MATURITY SCHEDULE (on inside front cover)

Transcription

1 NEW ISSUE RATINGS BOOK-ENTRY ONLY Insured Rating: S&P: AAA BANK QUALIFIED Underlying Rating: S&P: A+ (See Ratings ) In the opinion of Kronick, Moskovitz, Tiedemann & Girard, a Professional Corporation, Sacramento, California, Special Counsel, based upon an analysis of existing statutes, regulations, rulings, and court decisions and assuming, among other things, the accuracy of certain representations and compliance with certain covenants, the portion of the rental payments designated as and constituting interest paid by the District under the Facilities Lease and received by the owners of the Certificates is excludable from gross income for federal income tax purposes and is exempt from State of California personal income taxes. In the further opinion of Special Counsel, such interest is not an item of tax preference for purposes of the federal alternative minimum tax imposed on individuals or corporations; however, such interest is taken into account in determining adjusted current earnings for the purpose of computing the alternative minimum tax imposed on certain corporations. The obligations represented by the Certificates are eligible and the Rescue Union School District has designated them as qualified tax-exempt obligations pursuant to Section 265(b)(3) of the Internal Revenue Code of Special Counsel expresses no opinion regarding any other tax consequences related to the ownership or disposition of, or the accrual or receipt of interest with respect to, the Certificates. See Tax Matters. $6,625, CERTIFICATES OF PARTICIPATION Evidencing Undivided Proportionate Interests in Rental Payments Made by the RESCUE UNION SCHOOL DISTRICT (EL DORADO COUNTY, CALIFORNIA) Dated: Date of Delivery Due: October 1, as shown on inside cover The District will use proceeds of the Certificates to provide funds to refinance the construction and acquisition of school facilities by refunding a portion of the District s Certificates of Participation, Series 2001, to fund a reserve fund for the Certificates, and to pay certain costs of issuance. See Estimated Sources and Uses of Funds. The Certificates evidence undivided proportionate interests in Rental Payments made by the District under a Facilities Lease. The District has covenanted in the Facilities Lease to take all action necessary to include all Rental Payments in its annual budget and to make annual appropriations for such payments. The District s obligation to make Rental Payments may be abated during any period in which there is substantial interference with the District s use and occupancy of the property leased under the Facilities Lease by reason of material damage to, condemnation of, or defect in the District s title to the property. See Risk Factors Abatement of Rental Payments. The Certificates will be delivered in book-entry form only, registered to Cede & Co., as nominee of The Depository Trust Company, New York, New York ( DTC ), which will act as securities depository of the Certificates. Purchasers will not receive physical certificates representing their interest in the Certificates. Individual purchases of the Certificates will be in principal amounts of $5,000 and integral multiples thereof. Interest payable with respect to the Certificates will be payable on April 1 and October 1 of each year, commencing April 1, 2009, and principal payable with respect to the Certificates will be paid on the dates set forth in the Maturity Schedule on the inside cover. Interest and principal evidenced by the Certificates are payable by U.S. Bank National Association, as Trustee, to DTC, which remits such payments to its Participants for subsequent distribution to the beneficial owners of the Certificates. See Appendix F Book-Entry Only System. The Certificates are subject to redemption prior to maturity as described herein. See The Certificates Redemption of Certificates. The obligation of the District to make Rental Payments does not constitute an obligation for which the District is obligated to levy or pledge any form of taxation or for which the District has levied or pledged any form of taxation. Neither the Certificates nor the obligation of the District to make Rental Payments constitutes an indebtedness of the District, the State of California, or any of its political subdivisions within the meaning of any constitutional or statutory debt limitation or restriction. The scheduled payment of principal of and interest representing the Certificates when due will be guaranteed under a financial guaranty insurance policy to be issued concurrently with the delivery of the Certificates by Assured Guaranty Corp. (See CERTIFICATE INSURANCE and Appendix G SPECIMEN FINANCIAL GUARANTY INSURANCE POLICY. ) This cover page is for quick reference only. Investors should review the entire Official Statement to obtain information essential in making an informed investment. See Risk Factors for a discussion of factors that should be considered, in addition to the other matters set forth herein, in evaluating the investment quality of the Certificates. MATURITY SCHEDULE (on inside front cover) The Certificates are offered when, as and if delivered and received by the Underwriter, subject to the approval as to their legality by Kronick, Moskovitz, Tiedemann & Girard, a Professional Corporation, Sacramento, California, Special Counsel. The Certificates, in bookentry form, will be available for delivery through DTC in New York, New York, on or about December 17, This Official Statement is dated December 3, 2008.

2 Maturity (October 1) Principal Amount MATURITY SCHEDULE Interest Rate Price CUSIP (1) 2013 $3,350, % % AD ,275, AC3 (1) Copyright 2008, American Bankers Association. CUSIP date herein are provided by Standard & Poor s CUSIP Service Bureau, a division of the McGraw-Hill Companies, Inc., and are provided for convenience of reference only. Neither the District nor the Underwriter assumes any responsibility for the accuracy of these CUSIP data. Stabilization of and Changes to Offering Prices. The Underwriter may overallot or take other steps that stabilize or maintain the market price of the Certificates at a level above that which might otherwise prevail in the open market. If commenced, the Underwriter may discontinue such market stabilization at any time. The Underwriter may offer and sell the Certificates to certain dealers, dealer banks and banks acting as agent at prices lower than the public offering prices stated above, and those public offering prices may be changed from time to time by the Underwriter.

3 GENERAL INFORMATION ABOUT THIS OFFICIAL STATEMENT Use of Official Statement. This Official Statement is submitted in connection with the sale of the Certificates referred to herein and may not be reproduced or used, in whole or in part for any other purpose. This Official Statement is not a contract is not a contract between any Certificate owner and the District or the Underwriter. No Offering Except by This Official Statement. No dealer, broker, salesperson or other person has been authorized by the District or the Underwriter to give any information or to make any representations other than those contained in this Official Statement and, if given or made, such other information or representation must not be relied upon as having been authorized by the District or the Underwriter. No Unlawful Offers or Solicitations. This Official Statement does not constitute an offer to sell or the solicitation of an offer to buy nor may there be any sale of the Certificates by a person in any jurisdiction in which it is unlawful for such person to make such an offer, solicitation or sale. Information in Official Statement. The information set forth in this Official Statement has been furnished by the District and other sources that are believed to be reliable, but it is not guaranteed as to accuracy or completeness. Estimates and Forecasts. When used in this Official Statement and in any press release and in any oral statement made with the approval of an authorized officer of the District, the words or phrases will likely result, are expected to, will continue, is anticipated, estimate, project, forecast, expect, intend and similar expressions identify forward-looking statements. Such statements are subject to risks and uncertainties that could cause actual results to differ materially from those contemplated in such forward-looking statements. Any forecast is subject to such uncertainties. Inevitably, some assumptions used to develop the forecasts will not be realized and unanticipated events and circumstances may occur. Therefore, there are likely to be differences between forecasts and actual results, and those differences may be material. Involvement of Underwriter. The Underwriter has reviewed the information in this Official Statement in accordance with, and as a part of, its responsibilities to investors under the federal securities laws as applied to the facts and circumstances of this transaction, but the Underwriter does not guarantee the accuracy or completeness of such information. Documents. All summaries of documents referred to in this Official Statement are made subject to the provisions of such documents and qualified in their entirety to reference to such documents and do not purport to be complete statements of any or all of such provisions. Copies of documents referred to herein and other information concerning the Certificates are available from the Rescue Union School District, 2390 Bass Lake Road, Rescue, California 95672, telephone: (530) The District may impose a charge for copying, mailing and handling. No Securities Laws Registration. The Certificates have not been registered under the Securities Act of 1933, as amended, in reliance upon exceptions therein for the issuance and sale of municipal securities. The Certificates have not been registered or qualified under the securities laws of any state. Effective Date. This Official Statement speaks only as of its date, and the information and expressions of opinion contained in this Official Statement are subject to change without notice. Neither the delivery of this Official Statement nor any sale of the Certificates will, under any circumstances, give rise to any implication that there has been no change in the affairs of the District or other information contained herein since the date of this Official Statement. Insurer s Disclaimer. Assured Guaranty Corp. (the Insurer ) makes no representation regarding the Certificates or the advisability of investing in the Certificates. In addition, the Insurer has not independently verified, makes no representation regarding, and does not accept any responsibility for the accuracy or completeness of this Official Statement or any information or disclosure contained herein, or omitted herefrom, other than with respect to the accuracy of the information regarding the Insurer supplied by the Insurer and presented under the heading Certificate Insurance and Appendix G Specimen Financial Guaranty Insurance Policy.

4 RESCUE UNION SCHOOL DISTRICT County of El Dorado, State of California BOARD OF TRUSTEES Ellen Driscoll, President Bruce Lagomarsino, Vice President Serena Posner, Clerk Suzanna George, Member Nancy Brownell, Member * DISTRICT ADMINISTRATORS Dr. Carol Bly, Superintendent Ronna Wolcott, Assistant Superintendent, Business Services SPECIAL COUNSEL Kronick, Moskovitz, Tiedemann & Girard, A Professional Corporation Sacramento, California FINANCIAL ADVISOR Caldwell Flores Winters, Inc. Emeryville, California TRUSTEE U.S. Bank National Association San Francisco, California UNDERWRITER George K. Baum & Company Sacramento, California * Assumes office in December

5 TABLE OF CONTENTS INTRODUCTION... 1 The District... 1 Purpose of the Certificates... 1 Security and Sources of Payment for the Certificates... 1 Description of the Certificates... 2 Tax Exemption...3 Professionals Involved in the Offering... 3 Offering and Delivery of the Certificates... 3 Certificate Owners Risks... 3 Continuing Disclosure... 3 THE CERTIFICATES... 4 General Provisions... 4 Redemption of Certificates... 4 Plan of Refunding... 5 ESTIMATED SOURCES AND USES OF FUNDS... 5 CERTIFICATE PAYMENT SCHEDULE... 6 SECURITY AND SOURCES OF PAYMENT FOR THE CERTIFICATES... 6 Nature of the Certificates... 6 Rental Payments...6 Covenant to Appropriate Funds... 6 Rental Abatement... 7 The Facilities... 7 Certificate Reserve Fund... 7 Action on Default...8 Covenants to Insure... 8 CERTIFICATE INSURANCE... 8 The Insurance Policy... 8 The Insurer... 9 Recent Developments Capitalization of Assured Guaranty Corp Incorporation of Certain Documents by Reference RISK FACTORS Limited Nature of the Obligation to Make Rental Payments Additional General Fund Obligations Abatement of Rental Payments Risk of Earthquake and Flood Limited Recourse on Default; No Acceleration on Default Loss of Tax Exemption Bankruptcy and Equitable Limitations Revenue Sources to Make Rental Payments i

6 THE CORPORATION RESCUE UNION SCHOOL DISTRICT General Information Board of Trustees Key Personnel Average Daily Attendance and Base Revenue Limit Per Unit of ADA District Employees Employee Relations Retirement System Post-Employment Healthcare Benefits Insurance DISTRICT FINANCIAL MATTERS District Financial Statements Accounting Practices District Budget Comparative Financial Statements Revenue Sources Revenue Limit Sources Property Taxes Federal Sources Other State Sources Other Local Sources Developer Fees Mello-Roos Taxes Local Economy DISTRICT DEBT STRUCTURE Long-Term Borrowing General Obligation Bonds Capital Leases Direct and Overlapping Debt CONSTITUTIONAL AND STATUTORY PROVISIONS AFFECTING DISTRICT REVENUES AND APPROPRIATIONS Article XIIIA of the California Constitution Article XIIIB of the California Constitution Articles XIIIC and XIIID Proposition 1A Proposition 62: Limitations on Local Taxes Future Initiatives ii

7 STATE FUNDING OF EDUCATION General Propositions 98 and Minimum Funding Guarantee State Budget Process Recent State Budgets Fiscal Year Budget Fiscal Year Budget State Fiscal Crisis Additional Information on State Finances Future State Budgets TAX MATTERS CERTAIN LEGAL MATTERS ABSENCE OF MATERIAL LITIGATION CONTINUING DISCLOSURE RATINGS UNDERWRITING AUTHORIZATION APPENDIX A Audited Financial Statements...A-1 APPENDIX B Summary of Principal Legal Documents... B-1 APPENDIX C Proposed Form of Opinion of Special Counsel... C-1 APPENDIX D Form of Continuing Disclosure Certificate...D-1 APPENDIX E County Economic Profile... E-1 APPENDIX F Book-Entry Only System...F-1 APPENDIX G Specimen Financial Guaranty Insurance Policy...G-1 iii

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9 OFFICIAL STATEMENT $6,625, CERTIFICATES OF PARTICIPATION Evidencing Undivided Proportionate Interests in Rental Payments Made by the RESCUE UNION SCHOOL DISTRICT INTRODUCTION This Official Statement provides certain information concerning the sale and delivery of $6,625,000 principal amount of Rescue Union School District 2008 Certificates of Participation (the Certificates ). This introduction is not a summary of the Official Statement. It is only a brief description of and guide to, and is qualified by, more complete and detailed information contained in the entire Official Statement, including the cover page and appendices hereto, and the documents summarized or described herein. A full review should be made of the entire official Statement. No person is authorized to make offers to sell, or solicit offers to buy, the Certificates unless the entire Official Statement is delivered in connection with the offer or solicitation. The District The Rescue Union School District was established as an elementary school district in 1950 through the consolidation of Deer Valley, Live Oak, Tennessee and a portion of the Negro Hill school districts. The District is located approximately 30 miles east of the City of Sacramento on U.S. Highway 50 and encompasses approximately 51 square miles in unincorporated El Dorado County. The District serves a student enrollment of approximately 3,700 students and currently operates five elementary schools and two middle schools. The current pupil-teacher ratio is approximately 20:1 in grades K-3 and 30:1 in grades 4-8. Purpose of the Certificates The District will use proceeds of the Certificates to provide funds to refinance the construction and acquisition of school facilities by refunding the District s Certificates of Participation, Series 2001 (the Prior Certificates ), to fund a reserve fund for the Certificates, and to pay certain costs of issuance. See Estimated Sources and Uses of Funds. Security and Sources of Payment for the Certificates The Certificates will be executed and delivered pursuant to the Trust Agreement dated December 1, 2008 (the Trust Agreement ), between the District, the Rescue District Facilities Corporation (the Corporation ), and U.S. Bank National Association, as trustee (the Trustee ). The Certificates evidence undivided proportionate interests in the Rental Payments ( Rental Payments ) to be made by the District under the Facilities Lease dated December 1, 2008 (the Facilities Lease ), between the District and the Corporation. The Corporation will acquire a leasehold interest in certain real property (the Facilities ) pursuant to the Ground Lease, dated December 1, 2008 (the Ground Lease ), between the District and 1

10 the Corporation. Pursuant to the Facilities Lease, the District will simultaneously lease the Facilities from the Corporation in consideration for which the District will make Rental Payments. See The Facilities. Under the Trust Agreement, the Corporation will assign its rights under the Facilities Lease and the Ground Lease to the Trustee. The District covenants in the Facilities Lease to take such action as may be necessary to include all Rental Payments due in each fiscal year in its annual budget and to make the necessary annual appropriations for all such Rental Payments. The District, however, is not obligated to levy or pledge any form of taxation for the payment of Rental Payments, nor has the District covenanted to do so. The payment of Rental Payments is subject to abatement during any period in which, by reason of material damage, destruction, condemnation or title defect, there is substantial interference with the District s use and occupancy of the Facilities. See Security and Sources of Payment for the Certificates - Rental Abatement and Risk Factors - Abatement of Rental Payments. Abatement of Rental Payments under the Facilities Lease, to the extent payment is not made from alternative sources as described below, would result in all Owners receiving less that the full amount of principal and interest evidenced by the Certificates. To the extent proceeds of insurance are available or other moneys are available for the payment of Rental Payments in any of the funds and accounts established under the Trust Agreement (as described below), Rental Payments (or a portion thereof) may be made during periods of abatement. See Security and Sources of Payment for the Certificates. Description of the Certificates Authorized Denominations. The Certificates will be available to purchasers in denominations of $5,000 and integral multiples thereof. Registration, Transfers and Exchanges. The Certificates will be initially delivered in bookentry form only, registered to Cede & Co., as nominee of The Depository Trust Company, New York, New York ( DTC ), and will be available to purchasers of the Certificates (the Beneficial Owners ) in the denominations described above, under the book-entry system maintained by DTC, only through brokers and dealers who are or act through DTC Participants as described below. Beneficial Owners will not be entitled to receive physical delivery of the Certificates. See Appendix F Book-Entry Only System. If the book-entry only system is no longer used with respect to the Certificates, the Certificates will be registered and transferred in accordance with the provisions of the Trust Agreement. See Appendix F Book-Entry only System Discontinuance of Book-Entry Only System. Payments. Interest and principal evidenced by the Certificates are payable by the Trustee to DTC. Interest payable with respect to the Certificates will be payable on April 1 and October 1 of each year, commencing April 1, 2009, and principal payable with respect to the Certificates will be paid on the dates set forth in the Maturity Schedule on the inside cover. Disbursement of such payments to DTC Participants is the responsibility of DTC, and disbursement of such payments to the Beneficial Owners is the responsibility of DTC Participants. If the book-entry only system is no longer used with respect to the Certificates, the Beneficial Owners will become the registered owners of the Certificates and will be paid principal and interest evidenced by the Certificates by the Trustee. See Appendix F Book-Entry Only System. Redemption. The Certificates are subject to redemption prior to maturity as described herein. See The Certificates Redemption of Certificates. 2

11 Tax Exemption In the opinion of Kronick, Moskovitz, Tiedemann & Girard, a Professional Corporation, Sacramento, California, Special Counsel, based upon an analysis of existing statutes, regulations, rulings, and court decisions and assuming, among other things, the accuracy of certain representations and compliance with certain covenants, the portion of the rental payments designated as and constituting interest paid by the District under the Facilities Lease and received by the owners of the Certificates is excludable from gross income for federal income tax purposes and is exempt from State of California personal income taxes. In the further opinion of Special Counsel, such interest is not an item of tax preference for purposes of the federal alternative minimum tax imposed on individuals or corporations; however, such interest is taken into account in determining adjusted current earnings for the purpose of computing the alternative minimum tax imposed on certain corporations. Special Counsel expresses no opinion regarding any other tax consequences related to the ownership or disposition of, or the accrual or receipt of interest with respect to, the Certificates. See Tax Matters. Professionals Involved in the Offering U.S. Bank National Association, San Francisco, California, will act as Trustee with respect to the Certificates. The Certificates will be delivered subject to the approval as to their legality by Kronick, Moskovitz, Tiedemann & Girard, a Professional Corporation, Sacramento, California, Special Counsel. Caldwell Flores Winters, Inc., Emeryville, California, has served as financial advisor to the District in connection with the sale of the Certificates. Kronick, Moskovitz, Tiedemann & Girard, a Professional Corporation, and Caldwell Flores Winters, Inc., will receive compensation from the District contingent upon the sale and delivery of the Certificates. Offering and Delivery of the Certificates The Certificates are offered when, as and if delivered and received by the Underwriter, subject to the approval as to their legality by Special Counsel and the satisfaction of certain other conditions. It is anticipated that the Certificates in book-entry form will be available for delivery to DTC in New York, New York, on or about December 17, Certificate Owners Risks Certain events could affect the ability of the District to make the Rental Payments when due. See Risk Factors for a discussion of certain factors that should be considered, in addition to other matters set forth herein, in evaluating an investment in the Certificates. Continuing Disclosure The District will enter into a Continuing Disclosure Certificate under which it will covenant to provide certain financial information and operating data relating to the District not later than 270 days after the end of the District s fiscal year (which currently ends on June 30), commencing with the report for fiscal year (the Annual Report ) and to provide notices of the occurrence of certain enumerated events, if material, to each Nationally Recognized Municipal Securities Information Repository and the state information repository, if any. The specific nature of the information contained in the Annual Report or the notices of material events is presented in Appendix D Form of Continuing Disclosure Certificate. These covenants have been made in order to assist the Underwriter in complying with Securities and Exchange Commission Rule 15c2-12(b)(5). 3

12 The District has not timely filed the annual reports required by previous undertakings. The District has implemented new internal controls to ensure compliance in the future. General Provisions THE CERTIFICATES The Certificates evidence and represent proportionate interests of the Owners in Rental Payments and any redemptions to be paid by the District under the Facilities Lease. The Certificates will be issued in fully registered form, without coupons. The Certificates will be initially registered in the name of Cede & Co., as nominee of DTC. DTC will act as securities depository for the Certificates. Ownership interests in the Certificates may be purchased in book-entry form only, in denominations of $5,000 or any integral multiple thereof. While DTC acts as securities depository for the Certificates, all payments of principal, premium, if any, and interest represented by the Certificates shall be made to Cede & Co., as nominee of DTC. For information with respect to the payment and transfer of the Certificates, see Appendix F Book-Entry Only System. The Certificates will be dated their date of delivery. Interest represented by each Certificate will accrue on the principal components represented by such Certificate, at the applicable interest rate set forth on the inside cover page hereof, from the date of delivery thereof until its date of maturity or prior redemption, with interest becoming payable on each April 1 and October 1 (each, an Interest Payment Date ), commencing April 1, Interest with respect to the Certificates shall be calculated on the basis of a 360-day year comprising twelve 30-day months. Principal evidenced by the Certificates shall be payable on October 1 in each of the years and in the amounts set forth on the inside cover page of this Official Statement. Redemption of Certificates Extraordinary Redemption from Net Proceeds of Insurance or Condemnation. The Certificates are subject to redemption prior to maturity as a whole on any date or in part (pro rata among maturities and at random within a maturity) on any Interest Payment Date, at a redemption price equal to the principal amount thereof plus accrued interest to the date fixed for redemption, without premium, from (i) net insurance proceeds or condemnation awards not used to repair or replace the Facilities or portions thereof that have been materially damaged, destroyed or taken in eminent domain proceedings, or (ii) proceeds of title insurance. Selection of Certificates for Redemption. Whenever less than all the Outstanding Certificates of a maturity are to be redeemed on any one date, the Trustee shall select the Certificates to be redeemed (a) proportionately among Certificates with different stated maturities and (b) by lot among Certificates with the same stated maturity in any manner that the Trustee deems fair and appropriate, which decision shall be final and binding upon the District and the Owners. Notwithstanding the foregoing, all Certificates of the same maturity shall be redeemed prior to the redemption of any other Certificates with the same stated maturity. Notice of Redemption. The Trustee shall give notice, at the expense of the District, of the redemption of the Certificates; provided, however, that, except with respect to Mandatory Sinking Account Payment redemptions, the Trustee need not give notice of redemption of Certificates unless there has been deposited with the Trustee funds sufficient to pay the redemption price of the Certificates to be redeemed. The notice of redemption shall specify among other things (a) the Certificates or designated portions thereof (in the case of redemption of the Certificates in part but not in whole) that are to be 4

13 redeemed, (b) the date of redemption, (c) the redemption price and (d) the CUSIP numbers assigned to the Certificates to be redeemed. Effect of Redemption. If notice of redemption has been duly given and moneys for the payment of the redemption price of the Certificates to be redeemed are held by the Trustee, then on the redemption date designated in such notice, the Certificates so called for redemption shall become payable at the redemption price specified in such notice; and from and after the date so designated, interest evidenced by the Certificates so called for redemption shall cease to accrue, such Certificates shall cease to be entitled to any benefit or security hereunder and the Owners of such Certificates shall have no rights in respect thereof except to receive payment of the redemption price thereof, and such moneys shall be pledged to such redemption. The Trustee shall, upon surrender for payment of any of the Certificates to be redeemed, pay such Certificates at the redemption price thereof. Plan of Refunding A portion of the proceeds from the sale of the Certificates will be applied to redeem all of the Prior Certificates on December 17, ESTIMATED SOURCES AND USES OF FUNDS The proceeds to be received from the sale of the Certificates are estimated to be applied as set forth in the table below: Sources Principal Amount of Certificates $6,625, Original Issue Premium 89, Total Sources $6,714, Uses Redemption of Prior Certificates $5,811, Deposit to Certificate Reserve Fund 662, Costs of Issuance 240,403.40(1) Total Uses $6,714, (1) Includes the Underwriter s discount, fees of the financial advisor, Certificate insurance premium, costs of printing, Trustee fees, legal fees, rating agency fees, and miscellaneous other costs of issuance. 5

