$27,000,000 LIVERMORE VALLEY JOINT UNIFIED SCHOOL DISTRICT (ALAMEDA COUNTY, CALIFORNIA) GENERAL OBLIGATION BONDS, ELECTION OF 1999, SERIES 2006

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1 NEW ISSUE S&P Underlying Rating: A+ DTC BOOK-ENTRY ONLY Insured Rating: AAA See RATING herein In the opinion of Jones Hall, A Professional Law Corporation, San Francisco, California, Bond Counsel, subject, however to certain qualifications described herein, under existing law, the interest on the Bonds is excluded from gross income for federal income tax purposes and such interest is not an item of tax preference for purposes of the federal alternative minimum tax imposed on individuals and corporations, although for the purpose of computing the alternative minimum tax imposed on certain corporations, such interest is taken into account in determining certain income and earnings. In the further opinion of Bond Counsel, such interest is exempt from California personal income taxes. See LEGAL MATTERS herein. $27,000,000 LIVERMORE VALLEY JOINT UNIFIED SCHOOL DISTRICT (ALAMEDA COUNTY, CALIFORNIA) GENERAL OBLIGATION BONDS, ELECTION OF 1999, SERIES 2006 DATED: Date of Delivery DUE: August 1, as shown below The Livermore Valley Joint Unified School District General Obligation Bonds, Election of 1999, Series 2006 (the Series 2006 Bonds or Bonds ), in the aggregate principal amount of $27,000,000 are being issued in order to raise money for authorized school purposes. See INTRODUCTORY STATEMENT herein. The Bonds are payable from the proceeds of ad valorem property taxes which the Board of Supervisors of Alameda County is obligated to levy and collect without limitation as to rate or amount on all taxable property in the District (except for certain personal property which is taxable at limited rates), on behalf of the District for the payment of the Bonds. See " SECURITY AND SOURCE OF PAYMENT Security for Payment" herein. The Bonds are being issued as fully registered bonds, without coupons, and when delivered will be registered in the name of Cede & Co., as nominee of The Depository Trust Company, New York, New York ( DTC ). DTC will act as securities depository for the Bonds. Individual purchases of the Bonds will be made in book-entry-only form and only in authorized denominations, as described in this Official Statement. So long as Cede & Co. is the registered owner of the Bonds, principal of and interest on the Bonds will be payable to Cede & Co., as nominee for DTC, which is obligated to remit such amounts to the DTC Participants for subsequent disbursement to the Owners of the Bonds. See THE BONDS DTC Book-Entry Only herein. Interest on the Bonds is first payable on August 1, 2007, and semiannually thereafter on February 1 and August 1 of each year. See THE BONDS herein. The Bonds are subject to redemption prior to maturity. See "THE BONDS Redemptions Provisions" herein. The scheduled payment of principal of and interest on the Bonds when due will be guaranteed under an insurance policy to be issued concurrently with the delivery of the Bonds by MBIA Insurance Corporation. THIS COVER PAGE CONTAINS CERTAIN INFORMATION FOR QUICK REFERENCE ONLY. IT IS NOT INTENDED TO BE A SUMMARY OF ALL FACTORS RELEVANT TO AN INVESTMENT IN THE BONDS. INVESTORS SHOULD READ THE ENTIRE OFFICIAL STATEMENT TO OBTAIN INFORMATION ESSENTIAL TO THE MAKING OF AN INFORMED INVESTMENT DECISION. CAPITALIZED TERMS USED ON THIS COVER PAGE NOT OTHERWISE DEFINED WILL HAVE THE MEANINGS SET FORTH HEREIN. Maturity Date August 1 Principal Amount Coupon Interest Rate MATURITY SCHEDULE Reoffering Price or Yield Maturity Date August 1 Principal Amount Coupon Interest Rate Reoffering Price or Yield 2009 $ 610, % 3.650% 2019 $ 1,045, % 4.400% , ,105, , ,165, , ,230, , ,295, , ,365, , ,440, C , C ,520, C , ,605, C , ,695, $5,655, % Term Bond due August 1, 2031; Priced at Par Pursuant to the terms of a public sale held on July 12, 2006, the Bonds were awarded to Morgan Stanley DW Inc., as Underwriter of the Bonds. The Bonds will be offered when, as and if issued by the District and received by the Underwriter, subject to approval as to legality by Jones Hall, A Professional Law Corporation, San Francisco, California, Bond Counsel. It is anticipated that the Bonds, in definitive form, will be available for delivery through the facilities of DTC in New York, New York on or about August 1, C= Priced to call August 1, This Official Statement Is Dated July 12, 2006

2 NO DEALER, BROKER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED BY THE DISTRICT TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS, OTHER THAN THOSE CONTAINED HEREIN, AND IF GIVEN OR MADE, SUCH OTHER INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE DISTRICT. THIS OFFICIAL STATEMENT DOES NOT CONSTITUTE AN OFFER TO SELL NOR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THE BONDS BY A PERSON IN ANY JURISDICTION IN WHICH IT IS UNLAWFUL FOR SUCH PERSON TO MAKE AN OFFER, SOLICITATION OR SALE. THIS OFFICIAL STATEMENT IS NOT TO BE CONSTRUED AS A CONTRACT WITH THE PURCHASERS OF THE BONDS. STATEMENTS CONTAINED IN THIS OFFICIAL STATEMENT WHICH INVOLVE ESTIMATES, PROJECTIONS, FORECASTS OR MATTERS OF OPINION, WHETHER OR NOT EXPRESSLY SO DESCRIBED HEREIN, ARE INTENDED SOLELY AS SUCH AND ARE NOT TO BE CONSTRUED AS REPRESENTATIONS OF FACT. THE INFORMATION AND EXPRESSIONS OF OPINION HEREIN ARE SUBJECT TO CHANGE WITHOUT NOTICE AND NEITHER 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 DISTRICT SINCE THE DATE HEREOF. THIS OFFICIAL STATEMENT IS SUBMITTED WITH RESPECT TO THE SALE OF THE BONDS REFERRED TO HEREIN AND MAY NOT BE REPRODUCED OR USED, IN WHOLE OR IN PART, FOR ANY OTHER PURPOSE, UNLESS AUTHORIZED IN WRITING BY THE DISTRICT. ALL SUMMARIES OF DOCUMENTS AND LAWS CONTAINED HEREIN ARE MADE SUBJECT TO THE COMPLETE PROVISIONS AND DO NOT PURPORT TO BE COMPLETE STATEMENTS OF ANY OR ALL SUCH PROVISIONS. IN MAKING AN INVESTMENT DECISION INVESTORS MUST RELY ON THEIR OWN EXAMINATION OF THE DISTRICT AND THE TERMS OF THE OFFERING, INCLUDING THE MERITS AND RISKS INVOLVED. THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS OFFICIAL STATEMENT. THE ISSUANCE AND SALE OF THE BONDS HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AS AMENDED, IN RELIANCE UPON AN EXEMPTION PROVIDED THEREUNDER BY SECTION 3(a)2 FOR THE ISSUANCE AND SALE OF MUNICIPAL SECURITIES. IN CONNECTION WITH THIS OFFERING, THE UNDERWRITER MAY OVER-ALLOT OR EFFECT TRANSACTIONS THAT STABILIZE OR MAINTAIN MARKET PRICES OF THE BONDS OFFERED HEREBY AT LEVELS ABOVE THOSE WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME. THE UNDERWRITER MAY OFFER AND SELL THE BONDS TO CERTAIN DEALERS, INSTITUTIONAL INVESTORS, BANKS OR OTHERS AT PRICES LOWER OR HIGHER THAN THE PUBLIC OFFERING PRICES OR YIELDS STATED ON THE COVER PAGE HEREOF AND SAID PUBLIC OFFERING PRICES OR YIELDS MAY BE CHANGED FROM TIME TO TIME BY THE UNDERWRITER. CUSIP Numbers Maturity Date August 1 CUSIP Number Maturity Date August 1 CUSIP Number ZS ZT A ZU A ZV A ZW A ZX A ZY B ZZ B A B A B A B69 ii

3 $27,000,000 LIVERMORE VALLEY JOINT UNIFIED SCHOOL DISTRICT (ALAMEDA COUNTY, CALIFORNIA) GENERAL OBLIGATION BONDS ELECTION OF 1999, SERIES 2006 BOARD OF EDUCATION Julie Orvis, President William Dunlop, Clerk William Morrison, Member Thomas McLaughlin, Member Anne White, Member ADMINISTRATION Brenda Miller, Superintendent Robert Bronzan, Deputy Superintendent of Administrative Services Susan Kinder, Director of Fiscal Services Yolonda Holmes, Director of Human Resources Kelly Bowers, Director of Curriculum & Special Projects Floyd Wilson, Director of Facilities Bob See, Director of Student Services & Special Education Livermore Valley Joint Unified School District 685 East Jack London Blvd Livermore, California (925) FINANCIAL ADVISOR Government Financial Strategies inc N Street, Suite Thirteen Sacramento, California (916) BOND COUNSEL Jones Hall A Professional Law Corporation 650 California Street, 18th Floor San Francisco, California (415) PAYING AGENT U.S. Bank National Association One California Street, Suite 2550 San Francisco, CA (415) iii

4 $27,000,000 LIVERMORE VALLEY JOINT UNIFIED SCHOOL DISTRICT (ALAMEDA COUNTY, CALIFORNIA) GENERAL OBLIGATION BONDS ELECTION OF 1999, SERIES 2006 TABLE OF CONTENTS iv Page # INTRODUCTORY STATEMENT... 1 The District... 1 Description of the Bonds... 1 Authority for Issuance... 2 Security for the Bonds... 2 Bond Insurance... 2 Purpose of Issue... 2 Tax Matters... 2 Professionals Involved... 2 Other Information... 2 THE BONDS... 4 Authority for Issuance... 4 General Obligation Bond Election of Description of the Bonds... 4 Payment of Principal and Interest... 5 Redemption Provisions... 5 Sources and Uses of Funds... 7 Debt Service Schedule... 8 DTC Book-Entry Only... 9 FINANCIAL GUARANTY INSURANCE POLICY The Policy COUNTY POOLED INVESTMENT FUND SECURITY AND SOURCE OF PAYMENT Security for Payment Ad Valorem Property Taxation Taxation of State-Assessed Utility Property Property Taxes Alternative Method of Tax Apportionment Historical Assessed Valuation Major Taxpayers Local Economy, Workforce, and Major Employers of the County County Unemployment Transfer of Territory LIVERMORE VALLEY JOINT UNIFIED SCHOOL DISTRICT General Information The Board of Education and Key Administrative Personnel Population and Relevant Age Data... 20

5 Average Daily Attendance Charter School Employee Relations Pension Plans Other Post-Employment Benefits Special Tax - Measure D SCHOOL DISTRICT FINANCIAL INFORMATION Accounting Practices Budget and Financial Reporting Process Financial Statements Revenues Expenditures Short Term Borrowings Capitalized and Bonded Lease Obligation Long Term Bonded Indebtedness Direct and Overlapping Bonded Debt STATE FUNDING OF PUBLIC EDUCATION Revenue for Public Education Distribution of Revenue for School Districts The State Budget The State Budget Future Budgets CONSTITUTIONAL & STATUTORY PROVISIONS AFFECTING DISTRICT REVENUES & EXPENDITURES LEGAL MATTERS No Litigation Legal Opinion Tax Matters Legality for Investment RATING FINANCIAL ADVISOR INDEPENDENT AUDITORS UNDERWRITING AND INITIAL OFFERING PRICE CONTINUING DISCLOSURE ADDITIONAL INFORMATION APPENDIX A EXCERPTS FROM THE GENERAL PURPOSE FINANCIAL STATEMENTS OF THE DISTRICT AS OF AND FOR THE YEAR ENDING JUNE 30, 2005 APPENDIX B FORM OF CONTINUING DISCLOSURE CERTIFICATE APPENDIX C PROPOSED FORM OF OPINION OF BOND COUNSEL APPENDIX D FORM OF FINANCIAL GUARANTY INSURANCE POLICY v

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7 OFFICIAL STATEMENT $27,000,000 LIVERMORE VALLEY JOINT UNIFIED SCHOOL DISTRICT (ALAMEDA COUNTY, CALIFORNIA) GENERAL OBLIGATION BONDS ELECTION OF 1999, SERIES 2006 INTRODUCTORY STATEMENT The purpose of this Official Statement is to provide certain information concerning the sale and delivery of the Livermore Valley Joint Unified School District General Obligation Bonds, Election of 1999, Series 2006 (the Bonds ). This introduction is not a summary of this Official Statement. It is only a brief description of and guide to this Official Statement. This Introductory Statement is qualified by more complete and detailed information contained in the entire Official Statement, including the Cover Page and attached Appendices hereto, and the documents summarized or described herein. A full review should be made of the entire Official Statement by prospective investors in the Bonds. The offering of the Bonds to prospective investors is made only by means of the entire Official Statement. The District The District includes approximately 250 square miles, primarily in Alameda County (the County ), with 22 square miles in Contra Costa County. The District provides education (K - 12) services to the residents of the City of Livermore (the City ) and unincorporated parts of Alameda and Contra Costa counties. The District currently operates 10 elementary schools, four middle schools, two high schools, two continuation high schools and one alternative school. The District s total enrollment is approximately 13,561. The estimated number of residents within the District s boundaries is 83,939. For more complete information concerning the District, see LIVERMORE VALLEY JOINT UNIFIED SCHOOL DISTRICT herein. The District s audited financial statements for the fiscal year ended June 30, 2005 are included in APPENDIX A. Description of the Bonds The Bonds will be issued as current interest bonds. The Bonds will be dated their date of delivery (the Dated Date ) and will be issued as fully registered bonds, without coupons, in the denominations of $5,000 or any integral multiple thereof. The Bonds will mature on August 1 in the years indicated on the cover page of this Official Statement. See THE BONDS for further information. Interest on the Bonds will be paid each February 1 and August 1 (each an Interest Payment Date ), commencing August 1, The Bonds are subject to optional redemption prior to maturity. See THE BONDS Redemption Provisions. The Bonds will be issued in fully registered form only, registered in the name of Cede & Co, as nominee of The Depository Trust Company, New York, New York ( DTC ), and will be available to actual purchasers of the Bonds (the Beneficial Owners ), under the book-entry system maintained by DTC, only through brokers and dealers who are or act through DTC Participants as described herein. Beneficial Owners will not be entitled to receive physical delivery of the Bonds. See THE BONDS DTC Book-Entry-Only

8 Authority for Issuance The Bonds represent the fifth series of bonds authorized at an election held in the Livermore Valley Joint Unified School District (the District ) on March 2, 1999, whereby 82% of the qualified voters within the boundaries of the District voted to authorize the issuance of $150,000,000 aggregate principal amount of general obligation bonds. The Bonds are being issued by the District under and pursuant to the provisions of Title 1, Division 1, Part 10, Chapter 1 of the State of California Education Code, commencing with Section 15100, and all laws amendatory thereof or supplemental thereto insofar as they govern. The Board of Supervisors of the County has authorized school districts in the County to issue and sell bonds directly, without participation of County officers, pursuant to Education Code Section 15140(b). Security for the Bonds The Bonds represent a general obligation of the District payable from certain tax levies. The Board of Supervisors of the County has the power and is obligated to annually levy ad valorem taxes for the payment of the Bonds and the interest thereon upon all property within the District subject to taxation without limitation of rate or amount (except certain personal property which is taxable at limited rates). See SECURITY AND SOURCE FOR PAYMENT - Security for Payment herein. Bond Insurance The decision as to whether or not to buy bond insurance, and from which bond insurer the insurance policy will be purchased, will be determined by the underwriter at the time of the sale of the bonds. Purpose of Issue The net proceeds of the Bonds will be used to finance improvements to certain school facilities as approved by the voters at an election held on March 2, See THE BONDS General Obligation Bond Election of 1999 and THE BONDS Sources And Uses Of Funds. Tax Matters In the opinion of Jones Hall, A Professional Law Corporation, San Francisco, California, Bond Counsel, subject, however to the qualifications set forth below, under existing law, the interest on the Bonds is excluded from gross income for federal income tax purposes and such interest is not an item of tax preference for purposes of the federal alternative minimum tax imposed on individuals and corporations, provided, however, that, for the purpose of computing the alternative minimum tax imposed on corporations (as defined for federal income tax purposes), such interest is taken into account in determining certain income and earnings. See LEGAL MATTERS. Professionals Involved Government Financial Strategies inc., Sacramento, California has acted as Financial Advisor with respect to the sale and delivery of the Bonds. See FINANCIAL ADVISOR herein. All proceedings in connection with the issuance of the Bonds are subject to the approving legal opinion of Jones Hall, A Professional Law Corporation, San Francisco, California, Bond Counsel to the District with respect to the Bonds. U.S. Bank National Association will act as Paying Agent with respect to the Bonds. Jones Hall, A Professional Law Corporation and U.S. Bank National Association will receive compensation from the District contingent upon the sale and delivery of the Bonds. Other Information This Official Statement speaks only as of its date, and the information contained herein is subject to change. Copies of documents referred to herein and information concerning the Bonds are available, upon request, and upon payment of a charge for copying, - 2 -

