$23,736, BALDWIN PARK UNIFIED SCHOOL DISTRICT (Los Angeles County, California) General Obligation Bonds, Election of 2006, Series 2013

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1 NEW ISSUE FULL BOOK-ENTRY INSURED RATING: Standard & Poor s: AA UNDERLYING RATING: Standard & Poor s: A (See MISCELLANEOUS Ratings herein) In the opinion of Stradling Yocca Carlson & Rauth, a Professional Corporation, San Francisco, California ( Bond Counsel ), under existing statutes, regulations, rulings and judicial decisions, and assuming the accuracy of certain representations and compliance with certain covenants and requirements described herein, interest (and original issue discount) on the Bonds is excluded from gross income for federal income tax purposes and is not an item of tax preference for purposes of calculating the federal alternative minimum tax imposed on individuals and corporations. In the further opinion of Bond Counsel, interest (and original issue discount) on the Bonds is exempt from State of California personal income tax. $23,736, BALDWIN PARK UNIFIED SCHOOL DISTRICT (Los Angeles County, California) General Obligation Bonds, Election of 2006, Series 2013 Dated: Date of Delivery Due: August 1, as shown on inside cover This cover page contains certain information for general reference only. It is not a summary of this issue. Investors must read the entire Official Statement to obtain information essential to the making of an informed investment decision. Capitalized terms used on this cover page but not otherwise defined shall have the meanings assigned herein. The Baldwin Park Unified School District (Los Angeles County, California) General Obligation Bonds, Election of 2006, Series 2013 (the Bonds ), were authorized at an election of the registered voters of the Baldwin Park Unified School District (the District ) held on November 7, 2006, at which election the requisite fifty-five percent of the persons voting on the proposition voted to authorize the issuance and sale of $75,500,000 aggregate principal amount of general obligation bonds (the Authorization ). The Bonds are being issued to (i) pay the District s 2009 General Obligation Bond Anticipation Notes (the 2009 Notes ), (ii) pay capitalized interest on the Bonds, and (iii) pay the costs of issuing the Bonds. The 2009 Notes were issued to finance the repair, upgrading, acquisition, construction and equipping of certain District property and facilities, in anticipation of the issuance of bonds under the Authorization. The Bonds are general obligations of the District payable solely from ad valorem taxes. The Board of Supervisors of Los Angeles County is empowered and obligated to levy ad valorem taxes, without limitation as to rate or amount, upon all property within the District subject to taxation thereby (except certain personal property which is taxable at limited rates), for the payment of principal and Accreted Value of and interest on the Bonds when due. The Bonds will be issued in book-entry form only, and will be initially issued and registered in the name of Cede & Co. as nominee for The Depository Trust Company, New York, New York (collectively referred to herein as DTC ). Purchasers of interests in the Bonds (the Beneficial Owners ) will not receive physical certificates representing their interest in the Bonds. The Bonds will be issued as current interest bonds (the Current Interest Bonds ) and capital appreciation bonds (the Capital Appreciation Bonds ). Interest on the Current Interest Bonds accrues from their date of delivery, such interest payable on February 1 and August 1 of each year, commencing February 1, The Capital Appreciation Bonds are dated as of their date of delivery and accrete interest from such date, compounded semiannually on February 1 and August 1 of each year, commencing February 1, The Capital Appreciation Bonds will not pay interest on a current basis. Payments of principal and Accreted Value of and interest on the Bonds will be made by the designated Paying Agent to DTC for subsequent disbursement to DTC Participants who will remit such payments to the Beneficial Owners of the Bonds. U.S. Bank National Association has been appointed as agent of the Treasurer and Tax Collector of Los Angeles County to act as Paying Agent for the Bonds. The scheduled payment of principal (or, in the case of Capital Appreciation Bonds, the Accreted Value) of and interest on the Bonds when due will be guaranteed under a municipal bond insurance policy to be issued concurrently with the delivery of the Bonds by BUILD AMERICA MUTUAL ASSURANCE COMPANY. The Bonds are subject to optional and mandatory sinking fund redemption as further described herein. Maturity Schedule (see inside front cover) The Bonds will be offered when, as and if issued and received by the Underwriter, subject to the approval of legality by Stradling Yocca Carlson & Rauth, a Professional Corporation, San Francisco, California, Bond Counsel and Disclosure Counsel. Certain matters will be passed upon for the Underwriter by Nossaman LLP, Irvine, California. The Bonds, in bookentry form, will be available for delivery through the facilities of DTC in New York, New York on or about December 18, Dated: December 10, 2013

2 MATURITY SCHEDULE Base CUSIP (1) : $23,736, BALDWIN PARK UNIFIED SCHOOL DISTRICT (Los Angeles County, California) General Obligation Bonds, Election of 2006, Series 2013 $8,855, % Current Interest Term Bonds due August 1, Yield: 5.080%; CUSIP (1) : RJ7 $2,216, Capital Appreciation Serial Bonds Maturity (August 1) Denominational Amount Accretion Rate Reoffering Yield Maturity Value CUSIP (1) 2016 $7, % 1.450% $10,000 RM , ,000 RN , ,000 RP , ,000 RQ , ,000 RR , ,000 RS , ,000 RT , ,000 RU , ,000 RV , ,000 RW , ,000 RX , ,000 RY , ,000 RZ , ,000 SA , ,000 SB , ,000 SC , ,000 SD , ,000 SE , ,000 SF , ,000 SG , ,050,000 SH , ,195,000 SJ , ,970,000 SK3 $12,665, Capital Appreciation Term Bonds Maturity (August 1) Denominational Amount Accretion Rate Reoffering Yield Maturity Value CUSIP (1) 2042 $4,122, % 6.870% $28,490,000 SP ,641, ,485,000 SR ,901, ,565,000 SS6 (1) CUSIP is a registered trademark of the American Bankers Association. CUSIP data herein is provided by CUSIP Global Services, managed by Standard & Poor s Financial Services LLC on behalf of The American Bankers Association. This data is not intended to create a database and does not serve in any way as a substitute for CUSIP Services. None of the Underwriter, Financial Advisor or the District is responsible for the selection or correctness of the CUSIP numbers set forth herein.

3 This Official Statement does not constitute an offering of any security other than the original offering of the Bonds of the District. No dealer, broker, salesperson or other person has been authorized by the District to give any information or to make any representations other than as contained in this Official Statement, and if given or made, such other information or representation not so authorized should not be relied upon as having been given or authorized by the District. The issuance and sale of the Bonds have not been registered under the Securities Act of 1933 or the Securities Exchange Act of 1934, both as amended, in reliance upon exemptions provided thereunder by Sections 3(a)2 and 3(a)12, respectively. This Official Statement does not constitute an offer to sell or a solicitation of an offer to buy in any state in which such offer or solicitation is not authorized or in which the person making such offer or solicitation is not qualified to do so or to any person to whom it is unlawful to make such offer or solicitation. The information set forth herein, other than that provided by the District, has been obtained from sources which are believed to be reliable, but is not guaranteed as to accuracy or completeness, and is not to be construed as a representation by the District. The information and expressions of opinions herein are subject to change without notice and neither delivery of this Official Statement nor any sale made hereunder shall, under any circumstances, create any implication that there has been no change in the affairs of the District since the date hereof. This Official Statement is submitted in connection with the sale of the Bonds referred to herein and may not be reproduced or used, in whole or in part, for any other purpose. When used in this Official Statement and in any continuing disclosure by the District in any press release and in any oral statement made with the approval of an authorized officer of the District or any other entity described or referenced in this Official Statement, 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 within the meaning of the Private Securities Litigation Reform Act of 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. The Underwriter has provided the following sentence for inclusion in this Official Statement: The Underwriter has reviewed the information in this Official Statement in accordance with, and as part of, its responsibilities to investors under the federal securities laws as applied to the facts and circumstances of this transaction, but the Underwriter does not guarantee the accuracy or completeness of such information. IN CONNECTION WITH THIS OFFERING, THE UNDERWRITER MAY OVER ALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE BONDS AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME. THE UNDERWRITER MAY OFFER AND SELL THE BONDS TO CERTAIN DEALERS AND DEALER BANKS AND BANKS ACTING AS AGENT AT PRICES LOWER THAN THE PUBLIC OFFERING PRICES STATED ON THE INSIDE COVER PAGE HEREOF AND SAID PUBLIC OFFERING PRICES MAY BE CHANGED FROM TIME TO TIME BY THE UNDERWRITER. The District maintains a website. However, the information presented on the District s website is not incorporated into this Official Statement by any reference, and should not be relied upon in making investment decisions with respect to the Bonds. Build America Mutual Assurance Company ( BAM ) makes no representation regarding the Bonds or the advisability of investing in the Bonds. In addition, BAM 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 BAM, supplied by BAM and presented under the heading THE BONDS Bond Insurance and APPENDIX G SPECIMEN MUNICIPAL BOND INSURNACE POLICY.

4 BALDWIN PARK UNIFIED SCHOOL DISTRICT Board of Education Blance Estala Rubio, President Teresa I. Vargas, Vice-President/Clerk Christina M. Lucero, Member Carlos Lopez, Member Jack B. White, Member District Administration Mark M. Skvarna, Superintendent Shirley Chang, Chief Business Officer/Senior Director of Fiscal Services PROFESSIONAL SERVICES Bond Counsel and Disclosure Counsel Stradling Yocca Carlson & Rauth, a Professional Corporation San Francisco, California Financial Advisor Annette Yee and Company, LLC Carmel, California Paying Agent, Registrar and Transfer Agent U.S. Bank National Association, as agent of the Treasurer and Tax Collector of the County of Los Angeles Los Angeles, California Escrow Agent for 2009 Notes U.S. Bank National Association Los Angeles, California Verification Agent for 2009 Notes Causey Demgen & Moore, P.C. Denver, Colorado

5 TABLE OF CONTENTS Page INTRODUCTION... 1 CHANGES SINCE THE PRELIMINARY OFFICIAL STATEMENT... 1 THE DISTRICT... 1 PURPOSE OF THE BONDS... 2 AUTHORITY FOR ISSUANCE OF THE BONDS... 2 SOURCES OF PAYMENT FOR THE BONDS... 2 DESCRIPTION OF THE BONDS... 2 TAX MATTERS... 3 OFFERING AND DELIVERY OF THE BONDS... 3 BOND OWNER S RISKS... 3 CONTINUING DISCLOSURE... 4 PROFESSIONALS INVOLVED IN THE OFFERING... 4 OTHER INFORMATION... 4 THE BONDS... 5 AUTHORITY FOR ISSUANCE... 5 SECURITY AND SOURCES OF PAYMENT... 5 GENERAL PROVISIONS... 6 BOND INSURANCE... 7 ANNUAL DEBT SERVICE... 9 APPLICATION AND INVESTMENT OF BOND PROCEEDS REDEMPTION BOOK-ENTRY ONLY SYSTEM DISCONTINUATION OF BOOK-ENTRY ONLY SYSTEM; REGISTRATION, PAYMENT AND TRANSFER OF BONDS DEFEASANCE ESTIMATED SOURCES AND USES OF FUNDS TAX BASE FOR REPAYMENT OF BONDS AD VALOREM PROPERTY TAXATION ASSESSED VALUATIONS APPEALS OF ASSESSED VALUATIONS ASSESSED VALUATION OF SINGLE FAMILY HOMES ASSESSED VALUATION AND PARCELS BY LAND USE TAX LEVIES, COLLECTIONS AND DELINQUENCIES ALTERNATIVE METHOD OF TAX APPORTIONMENT - TEETER PLAN TAX RATES PRINCIPAL TAXPAYERS STATEMENT OF DIRECT AND OVERLAPPING DEBT CONSTITUTIONAL AND STATUTORY PROVISIONS AFFECTING DISTRICT REVENUES AND APPROPRIATIONS ARTICLE XIIIA OF THE CALIFORNIA CONSTITUTION LEGISLATION IMPLEMENTING ARTICLE XIIIA UNITARY PROPERTY ARTICLE XIIIB OF THE CALIFORNIA CONSTITUTION PROPOSITION ARTICLE XIIIC AND ARTICLE XIIID OF THE CALIFORNIA CONSTITUTION PROPOSITIONS 98 AND PROPOSITION PROPOSITION 1A AND PROPOSITION JARVIS VS. CONNELL PROPOSITION FUTURE INITIATIVES i