14 CERTIFICATE PAYMENT SCHEDULE The Facilities Lease requires that Rental Payments be made by the District to the Trustee on the Rental Payment Dates, which are the 15th day of the month immediately preceding each payment date for the Certificates. The following table sets forth the scheduled payments of principal and interest represented by the Certificates. Date Principal Interest Total Semi-Annual Payments Total Annual Payments April 1, 2009 $ 89, $ 89, October 1, , , $245, April 1, , , October 1, , , , April 1, , , October 1, , , , April 1, , , October 1, , , , April 1, , , October 1, 2013 $6,625, , ,780, ,935, TOTAL $6,625,000 $1,488, $8,113, $8,113, SECURITY AND SOURCES OF PAYMENT FOR THE CERTIFICATES Nature of the Certificates Each Certificate represents an undivided proportionate interest of the Owner thereof in the Rental Payments made under the Facilities Lease. The Corporation, pursuant to the Trust Agreement, will assign to the Trustee for the benefit of the Owners of the Certificates substantially all of the Corporation s rights under the Ground Lease and the Facilities Lease, including its right to receive Rental Payments, condemnation awards and insurance proceeds from the District as well as its right to enforce Rental Payments. The District will pay Rental Payments directly to the Trustee, as assignee of the Corporation. See Security and Sources of Payment for the Certificates - Rental Payments. Rental Payments The Facilities Lease requires that the District make Rental Payments for the use and possession of the Facilities. The obligation of the District to make Rental Payments does not constitute an obligation of the District for which the District is obligated to levy or pledge any form of taxation or for which the District has levied or pledged any form of taxation. Neither the Certificates nor the obligation of the District to make Rental Payments constitutes an indebtedness of the District, the State of California, or any of its political subdivisions within the meaning of any constitutional or statutory debt limitation or restriction. Covenant to Appropriate Funds The District has covenanted in the Facilities Lease to take all such action as may be necessary to include all Rental Payments due in each fiscal year in its annual budget and to make the necessary annual 6

15 appropriations therefor (except to the extent such payments are abated as permitted under the Facilities Lease). Rental Abatement Except to the extent of (i) amounts available in the funds held by the Trustee under the Trust Agreement, (ii) amounts, if any, received in respect of rental abatement insurance, and (iii) amounts, if any, otherwise available to the Trustee for payments in respect of the Certificates, Rental Payments will be abated during any period in which by reason of material damage, destruction or condemnation of the Facilities or any portion thereof or defects in title to the Facilities, there is substantial interference with the District s use and occupancy of the Facilities or any portion thereof. In such event, the amount of total abatement will be such that the resulting total rental does not exceed the total fair rental value of the portion of the Facilities not damaged, destroyed, condemned or affected by title defect. Such abatement or adjustment, if any, shall continue for the period commencing with such damage, destruction or taking or discovery of such title defect and ending with the restoration of the Facilities or portion thereof to tenantable condition or correction of the title defect. Any resulting reduction in Rental Payments would not constitute a default under either the Trust Agreement or the Facilities Lease and, upon the depletion of all amounts held by the Trustee under the Trust Agreement, would result in a delay in, or inability of the Trustee to make, further payments on the Certificates. In the event of any such damage, destruction, taking or title defect, the Facilities Lease shall continue in full force and effect. See Risk Factors. The Facilities Description. The Facilities consist of the site of and the existing school facilities located at the District s Marina Village School. The Facilities have an expected remaining useful life longer than the term of the Certificates. Marina Village School is a middle school serving grades 6-8 located at 1901 Francisco Drive, El Dorado Hills, California. This school was built in 1984 and renovated in The school comprises 53,430 square feet of buildings located on acres. This school has a capacity of 870 students. Substitution of Property. The District may substitute other District property for the Facilities, upon compliance with certain provisions of the Facilities Lease. See Appendix B - Summary of Principal Legal Documents Facilities Lease Substitution of Property. Certificate Reserve Fund The Trust Agreement establishes a reserve fund (the Certificate Reserve Fund ) and requires it to be funded in an amount equal to, as of the date of calculation, the least of (i) Maximum Annual Debt Service on all Certificates then Outstanding, (ii) 125% of average Annual Debt Service on all Certificates then Outstanding, and (iii) 10% of the aggregate principal amount of the Certificates executed and delivered on the closing date (or, if the Certificates were sold with more than a de minimis amount of original issue discount or premium, the issue price of the Certificates (excluding pre-issuance accrued interest), as those terms are defined in the Internal Revenue Code (the Certificate Reserve Requirement ). Amounts in the Certificate Reserve Fund are to be used to make delinquent Rental Payments to the extent that the moneys available in the Interest Fund and Principal Fund do not equal the amount of the principal and interest evidenced by the Certificates then coming due. In addition, moneys, if any, on deposit in the Certificate Reserve Fund will be withdrawn and applied by the Trustee for the final Rental Payments. 7

16 Subject to the requirements and restrictions contained in the Trust Agreement, the District may deliver a line of credit, letter of credit, an insurance policy, surety bond or any other comparable credit facility or combination thereof, in satisfaction of all or part of the Certificate Reserve Requirement, as provided in the Trust Agreement. If at any time the balance in the Certificate Reserve Fund is reduced below the Certificate Reserve Requirement, the first payment of Rental Payments thereafter received from the District under the Facilities Lease and not needed to pay the interest or principal evidenced by Certificates payable to the Owners on the next Interest Payment Date or Principal Payment Date will be used, to increase the balance in the Certificate Reserve Fund to the Certificate Reserve Requirement. Action on Default If the District defaults under the Facilities Lease, the Trustee, as assignee of the Corporation, may retain the Facilities Lease and hold the District liable for all Rental Payments thereunder on an annual basis and will have the right to re-enter and re-let the Facilities. If the Trustee re-lets the Facilities, the District would be liable for any resulting deficiency in Rental Payments. Alternatively, the Trustee may terminate the Facilities Lease and recover certain damages from the District. See Appendix B - Summary of Principal Legal Documents Facilities Lease Remedies on Default. Acceleration of future Rental Payments is not a remedy available under the Facilities Lease. See Risk Factors - Limited Recourse on Default; No Acceleration on Default. Covenants to Insure The Facilities Lease requires the District to maintain casualty insurance insuring the Facilities against fire, lightning, and all other risks covered by an extended coverage endorsement (excluding earthquake and flood), subject to a $5,000 loss deductible provision, in an amount equal to the full insurable value of the Facilities. The District does not currently maintain earthquake insurance with a commercial carrier and has no plans to do so. See Risk Factors - Risk of Earthquake and Flood. The Facilities Lease requires the District to maintain, throughout the term of the Facilities Lease, rental abatement insurance to cover the Corporation s loss, total or partial, of Rental Payments resulting from the loss of the use of any part of the Facilities as a result of any of the hazards covered in the casualty insurance required by the Facilities Lease, in an amount equal to the Rental Payments for the Facilities in the two-year period in which that amount is greatest. The Facilities Lease requires the District to obtain title insurance on the Facilities, in an amount equal to the aggregate amount of principal evidenced by the Certificates. CERTIFICATE INSURANCE The following information is not complete and reference is made to Appendix G for a specimen of the financial guaranty insurance policy (the Policy ) of Assured Guaranty Corp. ( Assured Guaranty or the Insurer ). The Insurance Policy Assured Guaranty has made a commitment to issue the Policy relating to the Certificates, effective as of the date of issuance of the Certificates. Under the terms of the Policy, Assured Guaranty will unconditionally and irrevocably guarantee to pay that portion of principal of and interest evidenced by the Certificates that becomes Due for Payment but shall be unpaid by reason of Nonpayment (the 8

17 Insured Payments ). Insured Payments shall not include any additional amounts owing by the District solely as a result of the failure by the Trustee to pay such amount when due and payable, including without limitation any such additional amounts as may be attributable to penalties or to interest accruing at a default rate, to amounts payable in respect of indemnification, or to any other additional amounts payable by the Trustee by reason of such failure. The Policy is non-cancelable for any reason, including without limitation the non-payment of premium. Due for Payment means, when referring to the principal of the Certificates, the stated maturity date thereof, or the date on which Certificates shall have been duly called for mandatory sinking fund redemption, and does not refer to any earlier date on which payment is due by reason of a call for redemption (other than by mandatory sinking fund redemption), acceleration or other advancement of maturity (unless Assured Guaranty in its sole discretion elects to make any principal payment, in whole or in part, on such earlier date) and, when referring to interest evidenced by the Certificates, means the stated dates for payment of interest. Nonpayment means the failure of the District to have provided sufficient funds to the Trustee for payment in full of all principal and interest Due for Payment on the Certificates. It is further understood that the term Nonpayment in respect of a Certificate also includes any amount previously distributed to the Holder (as such term is defined in the Policy) of such Certificate in respect of any Insured Payment by or on behalf of the District, which amount has been recovered from such Holder pursuant to the United States Bankruptcy Code in accordance with a final, nonappealable order of a court having competent jurisdiction that such payment constitutes an avoidable preference with respect to such Holder. Nonpayment does not include nonpayment of principal or interest caused by the failure of the Trustee to pay such amount when due and payable. Assured Guaranty will pay each portion of an Insured Payment that is Due for Payment and unpaid by reason of Nonpayment, on the later to occur of (i) the date such principal or interest becomes Due for Payment, or (ii) the business day next following the day on which Assured Guaranty shall have received a completed notice of Nonpayment therefor in accordance with the terms of the Policy. Assured Guaranty shall be fully subrogated to the rights of the Holders of the Certificates to receive payments in respect of the Insured Payments to the extent of any payment by Assured Guaranty under the Policy. The Policy is not covered by any insurance or guaranty fund established under New York, California, Connecticut or Florida insurance law. The Insurer Assured Guaranty is a Maryland-domiciled insurance company regulated by the Maryland Insurance Administration and licensed to conduct financial guaranty insurance business in all fifty states of the United States, the District of Columbia and Puerto Rico. Assured Guaranty commenced operations in Assured Guaranty is a wholly-owned, indirect subsidiary of Assured Guaranty Ltd. ( AGL ), a Bermuda-based holding company whose shares are publicly traded and are listed on the New York Stock Exchange under the symbol AGO. AGL, through its operating subsidiaries, provides credit enhancement products to the U.S. and global public finance, structured finance and mortgage markets. Neither AGL nor any of its shareholders is obligated to pay any debts of Assured Guaranty or any claims under any insurance policy issued by Assured Guaranty. Assured Guaranty is subject to insurance laws and regulations in Maryland and in New York (and in other jurisdictions in which it is licensed) that, among other things, (i) limit Assured Guaranty s 9

18 business to financial guaranty insurance and related lines, (ii) prescribe minimum solvency requirements, including capital and surplus requirements, (iii) limit classes and concentrations of investments, (iv) regulate the amount of both the aggregate and individual risks that may be insured, (v) limit the payment of dividends by Assured Guaranty, (vi) require the maintenance of contingency reserves, and (vii) govern changes in control and transactions among affiliates. Certain state laws to which Assured Guaranty is subject also require the approval of policy rates and forms. Assured Guaranty s financial strength is rated AAA (stable) by Standard & Poor s, a division of The McGraw-Hill Companies, Inc. ( S&P ), AAA (stable) by Fitch, Inc. ( Fitch ) and Aa2 (stable) by Moody s Investors Service, Inc. ( Moody s ). Each rating of Assured Guaranty should be evaluated independently. An explanation of the significance of the above ratings may be obtained from the applicable rating agency. The above ratings are not recommendations to buy, sell or hold any security, and such ratings are subject to revision or withdrawal at any time by the rating agencies. Any downward revision or withdrawal of any of the above ratings may have an adverse effect on the market price of any security guaranteed by Assured Guaranty. Assured Guaranty does not guaranty the market price of the securities it guarantees, nor does it guaranty that the ratings on such securities will not be revised or withdrawn. Recent Developments. Agreement to Acquire FSA. On November 14, 2008, AGL announced that it had entered into a definitive agreement with Dexia SA to purchase Financial Security Assurance Holdings Ltd. ( FSA ), the parent of financial guaranty insurance company, Financial Security Assurance, Inc. For more information regarding the proposed acquisition by AGL of FSA, see item 1.01 of the Current Report on Form 8-K filed by AGL with the Securities and Exchange Commission (the SEC ) on November 17, Ratings. On July 21, 2008, Moody s issued a press release stating that it had placed under review for possible downgrade the Aaa insurance financial strength rating of Assured Guaranty. In a press release dated November 14, 2008, Moody s responded to AGL s announcement of its agreement to acquire FSA, stating that the potential impact of the proposed transaction on the ratings of Assured Guaranty and FSA will be considered in the context of its ongoing rating reviews of both companies; those reviews are now expected to conclude in the near term. Reference is made to the press releases for the complete text of Moody s comments; copies of such documents are available at On November 21, 2008, Moody s issued a press release announcing that it had downgraded the insurance financial strength rating of Assured Guaranty to Aa2 from Aaa and that the status of Assured Guaranty s insurance financial strength rating had been changed to outlook stable from on review for possible downgrade. In the release, Moody s stated that Today s rating action concludes a review for possible downgrade that was initiated on July 21, 2008, and primarily reflects Moody s updated views on Assured s exposure to weakness inherent in the financial guaranty business model. The outlook for the ratings is stable, and the announced acquisition of FSA s financial guaranty business is not expected to have a meaningful impact on the credit profile of [Assured Guaranty].... The rating agency added that the acquisition of FSA by [AGL] will, if completed as planned, create a combined entity with substantial financial resources and a strong market position. Reference is made to such release for the complete text of Moody s comments; a copy of such document is available at s com. Assured Guaranty s AAA (stable) financial strength ratings by S&P and by Fitch were affirmed on June 18, 2008 and December 12, 2007, respectively. On November 14, 2008, Fitch issued a press release responding to AGL s announcement of its agreement to acquire FSA, indicating that they do not expect the acquisition, as presented, to have a negative impact on Assured Guaranty s rating. Reference is made to the press release for the complete text of Fitch s comments; a copy of such press release is 10

19 available at On November 17, 2008, S&P issued a press release responding to AGL s announcement of its agreement to acquire FSA, stating that the agreement appears to pose limited rating risk for Assured Guaranty. Reference is made to the press release for the complete text of S&P s comments; a copy of such press release is available at There can be no assurance as to what impact, if any, Moody s downgrade or the proposed acquisition will have on the company s financial strength ratings from Fitch or S&P. For more information regarding Assured Guaranty s insurance financial strength ratings, see AGL s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2008 (which was filed by AGL with the SEC on November 7, 2008). Capitalization of Assured Guaranty Corp. As of September 30, 2008, Assured Guaranty had total admitted assets of $1,767,134,629 (unaudited), total liabilities of $1,341,373,221 (unaudited), total surplus of $425,761,408 (unaudited) and total statutory capital (surplus plus contingency reserves) of $1,106,199,863 (unaudited) determined in accordance with statutory accounting practices prescribed or permitted by insurance regulatory authorities. As of December 31, 2007, Assured Guaranty had total admitted assets of $1,361,538,502 (audited), total liabilities of $961,967,238 (audited), total surplus of $399,571,264 (audited) and total statutory capital (surplus plus contingency reserves) of $982,045,695 (audited) determined in accordance with statutory accounting practices prescribed or permitted by insurance regulatory authorities. The Maryland Insurance Administration recognizes only statutory accounting practices for determining and reporting the financial condition and results of operations of an insurance company, for determining its solvency under the Maryland Insurance Code, and for determining whether its financial condition warrants the payment of a dividend to its stockholders. No consideration is given by the Maryland Insurance Administration to financial statements prepared in accordance with accounting principles generally accepted in the United States in making such determinations. Incorporation of Certain Documents by Reference The portions of the following documents relating to Assured Guaranty are hereby incorporated by reference into this Official Statement and shall be deemed to be a part hereof: The Annual Report on Form 10-K of AGL for the fiscal year ended December 31, 2007 (which was filed by AGL with the Securities and Exchange Commission (the SEC ) on February 29, 2008); The Quarterly Report on Form 10-Q of AGL for the quarterly period ended March 31, 2008 (which was filed by AGL with the SEC on May 9, 2008); The Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2008 (which was filed by AGL with the SEC on August 8, 2008); The Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2008 (which was filed by AGL with the SEC on November 7, 2008); and The Current Reports on Form 8-K filed by AGL with the SEC, as they relate to Assured Guaranty. All consolidated financial statements of Assured Guaranty and all other information relating to Assured Guaranty included in documents filed by AGL with the SEC pursuant to Section 13(a), 13(c), 14 11

20 or 15(d) of the Securities Exchange Act of 1934, as amended, subsequent to the date of this Official Statement and prior to the termination of the offering of the Certificates shall be deemed to be incorporated by reference into this Official Statement and to be a part hereof from the respective dates of filing such consolidated financial statements. Any statement contained in a document incorporated herein by reference or contained herein under the heading Certificate Insurance -The Insurer shall be modified or superseded for purposes of this Official Statement to the extent that a statement contained herein or in any subsequently filed document that is incorporated by reference herein also modifies or supersedes such statement. Any statement so modified or superseded shall not be deemed, except as so modified or superseded, to constitute a part of this Official Statement. Copies of the consolidated financial statements of Assured Guaranty incorporated by reference herein and of the statutory financial statements filed by Assured Guaranty with the Maryland Insurance Administration are available upon request by contacting Assured Guaranty at 1325 Avenue of the Americas, New York, New York 10019, or by calling Assured Guaranty at (212) In addition, the information regarding Assured Guaranty that is incorporated by reference in this Official Statement that has been filed by AGL with the SEC is available to the public over the Internet at the SEC s web site at and at AGL s web site at from the SEC s Public Reference Room at 450 Fifth Street, N.W., Room 1024, Washington, D.C , and at the office of the New York Stock Exchange at 20 Broad Street, New York, New York Assured Guaranty makes no representation regarding the Certificates or the advisability of investing in the Certificates. In addition, Assured Guaranty has not independently verified, makes no representation regarding, and 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 Assured Guaranty supplied by Assured Guaranty and presented under the heading Certificate Insurance. RISK FACTORS The following discussion sets forth some of the events that could affect the payment of Rental Payments. The following discussion of risks is not meant to be an exhaustive list of the risks associated with the purchase of the Certificates and does not necessarily reflect the relative importance of the various risks. Potential investors are advised to consider the following factors along with all other information contained in this Official Statement in evaluating the Certificates. There can be no assurances that other risk factors will not become material in the future. Limited Nature of the Obligation to Make Rental Payments The obligation of the District to make Rental Payments does not constitute an obligation of the District for which the District is obligated to levy or pledge any form of taxation or for which the District has levied or pledged any form of taxation. Neither the Certificates nor the obligation of the District to make Rental Payments constitutes an indebtedness of the District, the State of California, or any of its political subdivisions within the meaning of any constitutional or statutory debt limitation or restriction. Although the Facilities Lease does not create a pledge, lien or encumbrance upon the funds of the District, the District is obligated under the Facilities Lease to make Rental Payments from any source of legally available funds, subject to abatement under certain circumstances (see Abatement of Rental Payments below), and the District has covenanted in the Facilities Lease to take such action as may be 12

21 necessary to include all Rental Payments in its annual budget and annually to appropriate an amount necessary to make such Rental Payments. Additional General Fund Obligations The District is currently liable on other obligations payable from general revenues. See District Debt Structure. The District has the right and authority to enter into other obligations that constitute additional charges against its general revenues without obtaining the consent of the Owners or the beneficial owners of the Certificates. To the extent that additional obligations are incurred by the District, the funds available to make Rental Payments may be decreased. Abatement of Rental Payments The obligation of the District to make Rental Payments is in consideration for the right to use and occupy the Facilities. The amount of Rental Payments due under the Facilities Lease will be adjusted or abated during any period in which, by reason of material damage, destruction, condemnation or a title defect, there is substantial interference with the District s use and occupancy of any portion of the Facilities. If the damaged or destroyed portion of the Facilities cannot be replaced during the period of time in which proceeds of the District s rental abatement insurance will be available, plus the period for which other moneys in the funds held by the Trustee (including funds in the Certificate Reserve Fund) suffice to make Rental Payments, or if casualty insurance proceeds or condemnation proceeds are insufficient to provide for complete repair or replacement of the Facilities or redemption of the Certificates, there could be insufficient funds to make payments to Owners in full. Risk of Earthquake and Flood Under the Facilities Lease, the District is not required to maintain earthquake or flood insurance on the Facilities. The District does not currently carry earthquake or flood insurance with respect to the Facilities and has no plans to do so in the future. Future earthquakes or floods damage the Facilities, which could result in an abatement of Rental Payments. The rental interruption insurance procured by the District would not cover Rental Payments in the event an abatement due to damage or destruction caused by an earthquake or a flood. Limited Recourse on Default; No Acceleration on Default If the District defaults under the Facilities Lease, the Trustee, as assignee of the Corporation, may retain the Facilities Lease and hold the District liable for all Rental Payments on an annual basis and will have the right to re-enter and re-let the Facilities. If the Trustee re-lets the Facilities, the District would be liable for any resulting deficiency in Rental Payments. Alternatively, the Trustee may terminate the Facilities Lease and recover certain damages from the District. Owing to the specialized nature of the Facilities, no assurance can be given that the Trustee will be able to re-let any portion of the Facilities so as to provide rental income sufficient to make payments of principal and interest evidenced by the Certificates in a timely manner. The Trustee is not empowered to sell the Facilities for the benefit of the Owners. Furthermore, due to the governmental function of the Facilities, it is not certain whether a court would permit the exercise of the remedies of repossession and re-letting with respect thereto. Any suit for money damages would be subject to limitations on legal remedies against school districts in the State of California, including a limitation on the enforcement of judgments against funds needed to serve the public welfare and interest. Moreover, there can be no 13

22 assurance that such re-letting will not adversely affect the exclusion of the interest evidenced by the Certificates from federal income taxation. Acceleration of future Rental Payments is not a remedy available under the Facilities Lease. The District will only be liable for Rental Payments on an annual basis, and the Trustee would be required to seek a separate judgment each year for that year s defaulted Rental Payments. Loss of Tax Exemption As discussed under the caption Tax Matters, interest evidenced by the Certificates could become includable in gross income for purposes of federal income taxation retroactive to the date of delivery of the Certificates as a result of acts or omissions of the District in violation of its covenants in the Trust Agreement. Should such an event of taxability occur, the Certificates are not subject to special redemption and will remain outstanding until maturity or until redeemed under one of the redemption provisions contained in the Trust Agreement. Bankruptcy and Equitable Limitations In addition to the limitations on remedies contained in the Facilities Lease and the Trust Agreement, the rights and remedies provided in the Facilities Lease and the Trust Agreement may be limited by, and are subject to, the provisions of federal bankruptcy laws, as now or hereinafter enacted, and to other laws or equitable principles that may affect the enforcement of creditors rights. The various legal opinions delivered concurrently with the delivery of the Certificates (including Special Counsel s approving legal opinion) will be qualified as to the enforceability of the Certificates, the Trust Agreement, the Facilities Lease and other related documents by bankruptcy, reorganization, moratorium, insolvency, fraudulent conveyance or other similar laws relating to or affecting the enforcement of creditors rights, to the application of equitable principles, to the exercise of judicial discretion and to the limitation on legal remedies against public agencies in the State. Under Chapter 9 of the Bankruptcy Code (Title 11, United States Code), which governs the bankruptcy proceedings for public agencies such as the District, there are no involuntary petitions in bankruptcy. If the District were to file a petition under Chapter 9 of the Bankruptcy Code, the Owners of the Certificates, the Trustee and the Corporation could be prohibited from taking any steps to collect amounts due from the District under the Facilities Lease. Revenue Sources to Make Rental Payments The District derives the majority of its revenues from or through the State of California. See District Financial Matters. Decreases in State revenues, or changes in the State s method of funding education, can significantly affect appropriations made by the legislature to school districts and, consequently, the funds available to the District to make Rental Payments. See State Funding of Education. THE CORPORATION The Corporation is a nonprofit public benefit corporation duly organized and existing under the laws of the State of California. The Corporation was formed for the primary purpose of financing facilities and equipment for the District. The Corporation is not obligated in any manner whatsoever to make Rental Payments. 14

