PAYABLES, AND TRANSFERS The following is a summary of interfund receivables and payables reported in the fund financial statements: Funds Interfund Receivables Payables Major Funds: General $ 2,179,229 $ - Special Revenue - Federal Economic Stimulus - 534,651 Special Revenue - Other - 1,644,578 Total $ 2,179,229 $ 2,179,229 Interfund receivables and payables are temporary loans of cash between funds allowable under Section (2), Florida Statutes, for a period of less than 13 months. The temporary loans do not restrict, impede, or limit implementation or fulfillment of the original purpose for which the monies were received in the fund providing the advancement. All amounts will be repaid within the fiscal year. The following is a summary of interfund transfers reported in the fund financial statements: 14. SCHEDULE OF STATE REVENUE SOURCES The following is a schedule of the District s State revenue for the fiscal year: Florida Education Finance Program $ 229,215,516 Class Size Reduction 74,051,837 School Recognition 2,840,107 Motor Vehicle License Tax (Capital Outlay and Debt Service) 2,727,959 Workforce Development Program 2,351,740 Voluntary Pre K 1,448,140 Charter School Capital Outlay Funding 666,291 Food Service Supplement 419,874 Mobile Home License Tax 390,037 Full Service Schools 157,908 Fuel Tax Refund 155,195 School Health Supplement 90,730 Miscellaneous 462,411 Total $ 314,977,745 Funds Transfers In Interfund Transfers Out Accounting policies relating to certain State revenue sources are described in Note 1. Major Funds: General $ 5,312,376 $ - Capital Project: Other 1,628 19,030,980 Nonmajor Governmental Funds 36,756,122 17,493,061 Internal Service Funds 4,100,000 6,646,085 Enterprise Fund - 3,000,000 Total $ 46,170,126 $ 46,170,126 Interfund transfers represent permanent transfers of monies between funds. In general, funds are transferred from Capital Projects to the Debt Service Funds to make debt service payments for outstanding bond issues. The transfers to the Internal Service Fund is to provide funding for environmental regulation compliance and the transfers from the Internal Service Fund and Enterprise Fund to the General Fund to cover budget deficits

145 DISTRICT SCHOOL BOARD OF PASCO COUNTY NOTES TO FINANCIAL STATEMENTS JUNE 30, 2013 DISTRICT SCHOOL BOARD OF PASCO COUNTY NOTES TO FINANCIAL STATEMENTS JUNE 30, 2013 B PROPERTY TAXES The following is a summary of millages and taxes levied on the 2012 tax roll for the fiscal year: GENERAL FUND Millages Taxes Levied Nonvoted School Tax: Required Local Effort $ 108,362,147 Basic Discretionary Local Effort $ 15,914,959 CAPITAL PROJECTS FUNDS Nonvoted Tax: Local Capital Improvements $ 31,915,025 Total $ 156,192, STATE RETIREMENT PROGRAM Florida Retirement System. Essentially all regular employees of the District are eligible to enroll as members of the Florida Retirement System (FRS). The FRS is a single retirement system administered by the Department of Management Services, Division of Retirement, and consists of two cost-sharing, multiple-employer retirement plans and other nonintegrated programs. These include a defined-benefit pension plan (Plan), a Deferred Retirement Option Program (DROP), and a defined-contribution plan, referred to as the FRS Investment Plan. Defined Benefit Plan Plan provisions are established by Chapters 121 and 122, Florida Statutes; Chapter 112, Part IV, Florida Statutes; Chapter 238, Florida Statutes; and FRS Rules, Chapter 60S, Florida Administrative Code, wherein Plan eligibility, contributions, and benefits are defined and described in detail. Employees in the Plan vest at six years of service if enrolled before July 1, All employees enrolled in the Plan on or after July 1, 2011 vest at eight years of service. All vested members, enrolled prior to July 1, 2011, are eligible for normal retirement benefits at age 62 or at any age after 30 years of service, which may include up to 4 years of credit for military service, except for members classified as special risk who are eligible for normal retirement benefits at age 55 or at any age after 25 years of service. Members who enrolled in the Plan on or after July 1, 2011 and become vested are eligible for normal retirement at age 65 or at any age after 33 years of service, which may include up to four years of credit for military service, except for members classified as special risk who are eligible for normal retirement benefits at age 60 or at any age after 30 years of service. The Plan also includes an early retirement provision but there is a benefit reduction for each year a member retires before his or her normal retirement date. The Plan provides retirement, disability, and death benefits and annual cost-of-living adjustments. The DROP Program, subject to the provisions of Section , Florida Statutes, permits employees eligible for normal retirement under the Plan to defer receipt of monthly benefit payments while continuing employment with an FRS employer. An employee may participate in the DROP for a period not to exceed 60 months after electing to participate, except that certain instructional personnel may participate for up to 96 months. During the period of DROP participation, deferred monthly benefits are held in the FRS Trust Fund and accrue interest. Defined Contribution Plan Pursuant to Section , Florida Statutes, the Florida Legislature created a defined contribution program called the FRS Investment Plan (Investment Plan). Employees in the Investment Plan vest after one year of service. District employees participating in DROP are not eligible to participate in the program. This program is administered by FRS as an option to the defined benefit plan, and is self-directed by the employee. The employees have the responsibility of selecting how their funds are invested within the approved set of investment choices and may take their funds when they leave FRS. Employer and employee contributions are defined by law, but the ultimate benefit depends in part on the performance of investment funds. The Investment Plan is funded by employer and employee contributions that are based on salary and membership class (Regular, Elected County Officers, etc.). Contributions are directed to the individual member accounts, and the individual members allocate contributions and account balances among various approved investment options. There were 1,661 District participants in the Investment Plan during the fiscal year. Required employer contributions made to the program totaled $2,354,672 and employee contributions totaled $1,363,686. Funding Policy The contribution rates for Plan members are established and may be amended by the State of Florida. During the fiscal year, contribution rates were as follows: Percent of Gross Salary Class or Plan Employee Employer (A) Florida Retirement System, Regular Florida Retirement System, Elected County Officers Florida Retirement System, Senior Management Service Deferred Retirement Option Program, Applicable to Members from All of the Above Classes Florida Retirement System, Reemployed Retiree (B) (B) Note: (A) Employer rates include 1.11 percent for the post employment health insurance subsidy. Also, employer rates, other than for DROP participants, include.03 percent for administrative costs of the Investment Plan

146 DISTRICT SCHOOL BOARD OF PASCO COUNTY NOTES TO FINANCIAL STATEMENTS JUNE 30, 2013 DISTRICT SCHOOL BOARD OF PASCO COUNTY NOTES TO FINANCIAL STATEMENTS JUNE 30, 2013 B-54 (B) Contribution rates are dependent upon the retirement class in which reemployed. The District s liability for participation is limited to the payment of the required contribution at the rates and frequencies established by law on future payrolls of the District. The District s contributions, including employee contributions, for the fiscal years ending June 30, 2011, June 30, 2012, and June 30, 2013, totaled $32,608,437, $23,775,784 and $22,155,090 respectively, which were equal to the required contributions for each fiscal year. Pension Reporting The financial statements and other supplemental information of FRS are included in the comprehensive annual financial report of the State of Florida, which may be obtained from the Florida Department of Financial Services. Also, an annual report on the FRS, which includes its financial statements, required supplemental information, actuarial report and other relevant information, may be obtained from the Florida Department of Management Services, Division of Retirement. 17. EARLY RETIREMENT PROGRAM Plan Description As authorized by Section , Florida Statutes, the Board implemented an Early Retirement Plan (the Plan ), effective July 1, 1983, and amended as of January 1, The Plan is a single-employer, defined benefit pension plan. The purpose of the Plan is to provide District employees, who elect to retire under the early retirement provisions of the FRS, as described in Note 16, with a monthly benefit equal to the statutory reduction of the normal retirement benefits when early retirement precedes the normal retirement age of 62. Based on an actuarial report as of July 1, 2011, employee membership data related to the Plan was as follows. Retirees and Beneficiaries Currently Receiving Benefits 180 Active Plan Participants 4,597 Total 4,777 A summary of eligibility and benefits follow: Eligibility The participant must have elected early retirement under the FRS; attained the age of 50 but not have attained the age of 62 upon early retirement; been credited with at least 25 years (and who have reached the final step on the appropriate salary schedule) of service under the FRS upon early retirement; and (for nonunion contract employees) completed at least 12 years of service in the District. Benefits The amount of the monthly benefit will be equal to the reduction imposed on the retirement benefit by the FRS due to early retirement. The benefit amount will be based on the initial benefit amount determined by the FRS prior to any cost-of-living adjustments and will remain unchanged, once established, unless a specific increase is authorized by the Board. Effective July 1, 1997, the amount of early retirement benefits for new participants ages 50 through 54 has been reduced to a flat 35 percent of the FRS benefit, with this reduction phased-in over a period of four years. In addition, the plan was amended effective June 2011 to provide a one-time early retirement incentive payment for certain individuals who retired during the month. The payment was equal to 10 percent of annual salary to a maximum benefit of $5,000. Summary of Significant Accounting Policies The Plan is accounted for as Pension Trust Fund; therefore it is accounted for in substantially the same manner as a proprietary fund with a capital maintenance measurement focus and the accrual basis of accounting. Employer contributions are recognized in the period in which contributions are due. Benefits and refunds are recognized when due and payable in accordance with terms of the Plan. Plan assets are valued at fair value for financial statement purposes. Separate statements are not issued for the plan. Contributions and Reserves The District s Early Retirement Plan was established by the Board on July 1, 1983, and amended as of January 1, Pursuant to the Plan Agreement, no contribution shall be required or permitted from any member. Board contributions shall be sufficient to meet the annual pension cost of the Plan and to amortize the unfunded actuarial accrued liability within 30 years based on an actuary study. There are no long-term contracts to the Plan. Periodic employer contributions to the Plan are determined on an actuarial basis using the Entry Age Normal Cost Method. Annual pension cost is funded on a current basis. Pursuant to Section , Florida Statutes, the unfunded actuarial accrued liability is funded over a 30-year period for participants prior to July 1, 1997, and funded over a 40-year period for the revised plan. Periodic contributions for both normal cost and the amortization of the unfunded actuarial liability are based on the level percentage of payroll method. Significant actuarial assumptions used to compute annual required contributions are the same as those used to determine the actuarial accrued liability. Total contributions to the Plan in the , and the fiscal year, amounted to $1,380,553, $1,509,443 and $1,578,667 respectively. The contributions were paid by the Board and were made in accordance with actuarially determined contribution requirements 76 77

147 DISTRICT SCHOOL BOARD OF PASCO COUNTY NOTES TO FINANCIAL STATEMENTS JUNE 30, 2013 DISTRICT SCHOOL BOARD OF PASCO COUNTY NOTES TO FINANCIAL STATEMENTS JUNE 30, 2013 B-55 determined through an actuarial valuation performed as of July 1, The total annual pension cost for the , and the fiscal years was $953,391, $780,625 and $899,541 respectively. The percentage of pension cost contributed by the Board was 100 percent for all three fiscal years. As of July 1, 2012, the actuarial accrued liability for benefits was $24,534,590 of which $9,622,077 was unfunded. The computation of the annual required contribution for the fiscal year was based on the same: (a) actuarial assumptions, (b) benefit provisions, (c) actuarial funding method and (d) other significant factors used to determine the required annual contributions for the previous fiscal years. Benefits and refunds are recognized when due and payable in accordance with terms of the Plan. All of the assets in the District s Pension Trust Fund are legally required reserves. None of the assets have been designated by the Board for any other specific purpose. Costs of administering the Plan are financed through the Plan s resources (employer contributions and investment earnings). Concentrations The Plan s investments at June 30, 2013, consisted of the following: Maturity Balance Percentage Range June 30, 2013 of Plan Net Assets Cash and Cash Equivalents $ 945, % Collateralized Mortgage Obligations 6.99 Years Years 2,262, % Corporate Bonds 9.83 Years Years 450, % Government and Municipal Bonds 63 Days Years 7,225, % Mutual Fund-Government Securities 3 Days Year 1,200, % Government Sponsored Enterprise Securities 333 Days Years 3,664, % Total $ 15,749, % Interest Rate Risk The District s investment policy limits investments of reserves, project funds, debt proceeds and other non-operating funds to a maximum of five years with the average duration of all of these funds as a whole not to exceed three years as means of managing its exposure to fair value losses arising from increasing interest rates. Credit Risk The District s investment policy authorizes the District to participate in the State Board of Administration Florida PRIME. The policy also authorizes the District to invest in interest-bearing time deposits or savings accounts, direct obligations of the United States Treasury, money market funds with the Securities and Exchange Commission, and United States government funds registered under the Investment Act of The 78 policy further provides that the securities shall only be purchased from financial institutions which are qualified as public depositories by the Treasurer of the State of Florida, Florida-based regional dealers that qualify under Securities and Exchange Commission Rule 15C3-1, or from primary security dealers as designated by the Federal Reserve of New York. Additionally, funds of the District s Early Retirement Fund can be invested in any fixed income security that is rated in the highest category of either Moody s or Standard & Poor s and in collateralized mortgage obligations once the District personnel have been prudently advised and understand the risk characteristics of the investment product. Investments in the Morgan Stanley Institutional Liquidity Funds Government Portfolio was rated AAAm by Standard & Poor s and Aaa-mf by Moody s. Investments in corporate bonds were rated from A to BBB by Standard & Poor s and Baa1 to Baa3 by Moody s. Investments in municipal bonds were rated from AAA to BB+ by Standard and Poor s and Aaa to Ba1 by Moody s, except that three securities totaling $103,017 were unrated. Investments in collateralized mortgage obligations were rated from AAA to D by Standard and Poor s and Aaa to B1 by Moody s and investments in municipal bonds were rated AAA to BB+ by Standard and Poor s and Aaa to Ba1 by Moody s, except that seven securities with a market value of $103,858 were unrated. Investments adhered to the Distirct s Investment Policy when purchased, however, some investments were subsequently downgraded. Concentration of Credit Risk The District s investment policy has established permitted investment sectors which are designed to reduce concentration of credit risk of District s investment portfolio. More than 5 percent of the District s investments are in Government Sponsored Enterprise Securities. These securities are made up of investments in Federal National Mortgage Assn., Federal Home Loan Banks, and Federal Home Loan Mortgage Corp. and total 12.18, 4.63, and 7.95 percent of total plan investments, respectively. Funded Status and Funding Progress The required schedule of funding progress, immediately following the notes to financial statements, presents multiyear trend information about whether the actuarial value of plan assets is increasing or decreasing over time relative to the actuarial accrued liability for benefits. Information about the funded status of the Plan as of the most recent actuarial valuation date is as follows: Schedule of Funding Progress: Ratio of Actuarial Unfunded Unfunded Actuarial Actuarial Accrued Actuarial Actuarial Valuation Values of Liability Accrued Funded Covered Accrued Liability Date Plan Assets Entry Age Liability Ratio Payroll Covered Payroll 7/1/ ,912,513 24,534,590 9,622, % 173,775, % 79

148 DISTRICT SCHOOL BOARD OF PASCO COUNTY NOTES TO FINANCIAL STATEMENTS JUNE 30, 2013 DISTRICT SCHOOL BOARD OF PASCO COUNTY NOTES TO FINANCIAL STATEMENTS JUNE 30, 2013 B-56 Actuarial Information Additional information as of the latest actuarial valuation is as follows: Valuation Date July 1, 2011 Actuarial Cost Method Entry Age Normal Amortization Method Level Percent Open Remaining Amortization Period 30 Years Asset Valuation Method Market Value Actuarial Assumptions: Investment Rate of Return * 5.50% Projected Salary Increases * 4.00% *Includes Inflation at: 2.75% Cost-of-Living Adjustments None 18. OTHER POSTEMPLOYMENT BENEFITS Plan Description The Postemployment Benefits Plan is a single-employer defined benefit plan (Plan) administered by the District. Pursuant to the provisions of Section , Florida Statutes, former employees who retire from the District and their eligible dependents, may continue to participate in the District s health plan for medical, prescription drug, mental health/substance abuse, employee assistance program and life insurance. The District subsidizes the premium rates paid by retirees by allowing them to participate in the plan at reduced or blended group (implicitly subsidized) premium rates for both active and retired employees. These rates provide an implicit subsidy for retirees because, on an actuarial basis, their current and future claims are expected to result in higher costs to the Plan on average than those of active employees. Additionally for certain retirees, the District pays a portion of the cost of health, pharmacy insurance benefits. For those retirees, the School Board contributes the same amount toward the retiree's health insurance premium each year as it does toward an active employee s premium. This contribution is contingent upon the retiree meeting all of the following conditions: 1) 30 years of service under Florida Retirement System or 25 years of service under FRS and at least age 50 at retirement; 2) 20 years of service in the District; 3) contributes his/her health insurance subsidy received from the State of Florida toward the cost of this medical premium; and 4) continues to participate in one of the Board-approved health plans after his/her retirement. An eligible retiree may receive a cash payment in lieu of receiving these benefits. The Plan does not issue a stand-alone report and is not included in the report of a public employee retirement systems or another entity. In addition, the District contributed $20 per month toward health insurance premiums for eligible former employees. This contribution will continue as long as the eligible retiree maintains health benefits through the District. New retirees are not eligible for this program. Funding Policy The District has not advance-funded or established a funding methodology for the annual Other Postemployment Benefits (OPEB) costs or the net OPEB obligation, and the plan is financed on a pay-as-you-go basis. For the fiscal year, 1,651 retirees and eligible dependents received postemployment benefits. The District provided required contributions of $5,600,582 toward the annual OPEB cost, comprised of medical and life insurance premiums, pharmacy claims expense and administrative expenses net of retiree contributions totaling $2,185,877 or 0.73 percent of covered payroll. Annual OPEB cost and Net OPEB Obligation The District s annual OPEB cost (expense) is calculated based on the annual required contribution (ARC), an amount actuarially determined in accordance with the parameters of Governmental Accounting Standards Board Statement No. 45, Accounting and Financial Reporting by Employers for Postemployment Benefits Other Than Pensions. The ARC represents a level of funding that if paid on an ongoing basis, is projected to cover normal costs each year and amortize any unfunded actuarial liabilities over a period not to exceed 30 years. The following table shows 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 for Postemployment Benefits: Description Amount Normal Cost (Service cost for one year) $ 5,903,276 Amortization of Unfunded Actuarial Accrued Liability 6,451,732 Annual Required Contribution 12,355,008 Interest on Net OPEB Obligation 1,402,651 Adjustment to Annual Required Contribution (1,948,126) Annual OPEB Cost (Expense) 11,809,533 Contribution Toward the OPEB Cost (5,600,582) Increase in Net OPEB Obligation 6,208,951 Net OPEB Obligation, Beginning of Year 35,066,271 Net OPEB Obligation, End of Year $ 41,275,

149 DISTRICT SCHOOL BOARD OF PASCO COUNTY NOTES TO FINANCIAL STATEMENTS JUNE 30, 2013 DISTRICT SCHOOL BOARD OF PASCO COUNTY NOTES TO FINANCIAL STATEMENTS JUNE 30, 2013 B-57 The District s annual OPEB cost, the percentage of annual OPEB cost contributed to the plan, and the net OPEB obligation as of June 30, 2013, and the two preceding fiscal years are as follows: Percentage of Annual Fiscal Annual Amount OPEB Cost Net OPEB Year OPEB Cost Contributed Contributed Obligation $ 11,375,255 $ 4,506, % $ 28,899, ,291,130 5,124, % 35,066, ,809,533 5,600, % 41,275,222 Funded Status and Funding Progress As of January 1, 2012, the most recent actuarial valuation date, the actuarial accrued liability for benefits was $109,496,146, and the actuarial value of assets was $0, resulting in an unfunded actuarial accrued liability of $109,496,146. The covered payroll (annual payroll of active participating employees) was $318, , and the ratio of the unfunded actuarial accrued liability to the covered payroll was percent. The required schedule of funding progress immediately following the notes to the financial statements presents multi-year trend information about whether the actuarial value of plan assets is increasing or decreasing over time relative to the actuarial accrued liability for benefits. Actuarial valuations of an ongoing plan involve estimates of the value of reported amounts and assumptions about the probability of occurrence of events far into the future. Examples include assumptions about future employment and termination, mortality, and the healthcare cost trends. Amounts determined regarding the funded status of the plan and the annual required contributions of the employer are subject to continual revisions as actual results are compared with past expectations and new estimates are made about the future. Actuarial Methods and Assumptions Projections of benefits for financial reporting purposes are based on the substantive plan provisions, as understood by the employer and participating members. The actuarial methods and assumptions used include techniques that are designed to reduce the effects of short-term volatility in actuarial accrued liabilities and the actuarial value of assets, consistent with the longterm perspective of the calculations. The District s OPEB actuarial valuation as of January 1, 2012, used the entry age normal cost actuarial method to estimate the unfunded actuarial liability as of June 30, Because the OPEB liability is currently unfunded, the actuarial assumptions included a 4.0 percent discount rate. The actuarial assumptions also included an annual healthcare cost trend of 8.5 percent for the calendar year 2012, reduced by 0.5 percent per year, to an ultimate rate of 5.25 percent in The actuarial assumptions also included an inflation rate of 3.0 percent and 4.0 percent for salary increases for fiscal year The unfunded actuarial accrued liability is being amortized as a level percentage of projected payrolls on a closed basis. The remaining amortization period is 17 years. 19. MEMBERSHIP IN NONPROFIT CORPORATION The District participated in a nonprofit electric cooperative, the Withlacoochee River Electric Cooperative, Inc., established under the provisions of Chapter 425, Florida Statutes. In accordance with this Statute, revenues in excess of operating expenses, unless determined by a vote of the membership, are distributed by the Cooperative on a pro rata basis to its members. The policy of the Cooperative is to credit the excess revenues to members accounts. Capital credits are distributed only after the Cooperative attains a certain margin of profit required by the Rural Electrification Administration. At June 30, 2013, the accumulated credits to the District s account are $4,119,621. During the fiscal year, the District earned capital credits of $293,013 and received a cash payment of $142,274, for a net increase of $150, CONSTRUCTION CONTRACT AND OTHER COMMITMENTS The following is a summary of major construction contract commitments remaining at fiscal year-end: Contract Completed Balance Project Amount to Date Committed Administrative Complex Administration Parking and Utilities $ 2,220,749 $ 1,664,722 $ 556,027 Land O Lakes High Culinary Arts Building 3,516,091 3,451,368 64,723 R B Stewart Middle School Remodeling - Gym, Building No. 4 and No. 5 5,050, ,944 4,717,530 Richey Elementary Campus Redevelopment 11,691,942 10,655,842 1,036,100 Sanders Elementary Campus Redevelopment 2,183,522 1,874, ,425 Schrader Elementary Campus Redevelopment 2,305, ,529 1,902,942 Seven Springs Middle School Hydronic Piping Project 2,693,169 2,124, ,704 Wesley Chapel High Automotive Academy 1,366,971 1,347,740 19,231 Total $ 31,028,389 $ 21,853,707 $ 9,174,682 83

150 DISTRICT SCHOOL BOARD OF PASCO COUNTY NOTES TO FINANCIAL STATEMENTS JUNE 30, 2013 DISTRICT SCHOOL BOARD OF PASCO COUNTY NOTES TO FINANCIAL STATEMENTS JUNE 30, 2013 B-58 Appropriations in governmental fund types are encumbered upon issuance of purchase orders for goods and/or services. Even though appropriations lapse at the end of the fiscal year, unfilled purchase orders of the current year are carried forward and the next year s appropriations are likewise encumbered. The District uses encumbrance accounting for recording purchase order commitments. At June 30, 2013, the District has recorded $17,677,779 in encumbrances as follows: $4,274,860 for the General Fund: $7,374,932 for the Capital Projects-Other Fund; and $6,027,987 for the Nonmajor Governmental Funds. 21. RISK MANAGEMENT PROGRAMS 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. Workers' compensation, automobile liability, general liability, as well as medical, behavioral health and prescription plan coverage are being provided on a self-insured basis up to specified limits. The District has entered into agreements with various insurance companies to provide specific excess coverage of claim amounts above the stated amount on an individual claim basis, and aggregate excess coverage when total claims minus specific excess coverage exceeds the loss fund established annually by the District. The District has contracted with an insurance administrator to administer these self-insurance programs, including the processing, investigating, and payment of claims. Settled claims resulting from the risks described above have not exceeded commercial insurance coverage in any of the past three fiscal years. A liability in the amount of $6,513,000 was actuarially determined to cover estimated incurred, but not reported, workers compensation, automobile liability and general liability insurance claims payable at June 30, The following schedule represents the changes in claims liability for the current and prior fiscal year for the District's self-insurance program: 22. LITIGATION The Board is involved in several pending and threatened legal actions, the range of potential loss from which, as estimated by the Board s attorney, should not materially affect the financial condition of the District. However, one case has completed the initial trial and a verdict of $1,670,364 has been rendered in favor of the plaintiff. The District intends to defend itself vigorously through the appeals and Claims Bill process with the State Legislature and has not recorded an obligation in relation to this case. Final determination of liability, if any, is unlikely for a number of years. 23. SUBSEQUENT EVENTS On May 7, 2013, the School Board approved a resolution to issue $45,385,000 Certificates of Participation, Series 2013A. The proceeds of the certificates were deposited into an escrow fund on July 2, 2013 to provide funds for the purpose of refunding, on an advanced basis, a portion of the School Board s outstanding Certificates of Participation, Series 2004A. Interest will be payable semiannually on each August 1 and February 1, commencing August 1, The certificates will mature from August 1, 2015 to August 1, 2029 and were issued at interest rates ranging from 3.00 percent to 5.00 percent. Beginning of Current-Year Claims Balance at Fiscal Year and Changes in Claims Fiscal Liability Estimates Payments Year-End $ 8,175,000 $ 51,887,175 $ 52,579,295 $ 7,482, ,482,880 48,567,552 49,537,432 6,513,000 Life insurance coverage is being provided through purchased commercial insurance with a minimum deductible

151 . OTHER REQUIRED SUPPLEMENTARY INFORMATION B-59 This page was intentionally left blank. 86

152 DISTRICT SCHOOL BOARD OF PASCO COUNTY REQUIRED SUPPLEMENTARY INFORMATION SCHEDULE OF FUNDING PROGRESS - EARLY RETIREMENT PLAN Unfunded Unfunded Actuarial Actuarial Actuarial Actuarial Actuarial Accrued Liability Valuation Values of Accrued Accrued Funded Covered as Percent of Date Plan Assets Liability (1) Liability (2) Ratio (3) Payroll Covered Payroll 7/1/2003 5,859,574 $ (4) 13,630,135 $ (4) 7,770,561 $ (4) 43.0% 105,127,379 $ (4) 7.4% (5) 8.3% 7/1/2005 6,519,604 (5) 17,408,848 (5) 10,889,244 (5) 37.4% 130,477,299 7/1/2007 8,433,556 (6) 19,217,504 (6) 10,783,948 (6) 43.9% 152,703,567 (6) 7.1% 7/1/ ,777,103 (7) 19,597,593 (7) 8,820,490 (7) 55.0% 171,655,074 (7) 5.1% 7/1/ ,612,687 (8) 23,520,520 (8) 9,907,833 (8) 57.9% 173,775,663 (8) 5.7% B-60 Notes: (1)The actuarial method used is the Entry Age Normal Cost Method. (2)The unfunded actuarial accrued liability is the actuarial accrued liability minus the actuarial value of plan assets. (3)The percentage funded is derived by dividing the actuarial value of assets by the actuarial accrued liability. (4) Based on data from an actuarial valuation report as of July 1, (5) Based on data from an actuarial valuation report as of July 1, (6) Based on data from an actuarial valuation report as of July 1, (7) Based on data from an actuarial valuation report as of July 1, (8) Based on data from an actuarial valuation report as of July 1, SCHEDULE OF EMPLOYER CONTRIBUTIONS EARLY RETIREMENT PLAN Year Annual Ended Required Percentage June 30 Contribution Contribution 2005 $ 926, % ,202, % ,264, % ,368, % ,437, % ,314, % ,380, % ,509, % ,578, % 87

153 DISTRICT SCHOOL BOARD OF PASCO COUNTY REQUIRED SUPPLEMENTARY INFORMATION SCHEDULE OF FUNDING PROGRESS - OTHER POSTEMPLOYMENT BENEFITS Unfunded Actuarial Actuarial Actuarial Actuarial Actuarial Accrued Liability Valuation Values of Accrued Accrued Funded Covered as a Percentage of Date Plan Assets Liability (1) Liability (2) Ratio (3) Payroll Covered Payroll January 1, 2008 $ - $ 120,914,118 $ 120,914, % $ 320,836, % January 1, ,408, ,408, % 354,120, % January 1, ,496, ,496, % 318,668, % COMBINING AND INDIVIDUAL FUND STATEMENTS AND SCHEDULES B-61 Notes: (1) The actuarial method used is the Entry Age Normal Cost Method. (2) The unfunded actuarial accrued liability is the actuarial accrued liability minus the actuarial value of plan assets. (3) The percentage funded is derived by dividing the actuarial value of assets by the actuarial accrued liability. SCHEDULE OF EMPLOYER CONTRIBUTIONS - OTHER POSTEMPLOYMENT BENEFITS Year Contributed Contribution $ 4,506, % ,124, % ,600, % 88