9 mailing and handling, from the District at the address and telephone set forth on page iii of this Official Statement. This Official Statement is not to be construed as a contract with the purchasers of the Bonds. Statements contained in this Official Statement which involve estimates, forecasts or matters of opinion, whether or not expressly so described herein, are intended solely as such and are not to be construed as representations of fact. The summaries and references to documents, statutes and constitutional provisions referred to herein do not purport to be comprehensive or definitive, and are qualified in their entireties by reference to each of such documents, statutes and constitutional provisions. The information from sources other than the District set forth herein has been obtained from sources which are believed to be reliable but it is not guaranteed as to accuracy or completeness, and is not to be construed as a representation by the District. The information and expressions of opinions herein are subject to change without notice and neither 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 District since the date hereof. This Official Statement is submitted in connection with the sale of the Bonds referred to herein and may not be reproduced or used, in whole or in part, for any other purpose. [The remainder of this page intentionally left blank] - 3 -

10 THE BONDS Authority for Issuance The Bonds represent the fifth series of bonds authorized at an election held in the Livermore Valley Joint Unified School District (the District ) on March 2, 1999, whereby 82% of the qualified voters within the boundaries of the District voted to authorize the issuance of $150,000,000 aggregate principal amount of general obligation bonds. The Bonds are being issued by the District under and pursuant to the provisions of Title 1, Division 1, Part 10, Chapter 1 of the State of California Education Code, commencing with Section 15100, and all laws amendatory thereof or supplemental thereto insofar as they govern. The Board of Supervisors of the County has authorized school districts in the County to issue and sell bonds directly, without participation of County officers, pursuant to Education Code Section 15140(b). General Obligation Bond Election of 1999 Pursuant to provisions of the State of California Education Code and the State of California Elections Code (collectively, the Law ), the Board of Education (the District Board ) of the Livermore Valley Joint Unified School District (the District ), located within Alameda and Contra Costa Counties, California, adopted a resolution ordering a school bond election for the purpose of authorizing the issuance of $150,000,000 aggregate principal amount of general obligation bonds. On March 2, 1999, at an election duly held pursuant to the Law, more than two-thirds of the qualified voters within the boundaries of the District voted to approve Measure L, as follows: To enable the Livermore Valley Joint Unified School District to improve the health and safety conditions of the District s facilities, including the renovation of roofing, heating, plumbing and air-conditioning systems, the acquisition and construction of a new library and community center, and the acquisition, renovation, and construction of other necessary facilities, shall the District be authorized to issue bonds in the amount of not to exceed $150 million with an interest rate not to exceed the legal limit? The Registrar of Voters of the County of Alameda (the County ) certified the results of the election as follows: Results Of March 2, 1999 Municipal Bond Election Livermore Valley Joint Unified School District Yes No Total Total Votes Cast 7,793 1,697 9,490 Percentage 82.12% 17.88% % Source: Registrar of Voters, Alameda County, California Description of the Bonds The Bonds are being issued as fully registered bonds, without coupons, and when delivered will be registered in the name of Cede & Co., as nominee of The Depository Trust Company, New York, New York (the DTC ). DTC will act as securities depository for the Bonds. Individual purchases of the Bonds will be made in book-entry form only and only in authorized denominations of $5,000 principal amount or any integral multiple thereof. So long as Cede & Co. is the registered owner of the Bonds, principal, premium, if any, and interest on the Bonds will be payable to Cede & Co., as nominee for DTC, which is obligated to remit such amounts to the Direct or Indirect Participants, as hereinafter defined, for subsequent disbursement to the Beneficial Owners of the Bonds. See THE BONDS DTC Book-Entry Only herein

11 Payment of Principal and Interest The Bonds are being issued in the form of current interest bonds. Principal of and interest on the Bonds will be paid in lawful money of the United States of America by U.S. Bank National Association, the District's paying agent, registrar and transfer agent with respect to the Bonds (the Paying Agent ), to DTC, who will, in turn, disburse such payment to direct and indirect participants of DTC for subsequent disbursement to beneficial owners. The Bonds will be dated the date of delivery. Interest on the Bonds accrues from their date of delivery, and is payable semiannually on February 1 and August 1 of each year, commencing August 1, Each Bond shall bear interest from the Bond Payment Date next preceding the date of authentication thereof unless it is authenticated as of a day during the period from the 16th day of the month next preceding any Bond Payment Date to that Bond Payment Date, inclusive, in which event it shall bear interest from such Bond Payment Date, or unless it is authenticated on or before July 15, 2007, in which event it shall bear interest from its date of delivery. The Bonds are issuable in denominations of $5,000 principal amount or any integral multiple thereof. The Bonds mature on August 1, in the years and amounts set forth on the cover page hereof. The principal of the Bonds shall be payable in lawful money of the United States of America to the registered owner thereof, upon the surrender thereof at the principal corporate trust office of the Paying Agent. The interest on the Bonds shall be payable in lawful money of the United States of America to the person whose name appears on the bond registration books of the Paying Agent as the registered owner thereof as of the close of business on the 15th day of the month next preceding any Interest Payment Date (a "Record Date"), whether or not such day is a business day, such interest to be paid by check or draft mailed on such Interest Payment Date to such registered owner at such registered owners address as it appears on such registration books or at such address as the registered owner may have filed with the Paying Agent for that purpose. The interest payments on the Bonds shall be made in immediately available funds (e.g., by wire transfer) to any registered owner of at least $1,000,000 of outstanding Bonds who shall have requested in writing such method of payment of interest on the Bonds prior to the close of business on the Record Date immediately preceding any Interest Payment Date. Redemption Provisions Terms of Redemption: The Bonds maturing on or before August 1, 2014, are not subject to redemption prior to their respective maturity dates. The Bonds maturing on and after August 1, 2015, are subject to redemption prior to their respective stated maturity dates, at the option of the District, from any source of available funds, as a whole or in part on any date on or after August 1, 2014, upon notice as described below. If less than all of the Bonds are redeemed, such Bonds will be redeemed in inverse order of maturities or as otherwise directed by the District, and if less than all of the Bonds of any given maturity are redeemed, the portions of Bonds of such maturity to be redeemed will be determined by lot. The Bonds will be redeemed at the redemption prices set forth below (expressed as a percentage of the principal amount of Bonds called for redemption), together with accrued interest, if any, to the date of redemption. Optional Redemption Price Schedule 101% if redeemed on August 1, 2014 through July 31, 2015; 100% if redeemed on August 1, 2015 or thereafter. Mandatory Sinking Fund Redemption: The Bonds maturing by their terms on August, 2031, (the Term Bonds ), are subject to mandatory sinking fund redemption prior to their maturity in part, by lot, at a redemption price equal to the principal amount thereof to be redeemed, together with accrued interest to the date fixed for redemption, if any, without premium, solely from mandatory sinking fund payments, on each August 1 specified in the table below, but which amounts will be reduced proportionately by the principal amount of all such Term Bonds optionally redeemed

12 Mandatory Sinking Fund Redemption Schedule Livermore Valley Joint Unified School District General Obligation Bonds, Election of 1999, Series 2006 Sinking Fund Year Ending Amount August $1,785, ,885, * 1,985,000 * Indicates maturity date of the $5,655,000 Term Bond due August 1, Redemption Procedure. Notice of redemption will be given by the Paying Agent at the expense of the District. The Paying Agent shall cause notice of any redemption to be mailed, first class mail, postage prepaid, at least thirty (30) days but not more than sixty (60) days prior to the date fixed for redemption, to (i) one or more of the Information Services, and (ii) to the respective owners of any Bonds designated for redemption; but such mailing shall not be a condition precedent to such redemption and failure to mail or to receive any such notice shall not affect the validity of the proceedings for the redemption of such Bonds. In addition, notice of redemption shall be given by telecopy or certified, registered or overnight mail to each municipal registered securities depository holding Bonds as an owner at least two (2) days prior to such mailing to other owners. Such notice shall state the redemption date and the redemption price and, if less than all of the then outstanding Bonds are to be called for redemption, shall designate the serial numbers of the Bonds to be redeemed by giving the individual number of each Bond or by stating that all Bonds between two stated numbers, both inclusive, or by stating that all of the Bonds of one or more maturities have been called for redemption, and shall require that such Bonds be then surrendered to the Paying Agent for redemption at the said redemption price, giving notice also that further interest on such Bonds will not accrue from and after the redemption date. Effect of Notice of Redemption. A certificate of the Paying Agent or the District that notice of call and redemption has been given to Owners and to the appropriate securities depositories and information services shall be conclusive as against all parties. The actual receipt by the Owner of any Bond or by any securities depository or information service of notice of redemption shall not be a condition precedent to redemption, and failure to receive such notice, or any defect in the notice given, shall not affect the validity of the proceedings for the redemption of such Bonds or the cessation of interest on the date fixed for redemption. Rescission of Notice of Redemption. The District may rescind any optional redemption and notice thereof for any reason on any date prior to the date fixed for redemption by causing written notice of the rescission to be given to the owners of the Bonds so called for redemption. Any optional redemption and notice thereof shall be rescinded if for any reason on the date fixed for redemption monies are not available in the Debt Service Fund, or otherwise held in trust for such purpose in an amount sufficient to pay in full on said date the principal of, interest, and any premium due on the Bonds called for redemption. Notice of rescission of redemption shall be given in the same manner in which notice of redemption was originally given. The actual receipt by the owner of any Bond of notice of such rescission 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. Defeasance of Bonds: All or any portion of the outstanding maturities of the Bonds may be defeased at any time prior to maturity in the following ways: (a) Cash. By irrevocably depositing with an independent escrow agent selected by the District an amount of cash which together with amounts then on deposit in the Debt Service Fund, is sufficient to pay all Bonds outstanding and designated for defeasance, including all principal and interest and premium, if any; or (b) United States Obligations. By irrevocably depositing with an independent escrow agent selected by the District noncallable United States Obligations (as defined below) together with cash, if required, in such amount as will, in the opinion of an independent certified public account, together with interest to accrue thereon and moneys then on deposit in the Debt Service Fund together with the interest to accrue thereon, be fully sufficient to pay and discharge all Bonds outstanding and designated for defeasance (including all principal and interest represented thereby and prepayment premiums, if any), at or before their maturity date; then, notwithstanding that any such maturities of Bonds shall not have been surrendered for payment, all obligations of the District with respect to all such designated outstanding Bonds shall cease and terminate, except only the obligation of the Paying - 6 -

13 Agent or an independent escrow agent selected by the District to pay or cause to be paid from funds deposited pursuant to paragraphs (a) or (b) above, to the owners of such designated Bonds not so surrendered and paid all sums due with respect thereto. United States Obligations shall mean direct and general obligations of the United States of America, or obligations that are unconditionally guaranteed as to principal and interest by the United States of America, including (in the case of direct and general obligations of the United States of America) evidences of direct ownership of proportionate interests in future interest or principal payments of such obligations. Investments in such proportionate interests must be limited to circumstances wherein (a) a bank or trust company acts as custodian and hold the underlying United States Obligations; (b) the owner of the investment is the real party in interest and has the right to proceed directly and individually against the obligor of the underlying United States Obligations; and (c) the underlying United States Obligations are held in a special account, segregated from the custodian's general assets, and are not available to satisfy any claim of the custodian, any person claiming through the custodian, or any person to whom the custodian may be obligated; provided that such obligations are rated or assessed "AAA" by Standard & Poor's or "Aaa" by Moody's Investors Service. Sources and Uses of Funds The proceeds from the sale of the Bonds will be deposited with the Treasurer-Tax Collector of Alameda County (the Treasurer ), and (exclusive of any premium) will be deposited by the Treasurer to the credit of the building fund of the District (the Building Fund ). Moneys in the Building Fund are expected to be invested by the Treasurer in the Alameda County Investment Pool (the County Pool ) and will be applied solely to the purposes authorized by the bond measure and to pay certain authorized costs of issuing the Bonds. See COUNTY POOLED INVESTMENT FUND herein for a description of the County Pool. The premium, if any, received by the District from the sale of the Bonds will be transferred to the Treasurer for deposit in the Debt Service Fund (defined below), to be used only for payments of principal of and interest on the Bonds. Moneys in the Debt Service Fund will be invested by the Treasurer at the Treasurer s discretion pursuant to law and the investment policy of the County. See COUNTY POOLED INVESTMENT FUND herein. Set forth in the following table are the sources and expected uses of proceeds of the sale of the Bonds. Sources and Uses of Funds Schedule Livermore Valley Joint Unified School District General Obligation Bonds, Election of 1999, Series 2006 SOURCES OF FUNDS Principal Amount $27,000, Original Issue Premium $362, TOTAL SOURCES OF FUNDS $27,362, USES OF FUNDS Building Fund $27,000, Underwriter's Discount 1 $362, TOTAL USES OF FUNDS $27,362, Certain costs of issuance of the Bonds, consisting of the fees and expenses of bond counsel, financial advisor, and rating agency, as well as the premium relating to the financial guaranty insurance policy are being paid by the Underwriter from Underwriter's gross compensation

14 Debt Service Schedule Set forth in the following table is the debt service schedule pertaining to the Bonds. Livermore Valley Joint Unified School District General Obligation Bonds, Election of 1999, Series 2006 Interest Year Rate Semi-Annual Ending Date Principal Coupon Interest Payments Aug. 1 Aug. 1, $1,269, $1,269, $1,269, Feb. 1, , , Aug. 1, , , ,269, Feb. 1, , , Aug. 1, 2009 $610, % 634, ,244, ,879, Feb. 1, , , Aug. 1, , % 616, ,261, ,877, Feb. 1, , , Aug. 1, , % 597, ,277, ,874, Feb. 1, , , Aug. 1, , % 576, ,296, ,873, Feb. 1, , , Aug. 1, , % 560, ,320, ,880, Feb. 1, , , Aug. 1, , % 544, ,344, ,888, Feb. 1, , , Aug. 1, , % 526, ,371, ,897, Feb. 1, , , Aug. 1, , % 508, ,398, ,906, Feb. 1, , , Aug. 1, , % 489, ,429, ,918, Feb. 1, , , Aug. 1, , % 469, ,459, ,929, Feb. 1, , , Aug. 1, ,045, % 448, ,493, ,941, Feb. 1, , , Aug. 1, ,105, % 425, ,530, ,956, Feb. 1, , , Aug. 1, ,165, % 401, ,566, ,967, Feb. 1, , , Aug. 1, ,230, % 375, ,605, ,981, Feb. 1, , , Aug. 1, ,295, % 348, ,643, ,991, Feb. 1, , , Aug. 1, ,365, % 318, ,683, ,002, Feb. 1, , , Aug. 1, ,440, % 288, ,728, ,016, Feb. 1, , , Aug. 1, ,520, % 252, ,772, ,024, Feb. 1, , , Aug. 1, ,605, % 214, ,819, ,033, Feb. 1, , , Aug. 1, ,695, % 174, ,869, ,043, Feb. 1, , , Aug. 1, ,785, * 4.750% 134, ,919, ,053, Feb. 1, , , Aug. 1, ,885, * 4.750% 91, ,976, ,068, Feb. 1, , , Aug. 1, ,985, * 4.750% 47, ,032, ,079, $27,000, $20,627, $47,627, $47,627, *Indicates mandatory sinking fund payments of the $5,655,000 Term Bonds due August 1,