23 RESCUE UNION SCHOOL DISTRICT General Information The Rescue Union School District was established as an elementary school district in 1950 through the consolidation of Deer Valley, Live Oak, Tennessee, and a portion of the Negro Hill school districts. The District is located approximately 30 miles east of the City of Sacramento on U.S. Highway 50 and encompasses approximately 51 square miles in unincorporated El Dorado County. The District serves a student enrollment of approximately 4,100 students and currently operates five elementary schools and two middle schools. The current pupil-teacher ratio is approximately 20:1 in grades K-3 and 30:1 in grades 4-8. Board of Trustees The District is governed by a five-member Board of Trustees (the Board ), whose members are elected to four-year terms. The terms are staggered on two-year intervals to provide continuity of governance. Vacancies during terms are filled by an individual appointed by a majority of the remaining Board members or, if there is no majority, by a special election. Members appointed by a majority of the Board serve until the next scheduled election, at which time the voters elect a person to serve the remaining years of the term. Table 1 Rescue Union School District Board of Trustees Name Office Term Expires Ellen Driscoll President December 2010 Bruce Lagomarsino Vice President December 2008 Serena Posner Clerk December 2008 Suzanna George Member December 2010 Nancy Brownell* Member December 2010 * Assumes office in December Key Personnel The Superintendent of Schools of the District is appointed by the Board and reports to the Board. The Superintendent is responsible for management of the District s day-to-day operations and supervises the work of other District administrators and supervisors. A brief background of the Superintendent and key administrative personnel are set forth below: Dr. Carol Bly Ed.D, Superintendent Dr. Bly has been employed with the District since July 1, Prior to joining the District, she was the Deputy Superintendent of Educational Services for the Davis Joint Unified School District and spent more than thirty years with the Sacramento City Unified School District. Dr. Bly has masters and doctorate degrees from the University of La Verne. Ronna Wolcott, Assistant Superintendent, Business Services Ms. Wolcott has been employed with the District since July Prior to that, she served as the Assistant Chancellor, Business Services, the Director of Fiscal Services and Internal Auditor for the Kern Community College District over a ten-year period. She is a Certified Public Accountant and was employed for five years by Price Waterhouse. She 15

24 received a Bachelor of Science degree in Business Administration from California State University, Bakersfield. Average Daily Attendance and Base Revenue Limit Per Unit of ADA From Fiscal Year to Fiscal Year , the District s Average Daily Attendance ( ADA ) increased by 9.8 percent. Information concerning the ADA and the District s Base Revenue Limit per unit of ADA for each of these years as well as projections for fiscal years and are set forth in the following table. Table 2 Rescue Union School District Average Daily Attendance and Base Revenue Limit per ADA Fiscal Years to Fiscal Year Average Daily Attendance Base Revenue Limit Per ADA Funded Revenue Limit Per ADA ,544 $4, $4, ,651 4, , ,739 5, , ,893 5, , Projected Projected Projected ,947 5, , ,947 6, , Source: Rescue Union School District District Employees The following table sets forth the number of full-time equivalent certificated employees (teachers) and classified employees (non-teaching staff) employed by the District over the past five years. Table 3 Rescue Union School District District Employees (Full-Time Equivalents) Fiscal Years to Certificated Classified Total Fiscal Year Employees Employees Employees Source: Rescue Union School District 16

25 Employee Relations California law provides that employees are to be divided into appropriate bargaining units, which are to be represented by an exclusive bargaining agent. The Rescue Union Federation of Teachers (RUFT) serves as the exclusive bargaining agent for the District s the certificated employees. The existing employment contract between the District and its certificated employees expires on June 30, The California School Employees Association (CSEA) has been selected as the exclusive bargaining agent for the District s classified employees. The existing contract between the District and its classified employees expires on June 30, Retirement System The District participates in the State of California Teachers' Retirement System ( STRS ) which provides benefits to Certificated Personnel. The District also participates in the State of California Public Employees Retirement System ( PERS ) which provides benefits to full-time Classified Personnel and part-time employees who are employed more than 1,000 hours during the year. The District was required to contribute 8.25 percent of gross salary expenditures to STRS during the fiscal year ended June 30, The District's PERS contribution during fiscal year ended June 30, 2008, averaged 9.28 percent of gross salary expenditures. The District's retirement contributions for the fiscal year ended June 30, 2008, are as follows: Table 4 Rescue Union School District Retirement Contributions for Fiscal Year Actual Number of Employees Covered District's Fiscal Year Covered Payroll Employer Contribution as a Percentage of Covered Payroll Total Employer Contributions STRS 468 $1,198,085 $14,522, % PERS ,888 4,146, % Source: Rescue Union School District For the fiscal year the District has budgeted $1,243,591 for STRS and $432,608 for PERS. Both STRS and PERS are operated on a statewide basis. Post-Employment Healthcare Benefits The District provides post-employment healthcare benefits to three retirees, who will receive benefits until age 65. The District no longer offers this benefits program, and no current employees are eligible for benefits in the future. The District s actuarial accrued liability at January 1, 2007, was $114,200, and is unfunded. Insurance The District provides for its property, liability, and workers compensation insurance through participation in a joint powers agency (JPA). Property, liability and workers compensation insurance are provided by the local Schools Insurance Authority (SIA), a JPA composed of 37 Sacramento area school 17

26 districts. Property coverage applies to both real and personal property, and buildings and contents are insured for full replacement cost. Claims for property coverage between $5,000 and $5,000,000 are covered by the JPA; claims in excess of that amount up to $100,000,000 are covered by United States Fidelity & Guaranty Company. Claims for liability covered by the JPA are between $5,000 and $1,500,000. Claims in excess of $1,500,000 and not greater than $4,000,000 are covered by Schools Excess Liability Fund (SELF), another joint powers agency. Any claim under $5,000 is covered by the District through its liability deductible. District Financial Statements DISTRICT FINANCIAL MATTERS The District s financial statements with supplemental information for the year ended June 30, 2007, and the related statements of activities and of cash flows for the year then ended, and the report dated December 12, 2007, of Goodell, Porter & Fredericks, LLP (the Auditor ), are included in this Official Statement as Appendix A. The financial statements should be read in their entirety. The information set forth herein does not purport to be a summary of the District s financial statements. In connection with the inclusion of the financial statements and the report of the Auditor thereon in Appendix A to this Official Statement, the District did not request the Auditor to, and the Auditor has not undertaken to, update its report or to take any action intended or likely to elicit information concerning the accuracy, completeness or fairness of the statements made in this Official Statement, and no opinion is expressed by the Auditor with respect to any event subsequent to the date of its report. Accounting Practices The accounting policies of the District conform to generally accepted accounting principles and are in accordance with the policies and procedures of the California School Accounting Manual. In accordance with Section of the California Education Code, the policies and procedures of the California School Accounting Manual are to be followed by all school districts within the State. Revenue is recorded on an accrual basis except for taxes allocable to the District, which are considered revenue in the year collections are made and, therefore, are fully reserved. Expenditures are recorded according to receipt of goods and services on an accrual basis. Differences between estimated and actual accounts receivable and payable, as of the beginning of the year, are reflected as adjustments to the fund balance. District Budget The District is required by provisions of the California Education Code to maintain each year a balanced budget in which the sum of expenditures plus the ending fund balance for each year cannot exceed the revenues plus the carry-over fund balance from the previous year. The California State Department of Education imposes a uniform budgeting format for each school district in the State. The budget is subject to review and approval by the County Superintendent of Schools. The County Superintendent examines the adopted budget for compliance with the standards and criteria adopted by the State Board of Education and identifies technical corrections necessary to bring the budget into compliance, determines if the budget allows the district to meet its current obligations and determines if the budget is consistent with a financial plan that will enable the district to meet its multi-year financial commitments. The County Superintendent will approve or disapprove the adopted budget for each school district. Budgets will be disapproved if they fail the above standards. The District has never had an adopted budget disapproved by the County Superintendent. 18

27 Pursuant to State law, the District adopted on June 10, 2008, a fiscal line-item budget setting forth revenues and expenditures so that appropriations during fiscal year will not exceed the sum of revenues plus beginning fund balance. Comparative Financial Statements The following table shows the District s Statement of General Fund Revenues, Expenditures and Changes in Fund Balance for Fiscal Years through Table 5 Rescue Union School District Statement of General Fund Revenues, Expenditures & Changes in Fund Balance Fiscal Years to Audited Audited Audited Unaudited SOURCES Revenue Limit Sources: State Apportionments $9,390,449 $9,469,014 $12,123,874 Local Sources 7,300,841 8,619,797 8,154,194 Total Revenue Limit $16,691,290 $18,088,811 $20,278,068 $21,971,903 Federal Revenues $836,595 $992,081 $915,491 $936,580 Other State Revenues 3,415,893 3,775,432 5,075,962 4,431,374 Other Local Revenues 1,780,904 2,050,419 2,079,954 2,303,753 Total Revenues $22,724,682 $24,906,743 $28,349,475 $29,643,611 EXPENDITURES Certificated Salaries $11,809,991 $12,811,623 $14,118,662 $14,946,121 Classified Salaries 3,063,584 3,477,253 4,097,877 4,571,518 Employee Benefits 3,934,475 4,206,476 4,697,387 5,146,358 Books and Supplies 1,225,197 1,502,201 1,814,508 1,569,646 Services & Operating Expenditures 2,026,591 2,430,531 2,520,496 2,494,389 Capital Outlay 67, , , ,207 Other Outgo 15,830 44,047 64, ,356 Debt Service Retirement 38,926 28,324 29,327 Debt Service Interest 11,784 5,673 4,403 34,562 Total Expenditures $22,193,698 $24,884,352 $27,592,973 $29,153,035 Excess of Revenues Over (Under) Expenditures $530,984 $22,391 $756,502 $490,575 OTHER FINANCING SOURCES Operating Transfers In Operating Transfers Out (102,923) (135,789) (135,789) (140,154) Other 17,307 Total Other sources (uses) (102,923) (135,789) (118,482) (140,154) Net Increase/Decrease in Fund Balance $428,061 $(113,398) $638,020 $350,421 Beginning Fund Balance $2,521,667 $2,949,728 $2,836,330 $3,474,349 Ending Fund Balance $2,949,728 $2,836,330 $3,474,350 $3,824,770 Source: The District s Audited Financial Statements for FY through and the Unaudited Actuals Report for FY

28 Revenue Sources The District categorizes its General Fund revenues into four sources: (1) revenue limit sources (consisting of a mix of State apportionments of basic and equalization aid and local property tax revenues), (2) federal sources, (3) other State sources, and (4) other local sources. Each of these revenue sources is described below. Table 6 Rescue Union School District District Revenue Sources, Fiscal Years to Percentage of Total District General Fund Revenues Revenue Source Revenue limit sources 73% 72% 74% Federal revenues Other State revenues Other local revenues Source: Rescue Union School District Revenue Limit Sources Since fiscal year , State school districts have operated under general purpose revenue limits established by the State Legislature. In general, the base revenue limits are calculated for each school district by multiplying (1) the ADA for each such district by (2) a base revenue limit per unit of ADA. The base revenue limit calculations are adjusted annually in accordance with a number of factors designed primarily to provide cost of living increases and to equalize revenues among all State school districts of the same type. Funding of the District's revenue limit is accomplished by a mix of (1) local property taxes and (2) State apportionments of basic and equalization aid. Generally, the State's apportionments amount to the difference between the District's revenue limit and its local property tax revenues. The State has not been able to fully fund the base revenue limit each year. In fiscal year , the District's base revenue limit per unit of ADA was $5,521.82, which was fully funded. For fiscal year , the District estimates that its revenue limit per unit of ADA will be $5,836.82, which the District expects will not be fully funded; currently, the estimated deficit is 4.71%. Property Taxes Basis of Property Taxation. All property is assessed using full cash value as defined by Article XIIIA of the State Constitution. State law, however, provides exemptions from ad valorem property taxation for certain classes of property such as churches, colleges, non-profit hospitals, and charitable institutions. For purposes of allocating the County's 1% base property tax levy, future assessed valuation growth allowed under Article XIIIA (new construction, certain changes of ownership, up to 2% inflation) will be allocated on the basis of "situs" among the jurisdictions that serve the tax rate area within which 20

29 the growth occurs. Local agencies and schools will share the growth of "base" revenues from the tax rate area. Each year's growth allocation becomes part of each agency's allocation in the following year. The availability of revenue from growth in the tax bases in such entities may be affected by the existence of redevelopment agencies which, under certain circumstances, may be entitled to revenues resulting from the increase in certain property values. State law exempts $7,000 of the assessed valuation of an owner-occupied principal residence. This exemption does not result in any loss of revenue to local agencies because an amount equivalent to the taxes that would have been payable on such exempt values is paid by the State to local agencies. Ad Valorem Property Taxation. Taxes are levied for each fiscal year on taxable real and personal property located in the County as of the preceding January 1. Real property that changes ownership or is newly constructed is revalued at the time the change in ownership occurs or the new construction is completed and a supplemental tax bill is issued for that property. When a supplemental tax bill is issued, the current year property tax rate will be applied to the reassessment, and the taxes will then be adjusted by a proration factor to reflect the portion of the remaining tax year for which taxes are due. 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 then part of the assessment roll also containing State-assessed property, and property, the taxes on which are a lien on real property sufficient, in the opinion of the County Assessor, to secure payment of the taxes. Other property is assessed on the unsecured roll. Property taxes on the secured roll are due in installments, on November 1 and February 1 of each fiscal year, and if unpaid become delinquent on December 10 and April 10, respectively. A penalty of 10 percent attaches immediately to all delinquent payments. Property on the secured roll with respect to which taxes are delinquent becomes tax defaulted on or about June 30 of the fiscal year. Such property may thereafter be redeemed by payment of a penalty of 1.5 percent per month from the time of becoming tax delinquent to the time of redemption, plus costs and a redemption fee. If taxes are unpaid for a period of five years or more, the property is subject to sale by the Treasurer. Property taxes on the unsecured roll are due on January 1 and if unpaid become delinquent on August 31. A penalty of 10 percent attaches immediately to delinquent unsecured taxes. If unsecured taxes are unpaid at 5 p.m. on October 31, an additional penalty of 1.5 percent attaches to them on the first day of each month until paid. The County has four ways of collecting delinquent unsecured personal property taxes: (1) bringing a civil action against the taxpayer; (2) filing a certificate in the office of the County Clerk specifying certain facts in order to obtain a lien on certain property of the taxpayer; (3) filing a certificate of delinquency for record in the County Recorder's office in order to obtain a lien on certain property of the taxpayer; and (4) seizing and selling personal property improvements or possessor s interests belonging or assessed to the delinquent taxpayer. Unitary Taxation of Utility Property. Historically, property of regulated public utilities has been assessed for local tax purposes by the State Board of Equalization on a geographical basis in basically the same manner as other taxable property in any taxing jurisdiction. In 1987, the State Legislature enacted Chapter 921 amending Section 98.9 and various other sections of the Revenue and Taxation Code. The changes establish in each county one countywide tax rate area with the assessed value of all unitary and operating non-unitary utility property being assigned to this tax rate area. 21

30 The result is a single assessed valuation figure for all utility property owned by each utility within the county without any breakdown for individual taxing jurisdictions. All of this property is then subjected to a tax at a rate equal to the sum of the following two rates: 1. A rate determined by dividing the county s total ad valorem tax levies for the secured roll for the prior year, exclusive of levies for debt service, by the county s total ad valorem secured roll assessed value for the prior year. 2. A rate determined by dividing the county s total ad valorem tax levies for the secured roll for the prior year for debt service only by the county s total ad valorem secured roll assessed value for the prior year. The foregoing process results in the creation of two pools of money, pool 1 being available for general tax purposes and pool 2 for debt service purposes, each pool being then allocated to the various taxing jurisdictions in the county by a statutory formula. Teeter Plan. The County has adopted the Alternative Method of Distribution of Tax Levies and Collections and of Tax Sale Proceeds (the Teeter Plan ), as provided for in Section 4701 and following of the California Revenue and Taxation Code. Under the Teeter Plan, each participating local agency levying property taxes, including school districts, is credited the amount of uncollected taxes in the same manner as if the amount credited had been collected. In return, the County receives and retains delinquent payments, penalties and interest as collected, that otherwise would have been due the local agency. The Teeter Plan is to remain in effect unless the Board of Supervisors of the County orders its discontinuance or unless, prior to the commencement of the County s fiscal year, the Board of Supervisors receives a petition for its discontinuance from two-thirds of the participating revenue districts in the County. The County has never received a petition from any governing board to discontinue the Teeter Plan with respect to agencies in the County. The Board of Supervisors may, after holding a public hearing on the matter, discontinue the procedures with respect to any tax levying agency or assessment levying agency in the County if the rate of secured tax delinquency in that agency in any year exceeds 3 percent of the total of all taxes and assessments levied on the secured rolls in that agency. Assessed Valuation. District taxes are collected by the County at the same time and on the same tax rolls as are County, city and special district taxes. Assessed valuations are the same for both District and County taxing purposes. The valuation of secured property by the County is established as of January 1, and is subsequently equalized in August of each year. The following table shows the assessed valuation and secured tax charges in the District for the current fiscal year and the previous four fiscal years. 22

31 Table 7 Rescue Union School District Assessed Valuations Fiscal Years to Fiscal Year Local Secured Utility Unsecured Total $3,200,693,828 $0 $26,319,542 $3,227,013, ,749,782, ,134,088 3,777,916, ,435,888, ,251,323 4,466,140, ,870,588, ,054,006 4,902,642, ,969,456, ,579,444 5,005,036,026 Source: California Municipal Statistics, Inc. Secured Tax Charges and Delinquencies. The following table lists the secured tax charges and delinquencies for the District for fiscal years and Table 8 Rescue Union School District Secured Tax Charges and Delinquencies Fiscal Years to Fiscal Year Secured Tax Charge (1) Amt. Del. June 30 % Del. June ,511, , % ,447, ,529, (1) All taxes collected by the county within the school district. Source: California Municipal Statistics, Inc. 23

32 Tax Rates. The following table summarizes the total ad valorem tax rates levied by all taxing entities in a typical Tax Rate Area ( TRA ) within the District for fiscal years to Table 9 Rescue Union School District Typical Total Tax Rates (TRA ) Fiscal Years to General Levy % % % Rescue Union School District El Dorado Union High School District Los Rios Community College District Cameron Park Community Services District Total All Property El Dorado Irrigation District Total Land Only Source: California Municipal Statistics, Inc. 24

33 Largest Taxpayers. The following table lists the 20 largest secured property owners in the District for fiscal year Table 10 Rescue Union School District Largest Local Secured Property Taxpayers Property Owner Land Use Assessed Valuation % of Total (1) 1. Toll CA X LP Residential Development $51,649, % 2. Safeway Inc. Supermarket 20,806, GHC Company 5 LLC Residential Development 19,479, Lake Forest Apartments LLC Apartments 17,105, AGS Bramasole LLC Residential Development 11,784, Green Valley Marketplace Commercial 11,009, N. Bruce & Barbara E. Ashwill Commercial 10,006, Western Pacific Housing Inc. Residential Development 9,348, Cameron Oaks Partners Residential Development 9,044, Green Valley Station LLC Commercial 8,881, DC Management LLC Commercial 8,875, Pulte Home Corp. Residential Development 7,176, Serrano Associates LLC Residential Development 6,895, Frank S. Chiou & Wong Kathy Min Commercial 6,478, Silver Springs LLC Residential Development 5,019, Cambridge Self Stor Group Mini-Warehouses 4,567, Daniel & Martha Chartraw Rural Residential 4,534, Bridge-Cameron Ridge LLC Apartments 3,974, Michael Boureston Trust Apartments 3,690, Fay Louie Trust Residential Development 3,560, $223,888, % (1) Local Secured Assessed Valuation: $4,969,456,582 Source: California Municipal Statistics, Inc. 25

34 Assessed Valuation and Parcels by Land Use. The following table displays the distribution of assessed value by land use of property within the District. Table 11 Rescue Union School District Assessed Valuation and Parcels by Land Use Assessed Valuation (1) % of Total No. of Parcels % of Total Non-Residential: Commercial/Office $ 91,216, % % Vacant Commercial 15,448, Industrial 20,580, Vacant Industrial 1,388, Recreational 3,774, Government/Social/Institutional 4,913, Subtotal Non-Residential $137,320, % % Residential: Single Family Residence $4,495,696, % 10, % Condominium/Townhouse 105,180, Mobile Home 4,870, Residential Units 6,280, Residential Units/Apartments 84,370, Vacant Residential 135,737, Subtotal Residential $4,832,135, % 12, % Total $4,969,456, % 12, % (1) Local Secured Assessed Valuation; excluding tax-exempt property. Source: California Municipal Statistics, Inc. Federal Sources The federal government provides funding for several District programs, including special education programs, programs under the Educational Consolidation and Improvement Act, and specialized programs such as Drug Free Schools. Revenues received from the federal government are restricted in their use, and are not available to pay debt service. Other State Sources As discussed above, the District receives State apportionment of basic and equalization aid in an amount equal to the difference between the District's revenue limit and its property tax revenues. In addition to such apportionment revenue, the District receives substantial other State revenues ( Other State Sources ). These Other State Sources are primarily restricted revenues that fund items such as the Special Education Master Plan, home to school transportation, instructional materials and mentor teachers. 26

35 The District receives State aid from the California State Lottery (the Lottery ) which was established by a constitutional amendment approved at the November 1984 general election. Lottery revenues must be used for the education of students and cannot be used for non-instructional purposes such as real property acquisition, facility construction or the financing of research. The District is expected to receive approximately $137 per ADA in Lottery revenues in fiscal year Although the allocation formula is established, the exact amount of future Lottery revenues can only be projected. Lottery net revenues (gross revenues less prizes and administrative expenses) are allocated by computing an amount per ADA or full-time equivalent ( FTE ) students. This figure is derived by dividing the total net revenue amount by the total ADA for grades K-12 and community colleges, and by the total FTE for the University of California system and the California State University system. Each entity receives an amount equal to its total ADA or FTE, as applicable. Lottery revenues received by the District for the General Fund in fiscal year were estimated to be $553,393, which amounted to approximately 2 percent of total General Fund Sources. For fiscal year , Lottery revenue is projected to be $565,207, which amounts to approximately 2 percent of budgeted total General Fund Sources. Other Local Sources In addition to property taxes, the District receives additional local revenues from items such as the leasing of property owned by the District and interest earnings. Developer Fees The District collects developer fees pursuant to California Education Code section and California Government Code Section The District levies developer fees at the currently authorized maximum amount, $2.35 per square foot of habitable space on residential housing developments and $0.29 per square foot on commercial/industrial developments. These square-foot amounts are periodically adjusted for inflation. The following table shows the amount of developer fees collected in Fiscal Years to Table 12 Rescue Union School District Developer Fees Collected Fiscal Years to Source: Rescue Union School District Fiscal Year Developer Fees $2,375, ,443, ,107, , ,598 27