154 Combining Schedules of Nonmajor Governmental Funds Nonmajor Special Revenue Funds Nonmajor Special Revenue Funds are used to account for proceeds of specific revenue sources that are legally restricted to pay for specified activities. Food and Nutrition Services Fund To account for food and nutrition services activities, including the serving of breakfast and lunch at the schools. B-62 This page was intentionally left blank. Nonmajor Debt Service Funds Nonmajor Debt Service Funds are used to account for resources accumulated, primarily from tax proceeds and earnings on temporary investments, for the payment of principal and interest of long-term liabilities. State Board of Education Bonds Fund To account for payment of principal and interest on various bond issues serviced by the State of Florida on the District s behalf. District Revenue Bonds Fund To account for payment of principal and interest on Motor Vehicle License Tax Revenue Bonds, which are secured by racetrack funds and jai alai fronton funds received annually by Pasco County pursuant to Chapter , Special Acts of 1979, Laws of Florida. Certificates of Participation Fund To account for payments of principal and interest for obligations pertaining to lease payments from debt issued to finance acquisition and construction of schools and ancillary facilities. Nonmajor Capital Projects Funds Nonmajor Capital Projects Funds are used to account for resources to be used for the acquisition and construction of major capital assets; such as: land, new school buildings, additions to existing buildings, major renovation projects, school buses, and equipment and furniture. State Board of Education Bonds Fund To account for proceeds of bonds, issued on the District s behalf, by the State Board of Education, to be used for the construction and maintenance of schools. Public Education Capital Outlay Fund To account for Gross Receipts Tax to be used for construction, remodeling, renovation, and site improvement of educational facilities. District Revenue Bonds Fund To account for District Revenue Bond proceeds to be used for the acquisition and/or construction and maintenance of schools. Capital Outlay and Debt Service Fund - To account for the excess dollars from the debt service funds used for construction and maintenance of schools. Local Optional Millage Levy Fund To account for funds received from the assessment of property taxes for construction and maintenance of schools. 89

155 District School Board of Pasco County Combining Balance Sheet Nonmajor Governmental Funds June 30, 2013 Schedule A Schedule A Special Revenue Debt Service Debt Service Food and Total State Board District Certificates Total Nutrition Nonmajor of Education Revenue of Nonmajor Services Special Revenue Bonds Bonds Participation Debt Service Fund Funds Fund Fund Fund Funds Assets: Cash $ 5,789,468 $ 5,789,468 $ - $ 31,186 $ 54,213 $ 85,399 Cash with Fiscal Agent , ,633 Investments ,698-15,932,658 16,332,356 Accounts Receivable 22,690 22, Accrued Interest Receivable ,483 1,483 Due from Other Agencies 2,836,884 2,836, Inventories 1,223,200 1,223, Total Assets $ 9,872,242 $ 9,872,242 $ 399,698 $ 31,186 $ 16,779,987 $ 17,210,871 Capital Projects State Board Public Capital Local Total Total of Education Education Outlay and Optional Nonmajor Nonmajor Bonds Capital Outlay Debt Service Millage Levy Capital Projects Governmental Fund Fund Fund Fund Funds Funds $ - $ - $ 3,584,846 $ 1,258,324 $ 4,843,170 $ 10,718,037 5, ,834 63, ,946 2,029,611-10,057,489 19,612,256 31,699,356 48,031, ,690 3, ,688 37,974 39, ,891 12,891 2,849, ,223,200 $ 2,038,376 $ - $ 13,642,335 $ 20,975,993 $ 36,656,704 $ 63,739,817 B-63 Liabilities and Fund Balances: Liabilities: Salaries and Benefits Payable $ 400,392 $ 400,392 $ - $ - $ - $ - Payroll Deductions and Withholdings Payable 4,070 4, Accounts Payable 144, , , ,125 Construction Contracts Payable Construction Contracts Payable - Retainage Arbtitrage Rebate Payable ,938 71,938 Due to Other Funds Unearned Revenue 999, , Total Liabilities 1,548,878 1,548, , ,063 $ - $ - $ - $ - $ - $ 400, ,070 82, ,295 1,354,915 1,868,873 2,150, , , ,333 8,218-35,386 64, , , , ,762 90, ,681 1,595,811 2,153,373 3,911,314 Fund Balances: Nonspendable: Inventory 1,223,200 1,223, Restricted: Special Revenue 7,100,164 7,100, Debt Service ,698 31,186 16,570,924 17,001,808 Capital Projects Total Fund Balance 8,323,364 8,323, ,698 31,186 16,570,924 17,001,808 Total Liabilities and Fund Balances $ 9,872,242 $ 9,872,242 $ 399,698 $ 31,186 $ 16,779,987 $ 17,210, ,223, ,100, ,001,808 1,947,495-13,175,654 19,380,182 34,503,331 34,503,331 1,947,495-13,175,654 19,380,182 34,503,331 59,828,503 $ 2,038,376 $ - $ 13,642,335 $ 20,975,993 $ 36,656,704 $ 63,739,

156 District School Board of Pasco County Combining Schedule of Revenues, Expenditures, and Changes in Fund Balances Nonmajor Governmental Funds For the Fiscal Year Ended June 30, Special Revenue Debt Service Food and Total State Board District Certificates Total Nutrition Nonmajor of Education Revenue of Nonmajor Services Special Revenue Bonds Bonds Participation Debt Service Fund Funds Fund Fund Fund Funds Revenues: Federal Sources: Food Services $ 22,141,725 $ 22,141,725 $ - $ - $ - $ - State Sources: Public Education Capital Outlay Food Services 419, , SBE/COBI Bond Interest , ,377 CO & DS Withheld for State Education Bonds - - 2,375, ,375,234 CO & DS Interest CO & DS Distributed Racing Commission Funds , ,250 Local Sources: Property Taxes Food Services 11,441,922 11,441, Investment Earnings (116) 602, ,522 Local Grants and Other 38,620 38, Total Revenues 34,042,141 34,042,141 2,385, , ,638 3,211,383 Expenditures: Current-Education: Facilities Services Food Services 31,355,848 31,355, Capital Outlay: Facilities Acquisition and Construction Debt Service: Principal - - 1,635,000 90,000 21,832,001 23,557,001 Interest , ,935 15,198,780 16,110,854 Fiscal Charges , , ,886 Total Expenditures 31,355,848 31,355,848 2,453, ,280 37,652,768 40,326,741 Schedule B Special Revenue Debt Service Food and Total State Board District Certificates Total Nutrition Nonmajor of Education Revenue of Nonmajor Services Special Revenue Bonds Bonds Participation Debt Service Fund Funds Fund Fund Fund Funds Excess (Deficiency) of Revenues Over Expenditures 2,686,293 2,686,293 (68,082) 2,854 (37,050,130) (37,115,358) Other Financing Sources (Uses): Transfers In ,729,134 32,729,134 Transfers Out (2,926,988) (2,926,988) - - (1,628) (1,628) Total Other Financing Sources (Uses) (2,926,988) (2,926,988) ,727,506 32,727, Net Change in Fund Balances (240,695) (240,695) (68,082) 2,854 (4,322,624) (4,387,852) Fund Balances, Beginning 8,564,059 8,564, ,780 28,332 20,893,548 21,389,660 Fund Balances, Ending $ 8,323,364 $ 8,323,364 $ 399,698 $ 31,186 $ 16,570,924 $ 17,001,808 (Continued) Schedule B B-64

157 District School Board of Pasco County Combining Schedule of Revenues, Expenditures, and Changes in Fund Balances Nonmajor Governmental Funds For the Fiscal Year Ended June 30, Capital Projects State Board Public Capital Local Total Total of Education Education Outlay and Optional Nonmajor Nonmajor Bonds Capital Outlay Debt Service Millage Levy Capital Projects Governmental Fund Fund Fund Fund Funds Funds Revenues: Federal Sources: Federal Direct $ - $ - $ - $ - $ - $ 22,141,725 State Sources: Public Education Capital Outlay - 666, , ,291 Food Services ,874 SBE/COBI Bond Interest ,377 CO & DS Withheld for State Education Bonds ,375,234 CO & DS Interest ,394-25,394 25,394 CO & DS Distributed , , ,571 Racing Commission Funds ,250 Local Sources: Property Taxes ,896,444 30,896,444 30,896,444 Food Services ,441,922 Investment Earnings 12, , , ,510 1,458,032 Local Grants and Other ,620 Total Revenues 12, , ,831 31,073,505 32,720,210 69,973,734 Expenditures: Current-Education: Facilities Services ,745,559 1,745,559 1,745,559 Food Services ,355,848 Facilities Acquisition and Construction 379,264-2,271,628 14,685,844 17,336,736 17,336,736 Debt Service: Principal ,557,001 Interest ,110,854 Fiscal Charges - - 1,442-1, ,328 Total Expenditures 379,264-2,273,070 16,431,403 19,083,737 90,766,326 Schedule B Capital Projects State Board Public Capital Local Total Total of Education Education Outlay and Optional Nonmajor Nonmajor Bonds Capital Outlay Debt Service Millage Levy Capital Projects Governmental Fund Fund Fund Fund Funds Funds Excess (Deficiency) of Revenues Over Expenditures (366,681) 666,291 (1,305,239) 14,642,102 13,636,473 (20,792,592) Other Financing Sources (Uses): Transfers In - - 3,584, ,142 4,026,988 36,756,122 Transfers Out - (666,291) - (13,898,154) (14,564,445) (17,493,061) Total Other Financing Sources (Uses) - (666,291) 3,584,846 (13,456,012) (10,537,457) 19,263, Net Change in Fund Balances (366,681) - 2,279,607 1,186,090 3,099,016 (1,529,531) Fund Balances, Beginning 2,314,176-10,896,047 18,194,092 31,404,315 61,358,034 Fund Balances, Ending $ 1,947,495 $ - $ 13,175,654 $ 19,380,182 $ 34,503,331 $ 59,828,503 Schedule B B-65

158 B-66 This page was intentionally left blank. Schedules of Revenues, Expenditures, and Changes in Fund Balances Budget and Actual Governmental Funds 96 97

159 Schedule C1 District School Board of Pasco County Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual Special Revenue - Food and Nutrition Services Fund For the Fiscal Year Ended June 30, 2013 Schedule C2 District School Board of Pasco County Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual Debt Service - State Board of Education Bonds Fund For the Fiscal Year Ended June 30, 2013 B-67 Variance with Budgeted Amounts Final Budget - Positive Original Final Actual Amounts (Negative) Revenues: Federal Sources: Food Service $ 21,580,079 $ 21,580,079 $ 22,141,725 $ 561,646 State Sources: Food Service 446, , ,874 (26,461) Local Sources: Food Service Sales 12,018,460 12,063,813 11,441,922 (621,891) Local Grants and Other 45,353-38,620 38,620 Total Revenues 34,090,227 34,090,227 34,042,141 (48,086) Expenditures: Current-Education: Food Services Salaries Employee Benefits Purchased Services Energy Services Materials and Supplies Other Expenses 11,699,469 11,699,469 9,975,966 1,723,503 4,555,849 4,155,849 3,899, , , , ,986 59, , , ,000-14,976,882 16,196,882 15,338, ,278 1,152,479 1,515, , ,012 Total Expenditures 33,810,769 34,911,994 31,355,848 3,556,146 Excess (Deficiency) of Revenues Over Expenditures 279,458 (821,767) 2,686,293 3,508,060 Other Financing Sources (Uses): Transfers Out (350,000) (2,926,988) (2,926,988) - Net Change in Fund Balance (70,542) (3,748,755) (240,695) 3,508,060 Fund Balance, Beginning 8,564,059 8,564,059 8,564,059 - Fund Balance, Ending $ 8,493,517 $ 4,815,304 $ 8,323,364 $ 3,508,060 Variance with Budgeted Amounts Final Budget - Positive Original Final Actual Amounts (Negative) Revenues: State Sources CO & DS Withheld for State Education Bonds $ 2,342,123 $ 2,375,235 $ 2,375,234 $ (1) SBE/COBI Bond Interest - 10,377 10,377 - Total Revenues 2,342,123 2,385,612 2,385,611 (1) Expenditures: Debt Service: Principal 1,615,000 1,635,000 1,635,000 - Interest 727, , ,139 1 Fiscal Charges - 36,555 36,554 1 Total Expenditures 2,342,123 2,453,695 2,453,693 2 Excess (Deficiency) of Revenues Over Expenditures - (68,083) (68,082) 1 Net Change in Fund Balance - (68,083) (68,082) 1 Fund Balances, Beginning 467, , ,780 - Fund Balances, Ending $ 467,780 $ 399,697 $ 399,698 $

160 Schedule C3 District School Board of Pasco County Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual Debt Service - District Revenue Bonds Fund For the Fiscal Year Ended June 30, 2013 Schedule C4 District School Board of Pasco County Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual Debt Service - Certificates of Participation Fund For the Fiscal Year Ended June 30, 2013 B-68 Variance with Budgeted Amounts Final Budget - Positive Original Final Actual Amounts (Negative) Revenues: State Sources: Racing Commission Funds $ 223,250 $ 223,250 $ 223,250 $ - Local Sources: Investment Earnings (116) (291) Total Revenues 223, , ,134 (291) Expenditures: Debt Service: Principal 90,000 90,000 90,000 - Interest 129, , ,935 - Fiscal Charges 1,000 1, Total Expenditures 220, , , Excess (Deficiency) of Revenues Over Expenditures 2,390 2,490 2, Net Change in Fund Balance 2,390 2,490 2, Fund Balance, Beginning 28,332 28,332 28,332 - Fund Balance, Ending $ 30,722 $ 30,822 $ 31,186 $ 364 Variance with Budgeted Amounts Final Budget - Positive Original Final Actual Amounts (Negative) Revenues: Local Sources: Investment Earnings $ 2,950 $ 1,223,365 $ 602,638 $ (620,727) Expenditures: Debt Service: Principal 22,754,239 22,754,239 21,832, ,238 Interest 16,056,883 15,274,346 15,198,780 75,566 Fiscal Charges 196, , ,987 26,965 Total Expenditures 39,007,122 38,677,537 37,652,768 1,024,769 Excess (Deficiency) of Revenues Over Expenditures (39,004,172) (37,454,172) (37,050,130) 404,042 Other Financing Sources (Uses): Transfers In 26,333,540 32,729,134 32,729,134 - Transfer Out - (1,630) (1,628) 2 Total Other Financing Sources 26,333,540 32,727,504 32,727,506 2 Net Change in Fund Balance (12,670,632) (4,726,668) (4,322,624) 404,044 Fund Balances, Beginning 20,893,548 20,893,548 20,893,548 - Fund Balances, Ending $ 8,222,916 $ 16,166,880 $ 16,570,924 $ 404,

161 Schedule C5 District School Board of Pasco County Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual Capital Projects - Public Education Capital Outlay Fund For the Fiscal Year Ended June 30, 2013 Schedule C6 District School Board of Pasco County Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual Capital Projects - Other Fund For the Fiscal Year Ended June 30, 2013 B-69 Variance with Budgeted Amounts Final Budget - Positive Original Final Actual Amounts (Negative) Revenues: State Sources: Public Education Capital Outlay $ 668,617 $ 668,617 $ 666,291 $ (2,326) Total Revenues 668, , ,291 (2,326) Other Financing Uses: Transfer Out (668,617) (668,617) (666,291) 2,326 Total Other Financing Uses (668,617) (668,617) (666,291) 2,326 Net Change in Fund Balance Fund Balances, Beginning Fund Balances, Ending $ - $ - $ - $ - Variance with Budgeted Amounts Final Budget - Positive Original Final Actual Amounts (Negative) Revenues: Local Sources: Local Sales Tax $ 21,151,784 $ 27,151,784 $ 27,490,903 $ 339,119 Impact Fees 4,000,000 6,011,229 6,011,229 - Other Local - 3,000 3,000 - Investment Earnings - (386,617) (389,354) (2,737) Total Revenues 25,151,784 32,779,396 33,115, ,382 Expenditures: Current-Education: Facilities Services - 1,291,129 1,291,129 - Capital Outlay: Facilities Acquisition and Construction 39,284,987 53,509,792 10,688,424 42,821,368 Total Expenditures 39,284,987 54,800,921 11,979,553 42,821,368 Excess (Deficiency) of Revenues Over Expenditures (14,133,203) (22,021,525) 21,136,225 43,157,750 Other Financing Sources (Uses): Transfer In - 1,628 1,628 - Transfer Out (13,902,250) (19,030,980) (19,030,980) - Total Other Financing Sources (Uses) (13,902,250) (19,029,352) (19,029,352) - Net Change in Fund Balance (28,035,453) (41,050,877) 2,106,873 43,157,750 Fund Balances, Beginning 110,391, ,391, ,391,429 - Fund Balances, Ending $ 82,355,976 $ 69,340,552 $ 112,498,302 $ 43,157,

162 Schedule C7 District School Board of Pasco County Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual Capital Projects - State Board of Education Bonds Fund For the Fiscal Year Ended June 30, 2013 Schedule C8 District School Board of Pasco County Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual Capital Projects - Capital Outlay and Debt Service Fund For the Fiscal Year Ended June 30, 2013 B-70 Variance with Budgeted Amounts Final Budget - Positive Original Final Actual Amounts (Negative) Revenues: Local Sources: Investment Earnings $ - $ 12,583 $ 12,583 $ - Expenditures: Capital Outlay: Facilities Acquisition and Construction 1,754,470 1,765, ,264 1,386,644 Total Expenditures 1,754,470 1,765, ,264 1,386,644 Excess (Deficiency) of Revenues Over Expenditures (1,754,470) (1,753,325) (366,681) 1,386,644 Net Change in Fund Balance (1,754,470) (1,753,325) (366,681) 1,386,644 Fund Balances, Beginning 2,314,176 2,314,176 2,314,176 - Fund Balances, Ending $ 559,706 $ 560,851 $ 1,947,495 $ 1,386,644 Variance with Budgeted Amounts Final Budget - Positive Original Final Actual Amounts (Negative) Revenues: State Sources: CO & DS Distributed $ 225,000 $ 300,524 $ 276,571 $ (23,953) Interest on Undistributed CO & DS 2,000 25,394 25,394 - Local Sources: Investment Earnings - 2,684, ,866 (2,018,848) Total Revenues 227,000 3,010, ,831 (2,042,801) Expenditures: Capital Outlay: Facilities Acquisition and Construction 2,000,000 2,950,000 2,271,628 (678,372) Debt Service: Dues, Fees and Issuance Costs - 1,442 1,442 - Total Expenditures 2,000,000 2,951,442 2,273,070 (678,372) Excess (Deficiency) of Revenues Over Expenditures (1,773,000) 59,190 (1,305,239) (1,364,429) Other Financing Sources (Uses): Transfer In - 3,584,846 3,584,846 - Total Other Financing Sources (Uses) - 3,584,846 3,584,846 - Net Change in Fund Balance (1,773,000) 3,644,036 2,279,607 (1,364,429) Fund Balances, Beginning 10,896,047 10,896,047 10,896,047 - Fund Balances, Ending $ 9,123,047 $ 14,540,083 $ 13,175,654 $ (1,364,429)

163 Schedule C9 District School Board of Pasco County Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual Capital Projects - Local Optional Millage Levy Fund For the Fiscal Year Ended June 30, 2013 B-71 Variance with Budgeted Amounts Final Budget - Positive Original Final Actual Amounts (Negative) Revenues: Local Sources: Property Taxes $ 30,476,058 $ 30,876,058 $ 30,896,444 $ 20,386 Investment Earnings - 176, , Total Revenues 30,476,058 31,053,039 31,073,505 20,466 Expenditures: Current-Education: Facilities Services - 1,745,559 1,745,559 - Capital Outlay: Facilities Acquisition and Construction 19,761,785 23,681,117 14,685,844 8,995,273 Total Expenditures 19,761,785 25,426,676 16,431,403 8,995,273 Excess of Revenues Over Expenditures 10,714,273 5,626,363 14,642,102 9,015,739 Other Financing Sources (Uses): Transfers In 350, , ,142 (19,535) Transfers Out (21,571,290) (21,571,290) (13,898,154) 7,673,136 Total Other Financing Sources (Uses) (21,221,290) (21,109,613) (13,456,012) 7,653,601 Net Change in Fund Balance (10,507,017) (15,483,250) 1,186,090 16,669,340 Fund Balances, Beginning 18,194,092 18,194,092 18,194,092 - Fund Balances, Ending $ 7,687,075 $ 2,710,842 $ 19,380,182 $ 16,669,340 Combining Statements of Internal Service Funds Internal Service Funds are used to account for the financing of goods and services provided by one department to another department within the District, on a cost reimbursement basis. This practice provides a separate and complete accounting for all resources accumulated and used in rendering the services and activities listed below. Fully-Insured Benefit Plans To account for the financing of the District s fully-insured program for employees dental and life insurance benefits. Flexible Benefits Plan To account for the financing of the District s optional flexible fringe benefits program, for employees, as provided by Internal Revenue Code Section 125. Property, Casualty, and Liability Self-Insurance Plan To account for the financing and payment of claims for the District s self-insured liability and workers compensation program and fully insured property/casualty program. Self-Insured Benefit Plans To account for the financing and payment of claims for the District s selfinsured medical, behavioral health and prescription plans. Employee Assistance Program To account for the financing of services provided by the District s Employee Assistance Program. Energy Management Program To account for the financing of the District s Energy Management Program. Exclusive Agreement To account for the receipt and use of funds received from the District s exclusive agreement with National Beverages, Inc

164 District School Board of Pasco County Combining Statement of Fund Net Position Internal Service Funds June 30, 2013 Schedule D Schedule D B-72 Fully-Insured Flexible Property, Casualty, Benefit Benefits Liability and Workers' Plans Plan Compensation Plans Assets Current Assets: Cash $ 507,104 $ - $ 15,226,795 Cash with Fiscal Agent ,351 Investments 497,464-14,917,044 Accounts Receivable 263, ,677 Accrued Interest Receivable ,605 Total Current Assets 1,267,599-30,371,472 Noncurrent Assets: Capital Assets: Furniture, Fixtures and Equipment Accumulated Depreciation Total Noncurrent Assets Total Assets $ 1,267,599 $ - $ 30,371,472 Liabilities Current Liabilities: Salaries and Benefits Payable $ 4,048 $ - $ 772 Payroll Deductions and Withholdings Payable 1,904-1,614 Accounts Payable 14, ,961 Unearned Revenue Current portion of long-term liabilities: Compensated Absences Payable ,212 Estimated Insurance Claims Payable - - 2,311,000 Total Current Liabilities 20,060-2,629,559 Noncurrent Liabilities: Compensated Absences Payable 82,916-81,735 Estimated Insurance Claims Payable - - 4,202,000 Total Noncurrent Liabilities 82,916-4,283,735 Total Liabilities 102,976-6,913,294 Net Position Investment in Capital Assets Unrestricted 1,164,623-23,458,178 Total Net Position 1,164,623-23,458,178 Total Liabilities and Net Position $ 1,267,599 $ - $ 30,371,472 Self-Insured Employee Energy Benefit Assistance Management Exclusive Plans Program Programs Agreement Totals $ - $ 10,214 $ 1,372,628 $ 229,670 $ 17,346,411 36,527-5,479 1,826 68,183 19,323, ,865 2,194,383 1,058,050 38,130, ,655 3, ,240,141 21,908-3,286 1,095 40,894 20,166, ,857 3,575,776 1,290,641 56,825, , , (161,918) (161,918) ,900 19,900 $ 20,166,531 $ 153,857 $ 3,575,776 $ 1,310,541 $ 56,845,776 $ - $ 13,871 $ 481 $ - $ 19, ,040-5,073 8,212,692 19,624 1,153,991-9,694,376 8, ,296-7, , ,311,000 8,220,988 41,396 1,155,512-12,067,515-45,053 37, , ,202,000-45,053 37,425-4,449,129 8,220,988 86,449 1,192,937-16,516, ,900 19,900 11,945,543 67,408 2,382,839 1,290,641 40,309,232 11,945,543 67,408 2,382,839 1,310,541 40,329,132 $ 20,166,531 $ 153,857 $ 3,575,776 $ 1,310,541 $ 56,845,

165 District School Board of Pasco County Combining Statement of Revenues, Expenses and Changes in Fund Net Position Internal Service Funds June 30, 2013 Schedule E Schedule E B-73 Fully-Insured Flexible Property, Casualty, Benefit Benefits Liability and Workers' Plans Plan Compensation Plans Operating Revenues Insurance Premiums: Board Contributions $ 2,843,816 $ 598,900 $ 11,250,725 Employees Retirees Charges for Services Provided Other Operating Revenues ,665 Total Operating Revenues 2,843, ,900 11,751,390 Operating Expense Salaries 388, ,535 Employee Benefits 101,877-57,782 Purchased Services 228,176-1,267,409 Insurance Premiums 3,138,613 1,919,890 3,967,416 Energy Services Materials and Supplies 2,459-1,068 Insurance Claims - - 1,440,176 Capital Outlay Other 1,540-46,803 Depreciation Total Operating Expenses 3,861,038 1,919,890 7,038,728 Operating Income (Loss) (1,017,222) (1,320,990) 4,712,662 Nonoperating Revenues Investment Earnings (2,039) 6,889 37,211 Gifts, Grants and Bequests 275, Loss Recoveries ,161 Loss on Disposition of Assets Total Nonoperating Revenues 273,508 6,889 89,372 Income (Loss) Before Transfers (743,714) (1,314,101) 4,802,034 Transfers In ,000 Transfers Out - - (5,000,000) Change in Net Position (743,714) (1,314,101) 2,034 Total Net Position, July 1, ,908,337 1,314,101 23,456,144 Total Net Position, June 20, 2013 $ 1,164,623 $ - $ 23,458,178 Self-Insured Employee Energy Benefit Assistance Management Exclusive Plans Program Program Agreement Totals $ 49,042,210 $ 294,246 $ - $ - $ 64,029,897 6,634,123 1, ,635,361 3,993,401 20, ,013, ,342,252-8,342, , ,235 59,669, ,875 8,342,252 53,570 83,575,537-76, , ,286-32,522 45, ,785-70,019 2,189, ,572 3,864,661 8,993, ,019, ,630,043-10,630,043 3, , ,473 47,014, , ,567,552 1, ,666 9, , ,212 18,212 56,021, ,455 13,050, ,276 82,311,893 3,648,318 23,420 (4,707,838) (74,706) 1,263,644 61,578 (573) 13,111 2, , , , (1,532) (1,532) 61,578 (573) 13,111 1, ,923 3,709,896 22,847 (4,694,727) (73,668) 1,708,567 3,900, ,100,000 (1,646,085) (6,646,085) 5,963,811 22,847 (4,694,727) (73,668) (837,518) 5,981,732 44,561 7,077,566 1,384,209 41,166,650 $ 11,945,543 $ 67,408 $ 2,382,839 $ 1,310,541 $ 40,329,

166 District School Board of Pasco County Combining Statement of Cash Flows Internal Service Funds For the Fiscal Year Ended June 30, 2013 Schedule F Schedule F B-74 Fully-Insured Flexible Property, Casualty Benefit Benefits and Liability Plans Plan Self-Insurance Plan Cash Flows from Operating Activities: Cash Received from Services $ - $ - $ - Cash Received from Premiums 3,097, ,900 11,147,587 Cash Received from Other Operating Revenues ,665 Cash Payments to Suppliers for Goods and Services (3,373,978) (1,919,890) (5,045,472) Cash Payments to Employees for Services (499,113) - (347,333) Cash Payments to Insurance Claims - - (2,410,056) Net Cash Provided (Used) by Operating Activities (775,601) (1,320,990) 3,845,391 Cash Flows from Noncapital Financing Activities: Insurance Loss Recoveries ,161 Gifts, Grants and Bequests 275, Transfers From Other Funds ,000 Transfers To Other Funds - - (5,000,000) Net Cash Provided (Used) by Noncapital Financing Activities 275,547 - (4,747,839) Cash Flows from Investing Activities: Investment Income (2,039) 11,204 57,127 Purchase and Sale of Investments 2,038 1,305, ,741 Net Cash Provided (Used) by Investing Activities (1) 1,316, ,868 Net Change in Cash and Cash Equivalents (500,055) (4,318) (414,580) Cash and Cash Equivalents, Beginning 1,007,159 4,318 15,665,726 Cash and Cash Equivalents, Ending $ 507,104 $ - $ 15,251,146 Self-Insured Employee Energy Benefit Assistance Management Exclusive Plans Program Program Agreement Totals $ - $ - $ 8,342,252 $ - $ 8,342,252 59,313, , ,471, , ,235 (16,170,491) (80,845) (12,820,033) (110,064) (39,520,773) - (117,094) (213,180) - (1,176,720) (47,014,211) (113,165) - - (49,537,432) (3,870,785) 2,881 (4,690,961) (56,494) (6,866,559) , ,547 3,900, ,100,000 (1,646,085) (6,646,085) 2,253, (2,218,377) 91,452 (573) 17,592 4, ,827 1,510, (19,887) (4,828) 3,224,227 1,601,574 - (2,295) (764) 3,403,054 (15,296) 2,881 (4,693,256) (57,258) (5,681,882) 51,823 7,333 6,071, ,754 23,096,476 $ 36,527 $ 10,214 $ 1,378,107 $ 231,496 $ 17,414,594 Reconciliation of Operating Income (Loss) to Net Cash Provided (Used) by Operating Activities: Operating Income (Loss) $ (1,017,222) $ (1,320,990) $ 4,712,662 Adjustments to Reconcile Operating Income (Loss) to Net Cash Provided (Used) by Operating Activities Depreciation Change in Assets and Liabilities: Accounts Receivable 253,674 - (103,138) Accounts Payable (3,190) - 237,763 Salaries and Benefits Payable (16,805) - (22,505) Payroll Deductions and Withholdings Payable (518) - (260) Unearned Revenues Compensated Absences Payable 8,460 - (9,251) Estimated Insurance Claims Payable - - (969,880) Total Adjustments 241,621 - (867,271) Net Cash Provided (Used) by Operating Activities $ (775,601) $ (1,320,990) $ 3,845,391 $ 3,648,318 $ 23,420 $ (4,707,838) $ (74,706) $ 1,263, ,212 18,212 (364,113) (1,890) - - (215,467) (7,163,286) (10,546) 8,544 - (6,930,715) - (658) 22 - (39,946) - (59) 28 - (809) 8, ,296 - (7,386) 8, (969,880) (7,519,103) (20,539) 16,877 18,212 (8,130,203) $ (3,870,785) $ 2,881 $ (4,690,961) $ (56,494) $ (6,866,559)