6 DISTRICT FINANCIAL INFORMATION STATE FUNDING OF EDUCATION OTHER FUNDING SOURCES STATE DISSOLUTION OF REDEVELOPMENT AGENCIES STATE BUDGET MEASURES BUDGET PROCESS ACCOUNTING PRACTICES COMPARATIVE FINANCIAL STATEMENTS BALDWIN PARK UNIFIED SCHOOL DISTRICT INTRODUCTION ADMINISTRATION DISTRICT ENROLLMENT LABOR RELATIONS DISTRICT RETIREMENT SYSTEMS OTHER POST-EMPLOYMENT BENEFITS RISK MANAGEMENT DISTRICT DEBT STRUCTURE TAX MATTERS LEGAL MATTERS LEGALITY FOR INVESTMENT IN CALIFORNIA EXPANDED REPORTING REQUIREMENTS CONTINUING DISCLOSURE NO LITIGATION FINANCIAL STATEMENTS LEGAL OPINION MISCELLANEOUS RATINGS UNDERWRITING ADDITIONAL INFORMATION APPENDIX A: FORM OF OPINION OF BOND COUNSEL... A-1 APPENDIX B: EXCERPTS FROM THE DISTRICT S AUDITED FINANCIAL STATEMENTS... B-1 APPENDIX C: FORM OF CONTINUING DISCLOSURE CERTIFICATE... C-1 APPENDIX D: LOS ANGELES COUNTY TREASURY POOL... D-1 APPENDIX E: ECONOMIC AND DEMOGRAPHIC PROFILE OF THE CITY OF BALDWIN PARK AND THE COUNTY OF LOS ANGELES... E-1 APPENDIX F: TABLE OF ACCRETED VALUES... F-1 APPENDIX G: SPECIMEN MUNICIPAL BOND INSURANCE POLICY... F-1 ii

7 $23,736, BALDWIN PARK UNIFIED SCHOOL DISTRICT (Los Angeles County, California) General Obligation Bonds, Election of 2006, Series 2013 INTRODUCTION This Official Statement, which includes the cover page, inside cover page and appendices hereto, provides information in connection with the sale of the Baldwin Park Unified School District (Los Angeles County, California) General Obligation Bonds, Election of 2006, Series 2013 (the Bonds ). This Introduction is not a summary of this 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, inside cover page and appendices hereto, and the documents summarized or described herein. A full review should be made of the entire Official Statement. The offering of the Bonds to potential investors is made only by means of the entire Official Statement. Changes Since the Preliminary Official Statement Since the publication of the Preliminary Official Statement, the District has approved its first interim financial report for fiscal year , resulting in certain changes to the information presented under the heading DISTRICT FINANCIAL INFORMATION Budget Process General Fund Budgeting herein. In addition, since the publication of the Preliminary Official Statement, the District s Board of Education, at its December 10, 2013 meeting, elected new Board officers and swore-in two incoming Board members. Accordingly, information presented in this Official Statement regarding the composition of the Board of Education has been updated. The District The Baldwin Park Unified School District (the District ) covers approximately nine square miles in the eastern part of Los Angeles County (the County ), and serves the City of Baldwin Park, portions of the Cities of Irwindale, Industry and West Covina, and unincorporated areas of the County. The District currently maintains 13 elementary schools, four middle schools, two high schools, a continuation high school, an adult education program and an alternative education school. For fiscal year , the District s average daily attendance ( ADA ) is projected to be 13,956 students, and taxable property within the District has an assessed valuation of $3,997,842,998. The District is governed by a five-member Board of Education (the District Board ), each member of which is elected to a four-year term. Elections for positions to the District Board are held every two years, alternating between two and three available positions. The management and policies of the District are administered by a Superintendent appointed by the District Board who is responsible for day-to-day District operations as well as the supervision of the District s other personnel. Mr. Mark M. Skvarna is currently the District Superintendent. See DISTRICT FINANCIAL INFORMATION and BALDWIN PARK UNIFIED SCHOOL DISTRICT for information regarding the District generally and TAX BASE FOR REPAYMENT OF BONDS herein for information regarding the District s assessed valuation. 1

8 Purpose of the Bonds The Bonds are being issued to (i) pay the District s outstanding 2009 General Obligation Bond Anticipation Notes (the 2009 Notes ), (ii) pay capitalized interest on the Bonds, and (iii) pay the costs of issuing of the Bonds. The 2009 Notes were issued to finance the repair, upgrading, acquisition, construction and equipping of certain District property and facilities, in anticipation of the issuance of bonds under the Authorization (as defined herein). See THE BONDS Application and Investment of Bond Proceeds and ESTIMATED SOURCES AND USES OF FUNDS herein. Authority for Issuance of the Bonds The Bonds are issued pursuant to certain provisions of the State of California Government Code and pursuant to a resolution adopted by the Board of Education of the District. See THE BONDS Authority for Issuance herein. Sources of Payment for the Bonds The Bonds are general obligations of the District payable solely from ad valorem taxes. The Board of Supervisors of the County is empowered and obligated to annually levy ad valorem taxes, without limitation as to rate or amount, upon all property subject to taxation by the District (except certain personal property which is taxable at limited rates) for the payment of principal and Accreted Value of and interest on the Bonds. See THE BONDS Security and Sources of Payment and TAX BASE FOR REPAYMENT OF BONDS herein. Description of the Bonds Form and Registration. The Bonds will be issued in fully registered form only, without coupons. The Bonds will be initially registered in the name of Cede & Co., as nominee of The Depository Trust Company, New York, New York ( DTC ), who will act as securities depository for the Bonds. See THE BONDS General Provisions and Book-Entry Only System herein. Purchasers of interests in the Bonds (the Beneficial Owners ) will not receive physical certificates representing their interests in the Bonds purchased. In the event that the book-entry only system described below is no longer used with respect to the Bonds, the Bonds will be registered in accordance with the Resolution described herein. See THE BONDS Discontinuation of Book-Entry Only System; Registration, Payment and Transfer of Bonds herein. So long as Cede & Co. is the registered owner of the Bonds, as nominee of DTC, references herein to the Owners, Bondowners or Holders of the Bonds (other than under the caption TAX MATTERS and in APPENDIX A) will mean Cede & Co. and will not mean the Beneficial Owners of the Bonds. Current Interest Bonds and Capital Appreciation Bonds. The Bonds will be issued as current interest bonds (the Current Interest Bonds ) and capital appreciation bonds (the Capital Appreciation Bonds ). The Current Interest Bonds will bear interest on a periodic basis as further described herein. The Capital Appreciation Bonds will not bear interest on a periodic basis. The value at maturity of a Capital Appreciation Bond (the Maturity Value ) is equal to its Accreted Value (defined herein) upon the maturity thereof, such Accreted Value being composed of its initial principal amount (the Denominational Amount ) and the interest accreting thereon between the Date of Delivery (defined herein) and its respective maturity date. 2

9 Denominations. Individual purchases of interests in the Bonds will be available to purchasers of the Bonds in the denominations of $5,000 principal amount or Maturity Value, as applicable, or any integral multiple thereof. Redemption. The Bonds are subject to optional and mandatory sinking fund redemption prior to their stated maturity dates as further described herein. See THE BONDS Redemption herein. Payments. The Bonds will be dated as of the date of their initial execution and issuance (the Date of Delivery ). Interest on the Current Interest Bonds accrues from the Date of Delivery, and is payable semiannually on each February 1 and August 1, commencing February 1, 2014 (each, a Bond Payment Date ). Principal on the Current Interest Bonds is payable on August 1 of each year, as shown on the inside cover page hereof. Capital Appreciation Bonds will accrete in value from their Denominational Amounts on the Date of Delivery to their respective Maturity Values, at the rates per annum (each, an Accretion Rate ) set forth on the inside cover page hereof, compounded semiannually on February 1 and August 1 of each year commencing February 1, The Maturity Value of Capital Appreciation Bonds is payable only at maturity (unless earlier redeemed) according to the amounts set forth in the accreted values table as shown in APPENDIX F hereto. Payments of the principal and Accreted Value of and interest on the Bonds will be made by the designated paying agent, bond registrar and transfer agent (the Paying Agent ), to DTC for subsequent disbursement through DTC Participants (defined herein) to the Beneficial Owners. U.S. Bank National Association has been appointed as agent of the Treasurer and Tax Collector of Los Angeles (the Treasurer ) to act as Paying Agent for the Bonds. Bond Insurance. The scheduled payment of principal (and, in the case of Capital Appreciation Bonds, the Accreted Value) of and interest on the Bonds when due will be guaranteed under a municipal bond insurance policy to be issued concurrently with the delivery of the Bonds by BUILD AMERICA MUTUAL ASSURANCE COMPANY. See THE BONDS Bond Insurance herein. Tax Matters In the opinion of Stradling Yocca Carlson & Rauth, a Professional Corporation, San Francisco, California, Bond Counsel, based on existing statutes, regulations, rulings and judicial decisions and assuming the accuracy of certain representations and compliance with certain covenants and requirements described herein, interest on the Bonds is excluded from gross income for federal income tax purposes and is not an item of tax preference for purposes of calculating the federal alternative minimum tax imposed on individuals and corporations. In the further opinion of Bond Counsel, interest on the Bonds is exempt from State of California personal income tax. See TAX MATTERS herein. Offering and Delivery of the Bonds The Bonds are offered when, as and if issued, subject to approval as to their legality by Bond Counsel. It is anticipated that the Bonds in book-entry form will be available for delivery through the facilities of DTC in New York, New York, on or about December 18, Bond Owner s Risks The Bonds are general obligations of the District payable from ad valorem taxes which may be levied on all taxable property in the District, without limitation as to rate or amount (except with respect 3

10 to certain personal property which is taxable at limited rates). For more complete information regarding the taxation of property within the District, see TAX BASE FOR REPAYMENT OF BONDS herein. Continuing Disclosure Pursuant to that certain Continuing Disclosure Certificate relating to the Bonds, the District will covenant for the benefit of the Owners and Beneficial Owners of the Bonds to make available certain financial information and operating data relating to the District and to provide notices of the occurrence of certain listed events, in compliance with S.E.C. Rule 15c2-12(b)(5) (the Rule ). The specific nature of the information to be made available and of the notices of listed events is summarized below under LEGAL MATTERS Continuing Disclosure and APPENDIX C FORM OF CONTINUING DISCLOSURE CERTIFICATE herein. Professionals Involved in the Offering Stradling Yocca Carlson & Rauth, a Professional Corporation, San Francisco, California, is acting as Bond Counsel and Disclosure Counsel to the District with respect to the Bonds. Annette Yee and Company, LLC, Carmel, California is acting as Financial Advisor to the District with respect to the Bonds. Stradling Yocca Carlson & Rauth, a Professional Corporation and Annette Yee and Company, LLC will receive compensation from the District contingent upon the sale and delivery of the Bonds. Certain matters will be passed on for the Underwriter by Nossaman, LLP, Irvine, California. In addition to acting as Paying Agent, U.S. Bank National Association is acting as Escrow Agent for the 2009 Notes. Causey Demgen & Moore, P.C., Denver, Colorado, will act as Verification Agent in connection with the defeasance of the 2009 Notes. Other Information This Official Statement speaks only as of its date, and the information contained herein is subject to change. Copies of documents referred to herein and information concerning the Bonds are available from the Baldwin Park Unified School District, 3699 N. Holly Avenue, Baldwin Park, California 91706, telephone: (626) The District may impose a charge for copying, mailing and handling. No dealer, broker, salesperson or other person has been authorized by the District to give any information or to make any representations other than as contained herein and, if given or made, such other information or representations must not be relied upon as having been authorized by the District. This Official Statement does not constitute an offer to sell or the solicitation of an offer to buy nor shall there be any sale of the Bonds by a person in any jurisdiction in which it is unlawful for such person to make such an offer, solicitation or sale. This Official Statement is not to be construed as a contract with the purchasers of the Bonds. Statements contained in this Official Statement which involve estimates, forecasts or matters of opinion, whether or not expressly so described herein, are intended solely as such and are not to be construed as representations of fact. The summaries and references to documents, statutes and constitutional provisions referred to herein do not purport to be comprehensive or definitive, and are qualified in their entireties by reference to each such documents, statutes and constitutional provisions. The information set forth herein, other than that provided by the District, has been obtained from official sources which are believed to be reliable but it is not guaranteed as to accuracy or completeness, and is not to be construed as a representation by the District. The information and expressions of opinions herein are subject to change without notice and neither delivery of this Official Statement nor any sale made hereunder shall, under any circumstances, create any implication that there has been no 4