15 DTC Book-Entry Only The following information concerning DTC and DTC s book-entry-only system has been provided by DTC for use in securities disclosure documents. The District takes no responsibility for the accuracy or completeness thereof. There can be no assurance that DTC will abide by its procedures or that such procedures will not be changed from time to time. The following description includes the procedures and record-keeping with respect to beneficial ownership interests in the Bonds, payment of principal and interest, other payments with respect to the Bonds to Direct Participants or Beneficial Owners, confirmation and transfer of beneficial ownership interests in such Bonds, notices to Beneficial Owners and other related transactions by and between DTC, the participants, and the Beneficial Owners. Beneficial Owners should not rely on the following information with respect to such matters, but should instead confirm the same with DTC or the Direct Participants, as the case may be. The Depository Trust Company ( DTC ), New York, NY, will act as securities depository for the Bonds. The Bonds will be issued as fully-registered securities registered in the name of Cede & Co. (DTC s partnership nominee) or such other name as may be requested by an authorized representative of DTC. One fully-registered Security certificate will be issued for each maturity of the Bonds, each in the aggregate principal 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 2.2 million issues of U.S. and non-u.s. equity, corporate and municipal debt issues, and money market instrument from over 100 countries that DTC s participants ( Direct Participants ) deposit with DTC. DTC also facilitates the post-trade settlement among Direct Participants of sales and other securities transactions in deposited securities through electronic computerized book-entry transfers and pledges between Direct Participants accounts. This eliminates the need for physical movement of securities certificates. Direct Participants include both U.S. and non-u.s. securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations. DTC is a wholly-owned subsidiary of The Depository Trust & Clearing Corporation ( DTCC ). DTCC, in turn, is owned by a number of Direct Participants of DTC and Members of the National Securities Clearing Corporation, Fixed Income Clearing Corporation, and Emerging Markets Clearing Corporation (NSCC, FICC, and EMCC, also subsidiaries of DTCC), as well as by the New York Stock Exchange, Inc., the American Stock Exchange LLC, and the National Association of Securities Dealers, Inc. Access to the DTC system is also available to others such as both U.S. and non-u.s. securities brokers and dealers, banks, trust companies, and clearing corporations that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly ( Indirect Participants ). DTC has Standard & Poor s highest rating: AAA. 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 Bonds under the DTC system must be made by or through Direct Participants, which will receive a credit for the Bonds on DTC s records. The ownership interest of each actual purchaser of each Security ( Beneficial Owner ) is in turn to be recorded on the Direct and Indirect Participants records. Beneficial Owners will not receive written confirmation from DTC of their purchase. Beneficial Owners are, however, expected to receive written confirmations providing details of the transaction, as well as periodic statements of their holdings, from the Direct or Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers of ownership interests in the Bonds are to be accomplished by entries made on the books of Direct and Indirect Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interests in Bonds, except in the event that use of the book-entry system for the Bonds is discontinued. To facilitate subsequent transfers, all Bonds deposited by Direct Participants with DTC are registered in the name of DTC s partnership nominee, Cede & Co., or such other name as may be requested by an authorized representative of DTC. The deposit of Bonds with DTC and their registration in the name of Cede & Co. or such other DTC nominee do not effect any change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the Bonds; DTC s records reflect only the identity of the Direct Participants to whose accounts such Bonds 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 Bonds may wish to take certain steps to augment transmission to them of notices of significant events with respect to the Bonds, such as redemptions, tenders, defaults, and proposed amendments to the security documents. For example, Beneficial Owners of Bonds may wish to ascertain that the nominee holding the Bonds for their benefit has agreed to obtain and transmit notices to Beneficial Owners, in - 9 -

16 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. Redemption notices shall be sent to DTC. If less than all of the Bonds within an issue are being redeemed, DTC s practice is to determine by lot the amount of the interest of each Direct Participant in such issue to be redeemed. Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to Bonds unless authorized by a Direct Participant in accordance with DTC s Procedures. Under its usual procedures, DTC mails an Omnibus Proxy to the District 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 Bonds are credited on the record date (identified in a listing attached to the Omnibus Proxy). Redemption proceeds, distributions, and dividend payments on the Bonds 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 District or Trustee, on payable date in accordance with their respective holdings shown on DTC s records. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered in street name, and will be the responsibility of such Participant and not of DTC [nor its nominee], the Trustee, or the District, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of redemption proceeds, distributions, and dividend payments to Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) is the responsibility of the District or 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. DTC may discontinue providing its services as depository with respect to the Bonds at any time by giving reasonable notice to the District or the Trustee. Under such circumstances, in the event that a successor depository is not obtained, Security certificates are required to be printed and delivered. The District may decide to discontinue use of the system of book-entry transfers through DTC (or a successor securities depository). In that event, Security certificates will be printed and delivered. [The remainder of this page intentionally left blank]

17 FINANCIAL GUARANTY INSURANCE POLICY The following information has been furnished by MBIA Insurance Corporation for use in this Official Statement. The District makes no representation as to the accuracy or completeness of that information or as to the absence of material adverse changes in that information subsequent to the date hereof. Reference is made to Appendix D for a specimen of MBIA s policy (the Policy ). The Policy MBIA does not accept any responsibility for the accuracy or completeness of this Official Statement or any information or disclosure contained herein, or omitted herefrom, other than with respect to the accuracy of the information regarding the Policy and MBIA set forth under the heading FINANCIAL GUARANTY INSURANCE POLICY. Additionally, MBIA makes no representation regarding the Bonds or the advisability of investing in the Bonds. The MBIA Policy unconditionally and irrevocably guarantees the full and complete payment required to be made by or on behalf of the District to the Paying Agent or its successor of an amount equal to (i) the principal of (either at the stated maturity or by an advancement of maturity pursuant to a mandatory sinking fund payment) and interest on, the Bonds as such payments shall become due but shall not be so paid (except that 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 guaranteed by the MBIA Policy shall be made in such amounts and at such times as such payments of principal would have been due had there not been any such acceleration, unless MBIA elects in its sole discretion, to pay in whole or in part any principal due by reason of such acceleration); and (ii) the reimbursement of any such payment which is subsequently recovered from any Owner of the Bonds pursuant to a final judgment by a court of competent jurisdiction that such payment constitutes an avoidable preference to such Owner within the meaning of any applicable bankruptcy law (a Preference ). MBIA's Policy does not insure against loss of any prepayment premium which may at any time be payable with respect to any Bonds. MBIA's Policy does not, under any circumstance, insure against loss relating to: (i) optional or mandatory redemptions (other than mandatory sinking fund redemptions); (ii) any payments to be made on an accelerated basis; (iii) payments of the purchase price of Bonds upon tender by an owner thereof; or (iv) any Preference relating to (i) through (iii) above. MBIA's Policy also does not insure against nonpayment of principal of or interest on the Bonds resulting from the insolvency, negligence or any other act or omission of the Paying Agent or any other paying agent for the Bonds. Upon receipt of telephonic or telegraphic notice, such notice subsequently confirmed in writing by registered or certified mail, or upon receipt of written notice by registered or certified mail, by MBIA from the Paying Agent or any owner of a Bonds the payment of an insured amount for which is then due, that such required payment has not been made, MBIA on the due date of such payment or within one business day after receipt of notice of such nonpayment, whichever is later, will make a deposit of funds, in an account with U.S. Bank Trust National Association, in New York, New York, or its successor, sufficient for the payment of any such insured amounts which are then due. Upon presentment and surrender of such Bonds or presentment of such other proof of ownership of the Bonds, together with any appropriate instruments of assignment to evidence the assignment of the insured amounts due on the Bonds as are paid by MBIA, and appropriate instruments to effect the appointment of MBIA as agent for such owners of the Bonds in any legal proceeding related to payment of insured amounts on the Bonds, such instruments being in a form satisfactory to U.S. Bank Trust National Association, U.S. Bank Trust National Association shall disburse to such owners or the Paying Agent payment of the insured amounts due on such Bonds, less any amount held by the Paying Agent for the payment of such insured amounts and legally available therefor. MBIA Insurance Corporation MBIA Insurance Corporation ( MBIA ) is the principal operating subsidiary of MBIA Inc., a New York Stock Exchange listed company (the Company ). The Company is not obligated to pay the debts of or claims against MBIA. MBIA is domiciled in the State of New York and licensed to do business in and subject to regulation under the laws of all 50 states, the District of Columbia, the Commonwealth of Puerto Rico, the Commonwealth of the Northern Mariana Islands, the Virgin Islands of the United States and the Territory of Guam. MBIA, either directly or through subsidiaries, is licensed to do business in the Republic of France, the United Kingdom and the Kingdom of Spain and is subject to regulation under the laws of those jurisdictions

18 The principal executive offices of MBIA are located at 113 King Street, Armonk, New York and the main telephone number at that address is (914) Regulation As a financial guaranty insurance company licensed to do business in the State of New York, MBIA is subject to the New York Insurance Law which, among other things, prescribes minimum capital requirements and contingency reserves against liabilities for MBIA, limits the classes and concentrations of investments that are made by MBIA and requires the approval of policy rates and forms that are employed by MBIA. State law also regulates the amount of both the aggregate and individual risks that may be insured by MBIA, the payment of dividends by MBIA, changes in control with respect to MBIA and transactions among MBIA and its affiliates. The Policy is not covered by the Property/Casualty Insurance Security Fund specified in Article 76 of the New York Insurance Law. Financial Strength Ratings of MBIA Moody's Investors Service, Inc. rates the financial strength of MBIA Aaa. Standard & Poor's, a division of The McGraw-Hill Companies, Inc. rates the financial strength of MBIA AAA. Fitch Ratings rates the financial strength of MBIA AAA. Each rating of MBIA should be evaluated independently. The ratings reflect the respective rating agency's current assessment of the creditworthiness of MBIA and its ability to pay claims on its policies of insurance. Any further explanation as to the significance of the above ratings may be obtained only from the applicable rating agency. The above ratings are not recommendations to buy, sell or hold the Bonds, and such ratings may be subject to revision or withdrawal at any time by the rating agencies. Any downward revision or withdrawal of any of the above ratings may have an adverse effect on the market price of the Bonds. MBIA does not guaranty the market price of the Bonds nor does it guaranty that the ratings on the Bonds will not be revised or withdrawn. MBIA Financial Information As of December 31, 2005, MBIA had admitted assets of $11.0 billion (unaudited), total liabilities of $7.2 billion (unaudited), and total capital and surplus of $3.8 billion (unaudited) determined in accordance with statutory accounting practices prescribed or permitted by insurance regulatory authorities. As of March 31, 2006, MBIA had admitted assets of $11.2 billion (unaudited), total liabilities of $7.5 billion (unaudited), and total capital and surplus of $3.8 billion (unaudited) determined in accordance with statutory accounting practices prescribed or permitted by insurance regulatory authorities. For further information concerning MBIA, see the consolidated financial statements of MBIA and its subsidiaries as of December 31, 2005 and December 31, 2004 and for each of the three years in the period ended December 31, 2005, prepared in accordance with generally accepted accounting principles, included in the Annual Report on Form 10-K of the Company for the year ended December 31, 2005 and the consolidated financial statements of MBIA and its subsidiaries as of March 31, 2006 and for the three month period ended March 31, 2006 and March 31, 2005 included in the Quarterly Report on Form 10-Q of the Company for the period ended March 31, 2006, which are hereby incorporated by reference into this Official Statement and shall be deemed to be a part hereof. Copies of the statutory financial statements filed by MBIA with the State of New York Insurance Department are available over the Internet at the Company s web site at and at no cost, upon request to MBIA at its principal executive offices. Incorporation of Certain Documents by Reference The following documents filed by the Company with the Securities and Exchange Commission (the SEC ) are incorporated by reference into this Official Statement: The Company s Annual Report on Form 10-K for the year ended December 31, 2005; and The Company s Quarterly Report on Form 10-Q for the quarter ended March 31,

19 Any documents, including any financial statements of MBIA and its subsidiaries that are included therein or attached as exhibits thereto, filed by the Company pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of the Company s most recent Quarterly Report on Form 10-Q or Annual Report on Form 10-K, and prior to the termination of the offering of the Bonds offered hereby shall be deemed to be incorporated by reference in this Official Statement and to be a part hereof from the respective dates of filing such documents. Any statement contained in a document incorporated or deemed to be incorporated by reference herein, or contained in this Official Statement, shall be deemed to be modified or superseded for purposes of this Official Statement to the extent that a statement contained herein or in any other subsequently filed document which also is or is deemed to be incorporated by reference herein modifies or supersedes such statement. Any such statement so modified or superseded shall not be deemed, except as so modified or superseded, to constitute a part of this Official Statement. The Company files annual, quarterly and special reports, information statements and other information with the SEC under File No Copies of the Company s SEC filings (including (1) the Company s Annual Report on Form 10-K for the year ended December 31, 2005, and (2) the Company s Quarterly Report on Form 10-Q for the quarter ended March 31, 2006 are available (i) over the Internet at the SEC s web site at (ii) at the SEC s public reference room in Washington D.C.; (iii) over the Internet at the Company s web site at and (iv) at no cost, upon request to MBIA at its principal executive offices. In the event the Insurer were to become insolvent, any claims arising under a policy of financial guaranty insurance are excluded from coverage by the California Insurance Guaranty Association, established pursuant to Article 14.2 (commencing with Section 1063) of Chapter 1 of Part 2 of Division 1 of the California Insurance Code

20 COUNTY POOLED INVESTMENT FUND The information set forth under this section relating to the Alameda County Investment Pool has been obtained from the office of the Treasurer-Tax Collector of Alameda County and is believed to be reliable but is not guaranteed as to accuracy or completeness. The District makes no representation as to the accuracy or completeness of such information. Further information may be obtained by contacting the County of Alameda, Office of the Treasurer-Tax Collector, 1221 Oak Street, Room 131, Oakland, California, 94612, Telephone (510) Set forth below is the County s investment philosophy. The investments of the County shall be made in accordance with the basic principles of: 1) capital preservation; 2) liquidity; and 3) rate of return, in priority order. The investment portfolio shall be diversified' and designed to attain a market-average rate of return, taking into account the cash-flow characteristics and operating cash requirements of the County and its subdivisions. The portfolio shall strive to attain an average maturity of 18 months but not to exceed 24 months at any time. Investments shall be made with the general intention of holding to maturity and not for the purpose of trading. However, the Treasurer may, from time to time, swap or sell securities in order to re-position investment holdings to current coupon issues and/or realize market value profits, respectively, on securities held by the portfolio. The Treasurer may sell securities in which actual loss from such sale may be incurred under the following conditions: 1) to raise cash in order to meet unanticipated cash-flow need; 2) to swap securities for purposes of moving to current coupon issues; and 3) to avoid deterioration of the value of investments due to a rating downgrade or negative rating review of an issuer or if interest rates are anticipated to continually rise. The following table summarizes the County s investment portfolio as of March 31, 2006: Portfolio Structure As Of March 31, 2006 Alameda County Pooled Investment Fund Book Value Market % Held Cost Value LAIF $40,000,000 40,398, % Bankers Acceptance 41,249,390 41,575, % Collateralized Time Deposits 46,600,000 46,953, % Negotiable Certificates of Deposits 282,001, ,150, % Commercial Paper 209,563, ,491, % Money Market Funds 166,000, ,753, % Federal Agency Notes & Bonds 1,156,487,066 1,149,749, % Federal Agency Discount Notes 339,884, ,793, % Medium term Notes 164,291, ,636, % US Treasury Coupon 24,998,630 24,965, % US Treasury Discount 112,712, ,945, % Total Investments $2,583,788,598 $2,591,412, % Cash in Bank and on Hand 54,309,072 54,309, % Total Treasurer's Pool $2,638,097,670 $2,645,721, % Source: County of Alameda, Office of the Treasurer-Tax Collector

