$6,487,000 Oregon School Boards Association FlexFund Program

Transcription

1 OFFICIAL STATEMENT DATED JANUARY 19, 2012 $6,487,000 Oregon School Boards Association FlexFund Program $2,725,000 Series 2012A $3,762,000 Series 2012B (Qualified Zone Academy Bonds Federally Taxable Direct Payment) (Qualified School Construction Bonds Federally Taxable Direct Payment) DATED: February 7, 2012 (estimated Date of Delivery ) DUE: June 30, as shown on the inside front cover MOODY S RATING Aa2. See Rating herein. THE SERIES 2012A CERTIFICATES (QZAB) Certain Oregon school districts (collectively, the Series 2012A Issuers ) are issuing the $2,725,000 Series 2012A Certificates (QZAB) (as defined herein) which represent undivided ownership interests in the principal and interest payments (the 2012A Installment Payments ) due from the Series 2012A Issuers under the terms of their Installment Financing Agreements (QZAB) (the QZAB Agreements ). THE SERIES 2012B CERTIFICATES (QSCB) Certain Oregon school districts (collectively, the Series 2012B Issuers ) are issuing the $3,762,000 Series 2012B Certificates (QSCB) (as defined herein) which represent undivided ownership interests in the principal and interest payments (the 2012B Installment Payments ) due from the Series 2012B Issuers under the terms of their Installment Financing Agreements (QSCB) (the QSCB Agreements ). PURPOSE The Series 2012A Certificates (QZAB) and Series 2012B Certificates (QSCB) (collectively, the Series 2012 Certificates ) are being issued to finance the costs of real and personal property improvements (the Projects ) for the Series 2012A Issuers and Series 2012B Issuers (collectively, the Series 2012 Issuers ) and to pay a portion of the costs of issuance. See Purpose and Use of Proceeds herein. INTEREST AND PRINCIPAL PAYMENTS Interest on the Series 2012 Certificates will be paid on December 30, 2012 and semiannually thereafter on June 30 and December 30 of each year to the maturity or earlier redemption of the Series 2012 Certificates. Principal of and interest on the Series 2012 Certificates will be payable by the Series 2012 Trustee, initially the Bank of New York Mellon Trust Company, N.A., to DTC which, in turn, will remit such principal and interest to the DTC participants for subsequent disbursement to the beneficial owners of the Series 2012 Certificates at the address appearing upon the registration books on the 15 th day (the Record Date ) of the month of the payment date. MATURITY SCHEDULE See inside front cover. PREPAYMENT The Series 2012 Certificates are subject to prepayment prior to their stated maturities as more fully described herein. SECURITY The Series 2012 Issuers are legally required under their QZAB Agreements and QSCB Agreements (collectively, the Agreements ) to make Installment Payments to the Series 2012 Trustee during the term of the Agreements. EACH AGREEMENT IS A BINDING, FULL FAITH AND CREDIT OBLIGATION OF THE RESPECTIVE SERIES 2012 ISSUER WITHIN TAX LIMITATIONS DESCRIBED HEREIN. THE OBLIGATION OF THE SERIES 2012 ISSUERS TO MAKE THE INSTALLMENT PAYMENTS SHALL NOT BE SUBJECT TO ANNUAL APPROPRIATION. The Agreements are not secured by a security interest in or other lien on the Projects. The Agreements are further secured by an intercept agreement under which an amount equal to each Series 2012 Issuer s Installment Payments net of any Direct Payments received from the Federal Government for some or all of the interest and principal payments is required to be diverted from State Education Revenues (defined herein) to the Series 2012 Trustee for the purpose of paying such Series 2012 Issuer s Installment Payments. THE SERIES 2012 CERTIFICATES DO NOT CONSTITUTE A DEBT OR INDEBTEDNESS OF THE OREGON DEPARTMENT OF EDUCATION, THE STATE OF OREGON OR ANY POLITICAL SUBDIVISION THEREOF OTHER THAN THE INDIVIDUAL SERIES 2012 ISSUERS. EACH SERIES 2012 ISSUER IS ONLY RESPONSIBLE FOR ITS RESPECTIVE INSTALLMENT PAYMENTS. Summaries of the Agreements and the Master Trust Agreement are included herein. Complete copies of the Agreements and Master Trust Agreement are available upon request. BOOK-ENTRY ONLY The Series 2012 Certificates will be issued, executed and delivered in fully registered form under a book-entry only system and registered in the name of Cede & Co., as owner and nominee for The Depository Trust Company ( DTC ). DTC will act as initial securities depository for the Series 2012 Certificates. Individual purchases of the Series 2012A Certificates (QZAB) will be made in book-entry form, in the denomination of $5,000 or any integral multiple thereof. Individual purchases of the Series 2012B Certificates (QSCB) will be made in book-entry form, in the denomination of $5,000 or any integral multiple thereof except for one piece of $2,000. Purchasers will not receive certificates representing their interest in the Series 2012 Certificates purchased. TAX MATTERS In the opinion of Hawkins Delafield & Wood LLP, Certificate Counsel ( Certificate Counsel ), the portion of the payments made under the Agreements designated as and constituting interest received by the holders of the Series 2012 Certificates ( Interest ) is not excludable from gross income for federal income tax purposes under existing law. See Tax Matters herein for a discussion of the opinion of Certificate Counsel. In the opinion of Certificate Counsel, Interest received by the holders of the Series 2012 Certificates is exempt from Oregon personal income tax under existing law. DELIVERY The Series 2012 Certificates are offered for sale to the original purchaser subject to the final approving legal opinion of Certificate Counsel. It is expected that the Series 2012 Certificates will be available for delivery to the Series 2012 Trustee on behalf of DTC on or about the Date of Delivery. This cover page contains certain information for quick reference only. It is not a summary of the issue. Investors must read the entire Official Statement to obtain information essential to the making of an informed investment decision.