11 change in the affairs of the District since the date hereof. This Official Statement is submitted in connection with the sale of the Bonds referred to herein and may not be reproduced or used, in whole or in part, for any other purpose. Authority for Issuance THE BONDS The Bonds are issued pursuant to the provisions of Article 4.5 of Chapter 3 of Part 1 of Division 2 of Title 5 of the California Government Code of the State of California (the Act ), commencing with Section et seq., as amended, Article XIIIA of the California Constitution and pursuant to a resolution adopted by the Board of Education of the District on November 12, 2013 (the Resolution ). The District received authorization at an election held on November 7, 2006 by the requisite fifty-five percent of the votes cast by eligible voters within the District to issue $75,500,000 aggregate principal amount of general obligation bonds (the Authorization ). The Bonds constitute the third issuance of bonds under the Authorization. Security and Sources of Payment The Bonds are general obligations of the District payable solely from ad valorem taxes. The Board of Supervisors of the County is empowered and obligated to levy ad valorem taxes, without limitation as to rate or amount, for the payment of the principal and Accreted Value of and interest on the Bonds, upon all property subject to taxation by the District (except certain personal property which is taxable at limited rates). Such taxes will be levied annually in addition to all other taxes during the period that the Bonds are outstanding in an amount sufficient to pay the principal and Accreted Value of and interest on the Bonds when due. Such taxes, when collected, will be placed by the County in the Debt Service Fund (defined herein), which is segregated and maintained by the County and which is designated for the payment of the Bonds and interest thereon when due, and for no other purpose. Although the County is obligated to levy an ad valorem tax for the payment of the Bonds, and will maintain the Debt Service Fund, the Bonds are not a debt of the County. The moneys in the Debt Service Fund, to the extent necessary to pay the principal and Accreted Value of and interest on the Bonds as the same becomes due and payable, shall be transferred by the County to the Paying Agent. The Paying Agent will in turn remit the funds to DTC for remittance of such principal and interest to its Participants (as defined herein) for subsequent disbursement to the Beneficial Owners of the Bonds. The amount of the annual ad valorem taxes levied by the County to repay the Bonds will be determined by the relationship between the assessed valuation of taxable property in the District and the amount of debt service due on the Bonds in any year. Fluctuations in the annual debt service on the Bonds and the assessed value of taxable property in the District may cause the annual tax rates to fluctuate. Economic and other factors beyond the District s control, such as general market decline in land values, reclassification of property to a class exempt from taxation, whether by ownership or use (such as exemptions for property owned by the State of California (the State ) and local agencies and property used for qualified education, hospital, charitable or religious purposes), or the complete or partial destruction of the taxable property caused by a natural or manmade disaster, such as earthquake, flood or toxic contamination, could cause a reduction in the assessed value of taxable property within the District and necessitate a corresponding increase in the respective annual tax rates. For further information regarding the District s assessed valuation, tax rates, overlapping debt, and other matters concerning taxation, see CONSTITUTIONAL AND STATUTORY PROVISIONS AFFECTING DISTRICT 5

12 REVENUES AND APPROPRIATIONS Article XIIIA of the California Constitution and TAX BASE FOR REPAYMENT OF BONDS herein. General Provisions The Bonds will be issued in book-entry form only and will be initially issued and registered in the name of Cede & Co. Beneficial Owners will not receive certificates representing their interests in the Bonds. Current Interest Bonds. Interest on the Current Interest Bonds accrues from the Date of Delivery, and is payable on each Bond Payment Date, commencing February 1, Interest on the Current Interest Bonds shall be computed on the basis of a 360-day year of twelve 30-day months. Each Current Interest Bond shall bear interest from the Bond Payment Date next preceding the date of authentication thereof unless it is authenticated as of a day during the period from the 16th day of the month immediately preceding any Bond Payment Date to and including such Bond Payment Date, in which event it shall bear interest from such Bond Payment Date, or unless it is authenticated on or before January 15, 2014, in which event it shall bear interest from the Date of Delivery. The Current Interest Bonds are issuable in denominations of $5,000 principal amount, or any integral multiple thereof, and mature on August 1, in the years and amounts set forth on the inside cover page hereof. Capital Appreciation Bonds. Interest on each Capital Appreciation Bond is represented by the amount each such Bond accretes in value from its respective Denominational Amount on the Date of Delivery to the date for which Accreted Value is calculated. The Accreted Value of a Capital Appreciation Bond is calculated by discounting, on a 30-day month, 360-day year basis, its Maturity Value on the basis of a constant Accretion Rate compounded semiannually on February 1 and August 1, of each year to the date for which an Accreted Value is calculated, and if the date for which Accreted Value is calculated is between February 1 and August 1, by pro-rating the Accreted Values to the closest prior or subsequent February 1 and August 1. The Capital Appreciation Bonds will not pay interest on a periodic basis. The Capital Appreciation Bonds accrete in value from their Date of Delivery at the Accretion Rates per annum set forth on the inside cover hereof, compounded semiannually on February 1 and August 1 of each year commencing on February 1, The Maturity Value of a Capital Appreciation Bond is equal to the Accreted Value thereof at its maturity date. See also the maturity schedule on the inside cover page hereof, Annual Debt Service and APPENDIX F ACCRETED VALUES TABLE herein. Payment. The principal and Accreted Value of the Bonds will be payable in lawful money of the United States of America to the registered Owner thereof, upon the surrender thereof at the principal office of the Paying Agent. The interest on the Current Interest Bonds will be payable in lawful money to the person whose name appears on the bond registration books of the Paying Agent as the registered Owner thereof as of the close of business on the 15th day of the month preceding any Bond Payment Date (a Record Date ), whether or not such day is a business day, such interest to be paid by check or draft mailed on such Bond Payment Date to such registered Owner at such registered Owner s address as it appears on such registration books or at such address as the registered Owner may have filed with the Paying Agent for that purpose. The interest payments on the Current Interest Bonds will be made in immediately available funds (e.g., by wire transfer) to any registered Owner of at least $1,000,000 of such outstanding Current Interest Bonds who shall have requested in writing such method of payment of interest on such Bonds prior to the close of business on the Record Date immediately preceding any Bond Payment Date. 6

13 Bond Insurance Bond Insurance Policy. Concurrently with the issuance of the Bonds, Build America Mutual Assurance Company ( BAM ) will issue its Municipal Bond Insurance Policy for the Bonds (the Policy ). The Policy guarantees the scheduled payment of principal (and, in the case of Capital Appreciation Bonds, the Accreted Value) of and interest on the Bonds when due as set forth in the form of the Policy included as an APPENDIX G this Official Statement. The Policy is not covered by any insurance security or guaranty fund established under New York, California, Connecticut or Florida insurance law. Build America Mutual Assurance Company. BAM is a New York domiciled mutual insurance corporation. BAM provides credit enhancement products solely to issuers in the U.S. public finance markets. BAM will only insure obligations of states, political subdivisions, integral parts of states or political subdivisions or entities otherwise eligible for the exclusion of income under section 115 of the U.S. Internal Revenue Code of 1986, as amended. No member of BAM is liable for the obligations of BAM. The address of the principal executive offices of BAM is: 1 World Financial Center, 27 th Floor, 200 Liberty Street, New York, New York 10281, its telephone number is: , and its website is located at: BAM is licensed and subject to regulation as a financial guaranty insurance corporation under the laws of the State of New York and in particular Articles 41 and 69 of the New York Insurance Law. BAM s financial strength is rated AA/Stable by Standard and Poor s Ratings Services, a Standard & Poor s Financial Services LLC business ( S&P ). An explanation of the significance of the rating and current reports may be obtained from S&P at The rating of BAM should be evaluated independently. The rating reflects the S&P s current assessment of the creditworthiness of BAM and its ability to pay claims on its policies of insurance. The above rating is not a recommendation to buy, sell or hold the Bonds, and such rating is subject to revision or withdrawal at any time by S&P, including withdrawal initiated at the request of BAM in its sole discretion. Any downward revision or withdrawal of the above rating may have an adverse effect on the market price of the Bonds. BAM only guarantees scheduled principal and scheduled interest payments payable by the issuer of the Bonds on the date(s) when such amounts were initially scheduled to become due and payable (subject to and in accordance with the terms of the Policy), and BAM does not guarantee the market price or liquidity of the Bonds, nor does it guarantee that the rating on the Bonds will not be revised or withdrawn. Capitalization of BAM. BAM s total admitted assets, total liabilities, and total capital and surplus, as of September 30, 2013 and as prepared in accordance with statutory accounting practices prescribed or permitted by the New York State Department of Financial Services were $482.7 million, $12.1 million and $470.6 million, respectively. BAM is party to a first loss reinsurance treaty that provides first loss protection up to a maximum of 15% of the par amount outstanding for each policy issued by BAM, subject to certain limitations and restrictions. 7

14 BAM s most recent Statutory Annual Statement, which has been filed with the New York State Insurance Department and posted on BAM s website at is incorporated herein by reference and may be obtained, without charge, upon request to BAM at its address provided above (Attention: Finance Department). Future financial statements will similarly be made available when published. BAM makes no representation regarding the Bonds or the advisability of investing in the Bonds. In addition, BAM 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 BAM, supplied by BAM and presented under the heading THE BONDS Bond Insurance herein. Additional Information Available from BAM. Credit Insights Videos. For certain BAM-insured issues, BAM produces and posts a brief Credit Insights video that provides a discussion of the obligor and some of the key factors BAM s analysts and credit committee considered when approving the credit for insurance. The Credit Insights videos are easily accessible on BAM's website at Obligor Disclosure Briefs. Subsequent to closing, BAM posts an Obligor Disclosure Brief on every issue insured by BAM, including the Bonds. BAM Obligor Disclosure Briefs provide information about the gross par insured by CUSIP, maturity and coupon; sector designation (e.g. general obligation, sales tax); a summary of financial information and key ratios; and demographic and economic data relevant to the obligor, if available. The Obligor Disclosure Briefs are also easily accessible on BAM's website at Disclaimers. The Obligor Disclosure Briefs and the Credit Insights videos and the information contained therein are not recommendations to purchase, hold or sell securities or to make any investment decisions. Credit-related and other analyses and statements in the Obligor Disclosure Briefs and the Credit Insights videos are statements of opinion as of the date expressed, and BAM assumes no responsibility to update the content of such material. The Obligor Disclosure Briefs and Credit Insight videos are prepared by BAM and have not been reviewed or approved by the issuer of or the underwriter for the Bonds, and they assume no responsibility for their content. BAM receives compensation (an insurance premium) for the insurance that it is providing with respect to the Bonds. Neither BAM nor any affiliate of BAM has purchased, or committed to purchase, any of the Bonds, whether at the initial offering or otherwise. 8

15 Annual Debt Service The following table summarizes the annual debt service requirements of the District for the Bonds (assuming no optional redemptions): Current Interest Bonds Capital Appreciation Bonds Year Ending Aug. 1 Annual Principal Payment Annual Interest Payment (1) Annual Principal Payment (2) Annual Accreted Interest Payment (2) Total Annual Debt Service Payment $274, $274, , , , $7, $2, , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , ,047, , , , ,112, , , , ,177, , , , ,252, , , , ,327, , , , ,407, , , , ,492, , , ,991, ,637, , , ,425, ,412, , ,109, ,149, ,701, , ,086, ,474, ,003, , ,064, ,810, ,317, $1,245, , , ,097, ,647, ,610, , ,990, , ,372, ,349, , ,772, ,724, , ,190, ,118, , ,624, ,528, , ,079, ,960, , ,582, ,405, , ,073, ,874, , ,585, ,365, , ,114, ,873, , ,671, ,410, Total $8,855, $13,051, $14,881, $131,617, $168,405, (1) Interest payments on Current Interest Bonds will be made semiannually on February 1 and August 1 of each year, commencing February 1, (2) The Capital Appreciation Bonds are payable on August 1 of the years indicated above, and interest on such Capital Appreciation Bonds will accrete from the Date of Delivery, compounded semiannually on February 1 and August 1, commencing on February 1,