21 SECURITY AND SOURCE OF PAYMENT Security for Payment The Bonds represent the general obligation of the District payable from the proceeds of ad valorem property taxes that the Board of Supervisors of Alameda County have the power and are obligated to levy and collect upon all property within the District located within the county and subject to taxation by the District without limitation as to rate or amount (except for certain personal property that is taxable at limited rates) for payment of principal of and interest the Bonds. Such taxes, when collected, will be placed in the District s Debt Service Fund (as defined herein), which is maintained by the County as required by law for the payment of the principal of and interest on the Bonds when due. The annual tax rate will be based on the assessed value of taxable property in the District and debt service due in each year. Fluctuations in the annual debt service on the Bonds and the assessed value of taxable property in the District may cause the annual tax rate to fluctuate. Economic and other factors beyond the District's control, such as a general market decline in land values, reclassification of property to a class exempt from taxation, whether by ownership or use (such as exemptions for property owned by State and local agencies and property used for qualified educational, hospital, charitable or religious purposes), or the complete or partial destruction of taxable property caused by natural or manmade disaster, such as earthquake, flood, toxic dumping, etc., could cause a reduction in the assessed value of taxable property within the District and necessitate a corresponding increase in the annual tax rate. Ad Valorem Property Taxation The District utilizes the services of the County for the assessment and collection of taxes for District purposes, except for public utility property that is assessed by the State Board of Equalization. The State Constitution and sections of various State statutes provide exemptions from ad valorem property taxation for certain classes of property such as churches, colleges, nonprofit hospitals, and charitable institutions. The State Constitution exempts from ad valorem property taxation $7,000 of full value of owner occupied dwellings, and requires the Legislature to reimburse each local government for revenue lost as a result of the exemption. Taxation of State-Assessed Utility Property A portion of property tax revenue of the District is derived from utility property subject to assessment by the State Board of Equalization ( SBE ). State-assessed property, or unitary property, is property of a utility system with components located in many taxing jurisdictions assessed as part of a going concern rather than as individual parcels of real or personal property. Unitary and certain other state-assessed property is allocated to the counties by the SBE, taxed at special county-wide rates, and the tax revenues distributed to taxing jurisdictions (including the District) according to statutory formulae generally based on the distribution of taxes in the prior year. Recent changes to the structure of the California electric utility industry and the way in which components of the industry are regulated, including the sale of electric generation assets to largely unregulated, nonutility companies, may affect how utility assets are assessed in the future, and which local agencies are to receive the property taxes. The District is unable to predict the impact of these changes on its utility property tax revenues, or whether future legislation or litigation may affect the State s methods of assessing utility property and allocating tax revenues to local taxing agencies, including the District. So long as the District is not a basic aid district, any taxes lost due to a reduction in, or transfer to another jurisdiction of, utility property assessed valuation will be compensated by the State as equalization aid under the State s school financing formula. See STATE FUNDING OF PUBLIC EDUCATION Revenue for Public Education herein. Property Taxes Taxes are levied for the fiscal year on taxable real and personal property which is situated in the County as of the preceding January 1. For assessment and collection purposes, property is classified either as secured or unsecured, and is listed accordingly on separate parts of the assessment roll. The secured roll is that part of the assessment roll containing State assessed property and property secured by a lien on real property. Other property is assessed on the unsecured roll

22 Property taxes on the secured roll are due in two installments, on November 1 and February 1 of each fiscal year. If unpaid, such taxes become delinquent on December 10 and April 10, respectively, and a ten percent penalty attaches to any delinquent payment. In addition, property on the secured roll with respect to which taxes are delinquent is declared to be in default and has a delinquency certificate recorded on or after June 30 of the fiscal year. Such property may thereafter be redeemed by payment of the delinquent taxes and the delinquency penalty, plus a redemption penalty of one and one-half percent per month to the time of redemption. If taxes are unpaid for a period of five years or more, the tax-defaulted property is declared to be subject to the County Tax Collector's power of sale and may be subsequently sold within two years by the County Tax Collector. Property taxes on the unsecured roll are due as of the January 1 lien date and become delinquent, if unpaid, on August 31. A ten percent penalty attaches to delinquent taxes on property on the unsecured roll, and an additional penalty of one and one-half percent per month begins to accrue beginning November 1 of the fiscal year. The taxing authority has four ways of collecting unsecured personal property taxes: (1) a civil action against the taxpayer; (2) filing a certificate in the office of the County Clerk specifying certain facts in order to obtain a judgment lien on certain property of the taxpayer; (3) filing a certificate of delinquency for recordation in the County Recorder's office, in order to obtain a lien on certain property of the taxpayer; and (4) seizure and sale of personal property, improvements or possessory interest, belonging or assessed to the assessees. Alternative Method of Tax Apportionment The Board of Supervisors of the County has approved the implementation of the Alternative Method of Distribution of Tax Levies and Collections and of Tax Sale Proceeds (the Teeter Plan ), as provided for in Section 4701 et seq. of the California Revenue and Taxation Code. The Teeter Plan guarantees distribution of 100% of the general taxes levied to the taxing entities within the County, with the County retaining all penalties and interest penalties affixed upon delinquent properties and redemptions of subsequent collections. Under the Teeter Plan, the County apportions secured property taxes to local political subdivisions, including the District, for which the County acts as the tax-levying or tax-collecting agency. At the conclusion of each fiscal year, the County distributes 100% of any taxes delinquent as of June 30 th to the respective taxing entities. The Teeter Plan is applicable to secured and supplemental tax levies. The ad valorem property tax to be levied to pay the interest on and principal of the Bonds will be subject to the Teeter Plan, beginning in the first year of such levy in fiscal year The District will receive 100% of the ad valorem property tax levied to pay the Bonds irrespective of the actual delinquencies in the collection of such tax by the County. Historical Assessed Valuation Set forth in the following table is the total secured and unsecured historical assessed valuation for the District. Historical Total Secured and Unsecured Assessed Valuation Livermore Valley Joint Unified School District Fiscal Year Total Secured Total Unsecured Total Rate of Assessed Value Assessed Value Assessed Value Change $6,213,315,242 $349,002,706 $6,562,317, $6,988,565,583 $387,834,226 $7,376,399, % $8,001,870,062 $469,440,764 $8,471,310, % $8,784,652,632 $526,000,557 $9,310,653, % $9,664,742,233 $514,225,451 $10,178,967, % $10,552,876,080 $490,618,919 $11,043,494, % $11,743,326,870 $615,186,995 $12,358,513, % Source: Alameda County Assessor s Office. Assessed value data may differ from those provided by the Auditor/Controller s Office. Data includes land with an approximate assessed value of $52.5 million transferred during fiscal year to the Dublin Unified School District. See, SECURITY AND SOURCE OF PAYMENT-Transfer of Territory, herein

23 Major Taxpayers Set forth in the table below are the major taxpayers within the District for fiscal year Major Taxpayers Livermore Valley Joint Unified School District % of Property Owner Land Use Assessed Valuation Total (1) 1 Kaiser Foundation Hospitals Industrial $85,688, % 2 KLA Tencor Corporation Industrial 79,499, Oakland Scavenger Company Industrial 69,993, Patrician Associates Inc. & Principal Mutual Life Insurance Co. Industrial 48,603, Shea Center Livermore LLC Industrial 35,266, Valley Care Senior Housing Inc. Rest Home 33,123, Vineyard Management Company Office Building 29,316, Gould Livermore LLC Industrial 28,058, Catellus Development Corp. Shopping Center 27,977, Wente Bros. Winery 26,862, North Canyons Partners LLC Industrial/Office Building 26,307, Tri Valley Campus I LLC Office Building 25,882, Pfeiffer Ranch Investors Inc. Residential Development 25,654, Seco/Arroyo Shopping Center LP Shopping Center 25,458, Livermore Golf Properties Inc. Golf Course 24,735, Kraft Foodservice Inc. Industrial 23,443, Livermore Airway Business Park Office Building 22,981, Property Reserve Inc. Industrial 22,960, Western Investment Real Estate Trust Shopping Center 22,958, Techpark@North Canyons LP Industrial 22,383, $707,155, % (1) Local Secured Assessed Valuation: $11,767,894,376 Source: California Municipal Statistics, Inc. Assessed value data provided to California Municipal Statistics, Inc. by the Auditor/Controller s Office. Data includes land with an approximate assessed value of $52.5 million transferred during fiscal year to the Dublin Unified School District. See, SECURITY AND SOURCE OF PAYMENT-Transfer of Territory, herein. Local Economy, Workforce, and Major Employers of the County The District is located in the Eastern region of the San Francisco Bay Area with boundaries including the city of Livermore and unincorporated parts of Alameda and Contra Costa counties. The District currently operates 10 elementary schools, four middle schools, four high schools, four continuation high schools and one alternative school. The county of Alameda, located in the San Francisco-Oakland metropolitan area, is one of 58 counties in California and has a population of 1,496,968 as of Household median income within the County was $61,017 in 2002 as compared to $49,738 statewide, according to the U.S. Census Bureau. Countywide, unemployment has dropped in each of the last two years, most recently decreasing from 6.0% in 2004 to 5.2% in 2005, falling further in the first quarter of 2006, to 4.4%. The following table provides a listing of the major employers in the County as of March 1,

24 Major Employers Alameda County Employer Location Industry Alameda CG Support Center Alameda Federal Govt-National Security Alameda County Medical Center Oakland Hospitals Alta Bates Medical Center Berkeley Hospitals Bay Area Rapid Transit District Oakland Transit Lines Bayer Corp Berkeley Biological Products California State University Hayward Academic Colleges & Universities Chiron Blood Testing Emeryville Laboratories-Medical Chiron Corp Emeryville Laboratories- Research & Development Clorox Technical Center Pleasanton Commercial Physical Research East Bay Municipal Utility Oakland Water & Sewage Companies Highland General Hospital Oakland Hospitals Kaiser Foundation Hospital Oakland Hospitals Kaiser Permanente Hospital Hayward Physicians & Surgeons Lawrence Berkeley National Lab Berkeley Laboratories- Research & Development Lawrence Livermore National Lab Livermore Laboratories-Testing New United Motor MFG Inc Fremont Automobile Parts & Supplies Oakland Police Chief Oakland Police Departments People Soft Inc Pleasanton Computer Software Permanente Medical Group Hayward Physicians & Surgeons Sandia National Laboratories Livermore Laboratories- Research & Development Summit Medical Center Oakland Hospitals University of California Oakland Academic Colleges & Universities University-CA Dept. of Education OUTREACH Oakland Academic Colleges & Universities Valley Memorial Livermore Hospitals Washington Hospital Healthcare System Fremont Hospitals Source: California Employment Development Department. County Unemployment The following table contains a historical summary of the County s unemployment data, seasonally unadjusted. Historical Unemployment Data Alameda County * Total Labor Force 775, , , , ,600 # Employed 722, , , , ,000 # Unemployed 52,600 53,100 45,100 38,900 32,600 Unemployment Rate 6.8% 7.0% 6.0% 5.2% 4.4% Source: California Employment Development Department. * 2006 data is as of April

25 Transfer of Territory The District transferred 23 parcels, constituting a total assessed value of approximately $52.5 million, to the Dublin Unified School District during fiscal year The territory covered by the transfer is inhabited with little or no students. [The remainder of this page intentionally left blank.]

26 LIVERMORE VALLEY JOINT UNIFIED SCHOOL DISTRICT The information in this section concerning the operations of the District and the District's finances is provided as supplementary information only, and it should not be inferred from the inclusion of this information in this Official Statement that the principal of or interest on the Bonds is payable from the General Fund of the District. The Bonds are payable from the proceeds of an ad valorem tax required to be levied by the County in an amount sufficient for the payment thereof. See SECURITY AND SOURCE OF PAYMENT herein. General Information The District includes approximately 250 square miles, primarily in Alameda County, with 22 square miles in Contra Costa County. The District provides education (K - 12) services to the residents of the City of Livermore (the City ) and unincorporated parts of Alameda and Contra Costa counties. The District currently operates 10 elementary schools, 4 middle schools, 2 high schools, 2 continuation high schools and one alternative school. The Board of Education and Key Administrative Personnel The District Board governs all activities related to public education within the jurisdiction of the District. The District Board receives funding from local, State and federal government sources and must comply with the concomitant requirements of these funding source entities. The District Board consists of five members. Each District Board member is elected by the public for a four-year term of office and elections for the District Board are held every two years. The District Board has major decision making authority, the power to designate management, the responsibility to significantly influence operations and is accountable for all fiscal matters relating to the District. The current members of the District Board and their positions are set forth on page iii of this Official Statement. The Superintendent of the District is appointed by and reports to the District Board. The Superintendent is responsible for managing the District's day-to-day operations and supervising the work of other key District administrators. The members of the District Administration and positions held are set forth on page iii of this Official Statement. Population and Relevant Age Data The following table contains estimated historical population data and poverty data. The first row shows total population within the District. The second row shows the total number of relevant, as defined by the U.S. Census Bureau, children between the ages of 5-17 within the District. Each child is considered relevant to one and only one school district. If a school district provides all K-12 grades throughout their territory, all children within the territory are relevant to that school district. If an elementary and secondary school district occupy the same territory, the child is relevant to the school district that provides the grade for that child's age. The third row shows the number of relevant children in families in poverty. Total Population and Relevant Age Population Livermore Valley Joint Unified School District Total Population 75,960 77,624 77,133 76,879 76,577 Relevant Age 15,514 15,849 15,624 15,488 15,497 Relevant in Poverty 1, ,104 Source: U.S. Census Bureau s Small Area Income & Poverty Estimates - Model-Based Estimates

27 Average Daily Attendance Average Daily Attendance ( ADA ) is a measurement of the number of pupils attending classes of the District. The purpose of attendance accounting from a fiscal standpoint is to provide the basis on which apportionments of state funds are made to school districts. See STATE FUNDING OF PUBLIC EDUCATION herein. Set forth in the exhibit below is the ADA for the District for previous fiscal years. P-2 Average Daily Attendance Livermore Valley Joint Unified School District * ** P-2 ADA 13,508 13,616 13,417 12,852 12,994 *Figure for fiscal year is estimated. **Figure for fiscal year is projected. Source: Livermore Valley Joint Unified School District Charter School In November 2004, the State of California approved a petition to establish the Livermore Valley Charter School (the Charter School ), which opened in September The Charter School operates K-7 grades. For the school year, the Charter School will expand the number of its 1st grade classrooms from four to five in order to accommodate the five current Kindergarten classrooms that will be graduating to 1st grade. In addition, based upon the recommendation from the principal and with the approval of the CDE (California Department of Education), the Charter School Board voted to approve expanding the number of classrooms at both the 6th and 7th grade. For the school year, the Charter School will have four 6th grade and four 7th grade classrooms. The Charter School Board continues to forecast a $45,000 net income and a $179,000 fund balance at the end of the year. As of April 30, 2006, the Charter School had a fund balance of $403,145. Employee Relations California law provides that employees of public school districts of the State are to be divided into appropriate bargaining units that then are to be represented by an exclusive bargaining agent. The District has three recognized bargaining agents for its employees, the Livermore Education Association (the LEA ), which represents all non-management certificated staff, the California School Employees Association (the CSEA ), and the Service Employees International Union (the SEIU ), Local 790. The District has contracts with all bargaining units through The contracts cap health and welfare benefits, but allow for salaries to be renegotiated each year. Salary increases for are currently in negotiations

28 Bargaining Units, Number Of Employees, And Contract Status Livermore Valley Joint Unified School District CERTIFICATED # OF FTEs STATUS LEA Settled through June 30, 2006 CLASSIFIED # OF FTEs STATUS CSEA 254 Settled through June 30, 2006 SEIU, Local Settled through June 30, 2006 Note: FTEs are projected in the District s Second Interim Report. Pension Plans Qualified employees of the District are eligible to participate under defined benefit retirement plans maintained by agencies of the State. Certificated employees are eligible to participate in the cost-sharing multiple-employer State Teachers Retirement System ( STRS ). Classified employees are eligible to participate in the multiple-employer Public Employees Retirement Fund of the Public Employees Retirement System ( PERS ), which acts as a common investment and administrative agent for participating public entities within the State. STRS operates under the State of California Education Code sections commonly known as the State Teachers Retirement Law. Membership is mandatory for all certificated employees of California public schools meeting the eligibility requirements. STRS provides retirement, disability and death benefits based on an employee s years of service, age and final compensation. Employees vest after five years of service and may receive retirement benefits at age fifty-five. All full-time classified employees of the District participate in PERS, which provides retirement, disability and death benefits based on an employee s years of service, age and final compensation. Employees vest after five years of service and may receive retirement benefits at age fifty. These benefit provisions and all other requirements are established by State statute and District resolution. For a more complete description of the District s pension plan and annual contribution requirements, See APPENDIX A attached hereto. Other Post-Employment Benefits In addition to PERS and STRS, the District provides an early retirement incentive to those that qualify to retire at 65 by paying for health insurance premiums for the employee and their family. In 2005, an actuarial study was conducted using a liability calculation methodology consistent with GASB 45, which requires the full cost of providing post-retirement benefits for active employees be recognized for each year of service. The study shows the District s accrued liability for the program is $9,245,614, which represents the present value of all benefits earned to date assuming that an employee earns retiree healthcare benefits ratably over his or her career. The $9,245,614 is comprised of liabilities of $4,229,999 for active employees and $5,015,615 for retirees. As of July 1, 2005, the District currently has a reserve of $1,407,898 set aside for the pre-funding of benefits, resulting in the unfunded accrued liability amount of $7,837,716. Under GASB 45, the annual expense for fiscal year is $742,760, comprised of the present value of benefits accruing in the current year and a 30-year amortization of the unfunded accrued liability. In fiscal year , the District resolved to fund the remaining obligation for early retirement incentive programs by setting aside a level contribution of $1.3 million for each of the next eight years with the intention to pay off the remaining balance in year nine

29 Special Tax - Measure D On November 2, 2004, 71.6% of voters in the District approved Measure D, a special parcel tax measure. Pursuant to Measure D, a tax of $120 per parcel will be levied by the District and collected by the Alameda County and Contra Costa County Treasurer- Tax Collectors for five years, beginning with the fiscal year. It is anticipated that the parcel tax will generate approximately $3,000,000 per year for the District. The parcel tax revenues will be used for the salaries and benefits of teachers, science specialists, library technicians, and counselors. An oversight committee will be responsible for ensuring that the revenues are spent according to the ballot language. [The remainder of this page intentionally left blank.]