36 Mello-Roos Taxes The District, the Buckeye Union School District and the El Dorado Union High School District are the members of the El Dorado Schools Financing Authority, a joint exercise of powers agency that has established a Mello-Roos Community Facilities District within the Serrano development and collects special taxes for the purpose of funding new school construction that benefits the area of the Community Facilities District. The District s tax receipts from the Community Facilities District over the last five fiscal years is shown in the table below. Table 13 Rescue Union School District Mello-Roos Special Taxes Collected Fiscal Year to Fiscal Year Tax Revenues $ 28, , , , ,107 Source: Rescue Union School District Local Economy For general background information on the economy of El Dorado County, which may have effects on several of the District s revenue sources, see Appendix D County Economic Profile. DISTRICT DEBT STRUCTURE Long-Term Borrowing A schedule of changes in long-term debt payable from the District s general fund for the year ended June 30, 2008 is shown below: Table 14 Rescue Union School District Changes in Long-Term Debt Payable (Fiscal Year ) Balance June 30, 2007 Additions Deductions Balance June 30, 2008 General Obligation Bonds $21,258,308 $7,566,546 $ 405,000 $28,419,854 Certificates of Participation 13,665,000 7,345,000 6,320,000 Capital Leases 110,923 29, ,923 29,634 Compensated Absences 46,185 19,870 26,316 Early Retirement Incentives/OPEB 814, , , ,952 Total $35,895,330 7,842,269 8,074,844 35,662,756 Source: Rescue Union School District 28

37 General Obligation Bonds On July 1, 1998, the District sold $11,147, of general obligation bonds which were the first series issued of an issue of $27,000,000 authorized at an election held in the District on April 14, In 2005, the District issued its second series of general obligation bonds in the amount of $14,234, In 2007, the District issued its third series of general obligation bonds in the amount of $6,852, The annual payments to amortize general obligation bonds payable, outstanding as of June 30, 2008, are as follows: Table 15 Rescue Union School District General Obligation Bond Debt Service Year Ended June 30 Principal Interest Total 2009 $ 153,194 $ 1,054,990 $ 1,208, ,080 1,122,963 1,275, ,544 1,089,531 1,264, ,944 1,052,759 1,401, ,088 1,101,922 1,483, ,261,487 6,352,803 8,614, ,147,351 5,239,400 10,386, ,752,195 6,529,493 13,281, ,388,690 6,706,620 16,095,309 Total $24,759,571 $30,250,482 $55,010,053 Source: Rescue Union School District Capital Leases As of June 30, 2008, the District leased one school bus under an agreement that provides for title to pass upon expiration of the lease period. The District s annual lease payment is $13,815 and the final payment is due in the fiscal year. 29

38 Direct and Overlapping Debt Contained within the District are numerous overlapping local agencies providing public services. These local agencies have outstanding debt issued in the form of general obligation, lease revenue and special tax and assessment bonds. The direct and overlapping debt of the District is shown in the following table. Tax and revenue anticipation notes, revenue, mortgage revenue and tax allocation bonds, and non-bonded capital lease obligations are excluded from the debt statement. The District has not reviewed the following table for completeness or accuracy and makes no representation in connection therewith Assessed Valuation: $4,902,642,427 Table 16 RESCUE UNION SCHOOL DISTRICT Estimated Direct and Overlapping Bonded Debt DIRECT AND OVERLAPPING TAX AND ASSESSMENT DEBT: % Applicable (1) Debt 11/14/08 Los Rios Community College District 3.257% $ 4,863,027 El Dorado Union High School District ,160,079 Rescue Union School District ,606,377 (2) Cameron Park Community Services District ,159,890 El Dorado Hills Community Services District ,538 El Dorado Irrigation District ,144,279 El Dorado County Community Facilities District No ,273,028 El Dorado County Community Facilities District No ,081,174 California Statewide Community Development Authority Assessment Districts ,475,066 El Dorado Hills Community Services District 1915 Act Bonds ,385 TOTAL DIRECT AND OVERLAPPING TAX AND ASSESSMENT DEBT $69,583,843 DIRECT AND OVERLAPPING GENERAL FUND DEBT: El Dorado County Certificates of Participation % $ 778,609 Los Rios Community College District Certificates of Participation ,082 El Dorado Union High School District Certificates of Participation ,528,979 Rescue Union School District Certificates of Participation ,800,000 TOTAL DIRECT AND OVERLAPPING GENERAL FUND DEBT $12,331,670 COMBINED TOTAL DEBT $81,915,513 (3) (1) Based on ratios. (1) 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 ($24,606,377) % Combined Direct Debt ($30,406,377) % Total Direct and Overlapping Tax and Assessment Debt % Combined Total Debt % STATE SCHOOL BUILDING AID REPAYABLE AS OF 6/30/08: $0 Source: California Municipal Statistics, Inc. 30

39 CONSTITUTIONAL AND STATUTORY PROVISIONS AFFECTING DISTRICT REVENUES AND APPROPRIATIONS Article XIIIA of the California Constitution Basic Property Tax Levy. On June 6, 1978, California voters approved Proposition 13 ("Proposition 13"), which added Article XIIIA to the State Constitution ("Article XIIIA"). Article XIIIA limits the amount of any ad valorem tax on real property to 1% of the full cash value thereof, except that additional ad valorem taxes may be levied to pay debt service on (i) indebtedness approved by the voters prior to July 1, 1978, (ii) (as a result of an amendment to Article XIIIA approved by State voters on June 3, 1986) bonded indebtedness for the acquisition or improvement of real property which has been approved on or after July 1, 1978 by two-third of the voters on such indebtedness, and (iii) bonded indebtedness incurred by a school district or community college district for the construction, reconstruction, rehabilitation or replacement of school facilities or the acquisition or lease of real property for school facilities, approved by 55% of the voters of the district, but only if certain accountability measures are included in the proposition. Article XIIIA defines full cash value to mean "the county assessor s valuation of real property as shown on the tax bill under full cash value, or thereafter, the appraised value of real property when purchased, newly constructed, or a change in ownership have occurred after the 1975 assessment". This full cash value may be increased at a rate not to exceed 2% per year to account for inflation. Article XIIIA has subsequently been amended to permit reduction of the "full cash value" base in the event of declining property values caused by damage, destruction or other factors, to provide that there would be no increase in the "full cash value" base in the event of reconstruction of property damaged or destroyed in a disaster and in other minor or technical ways. Both the United States Supreme Court and the California State Supreme Court have upheld the general validity of Article XIIIA. Legislation Implementing Article XIIIA. Legislation has been enacted and amended a number of times since 1978 to implement Article XIIIA. Under current law, local agencies are no longer permitted to levy directly any property tax (except to pay voter-approved indebtedness). The 1% property tax is automatically levied by the County and distributed according to a formula among taxing agencies. The formula apportions the tax roughly in proportion to the relative shares of taxes levied prior to Increases of assessed valuation resulting from reappraisals of property due to new construction, change in ownership or from the annual adjustment not to exceed 2% are allocated among the various jurisdictions in the taxing area based upon their respective situs. Any such allocation made to a local agency continues as part of its allocation in future years. Article XIIIB of the California Constitution An initiative to amend the State Constitution entitled Limitation of Government Appropriations was approved on September 6, 1979 thereby adding Article XIIIB to the State Constitution ( Article XIIIB ). Under Article XIIIB, state and local governmental entities have an annual appropriations limit and are not permitted to spend certain monies which are called appropriations subject to limitation (consisting of tax revenues, state subventions and certain other funds) in an amount higher than the appropriations limit. Article XIIIB does not affect the appropriation of monies which are excluded from the definition of appropriations subject to limitation, including debt service on indebtedness existing or authorized as of January 1, 1979, or bonded indebtedness subsequently approved by the voters. In general terms, the appropriations limit is to be based on certain expenditures, and is to be adjusted annually to reflect changes in consumer prices, populations, and services provided by these entities. Among other provisions of Article XIIIB, if these entities revenues in any year exceed the amounts 31

40 permitted to be spent, the excess would have to be returned by revising tax rates or fee schedules over the subsequent two years. Articles XIIIC and XIIID On November 5, 1996, California voters approved Proposition 218 Voter Approval for Local Government Taxes Limitation on Fees, Assessments, and Charges Initiative Constitutional Amendment. Proposition 218 added Articles XIIIC and XIIID to the California Constitution, imposing certain vote requirements and other limitations on the imposition of new or increased taxes, assessments and property-related fees and charges. The District does not impose any such taxes, assessments, fees or charges; and, with the exception of the basic one percent ad valorem property tax levied and collected by the County under Article XIIIA of the California Constitution, a portion of which is allocated to the District, no such taxes, assessments, fees or charges are imposed on behalf of the District. Accordingly, while the provisions of Proposition 218 may have an indirect effect on the District, such as by limiting or reducing the revenues otherwise available to other local governments whose boundaries encompass property located within the District (thereby causing such local governments to reduce service levels and possibly adversely affecting the value of property within the District), the District does not believe that Proposition 218 will directly impact the revenues available to pay debt service on the Certificates. Proposition 1A On November 2, 2004, California voters approved Proposition 1A, which amends the State Constitution to significantly reduce the State's authority over major local government revenue sources. Under Proposition 1A, the State cannot (i) reduce local sales tax rates or alter the method of allocating the revenue generated by such taxes, (ii) shift property taxes from local governments to schools or community colleges, (iii) change how property tax revenues are shared among local governments without a two-thirds approval of both houses of the State Legislature or (iv) decrease Vehicle License Fee revenues without providing local governments with equal replacement funding. Beginning in , the State may shift to schools and community colleges a limited amount of local government property tax revenue if certain conditions are met, including: (i) a proclamation by the Governor that the shift is needed due to a severe financial hardship of the State, and (ii) approval of the shift by the State Legislature with a two-thirds vote of both houses. Under such a shift, the State must repay local governments for their property tax losses, with interest, within three years. Proposition 1A does allow the State to approve voluntary exchanges of local sales tax and property tax revenues among local governments within a county. Proposition 1A also amends the State Constitution to require the State to suspend certain State laws creating mandates in any year that the State does not fully reimburse local governments for their costs to comply with the mandates. This provision does not apply to mandates relating to schools or community colleges or to those mandates relating to employee rights. Proposition 62: Limitations on Local Taxes On November 4, 1986, California voters approved Proposition 62, an initiative statute limiting the imposition of new taxes by local agencies. The statute: (a) requires that new general taxes be approved by two-thirds of the local agency s governing board and a majority of its voters; (b) requires that new special taxes be approved by a majority of the local agency s governing board and two-thirds of its voters; (c) restricts the use of revenues from a special tax to the purposes for which the special tax was imposed; (d) prohibits all local agencies from imposing any ad valorem taxes on real property other than as permitted by Article XIIIA; (e) prohibits all local agencies from imposing any sales taxes or transactions taxes on the sale of real property; and (f) penalizes local agencies that fail to comply with the foregoing. 32

41 In 1995, the California Supreme Court affirmed the validity of Proposition 62 s requirements that new taxes be approved by the voters (overturning an earlier Court of Appeal decision declaring those voter approval provisions to be unconstitutional). Future Initiatives Articles XIIIA, XIIIB, XIIIC, and XIIID and Propositions 218, 1A and 62 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 that would affect the amount of revenues available to the District or its ability to expend such revenues. General STATE FUNDING OF EDUCATION As noted above, California school districts receive a significant portion of their general purpose funding from State appropriations. Variations in the level of State funding of school districts may affect this source of security for payment of the Certificates. Propositions 98 and Minimum Funding Guarantee Proposition 98, a constitutional and statutory amendment adopted by California voters in 1988 and amended by Proposition 111 in 1990, guarantees a minimum level of funding for public education from kindergarten through community college (K-14). Proposition 98 guarantees a level of funding based on the greater of two amounts determined under three different methods of calculation. The first amount is based on a percentage of General Fund revenues. This amount is defined under Test 1 as the amount produced by applying the same percentage of General Fund revenues appropriated to K-14 education in , or about 40%. (This percentage has been adjusted to approximately 41% to account for subsequent redirection of local property taxes, since such property tax shifts affect the share of districts revenue limits that are to be provided by State General Fund revenues.). The second amount is determined under one of two methods, Test 2 or Test 3, the choice of which is determined based on the relative growth of per capita income and General Fund revenues. In years of high or normal growth of General Fund revenues, Test 2 applies. Test 2 is designed to maintain prior-year service levels. The amount determined under Test 2 is the amount required to ensure that K-14 schools receive from State funds and local tax revenues the same amount received in the prior year, adjusted for changes in enrollment and for increases in per capita personal income. Test 3 is operative in years in which General Fund revenue growth per capita is more than 0.5% below growth in per capita personal income. The amount determined under Test 3 is the prior-year total level of funding from state and local sources, adjusted for enrollment growth and for growth in General Fund revenues per capita, plus 0.5% of the prior year level. If Test 3 is used in any year, the difference between the amount determined under Test 3 and Test 2 will become a credit to be paid to K-14 schools in future years when State General Fund growth exceeds personal income growth. On average, about 45% of State general fund revenues are currently spent on the State s share of Proposition 98 funding. The State s estimate of the total guaranteed amount varies through the stages of the annual budgeting process, from the Governor s initial budget proposal to actual expenditures to post-year-end revisions, as various factors change. The guaranteed amount will increase as enrollment and per capita personal income grow. If, at year-end, the guaranteed amount is calculated to be higher than the amount 33

42 actually appropriated in that year, the difference becomes an additional education funding obligation, referred to as settle-up. If the amount appropriated is higher than the guaranteed amount in any year, that higher funding level permanently increases the base guaranteed amount in future years. The Proposition 98 guaranteed amount may be suspended for one year at a time by enactment of an urgency statute. In subsequent years in which State general fund revenues are growing faster than personal income (or sooner, as the Legislature may determine), the funding level must be restored to the guaranteed amount. In recent years, the State s response to fiscal difficulties has had a significant impact on Proposition 98 funding and settle-up treatment. In , , , and the State required counties, cities, and special districts to shift property tax revenues to school districts, thereby relieving the State General Fund of some of the burden of the Proposition 98 guarantee. Proposition 1A, adopted by the voters in November 2004, restricts the State s ability to shift local property taxes. Beginning in Fiscal Year , the State will be able to divert up to 8% of local property tax revenues for State purposes (including, but not limited to, funding education) only if: (i) the Governor declares such action to be necessary due to a State fiscal emergency; (ii) two-thirds of both houses of the Legislature approve the action; (iii) the amount diverted is required by statute to be repaid within three years; (iv) the State does not owe any repayment to local agencies for past property tax or Vehicle License Fee diversions to local agencies; and (v) such property tax diversions do not occur in more than two of any ten consecutive fiscal years. The State has also sought to avoid or delay paying settle-up amounts when State revenues have lagged. The State has also sought to avoid increases in the base guaranteed amount through several devices: by treating any excess appropriations as advances (or loans) against subsequent years Proposition 98 minimum funding levels rather than current year increases; by permanently deferring yearend apportionments of Proposition 98 funds from June 30 to July 2, to reduce the ending fiscal year s base; and by suspending Proposition 98, as the State did in Existing settle-up obligations are estimated by the Legislative Analyst to total $4.3 billion, consisting of $1.3 billion for , $1.6 billion for , and $1.4 billion for prior years. Under current law, the obligations for the prior years, through , will be repaid to the education budget at $150 million per year beginning in The California Teachers Association filed a lawsuit against Governor Schwarzenegger in 2005 seeking to force the State to fund schools the full amount of the outstanding obligations. The parties have agreed to a settlement of this dispute through additional annual funding of approximately $400 million for seven years, commencing in Settlement funds are dedicated to class-size reduction, professional development, hiring counselors, and other specific expenditures for participating low-achieving schools. State Budget Process According to the State Constitution, the Governor is required to propose a budget to the State Legislature no later than January 10 of each year, and a final budget must be adopted by a two-thirds vote of each house of the Legislature no later than June 15, although this deadline is routinely missed. The budget becomes law upon the signature of the Governor, who retains veto power over specific items of expenditure. School district budgets must generally be adopted by July 1, and revised by the district s governing board within 45 days after the Governor signs the budget act to reflect any changes in budgeted revenues and expenditures made necessary by the adopted State Budget. On May 29, 2002, a California Court of Appeal held in White v. Davis (also referred to as Jarvis v. Connell) that the State Controller cannot disburse State funds after the beginning of the fiscal year until the adoption of the budget bill or an emergency appropriation, unless the expenditure is (i) authorized by 34

43 a continuing appropriation found in statute, (ii) mandated by the State constitution, such as appropriations for salaries of elected state officers, or (iii) required by federal law, such as payments to State workers (but at no more than minimum wage). The court specifically held that pre-budget disbursements of Proposition 98 funding for school districts are invalid. On May 1, 2003, the California Supreme Court upheld the decision of the Court of Appeal. During the State budget impasse the State Controller nonetheless treated revenue limit apportionments to school districts as continuous legislative appropriations under statute. The State Controller did not disburse certain categorical and other funds to school districts until the Budget Act was enacted. Recent State Budgets The discussion below of the and State Budgets is based on estimates and projections of revenues and expenditures for the current and future fiscal years and must not be construed as statements of fact. These estimates and projections are based upon various assumptions as updated in the proposed State Budget, which may be affected by numerous factors, including future economic conditions in the State and the nation, and there can be no assurance that the estimates will be achieved. Fiscal Year Budget The Governor signed the Budget Act on August 24, The adopted State Budget includes Proposition 98 funding of $50.8 billion for K-12 schools, or $8,635 per pupil statewide, an increase of $417 or 5.1% over the previous year s revised budget. New, ongoing enhancements to K-12 expenditures total $2.1 billion, and new one-time programs total $115 million. These are offset by a decline of $61 million to reflect statewide declining enrollment. The major programmatic expenditure changes include $2.1 billion in both statutory and discretionary cost-of-living adjustments (4.53%); $350 million in pupil transportation costs, $116 for deferred maintenance plus $100 million of one-time Williams v. State of California settlement funds for emergency repairs to the State s neediest school buildings; $102 million in grants to help students in low-performing schools; and $25 million to increase the school meal reimbursement rate. An additional $269 million in child care funding was added to the Proposition 98 budget; however this does not represent new spending, since expenditure responsibility will be moved from the State s General Fund. In addition, $567 million of the ongoing expenditure programs described above are funded with onetime and special fund sources in , creating pressures for future budgets. Fiscal Year Budget On September 23, 2008, the Governor signed the State Budget into law. The State Budget projects revenues of $ billion in and $ billion in It projects a reserve of $1.7 billion at June 30, 2009, but projects a deficit of $1.0 billion in Funding for K-12 schools from all sources remained relatively flat year to year, with total funding in ($71.9 billion) increasing only $281 million, or 0.4 percent, compared to Ongoing K-12 Proposition 98 spending in increases to $51.6 billion, which is about $1.3 billion more than the spending level for However, this increase is offset by a $1 billion year to year decrease in spending from all other fund sources. This decrease is mostly explained by the large amount of one time funding included in the budget. In the State Budget, these one time funds are backfilled with ongoing Proposition 98 dollars. As a result, funding from various sources has changed across the two years, but K 12 schools will receive about the same amount of total programmatic funding. Ongoing Proposition 98 per pupil spending is $8,726 an increase of $262, or 3.1 percent, over the prior year. However, including all the one time monies supporting ongoing, 35

44 traditionally Proposition 98 funded programs in , the year to year increase in per pupil Proposition 98 funding is $112, or 1.3 percent. The State Budget package includes legislation that, if approved by the voters, would authorize the California State Lottery to adopt changes that will help to improve its financial performance and protect education funding by increasing Proposition 98 minimum guarantee to offset the loss of lottery revenue to K-14 education in order to give schools more stable and growing source of funds to replace the historically unreliable lottery revenues. Additionally, this legislation would authorize the securitization of a portion of future lottery revenues, the proceeds of which would be deposited in a Debt Retirement Fund and available to help offset future General Fund expenditures. State Fiscal Crisis Developments since the enactment of the State Budget have led the Schwarzenegger Administration to project a current year deficit of $11.2 billion. These developments include: (i) lower than projected revenues as a result of continuing weak economic conditions, (ii) revenue measures in the State Budget resulting in less increased revenue than projected, (iii) potential required payments to the prison system s Medical Care Receiver in excess of the $100 million contained in the State Budget, and (iv) possible negative outcomes in pending litigation or other unanticipated costs not included in the State Budget. In addition, the modest deficit of $1 billion for fiscal year that was projected in the State Budget assumed receipt of $5 billion from the securitization of lottery revenues, which is subject to voter approval. The Governor has called a special session of the Legislature to consider various options to address the State s fiscal situation. The Governor has suggested that schools are facing a midyear cut in the $2 billion to $4 billion range. Additional Information on State Finances The full text of the adopted State Budget may be found at the internet website of the California Department of Finance, under the heading California Budget, and the Legislative Analyst s Office overview of the State Budget may be found at In addition, various State of California official statements, many of which contain a summary of the current and past State budgets and the impact of those budgets on school districts in the State, may be found at the website of the State Treasurer, Periodic reports on revenues and/or expenditures during the fiscal year are issued by the Governor s Office, the State Controller s Office and the LAO. The Department of Finance issues a monthly Bulletin, which reports the most recent revenue receipts as reported by state departments, comparing them to Budget projections. The Governor s Office also formally updates its budget projections three times during each fiscal year, in January, May and at budget enactment. These bulletins and other reports are available on the Internet. The information referred to above is prepared by the respective State agency maintaining each website and not by the District, and the District can take no responsibility for the continued accuracy of these internet addresses or for the accuracy, completeness or timeliness of information posted there, and such information is not incorporated herein by these references. Future State Budgets The District cannot predict what actions will be taken in the future by the Legislature and the Governor to deal with 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 36

45 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 during as budgeted. TAX MATTERS In the opinion of Kronick, Moskovitz, Tiedemann & Girard, a Professional Corporation, Sacramento, California, Special Counsel, based upon an analysis of existing statutes, regulations, rulings. and court decisions, and assuming, among other matters, compliance with certain covenants, interest evidenced by the Certificates is excludable from gross income for federal income tax purposes and is exempt from State of California personal income taxes. In the further opinion of Special Counsel, interest evidenced by the Certificates is not a specific item of tax preference for purposes of the federal individual or corporate alternative minimum taxes, although Special Counsel observes that such interest is included in adjusted current earnings when calculating corporate alternative minimum taxable income. A complete copy of the proposed form of opinion of Special Counsel is set forth in Appendix C. Special Counsel s opinion as to the exclusion from gross income of interest evidenced by the Certificates is based upon certain representations of fact and certifications made by the District and others and is subject to the condition that the District complies with all requirements of the Internal Revenue Code of 1986 (the Code ) that must be satisfied subsequent to the execution and delivery of the Certificates to assure that such interest will not become includable in gross income for federal income tax purposes. Failure to comply with such requirements of the Code might cause interest evidenced by the Certificates to be included in gross income for federal income tax purposes retroactive to the date of execution and delivery of the Certificates. The District has covenanted to comply with all such requirements. Special Counsel s opinions may be affected by actions taken (or not taken) or events occurring (or not occurring) after the date hereof. Special Counsel has not undertaken to determine, or to inform any person, whether any such actions or events are taken or do occur. Although Special Counsel has rendered an opinion interest evidenced by the Certificates is excludable from gross income for federal income tax purposes provided that the District continues to comply with certain requirements of the Code, the ownership or disposition of, or the accrual or receipt of interest evidenced by, the Certificates may otherwise affect an Owner s tax liability. The nature and extent of these other tax consequences will depend on the particular tax status of the Owner or the Owner s other items of income or deduction. Special Counsel expresses no opinion regarding any such other tax consequences. No assurance can be given that any future legislation or clarification of the Code, if enacted into law, will not cause interest evidences by the Certificates to be subject, directly or indirectly, to federal income taxation, or otherwise prevent Owners from realizing the full current benefit of the tax status of such interest. Further, no assurance can be given that the introduction or enactment of any such future legislation, or action of the Internal Revenue Service, including but not limited to selection of the Certificates for audit examination, or the course or result of any IRS examination of the Certificates, or bonds that present similar tax issues, will not affect the market price of the Certificates. Prospective purchasers of the Certificates should consult their own tax advisers regarding any pending or proposed federal tax legislation, as to which Special Counsel expresses no opinion. 37