16 See BALDWIN PARK UNIFIED SCHOOL DISTRICT District Debt Structure General Obligation Bonds herein for a table of the total annual debt service requirements for all of the District s outstanding general obligation bonded debt. Application and Investment of Bond Proceeds A portion of the proceeds from the sale of the Bonds will be paid to U.S. Bank National Association, acting as Escrow Agent, to the credit of an escrow fund (the 2009 Notes Escrow Fund ) created pursuant to an escrow agreement (the 2009 Notes Escrow Agreement ) by and between the District and the Escrow Agent. Amounts deposited in the 2009 Notes Escrow Fund will be used to purchase certain non-callable direct and general obligations of the United States of America, or obligations unconditionally guaranteed as to principal or interest by the United States of America (collectively, Federal Securities ), the principal of and interest on which will be sufficient, together with any monies deposited in the 2009 Notes Escrow Fund and held uninvested as cash, to enable the Escrow Agent to pay the principal of and interest on the 2009 Notes, as the same shall become due and payable. The sufficiency of the securities and cash on deposit in the 2009 Notes Escrow Fund, together with realizable interest and earnings thereon, to pay principal of and interest on the 2009 Notes as described above, will be verified by Causey Demgen & Moore, P.C. (the Verification Agent ). As a result of the deposit and application of funds so provided in the 2009 Notes Escrow Agreement, and assuming the accuracy of the Underwriter s and Verification Agent s computations, the 2009 Notes will be defeased and the obligation of the District to make payments of principal thereof and interest thereon will terminate. The ad valorem property taxes levied by the County for the payment of the Bonds, when collected, will be deposited into the fund designated as the Baldwin Park Unified School District, General Obligation Bonds, Election of 2006, Series 2013 Debt Service Fund (the Debt Service Fund ), which fund is held by the County held for payment of principal and Maturity Value of and interest on the Bonds. Any accrued interest or premium received by the County, on behalf of the District, upon the sale of the Bonds will be deposited in the Debt Service Fund. If, after all of the Bonds have been redeemed or paid and otherwise cancelled, there are moneys remaining in the Debt Service Fund or otherwise held in trust for the payment of the redemption price of the Bonds, any such excess amounts will be transferred to the general fund of the District as provided and permitted by law. Moneys in the Debt Service Fund are expected to be invested through the County s pooled investment fund. See APPENDIX D LOS ANGELES COUNTY TREASURY POOL herein. Redemption Optional Redemption. The Current Interest Bonds are subject to redemption prior to their stated maturity date, at the option of the District, from any source of available funds, in whole or in part, on any date on or after August 1, 2023, at a redemption price equal to the principal amount of the Current Interest Bonds called for redemption, without premium, together with interest accrued thereon to the date of redemption. The Capital Appreciation Bonds maturing on or before August 1, 2038 are not subject to redemption. The Capital Appreciation Bonds maturing on or after August 1, 2042 are subject to redemption prior to their respective stated maturity dates, at the option of the District, from any source of available funds, in whole or in part, on any date on or after August 1, 2023, at a redemption price equal to the Accreted Value of the Capital Appreciation Bonds called for redemption, as of the date set for such redemption, without premium. 10

17 Mandatory Sinking Fund Redemption. The Current Interest Bonds are subject to redemption prior to maturity from mandatory sinking fund payments on August 1 of each year, on and after August 1, 2042, at a redemption price equal to the principal amount thereof, plus accrued interest to the date fixed for redemption, without premium. The principal amount represented by such Current Interest Bonds to be so redeemed and the dates therefor and the final principal payment date is as indicated in the following table: (1) Maturity. Redemption Date (August 1) Principal Amount 2042 $1,245, (1) 7,610,000 In the event that a portion of the Current Interest Bonds is optionally redeemed prior to maturity, the remaining mandatory sinking fund payments shown above shall be reduced proportionately, in integral multiples of $5,000 principal amount, in respect of the portion of such Term Bonds optionally redeemed. The Capital Appreciation Bonds maturing on August 1, 2042, are subject to redemption prior to maturity from mandatory sinking fund payments on August 1 of each year, on and after August 1, 2039, at a redemption price equal to the Accreted Value thereof as of date fixed for redemption, without premium. The Accreted Value represented by such Capital Appreciation Bonds to be so redeemed and the dates therefor and the final payment date is as indicated in the following table: (1) Maturity. Redemption Date (August 1) Accreted Value 2039 $6,259, ,560, ,874, (1) 5,960, In the event that a portion of the Capital Appreciation Bonds maturing on August 1, 2042 is optionally redeemed prior to maturity, the remaining mandatory sinking fund payments shown above shall be reduced proportionately, in integral multiples of $5,000 Maturity Value, in respect of the portion of such Term Bonds optionally redeemed. The Capital Appreciation Bonds maturing on August 1, 2048, are subject to redemption prior to maturity from mandatory sinking fund payments on August 1 of each year, on and after August 1, 2044, at a redemption price equal to the Accreted Value thereof as of date fixed for redemption, without premium. The Accreted Value represented by such Capital Appreciation Bonds to be so redeemed and the dates therefor and the final payment date is as indicated in the following table: (1) Maturity. Redemption Date (August 1) Accreted Value 2044 $8,349, ,724, ,118, ,528, (1) 9,960,

18 In the event that a portion of the Capital Appreciation Bonds maturing on August 1, 2048 is optionally redeemed prior to maturity, the remaining mandatory sinking fund payments shown above shall be reduced proportionately, in integral multiples of $5,000 Maturity Value, in respect of the portion of such Term Bonds optionally redeemed. The Capital Appreciation Bonds maturing on August 1, 2053, are subject to redemption prior to maturity from mandatory sinking fund payments on August 1 of each year, on and after August 1, 2049, at a redemption price equal to the Accreted Value thereof as of date fixed for redemption, without premium. The Accreted Value represented by such Capital Appreciation Bonds to be so redeemed and the dates therefor and the final payment date is as indicated in the following table: (1) Maturity. Redemption Date (August 1) Accreted Value 2049 $10,405, ,874, ,365, ,873, (1) 12,410, In the event that a portion of the Capital Appreciation Bonds maturing on August 1, 2053 is optionally redeemed prior to maturity, the remaining mandatory sinking fund payments shown above shall be reduced proportionately, in integral multiples of $5,000 Maturity Value, in respect of the portion of such Term Bonds optionally redeemed. Selection of Bonds for Redemption. Whenever provision is made for the redemption of Bonds and less than all Bonds are to be redeemed, the Paying Agent, upon written instruction from the District, shall select Bonds for redemption as so directed and if not directed, in inverse order of maturity. Within a maturity, the Paying Agent shall select Bonds for redemption by lot. Redemption by lot shall be in such manner as the Paying Agent shall determine; provided, however, that the portion of any Bond to be redeemed in part shall be in integral multiples of $5,000 principal amount or Maturity Value, as applicable. Notice of Redemption. When redemption is authorized or required pursuant to the Resolution, upon written instruction from the District, the Paying Agent will give notice (a Redemption Notice ) of the redemption of the Bonds (or portions thereof). Each Redemption Notice will specify (a) the Bonds or designated portions thereof (in the case of redemption of the Bonds in part but not in whole) which are to be redeemed, (b) the date of redemption, (c) the place or places where the redemption will be made, including the name and address of the Paying Agent, (d) the redemption price, (e) the CUSIP numbers (if any) assigned to the Bonds to be redeemed, (f) the Bond numbers of the Bonds to be redeemed in whole or in part and, in the case of any Bond to be redeemed in part only, the portion of the principal amount or Maturity Value of such Bond to be redeemed, and (g) the original issue date, interest rate or Accretion Rate and stated maturity date of each Bond to be redeemed in whole or in part. The Paying Agent will take the following actions with respect to each such Redemption Notice: (a) at least 20 but not more than 45 days prior to the redemption date, such Redemption Notice will be given to the respective Owners of Bonds designated for redemption by registered or certified mail, postage prepaid, at their addresses appearing on the bond register; (b) at least 20 but not more than 45 days prior to the redemption date, such Redemption Notice will be given by (i) registered or certified mail, postage prepaid, (ii) telephonically confirmed facsimile transmission, or (iii) overnight delivery service, to the Securities Depository; and (c) at least 20 but not more than 45 days prior to the redemption 12

19 date, such Redemption Notice will be given by (i) registered or certified mail, postage prepaid, or (ii) overnight delivery service, to one of the Information Services. Information Services means Financial Information, Inc. s Daily Called Bond Service, 1 Cragwood Road, 2nd Floor, South Plainfield, New Jersey 07080, Attention: Editor; Mergent Inc., 585 Kingsley Park Drive, Fort Mill, South Carolina 29715, Attention: Called Bond Department; and Standard and Poor s J.J. Kenny Information Services Called Bond Record, 55 Water Street, 45th Floor, New York, New York Securities Depository shall mean The Depository Trust Company, 55 Water Street, New York, New York 10041, Fax (212) or Fax (212) A certificate of the Paying Agent or the District that a Redemption Notice has been given as provided in the Resolution will be conclusive as against all parties. Neither failure to receive any Redemption Notice nor any defect in any such Redemption Notice so given will affect the sufficiency of the proceedings for the redemption of the affected Bonds. Each check issued or other transfer of funds made by the Paying Agent for the purpose of redeeming Bonds will bear or include the CUSIP number, if any, identifying, by issue and maturity, the Bonds being redeemed with the proceeds of such check or other transfer. Rescission of Notice of Redemption. With respect to any notice of redemption of Bonds (or portions thereof) as described above, unless upon the giving of such notice such Bonds shall be deemed to have been defeased as described in Defeasance herein, such notice will state that such redemption will be conditioned upon the receipt by an independent escrow agent selected by the District, on or prior to the date fixed for such redemption, of the moneys necessary and sufficient to pay the principal and Accreted Value of, and premium, if any, and interest on, such Bonds to be redeemed, and that, if such moneys shall not have been so received, said notice shall be of no force and effect, the Bonds shall not be subject to redemption on such date and the Bonds shall not be required to be redeemed on such date. In the event that such notice of redemption contains such a condition and such moneys are not so received, the redemption will not be made and the Paying Agent will within a reasonable time thereafter (but in no event later than the date originally set for redemption) give notice, to the persons to whom and in the manner in which the notice of redemption was given, that such moneys were not so received. In addition, the District will have the right to rescind any Redemption Notice, by written notice to the Paying Agent, on or prior to the date fixed for such redemption. The Paying Agent will distribute a notice of the rescission of such notice in the same manner as such notice was originally provided. Partial Redemption of Bonds. Upon the surrender of any Bond redeemed in part only, the Paying Agent will execute and deliver to the Owner thereof a new Bond or Bonds of like tenor and maturity and of authorized denominations equal in Transfer Amount (which with respect to any outstanding Bonds means the principal amount or Accreted Value thereof, as applicable) to the unredeemed portion of the Bond surrendered. Such partial redemption is valid upon payment of the amount required to be paid to such Owner, and the District will be released and discharged thereupon from all liability to the extent of such payment. Effect of Notice of Redemption. If notice of redemption is given as described above, and the moneys for the redemption (including the interest accrued to the applicable date of redemption) having been set aside as described in Defeasance herein, the Bonds to be redeemed will become due and payable on such date of redemption. If on such redemption date, moneys for the redemption of all the Bonds to be redeemed, together with interest accrued to such redemption date, shall be held by an independent escrow agent selected by 13