2 DATED: Date of Delivery MATURITY SCHEDULE Oregon School Boards Association FlexFund Program DUE: June 30, as shown below Series 2012A (Qualified Zone Academy Bonds Federally Taxable Direct Payment) Due Interest June 30 Amount Rate Yield CUSIP 68605C 2030 $ 2,725, % 4.625% AS8 Series 2012B (Qualified School Construction Bonds Federally Taxable Direct Payment) Due Interest June 30 Amount Rate Yield CUSIP 68605C 2030 $ 3,762, % 4.625% AW9 Certain statements contained in this Official Statement do not reflect historical facts, but are forecasts and forward-looking statements. No assurance can be given that the future results discussed herein will be achieved, and actual results may differ materially from the forecasts described herein. In this respect, words such as estimated, projected, anticipate, expect, intend, plan, believe and similar expressions are intended to identify forward-looking statements. All projections, assumptions and other forward-looking statements are expressly qualified in the entirety by the cautionary statements set forth in this Official Statement. Certain information contained herein has been obtained from the Issuers and other sources which are believed to be reliable, but the accuracy or completeness of such information is not guaranteed and such information is not to be construed to be a representation of the Issuers, or Seattle-Northwest Securities Corporation (the Underwriter ). The Underwriter has reviewed the information in this Official Statement in accordance with, and as a part of, its responsibilities to investors under the federal securities laws as applied to the facts and circumstances of this transaction, but the Underwriter does not guarantee the accuracy or completeness of such information. Neither the delivery of this Official Statement nor any sale made hereunder shall, under any circumstances, create any implication that there has been no change in the affairs of the parties referred to above since the date hereof. The CUSIP numbers herein are provided by CUSIP Global Services (CGS), which is managed on behalf of the American Bankers Association by Standard and Poor s, a division of The McGraw-Hill Companies, Inc. CUSIP is a registered trademark of the American Bankers Association. CUSIP numbers are provided for convenience of reference only. CUSIP numbers are subject to change. Neither the District nor the Underwriter take any responsibility for the accuracy of such CUSIP numbers. Web addresses contained in this Official Statement are inactive textual references, not hyperlinks, and any websites, by such reference, are not incorporated herein. No dealer, broker, salesman or other person has been authorized by the Issuers or the Underwriter to give information or to make any representations with respect to the Series 2012 Certificates, other than those contained in this Official 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 Official Statement does not constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of the Series 2012 Certificates by any person in any jurisdiction in which it is unlawful for such person to make such offer, solicitation or sale. The prices at which the Series 2012 Certificates are offered to the public by the Underwriter (and the yields resulting therefrom) may vary from the initial public offering prices appearing on the cover page hereof. In addition, the Underwriter may allow concessions or discounts from such initial public offering prices to dealers and others. In connection with the offering of the Series 2012 Certificates, the Underwriter may affect transactions that stabilize or maintain the market price of the Series 2012 Certificates at a level above that which might otherwise prevail in the open market. Such stabilizing, if commenced, may be discontinued at any time. ii

3 Sponsor Oregon School Boards Association Salem, Oregon (503) Series 2012A Issuers Coquille School District No. 8 (Coos County) Myrtle Point School District No. 41 (Coos County) Rainier School District No. 13 (Columbia County) Series 2012B Issuers Corbett School District No. 39 (Multnomah County) Klamath County School District (Klamath County) South Umpqua School District No. 19 (Douglas County) Underwriter Seattle Northwest Securities Corporation Portland, Oregon (503) Certificate Counsel Hawkins Delafield & Wood LLP Portland, Oregon (503) Series 2012 Trustee The Bank of New York Mellon Trust Company, N.A. Seattle, Washington (206) iii

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5 Table of Contents Certain Definitions... vii Sponsor... 1 Description of the Series 2012 Certificates... 1 Principal Amount, Date, Interest Rates and Maturities... 1 Trustee and Registration Features... 1 Qualified Zone Academy Bonds and Qualified School Construction Bonds... 2 Redemption... 3 Authorization for Issuance... 6 Purpose and Use of Proceeds... 7 Purpose... 7 Estimated Sources and Uses of Funds A Installment Payments B Installment Payments Security for the Certificates Intercept Agreement Available State Education Revenues Intercept Payments Direct Payments Coverage Indebtedness Debt Capacity Debt Payment Record Future Debt Plans Summary of Certain Provisions of the Agreements Installment Financing Agreements Master Trust Agreement The Series 2012 Issuers General Enrollment Real Market Value Revenue Sources Oregon School District Funding State School Funding State Budget State K-12 Education Funding State Reserve Funds Federal Funding Property Taxes Financial Factors Financial Reporting and Accounting Policies Auditing Budgetary Process and Controls Investments Pension System Other Postemployment Benefits Risk Management The Initiative and Referendum Process Referendum Initiatives Tax Matters Original Issue Discount Bond Premium Disposition and Defeasance Information Reporting and Backup Withholding U.S. Holders IRS Circular 230 Disclosure Miscellaneous Page v