30 SCHOOL DISTRICT FINANCIAL INFORMATION The information in this section concerning the operations of the District and the District's finances is provided as supplementary information only, and it should not be inferred from the inclusion of this information in this Official Statement that the principal of or interest on the Bonds is payable from the General Fund of the District. The Bonds are payable from the proceeds of an ad valorem tax required to be levied by the County in an amount sufficient for the payment thereof. See SECURITY AND SOURCE OF PAYMENT herein. Accounting Practices The accounting practices of the District conform to Generally Accepted Accounting Principles in accordance with policies and procedures of the California School Accounting Manual, which must be used by all California school districts pursuant to Section of the State of California Education Code. District accounting is organized on the basis of fund groups, with each group consisting of a separate set of self-balancing accounts containing assets, liabilities, fund balances, revenues and expenditures. The major fund classification is the General Fund, which accounts for all financial resources not requiring a special type of fund. The District s fiscal year begins on July 1 and ends on June 30. The General Fund, special revenue and debt service funds are maintained and reported on the modified accrual basis of accounting. Under the modified accrual basis of accounting, revenues are recorded when received in cash or when measurable and available to finance operations during the year. Expenditures are recorded on an accrual basis except for interest on longterm debt, which is recognized when it becomes payable. Revenue from local taxes is recognized in the financial statements when collected by the Treasurer of the County. See SECURITY AND SOURCE OF PAYMENT herein. Revenue from the State representing apportionments is recognized when apportioned to the District by the County. Revenues from other specific State and/or federally funded projects are recognized when qualified expenditures have been incurred. The State of California Department of Education sends the District updated information from time to time explaining the acceptable accounting treatment of revenue and expenditure categories. The independent Auditor for the District is Nigro Nigro & White, PC, Temecula, California. The financial statements of the District as of and for the year ending June 30, 2005, are set forth in APPENDIX A attached hereto. Budget and Financial Reporting Process The District s General Fund finances the legally authorized activities of the District for which restricted funds are not provided. General Fund revenues are derived from such sources as federal and State school apportionments, taxes, use of money and property, and aid from other governmental agencies. The District is required by provisions of the State of California Education Code to maintain a balanced budget each year, where the sum of expenditures plus the ending fund balance cannot exceed revenues plus the carry-over fund balance from the previous year. The State of California Department of Education imposes a uniform budgeting format for school districts. The fiscal year for all school districts is July 1 to June 30. The same calendar applies to the budgets of county offices of education, except that their budgets and reports go to the Superintendent of Public Instruction for review. The State budget, too, is extremely important since school districts depend on it for almost all their revenue. There is a very close timing in the summer between final approval of the State budget, school finance legislation, and the adoption of local district budgets. In some years, the State budget is not approved by the deadline, which forces school districts to begin the new fiscal year with only estimates of the amount of money they will actually receive. The school district budgeting process involves continuous planning and evaluation. Within the deadlines, school districts work out their own schedules for considering whether or not to hire or replace staff, negotiating contracts with all employees, reviewing programs, and assessing the need to repair existing or acquire new facilities. Decisions depend on the critical estimates of enrollment, fixed costs, commitments in contracts with employees as well as best guesses about how much money will be available for elementary and secondary education. The timing of some decisions is forced by legal deadlines. For example, preliminary layoff notices to teachers must be delivered in March, with final notices in May. This necessitates projecting enrollments and determining staffing needs long before a school district will know either its final financial positions for the current year or its income for the next one

31 The governing board must submit a budget to the County Superintendent by July 1, and a publicized opportunity for public participation in the budget process is required by law. There are two options for budget adoption. School districts may adopt their budgets by July 1 and then revise and readopt them by September 1 after a public hearing. Alternatively, school districts may decide, by the previous October 31, to hold public hearings before adopting their budgets by July 1. School districts choosing this option revise their revenues and expenditures after the State budget act is adopted, without a second public hearing. All school districts must perform a criteria and standards review before budget adoption. In addition, those school districts on the alternative schedule for adoption must repeat the review before their revision only if the July 1 budget was disapproved. Legislation requires criteria and standards for stringent review of school districts' finances, focusing primarily on predictions of actual daily attendance, operating deficit, and reserves. The legislation also dictates when and how outside committees, or an appointed trustee in emergency situations, must work with school districts. This oversight is part of an effort to reduce the number of districts in financial trouble and to increase the responsible use of tax dollars. The county superintendents monitor all school districts' budgets, ongoing financial obligations and multi-year contracts. They have specific powers for recommending actions to revise budgets. They are not, however, authorized to abrogate existing collective bargaining agreements. School districts must review their financial position for the periods ending October 31 and January 31 in order to certify their abilities to meet commitments through the rest of the school year. Each school district is required by the State of California Education Code to file these two interim reports each year by not later than December 15 and March 15. The county offices of education must then, within 30 days, evaluate the interim reports and forward their comments to the State of California Department of Education and the State Controller's Office. Included in the report is a certification by the president of the governing board of each school district that classifies the school district according to its ability to meet its financial obligations. The certifications are grouped into three categories: A Positive Certification, which designates that the school district will be able to meet its financial obligations for the remainder of the fiscal year and the following two years; a Qualified Certification, which means that the school district may not be able to meet its financial obligations for the remainder of the fiscal year and following two years if certain events occur; and a Negative Certification, which signifies that the school district will not be able to meet its financial obligations for the remainder of the fiscal year or of the following year. Financial Statements Figures presented in summarized form herein have been gathered from the District s financial statements. Portions of the audited financial statements of the District for the fiscal year ending June 30, 2005, have been included in the appendix to this Official Statement. See APPENDIX A herein. Audited financial statements and other financial reports for all prior fiscal years are on file with the District and available for public inspection during normal business hours. Copies of financial statements relating to any year are available to prospective investors and or their representatives upon request by contacting the District at the address and telephone number set forth on page iii of this Official Statement, or by contacting the District s Financial Advisor, Government Financial Strategies inc., 1228 N Street, Suite Thirteen, Sacramento, California, , Tel. (916) The District received Positive Certifications for its First and Second Interim Reports for Fiscal Year The following table sets forth certain General Fund information for the District

32 General Fund Activity For The Fiscal Years Indicated Livermore Valley Joint Unified School District Audited Audited Audited Estimated Actuals Budget BEGINNING BALANCE $3,976,372 $2,134,902 $2,538,425 $9,291,129 $7,429,818 REVENUES Revenue Limit Sources $65,458,792 $65,329,814 $67,517,863 $69,660,108 $74,578,288 Federal Revenue 3,072,124 4,016,458 4,254,719 4,598,393 4,500,399 Other State Revenues 18,396,418 17,878,894 15,079,397 18,943,876 18,072,504 Other Local Revenues 2,057,665 3,024,303 3,601,573 7,831,256 4,685,395 TOTAL REVENUES $88,984,999 $90,249,469 $90,453,552 $101,033,633 $101,836,586 EXPENDITURES Certificated Salaries $47,137,998 $44,896,843 $41,445,545 $45,482,412 $46,760,368 Classified Salaries 13,341,292 12,315,059 12,289,726 13,659,953 13,710,202 Employee Benefits 16,738,711 18,170,140 17,378,176 19,826,002 19,611,638 Books and Supplies 2,784,310 3,995,108 3,035,004 7,969,207 5,905,287 Contracted Services 9,855,270 8,754,406 7,814,805 9,884,147 9,084,422 Capital Outlay 273,886 42,318 60,281 83,677 48,846 Other Outgo 715,863 1,863,951 1,526,973 3,919,407 3,821,471 Direct Support/Indirect Costs (143,889) (142,995) (169,842) (182,912) (136,384) TOTAL EXPENDITURES $90,703,441 $89,894,830 $83,380,668 $100,641,893 $98,805,850 FINANCING SOURCES (USES) ($123,028) $48,884 ($320,180) ($2,253,051) ($470,152) NET INCREASE (DECREASE) ($1,841,470) $403,523 $6,752,704 ($1,861,311) $2,560,584 ENDING BALANCE $2,134,902 $2,538,425 $9,291,129 $7,429,818 $9,990,402 Revenues The District categorizes its General Fund revenues into four primary sources: revenue limit sources, federal revenues, other state revenues and other local revenues. Revenue Limit Sources. Since fiscal year , California school districts have operated under general purpose revenue limits established by the State Legislature. In general, the state revenue limit for a school district is calculated by multiplying a base revenue limit per student by the school district s student enrollment measured in units of average daily attendance (ADA). The revenue limit calculations are adjusted annually in accordance with a number of factors designated primarily to provide cost of living increases and to equalize revenues among all California school districts of the same type. The District s estimated base revenue limit per unit of ADA is $5, for fiscal year and is budgeted to be $5, in fiscal year Revenue limit sources are estimated to account for 68.9% of total District revenues in fiscal year and 73.2% of budgeted revenues for fiscal year Funding of the District s revenue limit is accomplished by a mix of a) local taxes (composed predominantly of property taxes, and including miscellaneous taxes and community redevelopment funds, if any) and b) State apportionments of basic and equalization aid

33 Federal Sources. The federal government provides funding for several District programs. These federal revenues, most of which are restricted, were estimated to be 4.6% of General Fund revenues in fiscal year , and are budgeted to be 4.4% of General Fund revenues in fiscal year Other State Sources. In addition to apportionment revenues, the State provides funding for several District programs. These Other State revenues, most of which are restricted, were estimated to be 18.7% of General Fund revenues in fiscal year , and are budgeted to be 17.7% of General Fund revenues in fiscal year Included in Other State Sources are proceeds received from the State from the California State Lottery. Other Local Sources. In addition to property taxes, the District receives additional local revenues. Estimated revenues from Other Local Sources comprised 7.8% of General Fund revenues in fiscal year , and are budgeted to be 4.6% of General Fund revenues in fiscal year Expenditures Employee salaries and benefits are estimated to account for approximately 78.5% of the District s General Fund expenditures in fiscal year , and are budgeted to be 81.1% of General Fund expenditures in fiscal year The District employs full-time equivalent certificated (non-management) employees and full-time equivalent classified employees. Short Term Borrowings The District has in the past issued short-term tax and revenue anticipation notes ( TRANs ). Proceeds from the issuance of TRANs by the District during previous fiscal years have been used to reduce interfund dependency and to provide the District with greater overall efficiency in the management of its funds. The District last issued TRANs on October 17, 2002, which matured on October 17, The District has not issued TRANs since 2002 and does not expect to issue TRANs for fiscal year Capitalized and Bonded Lease Obligation The District s use of various capital and bonded lease arrangements in the past under agreements which provide for title of items and equipment being leased to pass to the lessee district upon expiration of the lease period. Under each such agreement, the Board has promised to annually appropriate the amounts necessary to make all future lease payments from available revenues. All lease and capitalized lease obligations of the District as of June 30, 2005, are set forth in APPENDIX A attached hereto. Long Term Bonded Indebtedness The District received authorization on March 2, 1999, to issue not to exceed $150,000,000 of general obligation bonds. In 2000, the District issued general obligation bonds in the principal amount of $53,000,000 (the Series 2000 Bonds ). The Series 2000 Bonds are rated AAA by Standard & Poor s Credit Market Services and Aaa by Moody s Investors Services, which reflects the issuance of a Financial Guaranty Insurance Policy issued by MBIA Insurance Corporation ( MBIA ). In 2001, the District issued general obligation bonds in the principal amount of $20,000,000 (the Series 2001 Bonds ). The Series 2001 Bonds are rated AAA by rated AAA by Standard & Poor s Credit Market Services and Aaa by Moody s Investors Services, which reflects the issuance of a Financial Guaranty Insurance Policy issued by Financial Security Assurance Inc. ( FSA ). In 2002, the District issued general obligation bonds in the principal amount of $20,000,000 (the Series 2002 Bonds ). The Series 2002 Bonds are rated AAA by Standard & Poor s Credit Market Services and Aaa by Moody s Investors Services, which reflects the issuance of a Financial Guaranty Insurance Policy issued by MBIA. In 2005, the District issued general obligation bonds in the principal amount of $30,000,000 (the Series 2005 Bonds ). The Series 2005 Bonds are rated AAA by Standard & Poor s Credit Market Services and Aaa by Moody s Investors Services, which reflects the issuance of a Financial Guaranty Insurance Policy issued by MBIA. The first four series of bonds (Series 2000, 2001, 2002 and 2005) represented a total of $123 million of bonds, the unpaid principal balance of which is $71,170,000 as of June 30, Following the issuance of the Series 2006 Bonds, the District will have issued all authorized bonds

34 Direct and Overlapping Bonded Debt The District s statement of direct and overlapping bonded debt, which is set forth below, was prepared by California Municipal Statistics, Inc. It has been included for general information purposes only. The District has not reviewed the statement for completeness or accuracy and makes no representations in connection with the statement. Contained within the District's boundaries are numerous overlapping local entities providing public services. These local entities may have outstanding bonds issued in the form of general obligation, lease revenue and special assessment bonds. The first column in the table below names the public agencies which have outstanding debt as of the date of the report and whose boundaries overlap the District. The second column in the table shows the assessed value of the area of overlap as a percentage of the total assessed value of the overlapping entity identified in the first column. The third column shows the corresponding portion of each overlapping entity s existing debt allocable to property within the District. The total amount of debt for each overlapping entity is not shown in the table. In addition, property owners within the District may be subject to other special taxes and assessments levied by other taxing authorities which provide services within the District. Such special taxes and assessments are not represented in the statement of direct and overlapping bonded debt