20 the District so as to be available therefor on such redemption date, and if notice of redemption thereof shall have been given as described above, then from and after such redemption date, interest on the Bonds to be redeemed will cease to accrue or accrete, as applicable, and become payable. All money held for the redemption of Bonds will be held in trust for the account of the Owners of the Bonds so to be redeemed. Bonds No Longer Outstanding. When any Bonds (or portions thereof), which have been duly called for redemption prior to maturity pursuant to the provisions of the Resolution, or with respect to which irrevocable instructions to call for redemption prior to maturity at the earliest redemption date have been given to the Paying Agent, in form satisfactory to it, and sufficient moneys shall be held irrevocably in trust for the payment of the redemption price of such Bonds or portions thereof, and, if applicable, accrued interest thereon the date fixed for redemption, then such Bonds will no longer be deemed outstanding and will be surrendered to the Paying Agent for cancellation. Book-Entry Only System The information in this section concerning DTC and DTC s book-entry system has been obtained from sources that the District believes to be reliable, but 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 (a) payments of interest, principal or premium, if any, with respect to the Bonds, (b) certificates representing ownership interest in or other confirmation or ownership interest in the Bonds, or (c) redemption or other notices sent to DTC or Cede & Co., its nominee, as the registered owner of the Bonds, 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. The Depository Trust Company ( DTC ), New York, NY, will act as securities depository for the Bonds. The Bonds will be issued as fully-registered securities registered in the name of Cede & Co. (DTC s partnership nominee) or such other name as may be requested by an authorized representative of DTC. One fully-registered Bond certificate will be issued for each maturity of the Bonds, in the aggregate principal amount of such maturity, and will be deposited with DTC. DTC, the world s largest securities depository, is a limited-purpose trust company organized under the New York Banking Law, a banking organization within the meaning of the New York Banking Law, a member of the Federal Reserve System, a clearing corporation within the meaning of the New York Uniform Commercial Code, and a clearing agency registered pursuant to the provisions of Section 17A of the Securities Exchange Act of DTC holds and provides asset servicing for over 3.5 million issues of U.S. and non-u.s. equity issues, corporate and municipal debt issues, and money market instruments (from over 100 countries) that DTC s participants ( Direct Participants ) deposit with DTC. DTC also facilitates the post-trade settlement among Direct Participants of sales and other securities transactions in deposited securities, through electronic computerized book-entry transfers and pledges between Direct Participants accounts. This eliminates the need for physical movement of securities certificates. Direct Participants include both U.S. and non-u.s. securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations. DTC is a wholly-owned subsidiary of The Depository Trust & Clearing Corporation ( DTCC ). DTCC is the holding company for DTC, National Securities Clearing Corporation and Fixed Income Clearing Corporation, all of which are registered clearing agencies. DTCC is owned by the users of its regulated subsidiaries. Access to the DTC system is also available to others such as both U.S. and non-u.s. securities brokers and dealers, banks, trust 14

21 companies, and clearing corporations that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly ( Indirect Participants ). DTC is rated AA+ by Standard & Poor s. The DTC Rules applicable to its Participants are on file with the Securities and Exchange Commission. More information about DTC can be found at Purchases of Bonds under the DTC system must be made by or through Direct Participants, which will receive a credit for the Bonds on DTC s records. The ownership interest of each actual purchaser of each 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 purchase. Beneficial Owners are, however, expected to receive written confirmations providing details of the transaction, as well as periodic statements of their holdings, from the Direct or Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers of ownership interests in the Bonds are to be accomplished by entries made on the books of Direct and Indirect Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interests in Bonds, except in the event that use of the book-entry system for the Bonds is discontinued. To facilitate subsequent transfers, all Bonds deposited by Direct Participants with DTC are registered in the name of DTC s partnership nominee, Cede & Co., or such other name as may be requested by an authorized representative of DTC. The deposit of Bonds with DTC and their registration in the name of Cede & Co. or such other DTC nominee do not effect any change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the Bonds; DTC s records reflect only the identity of the Direct Participants to whose accounts such Bonds are credited, which may or may not be the Beneficial Owners. The Direct and Indirect Participants will remain responsible for keeping account of their holdings on behalf of their customers. Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. Redemption notices shall be sent to DTC. If less than all of the Bonds within an issue are being redeemed, DTC s practice is to determine by lot the amount of the interest of each Direct Participant in such issue to be redeemed. Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to Bonds unless authorized by a Direct Participant in accordance with DTC s Procedures. Under its usual procedures, DTC mails an Omnibus Proxy to the District as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co. s consenting or voting rights to those Direct Participants to whose accounts Bonds are credited on the record date (identified in a listing attached to the Omnibus Proxy). Redemption proceeds and distribution on the Bonds will be made to Cede & Co., or such other nominee as may be requested by an authorized representative of DTC. DTC s practice is to credit Direct Participants accounts upon DTC s receipt of funds and corresponding detail information from the District or Paying Agent, on payable date in accordance with their respective holdings shown on DTC s records. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered in street name, and will be the responsibility of such Participant and not of DTC nor its nominee, Paying Agent, or the District, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of redemption proceeds and distribution to Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) is the responsibility of the District 15

22 or Paying Agent, disbursement of such payments to Direct Participants will be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners will be the responsibility of Direct and Indirect Participants. DTC may discontinue providing its services as depository with respect to the Bonds at any time by giving reasonable notice to the District or Paying Agent. Under such circumstances, in the event that a successor depository is not obtained, Bond certificates are required to be printed and delivered. The District may decide to discontinue use of the system of book-entry transfers through DTC (or a successor securities depository). In that event, Bond certificates will be printed and delivered. Discontinuation of Book-Entry Only System; Registration, Payment and Transfer of Bonds So long as any of the Bonds remain outstanding, the District will cause the Paying Agent to maintain at its principal office all books and records necessary for the registration, exchange and transfer of such Bonds, which shall at all times be open to inspection by the District, and, upon presentation for such purpose, the Paying Agent shall, under such reasonable regulations as it may prescribe, register, exchange or transfer or cause to be registered, exchanged or transferred, on said books, Bonds as provided in the Resolution. In the event that the book-entry system described above is no longer used with respect to the Bonds, the following provisions will govern the payment, registration, transfer, exchange and replacement of the Bonds. The principal and Accreted Value of the Bonds and any premium and interest upon the redemption thereof prior to the maturity will be payable in lawful money of the United States of America upon presentation and surrender of the Bonds at the designated office of the Paying Agent, initially located in Los Angeles, California. Interest on the Current Interest Bonds will be paid by the Paying Agent by check or draft mailed to the person whose name appears on the registration books of the Paying Agent as the registered Owner, and to that person s address appearing on the registration books as of the close of business on the Record Date. At the written request of any registered Owner of at least $1,000,000 in aggregate principal amount of Current Interest Bonds, interest shall be wired to a bank and account number on file with the Paying Agent as of the Record Date. Any Bond may be exchanged for Bonds of like tenor, maturity and Transfer Amount upon presentation and surrender at the principal office of the Paying Agent, together with a request for exchange signed by the registered Owner or by a person legally empowered to do so in a form satisfactory to the Paying Agent. A Bond may be transferred only on the Bond Register 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 office of the Paying Agent, accompanied by delivery of a written instrument of transfer in a form approved by the Paying Agent, duly executed. Upon exchange or transfer, the Paying Agent shall register, authenticate and deliver a new Bond or Bonds of like tenor and of any authorized denomination or denominations requested by the Owner equal to the Transfer Amount of the Bond surrendered and bearing or accreting interest at the same rate and maturing on the same date. Neither the District nor the Paying Agent will be required (a) to issue or transfer any Bonds during a period beginning with the opening of business on the 16th business day next preceding any Bond Payment Date, the stated maturity of any of the Bonds or any date of selection of Bonds to be redeemed and ending with the close of business on the applicable Bond Payment Date, the close of business on the applicable stated maturity date or any day on which the applicable notice of redemption is given or (b) to transfer any Bonds which have been selected or called for redemption in whole or in part. 16

23 Defeasance All or any portion of the outstanding maturities of the Bonds may be defeased at any time prior to maturity in the following ways: (a) (b) Cash: by irrevocably depositing with an independent escrow agent selected by the District an amount of cash which, together with any amounts transferred from the Debt Service Fund, is sufficient to pay all Bonds outstanding and designated for defeasance, including all principal thereof, interest thereon and premium, if any at or before their maturity dates; or Government Obligations: by irrevocably depositing with an independent escrow agent selected by the District noncallable Government Obligations together with any amounts transferred from the Debt Service Fund, together with any other cash, if required, in such amount as will, together with interest to accrue thereon, in the opinion of an independent certified public accountant, be fully sufficient to pay and discharge all Bonds outstanding and designated for defeasance, including all principal thereof, interest thereon and premium, if any at or before their maturity dates; then, notwithstanding that any such maturities of Bonds shall not have been surrendered for payment, all obligations of the District with respect to all such designated outstanding Bonds shall cease and terminate, except only the obligation of the independent escrow agent selected by the District to pay or cause to be paid from funds deposited pursuant to paragraphs (a) or (b) above, to the Owners of such designated Bonds not so surrendered and paid all sums due with respect thereto. Government Obligations shall mean direct and general obligations of the United States of America (which may consist of obligations of the Resolution Funding Corporation that constitute interest strips), or obligations that are unconditionally guaranteed as to principal and interest by the United States of America, or prerefunded municipal obligations rated in the highest rating category by Moody s Investors Service or Standard & Poor s. In the case of direct and general obligations of the United States of America, Government Obligations shall include evidences of direct ownership of proportionate interests in future interest or principal payments of such obligations. Investments in such proportionate interests must be limited to circumstances where (a) a bank or trust company acts as custodian and holds the underlying United States obligations; (b) the owner of the investment is the real party in interest and has the right to proceed directly and individually against the obligor of the underlying United States obligations; and (c) the underlying United States obligations are held in a special account, segregated from the custodian s general assets, and are not available to satisfy any claim of the custodian, any person claiming through the custodian, or any person to whom the custodian may be obligated; provided that such obligations are rated or assessed at least as high as direct and general obligations of the United States of America by either Standard & Poor s or by Moody s Investors Service. 17

24 ESTIMATED SOURCES AND USES OF FUNDS The proceeds of the Bonds, together with an equity contribution from the District, are expected to be applied as follows: Sources of Funds Uses of Funds Principal Amount of Bonds $23,736, Original Issue Premium 3,371, District Contribution 6, Total Sources $27,115, Costs of Issuance (1) $852, Debt Service Fund 274, Payment of 2009 Notes 25,988, Total Uses $27,115, (1) Reflects all costs of issuance, including the Underwriter s discount, legal and financial advisory fees, printing costs, rating agency fees, bond insurance premium and the costs and fees of the Paying Agent, Verification Agent and Escrow Agent. TAX BASE FOR REPAYMENT OF BONDS The information in this section describes ad valorem property taxation, assessed valuation, and other measures of the tax base of the District. The Bonds are payable solely from ad valorem taxes levied and collected by the County on taxable property in the District. The District s general fund is not a source for the repayment of the Bonds. Ad Valorem Property Taxation Taxes are levied by the County for each fiscal year on taxable real and personal property which is situated in the District as of the preceding January 1. For assessment and collection purposes, property is classified either as secured or unsecured and is listed accordingly on separate parts of the assessment roll. The secured roll is that part of the assessment roll containing State-assessed public utilities property and real property having a tax lien which is 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 two installments, on November 1 and February 1 of each fiscal year. If unpaid, such taxes become delinquent on December 10 and April 10, respectively, and a 10% penalty attaches to any delinquent payment. 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% per month 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 County Treasurer. Property taxes on the unsecured roll are due as of the January 1 lien date and become delinquent, if unpaid, on August 31. A 10% penalty attaches to delinquent unsecured taxes. If unsecured taxes are unpaid at 5:00 p.m. on October 31, an additional penalty of 1.5% attaches to them on the first day of each month until paid. The taxing authority 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 18

25 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 Clerk and 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 possessory interests belonging or assessed to the assessee. Assessed Valuations All property is assessed using full cash value as defined by Article XIIIA of the State Constitution. State law provides exemptions from ad valorem property taxation for certain classes of property such as churches, schools and colleges, non-profit hospitals, and charitable institutions. The following represents a 10-year history of assessed valuations in the District. ASSESSED VALUATIONS Baldwin Park Unified School District Fiscal Years through Local Secured Utility Unsecured Total $2,713,351,671 $1,974,834 $153,195,666 $2,868,522, ,029,824,124 1,525, ,654,519 3,178,004, ,367,967,495 1,462, ,968,172 3,536,398, ,664,106,692 1,134, ,399,873 3,833,641, ,909,844,679 1,134, ,427,385 4,092,406, ,712,444,066 1,272, ,377,969 3,901,094, ,668,378,294 1,272, ,873,795 3,846,524, ,683,584,056 10, ,564,648 3,853,158, ,708,206, ,032,750 3,874,239, ,832,854, ,988,571 3,997,842,998 Source: California Municipal Statistics, Inc. Economic and other factors beyond the District s control, such as general market decline in property values, disruption in financial markets that may reduce availability of financing for purchasers of property, reclassification of property to a class exempt from taxation, whether by ownership or use (such as exemptions for property owned by the State and local agencies and property used for qualified education, hospital, charitable or religious purposes), or the complete or partial destruction of the taxable property caused by a natural or manmade disaster, such as earthquake, flood or toxic contamination, could cause a reduction in the assessed value of taxable property within the District. Any such reduction would result in a corresponding increase in the annual tax rate levied by the County to pay the debt service with respect to the Bonds. See THE BONDS Security and Sources of Payment herein. Appeals of Assessed Valuations Under California law, property owners may apply for a reduction of their property tax assessment by filing a written application, in form prescribed by the State Board of Equalization, with the appropriate county board of equalization or assessment appeals board. In most cases, the appeal is filed because the applicant believes that present market conditions (such as residential home prices) cause the property to be worth less than its current assessed value. Any reduction in the assessment ultimately granted as a result of such appeal applies to the year for which application is made and during which the written application was filed. Such reductions are subject to yearly reappraisals and may be adjusted back to their original values when market conditions improve. Once the property has regained its prior value, adjusted for inflation, it once again is subject to the annual inflationary factor growth rate allowed under Article XIIIA. See CONSTITUTIONAL AND STATUTORY PROVISIONS AFFECTING DISTRICT REVENUES AND APPROPRIATIONS Article XIIIA of the California Constitution herein. 19