46 CERTAIN LEGAL MATTERS Kronick, Moskovitz, Tiedemann & Girard, a Professional Corporation, Sacramento, Special Counsel, will render an opinion with respect to the validity and enforceability of the Ground Lease, the Facilities Lease, and the Trust Agreement in connection with the Certificates, the form of which is set forth in Appendix C. Copies of the approving opinion will be available at the time of delivery of the Certificates. Payment of the fees and expenses of Special Counsel is contingent upon the sale and delivery of the Certificates. Special Counsel undertakes no responsibility for the accuracy, completeness, or fairness of this Official Statement. ABSENCE OF MATERIAL LITIGATION At the time of delivery of and payment for the Certificates, the District will certify that there is no action, suit, litigation, inquiry or investigation before or by any court, governmental agency, public board or body served, or to the best knowledge of the District threatened, against the District (i) that seeks to restrain or enjoin the execution or delivery of the Certificates, the Facilities Lease, the Ground Lease, or the Trust Agreement, (ii) contesting the validity of Certificates, the Facilities Lease, the Ground Lease, or the Trust Agreement, or the power of the District to perform its obligations thereunder, or (iii) that, if determined adversely to the District, would materially impair the District s ability to perform its obligations under the Facilities Lease or materially and adversely affect the District s financial condition. The District does have claims pending against it. The aggregate amount of the uninsured liabilities of the District that may result from all claims will not, in the opinion of the District, materially affect the District s finances or impair its ability to make Rental Payments under the Facilities Lease. CONTINUING DISCLOSURE Pursuant to the Continuing Disclosure Certificate, the District will covenant for the benefit of the Owners and the beneficial owners of the Certificates to provide certain financial information and operating data relating to the District no later than 270 days after the end of each of the District s fiscal years (the Annual Report ), commencing with the report for the fiscal year, and to provide notice of the occurrence of certain enumerated events with respect to the Certificates, if material. The Annual Report and any notices of such material events will be filed by or on behalf of the District with each Nationally Recognized Municipal Securities Information Repository (and with the State Information Depository, if any, established by the State of California). See Appendix D - Form of Continuing Disclosure Certificate. The District has not timely filed the annual reports required by previous undertakings. The District has implemented new internal controls to ensure compliance in the future. RATINGS The Certificates have been assigned a rating of AAA by S&P, based on the issuance by the Insurer of the Policy. The Certificates have been assigned an underlying rating of A+ by S&P. Such rating reflects only the views of such organization and any desired explanation of the significance of such rating should be obtained from the rating agency furnishing the same, at the following address: Standard & Poor s, 55 Water Street, 45 th Floor, New York, New York Generally, a rating agency bases its rating on the information and materials furnished to it and on investigations, studies and assumptions of its own. There is no assurance such rating will continue for any given period of time or that such rating will not be revised downward or withdrawn entirely by the rating agency, if in the judgment of such 38

47 rating agency, circumstances so warrant. Any such downward revision or withdrawal of such rating may have an adverse effect on the market price of the Certificates. UNDERWRITING The Certificates are to be purchased for reoffering by George K. Baum & Company (the Underwriter ). The Underwriter has agreed to purchase the Certificates at a purchase price of $6,654, (representing the aggregate principal amount evidenced by the Certificates of $6,625,000, plus net original issue premium of $89,344.50, and less underwriter s discount of $59,625). The purchase agreement with the District provides that the Underwriter will purchase all of the Certificates if any are purchased. The obligation to make such purchase is subject to certain terms and conditions set forth in the purchase agreement. The Underwriter may offer and sell the Certificates to dealers and others at a price lower than the offering price stated on the cover page hereof. The offering price may be changed from time to time by the Underwriter. AUTHORIZATION The execution and delivery of this Official Statement has been duly authorized by the District. RESCUE UNION SCHOOL DISTRICT By: /s/ Carol Bly Superintendent 39

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79 APPENDIX B SUMMARY OF PRINCIPAL LEGAL DOCUMENTS Table of Contents DEFINITIONS... B-2 GROUND LEASE... B-9 FACILITIES LEASE... B-10 General... B-10 Term... B-10 Substitution of Property... B-10 Rental Payments; Additional Payments... B-11 No Offsets; Net Lease... B-11 Abatement of Rental... B-11 Prepayments... B-12 Covenants of the District... B-12 Maintenance of the Facilities... B-12 Taxes and Other Governmental Charges; Utility Charges... B-12 Liens... B-12 Environmental Covenants... B-13 Assignment and Subleasing... B-13 Insurance... B-13 Fire and Extended Coverage Insurance... B-13 Public Liability and Property Damage Insurance... B-14 Rental Abatement Insurance... B-14 Workers Compensation Insurance... B-15 Title Insurance... B-15 Eminent Domain... B-15 Events of Default... B-15 Remedies on Default... B-16 TRUST AGREEMENT... B-17 General... B-17 Assignment... B-17 Establishment of Funds and Accounts... B-17 Certificate Fund... B-17 Allocation of Rental Payments... B-17 Application of Interest Fund... B-18 Application of Principal Fund... B-18 Application of Certificate Reserve Fund... B-18 Application of Redemption Fund... B-18 Investment of Moneys in Funds and Accounts... B-18 Events of Default; Remedies of Owners... B-18 Events of Default... B-18 Remedies... B-19 Application of Money Collected... B-19 Trustee to Represent Owners... B-20 Amendment of Trust Agreement... B-20 Defeasance... B-22 Consent of Insurer... B-22 Page B-1

80 The following are summaries of selected provisions of certain legal documents that are not described elsewhere in this Official Statement. These summaries do not purport to be comprehensive and reference should be made to the Ground Lease, the Facilities Lease, and the Trust Agreement for a full and complete statement of their provisions. All capitalized terms not defined in this Official Statement have the meanings set forth in the Trust Agreement. DEFINITIONS Additional Payments are additional payments made by the District pursuant to Facilities Lease. Applicable Environmental Laws means and shall include, but shall not be limited to, the Comprehensive Environmental Response, Compensation, and Liability Act ( CERCLA ), 42 USC Sections 9601 et seq.; the Resource Conservation and Recovery Act ( RCRA ), 42 USC Sections 6901 et seq.; the Federal Water Pollution Control Act, 33 USC Sections 1251 et seq.; the Clean Air Act, 42 USC Sections 7401 et seq.; the Hazardous Materials Transportation Act ( HMTA ), 49 USC Sections 1801 et seq.; the California Hazardous Waste Control Law ( HWCL ), California Health & Safety Code Sections et seq.; the Hazardous Substance Account Act ( HSAA ), California Health & Safety Code Sections et seq.; the Porter-Cologne Water Quality Control Act (the Porter-Cologne Act ), California Water Code Sections 1300 et seq.; the Air Resources Act, California Health & Safety Code Sections 3900 et seq.; the Safe Drinking Water & Toxic Enforcement Act, California Health & Safety Code Sections et seq.; and the regulations under each thereof; and any other local, state, and/or federal laws or regulations, whether currently in existence or hereafter enacted, that govern: (1) the existence, cleanup, and/or remedy of contamination on property; (2) the protection of the environment from spilled, deposited, or otherwise emplaced contamination; (3) the control of hazardous wastes; or (4) the use, generation, transport, treatment, removal, or recovery of Hazardous Substances, including building materials. Board means the governing board of the District. Bond Year or Year means the period ending on October 1 of each year. Business Day means any day other than a Saturday, Sunday, or a day on which banking institutions in the State or the state in which the Corporate Trust Office is located are authorized or obligated by law or executive order to be closed Certificate Reserve Requirement means, as of any date of calculation, an amount equal to the least of (i) Maximum Annual Debt Service on all Certificates then Outstanding, (ii) 125% of average Annual Debt Service on all Certificates then Outstanding, and (iii) 10% of the aggregate principal amount of the Certificates executed and delivered on the closing date (or, if the Certificates were sold with more than a de minimis amount of original issue discount or premium, the issue price of the Certificates (excluding pre-issuance accrued interest), as those terms are defined in the Internal Revenue Code). Facilities means the real property described in Exhibit A attached to the Facilities Lease and all improvements located thereon (excluding any relocatable buildings emplaced thereon that are not owned by the District or that are subject to a purchase money security interest). Hazardous Substance means any substance that shall, at any time, be listed as hazardous or toxic in any Applicable Environmental Law or that has been or shall be determined at any time by any agency or court to be a hazardous or toxic substance regulated under Applicable Environmental Laws; and also means, without limitation, any flammable explosives, radioactive materials, hazardous materials, hazardous wastes, hazardous or toxic substances, or related materials defined in CERCLA, HMTA, B-2

81 RCRA, and in the regulations adopted and publications promulgated pursuant thereto, or any other Federal, State or local environmental law, ordinance, rule, or regulation. Interest Payment Date means April 1 and October 1 in each year, commencing April 1, Investment Securities means the following: 1. (a) Cash (fully insured by the Federal Deposit Insurance Corporation), (b) direct obligations (other than an obligation subject to variation in principal repayment) of the United States of America ( U.S. Treasury Obligations ), (c) obligations fully and unconditionally guaranteed as to timely payment of principal and interest by the United States of America, (d) obligations fully and unconditionally guaranteed as to timely payment of principal and interest by any agency or instrumentality of the United States of America when such obligations are backed by the full faith and credit of the United States of America, or (e) evidences of ownership of proportionate interests in future interest and principal payments on obligations described above held by a bank or trust company as custodian, under which the owner of the investment is the real party in interest and has the right to proceed directly and individually against the obligor and the underlying government obligations are not available to any person claiming through the custodian or to whom the custodian may be obligated. 2. Federal Housing Administration debentures. 3. The listed obligations of government-sponsored agencies, which are not backed by the full faith and credit of the United States of America: (a) Federal Home Loan Mortgage Corporation (FHLMC) senior debt obligations and Participation certificates (excluded are stripped mortgage securities that are purchased at prices exceeding their principal amounts); (b) Farm Credit System (formerly Federal Land Banks, Federal Intermediate Credit Banks and Banks for Cooperatives) consolidated system-wide bonds and notes; (c) Federal Home Loan Banks (FHL Banks) consolidated debt obligations; or (d) Federal National Mortgage Association (FNMA) senior debt obligations and mortgage-backed securities (excluded are stripped mortgage securities that are purchased at prices exceeding their principal amounts). 4. Unsecured certificates of deposit, time deposits, and bankers' acceptances (having maturities of not more than 180 days or no more than 40% of the District s money invested under this Trust Agreement) of any bank the short-term obligations of which are rated A-1+ or better by Standard & Poor s and Prime-1 by Moody s. Additionally, no more that 30% of the District s money invested under this Trust Agreement may be invested in bankers acceptances of any one commercial bank. 5. Deposits the aggregate amount of which is fully insured by the Federal Deposit Insurance Corporation, in banks which have capital and surplus of at least $15 million. 6. Commercial paper (having original maturities of not more than 270 days) rated A-1+ by Standard & Poor s and Prime-1 by Moody's. Entities that may issue commercial paper shall be consistent with California Government Code Section or its equivalent. 7. Money market funds rated Aam or AAm-G by Standard & Poor s, or better and if rated by Moody s rated Aa2 or better. B-3

82 8. State-sponsored investment pools (such as the Local Agency Investment Fund referred to in Section of the California Government Code) rated AA- or better by Standard & Poor s. 9. State Obligations, which means: (a) Direct general obligations of any state of the United States of America or any subdivision or agency thereof to which is pledged the full faith and credit of a state the unsecured general obligation debt of which is rated at least A3 by Moody's and at least A- by Standard & Poor s, or any obligation fully and unconditionally guaranteed by any state, subdivision or agency whose unsecured general obligation debt is so rated. (b) Direct general short-term obligations of any state agency or subdivision or agency thereof described in (a) above and rated A-1+ by Standard & Poor s and MIG-1 by Moody's. (c) Special Revenue Bonds (as defined in the United States Bankruptcy Code) of any state or state agency described in (b) above and rated AA- or better by Standard & Poor s and Aa3 or better by Moody's. 10. Pre-refunded municipal obligations rated AAA by Standard & Poor s and Aaa by Moody's meeting the following requirements: (a) the municipal obligations are (1) not subject to redemption prior to maturity or (2)the trustee for the municipal obligations has been given irrevocable instructions concerning their call and redemption and the issuer of the municipal obligations has covenanted not to redeem such municipal obligations other than as set forth in such instructions; (b) the municipal obligations are secured by cash or U.S. Treasury Obligations that may be applied only to payment of the principal of, interest and premium on such municipal obligations; (c) the principal of and interest on the U.S. Treasury Obligations (plus any cash in the escrow) has been verified by the report of independent certified public accountants to be sufficient to pay in full all principal of, interest, and premium, if any, due and to become due on the municipal obligations ( Verification Report ); (d) the cash or U.S. Treasury Obligations serving as security for the municipal obligations are held by an escrow agent or trustee in trust for owners of the municipal obligations; (e) no substitution of a U.S. Treasury Obligation shall be permitted except with another U.S. Treasury Obligation and upon delivery of a new Verification Report; and (f) the cash or U.S. Treasury Obligations are not available to satisfy any other claims, including those by or against the trustee or escrow agent. 11. Repurchase agreements: with (1) any domestic bank, or domestic branch of a foreign bank, the long-term debt of which is rated at least A- by Standard & Poor s and A3 Moody's; or (2) any broker-dealer with retail customers or a related affiliate thereof which broker-dealer has, or the parent company (that guarantees the provider) of which has, long-term debt rated at least A- by Standard & Poor s and A3 by Moody's, which broker-dealer falls under the jurisdiction of the Securities Investors Protection Corporation; or (3) any other entity rated at least A- by Standard & Poor s and A3 Moody's and acceptable to the Insurer (each an Eligible Provider ), provided that: (a) (i) permitted collateral shall include U.S. Treasury Obligations, or senior debt obligations of GNMA, FNMA or FHLMC (no collateralized mortgage obligations shall be permitted for these providers), and (ii) collateral levels must be at least 102% of the total B-4

83 principal when the collateral type is U.S. Treasury Obligations, 103% of the total principal when the collateral type is GNMA s and 104% of the total principal when the collateral type is FNMA and FHLMC ( Eligible Collateral ); (b) the Trustee or a third party acting solely as agent therefor or for the District (the Custodian") has possession of the collateral or the collateral has been transferred to the Custodian in accordance with applicable state and federal laws (other than by means of entries on the transferor's books) and such collateral shall be marked to market; (c) the collateral shall be marked to market on a daily basis and the provider or the Custodian shall send monthly reports to the Trustee, the District, and the Insurer setting forth the type of collateral, the collateral percentage required for that collateral type, the market value of the collateral on the valuation date and the name of the Custodian holding the collateral; (d) the repurchase agreement (or guaranty, if applicable) may not be assigned or amended without the prior written consent of the Insurer; (e) the repurchase agreement shall state and an opinion of counsel shall be rendered at the time such collateral is delivered that the Custodian has a perfected first priority security interest in the collateral, any substituted collateral and all proceeds thereof; (f) the repurchase agreement shall provide that if during its term the provider's rating by either Moody's or Standard & Poor s is withdrawn or suspended or falls below A- by Standard & Poor s or A3 by Moody's, as appropriate, the provider must, notify the District, the Trustee and the Insurer within five (5) days of receipt of such notice. Within ten (10) days of receipt of such notice, the provider shall either: (i) provide a written guarantee acceptable to the Insurer, (ii) post Eligible Collateral, or (iii) assign the agreement to an Eligible Provider. If the provider does not perform a remedy within ten (10) business days, the provider shall, at the direction of the Trustee (who shall give such direction if so directed by the Insurer) repurchase all collateral and terminate the repurchase agreement, with no penalty or premium to the District or the Trustee. 12. Investment agreements: with a domestic or foreign bank or corporation the long-term debt of which, or, in the case of a guaranteed corporation the long-term debt, or, in the case of a monoline financial guaranty insurance company, claims-paying ability, of the guarantor is rated at least AA- by Standard & Poor s and Aa3 by Moody's, and acceptable to the Insurer (each an Eligible Provider ); provided that: (a) interest payments are to be made to the Trustee at times and in amounts as necessary to pay debt service (or, if the investment agreement is for the construction fund, construction draws) on the Certificates; (b) the invested funds are available for withdrawal without penalty or premium, at any time upon not more than seven (7) days' prior notice; the District and the Trustee hereby agree to give or cause to be given notice in accordance with the terms of the investment agreement so as to receive funds thereunder with no penalty or premium paid; (c) the provider shall send monthly reports to the Trustee, the District and the Insurer setting forth the balance the District or the Trustee has invested with the provider and the amounts and dates of interest accrued and paid by the provider; (d) the investment agreement shall state that it is an unconditional and general obligation of the provider, and is not subordinated to any other obligation of, the provider thereof or, if the provider is a bank, the agreement or the opinion of counsel shall state that the obligation of the provider to make payments thereunder ranks pari passu with the obligations of the provider to its other depositors and its other unsecured and unsubordinated creditors; B-5

84 (e) the investment agreement (or guaranty, if applicable) may not be assigned or amended without the prior written consent of the Insurer; (f) the District, the Trustee and the Insurer shall receive an opinion of domestic counsel to the provider that such investment agreement is legal, valid, binding and enforceable against the provider in accordance with its terms; (g) the District, the Trustee and the Insurer shall receive an opinion of foreign counsel to the provider (if applicable) that (i) the investment agreement has been duly authorized, executed and delivered by the provider and constitutes the legal, valid and binding obligation of the provider, enforceable against the provider in accordance with its terms, (ii) the choice of law of the state set forth in the investment agreement is valid under that country s laws and a court in such country would uphold such choice of law, and (iii) any judgment rendered by a court in the United States would be recognized and enforceable in such country; (h) the investment agreement shall provide that if during its term: (i) the provider's rating by either Standard & Poor s or Moody's falls below AA- or Aa3, the provider shall, at its option, within ten (10) days of receipt of publication of such downgrade, either (i) provide a written guarantee acceptable to the Insurer, (ii) post Eligible Collateral with the District, the Trustee or a third party acting solely as agent therefore (the Custodian ) free and clear of any third party liens or claims, or (iii) assign the agreement to an Eligible Provider, or (iv) repay the principal of and accrued but unpaid interest on the investment; (ii) the provider's rating by either Standard & Poor s or Moody's is withdrawn or suspended or falls below A- or A3, the provider must, at the direction of the District or the Trustee (who shall give such direction if so directed by the Insurer), within ten (10) days of receipt of such direction, repay the principal of and accrued but unpaid interest on the investment, in either case with no penalty or premium to the District or the Trustee. (i) if the provider is required to collateralize, permitted collateral shall include U.S. Treasury Obligations, or senior debt obligations of GNMA, FNMA or FHLMC (no collateralized mortgage obligations shall be permitted for these providers) and collateral levels must be 102% of the total principal when the collateral type is U.S. Treasury Obligations, 103% of the total principal when the collateral type is GNMA s and 104% of the total principal when the collateral type is FNMA and FHLMC ( Eligible Collateral ). In addition, the collateral shall be marked to market on a daily basis and the provider or Custodian shall send monthly reports to the Trustee, the District and the Insurer setting forth the type of collateral, the collateral percentage required for that collateral type, the market value of the collateral on the valuation date and the name of the Custodian holding the collateral; (j) the investment agreement shall state and an opinion of counsel shall be rendered, in the event collateral is required to be pledged by the provider under the terms of the investment agreement, at the time such collateral is delivered, that the Custodian has a perfected first priority security interest in the collateral, any substituted collateral and all proceeds thereof; (k) the investment agreement must provide that if during its term: (i) the provider shall default in its payment obligations, the provider's obligations under the investment agreement shall, at the direction of the District or the Trustee (who shall give such direction if so directed by the Insurer), be accelerated and amounts invested and accrued but unpaid interest thereon shall be repaid to the District or the Trustee, as appropriate, and (ii) the provider shall become insolvent, not pay its debts as they become due, be declared or petition to be declared bankrupt, etc. ( event of insolvency ), the provider's obligations shall automatically be accelerated and amounts B-6

85 invested and accrued but unpaid interest thereon shall be repaid to the District or the Trustee, as appropriate. 13. Any other form of investments approved in writing by the Insurer. Mandatory Sinking Account Payment means, with respect to Certificates of any maturity, the amount required by the Trust Agreement to be deposited by the District in a Sinking Account for the payment of Term Certificates of such maturity. Maximum Annual Debt Service shall mean the greatest amount of principal and interest becoming due and payable with respect to all Certificates in any Bond Year including the Bond Year in which the calculation is made or any subsequent Bond Year. Net Proceeds means the amount remaining from the gross proceeds of any insurance claim or condemnation award made in connection with the Facilities, after deducting all expenses (including attorneys fees) incurred in the collection of such claim or award. Outstanding, when used as of any particular time with reference to Certificates, means all Certificates theretofore, or thereupon being, executed and delivered by the Trustee under the Trust Agreement except (1) Certificates theretofore cancelled by the Trustee or surrendered to the Trustee for cancellation; (2) Certificates with respect to which all liability of the District shall have been discharged, including Certificates (or portions of Certificates) for which money is held in trust by the Trustee; and (3) Certificates for the transfer or exchange of or in lieu of or in substitution for which other Certificates shall have been executed and delivered by the Trustee pursuant to the Trust Agreement. Permitted Encumbrances means (1) liens for general ad valorem taxes and assessment, if any, not then delinquent, or that the District may, pursuant to the Facilities Lease, permit to remain unpaid, (2) easements, rights of way, mineral rights, drilling rights, and other rights, reservations, covenants, conditions, or restrictions that exist of record as of the date of recordation of the Facilities Lease and that the District certifies in writing will not materially impair the use of the Facilities, (3) the Ground Lease, as it may be amended from time to time, (4) the Trust Agreement, as it may be amended from time to time, (5) any right or claim of any mechanic, laborer, materialman, supplier, or vendor not filed or perfected in the manner prescribed by law, (6) easements, rights of way, mineral rights, drilling rights, and other rights, reservations, covenants, conditions, or restrictions established following the date of recordation of the Facilities Lease and to which the Corporation consents in writing, and (7) liens relating to special assessments levied with respect to the Facilities. Person means a corporation, firm, association, partnership, trust, or other legal entity or group of entities, including a governmental entity or any agency or political subdivision thereof. Principal Payment Date means a date on which principal evidenced by the Certificates becomes due and payable whether by maturity or redemption from a Mandatory Sinking Account Payment. Redemption Price means, with respect to any Certificate (or portion thereof) the principal amount represented by such Certificate (or portion) plus the applicable premium, if any, payable upon redemption thereof pursuant to the provisions of such Certificate and the Trust Agreement. Rental Payments means the Rental Payments payable by the District pursuant to the provisions of the Facilities Lease. B-7