35 Livermore Valley Joint Unified School District Statement of Direct and Overlapping Bonded Debt (As of June 1, 2006) Assessed Valuation: $12,406,627,158 Redevelopment Incremental Valuation: 332,696,830 Adjusted Assessed Valuation: $12,073,930,328 DIRECT AND OVERLAPPING TAX AND ASSESSMENT DEBT: % Applicable Debt 6/1/06 Bay Area Rapid Transit District 3.34% $3,338,000 Chabot-Las Positas Community College District ,087,508 Livermore Valley Joint Unified School District ,170,000 East Bay Regional Park District ,250 City of Livermore Community Facilities District No ,390,000 City of Livermore 1915 Act Bonds ,370,000 TOTAL DIRECT AND OVERLAPPING TAX AND ASSESSMENT DEBT $167,569,758 OVERLAPPING GENERAL FUND DEBT: Alameda County General Fund Obligations 8.32% $50,938,499 Alameda County Pension Obligations ,471,704 Alameda County Board of Education Certificates of Participation ,925 Contra Costa County General Fund and Pension Obligations ,285 Contra Costa County Board of Education Certificates of Participation Chabot-Las Positas Community College District Certificates of Participation ,409,164 City of Dublin Certificates of Participation ,998 City of Livermore Certificates of Participation ,235,000 City of Pleasanton General Fund Obligations ,856 San Ramon Valley Fire Protection District Certificates of Participation ,501 TOTAL OVERLAPPING GENERAL FUND DEBT $151,131,482 COMBINED TOTAL DEBT $318,701, Excludes general obligation bonds to be sold. 2. Excludes tax and revenue anticipation notes, enterprise revenue, mortgage revenue and tax allocation bonds and non-bonded capital lease obligations. Ratios to Assessed Valuation: Direct Debt ($101,170,000) 0.82% Total Direct and Overlapping Tax and Assessment Debt 1.35% Ratios to Adjusted Assessed Valuation: Combined Total Debt 2.64% STATE SCHOOL BUILDING AID REPAYABLE AS OF 6/30/05: $0 Source: California Municipal Statistics, Inc. Assessed value data provided by to California Municipal Statistics, Inc. by the Auditor/Controller s Office. Data includes land with an approximate assessed value of $52.5 million transferred during fiscal year to the Dublin Unified School District. See, SECURITY AND SOURCE OF PAYMENT-Transfer of Territory, herein

36 STATE FUNDING OF PUBLIC EDUCATION The information in this section concerning State funding of public education is provided as supplementary information only, and it should be not be inferred from the inclusion of this information in this Official Statement that the principal of or interest on the Bonds is payable from state revenues. The Bonds are payable from the proceeds of an ad valorem tax required to be levied by the County in an amount sufficient for the payment thereof. Revenue for Public Education Sources of Revenue. The State s K-12 education system is supported primarily from State revenues, mostly sales and income taxes. The availability of State funds for public education is a function of constitutional provisions affecting school district revenues and expenditures (see CONSTITUTIONAL & STATUTORY PROVISIONS AFFECTING SCHOOL DISTRICT REVENUES & EXPENDITURES). As a result, changes in State revenues may affect appropriations made by the State to school districts. State revenue sources for school districts are supplemented with local property taxes, federal aid, local miscellaneous funds, and the California lottery. In recent years, approximately 58% of all funds for California K-12 public education came from the State budget, which is required to be proposed by the Governor by January 10 and adopted by June 15 of each year (although the State often is late adopting the budget). Approximately 21% of funding for K-12 education comes from local property taxes. The California Constitution limits property taxes to one percent of the value of property; property taxes may only exceed this limit to repay voter approved debt. Statewide, approximately 13% of school districts revenues come from the federal government, and about 6% come from local miscellaneous sources. The latter category includes items such as food sales, money for debt repayment, interest on reserves and, in some cases, more significant sources such as developer fees and parcel taxes. Developer fees are fees that school districts can levy on new residential or commercial development within their boundaries to finance the construction or renovation of school facilities. Many school districts also seek grants or contributions, sometimes channeled through private foundations established to solicit donations from local families and businesses. School districts that still have unused school buildings or sites can lease or sell them for miscellaneous income as well. A significant number of school districts have secured the required two-thirds approval from local voters to levy special taxes on parcels or residences and/or have won voter approval, with either a two-thirds vote or a 55% majority, to sell general obligation bonds or to establish special taxing districts for the construction of schools. Use of such taxes is restricted by law. The final revenue source for school districts is the California State Lottery. Approved by voters in late 1984, the lottery generates about 1% of total school revenues. Every three months the Lottery Commission calculates 34% of lottery proceeds for all public education institutions, the minimum according to the lottery law. Every K-14 school district receives the same amount of lottery funds per pupil from the State, which may be spent for any instructional purpose, excluding capital projects. No other source of general purpose revenue is currently permitted for schools. Proposition 13 eliminated the possibility of raising additional ad valorem property taxes for general school support, and the courts have declared that fees may not be charged for school-related activities other than for busing services. The State Revenue Limit. The State Revenue Limit was first instituted in to provide a mechanism to calculate the amount of general purpose revenue a school district, community college district or county board of education is entitled to receive from State and local sources. Each school district has its own target amount of funding from State funds and local property taxes per Average Daily Attendance (the ADA ). The ADA is the average number of pupils attending school over the year. This target is known as revenue limit, and the funding from this calculation forms the bulk of all school districts' income. The State Legislature usually grants annual cost-of-living adjustments (COLAs) to revenue limits. The exact amount depends on whether the school district is an elementary, high school or a unified school district. Apportionments for revenue limits are calculated three times a year for each school district, community college district and county board of education. The first calculation is performed for the February 20th First Principal Apportionment, the second calculation for the June 25th Second Principal Apportionment, and the final calculation for the end of the year Annual Apportionment. Calculations are reviewed by the county and submitted to the State Department of Education with respect to school districts and to the Chancellor of the California Community Colleges with respect to community college districts, which, respectively, reviews the calculations for accuracy, calculates the amount of state aid owed to such school district or community college district, as the case may be, and notifies the State Controller of the amount, who then distributes the state aid

37 School districts that receive their revenue limit income entirely from property taxes are called basic aid school districts. They are permitted to keep all their property tax money (even if it exceeds their revenue limit). As guaranteed in the California Constitution, the State must apportion $120 per pupil. However, the categorical aid (see below) that districts receive counts toward this requirement. Distribution of Revenue for School Districts General Purpose. The largest part of each school district's revenue funds general operating expenses associated with providing education, including salaries, benefits, supplies, textbooks and regular maintenance. As previously mentioned, the Revenue Limit governs the amount each school district receives. Each school district also receives some State and federal money for special programs, special costs, or categories of children with particular educational needs, called categorical aid. Categorical Aid. This special support goes into a school district's General Fund, but its expenditure is restricted to the purpose for which it is granted. About seventy-five percent (75%) of the total money generated for education is for general purposes, and about twenty-five percent (25%) is for categorical aid. The complex allocation system is adjusted somewhat by the State Legislature almost every year, with unpredictable effects on individual school districts. There are a number of major federal and State categorical aid programs. Some allocations come automatically to school districts, while others require an application. Some programs are based on the characteristics of the children or families in a particular school district, such as gifted and talented, non-english speaking, migrant, low income or handicapped students. Others programs are for specific activities or expenses, such as transportation, textbooks or childcare. Each year a large amount of aid is allocated directly to the State Teachers' Retirement System (STRS) fund. For the past several years, supplemental grants have been directed to equalizing school districts' income from revenue limits plus specific categoricals. Most of the federal funds flow through the California Department of Education, which retains a certain percentage for administration. In terms of dollars and the number of children served, the largest categorical aid program is Special Education for the Handicapped. According to court decisions and federal and California law, school districts are responsible for the appropriate education of each handicapped child from age 3 to 21 who lives within their boundaries. The allocations do not cover the cost of educating them. School districts are required to contribute a certain amount of general purpose funds for Special Education, and many spend much more. This is known as encroachment. School Facilities. Growing enrollments and/or aging facilities require school districts to build or make major renovations to school buildings. The income from developer fees on residential or commercial property is insufficient to fund all facilities costs. Voter approved general obligation bond moneys may only be used for purchase or improvement of real property, while Mello- Roos taxes can be used for this as well as for ongoing maintenance or purchase of needed equipment. A majority of voters has regularly approved state bond measures for the construction or reconstruction of schools. The State Budget The information in this section has been compiled from publicly available information through the California Department of Finance and the Legislative Analysts Office. Neither the District, nor the County, nor the Underwriter assumes any responsibility for the accuracy of such information as set forth or incorporated by reference herein, although they believe that the information provided by the above-listed sources is reliable. On July 11, 2005, the Governor signed the Budget Act (the " Budget"). The following information is an excerpt from the Legislative Analyst's budget analysis: The budget reflects an improving state fiscal picture brought about by better than expected growth in General Fund revenues. The spending plan funds the Proposition 42 transfer to transportation, and includes significant increases in both K-12 and higher education. The Budget does not use any of the remaining $3.7 billion in deficit-financing bonds authorized by Proposition 57 in March 2004, and it prepays a $1.2 billion loan due to local governments in The Budget authorizes total general fund spending in of $90 billion (excluding expenditures of federal funds and bond funds), representing an increase of 10% from General Fund revenues and transfers are projected to increase by 5.62% - from $80 billion to $84.5 billion - while expenditures are proposed to grow by 9.75% - from $82 billion to $90 billion

38 The Budget provides for total Proposition 98 funding of $50 billion ($44.6 billion of which is specified for K-12 education), an increase of 6.1% over Proposition 98 per-pupil spending will increase to $7,402, which is $379 (or 5.4%) above the Budget level. Specific K-12 Funding includes: Cost-of-living adjustments - $1.7 billion growth - $328 million. The Budget fully funds COLAs. Specifically, it provides $1.7 billion for a 4.23% COLA. The budget also provides $328 million to fund growth for the limit and categorical programs. Deficit Factor Reduction - $401 million. To balance the State Budget, the state reduced revenue limits by not providing a COLA (of 1.8%) and reducing revenue limits by 1.2% from the level. The State Budget provided $270 million to restore part of these reductions. The Budget provides an additional $401 million for this purpose. Williams Settlement Facility Funding - $183.5 Million. This money will fund expansion of the class size reduction program for additional classes for deciles 1, 2, and 3 schools. The Budget provides a funding level of $10,325 per pupil. This level of per-pupil funding represents an increase of 3.87% from the $9,940 per pupil in The State Budget On June 30, 2006, the Governor signed the Budget Act (the Budget ), allowing the State to enter the new fiscal year with a budget in place for the first time in six years. The Budget incorporates more positive revenue assumptions than the Budget, due to tax policy changes, tax amnesty-related assumptions, and revenue revisions, which are primarily the result of strong personal and corporate income tax collections in recent months. In general, the Budget allows the State to pay down its debt and increase funding towards education. The State General Fund. There are $103.4 billion in total resources available for the fiscal year , which includes $9.5 billion from prior year balance plus budgeted revenues and transfers for fiscal year of $93.9 billion. This represents an increase of $1.2 billion, or about a 1%, from the revised total resources level. General fund spending is budgeted to increase from $92.7 billion in to $101.3 billion in Part of this increase is due to the early retirement of Economic Recovery Bonds. The resulting operating deficit in a is more than $7 billion. The year-end general fund balance is budgeted to be $2.2 billion, with a reserve of $2.1 billion (which includes the $472 million available in the Budget Stabilization Account). Funding for Education. As a result of higher than expected State revenues, the Budget substantially increases education spending for the fiscal year and restores full Proposition 98 funding. In addition, on May 10, 2006, State Superintendent of Public Instruction Jack O Connell announced that he reached an agreement to settle a lawsuit he filed jointly with the California Teachers Association against Governor Arnold Schwarzenegger over Proposition 98 funding (CTA and O Connell vs. Schwarzenegger lawsuit). See CONSTITUTIONAL & STATUTORY PROVISIONS AFFECTING DISTRICT REVENUES & EXPENDITURES - Proposition 98/111 for more details. The Governor agreed to repay the $2.9 billion the State owed the education community for the fiscal year Proposition 98 funding suspension. The $2.9 billion would be paid back over a period of six fiscal years, starting in through The Budget provides $55.1 billion in Proposition 98 funding for K-12 and community colleges, an increase of 3.3% from the revised spending levels. The Budget provides funding for K-12 total expenditures of $40.7 billion, which includes expenditures from the State s Bond Funds and Special Funds. For K-12, Proposition 98 per pupil funding is budgeted to increase to $8,288 in , which is an increase of $510 from the revised level total per pupil expenditure for K-12 schools is budgeted to be $11,264, an increase of $516 from the revised funding level, and an increase of $939 from the originally budgeted level. Because of the one-time nature of the unexpected tax revenues the State received from personal and corporate income taxes this April, increases in education funding are allocated mainly towards one-time programs rather than ongoing programs. The cost of living adjustment ( COLA ) for K-12 programs is 5.92%. The Budget provides for a net increase of $2.3 billion to school districts and county offices of education revenue limits. This net increase includes: decreased funding due to anticipated ADA decline increase due to COLA factor (total of $2.6 billion in funding to provide for the 5.92% COLA)

39 adjustment for revised local revenues $308.6 million to eliminate the deficit factor for school districts and county offices of education revenue limits $350 million for school district revenue limit equalization Some K-12 Proposition 98 General Fund expenditure highlights include: a $500 million arts, music and physical education one-time equipment grant $200 million to fund supplemental school counseling program a $533.5 million discretionary block grant mandate costs funding of $957 million, of which $927 million funds prior year claims For higher education, the Budget provides funding for the University of California, the California State University, and California's community colleges. The Budget provides for total Higher Education funding of $19.1 billion from all revenue sources. Community college funding totals over $8.7 billion, including approximately $6.2 billion from General Fund and Proposition 98 sources, for a net increase of $439.7 million above the revised level. Some ongoing Proposition 98 General Fund adjustments for community colleges include: $294.4 million increase to provide for the 5.92% COLA $159.4 million for equalization $97.5 million increase to provide 2% growth in apportionment $40 million increase to backfill a reduction in student fees from $26 per unit to $20 per unit, effective with the Spring 2007 semester, holding colleges harmless for the loss in fee revenue Future Budgets The District cannot predict what actions will be taken in the future by the State Legislature and the Governor to address changing State revenues and expenditures or the impact such actions will have on State revenues available in the current or future years for education. The State budget will be affected by national and State economic conditions and other factors over which the District will have no control. Certain actions could result in a significant shortfall of revenue and cash, and could impair the State's ability to fund schools as budgeted. Continued State budget shortfalls in future fiscal years could have an adverse financial impact on the District. For more information on the State Budget, please refer to the California Department of Finance s website at and to the Legislative Analyst s Office s website at [The remainder of this page intentionally left blank.]

40 CONSTITUTIONAL & STATUTORY PROVISIONS AFFECTING DISTRICT REVENUES & EXPENDITURES Principal and interest on the Bonds are payable from the proceeds of an ad valorem tax required to be levied by the County in an amount sufficient for the payment thereof. See THE BONDS--Security for Payment herein. Articles XIIIA and XIIIB of the Constitution, Propositions 39, 46, 98, 111, and 218 (Articles XIIIC and XIIID of the Constitution), are discussed in this section and in the preceding section State Funding of Public Education to describe the potential effect of these Constitutional and statutory measures on the ability of the District to levy taxes and spend tax proceeds for operating and other purposes, and it should not be inferred from the inclusion of such materials that these laws impose any limitation on the ability of the District to levy taxes for payment of the Bonds. The tax levied by the County for payment of the Bonds was approved by the District's voters in compliance with Article XIIIA and all applicable laws. Article XIIIA. In an election held on June 6, 1978, the voters of the State approved an initiative amendment to the State Constitution. The amendment added Article XIIIA to the State Constitution, commonly known as Proposition 13, which limits the taxing powers of California public agencies. Except as described in the following paragraph, Article XIIIA provides that the maximum ad valorem tax on real property cannot exceed one percent of the full cash value which is defined as the county assessor's valuation of real property as shown on the tax bill under full cash value or, thereafter, the appraised value of real property when purchased, newly constructed, or a change in ownership has occurred after the 1975 assessment, subject to exceptions for certain circumstances of transfer or reconstruction. The full cash value is subject to annual adjustments to reflect increases not to exceed two percent per year, or decreases in the consumer price index or comparable local data, or to reflect reduction in property value caused by damage, destruction or other factors. Article XIIIA requires a vote of two-thirds of the qualified electorate to impose special taxes, and except as described in the following sentence, prohibits the imposition of any additional ad valorem, sales or transaction tax on real property. As amended by Proposition 46, on June 3, 1986, Article XIIIA exempts from the one percent tax limitation ad valorem taxes required to pay debt service on indebtedness approved by the voters prior to July 1, 1978, or on bonded indebtedness approved by two-thirds of those voting thereon, after July 1, 1978, the proceeds of which are applied to the acquisition or improvement of real property. Proposition 39: On November 7, 2000, California voters approved an amendment (commonly known as Proposition 39) to the California Constitution. This amendment (1) allows school facilities bond measures to be approved by 55 percent (rather than two-thirds) of the voters in local elections and permits property taxes to exceed the current 1 percent limit in order to repay the bonds, and (2) changes existing statutory law regarding charter school facilities. The local school jurisdictions affected by this proposition are K-12 school districts, including the District, community college districts, and county offices of education. The 55 percent vote requirement would apply only if the local bond measure presented to the voters includes: (1) a requirement that the bond funds can be used only for construction, rehabilitation, equipping of school facilities, or the acquisition or lease of real property for school facilities; (2) a specific list of school projects to be funded and certification that the school board has evaluated safety, class size reduction, and information technology needs in developing the list; and (3) a requirement that the school board conduct annual, independent financial and performance audits until all bond funds have been spent to ensure that the bond funds have been used only for the projects listed in the measure. Legislation approved in June 2000 places certain limitations on local school bonds to be approved by 55 percent of the voters. These provisions require that the tax rate levied as the result of any single election be no more than $60 (for a unified school district), $30 (for a high school or elementary school district), or $25 (for a community college district), per $100,000 of taxable property value. The Governor can change these limitations with a majority vote of both houses of the Legislature and approval; unlike constitutional amendments, which may be changed only with another statewide vote of the people. The statutory provisions could be changed by a majority vote of both houses of the Legislature and approval by the Governor, but only to further the purposes of the proposition. Finally, Article XIIIA requires the approval of two-thirds of all members of the State Legislature to change any State laws for the purpose of increasing tax revenues. Article XIIIB. In a special election held on November 6, 1979, the voters of the State approved an initiative constitutional amendment. This amendment added Article XIIIB to the State Constitution. Article XIIIB limits the annual appropriations of the State and of any city, county, school district, special district, authority or other political subdivision of the State to the level of appropriations for the prior fiscal year, as adjusted for changes in the cost of living, population and services rendered by the government entity. The base year for establishing such appropriation limit is the fiscal year and the limit is to be adjusted annually to reflect changes in population, consumer prices and certain increases in the cost of services provided by these public agencies