167 B-75 This page was intentionally left blank. Combining Statements of Agency Funds Agency Funds are used to account for financial resources held by the District as an agent. Assets accounted for in an agency fund belong to the party or parties for which the District acts as an agent. Therefore, agency fund assets are offset by liabilities equal in amount. Agency funds do not report net assets. School Internal Accounts - To account for financial resources collected by the schools and held by the District as an agent, which will be used for school and student athletic activities, class activities and club activities. ABC Program - To account for employee and public donations, held by the District as an agent, to be used to assist financially disadvantaged students enrolled in Pasco County schools

168 District School Board of Pasco County Combining Statement of Assets and Liabilities Agency Funds June 30, 2013 Schedule G District School Board of Pasco County Combining Statement of Changes in Assets and Liabilities Agency Funds June 30, 2013 Schedule H B-76 School Internal ABC Accounts Program Total Assets: Cash $ 7,163,373 $ - $ 7,163,373 Investments - 64,582 64,582 Accounts Receivable 5,331-5,331 Inventories 33,791-33,791 Total Assets $ 7,202,495 $ 64,582 $ 7,267,077 Liabilities: Accounts Payable $ 786,965 $ - $ 786,965 Internal Accounts Payable 6,415,530-6,415,530 ABC Program Payable - 64,582 64,582 Total Liabilities $ 7,202,495 $ 64,582 $ 7,267,077 School Internal Accounts Beginning Ending Balance Additions Deductions Balance Assets: Cash $ 7,167,009 $ 17,265,698 $ 17,269,334 $ 7,163,373 Accounts Receivable 8,382 9,536 12,587 5,331 Inventories 31,035 35,373 32,617 33,791 Total Assets $ 7,206,426 $ 17,310,607 $ 17,314,538 $ 7,202,495 Liabilities: Accounts Payable $ 60,054 $ 3,510,674 $ 2,783,763 $ 786,965 Internal Accounts Payable 7,146,372 14,329, ,060,621 6,415,530 Total Liabilities $ 7,206,426 $ 17,840,453 $ 17,844,384 $ 7,202,495 ABC Program Beginning Ending Balance Additions Deductions Balance Assets: Cash $ 344 $ 5,029 $ 5,373 $ - Investments 67,963 1,672 5,053 64,582 Total Assets $ 68,307 $ 6,701 $ 10,426 $ 64,582 Liabilities: ABC Program Payable $ 68,307 $ 2,019 $ 5,744 $ 64,582 Total Agency Funds Beginning Ending Balance Additions Deductions Balance Assets: Cash $ 7,167,353 $ 17,270,727 $ 17,274,707 $ 7,163,373 Investments 67,963 1,672 5,053 64,582 Accounts Receivable 8,382 9,536 12,587 5,331 Inventories 31,035 35,373 32,617 33,791 Total Assets $ 7,274,733 $ 17,317,308 $ 17,324,964 $ 7,267,077 Liabilities: Accounts Payable $ 60,054 $ 3,510,674 $ 2,783,763 $ 786,965 Internal Accounts Payable 7,146,372 14,329,779 15,060,621 6,415,530 ABC Program Payable 68,307 2,019 5,744 64,582 Total Liabilities $ 7,274,733 $ 17,842,472 $ 17,850,128 $ 7,267,

169 Combining Statements of Component Units Component units are entities and/or organizations for which the School Board is financially accountable. Due to the nature and significance of their relationship with the School Board, exclusion of these entities and/or organizations would cause the District's basic financial statements to be misleading. The component units columns in the government-wide financial statements, Exhibits A and B, include consolidated financial data for the following component units: B-77 This page was intentionally left blank. Academy at the Farm, Inc. Focuses on creatively integrating equestrian, horticultural and farm animal components into an interactive, inclusive learning environment. Athenian Academy of Pasco County, Inc. A kindergarten through 8 th grade school offering students a program that incorporates the Greek language and culture. Countryside Montessori Charter School, Inc. Centers programs on providing an alternative elementary education program. Dayspring Academy for Education and the Arts Emphasizes the fine arts, offering students specialized instruction in dance, music, and art. Imagine School at Land O Lakes, LLC A kindergarten through 7 th grade school providing an alternative education program. Pasco Education Foundation, Inc. A separate not-for-profit corporation organized and operated as a direct-support organization under Section , Florida Statutes, to receive, hold, invest and administer property and to make expenditures to or for the benefit of the District

170 District School Board of Pasco County Combining Statement of Net Position Component Units June 30, 2013 Schedule I Schedule I B-78 Academy Athenian Countryside at the Academy of Montessori Farm, Inc. Pasco County, Inc. Charter School, Inc. Assets: Cash $ 110,967 $ 108,282 $ 61,141 Investments Accounts Receivable 11,904 19, Deposits Receivable ,000 Due From Other Agencies 23,758 41,631 8,146 Inventories Prepaid Expenses 58,627 48,061 - Loan Issuance Costs Deferred Charges Capital Assets (net of accumulated depreciation): Land 593, Construction in Progress - 44,303 - Leasehold Property and Improvements 243, ,875 Buildings and Fixed Equipment 442, , ,056 Furniture, Fixtures and Equipment 29,403 88,490 15,793 Motor Vehicles Computer Equipment 46, Improvements Other Than Buildings Total Assets $ 1,562,420 $ 645,324 $ 369,187 Liabilities: Current Liabilities: Salaries and Benefits Payable 2, ,597 - Accounts Payable - 30,090 23,460 Due To Other Agencies Unearned Revenue Total Current Liabilities 2, ,687 23,460 Long-term Liabilities: Due within one year: Note Payable 46,897 65, ,171 Compensated Absences Payable Total Due within one year 46,897 65, ,171 Due in more than one year: Note Payable 534,657-8,829 Total Due in more than one year 534,657-8,829 Total Liabilities 583, , ,460 Net Position: Net Investment in Capital Assets 775, , ,724 Restricted for Other Purposes Nonexpendable-Permanently Restricted Unrestricted 203,775 68,747 56,003 Total Net Position $ 978,862 $ 431,593 $ 185,727 Dayspring Academy Pasco Total for Education Imagine School Education Component and the Arts at Land O'Lakes, LLC Foundation, Inc. Units $ 305,338 $ 393,425 $ 151,354 $ 1,130, ,808,057 1,808, ,925 35, ,000 21,866 15, , ,704 3,274 1,824,282 1,954,948 18, , , ,038, , ,709 1,299, ,150,488 36, , ,709 3,640 94,104-97, , , ,845 $ 2,348,464 $ 644,109 $ 3,787,618 $ 9,357, , , ,144 23,451 70,958 92, ,571-31,518-31,518-7,250-7, , ,302 92, , ,274 26, ,236 82, , ,247 26, ,209 1,078,647 34,032-1,656,165 1,078,647 34,032-1,656,165 1,479, ,184 92,612 3,003, , ,632-2,179, ,830,649 1,830, ,906,568 1,906, ,592 22,293 (42,211) 436,199 $ 869,152 $ 192,925 $ 3,695,006 $ 6,353,

171 B-79 District School Board of Pasco County Combining Statements of Activities Component Units For the Fiscal Year Ended June 30, 2013 Program Revenues Net (Expense) Operating Capital Revenue Charges for Grants and Grants and and Changes Academy at the Farm, Inc., Activities: Expenses Services Contributions Contributions in Net Assets Instruction $ 1,827,757 $ - $ - $ - $ (1,827,757) Pupil Personnel Services 16, (16,719) Instruction Media (156) Instructional Staff Training 2, (2,606) Instruction Related Technology 94, (94,728) Board of Education 7, (7,000) General Administration 28, (28,952) School Administration 376, (376,038) Facilities Acquisition and Construction 61, ,462 - Operation of Plant 171, ,869 (164,199) Maintenance of Plant 51, (51,475) Community Service 88, (88,982) Debt Service - Interest 37, ,473 - Depreciation-Unallocated 100, (100,455) Total Academy at the Farm, Inc., Activities $ 2,864,871 $ - $ - $ 105,804 (2,759,067) General Revenues: Grants and Contributions not restricted to Specific Programs 3,301,324 Total General Revenues 3,301,324 Change in Net Position 542,257 Net Position, Beginning 436,605 Net Position, Ending $ 978,862 Program Revenues Operating Capital Revenue Charges for Grants and Grants and and Changes Athenian Academy of Pasco County, Inc., Activities: Expenses Services Contributions Contributions in Net Assets Instruction $ 1,306,301 $ - $ - $ - $ (1,306,301) Pupil Personnel Services 53, (53,406) Board of Education 30, (30,011) General Administration 200, (200,229) School Administration 276, (276,906) Facilities Acquisition & Construction (900) Fiscal Services 35, (35,365) Food Services 20, (20,346) Central Services 1, (1,042) Pupil Transportation Services 57,152-44,132 - (13,020) Operation of Plant 365, ,798 (249,378) Maintenance of Plant (200) Admin. Technology 25, (25,787) Community Services 48,884 72, ,775 Debt Service-Interest 5, (5,968) Depreciation-Unallocated 53, (53,916) Total Athenian Academy of Pasco County, Inc., Activities $ 2,481,589 $ 72,659 $ 44,132 $ 115,798 (2,249,000) General Revenues: Grants and Contributions not restricted to Specific Programs 2,330,531 Total General Revenues 2,330,531 Schedule J Program Revenues Net (Expense) Operating Capital Revenue Charges for Grants and Grants and and Changes Countryside Montessori Charter School, Inc., Activities: Expenses Services Contributions Contributions in Net Assets Instruction $ 1,019,299 $ - $ - $ - $ (1,019,299) Instructional Staff Training 1, (1,073) School Administration 265, (265,490) Facilities Acquisition and Construction 168, ,688 (93,312) Fiscal Services 26, (26,649) Operation of Plant 35, (35,268) Community Service 191, (191,614) Depreciation-Unallocated 21, (21,282) Total Countryside Montessori Charter School, Inc., Activities $ 1,728,675 $ - $ - $ 74,688 (1,653,987) General Revenues: Grants and Contributions not restricted to Specific Programs 1,596,837 Total General Revenues 1,596,837 Change in Net Position (57,150) Net Position, Beginning 242,877 Net Position, Ending $ 185,727 Program Revenues Net (Expense) Operating Capital Revenue Charges for Grants and Grants and and Changes Dayspring Academy for Education and the Arts Activities: Expenses Services Contributions Contributions in Net Assets Instruction $ 1,947,409 $ - $ 12,813 $ - $ (1,934,596) School Administration 809, (809,150) Facilities Acquisition & Construction 133, (133,268) Fiscal Services 74, (74,632) Pupil Transportation Services 74, (74,275) Operation of Plant 336, ,720 (105,743) Maintenance of Plant 38, (38,367) Community Service 304, (304,974) Amortization of Debt Issuance Cost 5, (5,410) Debt Service-Interest 54, (54,722) Depreciation-Unallocated 75, (75,435) Total Dayspring Academy for Education and the Arts Activities $ 3,854,105 $ - $ 12,813 $ 230,720 (3,610,572) General Revenues: Grants and Contributions not restricted to Specific Programs 3,669,582 Total General Revenues 3,669,582 Change in Net Position 59,010 Net Position, Beginning 810,142 Net Position, Ending $ 869,152 Schedule J Change in Net Position 81,531 Net Position, Beginning 350,062 Net Position, Ending $ 431,

172 B-80 District School Board of Pasco County Combining Statements of Activities Component Units For the Fiscal Year Ended June 30, 2013 Program Revenues Net (Expense) Operating Capital Revenue Charges for Grants and Grants and and Changes Imagine School at Land O'Lakes, LLC, Activities: Expenses Services Contributions Contributions in Net Assets Instruction $ 1,943,007 $ - $ - $ - $ (1,943,007) Pupil Personnel Services (206) Instructional Media 1, (1,082) Instructional and Curriculum Development 7, (7,241) Instructional Staff Training Services 1, (1,084) Instruction Related Technology 6, (6,168) Board of Education 7, (7,744) General Administration 488, (488,206) School Administration 247, (247,765) Fiscal Services 124, (124,110) Food Services 15, (15,320) Central Services 1, (1,287) Pupil Transportation Services 92, (92,496) Operation of Plant 1,016, ,852 (744,682) Maintenance of Plant 43, (43,573) Community Service 29, (29,599) Debt Service - Interest 5, (5,714) Depreciation-Unallocated 65, (65,610) Total Imagine School at Land O'Lakes Charter School, Activities $ 4,096,746 $ - $ - $ 271,852 (3,824,894) General Revenues: Grants and Contributions not restricted to Specific Programs 3,831,725 Total General Revenues 3,831,725 Change in Net Position 6,831 Net Position, Beginning 186,094 Net Position, Ending $ 192,925 Schedule J Program Revenues Net (Expense) Operating Capital Revenue Charges for Grants and Grants and and Changes Total Component Units Activities: Expenses Services Contributions Contributions in Net Assets Instruction $ 8,043,773 $ - $ 12,813 $ - $ (8,030,960) Pupil Personnel Services 70, (70,331) Instructional Media 1, (1,238) Instructional and Curriculum Development 7, (7,241) Instructional Staff Training Services 4, (4,763) Instruction Related Technology 100, (100,896) Board of Education 44, (44,755) General Administration 717, (717,387) School Administration 1,975, (1,975,349) Facilities Acquisition and Construction 363, ,150 (227,480) Fiscal Services 260, (260,756) Food Services 35, (35,666) Central Services 2, (2,329) Pupil Transportation Services 223,923-44, ,720 50,929 Operation of Plant 1,924, ,519 (1,529,990) Maintenance of Plant 133, (133,615) Admin. Technology Services 25, (25,787) Community Service 1,411,521 72, (1,338,862) Amortization of Debt Issuance Cost 5, (5,410) Debt Service - Interest 103, ,473 (66,404) Depreciation-Unallocated 316, (316,698) Total Component Units Activities $ 15,773,454 $ 72,659 $ 56,945 $ 798,862 (14,844,988) General Revenues: Grants and Contributions not restricted to Specific Programs 15,545,508 Total General Revenues 15,545,508 Change in Net Position 700,520 Net Position, Beginning 5,652,745 Schedule J Net Position, Ending $ 6,353,265 Program Revenues Net (Expense) Pasco Education Foundation, Inc., Activities: Operating Capital Revenue Charges for Grants and Grants and and Changes Expenses Services Contributions Contributions in Net Assets Community Service $ 747,468 $ - $ - $ - (747,468) General Revenues: Grants and Contributions not restricted to Specific Programs 815,509 Total General Revenues 815,509 Change in Net Position 68,041 Net Position, Beginning 3,626,965 Net Position, Ending $ 3,695,

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175 B-83 Statistical Section Introduction This section of the District s CAFR presents detailed information as a context for understanding what the information in the financial statements, note disclosures, and required supplementary information say about the District s overall financial health. This information has not been audited by the independent auditor. Financial Trends These tables contain trend information to help the reader understand how the District s financial performance and well-being changed over time. Table 1 Table 2 Table 3 Table 4 Revenue Capacity Net Position by Component Government-Wide Changes in Net Position Primary Government Fund Balances Governmental Funds Changes in Fund Balances Governmental Funds and Debt Service Ratios These tables contain information to help the reader assess the District s significant local revenue sources, the property tax, as well as other revenue sources. Table 5 Table 6 Table 7 Table 8 Table 9 Assessed and Estimated Actual Value of Taxable Property General Governmental Tax Revenues by Source Property Tax Levies and Collections Direct and Overlapping Property Tax Rates Principal Property Taxpayers Economic and Demographic Information These tables offer economic and demographic indicators to help the reader understand the environment within which the District s financial activities take place. Table 14 Table 15 Operating Information Demographic and Economic Statistics Principal Employers in Pasco County These tables contain service and infrastructure data to help the reader understand how the information in the District s financial report relates to the services the District provides and the activities it performs. Table 16 Table 17 Table 18 Table 19 Number of Personnel Teacher Base Salaries Operating Statistics School Building Information Sources: Unless otherwise noted, the information in this section is derived from the District s comprehensive annual reports for the relevant year. Debt Capacity These tables contain information to help the reader assess the affordability of the District s current levels of outstanding debt and the District s ability to issue additional debt in the future. Table 10 Table 11 Table 12 Table 13 Ratios of Outstanding Debt by Type Ratio of Net General Bonded Debt Outstanding Direct and Overlapping Governmental Activities Debt Legal Debt Margin Information

176 District School Board of Pasco County Net Position by Component - Government-Wide Last Ten Fiscal Years (Unaudited) Table 1 Table 1 B-84 For the Fiscal Year Ending June 30, 2004 June 30, 2005 June 30, 2006 June 30, 2007 Governmental Activities: Net Investment in Capital Assets $ 277,057,761 $ 284,226,371 $ 378,990,397 $ 464,698,097 Restricted 92,616, ,104, ,094, ,139,097 Unrestricted 25,890,788 26,058,611 31,819,974 36,251,972 Total Governmental Activities Net Position 395,565, ,389, ,904, ,089,166 Business-Type Activities: Net Investment in Capital Assets 68,678 87, , ,704 Unrestricted 2,583,585 3,175,388 3,257,051 2,677,980 Total Business-Type Activities Net Position 2,652,263 3,263,317 3,558,839 2,960,684 Primary Government: Net Investment in Capital Assets 277,126, ,314, ,292, ,980,801 Restricted 92,616, ,104, ,094, ,139,097 Unrestricted 28,474,373 29,233,999 35,077,025 38,929,952 Total Primary Government Net Position $ 398,217,491 $ 445,652,721 $ 525,463,292 $ 654,049,850 For the Fiscal Year Ending June 30, 2008 June 30, 2009 June 30, 2010 June 30, 2011 June 30, 2012 June 30, 2013 $ 477,656,475 $ 532,146,394 $ 609,215,910 $ 610,511,400 $ 587,895,355 $ 590,932, ,259, ,546, ,219, ,915, ,850, ,069,772 30,656,802 35,460,415 29,950,233 42,414,994 29,533,195 28,365, ,572, ,153, ,385, ,841, ,279, ,368, , , , , , ,337 2,484,446 2,766,947 3,678,225 4,609,491 5,387,604 3,013,904 2,713,010 2,951,654 3,825,092 4,764,622 5,525,352 3,180, ,885, ,331, ,362, ,666, ,033, ,098, ,259, ,546, ,219, ,915, ,850, ,069,772 33,141,248 38,227,362 33,628,458 47,024,485 34,920,799 31,379,589 $ 750,285,938 $ 770,105,431 $ 793,211,031 $ 814,606,380 $ 800,804,689 $ 794,548,252 Source: District records

177 132 District School Board of Pasco County Changes in Net Position - Primary Government Last Ten Fiscal Years (Unaudited) For the Fiscal Year Ending June 30, 2004 June 30, 2005 June 30, 2006 June 30, 2007 June 30, 2008 June 30, 2009 June 30, 2010 June 30, 2011 June 30, 2012 June 30, 2013 Expenses Governmental Activities Instruction $ 232,211,511 $ 249,481,508 $ 285,454,884 $ 320,279,886 $ 348,572,526 $ 351,559,669 $ 343,287,586 $ 363,757,272 $ 334,933,329 $ 343,554,241 Pupil Personnel Services 19,469,785 21,156,345 23,764,750 26,571,094 30,462,893 29,943,982 28,127,494 27,818,587 25,200,500 25,331,587 Instructional Media Services 8,225,851 8,899,097 9,456,379 9,481,851 10,360,657 8,979,508 10,116,970 9,838,612 7,354,703 6,917,067 Instruction and Curriculum Development Services 8,452,430 8,024,881 9,088,378 8,999,208 10,969,233 11,411,106 15,766,876 15,384,400 13,400,395 11,764,667 Instructional Staff Training 10,232,251 11,448,750 8,052,983 9,590,108 9,810,582 8,281,128 14,462,129 13,936,346 10,971,329 11,073,276 Instruction Related Technology - - 4,210,967 5,817,654 6,342,050 6,531,075 6,335,019 6,147,471 4,847,994 4,892,506 Board of Education 1,370,793 1,399,327 1,643,566 2,198,040 2,438,957 2,717,695 3,230,392 3,121, , ,730 General Administration 1,283,059 1,174,386 2,169,506 2,667,580 2,842,753 1,805,179 3,323,964 3,351,534 1,259,433 1,632,018 School Administration 23,980,247 24,847,257 27,011,932 31,744,739 35,422,367 34,476,174 36,740,305 36,616,082 34,008,721 34,289,049 Facilities Services 5,242,411 7,226,608 9,250,352 13,332,062 14,328,177 17,033,887 15,095,278 14,981,752 12,736,731 14,195,220 Fiscal Services 1,921,790 2,104,263 2,185,931 2,190,039 2,302,729 2,419,295 2,394,604 2,495,234 2,199,577 2,281,430 Food Services 22,153,742 23,244,513 25,144,171 28,045,838 29,733,446 29,605,467 31,228,131 30,842,650 30,476,104 31,884,356 Central Services 7,968,624 7,654,273 3,548,220 8,317,630 1,657,766 6,455,741 7,856, ,370 1,734,199 4,024,807 Pupil Transportation Services 17,541,767 20,260,829 22,880,871 27,696,272 30,352,782 28,153,490 27,870,375 28,495,921 27,912,093 27,623,111 Operation of Plant 25,010,607 30,108,432 35,355,100 40,372,538 45,807,271 43,875,230 46,244,124 46,454,690 46,432,259 42,208,748 Maintenance of Plant 9,648,268 10,598,270 11,565,861 11,512,727 13,161,025 13,258,894 13,349,962 12,712,872 11,012,852 10,903,885 Administrative Technology Services - - 1,704,019 2,245,453 3,066,415 3,229,763 3,299,616 3,173,777 3,084,540 3,146,509 Community Services 673, , , , , , , , , ,852 Interest on Long-term Liabilities 7,872,993 9,274,923 11,446,561 12,066,754 23,240,113 20,698,823 19,193,742 18,650,661 17,827,097 16,680,024 Depreciation-Unallocated 635, Total Government Activities Expenses 403,895, ,778, ,624, ,956, ,704, ,252, ,634, ,210, ,679, ,702,083 Business-Type Activities: PLACE Program 5,205,434 5,596,822 6,931,797 8,808,096 9,517,699 8,944,520 8,303,091 8,039,992 7,753,564 7,941,510 Total Business-Type Activities Expenses 5,205,434 5,596,822 6,931,797 8,808,096 9,517,699 8,944,520 8,303,091 8,039,992 7,753,564 7,941,510 Total Primary Government Expenses $ 409,101,164 $ 443,375,424 $ 501,556,673 $ 572,764,387 $ 631,222,452 $ 630,197,239 $ 636,937,394 $ 647,250,398 $ 594,432,675 $ 601,643,593 Program Revenues Governmental Activities: Charges for services Instruction $ 524,953 $ 498,499 $ 184,065 $ 151,873 $ 3,424,682 $ 1,645,400 $ 3,486,329 $ 254,868 $ 1,511,101 $ 522,095 Food Services 9,337,438 10,080,135 11,271,276 12,582,463 12,995,845 12,998,964 12,249,850 11,824,461 11,697,038 11,441,922 Pupil Transportation 800, , , ,040 1,054, , ,661 1,031,745 1,148, ,215 Operating grants and contributions 24,749,825 26,955,586 28,133,635 30,662,856 32,184,868 32,957,214 34,949,693 35,241,557 21,417,728 37,633,087 Capital grants and contributions 35,790,040 25,399,494 38,201,714 85,566,489 68,481,567 27,380,354 10,997,212 8,129,586 8,198,949 9,128,908 Total Government Activities Program Revenue 71,202,520 63,778,314 78,445, ,840, ,141,323 75,841,451 62,503,745 56,482,217 43,973,095 59,718,227 Table 2 For the Fiscal Year Ending June 30, 2004 June 30, 2005 June 30, 2006 June 30, 2007 June 30, 2008 June 30, 2009 June 30, 2010 June 30, 2011 June 30, 2012 June 30, 2013 Business-Type Activities: Charge for Services 5,652,571 6,131,730 7,057,611 8,012,395 9,320,202 9,144,709 9,174,266 8,975,781 8,495,164 8,562,722 Total Business-Type Activities Revenues 5,652,571 6,131,730 7,057,611 8,012,395 9,320,202 9,144,709 9,174,266 8,975,781 8,495,164 8,562,722 Total Primary Government Program Revenues $ 76,855,091 $ 69,910,044 $ 85,503,226 $ 137,853,116 $ 127,461,525 $ 84,986,160 $ 71,678,011 $ 65,457,998 $ 52,468,259 $ 68,280, Net (Expense) Revenues Government Activities $ (332,693,210) $ (374,000,288) $ (416,179,261) $ (434,115,570) $ (503,563,430) $ (545,411,268) $ (566,130,558) $ (582,728,189) $ (542,706,016) $ (533,983,856) Business-Type Activities 447, , ,814 (795,701) (197,497) 200, , , , ,212 Total Primary Government Net (Expenses)Revenues $ (332,246,073) $ (373,465,380) $ (416,053,447) $ (434,911,271) $ (503,760,927) $ (545,211,079) $ (565,259,383) $ (581,792,400) $ (541,964,416) $ (533,362,644) General Revenues and Other Changes in Net Position Governmental Activities: Property Taxes: Levied for general purposes $ 85,299,507 $ 96,731,933 $ 116,114,859 $ 143,633,620 $ 159,132,655 $ 163,132,311 $ 143,328,208 $ 137,589,229 $ 133,136,587 $ 120,318,952 Levied for debt services 5,691,990 5,827,079 5,506,507 5,799,859 5,361, Levied for capital purposes 26,719,999 23,941,847 28,960,352 37,977,156 43,207,373 42,857,117 36,814,096 32,903,497 32,505,792 30,896,444 Sales taxes - 7,009,724 17,137,576 26,642,211 27,157,517 26,452,520 25,671,147 25,406,921 25,321,574 27,490,903 Grants and contributions not restricted to Specific Programs 253,013, ,260, ,780, ,247, ,888, ,280, ,835, ,434, ,929, ,910,337 Transfers , ,000,000 Miscellaneous 7,213,634 13,968,454 22,049,977 19,279,136 11,549,775 9,890,216 17,536,819 14,463,706 9,702,528 11,129,246 Unrestricted investment earnings 2,096,071 5,084,613 12,144,845 11,720,442 10,595, ,403 5,176,446 2,385, ,374 1,326,648 Total Governmental Activities 380,034, ,824, ,694, ,300, ,047, ,992, ,362, ,184, ,143, ,072,530 Business-Type Activities Interest 34,400 76, , , ,894 37,709 2,263 3,741 13,223 33,677 Gain on sales of Capital Assets (807) Miscellaneous ,907 - Transfers (154,071) (3,000,000) Total Business-Type Activities 33,593 76, , ,546 (50,177) 38,455 2,263 3,741 19,130 (2,966,323) Total Primary Government $ 380,068,557 $ 420,900,610 $ 495,864,018 $ 563,497,829 $ 599,997,015 $ 565,030,572 $ 588,364,983 $ 603,187,749 $ 528,162,725 $ 530,106,207 Changes in Net Position Governmental activities $ 47,341,754 $ 46,824,176 $ 79,515,049 $ 129,184,713 $ 96,483,762 $ 19,580,849 $ 22,232,162 $ 20,455,819 $ (14,562,421) $ 3,911,326 Business-type activities 480, , ,522 (598,155) (247,674) 238, , , ,730 2,345,111 Total Primary Government $ 47,822,484 $ 47,435,230 $ 79,810,571 $ 128,586,558 $ 96,236,088 $ 19,819,493 $ 23,105,600 $ 21,395,349 $ (13,801,691) $ 6,256,437 Source: District records Table 2 B-85