86 Reserve Facility means any letter of credit, insurance policy, surety bond or other credit source deposited with the Trustee to satisfy the Certificate Reserve Requirement. Sinking Accounts means the accounts in the Principal Fund so designated in the Trust Agreement and established for the payment of the Term Certificates. State means the State of California. Term Certificates means the Certificates payable at or before their specified maturity date or dates from Mandatory Sinking Account Payments established for that purpose and calculated to retire such Certificates on or before their specified maturity date or dates. GROUND LEASE Under the Ground Lease, the District will lease the Facilities to the Corporation for an advance rental equal to the proceeds of the sale of the Certificates. The term of the Ground Lease will commence on the date of delivery of the Certificates and will terminate on October 1, 2013, unless extended because of rental abatement or sooner terminated because of redemption of the Certificates. General FACILITIES LEASE Simultaneously with the delivery of the Ground Lease, the Corporation will sublease the Facilities to the District pursuant to the Facilities Lease. Certain of the provisions of the Facilities Lease are summarized below; this summary does not purport to be complete or definitive and is qualified in its entirety by reference to the full terms of the Facilities Lease. Term The term of the Facilities Lease shall commence on the date of delivery of the Certificates and shall end on October 1, 2013, unless such term is extended or sooner terminated. If on October 1, 2013, the Certificates have not been fully paid, or if the rental payable under the Facilities Lease has been abated at any time and for any reason, then the term of the Facilities Lease will be extended for a period of 10 years. If the Certificates have been fully paid, or provision therefor made, the term of the Facilities Lease shall end 10 days thereafter. Substitution of Property The District and the Corporation may substitute alternate property for any property that constitutes the Facilities for purposes of the Ground Lease and the Facilities Lease, but only after the District shall have filed with the Trustee all of the following: Documents. Executed copies of the amended Ground Lease and Facilities Lease containing the amended description of the Facilities. Recording. A Statement of the District certifying that the amended Ground Lease and Facilities Lease, or memoranda thereof and an amended memorandum of the Trust Agreement, have been duly recorded in the official records of the county in which the real property is located; B-8

87 Replacement Value; Rental Value. An MAI fair market appraisal demonstrating that the value of the property that will constitute the Facilities after the substitution will be at least equal to the value of the Facilities originally leased under the Facilities Lease. Title Insurance. A California Land Title Association lender s policy or policies or a commitment for such policy or policies or an amendment or endorsement to an existing policy or policies in an amount or amounts such that the amount of title insurance coverage with respect to the Facilities after the substitution, addition or deletion is at least equal to the amount of such insurance with respect to the Facilities prior to the substitution. Each such policy or endorsement, when issued, shall name the Trustee as the insured and shall insure the leasehold estate of the District in such substituted property, subject only to the following exceptions: (i) Permitted Encumbrances, (ii) other exceptions that do not substantially interfere with the District s right to use and occupy the substituted property and that will not result in an abatement of Rental Payments. No Effect on Occupancy; Useful Life. A Statement of the District certifying that such substitution does not adversely affect the District s use and occupancy of the Facilities and that the Facilities, as amended, have a useful life extending at least to the date of termination of the Facilities Lease. No Prior Liens. A Statement of the District certifying that the property that will constitute the Facilities after the substitution is not subject to any liens securing monetary obligations (other than Permitted Encumbrances) unless such liens are subordinate to the interests of the Corporation created by the Facilities Lease. Essential Facilities. A Statement of the District certifying that the property that will constitute the Facilities after the substitution, addition or deletion is essential to the fulfillment of the District s governmental purposes. Opinion of Counsel. An Opinion of Counsel stating that such amendments are authorized or permitted by and comply with the Constitution and laws of the State of California and the Trust Agreement; upon execution and delivery will be valid obligations of the District and the Corporation; and will not cause the interest component of the Rental Payments to be included in gross income for federal income tax purposes. Notice to Rating Agencies. Evidence of delivery of written notice of the proposed substitution or release to each Rating Agency then rating the Certificates. Consent of Insurer. So long as the Policy is in effect and the Insurer is not in default with respect to its payment obligations thereunder, the written consent of the Insurer to the substitution. Rental Payments; Additional Payments Under the Facilities Lease, the District will pay the Rental Payments for the use of the Facilities. A portion of the Rental Payments will constitute principal components and an portion will constitute interest components. Rental Payments are due on the dates specified on the schedule attached to the Facilities Lease. The District also promises to pay Additional Payments, which include (i) all costs and expenses incurred by the Corporation or the Trustee in connection with the execution, performance, or enforcement of the Facilities Lease and the Trust Agreement, (ii) amounts required to be paid to the Trustee for deposit in the Certificate Reserve Fund, (iii) reimbursement to the issuer of a Reserve Facility delivered by the District to satisfy the Certificate Reserve Requirement, and (iv) all other amounts payable by the District under the terms of the Facilities Lease and the Trust Agreement. B-9

88 No Offsets; Net Lease The District promises to make all Rental Payments and Additional Payments when due without deduction or offset of any kind, notwithstanding any dispute between the Corporation and the District, and not to withhold any Rental Payments and Additional Payments pending the final resolution of any such dispute. The Facilities Lease will be deemed and construed to be a net-net-net lease and the District agrees that the Rental Payments shall be an absolute net return to the Corporation, free and clear of any expenses, charges, or setoffs whatsoever. Abatement of Rental Except to the extent of amounts held by the Trustee in the Certificate Reserve Fund or in any other funds established under the Trust Agreement otherwise available to the Trustee for payments in respect of the Certificates, Rental Payments and Additional Payments shall be abated proportionately during any period in which, by reason of damage to, destruction of, taking under the power of eminent domain (or sale to any entity threatening the use of such power) of, or title defect with respect to any portion of the Facilities, there is substantial interference with the use and possession of the Facilities or a portion thereof. The amount of abatement shall be such that the resulting Rental Payments and Additional Payments represent fair consideration for the use and possession of the portion of the Facilities not so interfered with. Such abatement shall commence with the date of such interference and shall end only with the cure thereof. Any determination of remaining fair rental value will be made with reference to the greater of the District s fair rental value certification as of the date of execution and delivery of the Certificates and the fair rental value on the date of determination. Prepayments Casualty/Condemnation. The District will prepay from net insurance proceeds and eminent domain proceeds, to the extent described below, all or a proportionate amount of the principal components of the Rental Payments then unpaid, at a prepayment amount equal to the sum of the principal components prepaid plus the interest component of such Rental Payments accrued to the date of prepayment. Optional Prepayment. The District may prepay, from any source of available funds, all or such part of the Rental Payments as specified by the District by depositing with the Trustee moneys or securities as provided in the Trust Agreement sufficient to make such Rental Payments when due. The District agrees that, if following such prepayment the Facilities are damaged or destroyed or taken by eminent domain, it is not entitled to, and by such prepayment waives the right of, abatement of such prepaid Rental Payments and shall not be entitled to any reimbursement of such Rental Payments. Any such prepayment shall be applied by the Trustee to pay the principal and interest components of the Certificates and to prepay Certificates if such Certificates are subject to redemption pursuant to the terms of the Trust Agreement. Covenants of the District: Maintenance of the Facilities. The District agrees that, at all times during the term of the Facilities Lease, the District will, at the District s own cost and expense, maintain, preserve, and keep the Facilities and every portion thereof in good repair, working order, and condition and that the District will from time to time make or cause to be made all necessary and proper repairs, replacements, and renewals. Taxes and other Governmental Charges; Utility Charges. If the use, possession, or acquisition by the District or the Corporation of the Facilities is found to be subject to taxation in any form (except B-10

89 for income or franchise taxes of the Corporation), the District will pay during the term of the Facilities Lease, as the same respectively become due, all taxes and governmental charges of any kind whatsoever that may at any time be lawfully assessed or levied against or with respect to the Facilities, and any equipment or other property acquired by the District in substitution for, as a renewal or replacement of, or a modification, improvement or addition to the Facilities; provided that, with respect to any governmental charges or taxes that may lawfully be paid in installments over a period of years, the District shall be obligated to pay only such installments as are accrued during such time as the Facilities Lease is in effect. The District shall pay or cause to be paid all gas, water, steam, electricity, heat, power, air conditioning, telephone, utility, and other charges incurred in the operation, maintenance, use, occupancy, and upkeep of the Facilities. Liens. In the event the District shall at any time during the term of the Facilities Lease cause any changes, alterations, additions, improvements, or other work to be done or performed or materials to be supplied, in or upon the Facilities, the District shall pay, when due, all sums of money that may become due for, or purporting to be for, any labor, services, materials, supplies, or equipment furnished or alleged to have been furnished to or for the District in, upon or about the Facilities and shall keep the Facilities free of any and all mechanics or materialmen s liens or other liens against the Facilities or the Corporation s interest therein. In the event any such lien attaches to or is filed against the Facilities or the Corporation s interest therein, the District shall cause each such lien to be fully discharged and released at the time the performance of any obligation secured by any such lien matures or becomes due, except that if the District desires to contest any such lien it may do so in good faith. If any such lien is reduced to final judgment and such judgment or such process as may be issued for the enforcement thereof is not promptly stayed, or if so stayed and said stay thereafter expires, the District shall forthwith pay and discharge such judgment. Environmental Covenants. The District will comply with all Applicable Environmental Laws with respect to the Facilities and will not use, store, generate, treat, transport, manufacture, refine, handle, transfer, produce, process, or dispose of any Hazardous Substance thereon or in a manner that would cause any Hazardous Substance to later flow, migrate, leak, leach, or otherwise come to rest on or in the Facilities. Assignment and Subleasing. Neither the Facilities Lease nor any interest of the District thereunder shall be mortgaged, pledged, assigned, sublet, encumbered (except for Permitted Encumbrances) or transferred by the District by voluntary act or by operation of law or otherwise, except with the prior written consent of the Corporation and the Insurer, which, in the case of subletting, shall not be unreasonably withheld; provided such subletting shall not affect the tax-exempt status of the interest components of the Rental Payments payable by the District thereunder. No such mortgage, pledge, assignment, sublease or transfer shall in any event affect or reduce the obligation of the District to make the Rental Payments and Additional Payments required under the Facilities Lease. Insurance Fire and Extended Coverage Insurance. 1. Coverage. The District shall maintain throughout the term of the Facilities Lease insurance against loss or damage to any structures constituting any part of the Facilities by fire and lightning, with extended coverage insurance, vandalism and malicious mischief insurance and sprinkler system leakage insurance. Said extended coverage insurance shall, as nearly as practicable, cover loss or damage by explosion, windstorm, riot, aircraft, vehicle damage, smoke, and such other hazards as are normally covered by such insurance. Full payment of proceeds of the insurance up to the policy limit B-11

90 shall not be contingent on the degree of damage sustained at other facilities owned or leased by the District; provided, however, that such insurance may be subject to a limit of $100,000,000 per occurrence. 2. Amount. Such insurance shall be in an amount equal to the replacement cost (without deduction for depreciation) of all structures constituting any part of the Facilities, excluding the cost of excavations, of grading and filling, and of the land (except that such insurance may be subject to deductible clauses for any one loss of not to exceed $5,000), or, in the alternative, shall be in an amount and in a form sufficient, in the event of total or partial loss, to enable all Certificates then Outstanding to be redeemed. The policy shall explicitly waive any co-insurance penalty. 3. Application of Net Proceeds. a. Repair or Replacement of Facilities. In the event of any damage to or destruction of any part of the Facilities caused by the perils covered by such insurance, the District, except as described below, shall cause the proceeds of such insurance to be utilized for the repair, reconstruction, or replacement of the damaged or destroyed item or items to at least the same good order, repair, and condition as they were in prior to the damage or destruction, insofar as the same may be accomplished by the use of said proceeds. b. Prepayment of Facilities Lease. Alternatively, the District, at its option, and if the proceeds of such insurance together with any other moneys then available for the purpose are at least sufficient to prepay an aggregate principal amount represented by the Outstanding Certificates of Participation plus accrued interest to the prepayment date, equal to the amount of the Outstanding Certificates of Participation attributable to the item or items of the Facilities so destroyed or damaged (determined by reference to the proportion that the acquisition and construction cost of such portion of the Facilities bears to the acquisition costs of the Facilities), may elect not to repair, reconstruct, or replace the damaged or destroyed portion of the Facilities and thereupon shall cause said proceeds to be used for the redemption of outstanding Certificates. If, however, the District has elected to acquire casualty insurance only in an amount sufficient to redeem all the Certificates Outstanding, the District shall use the proceeds of such insurance (together with amounts available in the Certificate Reserve Fund) to redeem the Outstanding Certificates, unless such insurance proceeds are sufficient to fully rebuild or repair the Facilities. 4. Self-Insurance. As an alternative to providing a policy of fire and extended coverage insurance, the District may adopt an alternative risk management program, including, without limitation, (i) a self-insurance method or plan of protection, (ii) a program involving captive insurance companies, (iii) participation in state or federal insurance programs, (iv) participation with other public agencies in mutual or other cooperative insurance or other risk management programs, including those made available through joint exercise of powers agencies, or (v) establishment or participation in other alternative risk management programs; if and to the extent such alternative risk management program shall afford reasonable coverage for the risks required to be insured against, in light of all circumstances, giving consideration to cost, availability, and similar programs, plans, or methods of protection adopted by public entities in the State of California other than the District. So long as the Policy is in effect and the Insurer is not in default with respect to its payment obligations thereunder, the District shall not selfinsure for this risk beyond any pooled insurance program in existence as of the date of delivery of the Certificates, unless the Insurer approves such self-insurance in writing. Public Liability and Property Damage Insurance. Except as described below, the District shall maintain throughout the term of the Facilities Lease a standard comprehensive general liability insurance policy or policies insuring against all direct or contingent loss or liability for damages for personal injury, death, or property damage occasioned by reason of the operation of the Facilities. The minimum liability B-12

91 limits of such insurance shall be $1,000,000 for personal injury or death of each person and $3,000,000 for personal injury or deaths of two or more persons in each accident or event and shall be $1,000,000 (subject to a deductible clause of not to exceed $10,000) for damage to property resulting from each accident or event. Such public liability and property damage insurance may, however, be in the form of a single limit policy in the amount of $3,000,000 covering all such risks. As an alternative to providing a policy of public liability and property damage insurance, the District may provide a self-insurance method or plan of protection if and to the extent such self-insurance method or plan of protection shall afford reasonable coverage for the risks required to be insured against, in light of all circumstances, giving consideration to cost, availability, and similar plans or methods of protection adopted by public entities in the State of California other than the District. So long as the Policy is in effect and the Insurer is not in default with respect to its payment obligations thereunder, the District shall not self-insure for this risk, unless the Insurer approves such self-insurance in writing. Rental Abatement Insurance. The District shall maintain throughout the term of the Facilities Lease rental abatement insurance to cover loss, total or partial, of the Rental Payments due thereunder owing to an abatement of rental as the result of any of the hazards covered by fire and extended coverage insurance. Such insurance shall be maintained in an amount sufficient to pay the Rental Payments during the two-year period in which the total of such Rental Payments is greatest. Workers Compensation Insurance. The District shall maintain workers compensation insurance covering all employees working at the Facilities in the amounts as required by law. Such insurance may be maintained by the District as part of or in conjunction with any other insurance maintained by the District. As an alternative to providing such insurance, the District may file a resolution with the State Department of Industrial Relations, Division of Self-Insurance Plans, declaring the District to be legally uninsured against workers compensation claims and may maintain that status; provided that the District shall annually confer with its insurance advisor concerning the District s workers compensation claims experience and project future claims exposure. The District covenants to budget the amounts and comply with the other actions recommended by the insurance advisor. The District further agrees to comply with any requirements made by the Division of Self-Insurance Plans as a result of any audit performed by that office. Title Insurance. The District shall provide a title insurance policy in an amount equal to the aggregate principal amount represented by the Certificates. Such title insurance policy shall be payable to the Trustee for the use and benefit of the Owners of the Certificates. Such policy shall be in the form of a CLTA lender s title policy issued by a company of recognized standing duly authorized to issue the same, subject only to Permitted Encumbrances. All proceeds received by the Trustee under said policy shall be applied and disbursed by the Trustee in the same order and priority and for the same purposes as proceeds received in eminent domain proceedings. Eminent Domain So long as any of the Certificates shall be outstanding, any award made in eminent domain proceedings for taking the Facilities or any portion thereof shall be applied to the prepayment of Rental Payments. Any such award made after all of the Certificates have been fully paid and retired shall be paid to the District. If the whole of the Facilities, or so much thereof as to render the remainder unusable for the purposes for which it was used by the District, shall be taken under the power of eminent domain, the term of the Facilities Lease shall cease as of the day that possession shall be so taken. If the award on a partial or complete taking, together with other funds available therefor, is insufficient to redeem all of the Outstanding Certificates, the District shall use all reasonable efforts to appeal such award to obtain an B-13

92 award that will be sufficient in amount to redeem the Certificates in full for a complete taking, or, in the event of a partial taking, an amount sufficient such that remaining Rental Payments will be sufficient to pay the remaining Outstanding Certificates. If less than the whole of the Facilities shall be taken under the power of eminent domain and the remainder is usable for the purposes for which it was used by the District at the time of such taking, then the Facilities Lease shall continue in full force and effect as to such remainder, and the parties waive the benefits of any law to the contrary, and in such event there shall be a partial abatement of rental. Events of Default. The following events shall be Events of Default: Payment Default. Failure of the District to pay any Rental Payments payable under the Facilities Lease when the same becomes due and payable, time being expressly declared to be of the essence of the Facilities Lease; Breach of Covenant. Failure of the District to keep, observe, or perform any other term, covenant or condition contained in the Facilities Lease or in the Trust Agreement to be kept or performed by the District for a period of 30 days after notice of the same has been given to the District by the Corporation or the Trustee; Transfer of District s Interest. Assignment or transfer of the District s interest in the Facilities Lease or any part thereof without the written consent of the Corporation, either voluntarily or by operation of law or otherwise; Bankruptcy or Insolvency. Institution of any proceeding under the United States Bankruptcy Code or any federal or state bankruptcy, insolvency, or similar law or any law providing for the appointment of a receiver, liquidator, trustee, or similar official of the District or of all or substantially all of its assets, by or with the consent of the District, or institution of any such proceeding without its consent that is not permanently stayed or dismissed within 60 days, or agreement by the District with the District s creditors to effect a composition or extension of time to pay the District s debts, or request by the District for a reorganization or to effect a plan of reorganization, or for a readjustment of the District s debts, or a general or any assignment by the District for the benefit of the District s creditors; Abandonment of the Facilities. Abandonment by the District of any part of the Facilities (except any portion thereof for which a substitution of property has been made). Remedies on Default Upon the occurrence and during the continuance of an Event of Default, it shall be lawful for the Corporation to exercise any and all remedies available pursuant to law or the following remedies granted pursuant to the Facilities Lease (provided that, so long as the Insurer is not in default in its payment obligations under the Policy, the Corporation shall take such actions at the direction, or with the prior consent, of the Insurer): Termination of Facilities Lease. By written notice to the District to terminate the Facilities Lease and to re-enter the Facilities and remove all persons in possession thereof and all personal property whatsoever situated upon the Facilities and place such personal property in storage in any warehouse or other suitable place in the county in which the District is located. In the event of such termination, the District agrees to surrender immediately possession of the Facilities, without let or hindrance, and to pay the Corporation all damages recoverable at law that the Corporation may incur by reason of default by the B-14

93 District, including, without limitation, any costs, loss or damage whatsoever arising out of, in connection with, or incident to any such re-entry upon the Facilities and removal or storage of such property by the Corporation or its duly authorized agents. Continuation of Facilities Lease; Reletting. Without terminating the Facilities Lease, (a) to collect each installment of rent as it becomes due and enforce any other term or provision thereof to be kept or performed by the District, regardless of whether or not the District has abandoned the Facilities, and/or (b) to enter, retake possession of, and re-let the Facilities. If the Corporation does not elect to terminate the Facilities Lease in the manner described in the preceding paragraph, the District agrees to keep or perform all covenants and conditions contained in the Facilities Lease. If the Facilities are not relet, the District agrees to pay the full amount of the rent to the end of the term of the Facilities Lease; if the Facilities are re-let, the District agrees to pay any deficiency in rent that results therefrom. The District further agrees to pay said rent punctually at the same time and in the same manner as for the payment of rent under the Facilities Lease (without acceleration), notwithstanding the fact that the Corporation may have received in previous years or may receive thereafter in subsequent years rental in excess of the rental specified in the Facilities Lease and notwithstanding any entry or re-entry by the Corporation or proceeding brought by the Corporation to recover possession of the Facilities. No Acceleration. Notwithstanding anything in the Facilities Lease or in the Trust Agreement to the contrary, there shall be no right under any circumstance to accelerate the Rental Payments or otherwise declare any Rental Payments not yet due to be immediately due and payable. General TRUST AGREEMENT The Trust Agreement sets forth the terms of the Certificates, the application of the proceeds of the sale of the Certificates, the nature and extent of the security for the Certificates, various rights of the Owners, and the rights, duties, and immunities of the Trustee. Certain provisions of the Trust Agreement are summarized below. Other provisions are summarized in this Official Statement under the caption The Certificates. This summary does not purport to be complete or definitive and is qualified in its entirety by reference to the full terms of the Trust Agreement. Assignment Under the Trust Agreement, the Corporation assigns to the Trustee, for the benefit of the Owners, certain of its rights and interests under the Facilities Lease, including its right to receive the Rental Payments and the right to enforce the payment of Rental Payments. Establishment of Funds and Accounts The Trust Agreement establishes the Certificate Fund, the Interest Fund, the Principal Fund, the Certificate Reserve Fund, and the Redemption Fund, which are to be held by the Trustee. Certificate Fund. All Rental Payments will be deposited by the Trustee upon receipt in the Certificate Fund, which fund the Trustee will maintain and apply in accordance with the Trust Agreement. Allocation of Rental Payments. The Trustee will transfer from the Certificate Fund and deposit in the following respective funds the following amounts on the dates described. The requirements of each B-15

94 such fund at the time of deposit to be satisfied before any deposit is made to any fund subsequent in priority: First: On each Interest Payment Date, the Trustee shall set aside in the Interest Fund an amount equal to the aggregate amount of interest becoming due and payable with respect to the Outstanding Certificates on such Interest Payment Date. Second: On each Principal Payment Date, the Trustee shall deposit in the Principal Fund an amount equal to (a) the aggregate amount of principal becoming due and payable with respect to the Certificates plus (b) the aggregate amount of the Mandatory Sinking Account Payments to be paid on such date into the respective Sinking Account for the Term Certificates. Third: The Trustee, on the date specified in a Written Request of the District filed with the Trustee, at the time that any prepaid Rental Payment is paid to the Trustee, shall deposit in the Redemption Fund that amount of moneys representing the portion of the Rental Payments designated as prepaid Rental Payments. Any moneys remaining in the Certificate Fund after the foregoing transfers shall be transferred, in order of priority, (i) into the Certificate Reserve Fund to the extent that the amount therein is less than the certificate reserve requirement, (ii) into the Rebate Fund if so directed by the District, and (iii) to the District. Application of Interest Fund. All amounts in the Interest Fund shall be used and withdrawn by the Trustee solely for the purpose of paying interest represented by the Certificates as it shall become due and payable (including accrued interest represented by any Certificates purchased or redeemed prior to maturity pursuant to the Trust Agreement). Application of Principal Fund. All amounts in the Principal Fund shall be used and withdrawn by the Trustee solely for the purposes of paying the principal represented by the Certificates when due and payable except that all amounts in the Sinking Accounts shall be used and withdrawn by the Trustee solely to purchase or redeem or pay at maturity Term Certificates. Application of Certificate Reserve Fund. If on any Interest Payment Date or Principal Payment Date the amount on deposit in the Interest Fund or the Principal Fund is insufficient to pay the interest or principal, respectively, evidenced by the Certificates payable on such Interest Payment Date or Principal Payment Date, the Trustee shall transfer from the Certificate Reserve Fund and deposit in the Interest Fund or the Principal Fund, as appropriate, an amount sufficient to make up such deficiency. If the amount on deposit in the Certificate Reserve Fund is not sufficient to make such transfer, the Trustee shall make a claim under any available Reserve Facility, in accordance with the provisions thereof, in order to obtain an amount sufficient to allow the Trustee to make such transfer as and when required. Application of Redemption Fund. All amounts deposited in the Redemption Fund shall be used and withdrawn by the Trustee solely for the purpose of redeeming Certificates in the manner, at the times and upon the terms and conditions specified in the Trust Agreement. Investment of Moneys in Funds and Accounts. All moneys in any of the funds and accounts held by the Trustee and established pursuant to the Trust Agreement shall be invested solely as directed by the District, solely in Investment Securities. Moneys in the Certificate Reserve Fund shall be invested in Investment Securities maturing within 5 years of the date of such investment, but in no event later than the final maturity of the Certificates. B-16