26 A second type of assessment appeal involves a challenge to the base year value of an assessed property. Appeals for reduction in the base year value of an assessment, if successful, reduce the assessment for the year in which the appeal is taken and prospectively thereafter. The base year is determined by the completion date of new construction or the date of change of ownership. Any base year appeal must be made within four years of the change of ownership or new construction date. No assurance can be given that property tax appeals in the future will not significantly reduce the assessed valuation of property within the District. Assessed Valuation of Single Family Homes The following table shows a per-parcel analysis of single family residences within the District, in terms of their fiscal year assessed valuation. PER PARCEL ASSESSED VALUATION OF SINGLE FAMILY HOMES Fiscal Year Baldwin Park Unified School District No. of Average Median Parcels Assessed Valuation Assessed Valuation Assessed Valuation Single Family Residential 10,453 $1,974,238,114 $188,868 $196, No. of % of Cumulative Total % of Cumulative Assessed Valuation Parcels (1) Total % of Total Valuation Total % of Total $0 - $24, % 0.804% $1,505, % 0.076% 25,000-49,999 1, ,152, ,000-74, ,305, ,000-99, ,975, , , ,534, , , ,044, , , ,343, , ,999 1, ,967, , ,999 1, ,673, , ,999 1, ,683, , , ,828, , , ,863, , , ,901, , , ,473, , , ,739, , , ,551, , , ,459, , , ,367, , , ,767, , , ,822, ,000 and greater ,278, Total 10, % $1,974,238, % (1) Improved single family residential parcels. Excludes condominiums and parcels with multiple family units. Source: California Municipal Statistics, Inc. 20

27 Assessed Valuation and Parcels by Land Use The following table shows a per-parcel analysis of the distribution of taxable property within the District by principal use, and the fiscal year assessed valuation of such parcels. ASSESSED VALUATION AND PARCELS BY LAND USE Fiscal Year Baldwin Park Unified School District % of No. of % of Non-Residential: Assessed Valuation (1) Total Parcels Total Commercial/Office $463,646, % % Vacant Commercial 10,512, Industrial 477,172, Vacant Industrial 33,251, Recreational 2,540, Government/Social/Institutional 26,092, Subtotal Non-Residential $1,013,216, % 1, % Residential: Single Family Residence $1,974,238, % 10, % Condominium/Townhouse 416,494, , Mobile Home Park 6,734, Residential Units 222,655, Residential Units/Apartments 157,153, Vacant Residential 42,361, Subtotal Residential $2,819,638, % 14, % Total $3,832,854, % 15, % (1) Local secured assessed valuation; excluding tax-exempt property. Source: California Municipal Statistics, Inc. [REMAINDER OF PAGE LEFT BLANK] 21

28 Tax Levies, Collections and Delinquencies The following table shows secured ad valorem tax charges within the District, and amounts delinquent as of June 30, for fiscal years through See also Ad Valorem Property Taxation herein. (1) (2) SECURED TAX CHARGES AND DELINQUENCIES Fiscal Years through Baldwin Park Unified School District Fiscal Year Secured Tax Charge (1) as of June 30 Amount Delinquent Percent Delinquent June $6,482, $303, % ,172, , ,114, , ,147, , ,211, , Fiscal Year Secured Tax Charge (2) as of June 30 Amount Delinquent Percent Delinquent June $5,915, $357, % ,887, , ,006, , ,396, , ,002, , % State general fund apportionment. Excludes redevelopment agency impounds. Reflects county-wide delinquency rate. General obligation bond debt service levy. Source: California Municipal Statistics, Inc. Alternative Method of Tax Apportionment - Teeter Plan Certain counties in the State of California operate under a statutory program entitled Alternate Method of Distribution of Tax Levies and Collections and of Tax Sale Proceeds (the Teeter Plan ). Under the Teeter Plan local taxing entities receive 100% of their tax levies net of delinquencies, but do not receive interest or penalties on delinquent taxes collected by the county. The County of Los Angeles has not adopted the Teeter Plan, and consequently the Teeter Plan is not available to local taxing entities within the County, such as the District. The District s receipt of property taxes is therefore subject to delinquencies. The District participates in the California Statewide Delinquent Tax Finance Authority ( CSDTFA ). CSDTFA is a joint exercise of powers agency formed for the purpose of purchasing delinquent ad valorem property taxes of its members in accordance with Section of the Government Code of the State of California. The District anticipates that CSDTFA will from time to time purchase delinquent ad valorem tax receivables from the District at a purchase price equal to 108.5% of such receivable. Any penalty charges collected with respect to such delinquencies will be retained by CSDTFA. CSDTFA does not ensure that the District will receive the timely payment of ad valorem property taxes levied to secure the Bonds. See also Ad Valorem Property Taxation herein. 22

29 Tax Rates The following table summarizes the total ad valorem tax rates levied by all taxing entities in a typical tax rate area (a TRA ) within the District during the five-year fiscal year period from to : SUMMARY OF AD VALOREM TAX RATES Typical Total Tax Rates (TRA 2088) (1) Fiscal Years through Baldwin Park Unified School District General % % % % % Baldwin Park Unified School District Mount San Antonio Community College District Metropolitan Water District Total % % % % % Source: California Municipal Statistics, Inc. Principal Taxpayers The following table lists the 20 largest local secured taxpayers in the District in terms of their secured assessed valuations: LARGEST LOCAL SECURED TAXPAYERS Fiscal Year Baldwin Park Unified School District % of Property Owner Primary Land Use Assessed Valuation Total (1) 1. Metropolitan Life Insurance Co. Office Building $58,941, % 2. In-N-Out Burgers Inc. Industrial 33,962, Millercoors LLC Industrial 31,733, Wal Mart Real Estate Business Trust Shopping Center 28,029, Sierra Center Investments LLC Shopping Center 21,000, Calmat Properties Co. Industrial 17,921, J and J Warehouse Company LLC Shopping Center 17,175, Baldwin Park Commerce Center LP Industrial 15,709, Home Depot USA Inc. Shopping Center 15,402, Walton CWCA Ramona 41 LLC Industrial 14,500, Dayton Hudson Corp. Shopping Center 13,555, SCE Federal Credit Union Office Building 13,161, M and A Gabaee Commercial 11,976, Oft Family Corporation Commercial 11,442, Voit Baldwin Partners LLC Office Building 10,930, Baldwin Park Plaza II LP Shopping Center 9,894, Baldwin Park LLC Commercial 9,400, Baldwin Hospitality LLC Hotel 9,110, Menesq Partners LLC Industrial 8,471, Walton CWCA Schabarum 42 LLC Industrial 8,300, $360,618, % (1) local secured assessed valuation: $3,832,854,427. Source: California Municipal Statistics, Inc. 23

30 Statement of Direct and Overlapping Debt Set forth below is a direct and overlapping debt report (the Debt Report ) prepared by California Municipal Statistics, Inc. dated as of November 15, 2013 for debt outstanding as of December 1, The Debt Report is included for general information purposes only. The District has not reviewed the Debt Report for completeness or accuracy and makes no representation in connection therewith. The Debt Report generally includes long-term obligations sold in the public credit markets by public agencies whose boundaries overlap the boundaries of the District in whole or in part. Such longterm obligations generally are not payable from revenues of the District (except as indicated) nor are they necessarily obligations secured by land within the District. In many cases long-term obligations issued by a public agency are payable only from the general fund or other revenues of such public agency. The table shows the percentage of each overlapping entity s assessed value located within the boundaries of the District. The table also shows the corresponding portion of the overlapping entity s existing debt payable from property taxes levied within the District. The total amount of debt for each overlapping entity is not given in the table. The first column in the table names each public agency which has outstanding debt as of the date of the report and whose territory overlaps the District in whole or in part. The second column shows the percentage of each overlapping agency s assessed value located within the boundaries of the District. This percentage, multiplied by the total outstanding debt of each overlapping agency (which is not shown in the table) produces the amount shown in the third column, which is the apportionment of each overlapping agency s outstanding debt to taxable property in the District. [REMAINDER OF PAGE LEFT BLANK] 24

31 Assessed Valuation: $3,997,842,998 STATEMENT OF DIRECT AND OVERLAPPING DEBT Baldwin Park Unified School District DIRECT AND OVERLAPPING TAX AND ASSESSMENT DEBT: % Applicable Debt 11/15/2013 Los Angeles County Flood Control District 0.374% $73,940 Metropolitan Water District ,106 Mt. San Antonio Community College District ,745,432 Baldwin Park Unified School District ,204,091 (1) City of Industry ,152 Los Angeles County Regional Park and Open Space Assessment District ,789 TOTAL DIRECT AND OVERLAPPING TAX AND ASSESSMENT DEBT $118,739,510 DIRECT AND OVERLAPPING GENERAL FUND DEBT: Los Angeles County General Fund Obligations 0.351% $5,835,956 Los Angeles County Superintendent of Schools Certificates of Participation ,450 Baldwin Park Unified School District Lease Revenue Bonds ,875,000 (2) City of Baldwin Park General Fund Obligations ,647,056 City of Baldwin Park Pension Obligations ,428,607 City of Industry General Fund Obligations City of Irwindale Certificates of Participation ,412 City of West Covina General Fund Obligations ,072 Los Angeles County Sanitation District No. 15 Authority ,754,358 Los Angeles County Sanitation District No. 22 Authority ,517 TOTAL GROSS DIRECT AND OVERLAPPING GENERAL FUND DEBT $65,095,113 Less: Los Angeles County general fund obligations supported by landfill revenues 19,276 TOTAL NET DIRECT AND OVERLAPPING GENERAL FUND DEBT $65,075,837 OVERLAPPING TAX INCREMENT DEBT (Successor Agencies): $30,807,332 GROSS COMBINED TOTAL DEBT $214,641,955 (3) NET COMBINED TOTAL DEBT $214,622,679 Ratios to Assessed Valuation: Direct Debt ($96,204,091) % Total Direct and Overlapping Tax and Assessment Debt % Combined Direct Debt ($137,079,091) % Gross Combined Total Debt % Net Combined Total Debt % Ratio to Successor Agency Redevelopment Incremental Valuation ($984,378,621): Total Overlapping Tax Increment Debt % (1) Excludes accreted interest on capital appreciation bonds. Includes 2009 Notes. (2) (3) Includes Qualified Zone Academy Bonds based on the principal amount due at maturity ($12,000,000 due 6/14/15). Excludes tax and revenue anticipation notes, enterprise revenue, mortgage revenue and non-bonded capital lease obligations. Source: California Municipal Statistics, Inc. 25