6 Table of Contents, Continued Rating Legal and Underwriting Approval of Counsel Litigation Continuing Disclosure Underwriting Concluding Statement Appendices: Form of Certificate Counsel Opinion... Appendix A Book-Entry Only System... Appendix B Forms of Continuing Disclosure Certificates... Appendix C Debt Service Schedules for Each Series 2012 Issuer... Appendix D Form of Intercept Agreement... Appendix E Page vi

7 Certain Definitions As used in this Official Statement, the following capitalized terms have the following meanings: Agreements means, collectively, the Installment Financing Agreements (QZAB) and Installment Financing Agreements (QSCB) in substantially the form submitted to the Trustee and executed and delivered by a Series 2012 Issuer and assigned to the Trustee by the Bank for the purpose of executing and delivering certificates of participation in such Agreement. Assignment Agency Agreement means an agreement between the Underwriter, the Bank and the Trustee, whereunder the Bank assigns its interest in the Agreements, and the Installment Payments due thereunder, to the Trustee for the benefit of the Owners of a Series of Certificates. Bank means The Bank of New York Mellon Trust Company, N.A., with a corporate trust office in Seattle, Washington, its successor, or any bank or trust company which may be substituted in its place as provided in the Master Trust Agreement. Business Day means any day of the year, other than a Saturday or Sunday, on which the Underwriter or the Trustee is not authorized or obligated by law or executive order to be closed. Certificate means any of the Certificates of Participation executed and delivered under the Master Trust Agreement, and evidencing and representing an ownership interest in an Agreement, ownership of which is recorded on the books required to be kept by the Registrar. Certificate Interest Rate means the rate of interest on a Certificate of a given Maturity Date. Closing Date means the date of delivery of a Series of Certificates to the initial purchasers thereof. Code means the Internal Revenue Code of 1986, as amended. Commencement Date means the Commencement Date for the Agreements as defined in such Agreements. Direct Payments means the direct interest subsidy payments received by the Series 2012 Trustee on behalf of a Series 2012 Issuer from the Federal Government for some or all of the interest payments on their Agreement. DTC means The Depository Trust Company, New York, New York. Government Obligations means direct obligations of or obligations the principal of and interest on which are unconditionally guaranteed by the United States of America and bank certificates of deposit secured by such obligations. 2012A Installment Payments means the semiannual payment amounts with interest components and principal components specified in the QZAB Agreements scheduled to be paid by the Series 2012A Issuer under said QZAB Agreements. 2012B Installment Payments means the semiannual payment amounts with interest components and principal components specified in the QSCB Agreements for scheduled to be paid by the Series 2012B Issuer under said QSCB Agreements. Installment Payments means, collectively, the 2012A Installment Payments and the 2012B Installment Payments. Installment Financing Agreement means the agreement between the Series 2012 Issuer and the Bank detailing financing terms. vii

8 Intercept Agreement means the agreement between the Series 2012 Issuer, the Series 2012 Trustee and the State of Oregon Department of Education detailing the diversion of the Series 2012 Issuer s State Education Revenues. Intercept Payments means a Series 2012 Issuers diverted State Education Revenues which are pledged to paying debt service on such Series 2012 Issuer s Agreement. Letter of Representations means the blanket letter of representations from the Bank, acting as agent for each District, to DTC, in the form required by DTC. Master Trust Agreement means the agreement dated July 1, 1995 between the Underwriter, the Bank and the Trustee creating an irrevocable trust for the benefit of the Registered Owners, and any amendments thereto. Maturity Date means, with respect to a Certificate, the date specified therein for the payment of the principal amount thereof, which corresponds to one of the Principal Payment Dates for the principal components of Installment Payments due under the Installment Financing Agreement in which said Certificate evidences and represents an ownership interest. Outstanding, when used as of any particular time with respect to Certificates, means all Certificates executed and delivered by the Registrar under the Master Trust Agreement, except: (a) (b) Certificates previously canceled or subject to cancellation on the books required to be kept by the Registrar; and Certificates for the payment of which funds in the necessary amount shall have previously been deposited with the Trustee (whether upon or prior to the Maturity Date of such Certificates). Owner, Certificate Owner, Registered Owner, Owner of a Certificate, or any similar term, when used with respect to a Certificate, means the person in whose name that Certificate is registered on the books required to be kept by the Registrar. Payment Fund means the Oregon School Boards Association FlexFund Program Payment Fund established by the Master Trust Agreement and held by the Trustee. Principal Payment Date means the payment dates of the Installment Payments set forth in an Agreement for each principal component of Installment Payments due thereunder. Project means the real and/or personal property for the Series 2012 Issuers subject to the Series 2012 Issuers Agreements to be used for the Series 2012 Issuers purposes, as more particularly described in such Agreement. QSCB Agreement means an Installment Financing Agreement (QSCB) entered into between a Series 2012B Issuer and the Bank. QZAB Agreement means an Installment Financing Agreement (QZAB) entered into between a Series 2012A Issuer and the Bank. Registrar means The Bank of New York Mellon Trust Company, N.A. with a corporate trust office in Seattle, Washington, its successor, or any bank or trust company which may be substituted in its place as provided in the Master Trust Agreement. Series 2012A Certificates (QZAB) means the Oregon School Boards Association FlexFund Program, Certificates of Participation, Series 2012A (Qualified Zone Academy Bonds Federally Taxable Direct Payment), which are secured by a full faith and credit obligation of each Series 2012A Issuer through its respective QZAB Agreement. Series 2012B Certificates (QSCB) means the Oregon School Boards Association FlexFund Program, Certificates of Participation, Series 2012B (Qualified School Construction Bonds Federally Taxable Direct viii