95 All interest, profits, and other income received from the investment of moneys in any fund or account held by the Trustee, other than the Rebate Fund, shall be transferred to the Certificate Fund. Transfers from the Certificate Reserve Fund shall be made only if, after the transfer, the amount on deposit in the Certificate Reserve Fund is at least equal to the Certificate Reserve Requirement. Events of Default; Remedies of Owners Events of Default. The following events shall be Events of Default: Payment Default. Default in the due and punctual payment of any Rental Payment when and as the same shall become due and payable; Breach of Covenant. Default by the District in the observance or performance of any covenant, condition, agreement, or provision in the Trust Agreement on its part to be observed or performed, for a period of 30 days after written notice, specifying such failure and requesting that it be remedied, has been given to the District by the Trustee; and Facilities Lease Default. An event of default as defined under the Facilities Lease. Remedies. If an Event of Default shall occur, then, and in each and every such case during the continuance of such Event of Default, the Trustee or the Owners of not less than a majority in aggregate principal amount represented by the Certificates at the time Outstanding may, upon notice in writing to the District, exercise the remedies provided to the Corporation in the Facilities Lease; provided that nothing shall affect or impair the right of action of any Owner to institute suit directly against the District to enforce payment of the obligation evidenced and represented by such Owner s Certificate. If an Event of Default shall occur, the Trustee shall have the right: Mandamus; Specific Performance. By mandamus or other action or proceeding or suit at law or in equity to enforce its rights against the Corporation or the District or any director, member, officer or employee thereof, and to compel the Corporation or the District or any such director, member, officer or employee to perform or carry out its or his or her duties under law and the agreements required to be performed by it or him or her contained in the Trust Agreement; Injunction. By suit in equity to enjoin any acts or things that are unlawful or violate the rights of the Trustee or any Owner; or Accounting. By suit in equity upon the happening of any event under the Trust Agreement to require the Corporation and the District and any directors, members, officers and employees thereof to account as the trustee of an express trust. Application of Money Collected. If an Event of Default shall occur and be continuing, the Trustee shall apply all funds then held or thereafter received by the Trustee under any of the provisions of the Trust Agreement (except as otherwise provided in the Trust Agreement) as follows and in the following order: 1. To the payment of any expenses necessary in the opinion of the Trustee to protect the interests of the Owners of the Certificates, including the costs and expenses of the Trustee and the Owners in declaring such Event of Default, and payment of reasonable fees and expenses of the Trustee (including reasonable fees and disbursements of its counsel and other agents) incurred in and about the performance of its powers and duties under the Trust Agreement; B-17

96 2. To the payment of the whole amount of principal then due with respect to the Certificates (upon presentation of the Certificates to be paid, and stamping thereon of the payment if only partially paid, or surrender thereof if fully paid) subject to the provisions of the Trust Agreement, with interest on such principal, at the rate or rates of interest with respect to the respective Certificates as follows: (a) Unless the principal represented by all of the Certificates shall have become due and payable, First: to the payment to the persons entitled thereto of all installments of interest then due in the order of their due dates, and, if the amount available shall not be sufficient to pay in full any installment or installments due on the same date, then to the payment thereof ratably, according to the amounts due on such date, to the persons entitled thereto, without any discrimination or preference; and Second: to the payment to the persons entitled thereto of all unpaid principal represented by or Redemption Price of any Certificates that shall have become due, whether at maturity or by call for redemption, in the order of their due dates, and, if the amount available shall not be sufficient to pay in full all the principal represented by the Certificates due on any date, then to the payment thereof ratably, according to the amounts of principal due on such date, to the persons entitled thereto, without any discrimination or preference. (b) If the principal represented by all of the Certificates shall have become due and payable, to the payment of the principal and interest then due and unpaid with respect to the Certificates, and, if the amount available shall not be sufficient to pay in full the whole amount so due and unpaid, then to the payment thereof ratably, without preference or priority of principal over interest, or of interest over principal, or of any installment of interest over any other installment of interest, or of any Certificate over any other Certificate, according to the amounts due respectively for principal and interest, to the persons entitled thereto without any discrimination or preference. Trustee to Represent Owners. Upon the occurrence and continuance of an Event of Default, the Trustee in its discretion may, and upon the written request of the Owners of not less than 25% in aggregate amount of principal represented by the Certificates then Outstanding (provided that, if more than one such request is received by the Trustee from Owners, the Trustee shall follow the written request executed by the Owners of the greatest percentage of principal represented by the Certificates then Outstanding in excess of 25%), and upon being indemnified to its satisfaction therefor, shall, proceed to protect or enforce its rights or the rights of such Owners by such appropriate action, suit, mandamus, or other proceedings as it shall deem most effectual to protect and enforce any such right, at law or in equity, either for the specific performance of any covenant or agreement contained in the Trust Agreement, or in aid of the execution of any power granted in the Trust Agreement, or for the enforcement of any other appropriate legal or equitable right or remedy vested in the Trustee or in such Owners under the Trust Agreement or any applicable law. Amendment of Trust Agreement Supplemental Trust Agreements without Consent of Owners. The Trust Agreement and the rights and obligations of the District, of the Trustee, and of the Owners of the Certificates may also be modified or amended from time to time and at any time by a Supplemental Trust Agreement, which the District may adopt without the consent of any Owners but only to the extent permitted by law and only for any one or more of the following purposes: B-18

97 1. to add to the covenants and agreements of the District contained in the Trust Agreement other covenants and agreements thereafter to be observed, to pledge or assign additional security for the Certificates (or any portion thereof), or to surrender any right or power reserved to or conferred upon the District in the Trust Agreement; 2. to make such provisions for the purpose of curing any ambiguity, inconsistency, or omission, or of curing or correcting any defective provision, contained in the Trust Agreement, or in regard to matters or questions arising under the Trust Agreement, as the District may deem necessary or desirable, and that shall not materially and adversely affect the interests of the Owners of the Certificates; 3. to modify, amend, or supplement the Trust Agreement in such manner as to permit the qualification thereof under the Trust Agreement Act of 1939, as amended, or any similar federal statute hereafter in effect, and to add such other terms, conditions, and provisions as may be permitted by said act or similar federal statute, and that shall not materially and adversely affect the interests of the Owners of the Certificates; 4. to modify or supplement the procedures for giving notice of redemption of Certificates in order to comply with regulations promulgated by the United States Securities and Exchange Commission; 5. to make modifications or adjustments necessary, appropriate, or desirable to accommodate credit enhancements including letters of credit and insurance policies delivered with respect to the Certificate Reserve Fund; 6. to amend, modify, or eliminate the book-entry registration system for the Certificates; 7. to make such provisions as are necessary or appropriate to ensure the exclusion of interest represented by the Certificates from gross income for purposes of federal income taxation; and 8. for any other purpose that does not materially and adversely affect the interests of the Owners of the Certificates. Supplemental Trust Agreements with Consent of Owners or Credit Enhancers. The Trust Agreement and the rights and obligations of the District, the Owners of the Certificates, and the Trustee may be modified or amended from time to time and at any time by a Supplemental Trust Agreement, which the District and the Trustee may enter into if the written consents of the Owners of a majority in aggregate amount of principal represented by the Certificates then Outstanding shall have been filed with the Trustee; provided that, if such modification or amendment will, by its terms, not take effect so long as any Certificates of any particular maturity remain Outstanding, the consent of the Owners of such Certificates shall not be required and such Certificates shall not be deemed to be Outstanding for the purpose of any calculation of Certificates Outstanding. The Trust Agreement and the rights and obligations of the District and of the Owners of the Certificates and of the Trustee may also be modified or amended at any time by a Supplemental Trust Agreement entered into by the District and the Trustee, which shall become binding when the written consents of each provider of a letter of credit or a policy of bond insurance for the Certificates shall have been filed with the Trustee, provided that at such time the payment of all the principal and interest represented by all Outstanding Certificates shall be insured by a policy or policies of municipal bond insurance or payable under a letter of credit the provider of which shall be a financial institution or association having unsecured debt obligations rated, or insuring or securing other debt obligations rated on the basis of such insurance or letters of credit, in one of the two highest Rating Categories of Moody s and Standard and Poor s. B-19

98 No such modification or amendment shall (1) extend the fixed maturity of any Certificate, or reduce the amount of principal represented thereby, or extend the time of payment or reduce the amount of any Mandatory Sinking Account Payment provided for the payment of any Certificate, or reduce the rate of interest with respect thereto, or extend the time of payment of interest represented thereby, or reduce any premium payable upon the redemption thereof, without the consent of the Owner of each Certificate so affected, or (2) reduce the aforesaid percentage of principal the consent of the Owners of which is required to effect any such modification or amendment, or permit the creation of any lien on the Rental Payments and other assets pledged under the Trust Agreement prior to or on a parity with the lien created by the Trust Agreement, or deprive the Owners of the Certificates of the lien created by the Trust Agreement on such assets (in each case, except as expressly provided in the Trust Agreement), without the consent of the Owners of all of the Certificates then Outstanding. Defeasance Discharge of Trust Agreement. Any Certificate may be paid by the District in any of the following ways: 1. by paying or causing to be paid the principal and interest represented by the Certificate, as and when the same become due and payable; 2. by depositing with the Trustee, an escrow agent or other fiduciary, in trust, at or before maturity, money or securities in the necessary amount to pay or redeem the Certificate; or 3. by delivering the Certificate to the Trustee for cancellation. If the District shall pay all Certificates that are Outstanding and also pay or cause to be paid all other sums payable by the District under the Trust Agreement and the Facilities Lease, then and in that case, at the election of the District, evidenced by a Statement of the District filed with the Trustee signifying the intention of the District to discharge all such indebtedness and the Trust Agreement, and notwithstanding that any Certificates shall not have been surrendered for payment, the Trust Agreement, the pledge of assets made thereunder, all covenants and agreements and other obligations of the District under the Trust Agreement, and the rights and interests created thereby (except as to any surviving rights of transfer or exchange of Certificates and rights to payment from moneys deposited with the Trustee) shall cease, terminate, become void, and be completely discharged and satisfied. In the event of a delivery of excess funds, upon Request of the District, the Trustee shall cause an accounting for such period or periods as may be requested by the District to be prepared and filed with the District and shall execute and deliver to the District all such instruments as may be necessary or desirable to evidence such discharge and satisfaction, and the Trustee shall pay over, transfer, assign, or deliver to the District all moneys or securities or other property held by it pursuant to the Trust Agreement that, as evidenced by a verification report (upon which the Trustee may conclusively rely) from a firm of certified public accountants, are not required for the payment or redemption of Certificates not theretofore surrendered for such payment or redemption. Discharge of Liability on Certificates. Upon the deposit with the Trustee, escrow agent, or other fiduciary, in trust, at or before maturity, of money or Investment Securities in the necessary amount to pay or redeem any Outstanding Certificate (whether upon or prior to its maturity or the redemption date of such Certificate), then all liability of the District in respect of such Certificate shall cease, terminate, and be completely discharged, except that thereafter (i) the Owner thereof shall be entitled to payment of the principal, premium, if any, and interest represented by such Certificate by the District, and the District shall remain liable for such payment, but only out of such money or securities deposited with the Trustee B-20

99 as aforesaid for their payment, and (ii) the Owner thereof shall retain its rights of transfer or exchange of Certificates. The District may at any time surrender to the Trustee for cancellation by it any Certificates previously executed and delivered, which the District may have acquired in any manner whatsoever, and such Certificates, upon such surrender and cancellation, shall be deemed to be paid and retired. Consent of Insurer So long as the Policy is in effect and the Insurer is not in default with respect to its payment obligations thereunder, the following provisions shall be in effect: 1. Control of Remedies. Any provision of the Trust Agreement to the contrary notwithstanding, upon the occurrence and continuance of an Event of Default, the Insurer shall be entitled to control and direct the enforcement of all rights and remedies granted to the Owners or the Trustee for the benefit of the Owners under the Trust Agreement; and the Insurer shall also be entitled to approve all waivers of Events of Default concerning the Certificates. 2. Amendments and Supplements. The Insurer s consent shall be required for the execution and delivery of any Supplemental Trust Agreement. B-21

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101 Rescue Union School District 2390 Bass Lake Road Rescue, CA APPENDIX C PROPOSED FORM OF OPINION OF SPECIAL COUNSEL [Closing Date] Re: Rescue Union School District 2008 Certificates of Participation Members of the Board of Trustees: We have acted as special counsel in connection with the execution and delivery of $6,625,000 aggregate principal amount of 2008 Certificates of Participation (the Certificates ) evidencing fractional interests of the owners thereof in rental payments to be made by the Rescue Union School District (the District ) pursuant to a facilities lease dated December 1, 2008 (the Facilities Lease ), between the District and the Rescue District Facilities Corporation (the Corporation ). The Certificates have been executed and delivered pursuant to a trust agreement dated December 1, 2008 (the Trust Agreement ), between U.S. Bank National Association, as trustee (the Trustee ), the District, and the Corporation. In connection therewith, the District and the Corporation have also executed and entered into a ground lease dated December 1, 2008 (the Ground Lease ). Capitalized terms used herein and not otherwise defined have the meanings ascribed thereto in the Trust Agreement. We have examined the law and such certified proceedings and other papers as we deem necessary to render this opinion. As to questions of fact material to our opinion, we have relied upon the representations of the District contained in the Facilities Lease, the Trust Agreement, and the certified proceedings and other certifications of public officials furnished to us. In the course of our representation, nothing has come to our attention that caused us to believe that any of the factual representations upon which we have relied are untrue, but we have made no other factual investigations. 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 school district under and by virtue of the laws of the State of California with the power to enter into the Ground Lease, the Facilities Lease, and the Trust Agreement and to perform the agreements on its part contained therein. 2. The Ground Lease, the Facilities Lease, and the Trust Agreement have been duly authorized, executed, and delivered by the District and, assuming due authorization, execution, and delivery by and enforceability against the other parties thereto, constitute valid and binding obligations of the District enforceable in accordance with their respective terms, except as enforcement may be limited by bankruptcy, insolvency, reorganization, arrangement, fraudulent conveyance, moratorium, or other laws affecting the enforceability of creditors rights generally, by the application of equitable principles, by the possible unavailability of specific performance or injunctive relief, and by the limitations on legal remedies against public agencies in the State of California. 3. Subject to the terms and provisions of the Facilities Lease, the Rental Payments are payable solely from the sources provided therefor in the Facilities Lease and the Trust Agreement. The obligation of the District to make Rental Payments pursuant to the Facilities Lease does not constitute a debt of the District or of the State of California or of any political subdivision thereof within the meaning of any constitutional or statutory debt limitation or restriction, and does not constitute an C-1

102 obligation for which the District is obligated to levy or pledge any form of taxation or for which the District has levied or pledged any form of taxation. 4. Assuming due authorization, execution, and delivery of the Trust Agreement by the Trustee and its enforceability against the Trustee, the owners of the Certificates are entitled to receive their proportionate share of the Rental Payments in accordance with the terms and provisions of the Trust Agreement. 5. The portion of the Rental Payments designated as and constituting interest paid by the District and received by the owners of the Certificates is excludable 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; however, such interest is taken into account in determining adjusted current earnings for purposes of computing the alternative minimum tax imposed on corporations. The opinions set forth in the preceding sentence are subject to the condition that the District comply with all requirements of the Internal Revenue Code of 1986 that must be satisfied subsequent to the delivery of the Certificates in order that such interest be, or continue to be, excludable 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 delivery of the Certificates. We express no opinion regarding other federal tax consequences arising with respect to the accrual or receipt of such interest or the ownership or disposition of the Certificates. 6. The portion of the Rental Payments designated as and constituting interest paid by the District and received by the owners of the Certificates is exempt from State of California personal income taxes. The opinions set forth above are further qualified as follows: a. Our opinions are limited to the matters expressly set forth herein and no opinion is to be implied or may be inferred beyond the matters expressly so stated; b. We are licensed to practice law in the State of California; accordingly, the foregoing opinions only apply insofar as the laws of the State of California and the United States may be concerned, and we express no opinion with respect to the laws of any other jurisdiction; c. We express no opinion as to the state or quality of title to any of the real or personal property described in the Ground Lease or the Facilities Lease, nor do we express any opinion as to the accuracy or sufficiency of the description of any such property contained therein; d. We express no opinion as to the enforceability under certain circumstances of contractual provisions respecting various summary remedies without notice or opportunity for hearing or correction, especially if their operation would work a substantial forfeiture or impose a substantial penalty upon the burdened party; e. We express no opinion as to the effect or availability of any specific remedy provided for in any agreement under particular circumstances, except that we believe such remedies are, in general, sufficient for the practical realization of the rights intended thereby; f. We express no opinion as to the enforceability of any remedies under the Facilities Lease with respect to environmental matters to the extent that the exercise or application of such remedies C-2

103 is inconsistent with or in violation of California Code of Civil Procedure section or 736 or of California Civil Code section ; g. We express no opinion as to the enforceability of any indemnification, contribution, choice of law, choice of forum, or waiver provisions contained in the Ground Lease, the Facilities Lease, or the Trust Agreement; h. We undertake no responsibility for the accuracy, completeness, or fairness of the Official Statement or any other offering materials relating to the Certificates and express no opinion herein with respect thereto; hereof. i. We disclaim any obligation to update this opinion for events occurring after the date Very truly yours, KRONICK, MOSKOVITZ, TIEDEMANN & GIRARD A Professional Corporation C-3

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105 APPENDIX D FORM OF CONTINUING DISCLOSURE CERTIFICATE This Continuing Disclosure Certificate (the Disclosure Certificate ) is executed and delivered by the Rescue Union School District (the District ) in connection with the execution and delivery of $6,625,000 aggregate principal amount of 2008 Certificates of Participation (the Certificates ) pursuant to a trust agreement dated December 1, 2008 (the Trust Agreement ), between U.S. Bank National Association, the District, and the Rescue District Facilities Corporation; and in connection therewith the District covenants and agrees as follows: SECTION 1. Purpose of the Disclosure Certificate. This Disclosure Certificate is being executed and delivered by the District for the benefit of the Certificateholders and Beneficial Owners of the Certificates 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 Trust Agreement, 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 means any Annual Report provided by the District pursuant to, and as described in, Sections 3 (Provision of Annual Reports) and 4 (Content of Annual Reports) of this Disclosure Certificate. Beneficial Owner means any person that (a) has or shares the power, directly or indirectly, to make investment decisions concerning ownership of any Certificates (including persons holding Certificates through nominees, depositories or other intermediaries), or (b) is treated as the owner of any Certificates for federal income tax purposes. Certificateholders means either the registered owners of the Certificates, or, if the Certificates are registered in the name of The Depository Trust Company or another recognized depository, any Beneficial Owner or applicable participant in its depository system. 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 means the District, or any successor Dissemination Agent designated in writing by the District and that has filed with the District a written acceptance of such designation. Listed Events means any of the events listed in Section 5(a) (Reporting of Significant Events Listed Events) of this Disclosure Certificate. National Repository means any Nationally Recognized Municipal Securities Information Repository for purposes of the Rule. A list of the National Repositories currently approved by the Securities and Exchange Commission may be found on the S.E.C. website at: Official Statement means the final Official Statement relating to the Certificates dated December 3, D-1

106 Participating Underwriter means any of the original underwriters of the Certificates required to comply with the Rule in connection with offering of the Certificates. Repository means each National Repository and each State Repository. Rule means Rule 15c2-12(b)(5) adopted by the Securities and Exchange Commission under the Securities Exchange Act of 1934, as the same may be amended from time to time. State means the State of California. State Repository means any public or private repository or entity designated by the State 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 Certificate, there is no State Repository. SECTION 3. Provision of Annual Reports. a. Delivery of Annual Report to Repositories. The District shall, or shall cause the Dissemination Agent to, not later than 270 days after the end of the District s fiscal year (which currently ends on June 30), commencing with the report for the Fiscal Year, provide to each Repository an Annual Report that is consistent with the requirements of Section 4 (Content of Annual Reports) of this Disclosure Certificate. The Annual Report may be submitted as a single document or as separate documents comprising a package, and may cross-reference other information as provided in Section 4 (Content of Annual Reports) of this Disclosure Certificate; provided that the audited financial statements of the District may be submitted separately from the balance of the Annual Report and later than the date required above for the filing of the Annual Report if they are not available by that date. b. Change of Fiscal Year. If the District s fiscal year changes, it shall give notice of such change in the same manner as for a Listed Event under Section 5(d) (Notice of Listed Events). c. Delivery of Annual Report to Dissemination Agent. Not later than fifteen (15) Business Days prior to the date specified in subsection (a) for providing the Annual Report to the Repositories, the District shall provide the Annual Report to the Dissemination Agent (if other than the District). If by such date, the Dissemination Agent has not received a copy of the Annual Report, the Dissemination Agent shall notify the District. d. Report of Non-Compliance. If the District is unable to provide an Annual Report to the Repositories by the date required in subsection (a), the Dissemination Agent shall send a notice to each Repository in substantially the form attached as Exhibit A. In lieu of filing the notice with each Repository, the Dissemination Agent may file such notice with the CPO. e. Annual Compliance Certification. The Dissemination Agent shall: (1) determine each year prior to the date for providing the Annual Report the name and address of each Repository; and (2) if the Dissemination Agent is other than the District, file a report with the District certifying that the Annual Report has been provided pursuant to this Disclosure Certificate, stating the date it was provided and listing all the Repositories to which it was provided. D-2

107 f. Delivery of Annual Report to CPO. In lieu of filing the Annual Report with each Repository in accordance with subsection (a) (Delivery of Annual Report to Repositories), the Dissemination Agent may file such Annual Report solely with the CPO. SECTION 4. Content of Annual Reports. The District s Annual Report shall contain or include by reference the following: a. Financial Statements. The audited financial statements of the District for the prior fiscal year, prepared in accordance with generally accepted accounting principles. If the District s audited financial statements are not available by the time the Annual Report is required to be filed pursuant to Section 3(a) (Delivery of Annual Report to Repositories), the Annual Report shall contain unaudited financial statements in a format similar to the financial statements contained in the final Official Statement, and the audited financial statements shall be filed in the same manner as the Annual Report when they become available; b. Annual Budget. The District s approved annual budget for the then-current fiscal year; c. Outstanding Certificates. Principal amount of Certificates outstanding; d. Other Obligations Paid from General Fund. Debt service schedules for all debt or other obligations (e.g., lease purchase agreements and certificates of participation) outstanding that are payable from the District s General Fund presented in a combined table showing the total of all such obligations in each year in a form comparable to the table entitled Rental Payments Schedule in the section of the Official Statement entitled The Certificates. Any or all of the items listed above may be included by specific reference to other documents, including official statements of debt issues of the District or related public entities, which 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 District shall clearly identify each such other document so included by reference. SECTION 5. Reporting of Significant Events. a. Listed Events. Pursuant to the provisions of this Section, the District shall give, or cause to be given, notice of the occurrence of any of the following events with respect to the Certificates, 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 Certificates; (7) modifications to rights of Certificateholders; (8) bond calls; (9) defeasances; (10) release, substitution, or sale of property securing repayment of the Certificates; (11) rating changes; and (12) initiation of bankruptcy proceedings by the District. D-3