178 District School Board of Pasco County Fund Balances - Governmental Funds Last Ten Fiscal Years (Unaudited) Table 3 Table 3 B-86 For the Fiscal Year Ending June 30, 2004 June 30, 2005 June 30, 2006 June 30, 2007 General Fund: Fund Balance: Nonspendable $ - $ - $ - $ - Restricted Assigned Unassigned Reserved 20,765,087 29,826,188 30,718,655 25,400,645 Unreserved 27,424,436 22,854,329 22,662,970 33,724,599 Total General Fund $ 48,189,523 $ 52,680,517 $ 53,381,625 $ 59,125,244 All Other Governmental Funds Fund Balance: Nonspendable Special Revenue-Food Service $ - $ - $ - $ - Restricted Special Revenue Debt Service Capital Projects Assigned Capital Projects Reserved 17,114,439 52,272,443 84,322,255 67,080,440 Unreserved, reported in: Capital Projects funds 137,603, ,450,717 66,991, ,514,782 Debt Service funds Special Revenue funds 7,615, ,307 1,112,459 1,390,340 Total all other government funds $ 162,333,435 $ 170,137,467 $ 152,426,157 $ 190,985,562 For the Fiscal Year Ending June 30, 2008 June 30, 2009 June 30, 2010 June 30, 2011 June 30, 2012 June 30, 2013 $ - $ - $ - $ 3,893,982 $ 4,568,706 $ 3,612, ,563,258 5,326,016 3,124, ,466,857 15,673,843 17,407, ,964,288 22,714,296 23,499,528 24,833,534 14,467,726 12,185, ,087,039 32,803,154 37,788, $ 60,920,573 $ 47,270,880 $ 49,973,715 $ 60,888,385 $ 48,282,861 $ 47,644,623 $ - $ - $ - $ 1,695,810 $ 1,380,195 $ 1,223, ,383,403 7,183,864 7,100, ,525,444 21,389,660 17,001, ,332, ,020, ,001, ,091,944 31,775, ,256,904 87,804,190 32,442, ,033, ,097, ,692, ,921, ,127,901 1,700,634 3,665, $ 303,418,761 $ 248,601,995 $ 194,722,629 $ 187,029,520 $ 171,749,463 $ 172,326,805 Note: (A) The District implemented GASB 54 for the fiscal year ended June 30, Fiscal years prior to 2011 have not been restated for implementation of GASB 54. Source: District records

179 District School Board of Pasco County Changes in Fund Balances - Governmental Funds And Debt Service Ratios Last Ten Fiscal Years (Unaudited) Table 4 Table 4 B-87 For the Fiscal Year Ending June 30, 2004 June 30, 2005 June 30, 2006 Revenues: Federal Sources: Federal Grants $ 29,851,174 $ 32,356,248 $ 39,534,258 Food Services 11,711,559 12,809,355 13,241,412 Total Federal Sources 41,562,733 45,165,603 52,775,670 State Sources: Florida Education Finance Program 186,318, ,043, ,638,043 Public Education Capital Outlay 2,591,195 8,532,339 6,276,697 Food Services 346, , ,066 State Grants and Other 72,217,070 63,561,130 74,807,937 Total State Sources 261,473, ,492, ,172,743 Local Sources: Property Taxes 117,711, ,476, ,581,718 Voter Approved Sales Tax - 7,009,724 17,137,576 Food Service sales 9,337,438 10,080,135 11,218,023 Interest Income and other 1,931,693 4,732,004 12,119,203 Local grants and other 18,959,383 25,701,558 44,272,755 Total local sources 147,940, ,999, ,329,275 Total Revenues 450,976, ,658, ,277,688 Expenditures: Current-Education: Instruction 217,194, ,509, ,722,522 Pupil Personnel Services 19,477,582 21,062,301 23,602,641 Instructional Media Services 7,917,753 8,668,730 9,174,479 Instruction and Curriculum Development Services 7,516,009 8,218,853 9,055,144 Instructional Staff Training 9,931,680 11,271,261 8,514,846 Instruction Related Technology - - 3,601,604 Board of Education 1,307,482 1,419,980 1,694,729 General Administration 1,219,732 1,192,890 1,695,006 School Administration 22,842,424 24,595,874 27,011,757 Facilities Services 3,673,013 5,143,051 5,813,105 Fiscal Services 1,795,050 2,018,434 2,230,050 Food Services 21,457,407 23,103,185 25,057,154 Central Services 7,425,925 7,444,562 7,097,572 Pupil Transportation Services 16,674,101 19,003,325 21,827,807 Operation of Plant 26,927,868 31,827,115 35,057,234 Maintenance of Plant 9,401,376 10,192,985 11,191,370 Administrative Technology Services - - 1,704,019 Community Services 703, , ,491 Capital Outlay: Facilities Acquisition and Construction 30,235,927 49,969, ,246,322 Other Capital Outlay 2,309,026 2,593,958 3,421,282 Debt Service: Principal 7,615,000 8,010,000 10,060,000 Interest 3,670,519 6,132,698 8,850,650 Fiscal Charges 4,519,550 3,022,013 3,206,317 Total Expenditures 423,815, ,236, ,550,101 Excess (Deficiency) of Revenues Over Expenditures 27,160,167 5,421,342 (70,272,413) Other Financing Sources (Uses): Bonds Issued 1,990,000 2,880,000 - Certificates of Participation Issued 63,970,000 4,018,097 67,833,454 Proceeds of Certificates of Participation Issued Premiums on Bonds Issued 2,010,597 55,692 - Proceeds from the Sale of Capital Assets 97, , ,031 Payments to Refunded Bond Escrow Agent Transfers In 7,596,261 9,604,411 41,977,480 Transfers Out (7,796,261) (9,804,411) (42,177,480) Total Other Financing Sources (Uses) 67,867,612 6,873,684 67,869,485 Net Change in Fund Balances $ 95,027,779 $ 12,295,026 $ (2,402,928) Debt service as a percentage of noncapital expenditures 2.88% 3.31% 3.90% 136 For the Fiscal Year Ending June 30, 2007 June 30, 2008 June 30, 2009 June 30, 2010 June 30, 2011 June 30, 2012 June 30, 2013 $ 35,062,439 $ 41,047,707 $ 39,525,911 $ 79,516,781 $ 96,950,923 $ 42,340,203 $ 42,541,633 14,638,784 15,555,805 17,236,057 19,688,152 20,815,526 20,980,131 22,141,725 49,701,223 56,603,512 56,761,968 99,204, ,766,449 63,320,334 64,683, ,168, ,672, ,130, ,428, ,031, ,656, ,215,516 16,678,822 20,051,633 19,148,129 1,622,195 3,524, , , , , , , , , , ,270, ,324, ,937,551 84,614,338 85,811,367 82,611,163 84,676, ,579, ,536, ,597, ,158, ,793, ,408, ,977, ,410, ,116, ,284, ,142, ,492, ,642, ,215,396 26,642,211 27,157,517 26,452,520 25,671,147 25,406,921 25,321,574 27,490,903 12,631,122 12,995,845 12,998,964 12,249,850 11,778,792 11,650,985 11,441,922 11,720,442 10,595, ,403 5,176,446 2,388, ,385 1,267,749 31,862,340 14,407,476 11,409,494 20,931,370 19,274,584 16,094,030 15,445, ,266, ,272, ,525, ,171, ,341, ,299, ,861, ,547, ,413, ,885, ,535, ,900, ,027, ,523, ,891, ,304, ,672, ,051, ,557, ,241, ,761,436 26,420,325 29,726,490 29,528,612 28,028,160 27,470,406 24,952,342 25,031,281 9,299,160 9,859,723 9,889,155 9,787,927 9,468,350 7,142,745 6,763,983 9,242,792 10,507,790 10,715,100 15,211,665 15,299,116 13,293,905 11,701,933 9,487,305 9,612,129 8,283,841 14,045,255 13,976,906 10,844,460 10,981,833 5,740,027 6,232,514 6,535,854 6,270,107 6,126,500 4,799,806 4,864,701 2,196,541 2,324,216 2,630,591 3,085,096 2,980, , ,772 2,616,659 2,767,340 2,325,305 3,355,050 3,317,673 1,226,250 1,512,137 31,362,443 34,253,024 34,093,343 36,185,408 36,404,238 33,210,176 33,759,267 8,342,020 7,826,662 6,192,119 6,532,646 6,424,831 4,028,151 4,833,626 2,300,185 2,211,103 2,422,560 2,316,906 2,404,739 2,114,358 2,228,720 27,918,172 29,541,716 29,274,591 31,001,571 30,565,745 30,189,633 31,598,711 7,191,057 7,317,591 6,900,844 6,326,380 6,675,392 5,903,365 5,643,763 25,471,695 29,248,215 26,931,416 26,787,809 27,697,245 27,217,617 27,052,856 39,315,801 45,123,394 43,075,688 45,838,612 46,183,311 46,025,891 41,856,266 12,349,335 12,800,678 12,846,399 13,167,442 12,518,437 10,877,222 10,586,881 2,815,871 3,029,555 3,118,180 3,178,804 3,196,306 3,030,764 3,118, , , , , , , , ,581, ,463, ,068,134 97,667,371 37,632,689 35,571,766 28,043,055 3,084,807 3,614,880 2,176,402 2,212,318 1,930, ,144 1,334,131 11,115,000 17,470,000 20,115,000 20,987,001 21,812,001 22,527,001 23,557,001 10,418,172 20,787,539 19,679,686 18,099,076 17,440,390 17,133,664 16,110,854 2,536,961 15,951,113 1,174,013 1,751,549 1,361, , , ,461, ,790, ,454, ,586, ,092, ,068, ,138,337 (62,914,656) (50,377,766) (69,569,796) (62,051,372) 1,808,897 (28,040,616) (5,615,327) 88,590,000 5,295,000-1,300,000 1,450,000 1,710, ,605,000 1,170,010 11,000, ,630, ,051, , , , , , , ,327 63,037 45, ,466 8,346 - (147,930,000) - (1,418,444) - (1,931,399) - 16,507, ,192,061 42,595,724 36,990,185 45,089,857 58,144,210 42,070,126 (16,707,160) (114,237,990) (42,795,724) (37,190,185) (45,289,857) (58,148,657) (36,524,041) 92,610, ,606,294 1,103,337 10,874,841 1,412, ,035 5,554,431 $ 29,695,748 $ 114,228,528 $ (68,466,459) $ (51,176,531) $ 3,221,561 $ (27,885,581) $ (60,896) 3.95% 6.17% 6.62% 6.45% 6.36% 7.05% 7.72% 137

180 B-88 Table 5 Estimated Actual Value (1) Exemptions (2) Taxable Assessed Value (4) Assessed Value as a (5) Centrally (3) Percentage of Total Fiscal Real Personal Real Personal Real Personal Assessed Estimated Direct Year Property Property Property Property Property Property Value Total Actual Value Tax Rate 2013 $ 24,978,580 $ 2,876,461 $ 5,389,039 $ 1,203,332 $ 19,589,541 $ 1,673,129 $ 14,013 $ 21,276, % ,013,760 3,039,322 7,278,503 1,322,493 20,735,257 1,716,829 14,073 22,466, % ,126,608 3,111,656 7,962,504 1,342,488 21,164,104 1,769,168 12,413 22,945, % ,681,664 3,238,561 11,481,883 1,324,084 21,199,781 1,914,477 13,209 23,127, % ,790,826 3,474,265 12,525,774 1,324,268 27,265,052 2,149,997 12,816 29,427, % ,731,681 3,026,634 15,219, ,859 27,511,908 2,178,775 3,678 29,694, % ,956,299 2,912,306 14,134, ,243 23,821,744 2,069,063 3,186 25,893, % ,816,171 2,703,034 9,780, ,281 18,035,493 1,901,753 12,278 19,949, % ,176,530 2,514,555 7,692, ,442 14,483,543 1,760,113 20,075 16,263, % ,856,854 2,378,108 6,536, ,111 12,320,096 1,653,997 17,233 13,991, % 9.82 (1) Section (2), Florida Statutes, defines assessed value of property as "an annual determination of the just or fair market value of an item or property...." Consequently, estimated actual value, above, is assessed value before exemptions. Pasco County Property Appraiser's Office. (2) Chapter 196, Florida Statutes, grants various exemptions for qualifying historic, economic development, governmental, and institutional property, the latter including charitable, religious, scientific, literary and educational property. Exemptions are also granted for residential property for widows/widowers, disabled/blind, homestead exemption ($25,000), additional homestead exemption (age 65 or older, $25,000), and homestead differential (just value minus a capped value) (3) Property, such as railroad property, for which valuation is provided to the Property Appraiser by the Florida Department of Revenue [see sec (4), Florida Statutes]. District School Board of Pasco County Assessed and Estimated Actual Value of Taxable Property Last Ten Fiscal Years (in thousands) (Unaudited) (4) Centrally Assessed Property has been added to the total estimated actual value of Real and Personal Property when computing this percentage. (5) Total Tax Levy (Pasco County CAFR) to Total Taxable Assessed Value (above). Tax rates are per $1,000 of assessed value. District School Board of Pasco County General Governmental Tax Revenues by Source Last Ten Fiscal Years (Unaudited) Property Tax Fiscal General Debt Capital Sales Year Purposes Service (1) Projects Tax (2) Total Table $ 120,318,952 - $ 30,896,444 $ 27,490,903 $ 178,706, ,136,587-32,505,792 25,321, ,963, ,589,229-32,903,497 25,406, ,899, ,328, ,814,096 25,671, ,813, ,132,311-42,857,117 26,452, ,441, ,132,655 5,361,489 43,207,373 27,157, ,859, ,633,620 5,799,859 37,977,156 26,642, ,052, ,114,859 5,506,507 28,960,352 17,137, ,719, ,731,933 5,827,079 23,941,847 7,009, ,510, ,299,507 5,691,990 26,719, ,711,496 (1) The voter approved property tax for debt service has ended; any debt service revenues collected after the fiscal year represent delinquent collections. The final debt service payment was made in the fiscal year. (2) Fiscal year ending June 30, 2005, was the first year that sales tax was collected. Source: District Records Source: Pasco County Property Appraiser

181 District School Board of Pasco County Property Tax Levies and Collections Last Ten Fiscal Years (Unaudited) Table 7 District School Board of Pasco County Direct and Overlapping Property Tax Rates Last Ten Fiscal Years (per $1,000 assessed valuation) (Unaudited) Table 8 B-89 Taxes Levied Collections Fiscal for the Percentage in Subsequent Percentage Year Fiscal Year Amount (A) of Levy Years Amount (A) of Levy 2013 $ 156,192,206 $ 151,072, % $ 142,954 $ 151,215, % ,034, ,642, % 554, ,196, % ,353, ,468, % 24, ,492, % ,767, ,089, % 52, ,142, % ,147, ,271, % 717, ,989, % ,038, ,240, % 461, ,701, % ,838, ,711, % 6,675, ,387, % ,434, ,217, % 319, ,537, % ,207, ,863, % 1,612, ,476, % ,221, ,152, % 534, ,686, % Note: Property Taxes become due and payable on November 1st of each year. A four percent (4%) discount is allowed if the taxes are paid in November, with the discount declining by one percent (1%) each month thereafter. Accordingly, taxes collected usually will never be 100% of the tax levy. Taxes become delinquent on April 1st of each year and tax certificates for the full amount of any unpaid taxes and assessments must be sold no later than June 1st of each year. (A) Net of allowable discounts Collected within the Fiscal Year of the Levy Total Collections to Date Local Required Discretionary Supplemental Capital Debt Total Fiscal Effort Local Discretionary Improvement Service Pasco Pasco Year Millage (3) Millage Millage (1) Millage Millage (2) Schools County (1) For the fiscal year and thereafter, the State of Florida combined the Supplemental Discretionary and Discretionary Local Millage into one Millage rate. (2) The voter approved Debt Service Millage expired with the fiscal year. (3) Local Required Effort Millage for the fiscal year includes the millage of.250 for Critical Need. Source: Pasco County website - Source: District records Property Tax Rates by Government School District County

182 District School Board of Pasco County Principal Property Taxpayers Current and Nine Years Ago (Unaudited) Table Taxable Percentage of Taxable Percentage of Assessed Total Assessed Assessed Total Assessed Taxpayer Rank Valuation Value Rank Valuation Value Duke Energy Center (Florida Power Corporation) 1 278,978, % 1 $ 259,057, % Withlacoochee River Electric Cooperative 2 217,080, % 4 137,820, % HCA Health Services of Florida 3 180,645, % 8 57,946, % Verizon Communications Inc. (1) 4 144,670, % 2 224,832, % Shady Hills Power Company LLC 5 105,791, % 3 157,309, % Goodforest LLC 6 86,900, % Florida Gas Transmission Company 7 80,444, % Bright House Networks 8 78,757, % 6 70,344, % Wal-Mart Stores 9 77,857, % 7 51,286, % Zephyrhills Bottled Water 10 59,692, % 5 62,939, % Walgreen Co ,236, % Gulf View Associates 9 40,691, % Total $ 1,310,819, % $ 1,099,464, % (1) Formerly General Telephone Company of Florida B-90 Source: District School Board of Pasco County CAFR Pasco County Property Appraiser Data [THIS PAGE INTENTIONALLY LEFT BLANK] 142

183 District School Board of Pasco County Ratios of Outstanding Debt by Type Last Ten Fiscal Years (Unaudited) Governmental Activities Personal Ratio of State Board District General Sales Certificates Total Income Outstanding Debt Fiscal of Education Revenue Obligation Tax Revenue of Note Capital Primary Estimated Per (thousands of To Personal Year Bonds Bonds Bonds Bonds Participation Payable Leases Government Population Capita dollars) Income (1) 2013 $ 15,498,519 $ 2,829,774 $ - $ 27,254,032 $ 342,845,923 $ - $ - $ 388,428, ,391 $ 826 N/A N/A ,015,000 2,960,000-38,680, ,210, ,865, , $ 14,974, ,315,000 3,050,000-50,365, ,397, ,127, , ,790, ,335,000 3,135,000-61,495, ,524, ,489, , ,635, ,795,000 3,220,000-72,195, ,336, ,546, ,702 1,050 12,750, ,080,000 3,300,000-82,485, ,626, ,491, ,668 1,095 12,750, ,875,000 3,380,000 5,320,000 88,590, ,196, ,361, , ,304, ,545,000 3,455,000 10,400, ,901, ,301, , ,569, ,755,035 3,470,188 15,250, ,661, ,136, , ,442, ,930,000 3,605,000 19,885, ,325, ,745, , ,263, Note: Details regarding the District's outstanding debt can be found in the notes to financial statements N/A = Data not currently available (1) Ratio per thousand dollars of personal income Source: District records Pasco County Government US Census Bureau: Table 10 [THIS PAGE INTENTIONALLY LEFT BLANK] B-91

184 District School Board of Pasco County Ratio of Net General Bonded Debt Outstanding Last Ten Fiscal Years (Unaudited) Table 11 District School Board of Pasco County Direct and Overlapping Governmental Activities Debt As of June 30, 2013 (Unaudited) Table 12 Net Ratio of Taxable Gross Less Debt Net Net General Net Fiscal Estimated Assessed Bonded Service Bonded Bonded Debt Bonded Year Population (1) Value (2) Debt (3) Funds (4) Debt to Assessed Value Debt Per Capita Percentage Amount Net Applicable to this Applicable to this Debt Governmental Governmental Jurisdiction Outstanding Unit Unit Pasco County Board of County Commissioners Overlapping Debt $ 80,333 0% $ - District School Board of Pasco County Direct Debt 388,428, % 388,428, ,391 $ 21,276,683 $ - $ - $ % ,457 22,466, % ,697 22,963, % ,709 25,445, % ,702 29,432, % ,668 29,694, % ,425 25,892,657 5,320,000-5,320, % ,355 19,949,524 10,400,000 5,320,000 5,080, % ,898 16,263,731 15,250,000 8,900,003 6,349, % ,776 13,991,326 19,885,000 8,453,142 11,431, % 29 Totals $ 388,508,761 $ 388,428,428 Note: Overlapping governments are those that coincide, at least in part, with the geographic boundaries of the District. This schedule estimates the portion of the outstanding debt of those overlapping governments that is borne by the residents and businesses of the District. This process recognizes that, when considering the District's ability to issue and repay debt, the entire debt burden borne by the residents and businesses should be taken into account. However, this does not imply that every taxpayer is a resident, and therefore responsible for repaying the debt of each overlapping government. Source : District records Pasco County CAFR, September 30, 2012 B-92 (1) 2010 Population estimate was obtained from the United States Census Bureau. (2) Net Taxable Assessed Values are expressed in thousands. (3) Includes General Obligation Bonds only. (4) Reserved for Debt Service - General Obligation Bonds only. Note: Details regarding the District's outstanding debt can be found in the notes to financial statements. Source: District records

185 District School Board of Pasco County Legal Debt Margin Information Last Ten Fiscal Years (Unaudited) Table 13 Table 13 For the Fiscal Year Ending June 30, 2004 June 30, 2005 June 30, 2006 For the Fiscal Year Ending June 30, 2007 June 30, 2008 June 30, 2009 June 30, 2010 June 30, 2011 June 30, 2012 June 30, 2013 Assessed Valuation $ 13,991,326,000 $ 16,263,731,000 $ 19,949,524,000 Debt Limit $ 1,399,132,600 $ 1,626,373,100 $ 1,994,952,400 Less: Net Debt applicable to the limit 200,745, ,136, ,301,612 Legal debt margin $ 1,198,387,600 $ 1,426,236,877 $ 1,737,650,788 $ 25,892,656,671 $ 29,694,362,126 $ 29,432,260,894 $ 25,445,098,119 $ 22,963,002,249 $ 22,466,159,275 $ 21,276,683,168 $ 2,589,265,667 $ 2,969,436,213 $ 2,943,226,089 $ 2,544,509,812 $ 2,296,300,225 $ 2,246,615,928 $ 2,127,668, ,361, ,491, ,546, ,489, ,127, ,865, ,428,248 $ 2,255,904,055 $ 2,488,944,601 $ 2,481,679,467 $ 2,093,020,191 $ 1,865,172,605 $ 1,836,750,309 $ 1,739,240,069 Total net debt applicable to the limit as a 14.35% 12.31% 12.90% percentage of debt 12.87% 16.18% 15.68% 17.74% 18.77% 18.24% 18.26% B-93 Note: This schedule was previously presented as a requirement of Rule 6A-1.037(2) State Board of Education, Florida Administration Code, which established a legal debt limit of 10 percent of the assessed valuation of the District. Rule 6A was repealed in March 2006; however, Management believes this information may still be of value to users. Source: District Records Pasco Property Appraisers Office

186 District School Board of Pasco County Demographic and Economic Statistics Last Ten Fiscal Years (Unaudited) Table 14 District School Board of Pasco County Principal Employers in Pasco County Current and Nine Years Ago (Unaudited) Table 15 Personal Income Per Capita Fiscal Estimated (thousands of Personal Unemployment Student Year Population (1) dollars) Income (4) Rate (2) Membership (3) ,391 N/A N/A 9.9% 66, ,457 $ 14,974,427 $ 32, % 65, ,697 13,790,695 29, % 66, ,500 13,635,875 29, % 66, ,702 (4) 12,750,465 (4) 27, % 66, ,668 (4) 12,750,465 (4) 29, % 66, ,425 (4) 13,304,700 (4) 30, % 64, ,355 (4) 12,569,000 (4) 29, % 62, ,898 (4) 11,442,000 (4) 28, % 59, ,776 (4) 10,263,464 26, % 56,822 N/A = Data not currently available Percentage Percentage of Total of Total Employer Rank Employees County Employment Rank Employees County Employment District School Board of Pasco County 1 8, % 1 7, % Wal-mart 2 2, % HCA Healthcare 3 2, % Physicians Injury Medical Center, LLC 4 2, % Pasco County Government 5 2, % 2 1, % Pasco County Sheriff 6 1, % 4 1, % State of Florida Government 7 1, % 3 1, % Florida Medical Clinic 8 1, % Florida Hospital Zephyrhills 9 1, % % Morton Plan North Bay Hosp./Recovery Cntr % Community Hospital of New Port Richey 5 1, % Regional Medical Center Bayonet Point 6 1, % Pasco Beverage, Inc % Saddlebrook Resort % US Postal Service % B-94 Source: (1) US Census Bureau (2) US Bureau of Labor Statistics (3) District records (4) Pasco County Government Total 23, % 19, % Source: Pasco Economic Development Council District School Board of Pasco County employment obtained from State of Florida Data for Budget Advertisement

187 District School Board of Pasco County Number of Personnel Last Ten Fiscal Years (Unaudited) Table 16 District School Board of Pasco County Teacher Base Salaries Last Ten Fiscal Years (Unaudited) Table 17 Ratio of Instructional and Other Administrative Fiscal Support Personnel Year Instructional Administrative Personnel Total to Pupils County Statewide Fiscal Minimum Maximum Average Average Year Salary (1) Salary (1) Salary (2) Salary (2) , ,504 8, , ,841 9, , ,085 9, , ,970 9, , ,310 9, , ,620 8, , ,306 8, , ,422 8, , ,566 7, , ,454 7, $ 36,420 $ 63,870 $ 42,595 $ 46, ,420 63,870 42,710 45, ,420 63,870 42,710 46, ,420 63,870 42,850 46, ,420 63,870 43,901 46, ,420 63,870 45,211 45, ,300 61,750 43,472 42, ,100 59,300 41,600 41, ,550 56,750 39,600 40, ,100 54,900 38,800 40,275 B-95 Source: State of Florida Data for Budget Advertisement District records Source: (1) District Records (2) Florida Department of Education

188 District School Board of Pasco County Operating Statistics Last Ten Fiscal Years (Unaudited) Table 18 Average Cost Pupil Percentage of Students Fiscal Daily Operating per Percentage Instructional Teacher Receiving Free or Year Membership Expenditures (1) Pupil Change Staff Ratio Reduced-Price Meals ,417 $ 449,649,188 $ 6, % 4, % , ,316,247 6, % 5, % , ,668,927 6, % 5, % , ,202,664 6, % 5, % , ,124,221 7, % 6, % , ,727,086 7, % 6, % , ,679,581 7, % 5, % , ,178,410 6, % 5, % , ,917,943 5, % 5, % , ,277,926 5, % 4, % (1) Operating expenditures include only General Fund expenditures. Source: District records B-96 This page was intentionally left blank

189 B-97 District School Board of Pasco County School Building Information Last Ten Fiscal Years (Unaudited) Table 19 Full-Time Equivalent Place in Square Capacity Enrollment Data Service (a) Footage (b) Portables (Students) Elementary Schools Anclote , Calusa , Centennial , Chasco , , Chester W. Taylor , Connerton , Cotee River , Cypress , Deer Park , , Denham Oaks , Double Branch , Fox Hollow , , Gulf Highlands , Gulf Trace , Gulfside , Hudson , James M. Marlowe , Lacoochee , Lake Myrtle , Longleaf , Dr. Mary Giella , Mittye P. Locke , Moon Lake , New River , Northwest , Oakstead , Odessa , Pasco , Pine View , Quail Hollow , Richey , Rodney B. Cox , San Antonio , Sand Pine , Sanders Memorial , , Schrader , Seven Oaks , Seven Springs , Shady Hills , Sunray , Trinity , , , Trinity Oaks , Veterans , Watergrass , Wesley Chapel , , , , West Zephyrhills , Woodland , Total Elementary Schools 25, , , Full-Time Equivalent Enrollment Data , , , , , , , , , , , , , , , , , , Table 19

190 B-98 District School Board of Pasco County School Building Information Last Ten Fiscal Years (Unaudited) Table 19 Full-Time Equivalent Place in Square Capacity Enrollment Data Service (a) Footage (b) Portables (Students) Middle Schools Bayonet Point , ,000 1, , Centennial , Charles S. Rushe , , Chasco , Crews Lake ,206-1, Dr. John Long , , Gulf , ,546 1, , , Hudson , ,168 1, , , Pasco , , Paul R. Smith ,602-1, Pine View , ,280 1, , , Raymond B. Stewart , , River Ridge (c) , Seven Springs , ,500 1, , , Thomas E. Weightman , ,083 1, , , Total Middle Schools 11, , , Education Centers Energy & Marine , F. K. Marchman Tech , Harry Schwettman , James Irvin , Moore Mickens , Other Programs n/a n/a - n/a Total Education Centers 1, , , High Schools Anclote ,463-1, Fivay ,342-1, Gulf , ,617 1, , , Hudson , ,694 1, , , J. W. Mitchell , ,951 2, , , Land O' Lakes , ,596 1, , , Pasco , ,554 1, , , Ridgewood , ,542 1, , , River Ridge (c) , ,970 3, , , Sunlake ,643-1, Wesley Chapel , ,547 1, , , Wiregrass Ranch , , Zephyrhills , ,444 1, , , Total High Schools 16, , , Full-Time Equivalent Enrollment Data , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , Table

191 B-99 District School Board of Pasco County School Building Information Last Ten Fiscal Years (Unaudited) Table 19 Full-Time Equivalent Place in Square Capacity Enrollment Data Service (a) Footage (b) Portables (Students) Charter Schools Academy at the Farm n/a n/a n/a n/a Athenian Academy n/a n/a n/a n/a Countryside Monetssori n/a n/a n/a n/a Dayspring Academy n/a n/a n/a n/a Deerwood Academy n/a n/a n/a n/a Imagine School n/a n/a n/a n/a Language Academy n/a n/a n/a n/a Richard Milburn Academy n/a n/a n/a n/a Total Charter Schools , East Bus Garage ,061 - n/a West Bus Garage ,292 - n/a Central Bus Garage ,484 1 n/a Administration Building , n/a District Maintenance ,354 - n/a Northwest Bus Garage ,941 1 n/a Southeast Bus Garage ,251 - n/a Total District 56, , , (a) Original date that the school was placed in service. This date does not reflect additions, renovations, replacements or remodeling. (b) Square footage is current, but does not include portables. (c) River Ridge was built as a combination Middle School and High School. All data was aggregate until when then Middle School received its own School Identifier. Full-Time Equivalent Enrollment Data , , , , , , , , , , , , , , Table 19 Source: District Records