9 Payment), which are secured by a full faith and credit obligation of each Series 2012B Issuer through its respective QSCB Agreement. Series 2012A Issuers means the school districts which have entered into QZAB Agreements, which QZAB Agreements are assigned to the Trustee pursuant to the Program. Series 2012B Issuers means the school districts which have entered into QSCB Agreements, which QSCB Agreements are assigned to the Trustee pursuant to the Program. Series 2012 Trustee means The Bank of New York Mellon Trust Company, N.A., with a corporate trust office in Seattle, Washington, its successor, or any bank or trust company which may be substituted in its place as provided in the Master Trust Agreement. Series of Certificates means all of the Certificates evidencing and representing an interest in Installment Payments scheduled to be paid by the District. Sponsor means the Oregon School Boards Association maintaining its principal office in Salem, Oregon. Subsidy Calculation Agreement means the Subsidy Calculation Agreement between each Series 2012 Issuer and the Series 2012 Trustee. Trust Estate means with respect to each Series of Certificates, the Agreements assigned to the Trustee by the Bank at the direction of the Underwriter for such Series of Certificates, the Installment Payments under said Agreements and any other moneys or payments realized from the foregoing. ix

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11 OFFICIAL STATEMENT $6,487,000 Oregon School Boards Association FlexFund Program $2,725,000 Series 2012A $3,762,000 Series 2012B (Qualified Zone Academy Bonds Federally Taxable Direct Payment) (Qualified School Construction Bonds Federally Taxable Direct Payment) All capitalized terms used in this Official Statement shall have the meanings set forth in Certain Definitions, herein. Capitalized terms not defined in Certain Definitions shall have the meanings assigned them in this text. The six Oregon school districts shown on page i of this Official Statement (collectively, the Series 2012 Issuers ) are furnishing this Official Statement to provide information in connection with the offering of $2,725,000 in aggregate principal amount of Series 2012A Certificates (QZAB) and $3,762,000 in aggregate principal amount of Series 2012B Certificates (QSCB) (collectively, the Series 2012 Certificates ). This Official Statement, which includes the cover page and appendices, provides information concerning the Series 2012 Issuers and the Series 2012 Certificates. Sponsor The Oregon School Boards Association ( OSBA ) is the sponsor of this pooled borrowing program (the Program ) for school districts, education service districts and community college districts. OSBA is not an issuer and does not have a financial obligation in connection with the Series 2012 Certificates issued under this program. OSBA is a non-profit association that was founded in 1946 and currently represents more than 1,400 locallyelected school and education service district board members. OSBA members also include board members from the State's 17 community colleges and representatives of the State Board of Education. OSBA is governed by a 22-member board of directors, which includes a five-member executive committee. Members at OSBA s annual meeting elect board members, nominated from each of Oregon s Congressional Districts. Principal Amount, Date, Interest Rates and Maturities Description of the Series 2012 Certificates The Series 2012 Certificates will be issued in the aggregate principal amount posted on the cover of this Official Statement and will be dated and bear interest from the Date of Delivery. The Series 2012 Certificates will mature on the dates and in the principal amounts and will bear interest (payable semiannually on December 30 and June 30, commencing December 30, 2012) at the respective rates as set forth on the inside front cover of this Official Statement. Interest on the Series 2012 Certificates will be computed on the basis of a 360-day year consisting of twelve 30- day months. Trustee and Registration Features Series 2012 Trustee. The principal of and interest on the Series 2012 Certificates will be payable by the Series 2012 Trustee, currently The Bank of New York Mellon Trust Company, N.A., to DTC which, in turn, is obligated to remit such principal and interest to its participants ( DTC Participants ) for subsequent disbursement to the Owners of the Series 2012 Certificates, described further in Appendix B attached hereto. The Series 2012 Trustee is required to perform only the duties specifically set forth in the Master Trust Agreement and there are no implied covenants to be read into the Master Trust Agreement against Series 2012 Trustee. The liability of the Series 2012 Trustee for actions taken or omitted to be taken under the Master Trust