41 Appropriations subject to Article XIIIB include generally the proceeds of taxes levied by the State or by any other entity of local government, exclusive of certain State subventions, refunds or taxes, benefit payments from retirement, unemployment insurance and disability insurance funds but excludes taxes to pay voter approved bonds. Proceeds of taxes include, but are not limited to, all tax revenues and the proceeds to an entity of government from (1) regulatory licenses, user charges, and user fees (but only to the extent such proceeds exceed the cost of providing the service or regulation), and (2) the investment of tax revenues. Article XIIIB includes a requirement that if an entity's revenues in any year exceed the amounts permitted to be spent, the excess would have to be returned by revising tax rates or fee schedules over the subsequent two years. State law provides that in the event a school district's appropriations will exceed its limit, the district may assume from the State a portion of the State's appropriations limit. Proposition 98/111: On November 8, 1988, voters of the State approved Proposition 98, a combined initiative constitutional amendment and statute called the Classroom Instructional Improvement and Accountability Act. Proposition 98 changed State funding of public education below the university level and the operation of the State s appropriations limit, primarily by guaranteeing K-14 schools a minimum share of General Fund revenues. Under Proposition 98 (as modified by Proposition 111, which was enacted on June 5, 1990, hereinafter defined as Proposition 98/111 ), K-14 schools are guaranteed the greater of (a) the percentage of General Fund revenues appropriated for school districts in Fiscal Year ( Test 1 ); (b) the amount of State and local proceeds of taxes appropriated to K-14 schools in the prior year, adjusted for changes in the cost of living (measured as in Article XIII B by reference to State per capita personal income) and enrollment ( Test 2 ); or (c) a third test, which would replace Test 2 in any year in which the percentage growth in State per capita personal income is greater than the percentage growth on per capita General Fund revenues plus one-half of one percent ( Test 3 ). Under Test 3, schools would receive the amount of State and local proceeds of taxes appropriated to K-14 schools in the prior year adjusted for changes in enrollment and per capita General Fund revenues, plus an additional small adjustment factor. If Test 3 is used in any year, the difference between Test 3 and Test 2 would become a credit to schools which would be the basis of payments in future years when per capita General Fund revenue growth exceeds per capita personal income growth. Legislation adopted prior to the end of the Fiscal Year, implementing Proposition 98, determined the K-14 schools' funding guarantee under Test 1 to be 40.3% of the General Fund tax revenues, based on appropriations. However, that percentage has been adjusted to 34% to account for a subsequent redirection of local property taxes, since such redirection directly affects the share of General Fund revenues to schools. Proposition 98/111 permits the Legislature by two-thirds vote of both houses, with the Governor's concurrence, to suspend the K- 14 schools' minimum funding formula for a one-year period. This guarantee was suspended in , initially with the agreement of the Education Coalition (an alliance of major education interest groups), and effectively reduced the amount schools received by $2 billion. The Legislature ratified the suspension in Senate Bill However, the Education Coalition agreed to the suspension under the terms that Proposition 98 funding would be reduced for only one year, the year of the State budget crisis, by a maximum of $2 billion; and if the situation were to improve, funding would be restored. But when the State s finances did improve, funding was not restored to the same level it at which it would have been, had the suspension not occurred. Subsequently, the State Superintendent of Public Instruction Jack O Connell filed lawsuit jointly with the California Teachers Association against Governor Arnold Schwarzenegger over this loss in Proposition 98 funding. On May 10, 2006, the two sides reached an agreement whereby, in effect, the State would repay all losses incurred due to the suspension, with payments to be made annually through Since Proposition 98/111 is unclear in some details, there can be no assurance that the Legislature or a court might not interpret it to require a different percentage of General Fund revenues to be allocated to K-14 districts or to apply the relevant percentage to the State's budget in a different way. Proposition 98/111 may place increasing pressure on the State's budget in future years, potentially reducing resources available for other State programs, especially to the extent that the Article XIIIB spending limit would restrain the State's ability to fund these other programs by raising taxes. Proposition 98/111 also changes how tax revenues in excess of the State s appropriations limit are distributed. Any excess State tax revenues up to a specified amount would, instead of being returned to taxpayers, be transferred to K-14 districts. Such transfer would be excluded from the appropriations limits for K-14 districts and the K-14 schools appropriations limits for the next year would automatically be increased by the amount of such transfer. These additional moneys would enter the base funding calculation for K-14 districts for subsequent years, creating further pressure on other portions of the State budget, particularly if revenues decline in a year following an Article XIIIB surplus. The maximum amount of excess tax revenues which could be transferred to schools is four percent of the minimum State spending for education mandated by Proposition 98/111, as described above. Article XIIIC and Article XIIID. On November 5, 1996, the voters of the State approved Proposition 218, the so-called Right to Vote on Taxes Act. Proposition 218 added Articles XIIIC and XIIID to the State Constitution, which contain a number of

42 provisions affecting the ability of local agencies, including school districts, to levy and collect both existing and future taxes, assessments, fees and charges. Among other things, Article XIIIC establishes that every tax is either a general tax (imposed for general governmental purposes) or a special tax (imposed for specific purposes); prohibits special purpose government agencies such as school districts from levying general taxes except as allowed by Article XIIIA; and prohibits any local agency from imposing, extending or increasing any special tax beyond its maximum authorized rate without a two-thirds vote. Article XIIID also provides that no tax may be assessed on property other than ad valorem property taxes imposed in accordance with Articles XIII and XIIIA of the California Constitution and special taxes approved by a two-thirds vote under Article XIIIA, Section 4. Article XIIIC also provides that the initiative power shall not be limited in matters of reducing or repealing local taxes, assessments, fees and charges. The State Constitution and the laws of the State impose a duty on the county treasurer/tax collector (of each county) to levy a property tax sufficient to pay debt service on general obligation bonds coming due in each year. Legislation adopted in 1997 provides that Article XIIIC will not be construed to mean that any Owner or Beneficial Owner of a municipal security assumes the risk of or consents to any initiative measure, which would constitute an impairment of contractual rights under the contracts clause of the U.S. Constitution. Article XIIID deals with assessments and property-related fees and charges. Article XIIID explicitly provides that nothing in Article XIIIC or XIIID shall be construed to affect existing laws relating to the imposition of fees or charges as a condition of property development; however it is not clear whether the initiative power is therefore unavailable to repeal or reduce developer and mitigation fees imposed by school districts. The interpretation and application of Proposition 218 will ultimately be determined by the courts with respect to a number of the matters discussed above, and it is not possible at this time to predict with certainty the outcome of such determination. Possible Future Actions. Article XIIIA, Article XIIIB and Propositions 39, 46, 98, 111 and 218 were each adopted as measures that qualified for the ballot pursuant to California's initiative process. From time to time other initiative measures could be adopted, further affecting K-14 school districts' revenues or such districts' ability to expend revenues. There is no assurance that the California electorate or Legislature will not at some future time approve additional limitations which could reduce property or other tax revenues and adversely affect the revenues of school districts or require additional expenditures. [The remainder of this page intentionally left blank.]

43 LEGAL MATTERS No Litigation There is no action, suit or proceeding known to be pending or threatened restraining or enjoining the sale and delivery of the Bonds, or in any way contesting or affecting the validity thereof or any proceeding of the District taken with respect to the issuance or sale of the Bonds, or the pledge or application of moneys or security provided for the payment of the Bonds, or the authority of the County to levy property taxes to pay principal and interest on the Bonds when due. Legal Opinion The validity of the Bonds and certain other legal matters are subject to the approving opinion of Jones Hall, A Professional Law Corporation, Bond Counsel. Bond Counsel undertakes no responsibility for the accuracy, completeness or fairness of this Official Statement. Tax Matters In the opinion of Jones Hall, A Professional Law Corporation, San Francisco, California, Bond Counsel, subject, however to the qualifications set forth below, under existing law, the interest on the Bonds is excluded from gross income for federal income tax purposes and such interest is not an item of tax preference for purposes of the federal alternative minimum tax imposed on individuals and corporations, provided, however, that, for the purpose of computing the alternative minimum tax imposed on corporations (as defined for federal income tax purposes), such interest is taken into account in determining certain income and earnings. A complete copy of the proposed form of Opinion of Bond Counsel is set forth in APPENDIX C hereto. The opinions set forth in the preceding paragraph are subject to the condition that the District comply with all requirements of the Internal Revenue Code of 1986 (the Code ) that must be satisfied subsequent to the issuance of the Bonds in order that such interest be, or continue to be, excluded from gross income for federal income tax purposes. The District has covenanted to comply with each such requirement. Failure to comply with certain of such requirements may cause the inclusion of such interest in gross income for federal income tax purposes to be retroactive to the date of issuance of the Bonds. If the initial offering price to the public (excluding bond houses and brokers) at which a Bond is sold is less than the amount payable at maturity thereof, then such difference constitutes original issue discount for purposes of federal income taxes and State of California personal income taxes. If the initial offering price to the public (excluding bond houses and brokers) at which each Bond is sold is greater than the amount payable at maturity thereof, then such difference constitutes original issue premium for purposes of federal income taxes and State of California personal income taxes. De minimis original issue discount and original issue premium is disregarded. Owners of Bonds with original issue discount or original issue premium, including purchasers who do not purchase in the original offering, should consult their own tax advisors with respect to federal income tax and State of California personal income tax consequences of owning such Bonds. In the further opinion of Bond Counsel, interest on the Bonds is exempt from California personal income taxes. Owners of the Bonds should also be aware that the ownership or disposition of, or the accrual or receipt of interest on, the Bonds may have federal or state tax consequences other than as described above. Bond Counsel expresses no opinion regarding any federal or state tax consequences arising with respect to the Bonds other than as expressly described above. Legality for Investment Under provisions of the California Financial Code, the Bonds are legal investments for commercial banks in California to the extent that the Bonds, in the informed opinion of the investing bank, are prudent for the investment of funds of depositors. Under provisions of the California Government Code, the Bonds are eligible to secure deposits of public moneys in California

44 RATING Standard & Poor's Corporation ("S&P") has assigned its municipal bond rating of AAA to the Bonds with the understanding that upon delivery of the Bonds, a financial guaranty insurance policy insuring the payment when due of the principal and interest with respect to the Bonds will be issued by MBIA Insurance Corporation. The Bonds have been assigned an underlying rating of A+. Such ratings reflect only the views of such organization and an explanation of the significance of such ratings may be obtained from Standard & Poor s at the following address: Standard & Poor's Corporation, 55 Water Street, New York, New York There is no assurance that any such rating will continue for any given period of time or that it will not be revised downward or withdrawn entirely by the rating agency, if in the judgment of the rating agency, circumstances so warrant. Any such downward revision or withdrawal of such ratings may have an adverse effect on the market price of the Bonds. FINANCIAL ADVISOR Government Financial Strategies inc., has been employed by the District to perform financial advisory services in relation to the sale and delivery of the Bonds. Government Financial Strategies inc., in its capacity as Financial Advisor, has read and participated in drafting certain portions of this Official Statement. Government Financial Strategies inc. has not, however, independently verified nor confirmed all of the information contained within this Official Statement. Government Financial Strategies inc. will not participate in the underwriting of the Bonds. Fees charged by Government Financial Strategies inc. are not contingent upon the sale of the Bonds. INDEPENDENT AUDITORS The general purpose financial statements of the District as of June 30, 2005, and for the fiscal year then ending, have been audited by Nigro Nigro & White, PC, Temecula, California. Information concerning the financial statements of the District as of and for the year ending June 30, 2005, are set forth in APPENDIX A attached hereto. Copies of past and current financial statements may be obtained from the District. See SCHOOL DISTRICT FINANCIAL INFORMATION herein. UNDERWRITING AND INITIAL OFFERING PRICE The Bonds were sold at a competitive public bid on July 12, The Bonds were awarded as set forth in the Official Notice of Sale to Morgan Stanley DW Inc., (the Underwriter ), for an amount equal to the principal amount of the Bonds, plus a net premium to the District of $362,163.75, at a True Interest Cost (TIC%) to the District of %. The Underwriter has agreed to pay costs of issuance in the amount of $95,230 in addition to paying the premium for the policy of municipal bond insurance. The Underwriter has certified to the District and to Bond Counsel the initial prices at which the Bonds have been reoffered to the general public (excluding bond houses, brokers, or similar persons or organizations acting in the capacity of underwriters or wholesalers), and at which at least ten percent (10%) of the Bonds of each maturity were sold. These reoffering prices or corresponding yields to maturity are as set forth on the Cover Page hereof. The initial offering prices stated on the Cover Page to this Official Statement may be changed from time to time by the Underwriter. The Underwriter may offer and sell the Bonds to certain dealers (including dealers depositing Bonds into investment trusts), dealer banks, banks acting as agents and others at prices lower than said public offering prices

45 CONTINUING DISCLOSURE The District has covenanted for the benefit of the holders and Beneficial Owners of the Bonds to provide certain financial information and operating data relating to the District (the Annual Report ), by not later than nine months after the end of the District s fiscal year (which currently would be March 30), commencing with the report for the fiscal year (which is due no later than March 30, 2007), and to provide notices of the occurrence of certain enumerated events, if material. The Annual Report will be filed by the District with each Nationally Recognized Municipal Securities Information Repository or Municipal Securities Rulemaking Board, and with the State information repository, if any. The notices of material events will be filed by the District with the Municipal Securities Rulemaking Board, and with the State information repository, if any. The specific nature of the information to be contained in the Annual Report or the notices of material events is summarized below under the caption APPENDIX B FORM OF CONTINUING DISCLOSURE CERTIFICATE. These covenants have been made in order to assist the Underwriters in complying with S.E.C. Rule 15c2-12(b)(5). The District has never failed to comply in all material respects with any previous undertakings with regard to said Rule to provide annual reports or notices of material events. ADDITIONAL INFORMATION The purpose of this Official Statement is to supply information to prospective buyers of the Bonds. Quotations from and summaries and explanations of the Bonds, the respective Resolutions providing for issuance of the Bonds, and the constitutional provisions, statutes and other documents referenced herein, do not purport to be complete, and reference is made to said documents, constitutional provisions and statutes for full and complete statements of their provisions. All data contained herein has been taken or constructed from District records. Appropriate District officials, acting in their official capacities, have reviewed this Official Statement and have determined that, as of the date hereof, the information contained herein is, to the best of their knowledge and belief, true and correct in all material respects and does not contain an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements made herein, in light of the circumstances under which they were made, not misleading. This Official Statement has been approved by the District. Additional information concerning the District, the Bonds or any other matters concerning the sale and delivery of the Bonds may be obtained by contacting the District at the address and telephone number set forth on page iii of this Official Statement, or by contacting the District s Financial Advisor at the address and telephone number set forth on page iii of this Official Statement. The execution and delivery of this Official Statement by the District has been duly authorized by its governing board. Livermore Valley Joint Unified School District By: /s/ Brenda Miller Superintendent