192 SINGLE AUDIT REPORT B-100 This page was intentionally left blank. 160

193 DAVID W. MARTIN, CPA AUDITOR GENERAL AUDITOR GENERAL STATE OF FLORIDA G74 Claude Pepper Building 111 West Madison Street Tallahassee, Florida PHONE: FAX: The President of the Senate, the Speaker of the House of Representatives, and the Legislative Auditing Committee B-101 This page was intentionally left blank. INDEPENDENT AUDITOR S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF THE FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS Report on the Financial Statements We have audited, in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States, the financial statements of the governmental activities, the business-type activities, the aggregate discretely presented component units, each major fund, and the aggregate remaining fund information of the Pasco County District School Board as of and for the fiscal year ended June 30, 2013, and the related notes to the financial statements, which collectively comprise the District s basic financial statements, and have issued our report thereon dated December 20, 2013, included under the heading INDEPENDENT AUDITOR S REPORT. Our report includes a reference to other auditors who audited the financial statements of the aggregate discretely presented component units, as described in our report on the Pasco County District School Board s financial statements. This report does not include the results of the other auditors testing of internal control over financial reporting or compliance and other matters that are reported on separately by those auditors. Internal Control Over Financial Reporting In planning and performing our audit of the financial statements, we considered the District s internal control over financial reporting (internal control) to determine the audit procedures that are appropriate in the circumstances for the purpose of expressing our opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the District s internal control. Accordingly, we do not express an opinion on the effectiveness of the District s internal control. A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent or detect and correct misstatements on a timely basis. A material weakness is a deficiency, or combination of deficiencies, in internal control such that there is a 161

194 B-102 reasonable possibility that a material misstatement of the District s financial statements will not be prevented, or detected and corrected on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance. Our consideration of internal control was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies and, therefore, material weaknesses or significant deficiencies may exist that were not identified. Given these limitations, during our audit we did not identify any deficiencies in internal control that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified. We did identify a certain deficiency in internal control, as described in the SCHEDULE OF FINDINGS AND QUESTIONED COSTS section of this report as Financial Statement Finding No. 1, that we consider to be a significant deficiency. Compliance and Other Matters As part of obtaining reasonable assurance about whether the District s financial statements are free of material misstatement, we performed tests of its compliance with certain provisions of laws, rules, regulations, contracts, and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit and, accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards. We noted certain matters that we reported to District management in our operational audit report No , dated December Management s response to the findings described in the SCHEDULE OF FINDINGS AND QUESTIONED COSTS section of this report is included as Exhibit A. We did not audit management s response and, accordingly, we express no opinion on it. Purpose of this Report The purpose of the INDEPENDENT AUDITOR S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF THE FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS is solely to describe the scope of our testing of internal control and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the District s internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the District s internal control and compliance. Accordingly, this report is not suitable for any other purpose. 162 Respectfully submitted, David W. Martin, CPA Tallahassee, Florida December 20, 2013 Audit Report No DAVID W. MARTIN, CPA AUDITOR GENERAL The President of the Senate, the Speaker of the House of Representatives, and the Legislative Auditing Committee AUDITOR GENERAL STATE OF FLORIDA G74 Claude Pepper Building 111 West Madison Street Tallahassee, Florida INDEPENDENT AUDITOR S REPORT ON COMPLIANCE FOR EACH MAJOR FEDERAL PROGRAM AND REPORT ON INTERNAL CONTROL OVER COMPLIANCE Report on Compliance for Each Major Federal Program We have audited the Pasco County District School Board s compliance with the types of compliance requirements described in the OMB Circular A-133 Compliance Supplement that could have a direct and material effect on each of the District s major Federal programs for the fiscal year ended June 30, The District s major Federal programs are identified in the SUMMARY OF AUDITOR S RESULTS section of the SCHEDULE OF FINDINGS AND QUESTIONED COSTS. Management s Responsibility Management is responsible for compliance with the requirements of laws, regulations, contracts, and grants applicable to its Federal programs. Auditor s Responsibility PHONE: FAX: Our responsibility is to express an opinion on compliance for each of the District s major Federal programs based on our audit of the types of compliance requirements referred to above. We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States of America; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; and OMB Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations. Those standards and OMB Circular A-133 require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the types of compliance requirements referred to above that could have a direct and material effect on a major Federal program occurred. An audit includes examining, on a test basis, evidence about the District s compliance with those requirements and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion on compliance for each major Federal program. However, our audit does not provide a legal determination of the District s compliance. 163

195 B-103 Opinion on Each Major Federal Program In our opinion, the District complied, in all material respects, with the types of compliance requirements referred to above that could have a direct and material effect on each of its major Federal programs for the fiscal year ended June 30, Other Matters The results of our auditing procedures disclosed instances of noncompliance, which are required to be reported in accordance with OMB Circular A-133 and which are described in the SCHEDULE OF FINDINGS AND QUESTIONED COSTS section of this report as Federal Awards Finding Nos. 1 through 3. Our opinion on each major Federal program is not modified with respect to these matters. The District s response to the noncompliance findings identified in our audit is described in the Exhibit A. The District s response was not subjected to the auditing procedures applied in the audit of compliance and, accordingly, we express no opinion on the response. Report on Internal Control Over Compliance District management is responsible for establishing and maintaining effective internal control over compliance with the types of compliance requirements referred to above. In planning and performing our audit of compliance, we considered the District s internal control over compliance with the types of requirements that could have a direct and material effect on each major Federal program to determine the auditing procedures that are appropriate in the circumstances for the purpose of expressing an opinion on compliance for each major Federal program and to test and report on internal control over compliance in accordance with OMB Circular A-133, but not for the purpose of expressing an opinion on the effectiveness of internal control over compliance. Accordingly, we do not express an opinion on the effectiveness of the District s internal control over compliance. A deficiency in internal control over compliance exists when the design or operation of a control over compliance does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, noncompliance with a type of compliance requirement of a Federal program on a timely basis. A material weakness in internal control over compliance is a deficiency, or combination of deficiencies, in internal control over compliance, such that there is a reasonable possibility that material noncompliance with a type of compliance requirement of a Federal program will not be prevented, or detected and corrected on a timely basis. A significant deficiency in internal control over compliance is a deficiency, or combination of deficiencies, in internal control over compliance with a type of compliance requirement of a Federal program that is less severe than a material weakness in internal control over compliance, yet important enough to merit attention by those charged with governance. Our consideration of internal control over compliance was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control over compliance that might be material weaknesses or significant deficiencies and, therefore, material weaknesses or significant deficiencies may exist that were not identified. We did not identify any deficiencies in internal control over compliance that we consider to be material weaknesses. However, we identified certain deficiencies in internal control over compliance as described in the SCHEDULE OF FINDINGS AND QUESTIONED COSTS section of this report as Federal Awards Finding Nos. 1 through 3 that we consider to be significant deficiencies. The District s response to the internal control over compliance findings identified in our audit is included as Exhibit A. The District s response was not subjected to the auditing procedures applied in the audit of compliance and, accordingly, we express no opinion on the response. 164 Purpose of this Report The purpose of this report on internal control over compliance is solely to describe the scope of our testing of internal control over compliance and the results of that testing based on the requirements of OMB Circular A-133. Accordingly, this report is not suitable for any other purpose. Respectfully submitted, 165 David W. Martin, CPA Tallahassee, Florida December 20, 2013 Audit Report No

196 DISTRICT SCHOOL BOARD OF PASCO COUNTY SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS For the Fiscal Year Ended June 30, 2013 DISTRICT SCHOOL BOARD OF PASCO COUNTY SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS For the Fiscal Year Ended June 30, 2013 Catalog of Federal Pass - Amount Domestic Through Amount of Provided Assistance Grantor Expenditures to Federal Grantor/Pass-Through Grantor/Program Title Number Number (1) Subrecipients Catalog of Federal Pass - Amount Domestic Through Amount of Provided Assistance Grantor Expenditures to Federal Grantor/Pass-Through Grantor/Program Title Number Number (1) Subrecipients United States Department of Agriculture: Indirect: Florida Department of Agriculture and Consumer Services: Child Nutrition Cluster: School Breakfast Program $ 5,070,791 $ - National School Lunch Program (2) ,553,377 - Summer Food Service Program for Children ,735 - Total Child Nutrition Cluster 22,019,903 - Fresh Fruit and Vegetable Program ,650 - Team Nutrition Grants None 31,629 - Total United States Department of Agriculture 22,160,182 - United States Department of Labor: Indirect: Florida Department of Education: National Farmworker Jobs Program ,783 - United States Department of Health and Human Services: Direct: Head Start (3) N/A $ 6,186,723 $ - Corporation for National and Community Service: Direct: Retired and Senior Volunteer Program N/A 103,566 - United States Department of Defense: Direct: Air Force Junior Reserve Officers Training Corps None N/A 190,303 - Army Junior Reserve Officers Training Corps None N/A 519,410 - Navy Junior Reserve Officers Training Corps None N/A 570,992 - Total United States Department of Defense 1,280,705 - B-104 United States Department of Education: Direct: Safe and Drug-free Schools and Communities - National Programs N/A 171,949 - Federal Pell Grant Program N/A 508, ,440 Total Direct 680, ,440 Indirect: Florida Department of Education: Special Education Cluster: Special Education - Grants to States , ,925,104 - Special Education - Preschool Grants , ,941 - Total Expenditures of Federal Awards $ 63,152,530 $ 280,253 Notes: (1) Basis of Presentation. The Schedule of Expenditures of Federal Awards represents amounts expended from Federal programs during the fiscal year as determined based on the modified accrual basis of accounting. The amounts reported on the Schedule have been reconciled to and are in material agreement with amounts recorded in the District's accounting records from which the basic financial statements have been reported. Noncash Assistance. (2) (A) National School Lunch Program - Includes $1,411,143 of donated food received during the fiscal year. Donated foods are valued at fair value as determined at the time of donation. Head Start. Expenditures include $699,705 for grant number/program year 04CH3070/44 and $5,487,018 (3) for grant number/program year 04CH3070/45. (4) ARRA-State Fiscal Stabilization Fund (SFSF)-Race-to-the Top Incentive Grants, Recovery Act. Expenditures total $1,283,079 for CFDA No Total Special Education Cluster 12,233,045 - School Improvement Grants Cluster: School Improvement Grants ,497 - ARRA-School Improvement Grants, Recovery Act ,067 - Total School Improvement Grants Cluster 719,564 - Adult Education - State Grant Program , ,699 - Title I Grants to Local Educational Agencies , 222, 226, ,407,207 - Migrant Education - State Grant Program ,403 - Career and Technical Education - Basic Grants to States ,918 - Education for Homeless Children and Youth ,581 - English Language Acquisition Grants ,018 - Improving Teacher Quality State Grants ,945,129 - ARRA-Education Technology State Grants, Recovery Act ARRA-State Fiscal Stabilization Fund (SFSF) -Race-to-the Top Incentive Grants, Recovery Act (4) RL111 1,119,073 12,813 University of South Florida: ARRA-State Fiscal Stabilization Fund (SFSF) -Race-to-the Top Incentive Grants, Recovery Act (4) None 164,006 - Total Indirect 32,562,167 12,813 Total United States Department of Education 33,242, ,

197 PASCO COUNTY DISTRICT SCHOOL BOARD SCHEDULE OF FINDINGS AND QUESTIONED COSTS FOR THE FISCAL YEAR ENDED JUNE 30, 2013 PASCO COUNTY DISTRICT SCHOOL BOARD SCHEDULE OF FINDINGS AND QUESTIONED COSTS (CONTINUED) FOR THE FISCAL YEAR ENDED JUNE 30, 2013 SUMMARY OF AUDITOR S RESULTS B-105 Financial Statements Type of auditor s report issued: Internal control over financial reporting: Material weakness(es) identified? Significant deficiency(ies) identified? Noncompliance material to financial statements noted? Federal Awards Internal control over major programs: Material weakness(es) identified? Significant deficiency(ies) identified? Type of auditor s report issued on compliance for major programs: Any audit findings disclosed that are required to be reported in accordance with Section 510(a) of OMB Circular A-133? Unmodified No Yes No No Yes Unmodified Identification of major programs: CFDA Number(s): Name of Federal Program or Cluster: and Child Nutrition Cluster Improving Teacher Quality State Grants ARRA State Fiscal Stabilization Fund (SFSF) Race-to-the-Top Incentive Grants, Recovery Act Head Start Dollar threshold used to distinguish between Type A and Type B programs: $1,894,575 Auditee qualified as low-risk auditee? Yes Yes Finding No. 1: Financial Reporting FINANCIAL STATEMENT FINDING SIGNIFICANT DEFICIENCY Preparation of fund financial statements pursuant to generally accepted accounting principles (GAAP) requires an analysis to determine the major governmental funds that require separate columnar presentation. The District is required to report a governmental fund as major when the fund s assets and deferred outflows, liabilities and deferred inflows, revenues, or expenditures represent at least 10 percent of the total governmental funds for these respective classifications. Our review of the District s fiscal year annual financial report (AFR), as submitted to the Florida Department of Education (FDOE) and presented for audit, disclosed that financial reporting procedures could be improved. For example, the District did not report the account balances and transactions of the Special Revenue Other Federal programs fund as a major fund, due to errors in calculating the 10 percent threshold for governmental funds. Separately reporting major funds allows financial statement users to readily identify the District s most significant funds and their account balances and transactions, and ensures compliance with GAAP. We discussed the financial reporting errors with District personnel, and District personnel corrected the major fund classifications on a revised AFR, resubmitted the revised AFR to the FDOE, and correctly reported the account balances and transactions on its Comprehensive Annual Financial Report submitted to us for audit. However, our audit procedures cannot substitute for management s responsibility to implement adequate controls over financial reporting. Recommendation: The District should improve its financial reporting procedures to ensure that financial statement account balances and transactions are properly reported

198 B-106 FEDERAL AWARDS FINDINGS AND QUESTIONED COSTS Federal Awards Finding No. 1: Federal Agencies: United States Department of Agriculture, United States Department of Education, and United States Department of Health and Human Services Pass-Through Entities: Florida Department of Education and Florida Department of Agriculture and Consumer Services Programs: Child Nutrition Cluster (CFDA Nos , , and ), Improving Teacher Quality State Grants (CFDA No ), Race-To-The-Top (CFDA No ), and Head Start Cluster (CFDA No ) Finding Type: Noncompliance and Significant Deficiency Questioned Costs: Unknown Allowable Costs/Cost Principles. Attachments A and B of United States Office of Management and Budget (OMB) Circular A-87 establish cost principles to be applied and guidance for determining allowable costs and applicable credits to Federal awards. Also, Section 22.d.5 of Attachment B provides that whenever funds are transferred from a self-insurance reserve to other accounts (e.g., General Fund), refunds shall be made to the Federal Government for its share of funds transferred, including earned or imputed interest from the date of transfer. In addition, Section C of Attachment A specifies that, to be allowable costs under a grant program, the costs must be net of all applicable credits, and defines applicable credits as receipts or reductions of expenditure-type transactions that offset or reduce expense items allocable to Federal awards as direct or indirect cost, including insurance refunds or rebates. Transfer of Insurance Program Refunds. The District provides group medical, behavioral, and prescription coverage for its employees on a self-insured basis and accounts for the activities of this program within a health self-insurance program internal service fund. Based on the number of employees that participate in the self-insurance program and are funded by each of the respective fund types, the District allocated premium costs of the self-insurance program to those fund types. During the fiscal year, the District reported virtually all payroll expenditures in the General Fund and special revenue funds, and health self-insurance program revenues exceeded expenses by $3.65 million. Given the surplus revenues over expenses, the Board approved a transfer of $1.65 million from the health self-insurance program to the General Fund; however, District personnel had not made a determination of the portion attributable to Federal programs for program costs previously charged to Federal programs. Without such a determination, District records did not evidence that applicable refunds were made to the Federal Government for its share of the funds transferred, contrary to OMB Circular A-87. Rebate Credits. The District maintains a purchasing card (P-card) program, provided through a financial institution, as an available procurement option for its purchasing process. As an incentive, the District receives annual rebates from the financial institution for this program, with the amounts determined based on the dollar amount of P-card purchases during annual periods. During the period June 2012 through May 2013, the District had P-card purchases totaling $7,119,485, resulting in receipt as of June 2013 of a rebate of $99, The $99, rebate received by the District included $23, that was generated by the Child Nutrition Cluster (CNC) program funds. However, the rebate was not allocated to CNC program funds from which the P-card purchases were made. Instead, the rebate was recognized as revenue and applied to the General Fund, which is used for general operating purposes. 170 District personnel indicated they were unaware that rebates should be accounted for in the specific fund type that generated the rebates. As CNC program funds are restricted by Federal law, rebates generated by expenditures of those funds may be subject to the same restrictions. Without procedures to allocate rebates to the appropriate funding source, there is an increased risk that rebates generated by restricted resources may be used for purposes inconsistent with the restrictions on these resources. Recommendation: The District should make a determination of the portion of the $1.65 million of transferred funds that should be credited to Federal programs and consult with the Florida Department of Education for resolution of this matter. The District should also consult with the United States Department of Agriculture and the Florida Department of Agriculture and Consumer Services for resolution on the use and allocation of rebates received on P-card purchases. District Contact Person: Olga Swinson, Chief Finance Officer Federal Awards Finding No. 2 Federal Agencies: United States Department of Agriculture Pass-Through Entities: Florida Department of Agriculture and Consumer Services Program: Child Nutrition Cluster (CFDA Nos , , and ) Finding Type: Noncompliance and Significant Deficiency Questioned Costs: $2,484,846 Allowable Costs/Cost Principles. OMB Circular A-87, Attachment A, Section C.1.e, provides that to be allowable, costs should be consistent with policies, regulations, and procedures that apply uniformly to both Federal awards and other activities of the governmental unit. Guidance from the United States Department of Agriculture s Indirect Costs Guidance for State Agencies and School Food Authorities (Indirect Cost Manual) prohibits the use of food service funds for capital expenditures, such as renovations, without prior approval of the Florida Department of Agriculture and Consumer Services (FDACS). Account balances and transactions of the CNC Cluster program are accounted for in the Special Revenue Food Service (SRFS) Fund. For the fiscal year, the District transferred $2,484,846 from the SRFS Fund to the Capital Projects - Capital Outlay and Debt Service Fund. District personnel indicated that the Board approved these transfers for several school cafeteria renovations; however, the District did not obtain prior approval from the FDACS for these transfers, contrary to the Indirect Cost Manual. Without such approval, the transfers represent $2,484,846 of questioned costs subject to disallowance by the grantor. Recommendation: The District should document to the grantor (FDACS) the allowability of the $2,484,846 of questioned costs or restore this amount to the CNC programs. District Contact Person: Olga Swinson, Chief Finance Officer Federal Awards Finding No. 3 Federal Agencies: United States Department of Agriculture Pass-Through Entities: Florida Department of Education Program: Child Nutrition Cluster (CFDA Nos , , and ) Finding Type: Noncompliance and Significant Deficiency Questioned Costs: $134, Allowable Cost/Cost Principles. OMB Circular A-87 provides principles for determining allowable costs, including indirect costs that may be allocated to a Federal program. Indirect costs are costs that are incurred for a common or 171

199 joint purpose, are not readily assignable to the cost objectives specifically benefited without effort disproportionate to the results achieved, and are calculated by multiplying allowed costs by an approved indirect cost rate. For the fiscal year, District personnel charged indirect costs to the CNC programs by applying the fiscal year indirect cost rate (3.80 percent) to fiscal year expenditures, instead of applying the fiscal year indirect cost rate (2.92 percent). As a result, the District inadvertently overcharged $134, of indirect costs to the CNC program. The $134, represents questioned costs subject to disallowance by the grantor. Recommendation: The District should enhance procedures to ensure that the proper indirect cost rate is used when calculating indirect costs, and restore the $134, of questioned costs to the CNC programs. SUMMARY SCHEDULE OF PRIOR AUDIT FINDINGS FEDERAL AWARDS PASCO COUNTY DISTRICT SCHOOL BOARD SUMMARY SCHEDULE OF PRIOR AUDIT FINDINGS - FEDERAL AWARDS For the Fiscal Year Ended June 30, 2013 Listed below is the District's summary of the status of prior audit findings on Federal programs: Audit Report No. Program/Area Brief Description Status Comments and Federal Awards Finding No. Moore Stephens Lovelace, P.A. There were no prior Federal audit findings. District Contact Person: Olga Swinson, Chief Finance Officer PRIOR AUDIT FOLLOW-UP The District had taken corrective actions for findings included in the previous financial audit report. MANAGEMENT S RESPONSE Management s response is included as Exhibit A. B

200 EXHIBIT A MANAGEMENT S RESPONSE EXHIBIT A (CONTINUED) MANAGEMENT S RESPONSE B

201 APPENDIX C CERTAIN LEGAL DOCUMENTS Master Lease Form of Schedule 2014-QSCB Master Trust Agreement Form of Series 2014-QSCB Supplemental Trust Agreement Form of Series 2014-QSCB Assignment Agreement

202 [THIS PAGE INTENTIONALLY LEFT BLANK]

203 MASTER LEASE PURCHASE AGREEMENT Between FLORIDA SCHOOL BOARDS ASSOCIATION, INC. as Lessor AND THE SCHOOL BOARD OF PASCO COUNTY, FLORIDA acting as the governing body of the School District of Pasco County, Florida as Lessee Dated as of April 1, 1992 C-1

204 TABLE OF CONTENTS ARTICLE I DEFINITIONS AND EXHIBITS Page SECTION 1.1. Definitions 4 SECTION 1.2. Rules of Construction 14 ARTICLE II LEASE OF FACILITIES SECTION 2.1. Lease of Facilities ; 15 SECTION 2.2. Lease Terra : SECTION 2.3. Acquisition of Facilities SECTION 2.4. School Board«s Liability ; 16 SECTION 2.S. Possession and Enjoyment 16 SECTION 2.6. Trustee Access to Facilities,.17 SECTION 2.7. Disclaimer of* Warranties 17 SECTION 2.8. Warranties of the Facilities 2,7 SECTION Compliance Vith Law.».. <. 18 SECTION Representations, Covenants and Warranties of the School Board,.. '. 18 SECTION Representations, Covenants and warranties of Association ;...*. 19 * ARTICLE lit c LEASE PAYMENTS SECTION 3.1. Payment of Lease Payments 21 SECTION 3.2. Credits to Lease Payments 23 SECTION 3.3. Basic Lease :payjtient Components 23 SECTION 3.4. Lease Payments to be Unconditional 24 SECTION 3.5. Non-appropriation 24 SECTION 3.6. Surrender of Facilities 25 ARTICLE IV TERMINATION SECTION 4.1, Termination of Lease Term. 27 SECTION 4.2. Effect of. Termination ; 27 ARTICLE V COVENANTS OF SCHOOL BOARD SECTION 5.1. Maintenance of the Facilities by the School Board SECTION 5.2. Taxes, other Governmental Charges and Utility 29 Charges,.. 29 SECTION 5.3. Provisions Regarding Insurance, ; SECTION 5.4. Damage, Destruction or Condemnation 31 - i - SECTION 5.5. Insufficiency of Net Proceeds 32 SECTION 5.6. Advances 33 SECTION 5.7. Release and Indemnification; Warranties...,. 33 SECTION 5.8. Payment and Performance Bonds and other Guaranty 33 SECTION 5.9. Essential Governmental Functions 33 SECTION Tax Exemption; Rebates 34 SECTION Budget'and Tax Levy 34 SECTION Additional Covenants with Respect to Credit Facility Issuers 35 SECTION Compliance'with Law, Regulations, Etc 36 SECTION Environmental Compliance.. 37 ARTICLE VI TITLE SECTION 6.1. Title to Facility Sites and Facilities 40 SECTION 6.2. Liens..;...;.;;... t... i 41 SECTION 6.3. Use of the Facilities-... v > :...' 41 SECTION 6.4. Substitution, of Facilities..,, 42 SECTION 6,5, Title and' Designated Equipment, 42 ARTICLE VI;I ASSIGNMENT, OPTION TO PURCHASE, AND PREPAYMENT SECTION 7.1. Assignment; Subleasing /. 44 SECTION 7.2. Prepayment ; 45 SECTION 7.3. Prepayment Deposit 46 SECTION 7.4. Refunding Certificates. >,' 47 ARTICLE VIII- EVENTS OF DEFAULT AND REMEDIES SECTION 8. JL. Events of Default Defined,\ SECTION 8.5. Remedies on Default...>;,.. 49 SECTION 8.3. NO Remedy Exclusive *. 49 ARTICLE IX MISCELLANEOUS SECTION 9.1. Notices 50 SECTION 9.2. Binding Effect. 50 SECTION 9.3. Severability 50 SECTION 9.4. Amendments < 51 TtQN 9-5. Execution in Counterparts,..,.;.* 51 I!* 0N 9 6 Captions.-.' 51 $isp 0N 9.7. interest 51 ffffitfn Compliance with Trust Agreement Si f gyx+on 9.9. Memorandum of Lease, 51 1IS^0N 9-10 Applicable Law..." 51 vpfctron Nonrecourse obligation of Association 51 - ii - MASTER LEASE PURCHASE AGREEMENT This Master Lease Purchase Agreement dated as of April 1, 1992 (this -Master Lease"), between THE SCHOOL BOARD. OF PASCO COUNTY, FLORIDA, acting as the governing body of the School District of Pasco County, Florida (the "District"), a body corporate pursuant to Article IX, Section 4(a), Florida Constitution (1968), and Chapter 230, Florida Statutes, as lessee (the "School Board"), and FLORIDA SCHOOL BOARDS ASSOCIATION, INC., a not-for-profit corporation organized and existing under and pursuant to Chapter 617, Florida Statutes, as amended, aslessor (the "Association"). W X T N E S SB T H'.. WHEREAS, the School Board has the power., under Section (2) Florida Statutes,, to receive, purchase, acquire, lease sell, hol3, transmit and convey ti&le to real and personal property for educational purposes,, and under Section (9) Florida Statutes, to enter into leases or lease purchase agreements of grounds. and educational facilities, or of educational facilities, including equipment built, IjjstalliBd or established therein or"- arttfcehed thereto for school purposed in accordance with the provisions of Chapter 215, Florida Statutes;. and WHEREAS, the Association is a "private.corporation" within the meaning of Section ) (b),, Florida Statutes, andulsv "non-profit educational organization" within the meaning. of Section S6 (3) (a"), Florida Statutes; and WHEREAS, the School Board is or shall be thfc. owner Of.jjpejr$&fa real property iocated. in Pasco County (whifch, together wl h. all buildings,.striie^urev and improvements :now'or hereafter eroded or situated ' thereon, any easements 'or-rother rights or. privileges. in ad}pining property inuring to the fee simple owner of;.such,-.i a<l.by retfsbn of ownership of; such, land,and all..fixtures, additions,'alterations or replacements thereto, now or hereafter located in, on or used in connection with or attached *pr.jiria<ie to such land, to the extent title thereto may vest in.the \.School Board, is hereinafter referred to as a "Facility Site"); ;:-anjd WHEREAS, pursuant ±Q a resolution duly adopted by the School Board on April 7, 1992, the School Board has determined ;fehat it is s in.'the best interest of the District for the School :j gard to enter' i^ato and execute this Master Lease and certain ilrejuted documents thereto for the purpose of lease purchasing :: e ain real property, facilities, and equipment relating thereto as^above provided ("Facilities") from the Association from; time itp-tljtie, which Facilities must, to the extent required by Florida 1 C-2 law, be listed on the Educational Plant Survey for Pasco County Schools conducted from time to time. by the State Department of Education; and WHEREAS, Facilities approved by the State Department of Education may be lease-purchased from time to time pursuant to Schedules substantially in the form of Exhibit A hereto (individually, a "Schedule"), each such Schedule upon execution and delivery by the School Board and the Association together with the provisions of the Master Lease to constitute a separate lease agreement (a "Lease"); and WHEREAS, the School Board as. lessor and the Association as lessee may enter into one or more ground leases from time to time with respect to one or more Facility Sites (individually, a "Ground Lease"); and WHEREAS, the ground leasing of a Facility Site, the subleasing of a Facility site back to thfc. School Board and the leasef-purchasa-, financing of the Facilities set forth on a particular Schedule, are herein Collectively referred to as a "Project"; and v - WHEREAS, at the direction of the School Board, the Association, will provide for the payment of the cost of acgxiiring, constructing and installing Facilities from time to time by entering into a Master Trust Agreement dated as of April 1, 1992 (as the same may be amended or supplemented from time to time, the "Trust Agreement") with First Union National. Bank of Florida, Jacksonville, Florida, as Trustee (the "Trustee") pursuant to which the Association shall (a) direct the Trustee to establish a trust and assign to. the Trustee all of said Association's right, title and interest in and to this Master Lease and all Schedules hereto, except as otherwise provided herein, (b) direct the Trustee to execute and deliver to the public from time to time, Series of Certificates of Participation evidencing undivided' proportionate interests of the owners thereof in Basic Lease payments to be made by the School.Board, as lessee, pursuant to each Lease.relating thereto and (c) deposit the proceeds of each series of Certificates with the Trustee and.direct*the Trustee to hold the proceeds of the sale of such Certificates in trust subject to application only"to pay the costs of acquisition, construction and installation of the Facilities to be financed under the Lease relating thereto and identified on a schedule, and. related costs including, without limitation, capitalized interest, accrued interest and costs of issuance; and to make lease payments with respect thereto; and WHEREAS, each Certificate of a Series shall represent an ^undivided proportionate interest in the principal portion of the : $asic Lease Payments due and payable under one or more particular ^Leases relating to such Series on the maturity date or earlier prepayment date of such Certificate, and in the. interest pdrtion.: of, such Basic Lease Payments due and payable semiannually, to and ^including such maturity date or earlier prepayment date; and 2