12 Agreement is limited to its gross negligence or willful misconduct. The Series 2012 Trustee is entitled to rely in good faith on the statements or information contained in any document or instrument submitted to it in connection with the performance of its duties under the Master Trust Agreement. The Series 2012 Trustee is not required to recognize any person as an Owner of a Series 2012 Certificate unless the Series 2012 Certificate is submitted to the Series 2012 Trustee for inspection. The Series 2012 Trustee is not liable for any action taken or omitted to be taken by it in good faith and in accordance with the instructions of Owners of a majority in principle amount of the Series 2012 Certificates outstanding. The Series 2012 Trustee makes no representations or warranties, express or implied, regarding the Projects and except for the provisions of the preceding paragraphs of this section relating to the Series 2012 Trustee, the Series 2012 Trustee has no responsibility for any statements contained in this Official Statement, or the Agreements or any other documents described or referred to herein. All persons having any claim against the Series 2012 Trustee shall look only to the funds and accounts held by the Series 2012 Trustee under the Master Trust Agreement for payment or satisfaction. The Series 2012 Trustee has no individual liability for payment of the Series 2012 Certificates. Payment shall be made under the Master Trust Agreement only to the extent that the Series 2012 Trustee shall have received sufficient funds and income to make such payments. The Master Trust Agreement also provides that under the circumstances specified therein, the Series 2012 Trustee may require indemnity to its satisfaction and opinions of counsel before taking any action. Book-Entry System. The Series 2012 Certificates will be issued in fully registered form and, when issued, will be registered in the name of Cede & Co. as nominee for DTC. DTC will act as securities depository for the Series 2012 Certificates. Individual purchases and sales of the Series 2012A Certificates (QZAB) may be made in book-entry form only in minimum denominations of $5,000 within a single maturity and integral multiples thereof. Individual purchases of the Series 2012B Certificates (QSCB) will be made in book-entry form, in the denomination of $5,000 or any integral multiple thereof except for one piece of $2,000. Purchasers will not receive certificates representing their interest in the Series 2012 Certificates. See Appendix B attached hereto for additional information. Procedure in the Event of Revisions of Book-Entry Transfer System. If DTC resigns as the securities depository and the Series 2012 Issuers are unable to retain a qualified successor to DTC, or the Series 2012 Issuers have determined that it is in the best interest of the Series 2012 Issuers not to continue the book-entry system of transfer or that interests of the Owners of the Series 2012 Certificates might be adversely affected if the bookentry system of transfer is continued, the Series 2012 Issuers will cause the Series 2012 Trustee to authenticate and deliver to the Owners of the Series 2012 Certificates or their nominees, replacement Series 2012 Certificates in fully registered form, in the denomination of $5,000 or any integral multiple thereof within a maturity. Thereafter, the principal of the Series 2012 Certificates will be payable upon due presentment and surrender thereof at the principal office of the Series 2012 Trustee; interest on the Series 2012 Certificates will be delivered to the persons in whose names such Series 2012 Certificates are registered, at the address appearing upon the registration books on the 15th day of the month of an interest payment date, and the Series 2012 will be transferable as provided in the Master Trust Agreement. Qualified Zone Academy Bonds and Qualified School Construction Bonds Section 54A and 54E of the Internal Revenue Code of 1986, as amended (the Code ), authorizes school districts to issue tax-credit bonds known as Qualified Zone Academy Bonds to finance the rehabilitation or repair of a public school facility in which a qualified zone academy is located, the acquisition of equipment for such academy, developing course materials for education to be provided at such academy and training teachers and other school personnel in such academy. Section 54A and 54F of the Code authorizes school districts to issue tax-credit bonds known as Qualified School Construction Bonds to finance the construction, rehabilitation, or repair of a public school facility, the acquisition of land on which such a facility is to be constructed with the proceeds of the Qualified School Construction Bonds, and the acquisition of equipment for use in such a facility that is being constructed, rehabilitated, or repaired with the proceeds of such bonds. H.R. 2847, the Hiring Incentives to Restore Employment (HIRE) Act (the HIRE Act ) which was introduced and passed by the United States Congress and signed into law on March 18, 2010, allows an issuer of certain Qualified Zone Academy Bonds or Qualified School Construction Bonds issued after March 18, 2010 to elect to receive subsidy payments (each a Direct Payment ) from the federal government equal to the lesser of (i) the amount of interest payable under such bond on such date, or (ii) the amount of interest which would have been 2