108 b. Determination of Materiality of Listed Events. Whenever the District obtains knowledge of the occurrence of a Listed Event, the District shall as soon as possible determine if such event would be material under applicable federal securities laws. c. Notice to Dissemination Agent. If the District has determined that knowledge of the occurrence of a Listed Event would be material under applicable federal securities laws, the District shall promptly notify the Dissemination Agent (if other than the District) in writing. Such notice shall instruct the Dissemination Agent to report the occurrence pursuant to subsection (d) (Notice of Listed Events). d. Notice of Listed Events. The District shall file, or cause the Dissemination Agent to file, a notice of the occurrence of a Listed Event, if material, with each Repository. Notwithstanding the foregoing, notice of Listed Events described in subsections (a)(8) (bond calls) and (9) (defeasances) need not be given under this subsection any earlier than the notice (if any) to Certificateholders of affected Certificates pursuant to the Trust Agreement. e. Filing of Notice of Listed Events with CPO. In lieu of fling the notice of the occurrence of a Listed Event, if material, with the Repositories in accordance with subsection (d) (Notice of Listed Events), the Dissemination Agent may file such notice of a Listed Event with the CPO. SECTION 6. Termination of Reporting Obligation. The District s obligations under this Disclosure Certificate shall terminate upon the legal defeasance, prior redemption or payment in full of all of the Certificates or upon the delivery to the District of an opinion of counsel experienced in interpretation of the Rule to the effect that continuing disclosure is no longer required by the Rule. If such termination occurs prior to the final maturity of the Certificates, the District shall give notice of such termination in the same manner as for a Listed Event under Section 5(d) (Notice of Listed Events). SECTION 7. Dissemination Agent. a. Appointment of Dissemination Agent. The District may, from time to time, appoint or engage a Dissemination Agent to assist it in carrying out its obligations under this Disclosure Certificate, and may discharge any such Agent, with or without appointing a successor Dissemination Agent. If the Dissemination Agent is not the District, the Dissemination Agent shall not be responsible in any manner for the content of any notice or report prepared by the District pursuant to this Disclosure Certificate. The initial Dissemination Agent shall be the District. b. Compensation of Dissemination Agent. The Dissemination Agent shall be paid compensation by the District for its services provided hereunder in accordance with its schedule of fees as agreed to between the Dissemination Agent and the District from time to time and all expenses, legal fees and advances made or incurred by the Dissemination Agent in the performance of its duties hereunder. The Dissemination Agent shall not be deemed to be acting in any fiduciary capacity for the District, Certificateholders or Beneficial Owners, or any other party. The Dissemination Agent may rely and shall be protected in acting or refraining from acting upon any direction from the District or an opinion of counsel experienced in interpretation of the Rule. The Dissemination Agent may at any time resign by giving written notice of such resignation to the District. SECTION 8. Amendment; Waiver. Notwithstanding any other provision of this Disclosure Certificate, the District may amend this Disclosure Certificate (and the Dissemination D-4

109 Agent shall agree to any amendment so requested by the District that does not impose any greater duties or risk of liability on the Dissemination Agent), and any provision of this Disclosure Certificate may be waived, provided that the following conditions are satisfied: a. Change in Circumstances. If the amendment or waiver relates to the provisions of Sections 3(a) (Delivery of Annual Report to Repositories), 4 (Content of Annual Reports), or 5(a) (Listed Events), 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 Certificates, or the type of business conducted; b. Compliance as of Issue Date. The undertaking, as amended or taking into account such waiver, would, in the opinion of a nationally recognized bond counsel, have complied with the requirements of the Rule at the time of the original issuance of the Certificates, after taking into account any amendments or interpretations of the Rule, as well as any change in circumstances; and c. Consent of Certificateholders; Non-impairment Opinion. The amendment or waiver either (i) is approved by the Certificateholders in the same manner as provided in the Trust Agreement for amendments to the Trust Agreement with the consent of Certificateholders, or (ii) does not, in the opinion of nationally recognized bond counsel, materially impair the interests of the Certificateholders or Beneficial Owners. If this Disclosure Certificate is amended or any provision of this Disclosure Certificate is waived, the District shall describe such amendment or waiver in the next following Annual Report and shall include, as applicable, a narrative explanation of the reason for the amendment or waiver and its impact on the type (or in the case of a change of accounting principles, on the presentation) of financial information or operating data being presented by the District. In addition, if the amendment relates to the accounting principles to be followed in preparing financial statements, (i) notice of such change shall be given in the same manner as for a Listed Event under Section 5(d) (Notice of Listed Events), and (ii) the Annual Report for the year in which the change is made should present a comparison (in narrative form and also, if feasible, in quantitative form) between the financial statements as prepared on the basis of the new accounting principles and those prepared on the basis of the former accounting principles. SECTION 9. Additional Information. Nothing in this Disclosure Certificate shall be deemed to prevent the District from disseminating any other information, using the means of dissemination set forth in this Disclosure Certificate or any other means of communication, or including any other information in any Annual Report or notice of occurrence of a Listed Event, in addition to that which is required by this Disclosure Certificate. If the District chooses to include any information in any Annual Report or notice of occurrence of a Listed Event in addition to that which is specifically required by this Disclosure Certificate, the District shall have no obligation under this 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 District to comply with any provision of this Disclosure Certificate any Certificateholder or Beneficial Owner of the Certificates may take such actions as may be necessary and appropriate, including seeking mandate or specific performance by court order, to cause the District to comply with its obligations under this Disclosure Certificate. A default under this Disclosure Certificate shall not be deemed an Event of Default under the Trust Agreement, and the sole remedy under this Disclosure Certificate D-5

110 in the event of any failure of the District 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 District agrees to indemnify and save the Dissemination Agent, its officers, directors, employees and agents, harmless against any loss, expense and liabilities which it may incur arising out of or in the exercise or performance of its powers and duties hereunder, including the costs and expenses (including attorneys fees) of defending against any claim of liability, but excluding liabilities due to the Dissemination Agent s negligence or willful misconduct. The Dissemination Agent shall not be deemed to be acting in any fiduciary capacity for the District, Certificateholders, or Beneficial Owners or any other party. The Dissemination Agent may rely and shall be protected in acting or refraining from acting upon any direction from the District or an opinion of nationally recognized bond counsel. The obligations of the District under this Section shall survive resignation or removal of the Dissemination Agent and payment of the Certificates. No person shall have any right to commence any action against the Dissemination Agent seeking any remedy other than to compel specific performance of this Disclosure Certificate. SECTION 12. Beneficiaries. This Disclosure Certificate shall inure solely to the benefit of the District, the Dissemination Agent, the Participating Underwriters and Certificateholders and Beneficial Owners from time to time of the Certificates, and shall create no rights in any other person or entity. Dated: [Closing Date] RESCUE UNION SCHOOL DISTRICT By: Superintendent EXHIBIT A NOTICE TO REPOSITORIES OF FAILURE TO FILE ANNUAL REPORT Name of District: Name of Certificates: Date of Issuance: Rescue Union School District 2008 Certificates of Participation [Closing Date] NOTICE IS HEREBY GIVEN that Rescue Union School District (the District ) has not provided an Annual Report with respect to the above-named Certificates as required by a Continuing Disclosure Certificate executed on [Closing Date], with respect to the above-captioned certificates of participation. The District anticipates that the Annual Report will be filed by. Dated: RESCUE UNION SCHOOL DISTRICT By: D-6

111 APPENDIX E COUNTY ECONOMIC PROFILE The information in this appendix concerning the County s economy is provided as supplementary information only, and it should not be inferred that the inclusion of this information in this Official Statement affects in any way the obligation of the County on behalf of the District to levy ad valorem taxes on taxable property within the District in an amount sufficient to pay debt service on the Bonds. See SECURITY FOR THE BONDS. General Information El Dorado County is located in the central Sierra Nevada foothills, approximately 30 miles east of Sacramento. According to the Bureau of Economic Analysis, in 2006, the County had per capita personal income of $44,657, which placed it 8th in the State. This figure was 113% of the state average. Based on the 2004 Census estimate, the median household income was $56,629. Based on data compiled by the California Association of Realtors, the median price of homes sold in the County was $396,000 as of January Population The population of the County has grown at a rate of 8% from the year 2003 to the year The following exhibit displays population data for the previous six years, beginning in 2003, for the County and select cities within the County. HISTORICAL POPULATION ESTIMATES EL DORADO COUNTY AND SELECTED CITIES Placerville 10,272 10,244 10,197 10,146 10,187 10,271 South Lake Tahoe 23,977 23,847 23,700 25,530 23,582 23,725 Balance of County 132, , , , , ,726 Incorporated 34,249 34,091 33,897 33,676 33,769 33,996 County Total 166, , , , , ,722 Source: California Department of Finance, Demographic Research Unit E-1

112 Industry The majority of the County labor market centers around government, services and retail trade. The following exhibit shows the historical estimated number of wage and salary workers by industry group. ESTIMATED NUMBER OF WAGE AND SALARY WORKERS BY INDUSTRY GROUP EL DORADO COUNTY Type of Employment Farm Natural Resources and Mining Construction 4,600 4,700 5,300 5,500 5,600 5,700 Manufacturing 2,300 2,300 2,100 2,200 2,300 2,400 Wholesale Trade 1,000 1, ,000 1,000 1,000 Retail Trade 6,000 5,800 5,800 5,900 5,900 5,900 Transportation, Warehousing and Utilities Information Finance and Insurance 2,100 2,700 2,600 2,500 2,500 2,500 Real Estate and Rental and Leasing Professional and Business 5,700 6,000 6,800 6,800 7,300 7,600 Services Educational and Health 4,900 5,200 5,400 5,700 6,000 6,100 Services Leisure and Hospitality 7,500 7,600 8,100 7,900 7,700 7,600 Other Services 1,200 1,500 1,700 1,800 1,900 2,000 Government 9,300 9,100 9,100 9,800 9,500 9,800 Total 48,300 49,400 51,500 52,800 52,600 53,600 Notes: (1). Annual averages (2) Columns may not add to indicated total due to independent rounding. Source: State of California Employment Development Department, 2007 Benchmark. E-2

113 Employment El Dorado County s civilian labor force reached an annual level of 94,500 in 2007, an increase of 1.6% over Employment also increased during the period by approximately 1,500 people and unemployment increased by 600 people during that time. As a result, the County s unemployment rate increased to 5.2% in The following two exhibits show historical labor force data and major private sector employers for the County. CIVILIAN LABOR FORCE, EMPLOYMENT AND UNEMPLOYMENT EL DORADO COUNTY Type of Employment Civilian Labor Force 84,100 86,600 88,100 89,500 92,000 93,000 94,500 Civilian Employment 80,500 82,100 83,200 84,800 87,600 88,700 89,600 Civilian 3,600 4,500 4,900 4,700 4,400 4,300 4,900 Unemployment Unemployment Rate 4.3% 5.2% 5.6% 5.3% 4.8% 4.6% 5.2% Source: State of California Employment Development Department, 2007 Benchmark. E-3

114 MAJOR EMPLOYERS EL DORADO COUNTY (2006) Employer Name Location Industry Barton Memorial Hospital Twin Bridges Hospitals Barton Memorial Hospital Center South Lake Tahoe Laboratories medical Camp Richardson Resort South Lake Tahoe Resorts Cemex El Dorado Hills Cement wholesale Child Development Programs Placerville Child care service D & D Roofing & Sheet Metal South Lake Tahoe Roofing contractors DST Output El Dorado Hills Computer software El Dorado County Sheriff Placerville Sheriff El Dorado County Social Services Placerville County Government Social/Human Services El Dorado County Superior Court South Lake Tahoe Government Offices County El Dorado Irrigation District Placerville Water & sewage companies utility Embassy Suites Hotel South Lake Tahoe Hotels & motels Fortune 800 El Dorado Hills Telemarketing services Heavenly Sports South Lake Tahoe Sporting goods retail Lake View Lodge South Lake Tahoe Resorts Lake Tahoe Community College South Lake Tahoe Schools - Universities & colleges academic Marriott Grand Residence Club South Lake Tahoe Hotels & motels Marshall Hospital Placerville Hospitals Marshall Medical Placerville Hospitals Marshall Medical Center El Dorado Hills Hospitals MC Clone Construction Framing Cameron Park General contractors More Recycling Center Placerville Recycling centers (wholesale) Safeway South Lake Tahoe Grocers - retail Sierra-At-Tahoe Twin Bridges Skiing Centers & resorts Spare Time Inc. El Dorado Hills Health clubs, studios & gymnasium Wal-Mart Placerville Department stores Source: State of California Employment Development Department, Labor Market Information. E-4

115 Many people who live within the District commute to work in Sacramento, which is approximately 30 miles from Sacramento along Highway 50. In addition to employment opportunities with the State and local government, residents work in a variety of private businesses. The following table lists the major employers in Sacramento County. MAJOR EMPLOYERS IN SACRAMENTO COUNTY Employer Name Location Industry Air Resources Board Sacramento State government environmental programs American River College Sacramento Schools business & vocational Ampac Fine Chemicals LLC Rancho Cordova Chemicals - manufacturers California State University Sacramento Schools universities and colleges academic Child Abuse Prevention Office Sacramento Government individual/family social services Corrections Department Sacramento State government correctional institutions Delta Dental Rancho Cordova Insurance Disabled American Veterans Sacramento Veterans & military organizations Education Department Sacramento State government education programs Electrical Workers Sacramento Labor organizations Employment Development Department Sacramento Government job training/vocational rehabilitation services Environmental Protection Agency Sacramento State Government environmental programs Kaiser Foundation Hospital Sacramento Hospitals Mercy Hospitals Regional Rehab Sacramento Hospitals Mercy San Juan Medical Center Carmichael Hospitals Sacramento Bee Sacramento Newspapers (publishers/mfrs) Sacramento County Water Quality Sacramento County government environmental programs SMUD Sacramento Electric companies Social Services Department Sacramento State Government social/human resources Sutter Memorial Hospital Sacramento Hospitals UC Davis Children s Hospital Sacramento Hospitals UC Davis Health System Sacramento Physicians & surgeons UC Davis Medical Group Sacramento Physicians & surgeons UC Davis Medical Center Sacramento Hospitals Source: State of California Employment Development Department, Labor Market Information. E-5

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117 APPENDIX F BOOK-ENTRY ONLY SYSTEM The information in the following section entitled DTC s Book-Entry System has been provided by DTC for use in securities offering documents, and the District takes no responsibility for the accuracy or completeness thereof. The District cannot and does not give any assurances that DTC, DTC Participants or Indirect Participants will distribute to the Beneficial Owners either (a) payments of debt service on or the redemption price of the Certificates or (b) certificates representing ownership interest in or other confirmation of ownership interest in the Certificates, or that they will so do on a timely basis or that DTC, DTC Participants or DTC Indirect Participants will act in the manner described in this Official Statement. The current Rules applicable to DTC are on file with the Securities and Exchange Commission and the current Procedures of DTC to be followed in dealing with DTC Participants are on file with DTC. DTC s Book-Entry System DTC will act as securities depository for the Certificates. The Certificates will be issued as fullyregistered securities registered in the name of Cede & Co. (DTC s partnership nominee). One fullyregistered Bond certificate for each maturity will be issued for the Certificates in the aggregate principal amount of each 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 1934, as amended. DTC holds and provides asset servicing for over 2 million issues of U.S. and non-u.s. equity issues, corporate and municipal debt issues, and money market instruments from over 85 countries that its 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, Government Securities Clearing Corporation, MBS Clearing Corporation, and Emerging Markets Clearing Corporation (NSCC, GSCC, MBSCC, and EMCC are 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 ranking: AAA. The Rules applicable to DTC and its Direct and Indirect Participants are on file with the Securities and Exchange Commission. More information about DTC can be found at Purchases of Certificates under the DTC system must be made by or through Direct Participants, which will receive a credit for the Certificates on DTC s records. The ownership interest of each actual purchaser of each Bond ( 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 F-1

118 purchase. Beneficial Owners, however, are 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 Certificates are to be accomplished by entries made on the books of Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interests in the Certificates, except in the event that use of the book-entry system for the Certificates is discontinued. To facilitate subsequent transfers, all Certificates deposited by Participants with DTC are registered in the name of DTC s partnership nominee, Cede & Co., or such other names as may be requested by an authorized representative of DTC. The deposit of Certificates with DTC and their registration in the name of Cede & Co. do not effect any change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the Certificates; DTC s records reflect only the identity of the Direct Participants to whose accounts such Certificates are credited, which may or may not be the Beneficial Owners. The Direct and Indirect Participants will remain responsible for keeping account of their holdings on behalf of their customers. Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. Redemption notices shall be sent to DTC. If less than all of the Certificates within a maturity are being redeemed, DTC s practice is to determine by lot of the amount of the interest of each Direct Participant in such maturity to be redeemed. Neither DTC nor Cede & Co. will consent or vote with respect to Certificates 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 the Certificates are credited on the record date (identified in a listing attached to the Omnibus Proxy). Debt service payments on the Certificates will be made to Cede & Co. or such other nominee as may be requested by an authorized representative of DTC. DTC s practice is to credit Direct Participants accounts on a 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, the Paying Agent, or the District, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of debt service on or redemption price of the Certificates to DTC (or such other nominee as may be requested by an authorized representative of DTC) is the responsibility of the District or the Paying Agent, disbursement of such payments to Direct Participants shall be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners shall be the responsibility of Direct and Indirect Participants. DTC may discontinue providing its services as securities depository with respect to the Certificates at any time by giving reasonable notice to the District or the Paying Agent, or the District may decide to discontinue use of the system of book-entry transfers through DTC. Under such F-2

119 circumstances, in the event that a successor securities depository is not obtained, Bond certificates are required to be printed and delivered. Discontinuation of Book-Entry Only System; Transfer and Exchange of Certificates In the event that the book-entry system described above is no longer used with respect to the Certificates, the following provisions will govern the transfer and exchange of the Certificates. Any Bond may, in accordance with its terms, be transferred, upon the registration books, by the person in whose name it is registered, in person or by his duly authorized attorney, upon surrender of such Bond for cancellation at the principal office of the Paying Agent, accompanied by delivery of a written instrument of transfer in a form approved by the Paying Agent, duly executed. Certificates may also be exchanged at the principal office of the Paying Agent for a like aggregate principal amount of Certificates of authorized denominations and of the same maturity. Whenever any Bond shall be surrendered for transfer or exchange, the District shall execute and the Paying Agent shall authenticate and deliver a new Bond or Certificates of the same maturity and for an equivalent aggregate principal amount. The District may charge a reasonable sum for each new Bond issued upon any transfer or exchange. The Paying Agent shall not be required to transfer or exchange (i) Certificates of any series during the period established by the Paying Agent for the selection of Certificates of such series for redemption or (ii) any Bond that has been selected for redemption in whole or in part, except the unredeemed portion of such Bond selected for redemption in part, from and after the day that such Bond has been selected for redemption in whole or in part. F-3

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121 APPENDIX G SPECIMEN FINANCIAL GUARANTY INSURANCE POLICY G-1

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123 Financial Guaranty Insurance Policy Issuer: Policy No.: Obligations: Premium: Effective Date: Assured Guaranty Corp., a Maryland corporation ( Assured Guaranty ), in consideration of the payment of the Premium and on the terms and subject to the conditions of this Policy (which includes each endorsement hereto), hereby unconditionally and irrevocably agrees to pay to the trustee (the Trustee ) or the paying agent (the Paying Agent ) for the Obligations (as set forth in the documentation providing for the issuance of and securing the Obligations) for the benefit of the Holders, that portion of the Insured Payments which shall become Due for Payment but shall be unpaid by reason of Nonpayment. Assured Guaranty will make such Insured Payments to the Trustee or the Paying Agent on the later to occur of (i) the date applicable principal or interest becomes Due for Payment, or (ii) the Business Day next following the day on which Assured Guaranty shall have Received a completed Notice of Nonpayment. If a Notice of Nonpayment by Assured Guaranty is incomplete or does not in any instance conform to the terms and conditions of this Policy, it shall be deemed not Received, and Assured Guaranty shall promptly give notice to the Trustee or the Paying Agent. Upon receipt of such notice, the Trustee or the Paying Agent may submit an amended Notice of Nonpayment. The Trustee or the Paying Agent will disburse the Insured Payments to the Holders only upon receipt by the Trustee or the Paying Agent, in form reasonably satisfactory to it of (i) evidence of the Holder's right to receive such payments, and (ii) evidence, including without limitation any appropriate instruments of assignment, that all of the Holder's rights to payment of such principal or interest Due for Payment shall thereupon vest in Assured Guaranty. Upon and to the extent of such disbursement, Assured Guaranty shall become the Holder of the Obligations, any appurtenant coupon thereto and right to receipt of payment of principal thereof or interest thereon, and shall be fully subrogated to all of the Holder's right, title and interest thereunder, including without limitation the right to receive payments in respect of the Obligations. Payment by Assured Guaranty to the Trustee or the Paying Agent for the benefit of the Holders shall discharge the obligation of Assured Guaranty under this Policy to the extent of such payment. This Policy is non-cancelable by Assured Guaranty for any reason. The Premium on this Policy is not refundable for any reason. This Policy does not insure against loss of any prepayment premium or other acceleration payment which at any time may become due in respect of any Obligation, other than at the sole option of Assured Guaranty, nor against any risk other than Nonpayment. Except to the extent expressly modified by any endorsement hereto, the following terms shall have the meanings specified for all purposes of this Policy. Avoided Payment means any amount previously distributed to a Holder in respect of any Insured Payment by or on behalf of the Issuer, which amount has been recovered from such Holder pursuant to the United States Bankruptcy Code in accordance with a final, nonappealable order of a court having competent jurisdiction that such payment constitutes an avoidable preference with respect to such Holder. Business Day means any day other than (i) a Saturday or Sunday, (ii) any day on which the offices of the Trustee, the Paying Agent or Assured Guaranty are closed, or (iii) any day on which banking institutions are authorized or required by law, executive order or governmental decree to be closed in the City of New York or in the State of Maryland. Due for Payment means (i) when referring to the principal of an Obligation, the stated maturity date thereof, or the date on which such Obligation shall have been duly called for mandatory sinking fund redemption, and does not refer to any earlier date on which payment is due by reason of a call for redemption (other than by mandatory sinking fund redemption), acceleration or other advancement of maturity (unless Assured Guaranty in its sole discretion elects to make any principal payment, in whole or in part, on such earlier date) and (ii) when referring to interest on an Obligation, the stated date for payment of such interest. Holder means, in respect of any Obligation, the person or entity who, at the time of Nonpayment, is entitled under the terms of such Obligation to payment of principal or interest thereunder, except that Holder shall not include the Issuer or any person or entity whose direct or indirect obligation constitutes the underlying security for the Obligations. Insured Payments means that portion of the principal of and interest on the Obligations that shall become Due for Payment but shall be unpaid by reason of Nonpayment. Insured Payments shall not include any additional amounts owing by the Issuer solely as a result of the failure by the Trustee or the Paying Agent to pay such amount when due and payable, including without limitation any such additional amounts as may be attributable to penalties or to interest accruing at a default rate, to amounts payable in respect of indemnification, or to any other additional amounts payable by the Trustee or the Paying Agent by reason of such failure. Nonpayment means, in respect of an Obligation, the failure of the Issuer to have provided sufficient funds to the Trustee or the Paying Agent for payment in full of all principal and interest Due for Payment on such Obligation. It is further understood that the term "Nonpayment" in respect of an Obligation includes any Avoided Payment. Receipt or Received means actual receipt or notice of or, if notice is given by overnight or other delivery service, or by certified or registered United States mail, by a delivery receipt signed by a person authorized to accept delivery on behalf of the person to whom the notice was given. Notices to Assured Guaranty may be mailed by registered mail or personally delivered or telecopied to it at 1325 Avenue of the Americas, New York, New York 10019, Telephone Number: (212) , Facsimile Number: (212) , Attention: Risk Management Department Public Finance Surveillance, with a copy to the General Counsel, or to such other address as shall be specified by Assured Guaranty to the Trustee Page 1 of 2 Form NY-FG (05/07)