205 WHEREAS, the relationship between the Association and the School Board under this Master Lease shall be a continuing one and Facilities may, from time to time, be added to or deleted from this Master Lease in accordance with the terms hereof and of the Schedule describing such Facilities; and WHEREAS, the School Board intends for this Master Lease to remain in full force and effect until the last Lease payment Date for any Project, unless sooner terminated in accordance with the terms provided herein; and WHEREAS, Section (9), Florida statutes (the M Aet"), provides that the provisions of this Master Lease shall be subject to approval by the Florida Department of Education, which approval has been received; and WHEREAS, Section (3) (b) 3, Florida Statutes, provides that.no lease purchase agreement entered into pursuant thereto shall constitute a debt, liability or obligation of the State of Florida or the School 90ard or shall be a pledge of the faith and credit of the state or the school Board, ail as further provided in Section 3-1 hereof; NOW, THEREFORE, the parties hereto mutually agre* as follows; ARTICLE I DEFINITIONS AND EXHIBITS SECTION 1.1. Definitions. The terms set forth in this section shall have the meanings ascribed to them for all purposes of this Master Lease unless the context clearly indicates some other meaning, or unless otherwise provided in a particular Schedule. Terms used herein and not otherwise defined shall have the meaning given to them in the Trust Agreement. "Acquisition Account" shall mean any Acquisition Account established pursuant to Section 401 of the Trust Agreement and in any Supplemental Trust Agreement. "Additional Lease Payment" shall mean any amounts payable by the School Board undet the terms of this Master Lease, other than a Basic Lease Payment; as set forth iii a. Schedule to this Master tease and.so designated; "Asbestos Containing Materials* sftali mezn material in friable form containing more than one' percent (1%) of the asbestiform varieties of (a) chrysotile.(serpentine); <b) croeidoldte (ricbeqkite); (c) aitiosite (Cummtngtoh-itegrinerite); (d) anthophyllite; (e) t remoli te; and (i) act nolfte. "Asbestos Operations and Maintenance Plan" shall mean that written plan for. the Facilities relating to monitoring arid maintaining all Asbestos Containing Materials used in or located on such Facilities. "Assignment Agreement" shali ;.. mean env assignment agreement pursuant to which the Association shall nave assigned to the Trustee all of its right, title arid interest in and to the Leasfc or Leases created by one or more patticruiar Schedules, including its right to receive Lease Payments--thereunder. "Association" shall mean Florida. School Boards Association, Inc., a not-for-profit corporation organized and existing under the laws of the State 6f Florida, its successors and assigns*. ' "Authorized Association Representative" shall mean the Executive Director, President, any Vice President, Secretary or Assistant Secretary or any other person or persons designated by a resolution of the Association and identified in a certificate of the Secretary of the Association signed by any two of the above-named. - officers and filed with the Trustee, which certificate contains the specimen signature of each such designated person. "Authorized School Board Representative" shall mean the Assistant Superintendent for Business Services and any persbn or persons designated by the Assistant Superintendent for Business 4 Services and authorized to act on behalf of the School Board by a written certificate signed on behalf of the School Board by the Chairman containing the specimen signature of each such person. "Basic Lease Payment" shall mean, with respect to each Lease, or each Facility financed under such Lease, as of each Lease payment Date, the amount set forth in a Schedule to this Master Lease corresponding to such Lease Payment Date and designated as a Basic Lease Payment in such Schedule. "Business Day" shall mean a day other than Saturday, Sunday or day on which banks iji the state of Mew York or State of Florida are authorized or required to be closed, or a day on which the Mew York stock Exchange is closed. "Certificate. 11 or "Certificates * ishall mean. the Certificates of Participation, executed and -delivered from time bd time by the trustee pursuant, td the Trust Agreement, Each Series of Certificates issued vihder he fr\ist Agreement shall bear a Series designation to Idehtiiy si^ch Series of Certificates to a particular Schedule to this Master'tease; "Certificate holder*.or. "Holder of Certificates" shall mean the registered owner of ahy Certificate dr Certificates, "Certificate of Acceptajice" shall mean the certificate of the School Board substantially in the form of Ekhlblt 8 to this toaster Lease to be delivered pursuant to the provisions of Section 2.3 hereof- "Chairman" shsli m^an the Chalrmaft of the school Board and any person or persons designated" fa'y the School Board and authorised to act on behalf of the Chairmaxi. "Code" means the Internal Revenue Code of 1986, as amended, and ther applicable regulations thereunder. *nd under the Internal Revenue Code of "Commencement Date" shall mean the date set forth in each Schedule hereto which is the effective date of such Schedule. "Completion Date" shall mean, with respect to the Facilities described in a particular Schedule, the date specified by the School Board in a Certificate of Acceptance, pursuant to Section 2.3 hereof/ as the date of completion of acquisition, construction and installation of such Facilities. "Contractor" shall mean the person, firm, corporation or joint venture authorized to do business in Florida with whom a contract has been made directly with the School Board for the performance of the work with respect to any Facilities described by the Instructions to Bidders and General Conditions. "Cost" shall mean costs and expenses related to the acquisition, construction and installation of any Facilities including, but not limited to, (i) costs and expenses of the acquisition of the title to or other interest in real property, including lease-hold interests, easements, rights-of-way and licenses, including, without limitation, lease payments to be made by the Association under the terms of- a Ground Lease until the.expected acceptance of the Facilities related thereto as described herein, (ii) costs and expenses incurred for labor and materials and payments to contractors, builders, materialmen and vendors, for the acquisition, construction and installation of the Facilities, (iii) the cost of sutety bonds and insurance of all kinds, including premiums and other charges in connection with obtaining title insurance; that may be advisable or necessary prior to completion of any of the Facilities which is not paid by a contractor or otherwise provided for, (iv) the costs and expenses for design, test borings, surveys,: estimates, plans and specificatioris-and preliminary investigations therefor., aha for supervising construction and installation offacilities, <vf costs a v rid. expenses required for the acquis itiioh and Installation <$ equipment or machinery' t&at. comprise part of the fi'atetties, (vl) all costs which the school Board or Association shall be required to pay for or in connection wifch additions.to,?iid expansions, of Facilities, (vii) all costs' Whidh the School goafcd or the Association shall be required to pay to provide improvements, including, offsite improvements, necessary for the use and occupancy ;bf Fifei'ii%ie^, ' including '?6 < s',l#aljtways,. tffctffctv sewer, electric, fire-alarms : anq o her utilities:,.fviii) a'ny sums teguired* to reimburse tn0 school. Board, or Association for «dvan«^'mad#'by ettiiet'' of thetfr for anyb". tfte;abby%items'or gbt- ot&er dosts" incurred and fop * work adft =by either, ojf them', in ejomeefcion with. ' *&&!ti%i**,.. iixj depositor into ',aitf: fteserve A^t^ht rehired puirsuanv to a Supplefneiitai ;.Tpiet >griemeat; (x). #ge%,. e*$>ertsfcs ana liabilities of thk.". School..Board or Association, if any, incurred in connection with the acquisition, cftn&triiictloh and iftstaliation of Facilities, (.xi) Costs of I stance,. and (xil) interest during : Construe felon and for a reasonable period of time up to six. (6) months ^thereafter. "Costs.of issuance" shall mean the items of expense ig^reed in connection with; the authorization, sale and!, delivery- Orfeach Series: of certificates, which items of expense shall include, but not be limited to,,, document printing and rfeproductidh costsi, filing and recording fees, costs of credit ratings,; initial fees and charges of the Trustee and any Credit. Facility Issuer or provider of a Reserve Account Letter of Credit/Insurance Policy, legal fees and charges, professional consultants' fees, fees and charges. for execution, delivery, transportation and safekeeping of Certificates, premiums, costs and expenses of refunding Certificates and other costs, charges and fees, including those of the Association, in connection with the foregoing. 5 C-3 6

206 "Costs of Issuance Subaccount" shall mean a Costs of Issuance Subaccount within an Acquisition Account established pursuant to. the Trust Agreement and a Supplemental Trust Agreement in connection with the issuance of a Series of Certificates. "Credit Facility" shall mean, with respect to a Series of Certificates, the letter of credit, insurance policy, guaranty, surety bond or other irrevocable security device, if any, supporting the obligations of the School Board to make Basic Lease Payments relating to such Series of Certificates. "Credit Facility Issuer" shall- mean, with respect to a Series of Certificates, the issuer of. the Credit Facility, if any^ fop such Series of Certificates. "Designated Equipment" means that portion of the Facilities which is, movable personal property, which- is not. included in th construction contract for the construction..of the Facilities, and which is designated on the applicable Lease Schedule.. "District* shall mean the. school District of Pasco County,. Florida. *Environmental Regulations" shall mean all Laws, and Regulations, now or hereafter in effect.,, with.- respect. ' to a?ralr^9us Materials, including, without* limitation,.",". Ztie Cpmpr«/iens.ive Environmental Response, Compensation, -and Liability Act, as amended.( 2 u * *..&: Seat ion 9 01, et s*rq») (together with t e regulations p.rdmulgated thereunder, *GERGLA"),. the Resource Gpn^rvat'iori.^nd ftecov-ery Act, as amended (42 tks.c, Section 6901, et- fgecjf.). (together with the - regulations promulgated thereunaer, "RCRA").; ; thej' Emergency Planning and Community : igfitto*know Act, as; amended (42 V.S.C* SeGtion nooi, et eg.) (together with the regulations promulgated thereunder>,"title 'tli n y, the Clean Water Act.,, as..-amended-(33'.u;;&..c,/section 1321, et,seq,) (together with the. <regulat ions/promulgated thereunder., 1CWA"), the Clean Air Act, as amended (42 U.S..C. 'Section 7401,r et SSS') (together with the regulations promulgated thereunder, "CAA*) and the ToxlC substances Control Act, as amended 915 O.S.C. Section 2601 et seq.) (together with the regulations promulgated thereunder, "TSGA"), and any state or local similar laws and regulations and any so-called local, state or federal "superfund" or "superlien" law.. "Event of Extraordinary Prepayment" shall mean one or more of the events so designated in Section 7.2 hereof. "Excess Earnings" shall mean, with respect to each Series of Certificates, (J.) the amount by which the earnings on. the Gross Proceeds of such Certificates exceeds the amount which would have been earned thereon if such Gross proceeds were invested at a yield equal to the yield on the interest portion, of 7 the Basic Lease Payments represented by such Certificates, as such yield is determined in accordance with the Code, and (ii) amounts earned on the investment of earnings on the Gross Proceeds of such Certificates. "Facility or "Facilities" shall mean the real property, buildings, improvements, equipment, fixtures, furnishings, built, installed or established therein, and all appurtenances thereto and interests therein, set forth on a schedule, "Facility Site 11 shall mean the real property upon which a Facility is to be located within the District, and more particularly described in a Ground Lease.. "Fiscal Year 1?.shall mean the twelve month fiscal period of the School Board which under current law commences on July l in every year and ends on June 30 of the succeeding year. ^General Condition*?" shall mean - the. General Conditions ami Supplementary General Conditions of the school Board as in effect from time to time With respect to any Project. " M Gross Proceeds H. shall mean, with respect. to each Series of Certificates, unless inconsistent with the provisions $f the Code, In whl<eh i?ase as provided in the Code, (i) amounts received by or on behalf of the Association from the sale of such Certificates; (ii) amounts received as a result of investments of amounts described in (i); <iii) amounts; treated as transferred proceeds of suesb Certificates in acco^ahce with; the dode; : (iv) amoupcts- treated as proee&ds under the provisions of the code rafting to invested sinking funds; (V) securities or obligations. pledged, if any> as security for payment.of Basic Lease pay«$nts tinder the Master Lease (which aikmsftts are limited in accordance w^thsections 235*0& (3j and %1 A${2) \ (e), Florida Statutes; {VflU amounts received With respect to obligations acguired with 0$o$$ Proceeds; (Vii) amounts used to pay the principal and Interest pprtions.of Basic Lease : Payments ^represented by such, Certificates; (viii) amounts in any Reserve Account established pursuant to a. Supplemental Trust. Agreement;. and ;(ix) ; amounts r^eived as a result of the investment of Gross Proceeds not «described in (i) above "Ground Lease* shall mean one or more ground leases between the School Board and the Association, as amended and ^supplemented from time to time, pursuant to which the School Board shall ground lease one or more Facility Sites to the Association. hazardous Materials'* shall have the meaning given in Section 5-13(a), "Insurance Consultant" shall mean a nationally ; FeSponised independent insurance company or broker, selected by :the School Board, that has actuarial personnel experienced in.the 8 area of insurance for which the School Board is to be selfinsured and shall include Gallagher Basset [full name], the School Board's current Insurance Consultant- "Laws and Regulations" shall have the meaning given in Section 5.13(a). "Lease* shall mean each separate Schedule to this*master Lease executed and delivered by the School Board and the Association, together with the terms and provisions of the Master Lease. "L&as& Payment Account H shall mean any Lease Payment Account.established pursuant to Section 401 df the Trust Agreement and in any Supplement al Trust Agreement. "tease Payment Date" shall mean, with respect tp a Lease,, eaiih date set forth on the corresponding Schedule designated! as a Lgfe&fe P^ytneht' Date fot such Lease.. once. established ii/ide^ ^jie^tile. 1992A, <easte Payment Dates shall be the same undi'tr all ffcmture tease Schedules. "Lease Payments * shall mean all amounts payable by the Sehool Board pursuant,fcp. the terms bf a Lease, including Basic t#ase Payments,, Additional Lease Payments and Supplemental Payxnen-ts. "Lease Terip" shall mean the period during Which, a Lease is? In effect b$ specified in the Schedule corresponding to such. te&*e. "Master Leatfe" shall mean this Master Lease Purchase Ag eement dated a? *of April l, 1992, between the Apsoci^ti&n and ll^'sf^0^ b6ht4 Snd '" 4ny and all modifications, alterations, MSftgrn^rttf} ahd supplements thereto. *Net Proceeds* shall mean, with respect to one or wore - acli.ties tirtahceo! uifder a Lease, proceeds from any Insurance, $9lidemJiafcton, performance bond, Federal or State'flood disaster '$ $istaiice> or any other financial guaranty paid with respect to :mw'?ac it es remaining after. payment therefrom of all ;ffs58fta6lfe'expenses, Including attorneys' fees, incurred in the 'cbliection thereof; and, with respect to insurance, to the extent *^t,.the school Board elects to self- insure under Sect ion S. 3 r^dfr snail include any moneys payable from any appropriation ifl6 by the School Board and moneys payable tinder any excess ;. N! ra ge * n $ u rence policy in connection with such self-insurance. -: \. "Opinion of Counsel" shall mean an opinion signed by an fcorney or firfrt of attorneys of recognized standing and who are im$fieo* to pass on the legality of the particular matter (who Jy/be counsel to the School Board or special Tax Counsel) tleieted by the School Board. 9 C-4 "Outstanding", when used with reference to the Certificates and except as provided in Section 702 of the Trust Agreement, shall mean, as of any date, Certificates theretofore or thereupon being authenticated and delivered under the Trust Agreement except: (i) Certificates canceled by, or duly surrendered for cancellation to, the Trustee at or prior to such date; (ii) Certificates (or portions of Certificates) for the payment or prepayment of which moneys, equal to the principal portion or Prepayment Price thereof, as the case may be/ with interest to the date of maturity ot Prepayment Date, shall be held in trust under the Trust Agreement and set aside for such payment or prepayment, (Whether at or prior to the maturity or Prepayment Date}/ provided that if su h Certificates for portions df Certificates) **re to be prepaid, nbtice of stich prepfeiyw^ht shall have bafen iven as provided in Article Iir <$f the Trust A&fibement; (ill) Certificates in lieu.of or in substitution forwhkh other CertlfieateS shall have been executed and delivered pursuant td Article ill of the Trust Agreement; and (iv) Certificates deemed to have been paid as provided in subsection 2 of Section 601 of the Trust Agreement. "Payment Date" shall mean a date oh which the principal p&rtifcn or the interest portion of Basic. Lh$se Payments is payable to Certificate holders pursuant to the tertns of such Certificates. *Permitted Encumbrances" shall mean in regard to a Facility Site: (1) the Lease relating thereto and any liens and encumbrances created or petmitted thereby; (2) the Assignment Agreement relating thereto and any liens and encumbrances created or permitted thereby; (3) the Trust Agreement and liens and encumbrances created or permitted thereby; (4) any Ground Lease applicable thereto and any liens and encumbrances created or permitted thereby; (5) siibject to the provisions of Section of the Master Lease, any mechanics, laborers, materialman's, Suppliers or vendor's lien or right in respect thereof if 10

207 payment is not yet due under the contract in question or if such lien is being contested in accordance with the provisions of the Master Lease; (6) (a) rights reserved to or vested in any municipality or public authority by the terms of any right, power, franchise, grant, license, permit or provision of law; (b) any liens for taxes, assessments, levies, fees, water and sdwer rents or charges and other government and similar charges, which are not due and payable or which are not delinquent or the amount or validity of which are being contested and execution thereon is stayed; (c) easements, rights-of-way, servitudes, restrictions, oil, gas or other mineral reservations arid other minor defects, encumbrances attd Irregularities in the title to any property which, in the Opinion of Counsel/ do not materially impair the use of such property or materially aftd adversely affect the.value thfereof or*materially adversely affect the benefits enjoyed by C&tt[i$ieate holders in the Facility Site under the Gtbund Lease, t^afe^ignm^nt Agreement and the Trust Agreement; and (d) rights t^^tved to or vested in any municipality or public authority to cotitfol dt regiilate any property or to use such property in any msjflftfe* that do not in the Opinion of Counsel, materially, affect ths'use of the Facility site for educational-purposes or the b#]tlfe it# enjoyed by certificate holders in the Facility Site under tlie Ground Lease, the Assignment Agreement and the Trust Agreement; and ^ (7) any other liens or encumbrances permitted by tn^' Schedule relating to such Facility Site#. provided such lien. or eii<?uitibrance shall not, as expressed lrt an Opinion of Counsel, materially adversely affect the intended use of such Facility Si $ by the School Board for educational purposes or the benefits eirjoysd by Certificate holders in t^e Facility Site under the O^iifld Lfeas^, the Assignment Agreement and the Trust Agreement, &$& such liens and encumbrances are approved by the Credit Facility Issuer for the series of Certificates relating to such Facility Site. " Prepayment Account * shall mean any Prepayment Account established pursuant to Section 401 of the Trust Agreement and in a$y Supplemental Trust Agreement. " Prepayment Date* shall mean the date on which optional prepayment, extraordinary prepayment or sinking fund prepayment of Basic Lease Payments represented by a Series of Certificates Outstanding shall be made pursuant to the Trust Agreement and any Stipplemental Trust Agreement "Prepayment Price" shall mean, with respect to any Certificate, the principal amount thereof (together with the pte/niurh, if any, applicable upon an optional prepayment) payable -upon prepayment thereof pursuant to such Certificate and the Trust Agreement and any Supplemental Trust Agreement, together with accrued interest represented by such Certificate to the Prepayment Date, il "Project" shall mean the lease purchase financing and construction of the Facilities set forth on a particular Schedule and, if all or a portion of such Facilities shall be comprised of real property, the ground leasing of the related Facility Site by the School Board to the Association and the subleasing of such Facility Site back to the School Board. "Project Fund" shall mean the trust fund designated as the * Project Fund" created and established in Section 401 of the Trust Agreement. "Purchase Option Price" shall mean, with respect to any Facility- financed under a Lease, as of each Lease Payment Date, the Basic tease Payment then due plus the amount so designated find ^et forth- on the Schedule for sudh Fadllity as the Remaining Principal miniis any credits pursuant to the provisions bf Section 3.2 hereof, plus, an amount egual to the interest to accrue* with ipe$ tettt to the Certificates to be prepaid' as a* result of the release of such ad 11 ity from the Leased frbm such ZTe&Se Payment. *tet<f to the nfettt available date for prepaying such Certificates; Uttis&s sudh pr ayjtfeftt shall occur oh such Lease. Payment Date, plus an amount equal to a pro rata portion of any Additional Lease Pay^eritife th^h due 3xid owin^; ilhder tue Lease rfelateihg to jgu&h[facility/ ikcltiding. any ^repaj^ent ^iffemlums pfeydtfle on the <^rtirficates; :^fepaid-. " -Qualified Financial Institution" shall mean a bank, trust comp&fty, rfatiblial Banking association or a cbrpforation iswej^ct to rfegitftration -with the- Board of Governors of the $< && *& Reserve system under the Bank Holding Company Act of I9S6 or the Federal National Mortgage Association or any insurance coritpany ot &%K&t: coip6 t±6a (1) whdfce uhsefciired 1 bbligat^bhs or ;tft^^ obligations h&ve b6dtt: Sssighed a ' r&tjjig by a Rating Agency which i^ lib^ lowet thrfri AA/Aa, be which s h ii^sftied a letter tff Credit; cohtract, agreement or surety bond *ifi*sti pbrt of i3ebt bbligatibns which 'have been-vs6 rated based on %Wch credit support; or-(11) which collateralizes.fits obligations at all times at levels in compliance with the'^requirements of the Rating Agencies for a tings"hot lower than AA/Aav ; ' ; " "Rating-Agency 11 shall mean each of Standard & Poor's : ; C6rporatiori> Moody's investors settled and ahy other nationally v reco$hi2ed rating service which shall have provided a rating on ;&ny OutstaAdin^ Certificates. "Reimbursement Agreement 11 shall mean any reimbursement agreement between the School Board and any Credit Facility Issuer. "Release* shall have the meaning given in Section 5.13(a). "Reserve Account" shall mean any Reserve Account ; established pursuant to Section 401 of the Trust Agreement and in any Supplemental Trust Agreement. 12 "Reserve Account Letter of Credit/Insurance Policy" shall mean the irrevocable letter or line of credit, insurance policy, surety bond or guarantee agreement issued by a Qualified Financial Institution In favor of the Trustee which is to be deposited into a Reserve Account in order to fulfill the Reserve Requirements relating thereto. "Reserve Requirement 1 * shall mean, in regard to a Reserve Account-to secure a Series of Certificates,, such amounts, if any, as shall be provided in the Supplemental Trust Agreement authorizing the issuance of such Series and in the Schedule relating thereto, provided such Reserve Requirement shall not exceed the lesser of (i) the maximum Principal. Portion and interest Portion of Basic...Lease payments represented by Certificates of the Series secured by such Reserve Account in the current or any subsequent fii&cai Year,.(11) one hundred twentyflye percent (125%) of the average Principal'Portion and Interest Portion of Sasic Lease Payments represented by Certificates of the Series; secured by such. Reserve Account in the current.or aoy subsequent Fiscal Years, and (ill) ten percent (10%) of the proceeds of such Series of Certificates, "schedule" shall,m6an a schedule to this Master Lease to be executed and delivered by the School Board and the Association for each Project; as amended and supplemented from time to time substantially in the form of Exhibit A hereto* "School Board" shall mean. The School Board of Pasco County, Florida, a body corporate and the governing body of the District. "Series" or "Series of Certificates" shall mean the aggregate amount of each Series of Certificates evidencing an undivided proportionate interest of the owners thereof in.one or more particular Leases and the Basic Lease Payments thereunder, issued pursuant to the Trust Agreement and va ^Supplemental Trust Agreement. "Special Tax Counsel" shall, mean Squire, Sanders & Dempsey or any other attorney at law or firm of attorneys, of nationally recognized standing in matters pertaining to the exclusion from gross income for Federal income tax purposes of the interest on obligations issued by states and political subdivisions, and duly admitted to practice law before the highest court of any state of the United;States of America. "State" shall mean the State of Florida. "Superintendent" shall mean the Superintendent of Schools of the Pasco County Public Schools» "Supplemental Payments" shall mean all amounts due under a Lease other than Basic Lease Payments and Additional Lease Payments. "Supplemental Trust Agreement" shall mean any agreement supplemental or amendatory of the Master Trust Agreement. "Trust Agreement" shall mean the Master Trust Agreement dated as of April 1, 1992 entered into by and between the Association and the Trustee, and any Supplemental Trust Agreement. "Trustee" shall mean First Union National Bank of Florida, Jacksonville, Florida and its successors or assigns which may at any tune be substituted in its place pursuant to the provisions of the Trust Agreement. SECTION 1.2. Rules of Construction. Words of the masculine gender shall be' deemed arid construed to include correlative words of the feminine and heater genders. Unless the context shall otherwise indicate, words Importing the singular number shall include the plaral number and vice versa, and words importing persons shall include firms, associations and corporations, including* public bodies as well as natural persons. The terms "hereby", "hereof, "hereto", "hereln H, "hereunder*, and any similar terms, as used, in this Master Lease,, refer to this Master Lease. V*' (END OF ARTICLE I) 13 C-5