13 payable under such bond on such date if such interest were determined at the applicable credit rate determined under section 54A(b)(3) of the Code with respect to such bond. The Series 2012A Issuers have irrevocably elected to designate the QZAB Agreements as Qualified Zone Academy Bonds and have additionally irrevocably elected to receive Direct Payments from the United States Treasury in connection therewith. The Series 2012B Issuers have irrevocably elected to designate the QSCB Agreements as Qualified School Construction Bonds and have additionally irrevocably elected to receive Direct Payments from the United States Treasury in connection therewith. The interest on the Series 2012 Certificates will not be excludable from gross income for federal income tax purposes. See Tax Matters herein. The Direct Payments will be paid directly to the Series 2012 Trustee and will be used to pay debt service on the Series 2012 Certificates. The Direct Payments are also pledged as security on the Series 2012 Certificates. No holders of any Series 2012 Certificates are entitled to such Direct Payments or to receive a tax credit with respect to the Series 2012 Certificates. Under Section 6431(f) of the Code, an issuer of certain types of tax credit bonds ( Specified Tax Credit Bonds ), including certain Qualified Zone Academy Bonds and Qualified School Construction Bonds, may apply to receive Direct Payments described above directly from the Secretary of the U.S. Treasury (the Secretary ). To receive a Direct Payment under currently existing procedures, issuers or an agent on behalf of an issuer, have to file a tax form (now designated as Form 8038-CP) between 90 and 45 days prior to the corresponding interest payment date. The Direct Payments are expected to be received contemporaneously with the interest payment date with respect to the Specified Tax Credit Bond. Depending on the timing of the filing and other factors, the Direct Payment may be received before or after the corresponding interest payment date. The Series 2012 Issuers Subsidy Calculation Agreements with the Series 2012 Trustee provide that the Series 2012 Trustee will file the Form 8038-CP and accept the Direct Payments on the Series 2012 Issuers behalf. Such Direct Payments will be used for the repayment of the Series 2012 Certificates. No assurances are provided that the Series 2012 Issuers or the Series 2012 Trustee on the Series 2012 Issuers behalf will receive the Direct Payment on a timely basis or in amount sufficient to make the interest payment when due. The amount of any Direct Payment is subject to legislative changes by Congress. Direct Payments will only be paid if the Series 2012 Certificates are Specified Tax Credit Bonds. For the Series 2012 Certificates to be and remain Specified Tax Credit Bonds, the Series 2012 Issuers must comply with certain covenants and the Series 2012 Issuers must establish certain facts and expectations with respect to the Series 2012 Certificates, the use and investment of proceeds thereof and the use of property financed thereby. Also, Direct Payments are subject to offset against certain amounts that may, for unrelated reasons, be owed by a Series 2012 Issuer to a unit of the state or federal government. Each Series 2012 Issuer agrees that the debt service payments are the responsibility of the Series 2012 Issuer. To the extent the Intercept Payments, when added to the Direct Payments, are not received by the Series 2012 Trustee on a timely basis, or in a sum sufficient to make the debt service payments in full when due, the Series 2012 Issuers shall make payments from any legally available funds in sufficient amounts to make the debt service payments in full when due. Redemption Series 2012A Certificates (QZAB) Optional Redemption. The Series 2012A Issuers reserve the right and option to redeem the Series 2012A Certificates (QZAB) prior to maturity, as a whole or in part, on any business day, at the Make-Whole Redemption Price (as defined below) determined by an independent accounting firm, investment banking firm or financial advisor retained by a Series 2012A Issuer at the Series 2012A Issuer s expense to calculate such redemption price. Make-Whole Redemption Price means, with respect to any redemption date for a particular Series 2012A Certificate (QZAB), the greater of (i) the issue price (but not less than 100% of the principal amount of the Series 2012A Certificates (QZAB) to be redeemed); or (ii) the sum of the present values of the remaining scheduled payments of principal of and interest on the Series 2012A Certificates (QZAB) to be redeemed (taking into account mandatory sinking fund redemptions on a proportionate basis), not including any portion of those payments of interest accrued and unpaid as of the date on which the Series 2012A Certificates (QZAB) are to be 3

14 redeemed, discounted to the date on which such Series 2012A Certificates (QZAB) are to be redeemed on a semi-annual basis, assuming a 360-day year consisting of twelve 30-day months, at the Comparable Treasury Yield (defined below) plus 50 basis points, plus accrued and unpaid interest on the Series 2012A Certificates (QZAB) to be redeemed to the redemption date. Comparable Treasury Yield means the yield which represents the weekly average yield to maturity for the preceding week appearing in the most recently published Federal Reserve Statistical Release designated H.15(519) Selected Interest Rates under the heading Treasury Constant Maturities, (or, if such Statistical Release is no longer published, any publicly available source of similar market data) for the maturity corresponding to the remaining term to maturity of the Series 2012A Certificate (QZAB) being redeemed. The Comparable Treasury Yield will be determined as of the date that is no earlier than four business days prior to the date the redemption notice is mailed. If the H.15(519) statistical release sets forth a weekly average yield for United States Treasury securities that have a constant maturity that is the same as the remaining term to maturity of the Series 2012A Certificate (QZAB) being redeemed, then the Comparable Treasury Yield will be equal to such weekly average yield. In all other cases, the Comparable Treasury Yield will be calculated by interpolation on a straight-line basis, between the weekly average yields on the United States Treasury securities that have a constant maturity (a) closest to and greater than the remaining term to maturity of the Series 2012A Certificate (QZAB) being redeemed; and (b) closest to and less than the remaining term to maturity of the Series 2012A Certificate (QZAB) being redeemed. Any weekly average yields calculated by interpolation will be rounded to the nearest 1/100th of 1%, with any figure of 1/200th of 1% or above being rounded upward. Special Mandatory Redemption of the Series 2012A Certificates (QZAB) from Unexpended Proceeds. The principal component of the 2012A Installment Payments shall be subject to special mandatory redemption if any proceeds of a QZAB Agreement (including investment earnings) have not been spent within three years from the Date of Delivery, or any extension period granted by the Secretary of the Treasury. The Series 2012A Certificates (QZAB) will be redeemed in an amount equal to the unexpended proceeds (including investment earnings) of the QZAB Agreements, plus any additional amounts which in the opinion of Certificate Counsel are necessary to maintain the status of the Series 2012A Certificates (QZAB) as Qualified Zone Academy Bonds, in whole or in part, in authorized denominations, at a price of par, plus accrued interest, if any, on or before three years from the Date of Delivery, or the end of any extension period granted by the Secretary of the Treasury. Extraordinary Optional Redemption of the Series 2012A Certificates (QZAB). The Series 2012A Issuers additionally reserve the right and option to redeem the Series 2012A Certificates (QZAB) prior to their stated maturity date at any time on, as a whole or in part, on any business day, upon the occurrence of an Extraordinary Event, at the Extraordinary Optional Redemption Price. An Extraordinary Event will have occurred if a Series 2012A Issuer determines that a material adverse change has occurred to Sections 54A, 54E or 6431 of the Code or there is any guidance published by the IRS or the United States Department of the Treasury with respect to such sections or any other determination by the IRS or the United States Department of the Treasury, which determination is not the result of any act or omission by the Series 2012A Issuer to satisfy the requirements to qualify to receive the Direct Payments, pursuant to which the Series 2012A Issuer s Direct Payments are reduced or eliminated. Extraordinary Optional Redemption Price means the greater of (i) the issue price (but not less than 100%) of the principal amount of the Series 2012A Certificates (QZAB) to be redeemed, or (ii) the sum of the present values of the remaining scheduled payments of principal of and interest on the Series 2012A Certificates (QZAB) to be redeemed (taking into account any mandatory sinking fund redemptions on a proportionate basis), not including any portion of those payments of interest accrued and unpaid as of the date on which the Series 2012A Certificates (QZAB) are so redeemed, discounted to the date on which the Series 2012A Certificates (QZAB) are to be redeemed, on a semi-annual basis, assuming a 360-day year consisting of twelve 30-day months, at the Comparable Treasury Yield plus 100 basis points plus accrued and unpaid interest on the Series 2012A Certificates (QZAB) to be redeemed to the redemption date. 4