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47 APPENDIX A EXCERPTS FROM THE GENERAL PURPOSE FINANCIAL STATEMENTS OF THE DISTRICT AS OF AND FOR THE YEAR ENDING JUNE 30, 2005

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101 APPENDIX B FORM OF CONTINUING DISCLOSURE CERTIFICATE

102 APPENDIX B $27,000,000 LIVERMORE VALLEY JOINT UNIFIED SCHOOL DISTRICT (Alameda County, California) General Obligation Bonds Election of 1999, Series 2006 CONTINUING DISCLOSURE CERTIFICATE This Continuing Disclosure Certificate (the "Disclosure Certificate") is executed and delivered by the Livermore Valley Joint Unified School District (the "Issuer") in connection with the issuance of $27,000,000 General Obligation Bonds, Election of 1999, Series 2006 (the "Bonds"). The Bonds are being issued pursuant to a Resolution of the Board of Education of the Issuer adopted June 27, 2006 (the "Resolution"). The Issuer covenants and agrees as follows: Section 1. Purpose of the Disclosure Certificate. This Disclosure Certificate is being executed and delivered by the Issuer for the benefit of the holders and beneficial owners of the Bonds and in order to assist the Participating Underwriters in complying with S.E.C. Rule 15c2-12(b)(5). Section 2. Definitions. In addition to the definitions set forth in the Resolution, which apply to any capitalized term used in this Disclosure Certificate unless otherwise defined in this Section, the following capitalized terms shall have the following meanings: "Annual Report" shall mean any Annual Report provided by the Issuer pursuant to, and as described in, Sections 3 and 4 of this Disclosure Certificate. "CPO" means the Internet-based filing system currently located at or such other similar filing system approved by the Securities and Exchange Commission. "Dissemination Agent" shall mean the Issuer, or any successor Dissemination Agent designated in writing by the Issuer and which has filed with the Issuer a written acceptance of such designation. "Listed Events" shall mean any of the events listed in Section 5(a) of this Disclosure Certificate. "National Repository" shall mean any Nationally Recognized Municipal Securities Information Repository for purposes of the Rule. "Participating Underwriter" shall mean any of the original underwriters of the Bonds required to comply with the Rule in connection with the offering of the Bonds. "Repository" shall mean each National Repository and each State Repository. B-1

103 "Rule" shall mean Rule 15c2-12(b)(5) adopted by the Securities and Exchange Commission under the Securities Exchange Act of 1934, as the same may be amended from time to time. "State Repository" shall mean any public or private repository or entity designated by the State of California as a state repository for the purpose of the Rule and recognized as such by the Securities and Exchange Commission. As of the date of this Disclosure Certificate, there is no State Repository. Section 3. Provision of Annual Reports. (a) The Issuer shall, or shall cause the Dissemination Agent to, not later than nine months after the end of the Issuer's fiscal year (which currently would be March 30), commencing with the report for the Fiscal Year, provide to each Repository (or, in lieu of providing to each Repository, provide to the CPO), an Annual Report which is consistent with the requirements of Section 4 of this Disclosure Certificate. Not later than fifteen (15) Business Days prior to said date, the Issuer shall provide the Annual Report to the Dissemination Agent (if other than the Issuer). The Annual Report may be submitted as a single document or as separate documents comprising a package, and may include by reference other information as provided in Section 4 of this Disclosure Certificate; provided that the audited financial statements of the Issuer may be submitted separately from the balance of the Annual Report, and later than the date required above for the filing of the Annual Report if not available by that date. If the Issuer's fiscal year changes, it shall give notice of such change in the same manner as for a Listed Event under Section 5(c). (b) If the Issuer is unable to provide to the Repositories an Annual Report by the date required in subsection (a), the Issuer shall, by written direction, cause the Dissemination Agent to provide to (i) each National Repository or the Municipal Securities Rulemaking Board and (ii) each appropriate State Repository (with a copy to the Trustee) a notice, in substantially the form attached as Exhibit A. In lieu of filing the notice with each Repository, the Issuer or the Dissemination Agent may file such notice with the CPO. (c) With respect to the Annual Report, the Dissemination Agent shall: (i) determine each year prior to the date for providing the Annual Report the name and address of each National Repository and each State Repository, if any; and (ii) if the Dissemination Agent is other than the Issuer, file a report with the Issuer certifying that the Annual Report has been provided pursuant to this Disclosure Certificate, stating the date it was provided and listing all the Repositories to which it was provided. Section 4. Content of Annual Reports. The Issuer's Annual Report shall contain or incorporate by reference the following: (a) Audited Financial Statements prepared in accordance with generally accepted accounting principles, as promulgated to apply to governmental entities from time to time by the Governmental Accounting Standards Board. If the Issuer's audited financial statements are not available by the time the Annual Report is required to be filed pursuant to Section 3(a), the B-2

104 Annual Report shall contain unaudited financial statements in a format similar to the financial statements contained in the final Official Statement, and the audited financial statements shall be filed in the same manner as the Annual Report when they become available. (b) Adopted Budget for the current fiscal year. (c) to the extent not set forth in the Issuer's audited financial statements, (i) information relating to average daily attendance, (ii) information relating to the Issuer's outstanding debt, (iii) information relating to total assessed valuations of taxable properties within the Issuer, and (iv) information relating to secured tax charges and delinquencies.; (d) In addition to any of the information expressly required to be provided under paragraphs (a), (b) and (c) of this Section 4, the Issuer shall provide such further information, if any, as may be necessary to make the specifically required statements, in the light of the circumstances under which they are made, not misleading. Any or all of the items listed above may be included by specific reference to other documents, including official statements of debt issues of the Issuer or related public entities, which have been submitted to each of the Repositories or the Securities and Exchange Commission. If the document included by reference is a final official statement, it must be available from the Municipal Securities Rulemaking Board. The Issuer shall clearly identify each such other document so included by reference. Section 5. Reporting of Significant Events. (a) Pursuant to the provisions of this Section 5, the Issuer shall give, or cause to be given, notice of the occurrence of any of the following events with respect to the Bonds, if material: (1) Principal and interest payment delinquencies. (2) Non-payment related defaults. (3) Unscheduled draws on debt service reserves reflecting financial difficulties. (4) Unscheduled draws on credit enhancements reflecting financial difficulties. (5) Substitution of credit or liquidity providers, or their failure to perform. (6) Adverse tax opinions or events affecting the tax-exempt status of the security. (7) Modifications to rights of security holders. (8) Contingent or unscheduled bond calls. (9) Defeasances. (10) Release, substitution, or sale of property securing repayment of the securities. (11) Rating changes. (b) Whenever the Issuer obtains knowledge of the occurrence of a Listed Event, the Issuer shall as soon as possible determine if such event would be material under applicable Federal securities law. B-3

105 (c) If the Issuer determines that knowledge of the occurrence of a Listed Event would be material under applicable Federal securities law, the Issuer shall promptly file a notice of such occurrence (i) each National Repository or the Municipal Securities Rulemaking Board and (ii) each appropriate State Repository. Notwithstanding the foregoing, notice of Listed Events described in subsections (a)(8) and (9) need not be given under this subsection any earlier than the notice (if any) of the underlying event is given to holders of affected Bonds pursuant to the Resolution. In lieu of filing the notice of Listed Event with each Repository in accordance with the preceding paragraph, the Issuer or the Dissemination Agent may file such notice of a Listed Event with the CPO. Section 6. Termination of Reporting Obligation. The Issuer's obligations under this Disclosure Certificate shall terminate upon the legal defeasance, prior redemption or payment in full of all of the Bonds. If such termination occurs prior to the final maturity of the Bonds, the Issuer shall give notice of such termination in the same manner as for a Listed Event under Section 5(c). Section 7. Dissemination Agent. The Issuer may, from time to time, appoint or engage a Dissemination Agent to assist it in carrying out its obligations under this Disclosure Certificate, and may discharge any such Agent, with or without appointing a successor Dissemination Agent. Section 8. Amendment; Waiver. Notwithstanding any other provision of this Disclosure Certificate, the Issuer may amend this Disclosure Certificate, and any provision of this Disclosure Certificate may be waived, provided that the following conditions are satisfied: (a) if the amendment or waiver relates to the provisions of Sections 3(a), 4 or 5(a), it may only be made in connection with a change in circumstances that arises from a change in legal requirements, change in law, or change in the identity, nature, or status of an obligated person with respect to the Bonds, or type of business conducted; (b) the undertakings herein, as proposed to be amended or waived, would, in the opinion of nationally recognized bond counsel, have complied with the requirements of the Rule at the time of the primary offering of the Bonds, after taking into account any amendments or interpretations of the Rule, as well as any change in circumstances; and (c) the proposed amendment or waiver either (i) is approved by holders of the Bonds in the manner provided in the Indenture for amendments to the Indenture with the consent of holders, or (ii) does not, in the opinion of the Trustee or nationally recognized bond counsel, materially impair the interests of the holders or beneficial owners of the Bonds. If the annual financial information or operating data to be provided in the Annual Report is amended pursuant to the provisions hereof, the first annual financial information filed pursuant hereto containing the amended operating data or financial information shall explain, in narrative form, the reasons for the amendment and the impact of the change in the type of operating data or financial information being provided. If an amendment is made to the undertaking specifying the accounting principles to be followed in preparing financial statements, the annual financial information for the B-4

106 year in which the change is made shall present a comparison between the financial statements or information prepared on the basis of the new accounting principles and those prepared on the basis of the former accounting principles. The comparison shall include a qualitative discussion of the differences in the accounting principles and the impact of the change in the accounting principles on the presentation of the financial information, in order to provide information to investors to enable them to evaluate the ability of the Issuer to meet its obligations. To the extent reasonably feasible, the comparison shall be quantitative. A notice of the change in the accounting principles shall be sent to the Repositories in the same manner as for a Listed Event under Section 5(c). Section 9. Additional Information. Nothing in this Disclosure Certificate shall be deemed to prevent the Issuer from disseminating any other information, using the means of dissemination set forth in this Disclosure Certificate or any other means of communication, or including any other information in any Annual Report or notice of occurrence of a Listed Event, in addition to that which is required by this Disclosure Certificate. If the Issuer chooses to include any information in any Annual Report or notice of occurrence of a Listed Event in addition to that which is specifically required by this Disclosure Certificate, the Issuer shall have no obligation under this Disclosure Certificate to update such information or include it in any future Annual Report or notice of occurrence of a Listed Event. Section 10. Default. In the event of a failure of the Issuer to comply with any provision of this Disclosure Certificate, any holder or beneficial owner of the Bonds may take such actions as may be necessary and appropriate, including seeking mandate or specific performance by court order, to cause the Issuer to comply with its obligations under this Disclosure Certificate. A default under this Disclosure Certificate shall not be deemed an Event of Default under the Resolution, and the sole remedy under this Disclosure Certificate in the event of any failure of the Issuer to comply with this Disclosure Certificate shall be an action to compel performance. Section 11. Duties, Immunities and Liabilities of Dissemination Agent. The Dissemination Agent shall have only such duties as are specifically set forth in this Disclosure Certificate, and the Issuer agrees to indemnify and save the Dissemination Agent, its officers, directors, employees and agents, harmless against any loss, expense and liabilities which it may incur arising out of or in the exercise or performance of its powers and duties hereunder, including the costs and expenses (including attorneys fees) of defending against any claim of liability, but excluding liabilities due to the Dissemination Agent's negligence or willful misconduct. The obligations of the Issuer under this Section shall survive resignation or removal of the Dissemination Agent and payment of the Bonds. B-5

107 Section 12. Beneficiaries. This Disclosure Certificate shall inure solely to the benefit of the Issuer, the Dissemination Agent, the Participating Underwriters and holders and beneficial owners from time to time of the Bonds, and shall create no rights in any other person or entity. Date: August 1, 2006 LIVERMORE VALLEY JOINT UNIFIED SCHOOL DISTRICT By: Director of Fiscal Services B-6

108 EXHIBIT A NOTICE OF FAILURE TO FILE ANNUAL REPORT Name of Issuer: Livermore Valley Joint Unified School District Name of Bond Issue: $27,000,000 General Obligation Bonds, Election of 1999, Series 2006 Date of Issuance: August 1, 2006 NOTICE IS HEREBY GIVEN to [(i) each National Repository or the Municipal Securities Rulemaking Board and (ii) each appropriate State Repository] [the CPO and the Municipal Securities Rulemaking Board] that the Issuer has not provided an Annual Report with respect to the above-named Bonds as required by Section 4 of the Issuer's Resolution adopted June 27, The Issuer anticipates that the Annual Report will be filed by.] Dated: LIVERMORE VALLEY JOINT UNIFIED SCHOOL DISTRICT By Exhibit A

109 APPENDIX C PROPOSED FORM OF OPINION OF BOND COUNSEL

110 APPENDIX C PROPOSED FORM OF OPINION OF BOND COUNSEL [LETTERHEAD OF JONES HALL] August 1, 2006 Board of Education Livermore Valley Joint Unified School District 685 East Jack London Boulevard Livermore, California OPINION: $27,000,000 Livermore Valley Joint Unified School District (Alameda County, California) General Obligation Bonds, Election of 1999, Series 2006 Members of the Board of Education: We have acted as bond counsel to the Livermore Valley Joint Unified School District (the District ) in connection with the issuance by the District of $27,000,000 Livermore Valley Joint Unified School District (Alameda County, California) General Obligation Bonds, Election of 1999, Series 2006, dated August 1, 2006 (the Bonds ), pursuant to Title 1, Division 1, Part 10, Chapter 1 of the California Education Code, commencing with Section (the Act ) and a resolution of the Board of Education of the District (the Board ) adopted on June 27, 2006 (the Resolution ). We have examined the law and such certified proceedings and other papers as we deemed necessary to render this opinion. As to questions of fact material to our opinion, we have relied upon representations of the Board contained in the Resolution and in the certified proceedings and certifications of public officials and others furnished to us, without undertaking to verify the same by independent investigation. Based upon the foregoing, we are of the opinion, under existing law, as follows: 1. The District is duly created and validly existing as a unified school district with the power to issue the Bonds and to perform its obligations under the Resolution and the Bonds.

111 Board of Education Livermore Valley Joint Unified School District August 1, 2006 Page 2 2. The Resolution has been duly adopted by the Board and constitutes a valid and binding obligation of the District, enforceable upon the District. 3. The Bonds have been duly authorized, executed and delivered by the District and are valid and binding general obligations of the District, and the Board of Supervisors of Alameda County is required under the Act to levy a tax upon the property in the District, unlimited as to rate or amount, for the interest and redemption of all outstanding bonds of the District, including the Bonds. 4. Interest on the Bonds is excluded from gross income for federal income tax purposes and is not an item of tax preference for purposes of the federal alternative minimum tax imposed on individuals and corporations; it should be noted, however, that for the purpose of computing the alternative minimum tax imposed on such corporations (as defined for federal income tax purposes), such interest is required to be taken into account in determining certain income and earnings. The opinions set forth in the preceding sentences are subject to the condition that the District comply with all requirements of the Internal Revenue Code of 1986, as amended, that must be satisfied subsequent to the issuance of the Bonds in order that interest thereon be, or continue to be, excluded from gross income for federal income tax purposes. The District has covenanted to comply with each such requirement. Failure to comply with certain of such requirements may cause the inclusion of interest on the Bonds in gross income for federal income tax purposes to be retroactive to the date of issuance of the Bonds. We express no opinion regarding other federal tax consequences arising with respect to the Bonds. 5. The interest on the Bonds is exempt from personal income taxation imposed by the State of California. The rights of the owners of the Bonds and the enforceability of the Bonds and the Resolution may be subject to bankruptcy, insolvency, reorganization, moratorium and other similar laws affecting creditors' rights heretofore or hereafter enacted and may also be subject to the exercise of judicial discretion in appropriate cases. Respectfully submitted, A Professional Law Corporation 2

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113 APPENDIX D SPECIMEN FORM OF MUNICIPAL BOND INSURANCE POLICY

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