32 CONSTITUTIONAL AND STATUTORY PROVISIONS AFFECTING DISTRICT REVENUES AND APPROPRIATIONS The principal and Accreted Value of and interest on the Bonds are payable solely from the proceeds of an ad valorem tax levied by the County for the payment thereof. (See THE BONDS Security and Sources of Payment herein) Articles XIIIA, XIIIB, XIIIC and XIIID of the State Constitution, Propositions 98 and 111, and certain other provisions of law discussed below, are included in this section to describe the potential effect of these Constitutional and statutory measures on the ability of the County to levy taxes on behalf of the District and to the District to spend tax proceeds for operating and other purposes, and it should not be inferred from the inclusion of such materials that these laws impose any limitation on the ability of the County to levy taxes for payment of the Bonds. The tax levied by the County for payment of the Bonds was approved by the District s voters in compliance with Article XIIIA, Article XIIIC, and all applicable laws. Article XIIIA of the California Constitution Article XIIIA ( Article XIIIA ) of the State Constitution limits the amount of ad valorem taxes on real property to 1% of full cash value as determined by the county assessor. Article XIIIA defines full cash value to mean the county assessor s valuation of real property as shown on the bill under full cash value, or thereafter, the appraised value of real property when purchased, newly constructed or a change in ownership has occurred after the 1975 assessment, subject to exemptions in certain circumstances of property transfer or reconstruction. Determined in this manner, the full cash value is also referred to as the base year value. The full cash value is subject to annual adjustment to reflect increases, not to exceed 2% for any year, or decreases in the consumer price index or comparable local data, or to reflect reductions in property value caused by damage, destruction or other factors. Article XIIIA has been amended to allow for temporary reductions of assessed value in instances where the fair market value of real property falls below the adjusted base year value described above. Proposition 8 approved by the voters in November of 1978 provides for the enrollment of the lesser of the base year value or the market value of real property, taking into account reductions in value due to damage, destruction, depreciation, obsolescence, removal of property, or other factors causing a similar decline. In these instances, the market value is required to be reviewed annually until the market value exceeds the base year value. Reductions in assessed value could result in a corresponding increase in the annual tax rate levied by the County to pay debt service on the Bonds. See THE BONDS Security and Sources of Payment and TAX BASE FOR REPAYMENT OF BONDS herein. Article XIIIA requires a vote of two-thirds or more of the qualified electorate of a city, county, special district or other public agency to impose special taxes, while totally precluding the imposition of any additional ad valorem, sales or transaction tax on real property. Article XIIIA exempts from the 1% tax limitation any taxes above that level required to pay debt service (a) on any indebtedness approved by the voters prior to July 1, 1978, or (b), as the result of an amendment approved by State voters on June 3, 1986, on any bonded indebtedness approved by two-thirds of the votes cast by the voters for the acquisition or improvement of real property on or after July 1, 1978, or (c) 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 fifty-five percent or more of the votes cast on the proposition, but only if certain accountability measures are included in the proposition. The tax for payment of the Bonds falls within the exception described in (c) of the immediately preceding sentence. In addition, Article XIIIA requires the approval of two-thirds of all members of the state legislature to change any state taxes for the purpose of increasing tax revenues. 26

33 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. All taxable property value included in this Official Statement is shown at 100% of taxable value (unless noted differently) and all tax rates reflect the $1 per $100 of taxable value. Both the United States Supreme Court and the California State Supreme Court have upheld the general validity of Article XIIIA. Unitary Property Some amount of property tax revenue of the District is derived from utility property which is considered part of a utility system with components located in many taxing jurisdictions ( unitary property ). Under the State Constitution, such property is assessed by the State Board of Equalization ( SBE ) as part of a going concern rather than as individual pieces of real or personal property. Stateassessed unitary and certain other property is allocated to the counties by SBE, taxed at special countywide rates, and the tax revenues distributed to taxing jurisdictions (including the District) according to statutory formulae generally based on the distribution of taxes in the prior year. The California electric utility industry has been undergoing significant changes in its structure and in the way in which components of the industry are regulated and owned. Sale of electric generation assets to largely unregulated, nonutility companies may affect how those assets are assessed, and which local agencies are to receive the property taxes. The District is unable to predict the impact of these changes on its utility property tax revenues, or whether legislation may be proposed or adopted in response to industry restructuring, or whether any future litigation may affect ownership of utility assets or the State s methods of assessing utility property and the allocation of assessed value to local taxing agencies, including the District. So long as the District is not a basic aid district, taxes lost through any reduction in assessed valuation will be compensated by the State as equalization aid under the State s school financing formula. See DISTRICT FINANCIAL INFORMATION State Funding of Education herein. Article XIIIB of the California Constitution Article XIIIB ( Article XIIIB ) of the State Constitution, as subsequently amended by Propositions 98 and 111, respectively, limits the annual appropriations of the State and of any city, county, school district, authority or other political subdivision of the State to the level of appropriations of the particular governmental entity for the prior fiscal year, as adjusted for changes in the cost of living and in population and for transfers in the financial responsibility for providing services and for certain declared emergencies. As amended, Article XIIIB defines: 27

34 (a) (b) change in the cost of living with respect to school districts to mean the percentage change in California per capita income from the preceding year, and change in population with respect to a school district to mean the percentage change in the ADA of the school district from the preceding fiscal year. For fiscal years beginning on or after July 1, 1990, the appropriations limit of each entity of government shall be the appropriations limit for the fiscal year adjusted for the changes made from that fiscal year pursuant to the provisions of Article XIIIB, as amended. The appropriations of an entity of local government subject to Article XIIIB limitations include the proceeds of taxes levied by or for that entity and the proceeds of certain state subventions to that entity. Proceeds of taxes include, but are not limited to, all tax revenues and the proceeds to the entity from (a) regulatory licenses, user charges and user fees (but only to the extent that these proceeds exceed the reasonable costs in providing the regulation, product or service), and (b) the investment of tax revenues. Appropriations subject to limitation do not include (a) refunds of taxes, (b) appropriations for debt service such as the Bonds, (c) appropriations required to comply with certain mandates of the courts or the federal government, (d) appropriations of certain special districts, (e) appropriations for all qualified capital outlay projects as defined by the legislature, (f) appropriations derived from certain fuel and vehicle taxes and (g) appropriations derived from certain taxes on tobacco products. Article XIIIB includes a requirement that all revenues received by an entity of government other than the State in a fiscal year and in the fiscal year immediately following it in excess of the amount permitted to be appropriated during that fiscal year and the fiscal year immediately following it shall be returned by a revision of tax rates or fee schedules within the next two subsequent fiscal years. Article XIIIB also includes a requirement that fifty percent of all revenues received by the State in a fiscal year and in the fiscal year immediately following it in excess of the amount permitted to be appropriated during that fiscal year and the fiscal year immediately following it shall be transferred and allocated to the State School Fund pursuant to Section 8.5 of Article XVI of the State Constitution. See Propositions 98 and 111 herein. Proposition 26 On November 2, 2010, voters in the State approved Proposition 26. Proposition 26 amends Article XIIIC of the State Constitution to expand the definition of tax to include any levy, charge, or exaction of any kind imposed by a local government except the following: (1) a charge imposed for a specific benefit conferred or privilege granted directly to the payor that is not provided to those not charged, and which does not exceed the reasonable costs to the local government of conferring the benefit or granting the privilege; (2) a charge imposed for a specific government service or product provided directly to the payor that is not provided to those not charged, and which does not exceed the reasonable costs to the local government of providing the service or product; (3) a charge imposed for the reasonable regulatory costs to a local government for issuing licenses and permits, performing investigations, inspections, and audits, enforcing agricultural marketing orders, and the administrative enforcement and adjudication thereof; (4) a charge imposed for entrance to or use of local government property, or the purchase, rental, or lease of local government property; (5) A fine, penalty, or other monetary charge imposed by the judicial branch of government or a local government, as a result of a violation of law; (6) a charge imposed as a condition of property development; and (7) assessments and property-related fees imposed in accordance with the provisions of Article XIIID. Proposition 26 provides that the local 28

35 government bears the burden of proving by a preponderance of the evidence that a levy, charge, or other exaction is not a tax, that the amount is no more than necessary to cover the reasonable costs of the governmental activity, and that the manner in which those costs are allocated to a payor bear a fair or reasonable relationship to the payor s burdens on, or benefits received from, the governmental activity. Article XIIIC and Article XIIID of the California Constitution On November 5, 1996, the voters of the State approved Proposition 218, popularly known as the Right to Vote on Taxes Act. Proposition 218 added to the California Constitution Articles XIIIC and XIIID (respectively, Article XIIIC and Article XIIID ), which contain a number of provisions affecting the ability of local agencies, including school districts, to levy and collect both existing and future taxes, assessments, fees and charges. According to the Title and Summary of Proposition 218 prepared by the California Attorney General, Proposition 218 limits the authority of local governments to impose taxes and property-related assessments, fees and charges. Among other things, Article XIIIC establishes that every tax is either a general tax (imposed for general governmental purposes) or a special tax (imposed for specific purposes), prohibits special purpose government agencies such as school districts from levying general taxes, and prohibits any local agency from imposing, extending or increasing any special tax beyond its maximum authorized rate without a two-thirds vote; and also provides that the initiative power will not be limited in matters of reducing or repealing local taxes, assessments, fees and charges. Article XIIIC further provides that no tax may be assessed on property other than ad valorem property taxes imposed in accordance with Articles XIII and XIIIA of the California Constitution and special taxes approved by a two-thirds vote under Article XIIIA, Section 4. Article XIIID deals with assessments and propertyrelated fees and charges, and explicitly provides that nothing in Article XIIIC or XIIID will be construed to affect existing laws relating to the imposition of fees or charges as a condition of property development. The District does not impose any taxes, assessments, or property-related fees or charges which are subject to the provisions of Proposition 218. It does, however, receive a portion of the basic 1% ad valorem property tax levied and collected by the County pursuant to Article XIIIA of the California Constitution. 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. Propositions 98 and 111 On November 8, 1988, voters approved Proposition 98, a combined initiative constitutional amendment and statute called the Classroom Instructional Improvement and Accountability Act (the Accountability Act ). Certain provisions of the Accountability Act have, however, been modified by Proposition 111, discussed below, the provisions of which became effective on July 1, The Accountability Act changed State funding of public education below the university level and the operation of the State s appropriations limit. The Accountability Act guarantees State funding for K-12 school districts and community college districts (hereinafter referred to collectively as K-14 school districts ) at a level equal to the greater of (a) the same percentage of State general fund revenues as the percentage appropriated to such districts in , and (b) the amount actually appropriated to such districts from the State general fund in the previous fiscal year, adjusted for increases in enrollment and changes in the cost of living. The Accountability Act permits the Legislature to suspend this formula for a one-year period. 29

36 The Accountability Act also changed how tax revenues in excess of the State appropriations limit are distributed. Any excess State tax revenues up to a specified amount are, instead of being returned to taxpayers, is transferred to K-14 school districts. Any such transfer to K-14 school districts would be excluded from the appropriations limit for K-14 school districts and the K-14 school district appropriations limit for the next year is automatically increased by the amount of such transfer. These additional moneys enter the base funding calculation for K-14 school districts for subsequent years, creating further pressure on other portions of the State budget, particularly if revenues decline in a year following an Article XIIIB surplus. The maximum amount of excess tax revenues which can be transferred to K-14 school districts is 4% of the minimum State spending for education mandated by the Accountability Act. Since the Accountability Act is unclear in some details, there can be no assurances that the Legislature or a court might not interpret the Accountability Act to require a different percentage of State general fund revenues to be allocated to K-14 school districts, or to apply the relevant percentage to the State s budgets in a different way than is proposed in the Governor s Budget. On June 5, 1990, the voters approved Proposition 111 (Senate Constitutional Amendment No. 1) called the Traffic Congestion Relief and Spending Limitations Act of 1990 ( Proposition 111 ) which further modified Article XIIIB and Sections 8 and 8.5 of Article XVI of the State Constitution with respect to appropriations limitations and school funding priority and allocation. The most significant provisions of Proposition 111 are summarized as follows: a. Annual Adjustments to Spending Limit. The annual adjustments to the Article XIIIB spending limit were liberalized to be more closely linked to the rate of economic growth. Instead of being tied to the Consumer Price Index, the change in the cost of living is now measured by the change in California per capita personal income. The definition of change in population specifies that a portion of the State s spending limit is to be adjusted to reflect changes in school attendance. b. Treatment of Excess Tax Revenues. Excess tax revenues with respect to Article XIIIB are now determined based on a two-year cycle, so that the State can avoid having to return to taxpayers excess tax revenues in one year if its appropriations in the next fiscal year are under its limit. In addition, the Proposition 98 provision regarding excess tax revenues was modified. After any two-year period, if there are excess State tax revenues, 50% of the excess are to be transferred to K-14 school districts with the balance returned to taxpayers; under prior law, 100% of excess State tax revenues went to K-14 school districts, but only up to a maximum of 4% of the schools minimum funding level. Also, reversing prior law, any excess State tax revenues transferred to K-14 school districts are not built into the school districts base expenditures for calculating their entitlement for State aid in the next year, and the State s appropriations limit is not to be increased by this amount. c. Exclusions from Spending Limit. Two exceptions were added to the calculation of appropriations which are subject to the Article XIIIB spending limit. First, there are excluded all appropriations for qualified capital outlay projects as defined by the Legislature. Second, there are excluded any increases in gasoline taxes above the 1990 level (then nine cents per gallon), sales and use taxes on such increment in gasoline taxes, and increases in receipts from vehicle weight fees above the levels in effect on January 1, These latter provisions were necessary to make effective the transportation 30