208 ARTICLE II LEASE OF FACILITIES SECTION 2.1. Legse of Facilities, The Association hereby agrees to demise an3 lease to the School Board, "as is", and the School Board hereby agrees to hire, take and lease from the Association, the right, title and interest of the Association in and to the Facilities,.listed on each Schedule hereto, on the terms and conditions set forth in this Master Lease. SECTION 2.2, Lease Term. This Master Lease shall be for an original Term commencing on the date hereof through and including.june 30, 1592, and automatically renewable annually thereafter through the last date Set..forth on any Schedule hereto (6r the last date on which.certificates are Out^tandlil^.andetr the TrUst Agreement, if later), unless sooner terminated in egfcdrdariee with the provisions hereof including in particular Sections 3*5 and 4.1 hereof..tipdft ^Kpitatiptt or termination of the -Lease term, the, Trustee, the* School Boar# and the Association, at the-expense of, t e School Board, sft&li execute afed deliver such documents., if any, as shall: be necessary to evidence such termination. The Useful life of the Facilities shall extend beyond the last, date set forth on the particular Schedule relating to such Facilities. SECTION 2. 3.,. Ac^jgitlon; of F&clljtles. The School Boatfd shall be responsible for acquisition, construction and dwsta'll^atidn of the = Facilities > as ageht for the Association:, pu^surant to the spetrificitlohs of the School Board', including the letting of all contracts for* the acquisition, construction and installation of the Facilities and for supervising the acquisition, construction and instelletibn of the Facilities. Contracts in connection with the.acquisition, construction and installation of the Facilities.shall be let in aasdrdaiice with the. competitive bidding policies of the School B&* d and laws applicable to -school hoards,, including where applicable the requirements of Sections (3)and *iotlda Statutes, Chapters 234 and 237, Florida Statutes, and Regulations promulgated by the State Department of Education thereunder;. including Rule 6A-2 FAC, and 6A ^ FAC regarding pool purchases, and in accordance with the General Conditions* All rules and regulations of the State.Department of Edtidatidn applicable to acquisition and construction of educational facilities by the School Board shall apply to the same extent to the acquisition and construction of the Facilities by the school Board acting in its capacity as agent for the Association. ' Moneys deposited in the Acquisition Account established With respect to particular Facilities shall be disbursed :from time to time to pay the Costs of such Facilities, all as provided in Section 402 of the Trust Agreement and the applicable 15 provisions of the related Supplemental Trust Agreement. The School Board agrees that it will deliver to the Trustee completed requisitions in the form attached to the Trust Agreement as Exhibit B, and upon completion of acquisition, construction and installation of the Facilities, will deliver a Certificate of Acceptance in the form attached hereto as Exhibit B in order for the Trustee to make the final advances therefor in accordance with the provisions of the Trust Agreement. The School Board further agrees to deliver the items described in said Section 402 of the Trust Agreement with respect to the acquisition of each portion of a Facility constituting land or an interest therein, to be financed hereunder. The School Board shall be responsible for, and shall use Its best efforts to effect the : completion of acquisition; construction and installation of, the Facilities, whethef or not amounts in the Acquisition Account relating to such Facilities are sufficient to pay the costs thereof. if it is determined upon audit or..other review- that moneys were improperly drawn ftom the Acquisition Account, the School Bo4rd" upon proper. notifieatioh thereof shall deposit an airtouht sufficient to restore-the balance therein with, the Trustee, no later than thirty (30) days following receipt of,such notification. <. Upon determihatton by the School adartf prior to delivery of a-cettfflcate of Acceptance that amounts Oh deposit* in the Acquisition. Account for particular" Fdctilties will' exceed the tfcrou&l b6st$s of stich feagilities, tfie^ School Board" niay amend i?h# j?ieitat?ed Leetee and. ; Gtouhd fcease fdr thec' pxiirpose of finatielngr : additional ''Facilities orjportioris of Facilities- = frbm such fuhds oil-deposit in such: Acquisition Accounts u\.:y :! 8smmn -2.4* school Board's. %&iib%&i%v. As between the.:;$&mu&*b& f^ahd any as^nev! of" tse'^s^cjamon., SfcfclOSteg the.,: T^ttee) -ana the School Boam, the Bfchoolfibarar'assumesliability pisfrvf11? rl^sks bf loss with tespebt to-the. P^«siii*ies. The 1 School ; Bfcfem* shall' maihtsih ih force du'rihg-theibhfclre acduls'ition,,: Construction ahd ihstallatloh- period -=0f^any.labilities, prc-perty \ chsftidge insurance as required by. ; section r v 5:a heifedf and ffofc the b&he?fifc of certificate holders), as assignee of the Association,.&$&' Trustee shall^ be - named as an additional insured :and! loss payee'thereon, Tn the event the School Board-or. Association ^eeelvas any damages or other moneys from any contractor, Manufacturer or supplier of any portion of the Facilities or its surety pursuant to thiis Section 2.4 or 5.3,..such moneys shall be paid tb-the Trustee for disposition in accordance with Section 4 V-hereof.- ' :>'' SECTION 2.5. possession and Enjoyment. From and after $he acceptance by the School Board of any Facilities in l^fcordahee with the terms of this Master Lease, the Association $gteies that it will not interfere with the quiet use;and fcjoyment of the Facilities by the School Board during the Lease tm set forth in the schedule relating to such Facilities, and f 16 that the School Board shall during such Lease Term, peaceably and quietly have and hold and enjoy such Facilities, without hindrance or molestation from the Association, except as expressly set forth herein* At the request of the School Board and at the School Board's expense, the Association shall join in any legal action in which the School Board asserts its right to such possession and enjoyment to the extent the Association lawfully may do so* upon expiration or termination of the Lease Term other than is a result of nonappropriation or default, the School Board shall enjoy full right, title and interest in and to the Facilities, unless the Facilities are otherwise disposed of in accordance with the terms of this Master Lease. SECTION 2.6. Trustee Access to Facilities, During the Lease Term, the school Board agrees that the Trustee, as assignee of the Association, or its agents, shall have the right during the School Board's normal working hours on the School Board's normal working days to examine arid insjpect the Facilities for the purpose of assuring, that the Facilities are being properly maintained> preserved, and kept in goo3 repair and condition; provided, however, that the Trustee is under no obligation to examine and Inspect any Facilities. SECTION 2.7* Disclaimer of Warranties, The School Board acknowledges that each Of the Association, the Trustee, the Certificate holders and any Credit Facility Issuer or issuer of a Reserve Account Letter of Credit/IriSurance Policy MAKES NO WARRANTY OR REPRESENTATION, EITHER EXPRESS OR IMPLIED, AS TO THE TITLE TO, VALUE, DESIGN, CONDITION, MERCHANTABILITY OR FITNESS FOR PARTICULAR PURPOSE OR FI^NE^S FOR USE OF ANY FACILITIES OR ANY PORTION THEREOF, OR AS' TO THfi QUALlf*, CAPACITY OF THE, MATERIAL OR WORKMANSHIP IN SUCH FAClfctTl S/ OR ANY WARRANTY THAT SUCH FACILITIES WILL SATISFY THE RfcQUISfiM^S OF ANY LAW., RULE,.S&BCfrX'CAZXQNS- OR CONTRACT WHICH PROVIDES fok SPECIFIC MACHINERY, OPERATORS.OR SPECIAL METHODS; OR ANY OTHER WARRANTY OF ANY KIND WHATSOEVER, In no event shall the Association, the Trustee, the Certificate holders or any Credit Facility Issuer x>r issuer of a Reserve Account Letter of Credit/iniurance Policy be liable for any Incidental, indirect, special or consequential damage in connection with or arising out of this ' Master Lease or the existence, furnishing, functioning or School Board's use of the Facilities, or any item, product or service provided for in this Master Lease* SECTION 2-8. Warranties of the Facilities. The Association hereby appoints the School Board its agent and attorney-in-fact during the Lease Term to assert from time to time whatever claims and rights, including warranties of the Facilities, which the Association or the School Board may have against the contractor, manufacturer or supplier of any Facilities or portion thereof. SECTION 2.9. Compliance with Lay. The School Board represents, warrants and covenants that it has complied and will comply throughout the Term of this Master Lease with the requirements of Sections (3) and , as- well as Chapter 119, Florida statutes relating to public access to its records and the openness of its meetings to the public. SECTION Representations, Covenants and Warranties of the School Board The School Board represents, covenants and warrants as follows: (a) The School Board is the governing body of the Disftrict, a body corporate pursuant to Article ix, Section 4(a), the Florida Constitution (1968), and chapter i30, Florida Statutes, has power to enter into this Master Lease and each. schedule.hetreto.and has duly authorised and taken the necessary acts requited prior to (including all required approvals) the execution and delivery of: this Master Lease; The School Board warrants that this Master Lease, upon the execution and delivery thereof, is a valid, legal and binding limited obligation of the.school BOatd, payable from current of othar fuhds authorised by law and appropriated for such purpose as provided in Section 3.1 hereof\ (b) Neither the execution and delivery of this Master Lease nor the consummation of the transactions.. contemplated hereby; nor the fulfillment " of or compliance with - the terms* and conditions hereof coflflicts #ith br- results in a breath ef the terms, c6dditions;oi? provision* of any restriction or any agreement or instietment to which the" sehooi Board is now,a putty or by which the School Board is bound; or constitutes a default under any of the foregoing; nor conflict* with or results in a violation' of any ptdvi^ibfi of law governing : the. ; school a Board; and no representation, covenant and - warranty..?<hereih is false, misleading or erroneous in any materlal^icfespect. <&) There is no action, suit, proceeding, inquiry or investigation, at law or in equity, before or by any court, public* board or body, known to be pending or threatened against or- affecting the School Board nor to th6 best of the -knowledge of the School Board" is there any basis-.therefor, whetein an unfavorable decision,. ruling, or finding would..materially and adversely affect the transactions contemplated by the School Board or which Would adversely affect, in any way, the validity or enforceability of this Master Lease or any material agreement or instrument to which the School Board is a party, used or contemplated for use in the consymmation of the transactions contemplated hereby. 17 C-6 18

209 (d) The estimated Cost of any Facilities shall not be less than the amount set forth on each Schedule relating to such Facilities. The Facilities will be designed and constructed so as to comply, with all applicable building and zoning ordinances and regulations, if any, and any and all applicable judicial and state standards and requirements relating to the Facilities. (e) The moneys in each Acquisition Account and any investment earnings thereon will be used only for payment of Cost of the Facilities, or payment of Basic tease payments. (f) The School Board shall have fee simple title. to all Facility Sites, subject only to Pernvitted Encumbrances, prior to entering into any Ground tease with tespefct to such.facility Sites, or amending any Ground Lease to add such Facility Sites. (g) III lis use 6 the Facilities, the School Board shall comply with ail applicable Federal, State arid local governmental laws, regulations, ordinances, rjiles, orders, standards and codfes ahd with all hatf&rd insurance underwriters 1 standatds applicable to the Facilities. (h.) Amounts sufficient to pay the current fiscal Year'sljea.se payment^, if any^ have been appropriated and are avail able t&erefor,. taking into accoliht amounts to be available therefor in the tease Payment Account and the Capitalized Interest Account created under the Trust Agreeifu&rifc %" (1) information supplied and statements made by the School Board In any rinancial statement or current budget delivered prior to or tjontemporaneously with this Master Lease present such information fairly and accurately, in accordance with generally accepted accounting principles. (j) The Facilities comply or, upon acceptance by the School Board, will comply in all material respects with all presently applicable building and zoning, health, environmental and safety ordinances and laws and all other applicable laws, rules and regulations. SECTION Representations, Covenants and warranties of Association. The Association represents, covenants and warrants as follows: (a) The Association is a Florida not-for-profit corporation duly created, existing and in good standing under the laws of the State, is duly qualified to do 19 business in the State, has all necessary power to enter into this Master Lease and each Schedule hereto, is possessed of full power to own, lease and hold real and personal property and to lease and sell the same as lessor, and has duly authorized the execution and delivery of this Master Lease* (b) Neither the execution and delivery.hereof, nor the fulfillment of or compliance with the terms and conditions hereof, nor the consummation of the transactions contemplated hereby, conflicts with or results in a breach of the terms, conditions and provisions of any restriction or any agreement or instrument to which the Association is how a party or by which the A&soclation is bound,.or constitutes a default under any of the foregoing or results in.the creation or imfc&sition of any lien, charge or encumbrance whatsoever upon any of the property or assets of tfoe Association, or tipon the : Facilities, except permitted Encumbrances (d) To thfe knowledge* of/ta is no litigation of proceeding peridihcj or threatened aoainst the Association or any other pet*0n a eeeftig th6 right of the Association to execute br : deiiveir this Master Lease or to comply with its 0lSlJLgati6n^ under this Master Lease, Neither the execution iand delivery, of this Master Lease by the. Association, not compliance by the Association with its obligations under this Master Lease, require the approval of any regulatory body, any parent company, or any other entity, whifch approval has not been obtained. (d) NO member of the Board of Directors of the Association or any other officer of the Association has any significant or conflicting interest, financial, employment or otherwise/ in the Facilities or in the transactions contemplated hereby* (END OP ARTICLE II) 20 ARTICLE III LEASE. PAYMENTS SECTION 3.1. Payment of Lease Papents. Subject to the conditions stated herein/ the School Board" Agrees to pay the Basic Lease Payments stated oh each particular Schedule hereto and agrees to pay and discharge Additional Lease Payments, including all other amounts, liabilities and obligations which the school Board assumes or agrees to pay to the Association or to others as provided herein and oh each Schedule hereto, together with interest on any overdue amount; PROVIDED, HOWEVER, THAT NEITHER THE SCHOOL BOARD, THE DISTRICT, THE STATE OP FLORIDA, NOR ANY POLITICAL SUBDIVISION THEREOF, SHALL BE.OBLIGATED. TO PA*, gxcept "FROM ; SCHOOL BOARD APPROPRIATED 4FUNDS, ANY SUMS DUJJ TO THE, ASSOCIATION HEREUNDER FROM ANY SOURCE OF TAXATION, AND THE FULL FAITH AND CREDIT.Ot THE SCHOOL BOARD AND THE DI$TRtC* IS NOT PLEDGED FOR PAYMENT QF SUCH SUMS DUE HEREUNDER AND SUCH SUMS DO NOT CONSTiWTB'AN INDEBTEDNESS OF THE. SCHOOL KJAfcD OR -THE DISTRICT ftlt&in.the- WEANING OF ANY GON^tlTUfI$NAL OR STATUTORY PROVISION $R LIMITATION.'. NEITHER. THE ASS^IATJQN,THE TRUSTEE,; NOR ANY CB^$IFI<&TE HOLDER MAY COMPEL THE'L^VY;9F ANY AD VALOREM TAXES BY 'fhe SCHOOL-BOARD TO PAY THE. LEASE, PAYMENTS HEREUNDER. All' Basic,Lease, Payments a«d Additional Lease Payments and all Supplemental payments shall be made from, current or other fuiids authorized by law and appropriated for such purpose by the School Board. Oft each Lease payment pate, the School Board shall pay to the Trustee, in lawful money of the United States of America, thfe Basic.Lease payments for such Lease Payment Date, less any credits as. contemplated by Section 3.2 hereof, and less any reductionsas; contemplated by Section 4.2. ; hereof. The School Board afrees to deposit Such amounts with, the Trustee oh each Lease Payment Date in order to assure thit sufficient moneys will b available to the Trustee to make til^ly.dlstrtt>ut±on thereof t# the Certificate holders, or to rej^burse-any SGr»dit Facility Issuer as provided In, the following paragraph, all.in -accordance with the Trust Agreement. Ifi the event that the-trusfcee has hot received such Basic Lease Payments prior to such Lease Payment. Dai;e; the'trustee shall notify the School Board on the Business Day following the day payment was due that such Basic Lease Payments have not been received; provided, however, that such notice is for the purpose of convenience only and the School Board's obligation to make such payments shall in no way be conditioned by the giving or receipt of such notice. The school Board shall also pay, when due, directly to the party entitled thereto, Additional Lease Payments and Supplemental Payments in accordance with the terms of this Master Lease and each Schedule hereto and the Trust Agreement. Additional Lease Payments for each separate Lease entered into under tjii? Master Lease include, without limitation, optional prepayment premiums, Trustee fees and expenses, Association service fees and expenses and Credit Facility Issuer fees and expenses, if any, and all other amounts due the Trustee under the Trust Agreement or under this Master Lease and all other amounts due a Credit Facility Issuer Under any Reimbursement Agreement, all as set forth on a particular Schedule hereto or otherwise in the Trust Agreement, Supplemental Payments for each separate Lease hereunder include, without limitation, amounts required to be paid under Sections 5.6 and 5.10 hereof, and amounts necessary to restore the balance in a Reserve Account for a particular Series of Certificates to the Reserve Requirement for such Series as provided in Section 405(a) of the Trust Agreement. The School Board hereby authorizes the Trustee, as assignee df the Association, (i) to create a Reserve Account to be held by the trustee under the trudt Agreement f6t : each Series of Certificates unless otherwise provided by the Schedule relating thereto, <ii) to deposit in each Reserve Account either a portion of the proceeds;; from the : sale df the. Series of Certificates relating thereto or ; a Reseive ACcbimt tetter of Credit/In9UJtran<ie P<iilcy : fegtidlto the Reserve Requireinfeht. relating to such S&ties or f c6mblhati6h. thereof; arid (iti) to ufee su6h moneys or amouhts dra&h on the Reserve Account fcettfer df Credit/lnfeuiraQc^ Policy deposited 16' feach silbftccount of the Reserve Account as set forth ' in Section 40S'of" the Trtifet Agreement, in the event the aggregate amount of.any. cash > the value of ahy ihvestmeftt Securities and the. stated aftbuht of - any Reserve Accbunt fcett'e of" - Credit/Insurance Policy in < a Reserve Account shall be less than - the Reserve Requl reineht provided therefor,thk School War«3 shall pay to the* ^"r^stife-ffcom m6heys budgeted n 8p >rb >Hatea ah~ fiasic Leasie payments mt&ttg the current Fiscal year as 'S\ippi mfent&l aym&nfes aln- dhtbiihfc'equal, to such deficiency within thirty (30) days of receipt of notice of the deficiency fjrbrnttifetrii&tee. tji the event the YtuBtee makes a draw on a'fte^ferye Accdu/it tfcttet of Gredit/Inititanfce.Pdllcy to pay all or a portion of the ambtirits equal* to Basic L6ase Payments represented by a y &i ries of CeHifieat^vra^ cause the amount wiiibfi th6 trustee has dribwh ^ilerr- subh Reserve Account Letter dt "Credit/lnstjiTr&ite^ Policy ^o be^^ In the event: i Steseirve Account Letter 6f Cr^it/Ihsur^hce -policy on deposit in a Reserve Account expires or is terminated,, the School Board shall, simultaneously with such expiration or termination, either replace stich Letter of Credit/IhSuretice Policy With a subsequent Reserve Account Letter of Credit/Insurance Policy With a stated amount equal to that of th^ expired or terminated Letter of Credit/Insurance Policy, or transfer to the Trustee/ for \ deposit in such Reserve Account in which such Policy had been deposited, an amount of cash equal to the stated amount of such expired oir terminated Letter of Credit/Insurance Policy; provided, however, that the school Board shall only be required to provide a" replacement Reserve Account Letter of Credit/Insurance. Policy or to deposit an amount of cash with the Trustee so that the Reserve Requirement is met with respect to the particular Series of Certificates. 21 C-7 22

210 SECTION 3.2. Credits to Lease Payments, The Lease Payments due hereunder shall Be reduced when applicable by the amounts credited as follows: (a) The Trustee shall deposit into* the Lease Payment Account established with respect to each Lease, Interest income in accordance with the Trust Agreement and apply such amounts as provided therein. (b) Unless otherwise provided in the Schedule relating thereto, upon the completion of acquisition and construction of the Facilities financed under a particular Lease and payment of all Costs of such Facilities or upon the termination of the Lease Term of a particular Lease pursuant to Section 4.1 hereof, the amounts, if any, on deposit in the Acquisition Account for the. related Series of Certificates shall be transferred to the Lease Payment Account-*, for such Series, to be applied to Basic Lease payments next. coming due under the Lease; provided, however/ that if, upon, deli very by the School Board of a Certificate of Acceptance indicating completion of the acquisition, construction, installation arid payment of all costs of the Facilities financed under a particular Efease (including the failure of the School Board to acquire any component of such Facilities}, there shall remain in the related- Acquisition Account an amount greater than the amount of Basic Lease Payments coming due in tjie immediately following Fiscal Year under such Lease, such remaining amount in excess of next Fiscal year's payment* shall be transferred to the related Prepayment Account in accordance with Section 7.2(B) hereof. (c) There shall be deposited in the Lease Payment Account or the Prepayment Account fot a Series of Certificates, as the case itiay be. Net Proceeds r6ali?ed. in the event of. damage,.destruction or-condemhatidn to be applied to Basic : Lease Payments sunder the related Lease, or to the Prepayment Price : of <such Series of Certificates, all as provided for in Section 5.4 (b) hereof (d) With respect to the payment 'of the interest portion of Basic Lease Payments, there shall be credited against amounts due by the School Board the amounts available for such purpose in the related Capitalized Interest Account and the related Lease payment Account (including investment earnings thereon). SECTION 3*3. Basic Lease payment Components«A portion of each Basic Lease Payment is paid as and represents the payment of interest, and the balance of each Basic Lease Payment is paid as and represents the payment of principal. Each Schedule Jiereto shall set forth such-components of each Basic Lease Payment for each Facility or Facilities financed hereunder. 23 SECTION 3,4, Lease payments to be Unconditional Subject to Sections 3.1 ~and 3.S hereof, the obligations of the.school Board to make Lease Payments and to pay all other amounts provided for herein and in each Schedule and to perform its obligations under this Master Lease and each Schedule, shall be absolute and unconditional, and such Lease Payments and other amounts shall be payable without abatement or any rights of setoff, recoupment, counterclaim or defense the School Board might have against any. supplier, contractor, the Association, the Trustee or any other person and whether or not the Facilities are accepted for use or used by the School Board or available for use by the School Board, whether as a result of damage, destruction, condemnation, defect in title or failure of consideration or otherwise. This Master Lease shall be deemed and construed to be a *riet lease", SECTION 3.5* Man- appropriation. Notwithstanding anything in this Master Lease to the contrary, the cost and ex eris6 of the psfcform&nce by the School B6ard of its Obligations under this Mastejr Lease and each Schedule hereto and the incurrence of any liabilities of the School Board hereunder and uhd^teach Schedule hereto including;, wdthdut limitation, the payment of all tease Payments a'h'd all other amouftts required to be paid by the School fcoard under this Master Lease and each Schedule hereto,, shall be subject, to and dependent upon appropriations being duly made from time to time by' the School Board for such purposes. under no circumstances shall the failure of the School Board to appropriate * sufficient funds constitute a default or require payment of a penalty, or in any way limit the right of the School Board to purchase or utilize educational facilities similar in function to those leased hereunder. Unless the School Board, at a public meeting held prior to the end of the then current Fiscal. Year, shall give notice of its ihtent not to. appropriate the funds -necessary to make all Lease payhtents coming due. in the following Pineal/>3fear under this Mastifeir Lease and each schedule -hereto, the'^superlntendertt shall include, as. a separate line item, in the'- superintendent\s. tentative budget proposal the funds necessary to make such Lease Payments, and the Lease Term of all Leases shall be automatically relieved on June 30 of the current Fiscal Year, for the following Fiscal Sear, subject to appropriation bein made by the School Board in the final official budget. If no such appropriation is made in the final official budget, or if no official budget is adopted as of the last day upon which a filial budget is required to have been adopted under Chapter 237, Florida* Statutes, and. applicable regulations thereunder, the Lease Term of all Leases shall terminate as of the date of adoption of the final official budget, or such last day, whichever is earlier. If the School Board declares its intent at such public meeting prior to the end of the then current Fiscal Year, not to appropriate the funds, the Lease Term of all Leases shall not be 24 automatically renewed for the following Fiscal Year/ but shall terminate on June 30th of the current Fiscal Year* The School Board shall provide written notice of any nonappropriation of funds described herein to the Trustee, any Credit Facility Issuer and any issuer of a Reserve Account Letter of Credit/Insurance Policy within three {3) Business Days thereafter, SECTION 3.6- Surrender pf Facilities. (A) Upon the termination of the Lease Term of all Leases prior to the payment of all Lease Payments scheduled therefor or without the payment of the then applicable Purchase Option Price of the Facilities financed under such Lease, or (B) as provided in Section ft.-2 hereof upon "the occurrence of an event of..default, the School Board shall immediately Surrender its leasehold estate created hereunder and deliver use, possession and cdntrol of all the facilities then subject to this Master.Lease to the Trustee as assignee of the Association or any person designated by it, in the condition, state of repair and appearance required under this Master Lease, in accordance with the ittstiuctions of the Trustee, except with respect. fcp Designated Equipment*, as hereinafter provided. The School Board agrees to execute and deliver any and all instruments necessary to accbtoplistv such surrender, in rfedordable form, upon such surrender, the transferee shall sell or relet its interest in the Facilities in such mariner and to such person or persons for any lawful purpose or purposes, as it shall, in its sole discretion, determine to be appropriate. The proceeds derived by such transferee from any.such sale or relets in9 *> the School Board's leasehold interest in the Fajsiilfcles shall be ppplled as provided in section 504 of the Trust Agreement* Any excess after all Such payments shall be paid to-the school Board. ; If the School Board shall refuse or fail to voluntarily surrender its leasehold estate or deliver possession of the Facilities t?o the Association or its.assignee :as above provided, the Association or its assignee may enter into and upon the Facilities, or any part thereof, and- repossess the same and thereby restore the Association, or its assignee to its former possessory estate as lessee under the relatea Ground Lease and lessor hereunder, and expel the School Board and remove its effects forcefully, if necessary, without being taken br deemed to be guilty in any manner of trespass in order that the Trustee may sell or re-let such, leasehold interest in the Facilities, subject to Permitted Encumbrances, for any lawful purpose or purposes, for the remainder of the term of the related Ground Lease, if applicable, and the School Board shall have no further possessory right whatsoever in the Facilities, for the remainder of the term of the respective Ground Lease; the Trustee may exercise all available remedies at law or in equity to evict the School.Board and to enjoy its possessory rights to all Facility Sites under one or more Ground Leases; and the School Board shall be responsible for the payment of damages in an amount equal to 25 C-8 the Lease Payments which would have accrued hereunder, calculated on a daily basis, for any period during which the School Board fails to surrender the Facilities or for any.pther loss suffered by the Association or its assignee as a result of the School Board's failure to surrender the Facilities, all without prejudice to any remedy which might otherwise be available to the Association or its assignee for arrears of. Lease Payments or for any breach of the School Board's covenants herein contained. Upon the termination of the Lease Term of all Leases as a result of a default by the School Board, the Trustee, the Association or its assignee shall have, in addition to the rights and remedies described above, the right; to sue for compensatory damages, including upon failure of the School Board to surrender possession of the Facilities to the Trustee or.other assignee of the Association, damages for any loss suffered by.the trustee, the Association or its assignee as a result of the School- Board's fijujiirfc tb take such actions as required, Including reasonable legal fees-. Prior to the termination of the Lease Term for any particular Facility Site, and related Facilities, fche School BOfcird, as owner, of the Facility Sites, may voluntarily and in cootte ration with the Association or its assignee sell the Facility Sites arid the Facilities, the proceeds of suqh sale to b applied by the trustee in the manner described above in this section. The sale of any.particular Facility Site and Facility thereon shall require the consent of the Credit Facility Issuer, if any, insuring the series of Certificates relating to such Facility Site and Facility thereon- If applicable,,such sale shall fed conducted in accordance with the requirements of Section 235*04(1) Florida Statutes, and the ruies of the State Department of Education promulgated thereunder. No such sale shall entitle the School.Board to any reimbursement of any Lease Payment, nor shall the School Board be entitled to any abatement or diminution in Lease Payments hereunder except as specifically provided in Section 7,2 hereof. Notwithstanding anything In this Section <or elsewhere in thi$ Agreement^ If any Lease is terminated prior to the payment in full of the applicable ease Payments, all Lease Payments made with respect to such Lease prior to such termination shall be allocated first to.any peslgnated Equipment with respect to such Lease. Neither the Association, the Trustee, nor any Certificate Holder, shall have any rights or remedies with respect to:the Designated Equipment, and the School Board shall not be required to surrender any such Designated Equipment under the provisions of this section* (END OF ARTICLE III) 26

211 will ARTICLE IV TERMINATION SECTION 4.1. Termination of Lease Term. The Lease Term terminate upon the earliest of any of the following events: (a) with respect to all Leases, on the latest Lease Payment Date set forth in any Schedule attached to this Master Lease; (b) with respect to all Leases, in the event of nonappropriation of funds for payment of Lease payments as provided in Sections 3.1, 3-4 and 3.5 of this Master Lease; (c) with respect to all Leases, upon a default by the School Board with respect to arty Lease and the termination of the Lease Term of all Leases by the Trustee pursuant to Section 8.2(1J of this Master Lease; (dj with respect to a particular Lease, upon payment by the School Board of the Purchase Option Price of the particular Facilities leased under such Lease, or upon provision for such payment pursuant to Section' 7^3 hereof; provided, however, that upon such provision for payment, the obligation to make Lease Payments under such Lease shall continue to be payable solely from such provision for payment.. SECTION 4.2. gffgct pf Termination, (a) Upon the termination of the Lease Teria for the reason referred to in Section 4.1(b) or (c) hereof, the provisions of Section 3.6 shall be applicable. Upon such termination for the reason referred to in Section 4.1(c) hereof, the provisions of Sections 8.2 and 8.3 shall also be applicable. (b) in the event of termination of the Lease Term for the reason referred to in Section 4.l<d) hereof, there shall be applied solely from the amounts deposited.pursuant to.section 7.3 hereof as a reduction against su h Basic Lease Payments to become due after such termination, /an amount equal to the Basic Lease Payments applicable to the particular Facilities so purchased. (c) Notwithstanding the termination of the Lease Term pursuant to Section 4.1 hereof, the representations of the School Board set forth in section 2.10 hereof and the provisions of Section 5.7 hereof shall survive such termination. (d) upon termination of the Lease Term for the reason referred to in Section 4.1(b) or 4.1(c) hereof, the Association or the Trustee, as assignee of the Association, shall declare the Purchase Option Price under any particular Lease Schedule due and payable in whole or in part if directed to do so by the related Credit Facility Issuer and, in such event, such Purchase (Jption Price (or portion thereof) shall be deemed payable hereunder; provided, however, that no such declaration shall be construed to create any obligation or liability of the School Board for the payment of any such Purchase Option Price, and the School Board shall be obligated to pay and be liable for only Lease Payments which, under the related Lease Schedule, were due and payable by the School Board prior to the termination of the related Lease hereunder and for which an appropriation has been made by the School Board in accordance with Section 3.5 hereof. If, at the direction of the related Credit Facility Issuer, only a portion of the Purchase Option Price is declared due, such Credit Facility Issuer may, from time to time thereafter direct the Trustee to declare any remaining portion due. (END OF ARTICLE IV) ARTICLE V COVENANTS OP SCHOOL BOARD SECTION 5.1. Maintenance. of the Facilities by the School Board. The School Board agrees that at all times during each Lease Term, the School Board will, at the School Board's own cost and expense, maintain, preserve and keep the Facilities in good repair and condition, and that School Board will from time to time make or cause to be made all necessary and proper repairs, replacements and renewals, interior and exterior, thereto. The Association shall have no obligation in any of. these matters, or for the making of repairs, improvements or additions to the Facilities. SECTION s. 2. Taxes, Other Governmental, changes and gfrillty Charges. In the event that: the ownership, leasing, use, possession or acquisition of the Facilities or Facility Sites are found to be subject to taxation in any form, the School Board will pay during each fcease Term, as the same come due, all ad valorem or other taxes, special' assessments, imposts and other governmental charges of any kind whatsoever that may at any time be lawfully assessed.or levied against : or with respect to the Facilities or Facility Sites and any facilities or 6ther property acquired by the School Board as permitted under this Master Lease in substitution for, as a renewal or replacement, of, or a modification, improvement or addition to the Facilities or Facility Sites, as well as all utility and other charges incurred in the operation, maintenance, use; occupancy and upkeep of the Facilities and Facility Sites; provided; that, with respect to any governmental charges described above that may lawfully be paid in installments,bfcterr a period of ^ears, the School Bpard shall be obligated t& pay only such installments as have accrued dliring the time the i>ease Term is in effect. SECTION s.3. Provisions,.Regarding.^insurance. During acquisition, construction and installation. Of *fce -Facilities, the School Board shall require any: contractor to p bv qe. Worker's Compensation, Comprehensive General Liability InsuranceV Builders Risk insurance. Automobile Liability Insurance, Property Insurance, Professional Liability insurance and other insurance. pursuant to the terms of the General conditions of the School Board. Contractors shall be required to provide builders' all risk property damage insurance in an amount not less than the full value of all work in place and materials and equipment provided or delivered by each supplier. The Trustee and the Association shall be named as additional insureds and loss payees wherever the School Board is to be so named, and shall be entitled to written notice of cancellation to the same extent as the School Board. Subject to the provisions of the following paragraph, the School Board shall, during the Lease Term, purchase and maintain property insurance coverage in an amount not less than 29 C-9 $500,000 per occurrence, covering the replacement cost of its property including the Facilities insuring against the perils of FIRE, LIGHTNING, WINDSTORM, HAIL, HURRICANE, WINDBLOWN RAIN, DAMAGE FROM WATfcR, EXPLOSION, AIRCRAFT, VEHICLES/ SMOKE, VANDALISM AND MALICIOUS MISCHIEF, TRANSPORTATION HAZARDS, THEFT AND BURGLARY. The School Board shall also purchase and maintain, or cause to be purchased and maintained, combined general and automobile liability insurance coverage in an amount not less than $1,000,000 per occurrence, with $1;000,000 excess coverage and a deductible not greater than $5,000* The School Board shall also purchase and maintain., or cause to be purchased and maintained boiler & machinery insurance coverage {including air conditioning equipment) in an amount not less than $S00,000 per accident. The School Board may elect to self insure for any such damage or liability,, as provided above, upon the following terrfts and conditions: (a) the sel-f^insurance program shall be approved by the insurance Consultant; (b) the Insurance Consultant shall ascertain the anticipated amount ^f losses and/or'claiaus to OCGU* arid become due during eachfiscal Xearf and the School Efoai?ti ghaii either (i) provide for the payment ot such anticipated losses and/or claims in its budget ^or'stteh Fiscal Yetfit/or (ii>^ purchase an insurance policy or policies- to' provide forsuch payment;. ; ; (c) the self-insurance program shall include* an. excess liability and - loss coverage poteey tiiider \rfileh losses 1 in excess <jf the amounts budgeted -by -thfe ^chciol Board ih each fiscal Vear for claims -and looses to be paid during eutah Fiscal year shall be paid; the adequacy of such excess liability and loss /.coverage policy or policies shall be evaluated at l^a«t ^annaally^by the Insurance Consultant; /and any -deficiencies in such excess coverage shall be remedied in accordance with the recommendations of the Insurance consultant; Flood insurance shall be separately maintained for its property, including any of the Facilities, located in a federally designated flood plain, in such amounts per occurrence recottrttended by the insurance.consultant as g available at commercially reasonable costs and in minimum amounts bein necessary to qualify for the federal disaster relief programs. If such minimum amounts aire not available at commercially reasonable costs in the opinion of the Insurance Consultant, the School Board shall self-insure for such amounts as will qualify for the Federal disaster relief program. The sufficiency of the School Board's flood insurance coverage shall be reviewed at least annually by the Insurance 30