15 The Extraordinary Optional Redemption Price shall be determined by an independent accounting firm, investment banking firm or financial advisor retained by a Series 2012A Issuer at the Series 2012A Issuer s expense prior to the date the redemption notice is mailed. Series 2012B Certificates (QSCB) Optional Redemption. The Series 2012B Issuers reserves the right and option to redeem the Series 2012B Certificates (QSCB) prior to maturity, as a whole or in part, on any business day, at the Make-Whole Redemption Price (as defined below) determined by an independent accounting firm, investment banking firm or financial advisor retained by a Series 2012B Issuer at the Series 2012B Issuer s expense to calculate such redemption price. Make-Whole Redemption Price means, with respect to any redemption date for a particular Series 2012B Certificate (QSCB), the greater of (i) the issue price (but not less than 100% of the principal amount of the Series 2012B Certificates (QSCB) to be redeemed); or (ii) the sum of the present values of the remaining scheduled payments of principal of and interest on the Series 2012B Certificates (QSCB) to be redeemed (taking into account mandatory sinking fund redemptions on a proportionate basis), not including any portion of those payments of interest accrued and unpaid as of the date on which the Series 2012A Certificates (QSCB) are to be redeemed, discounted to the date on which such Series 2012B Certificates (QSCB) are to be redeemed on a semi-annual basis, assuming a 360-day year consisting of twelve 30-day months, at the Comparable Treasury Yield (defined below) plus 50 basis points, plus accrued and unpaid interest on the Series 2012B Certificates (QSCB) to be redeemed to the redemption date. Comparable Treasury Yield means the yield which represents the weekly average yield to maturity for the preceding week appearing in the most recently published Federal Reserve Statistical Release designated H.15(519) Selected Interest Rates under the heading Treasury Constant Maturities, (or, if such Statistical Release is no longer published, any publicly available source of similar market data) for the maturity corresponding to the remaining term to maturity of the Series 2012B Certificate (QSCB) being redeemed. The Comparable Treasury Yield will be determined as of the date that is no earlier than four business days prior to the date the redemption notice is mailed. If the H.15(519) statistical release sets forth a weekly average yield for United States Treasury securities that have a constant maturity that is the same as the remaining term to maturity of the Series 2012B Certificate (QSCB) being redeemed, then the Comparable Treasury Yield will be equal to such weekly average yield. In all other cases, the Comparable Treasury Yield will be calculated by interpolation on a straight-line basis, between the weekly average yields on the United States Treasury securities that have a constant maturity (a) closest to and greater than the remaining term to maturity of the Series 2012B Certificate (QSCB) being redeemed; and (b) closest to and less than the remaining term to maturity of the Series 2012B Certificate (QSCB) being redeemed. Any weekly average yields calculated by interpolation will be rounded to the nearest 1/100th of 1%, with any figure of 1/200th of 1% or above being rounded upward. Special Mandatory Redemption of the Series 2012B Certificates (QSCB) from Unexpended Proceeds. The principal component of the 2012B Installment Payments shall be subject to special mandatory redemption if any proceeds of a QSCB Agreement (including investment earnings) have not been spent within three years from the Date of Delivery, or any extension period granted by the Secretary of the Treasury. The Series 2012B Certificates (QSCB) will be redeemed in an amount equal to the unexpended proceeds (including investment earnings) of the QSCB Agreements, plus any additional amounts which in the opinion of Certificate Counsel are necessary to maintain the status of the Series 2012B Certificates (QSCB) as Qualified School Construction Bonds, in whole or in part, in authorized denominations, at a price of par, plus accrued interest, if any, on or before three years from the Date of Delivery, or the end of any extension period granted by the Secretary of the Treasury. Extraordinary Optional Redemption of the Series 2012B Certificates (QSCB). The Series 2012B Issuers additionally reserve the right and option to redeem the Series 2012B Certificates (QSCB) prior to their stated maturity date at any time on, as a whole or in part, on any business day, upon the occurrence of an Extraordinary Event, at the Extraordinary Optional Redemption Price. An Extraordinary Event will have occurred if a Series 2012B Issuer determines that a material adverse change has occurred to Sections 54A, 54F or 6431 of the Code or there is any guidance published by the IRS or the United States Department of the Treasury with respect to such sections or any other determination by the 5