212 Consultant, and the School Board shall follow the recommendations of the insurance Consultant so long as the recommended insurance meets the criteria set forth in the preceding paragraph. Any Insurance policy issued pursuant to this Section 5-3 shall provide that the Association and the Trustee shall be notified of any proposed cancellation of such policy thirty (30) days prior to the date set.for cancellation. If required by Florida law, the School Board shall carry or cause to be carried worker's compensation insurance covering all employees on, in, hear or about the Facilities, and upon request, shall furnish or Cause to be furnished to the Association and the Trustee certificates evidencing such coverage In the event of any loss, damage> injury, accident, theft or condemnation involving the Facilities, the School Board shall promptly provide or cause to be provided to the Association and the Trusted written notice thereof, and make available or cause to be made available to the Association and the Trustee all information and documentation relating thereto. Any.insurance policy maintained pursuant to this Section 5..3 shall. b$ so written or endorsed to provide that the Trustee (on behalf: o'f the'/ Certificate holders); the Association and the School Boird are natoed as loss payees as their interests.may appear and the Net Proceeds of any appropriation made. In connection wjltti a self~insurance election shall be payable to the School Boardi, tjie Association and the Trustee (on bfehalf of the Certificate holders) : as "their respective interests may appear. The Met Proceeds of the insurance required in this section 5 3- or the Net proceed of any appropriation in connection With a selfinsurance election shall be applied as provided in Section 5.4(a).. and Section 5.4(b) heteof. SECTION 5.4. Damagef j destruction. or^condemnatiop. If prior to the termination of the tease.texflruhdfer a particular Lease, the Facilities financed tinder Such ^Lease *>r any portion thereof are destroyed or are damaged by fire or other casualty, or title to, or the temporary use of such Facilities or any portion thereof shall be taken under the exercise of the power of emthent domain, the School Board Shall, within sixty (60) days acft^r such damage, destruction or condemnation elect one of the fqilowing two ^options by Written notice from an Authorized School Board Representative of such election to the Association and the Trustee: (a) Option A - Repair,. Restoration or Replacement. Except as provided below, the School Board will cause the Net Proceeds of any insurance or the Net Proceeds of any appropriation rtiade in connection with a self-insurance election, or the Net proceeds of any claim or condemnation award to be applied to the prompt 31 repair, restoration, or replacement (in which, case such replacement shall become subject to the provisions of the related Lease as fully as if it were the originally leased Facilities) of such Facilities. Any such Net Proceeds received by the Trustee shall be deposited in the related Acquisition Account and be applied by the Trustee toward the payment of the Cost of such repair, restoration or replacement/ utilizing the same requisition process set forth in the Trust Agreement for the payment of the Cost of the Facilities from such Acquisition Account, (b) Option B - Partial Prepayment* Provided, however, if the School Board has determined that its Operations have not been, materially affected and that it is not in the best interest of the School Board to repair, restore or replace that portion of the Facilities so damaged, destroyed or condemned, then the School Board shall not be required to comply with the provisions of subparagraph (a) set forth above- If the Net pirodeeds are equal to less than ten percent (10%) of th Regaining Principal portion of the Basic Lease Payments relating to such Facilities/ such Net Proceeds shall be deposited in the Lease Payment Account for the Series of Certificates relating to such Facilities to be Credited against Basic Lease Payments next coming dye in accordance With Section 3.2 <C) hereof.. If the. Net Proceeds are equal to or greater than ten percent (10%) of the Remaining Principal Portion of the Basic Lease Payments relating to such Facilities, such Net Proceeds shall be.deposited in the Prepayment Account for the Series of Certificates relating to such Facilities to be applied to the prepayment in part of the principal portion and accrued Interest portion of Basic Lease payments relating to such Facilities represented by the Certificates in accordance with Section 7.2 hereof. The School Board assumes all risk or loss of or damage to or liabilities in respect of the Facilities during the term of this Master Lease. SECTION S.S. Insufficiency of Net Proceeds. If the School Board elects to repair, restore or replace the Facilities under the terms of Section 5.4(a) hereof and the Net Proceeds therefor are insufficient to pay in full the Cost.of such repair, restoration or replacement, the school Board shall complete the work and pay any Cost in excess of the amount of the Net Proceeds, and the School Board agrees that, if by reason of any such insufficiency of the Net Proceeds the School Board shall make any payments pursuant to the provisions of this Section, the School Board shall not be entitled to any reimbursement therefor from the Association or the Trustee nor shall the School Board be entitled to any diminution of the amounts payable under the related Lease. 32 SECTION 5-6. Advances. In the event the School Board shall not elect to self-insure any risk that would otherwise requite the maintenance of insurance coverage hereunder, and shall fail to maintain the full insurance coverage, required hereunder, the Association or its assignee shall purchase the required policies of insurance and pay the premiums on the same, or if the School Board shall fail to keep the Facilities in good repair and operating condition, the Association or its assignee may, but shall be under tic obligation to, make such repairs or replfccements as are necessary and provide for payment thereof; and all amounts so advanced therefor by the Association shall become immediately due and payable as a Supplemental Payment unddrt'he kease relating to such Facilities, which amounts, together with interest thereon (at an annual interest rate equal t6 the ihtsirest portion of the Basic Lease:Payments applicable to suett Facilities? * expressed as an annual interest.rate) until ' paid, the School Board agrees to pay. SECTION. 5^7. Release andvv... lademnlfldafclonv; yftrfoatjesi TO the extent permittees tf }>' *l<&idalaw, including the fcrevisiohs of Section?68,28, Florida Statutes, the School BSaro shall indemnify and save the Association and the * Trustee h'airftfce&e froth and against any. and all liability, obligations,, clalifis "and damages, including consequential damages and reasonable legal fees and expenses, arising out of, or in connection' vritn > ' the transactions contemplated, by this Master If&agte, ;all Sfchfcdules hereto> any Ground tease, any Assignment A^e6ih6ht and the Ttust - Agreement including, without limitation;. th&-i6«eahce : 6f Certificates; except in fche-case,of liability,. atoli^atibfts,r- 4 claims and damages arising out-of their own n.^fll^h^e. * Willful misconduct* Furthermore, any warranties by. the. School Board contained in this Master Lease are subject to the provisions o f Section 766* 2a, Florida statutes '/-'.- SECTION -5.-ft* Payment.and. r pqi?fo1r?n^ncp; ::.^oflfls afld othgr C^frjjgty,» The school Board i agrees "to "'.cause--: :^hycontractor to ptb vige j performance; payment and -guarantee ^and-any additional bonehs &t surety bonds > if and when required pursuant to the General Conditions and the provisions of Section 25S.05 Florida Statutes, and other applicable provisions of Florida law or by the Credit Facility Issuer. Such bonds or other sureties shall be ±n dtial cfollgee form, naming the School Board and the Trustee as dual obligees. SECTION 5.9. Essential (&vernmental Functions. The School Board represents and warrants that the services to be provided by or" from the Facilities are essential to the delivery of the School -Board's essential, governmental services, and covenants that during the Lease Term it will use the Facilities to perform essential governmental functions relating to its statutory responsibility of providing for public education throughout the District. The School Board represents and 33 C-10 covenants that it has an immediate need for the Facilities, that it does not expect such need to diminish during the Lease Term and that it intends to use the Facilities for public school educational purposes throughout the Lease Term. SECTION Tax Exemption; Rebates. In order to maintain the exclusion from gross income for federal income tax purposes of the interest portion of the Basic Lease Payments paid to the certificate holders, the School Board shall comply with the provisions of the Code applicable to this Master Lease and each Schedule thereto, and each Series of Certificates issued under the Trust Agreement, including without limitation the provisions of the Code relating to the computation of the yield on investments of the Gross Proceeds of : each Series of _ Certificates, reporting of earnings on the.gross Proceeds of-each Series of Certificates, and rebating Excess Earnings to the Department of the Treasury of the United states of America, in furtherance of the foregoing, the School Board shall comply with the Tax,Compliance' Certificate as to compliance with the Code with respect-to each Lease : and each Series of Certificatesf to be delivered. By the scliodj Board at the.. tijie each Series of Certificates is lssued> as such certificate may be amended from time to time> as a source of guidance for achieving compliance with the Code. The School Board shall not take any action or fail to take any -action tfhich would cause a Lease and the Series of Certificates reflating thereto to be "arbitrage bonds" within the meaning of Section 146 <*) of the code or which would otherwise cause the portion 6f Basic Lease Payments under such.lease representing the payment of interest as set forth in Section 3l3 hereof to be includable in the gross income of the Certificate holders; In the event that the School Board shall fai'l %o rebate such Excess Earnings when due. the- Association-or its.assignee may, but sliall be= under no obligation to, 'pay?.amounts due-to" the Treasury; and all amounts so ^advanced. byfche.:association or its assignee shall become immediately due and payable as a Supplemental Payment under the Lease relating to such Series of Certificates, which amounts, together with Interest ^hereon {at an annual interest rate equal to the interest portion of the Basic- tease Payments relating thereto expressed as an annual interest rate) until paid, the school Board agrees to pay. SECTION Budget and Tax Levy. The School Board covenants that it shall cause the Superintendent to prepare and submit the budget recommendation in accordance with Section 3.5 hereof including provision for discretionary capital outlay millage under Section , Florida Statutes, and that the. School Board will act on such recommendation, will hold public hearings, will adopt tentative and final official budgets., and will submit such budgets to the Department of Education for 34

213 approval, all pursuant to the requirements of the laws of Florida and the regulations of the Department of Education as in effect from time to time. Subject to the right of non-appropriation set forth in Sections 3.1 and 3.5 hereof, the School Board expects that its Available Revenues will be sufficient to meet its Lease Payment obligations under the Master Lease in each Fiscal Year. SECTION Additional Covenants, with Respect to Credit Facility Issuers. For so long as any Certificates, as to which a Credit Facility is provided, are outstanding under the Trust Agreement, the School Board hereby covenants and agrees as follows: (a) The Credit Facility Issuer shall be provided with the following information: (i) Annual unaudited financial statements when available, annual audited financial statements of the School Board promptly upon receipt thereof from the Auditor General.of the State of Florida, and the ; aftmial budget within 30 days after the approval thereof; (ii) Opon delivery of the annual audited financial statements of the School Board, a certificate of the chlet financial officer of the school Board stating that, to the best of such individual's knowledge following reasonable inquiry, no Event of Default Or event of ndnapproprlation has occurred, or tf an Event of Default or event of tionappr6prlation has occurred, fltfecifying ther. nature' thereof and, if the School Board has a right to : cure pursuant to Section Q.1(b), stating in reasonable $itail the steps, if any, being taken by the School Board to cure such Event of Default; (ill) the Official Statement, if any, prepared in connection with the -issuance -of additional indebtedness of the School Board within 30 days of the incurrence thereof; (iv) Notice of any failure of the School Board to make any payment required hereunder within two Business frays after knowledge thereof; (v) Copies of all reports, certificates and notices required to be delivered by the school Board hereunder; and (vi) Such additional information as the Credit Facility Issuer from time to time may reasonably request. SECTION Compliance with Law, Regulations, Etc. (a) The School Board has, after due inquiry, no knowledge and has not given or received any written notice indicating that its Facilities or the past or present use thereof or any practice, procedure or policy employed by it in the conduct of its business materially violates any applicable law, regulation, code, order, rule, judgment or consent agreement, including, without limitation, those relating to zoning, building, use and occupancy, fire safety, health/ sanitation, air pollution, ecological. matters,, environmental protection, hazardous or toxic materials, substances or wastes, conservation/ parking,. architectural barriers to the, handicapped, or restrictive covenants or other agreements affecting title to the Facilities {collectively, "Laws and Regulations*'). without limiting the generality of the foregoing, neither the. School Board nor to the best of its knowledge, after due inquiry, any prior or present owner, tenant or subtenant of any of the Facilities has, other than as set forth in subsections (a) and (b) of this Section or as may have been remediated in accordance with taws and Regulations, (i) used, treated, stored, transported or disposed of any material amount of flammable explosives, pplychlosinated biphenyl compounds, heavy metal's,. chlbriiiatigd solvents-,-. cyanide, radon, petroleum.products, asbestos or any Asbestos. Containing Materials, methane, radioactive materials. p^iiutahts, hazardous materials, hazardous wastes, hazardous, idxici * r regulated substances or ^elated materials, as defined in.gbfteia,, RGRA*. <?WA,: CAA,. fsca 30d ftfele 111, and the jt^g^lations promulgated pursuant thereto,.and".. in all. other nyifc«jnmental, Regulations applicable,tp the School Board; any.of t^jhe Jpacili^ies or, the business, operations conducted by the $cjjoc>l fepatrd. ^hereon ccoj.lectiveiyf."hazardous thaterlals") oh, from or b^he^lhfits Facilities> (ii) popped,. spilled, leaked, disposed of, eftptied, discharged or released {hereinafter collectively referred to as "Release") any material amount of Hazardous Materiais on,, from.or beneath its Facilities,\.6t Mii) stored any material amount of petroleum products at its facility sites.in underground storage tanks. (b) Excluded from the representations and warranties in subsection (a). hereof with respect to Hazardous Materials in those amounts ordinarily found in the inventory of or used in the maintenance of public schools and related facilities, the use, treatment, storage, transportation and disposal of which has been and shall be in compliance with all Laws and Regulations. (c) No Facilities located in an area of high potential incidence of radon has an unventilated basehient or subsurface portion which is occupied or used for any purpose pther than the foundation or support of the improvements to such Facilities (d) The School Board has not received any notice from any insurance company which has issued a policy with respect to the Facilities or from the applicable state or local government agency responsible for insurance standards (or any other body exercising similar functions) requiring the performance of any repairs, alterations or other word, which repairs, alterations or other word have not been completed at the Facilities* The School Board has not received any notice of defaulter breach which has not been cured under any covenant, condition, restriction, right-of-way, reciprocal easement agreement or other easement affecting its Facilities which is to be performed or complied with by it. SECTION Environmental Compliance* {a) The School Board shall not use or-permit the Facilities or any part thereof to be used to generate, manufacture, refine, treat, store, handle, transport or dispose of, transfer, produce or process Hazardous Materials, except, and only to the ektent, if necessary to rhalntaift the improvements on the Facilities and then, only lift compliance with all Environmental Regulations, and any state* -fe^l*&i&fi%'laws and regulations, not shall it permit, as a rfeaultr of Shy intentional or unintentional act or omission on its part or by any tenant, subtenant, licensee,, gtiefct, invitee, contractor', employee and agent, the storage/ transportation, disposal or use of Hazardous Materials or the Release or threat of Release of Hazardous Materials on, from or beneath the Facilities or *>hto any other property excluding/ however, thdse Hazardous Hatetials in those amounts ordlharily found in the : inventory of or used in the maintenance Of-public schools and telatted facilities, the use, sitorage, treatment, transportation and disposal of which shall be irt compliance with all Environmental * Regulations. Upon.the occurrence of any Release or threat of Release of Hazardous. Materials, the School Board shall promptly commence and perform, or cause to be commenced and performed promptly;, * -without cost to the Association; all investigations, stttdi*?,'/sampling and testing, and all remedial, removal ^andother^a^tl^ons necessary to clean up and remove all Hazardous Materials- : so 'released, oh, from or beneath the Facilities or other property, in compliance with all Environmental Regulations. Notwithstanding anything to the contrary contained herein. Underground storage tanks shall only be permitted subject to compliance with subsection (d) and only to the extent necessary to maintain the improvements on the Facilities, (b) The School Board shall comply with, and shall cause its tenants, subtenants, licensees, guests, invitees, contractors, employees and agents to comply with, all Environmental Regulations, and shall keep the Facility Sites free and clear of any liens imposed pursuant thereto (provided, however, that any such liens, if not discharged, may be bonded). The School Board Shall cause each tenant under any lease, and use its best efforts to cause all of suoh tenant's subtenants, agents, licensees,, employees, contractors, guests and invitees and the guests and invitees of all of the foregoing to comply - with all Environmental Regulations with respect to the Facilities; provided, however, that notwithstanding that a portion of this covenant is limited to the School Board's use of its best efforts, the School Board shall remain solely responsible for ensuring such compliance and such limitation shall not diminish or affect in.any way the School Board's obligations containted in subsection (e) hereof as provided in subsection (c) hereof. Upon receipt of any notice form any Person with regard to the Release of Hazardous Materials on, from or beneath the Facilities, the School Board shall give prompt written notice thereof to the Trustee, the Association and the Credit Facility issuer (arid, in any event, prior to the expiration of any period in which to respond to such notice under any Environmental Regulation).* ( ) Irrespective of whether any representation or warranty contained in Section 5*13 is not true or correct, the School Board shall defend, indemnify and hold harmless the Association, the Trustee and the Credit Facility issuer, its partners, depositors and each of its and their employees, agents,. officers, directors/trustees, successors and assigns, from and against any claims, demands, penalties-, fines, attorneys 1 fees (including, without limitation, attorneys' fees incurred to.enforce the indemnification contained in this Section 5.14, Consultants' fees, investigation and laboratory fees, liabilities, settlements (five (5) Business Days' prior notice of which the Association, the Trustee or the Credit Facility Issuer, as appropriate, shall have delivered to the.school Board), court costs, damages, losses, costs or expenses of whatever kind or nature, known or unknown, contingent or otherwise, occurring in whole or in part, arising out of, or in any way related to, (i) the presence, disposal. Release, threat of Release, removal, discharge, storage or transportation of any Hazardous Materials on, from or beneath the Facilities, (11). : any ^personal injury {including wrongful death) or property damage :< : real or personal) arising out of or related to ^uch>hazardous^materials, (ill) any lawsuit brought or threatened, settlement..reached (five (5) Business Days' prior notice of which the Association, the Trustee or the Credit Facility Issuer, as appropriate, shall have delivered to the School Board, or governmental order relating to Hazardous Materials on, from or beneath any of the Facilities, (iv) any violation of Environmental Regulations or subsection (a) or (b) (, or (e) hereof by it or any of its agents, tenants, employees, contractors, licensees,. guests, subtenants or invitees, and (v) the imposition of any governmental Lien for the recovery of environmental, cleanup or removal costs. To the extent that the school Board is strictly, liable under any Environmental Regulation, its obligation to the Association, the Trustee and the Credit Facility Issuer and the other indemnitees under the foregoing indemnification shall likewise be without regard to fault on its part with respect to the violation of any Environmental Regulation which results in liability to any 37 C-11 38

214 indemnitee. Its obligations and liabilities under this Section 5.14(c) shall survive any foreclosure of the security interest in the Facilities or the delivery of any instrument in lieu of foreclosure, and the satisfaction of all Bonds. (d) The School Board shall conform to and carry out a reasonable program of maintehance and inspection of all underground storage tanks, and shall maintain, repair, and replace such tanks only in afccordance with Laws and Regulations, including but not limited to Environmental Regulations. (END OF ARTICLE V) ARTICLE VI TITLE SECTION 6.1. Title to Facility Sites and Facilities.. Throughout the term of each Ground Lease, fee title to the Facility Sites described therein shall.tee in the name of the School Board, subject to Permitted Encumbrances, upon acquisition and acceptance of any component of.the Facilities by the School Board, title to such Facilities shall be vested in the School Board, subject to Permitted Encumbrances. At such time as payment, or provision for payment as provided in Section 7.2 or 7.3, hereof, of all. tease Payments or the then applicable Purchase Option Price of 6iie' or more Facilities has been made in full, the School Board, snail. be deemed to" have exercised" an option to purchase such Facilities and fee' simple title to such Facilities free and clear of all encumbrances,-including-the-association's iht^.k«st in. the \ Facilities as. lessor hereunder, 'and as lessee under the; cjrouhd.tease, except Permitted Encumbrances, shall vest in^. thei school Board. Upon, substitution of other Facilities. for Facilities fihpnoed under a. tease- as herein provided, fee simple t^le t<x %$p. I'aciyi'ities for which..9umt4tt«tijdit/tia5.'^en.'.maid!»; sh^ll, vest... in: the School Board free and clear of all encumbrances, including- the Association's interest in the Facilities -as-lessor hereunder and as lessee uiiider the.ground te se, exgjsjjrfc'' pip.rroitt«d Bnc%nbr4hces..,.., The Assqci^tioh Hereby ak p»ijits the School Baa,rd as its agent' to prepare aind' file or redbrd in appropriate "pffices such docunjerits as may,be: necessary to, (Cause record: tf^le. to such Facilities,;, to vest. la tjhe ; s<chpol B %rjx. the Association.,agrees to. immediately execute -a- written sjlir e(hdek..and', release : $tid an: assignment, without recourse, or w^lriranty; of ill its right, title, and: interest under, the related t^^se and Orouhd tease to the school Board,.or'..-shall execute aihfcpdroehts, to the tease. Schedule, if appropriate in :the case pf tftcj jpurjch'ase of portions; of the Facilities, financed' under a Leajjjje, as."weii as all other.'instrumehts.necessary to vest good and Jnarlcetable fee simple title to the Facility in. the schdpl Boara: and: relinquish, the Association '^ interest vtherein * subj ect o#ly to, Permitted Encumbrances. The related' Ground Lease shall then be terminated, or modified, as provided therein. The Association shall request the execution of such instruments by the- Trustee as may be necessary to effect the conveyances described herein. There shall be no merger of a-tease or of the leasehold estate thereby.created in any Facilities or Facility sites with the fee simple estate in such Facilities or Facility Sites by reason of the fact that the same person may acquire or hold, directly or indirectly, a tease or leasehold estate therein created or any interest therein, and the fee simple estate in the Facilities or Facility sites relating to such Lease or any interest in such fee simple estate. 40 If required by a Credit Facility Issuer, the School Board shall provide one or more policies of leasehold title insurance, in form satisfactory to the Trustee, naming the School Board, the Association and the Trustee as insureds, as their interests may appear, in amounts as required by such Credit Facility Issuer. Proceeds of any payment under a title insurance policy shall be paid to the Trustee and held for application (at the direction of the School Board prior to the occurrence of an Event of Default or a nonappropriation hereunder) first, to cure - any defect in title, and second, in accordance with the riorities set forth in Section 504(a) of the Trust. Agreement.? he, execution of each Ground Lease and each amendment thereto, addiifrg or modifying a Facility site shall be subject to the approval of the related credit Facility Issuer, if any, and at the time of such execution,.there eheii ftfe-^delivered by the School fcdard to this Trustee an [opinion of Counsel) with respect to each Facility Site to the effect that (a) there are no lieris or encumbrahc6s oh any Facility Site that are not Permitted Encumbrances under.the Master Lease, and (b) th6re shall be ho mefcger of the fee simple Estate of the School Board in the Facility Sites with the. leasehold estates created therein by a Ground tease or this Master Lease, notwithstanding the fact that the same person may hold one or more leasehold estates and such fee simple estate; SECTiOM 6.2. Liens. Except as permitted under this Master Lease, during the Lease TSrin each of the Association and the School Board shall not, directly or indirectly, create, incut, assume or suffer to exist any security interest, pledge, lieh; charge, encumbrance or claim on any of the Facilities or Facility Sites or leasehold interests therein, other than the respective riqhts 6f the Trustee, the Association and the School BOard as heteih provided. The Schooi fcoard shall reimburse the Association or the Ttustee for any exjpense incurred by the Association or the trustee in order to discharge or remove any such* security intetest, pledge, Ilea/ charge^ encumbrance or claim; provided, howevor, th&t neither *h& association nor the Trustee is under any obligation to-, incuriasuch expense without having been provided, in advance, with any ^amounts needed to pay such expense* SECTION 6.3. Use of the Facllltleis, The School Board will not use, ot maintain the Facilities improperly, carelessly, in violation of any applicable law or in a manner contrary to their use as* educational facilities as contemplated by this Master Lease. The School Board shall provide all permits and licenses, if any, necessary for the acquisition, construction and installation of the Facilities. In addition, the School Board agrees to comply in all respects (including, without limitation, with respect to the use and maintenance of the Facillti6s) with all applicable laws of the jurisdictions in which the Facilities are located and with all applicable regulations, orders and decrees of any legislative, executive, administrative or judicial body exercising any power or jurisdiction over the Facilities; 41 C-12 provided, however, that the school Board may contest in good faith the validity or application of any such law or rule in any reasonable manner which does not adversely affect the interest or rights of the Association or the Trustee under this Master Lease. SECTION 6.4. substitution of Facilities. To the extent permitted by law, the School Board may substitute for any Facilities other facilities owned by the School Board, provided such substituted facilities (a) have the same or a greater remaining useful life, <b) have a fair mafket value equal to or. greater than the Facilities for which they are substituted, (c) are of substantially equal utility as the Facilities to be replaced and meet the requirement. of Section 5.9 hereof, <d) are freehand clear of all liens and encumbrances, except Permitted Encumbrances, and (e) are approved for substitution by the State Department of Education. Such substitution must also be approved by the Credit Facility Issuer, if any, for the Series of Certificates from which the Facilities to be replaced were originally financed, in order to effect such substitution, the Facilities to be replaced shall be released from the encumbrance of the related Lease and Ground Lease by appropriate instrument executed by the School Board.and the Association (or Trustee as assignee of the Association) in form sufficient to leave good and ' marketable fee simple title to such Facilities in the School Board, sublect only to Permitted Encumbrances, and the facilities to be substituted shall likewise be incorporated in the appropriate Lease and Ground Lease modifications. The related Schedule shall be appropriately amended, and the related Ground Lease shall be amended or cancelled and replaced, to reflect such substitution. There shall also be delivered at the time of substitution, an Opinion of counsel addressed to the School Board, the, Association, the Trustee and any Credit Facility Issuer as to the legality and validity of such substitution under the laws of the State, a policy of leasehold title insurance (if required by the applicable Credit Facility; -Issuer) vend an Opinion of Counsel as described in Section 6.1 hereof*with.respect to the substitute Facility Site, For purposes hereof, "fair market value" shall be determined on the basis of an MAI appraisal performed by an appraiser jointly selected by the School Board and the Trustee. SECTION 6.5 Title to Designated Equipment. Title to Designated Equipment shall vest in the School Board upon acquisition thereof. In the event of a termination of any Lease under which Designated Equipment is leased prior to the payment in full of all Lease payments under such Lease, the School Board shall be deemed to have exercised its option to purchase such Designated Equipment at an option price equal to the lower of (i) the fair market value thereof or (ii) the amount of Bade Lease Payments made under such Lease prior to the termination thereof. Title to the Designated Equipment shall vest in the School Board 42