16 IRS or the United States Department of the Treasury, which determination is not the result of any act or omission by the Series 2012B Issuer to satisfy the requirements to qualify to receive the Direct Payments, pursuant to which the Series 2012B Issuer s Direct Payments are reduced or eliminated. Extraordinary Optional Redemption Price means the greater of (i) the issue price (but not less than 100%) of the principal amount of the Series 2012B Certificates (QSCB) to be redeemed, or (ii) the sum of the present values of the remaining scheduled payments of principal of and interest on the Series 2012B Certificates (QSCB) to be redeemed (taking into account any mandatory sinking fund redemptions on a proportionate basis), not including any portion of those payments of interest accrued and unpaid as of the date on which the Series 2012B Certificates (QSCB) are so redeemed, discounted to the date on which the Series 2012B Certificates (QSCB) are to be redeemed, on a semi-annual basis, assuming a 360-day year consisting of twelve 30-day months, at the Comparable Treasury Yield plus 100 basis points plus accrued and unpaid interest on the Series 2012B Certificates (QSCB) to be redeemed to the redemption date. The Extraordinary Optional Redemption Price shall be determined by an independent accounting firm, investment banking firm or financial advisor retained by a Series 2012B Issuer at the Series 2012B Issuer s expense prior to the date the redemption notice is mailed. Notice of Redemption (Book-Entry). So long as the Series 2012 Certificates are in book-entry only form, the Series 2012 Trustee shall notify DTC of an early redemption no fewer than 20 calendar days nor more than 60 calendar days prior to the date fixed for redemption, and shall provide such information as required by a letter of representation submitted to DTC in connection with the issuance of the Series 2012 Certificates. Notice of Redemption (No Book-Entry). During any period in which the Series 2012 Certificates are not in bookentry only form, unless waived by any Owner of the Series 2012 Certificates to be redeemed, official notice of any redemption of Series 2012 Certificates shall be given by the Series 2012 Trustee on behalf of the Series 2012 Issuers by mailing a copy of an official redemption notice by first class mail, postage prepaid, no fewer than 20 calendar days nor more than 60 calendar days prior to the date fixed for redemption, to the Owners of the Series 2012 Certificates to be redeemed at the address shown on the bond register or at such other address as is furnished in writing by such Owner to the Series 2012 Trustee. Conditional Notice of Redemption. Any notice of optional redemption may state that the optional redemption is conditional upon receipt by the Series 2012 Trustee of moneys sufficient to pay the redemption price of the Series 2012 Certificates that are to be redeemed or upon the satisfaction of any other condition, and/or that such notice may be rescinded upon the occurrence of any other event, and any conditional notice so given may be rescinded at any time before payment of such redemption price if any such condition so specified is not satisfied or if any such other event occurs. Notice of such rescission or of the failure of any such condition shall be given by the Series 2012 Trustee to affected owners of Series 2012 Certificates as promptly as practicable upon the failure of such condition or the occurrence of such other event. Authorization for Issuance The Series 2012 Issuers are authorized pursuant to the Constitution and laws of the State, namely, Oregon Revised Statutes ( ORS ) Section , to enter into financing agreements, lease-purchase agreements or other contracts of purchase to finance or refinance real or personal property and to authorize certificates of participation in the payment obligations of the Series 2012 Issuers under such financing agreements, leasepurchase agreements or other contracts of purchase. Under and in accordance with the laws and provisions of the State, each Series 2012 Issuer s Board of Directors adopted a resolution (collectively, the Resolutions ) that authorized each Series 2012 Issuer to enter into an Agreement for the execution and delivery of their respective portions of the Series 2012 Certificates. Such execution and delivery of the Series 2012 Certificates does not require a vote of the people. The table below details the dates each Series 2012 Issuer approved their respective authorizing resolution. 6

17 The Resolutions Series 2012A Issuer Resolution No. Resolution Adopted Par Amount 1. Coquille School District No December 12, 2011 $ 1,025, Myrtle Point School District No December 12, , Rainier School District No December 12, ,200,000 Series 2012B Issuer 1. Corbett School District No December 14, 2011 $ 1,000, Klamath County School District December 9, ,412, South Umpqua School District No December 14, ,000 Source: The Series 2012 Issuers. Pursuant to the Resolutions, the Series 2012 Issuers have pledged to use all of their respective general nonrestricted revenues and other funds which may be available, including any taxes levied within the restrictions of Sections 11 and 11b, Article XI of the Constitution of the State of Oregon ( Article XI, Sections 11 and 11b ) to generate funds sufficient to make all Installment Payments. Purpose Purpose and Use of Proceeds The proceeds of the Series 2012 Certificates are expected to be used to finance the following Projects of the Series 2012 Issuers: The Projects Series 2012A Issuer Project 1. Coquille School District No. 8 Roof replacement & improvements at various school facilities 2. Myrtle Point School District No. 41 Various improvements at the elementary & high schools 3. Rainier School District No. 13 Energy efficiency improvements to school facilities Series 2012B Issuer 1. Corbett School District No. 39 Springdale school remodeling 2. Klamath County School District Various capital improvements & renovations at several school facilities 3. South Umpqua School District No. 19 Replace windows at elementary & middle schools Source: The Series 2012 Issuers. In addition, up to 2% of the par amount of each Series 2012 Issuer s Agreement may be applied toward the payment of certain issuance fees and expenses, including, but not limited to, fees of Certificate Counsel, Series 2012 Trustee, the Oregon School Boards Association, the rating agency, the Underwriter, and the costs of printing and distributing the preliminary and final Official Statement. Issuance fees exceeding the 2% limitation will be paid by the Series 2012 Issuers from cash on hand. 7