37 funding package approved by the Legislature and the Governor, which was expected to raise over $15 billion in additional taxes from 1990 through 2000 to fund transportation programs. d. Recalculation of Appropriations Limit. The Article XIIIB appropriations limit for each unit of government, including the State, is to be recalculated beginning in fiscal year It is based on the actual limit for fiscal year , adjusted forward to as if Proposition 111 had been in effect. e. School Funding Guarantee. There is a complex adjustment in the formula enacted in Proposition 98 which guarantees K-14 school districts a certain amount of State general fund revenues. Under prior law, K-14 school districts were guaranteed the greater of (1) 40.9% of State general fund revenues ( Test 1 ) or (2) the amount appropriated in the prior year adjusted for changes in the cost of living (measured as in Article XIIIB by reference to per capita personal income) and enrollment ( Test 2 ). Under Proposition 111, schools will receive the greater of (1) Test 1, (2) Test 2, or (3) a third test ( Test 3 ), which will replace Test 2 in any year when growth in per capita State general fund revenues from the prior year is less than the annual growth in California per capital personal income. Under Test 3, schools will receive the amount appropriated in the prior year adjusted for change in enrollment and per capita State general fund revenues, plus an additional small adjustment factor. If Test 3 is used in any year, the difference between Test 3 and Test 2 will become a credit to schools which will be paid in future years when State general fund revenue growth exceeds personal income growth. Proposition 39 On November 7, 2000, California voters approved an amendment (commonly known as Proposition 39) to the California Constitution. This amendment (1) allows school facilities bond measures to be approved by 55% (rather than two-thirds) of the voters in local elections and permits property taxes to exceed the current 1% limit in order to repay the bonds and (2) changes existing statutory law regarding charter school facilities. As adopted, the constitutional amendments may be changed only with another Statewide vote of the people. The statutory provisions could be changed by a majority vote of both houses of the Legislature and approval by the Governor, but only to further the purposes of the proposition. The local school jurisdictions affected by this proposition are K-12 school districts, including the District, community college districts, and county offices of education. As noted above, the California Constitution previously limited property taxes to 1% of the value of property, and property taxes could only exceed this limit to pay for (1) any local government debts approved by the voters prior to July 1, 1978 or (2) bonds to buy or improve real property that receive two-thirds voter approval after July 1, The 55% vote requirement applies only if the local bond measure presented to the voters includes: (1) a requirement that the bond funds can be used only for construction, rehabilitation, equipping of school facilities, or the acquisition or lease of real property for school facilities; (2) a specific list of school projects to be funded and certification that the school board has evaluated safety, class size reduction, and information technology needs in developing the list; and (3) a requirement that the school board conduct annual, independent financial and performance audits until all bond funds have been spent to ensure that the bond funds have been used only for the projects listed in the measure. Legislation approved in June 2000 placed certain limitations on local school bonds to be approved by 55% of the voters. These provisions require that the tax rate per $100,000 of taxable property value projected to be levied as the result of any single election be no more than $60 (for a unified school 31

38 district), $30 (for a high school or elementary school district), or $25 (for a community college district). These requirements are not part of Proposition 39 and can be changed with a majority vote of both houses of the Legislature and approval by the Governor. Proposition 1A and Proposition 22 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 two-third approval of both houses of the State Legislature or (iv) decrease Vehicle License Fee revenues without providing local governments with equal replacement funding. 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 22, The Local Taxpayer, Public Safety, and Transportation Protection Act, approved by the voters of the State on November 2, 2010, prohibits the State from enacting new laws that require redevelopment agencies to shift funds to schools or other agencies and eliminates the State s authority to shift property taxes temporarily during a severe financial hardship of the State. In addition, Proposition 22 restricts the State s authority to use State fuel tax revenues to pay debt service on state transportation bonds, to borrow or change the distribution of state fuel tax revenues, and to use vehicle license fee revenues to reimburse local governments for state mandated costs. Proposition 22 impacts resources in the State s general fund and transportation funds, the State s main funding source for schools and community colleges, as well as universities, prisons and health and social services programs. According to an analysis of Proposition 22 submitted by the Legislative Analyst s Office (the LAO ) on July 15, 2010, the reduction in resources available for the State to spend on these other programs as a consequence of the passage of Proposition 22 was expected to be approximately $1 billion in fiscal year , with an estimated immediate fiscal effect equal to approximately 1% of the State s total general fund spending. The longer-term effect of Proposition 22, according to the LAO analysis, will be an increase in the State s general fund costs by approximately $1 billion annually for several decades. See also DISTRICT FINANCIAL INFORMATION State Dissolution of Redevelopment Agencies herein. Jarvis vs. Connell On May 29, 2002, the California Court of Appeal for the Second District decided the case of Howard Jarvis Taxpayers Association, et al. v. Kathleen Connell (as Controller of the State of California). The Court of Appeal held that either a final budget bill, an emergency appropriation, a selfexecuting authorization pursuant to state statutes (such as continuing appropriations) or the California Constitution or a federal mandate is necessary for the State Controller to disburse funds. The foregoing requirement could apply to amounts budgeted by the District as being received from the State. To the extent the holding in such case would apply to State payments reflected in the District s budget, the requirement that there be either a final budget bill or an emergency appropriation may result in the delay of such payments to the District if such required legislative action is delayed, unless the payments are self-executing authorizations or are subject to a federal mandate. On May 1, 2003, the California Supreme Court upheld the holding of the Court of Appeal, stating that the Controller is not authorized under State law to disburse funds prior to the enactment of a budget or other proper appropriation, but 32

39 under federal law, the Controller is required, notwithstanding a budget impasse and the limitations imposed by State law, to timely pay those State employees who are subject to the minimum wage and overtime compensation provisions of the federal Fair Labor Standards Act. Proposition 30 On November 6, 2012, voters of the State of California approved the Temporary Taxes to Fund Education, Guaranteed Local Public Safety Funding, Initiative Constitutional Amendment (also known as Proposition 30 ), which temporarily increases the State Sales and Use Tax and personal income tax rates on higher incomes. Proposition 30 temporarily imposes an additional tax on all retailers, at the rate of 0.25% of gross receipts from the sale of all tangible personal property sold in the State from January 1, 2013 to December 31, Proposition 30 also imposes an additional excise tax on the storage, use, or other consumption in the State of tangible personal property purchased from a retailer on and after January 1, 2013 and before January 1, 2017, for storage, use, or other consumption in the State. This excise tax will be levied at a rate of 0.25% of the sales price of the property so purchased. For personal income taxes imposed beginning in the taxable year commencing January 1, 2012 and ending December 31, 2018, Proposition 30 increases the marginal personal income tax rate by: (i) 1% for taxable income over $250,000 but less than $300,000 for single filers (over $340,000 but less than $408,000 for joint filers), (ii) 2% for taxable income over $300,000 but less than $500,000 for single filers (over $408,000 but less than $680,000 for joint filers), and (iii) 3% for taxable income over $500,000 for single filers (over $608,000 for joint filers). The revenues generated from the temporary tax increases will be included in the calculation of the Proposition 98 minimum funding guarantee for school districts and community college districts. See CONSTITUTIONAL AND STATUTORY PROVISIONS AFFECTING DISTRICT REVENUES AND APPROPRIATIONS Proposition 98 and 111 herein. From an accounting perspective, the revenues generated from the temporary tax increases will be deposited into the State account created pursuant to Proposition 30 called the Education Protection Account (the EPA ). Pursuant to Proposition 30, funds in the EPA will be allocated quarterly, with 89% of such funds provided to schools districts and 11% provided to community college districts. The funds will be distributed to school districts and community college districts in the same manner as existing unrestricted per-student funding, except that no school district will receive less than $200 per unit of ADA and no community college district will receive less than $100 per full time equivalent student. The governing board of each school district and community college district is granted sole authority to determine how the moneys received from the EPA are spent, provided that, the appropriate governing board is required to make these spending determinations in open session at a public meeting and such local governing boards are prohibited from using any funds from the EPA for salaries or benefits of administrators or any other administrative costs. Future Initiatives Article XIIIA, Article XIIIB, Article XIIIC and Article XIIID of the California Constitution and Propositions 98, 39, 22, 26 and 30 were each adopted as measures that qualified for the ballot pursuant to the State s initiative process. From time to time other initiative measures could be adopted further affecting District revenues or the District s ability to expend revenues. The nature and impact of these measures cannot be anticipated by the District. 33

40 DISTRICT FINANCIAL INFORMATION The information in this section concerning the District s general fund finances is provided as supplementary information only, and it should not be inferred from the inclusion of this information in this Official Statement that the principal and Accreted Value of or interest on the Bonds is payable from the general fund of the District. The Bonds are payable from the proceeds of an ad valorem tax required to be levied by the County on taxable property within the District in an amount sufficient for the payment thereof. See THE BONDS Security and Sources of Payment herein. State Funding of Education School district revenues consist primarily of guaranteed State moneys, local property taxes and funds received from the State in the form of categorical aid under ongoing programs of local assistance. All State aid is subject to the appropriation of funds in the State s annual budget. Revenue Limit Funding. Previously, school districts operated under general purpose revenue limits established by the State Department of Education. In general, revenue limits were calculated for each school district by multiplying the ADA for such district by a base revenue limit per unit of ADA. Revenue limit calculations were subject to adjustment in accordance with a number of factors designed to provide cost of living adjustments ( COLAs ) and to equalize revenues among school districts of the same type. Funding of a school district s revenue limit was provided by a mix of local property taxes and State apportionments of basic and equalization aid. Beginning in fiscal year , school districts will be funded based on uniform funding grants assigned to certain grade spans. See Local Control Funding Formula herein. The following table reflects the District s historical ADA and the revenue limit rates per unit of ADA for fiscal years through (1) AVERAGE DAILY ATTENDANCE AND REVENUE LIMITS Fiscal Years through Baldwin Park Unified School District Fiscal Year Average Daily Attendance (1) Base Revenue Limit Per ADA Deficit Revenue Limit Per ADA (2) ,728 $6, $5, ,340 6, , ,980 6, , ,630 6, , ,256 6, , Reflects ADA as of the second principal reporting period (P-2 ADA), ending on or before the last attendance month prior to April 15 of each school year. (2) Deficit revenue limit funding, when provided for in State budgetary legislation, reduced the revenue limit allocations received by school districts by applying a deficit factor to the base revenue limit for the given fiscal year, and resulted from an insufficiency of appropriation funds in the State budget to provide for State aid owed to school districts. The State s practice of deficit revenue limit funding was most recently reinstated beginning in fiscal year , and discontinued following the implementation of the LCFF (as defined herein). Source: Baldwin Park Unified School District. 34

41 Local Control Funding Formula. State Assembly Bill 97 (Stats. 2013, Chapter 47) ( AB 97 ), enacted as part of the State budget, establishes a new system for funding school districts, charter schools and county offices of education. Certain provisions of AB 97 were amended and clarified by Senate Bill 91 (Stats. 2013, Chapter 49). The primary component of AB 97, as amended by SB 91, is the implementation of the Local Control Funding Formula ( LCFF ), which replaces the revenue limit funding system for determining State apportionments, as well as the majority of categorical program funding. State allocations will be provided on the basis of target base funding grants per unit of ADA (a Base Grant ) assigned to each of four grade spans. Each Base Grant is subject to certain adjustments and add-ons, as discussed below. Full implementation of the LCFF is expected to occur over a period of several fiscal years. Beginning in fiscal year , an annual transition adjustment will be calculated for each school district, equal to such district s proportionate share of appropriations included in the State budget to close the gap between the prior-year funding level and the target allocation following full implementation of the LCFF. In each year, school districts will have the same proportion of their respective funding gaps closed, with dollar amounts varying depending on the size of a district s funding gap. For fiscal year , the Base Grants per unit of ADA for each grade span are as follows: (i) $6,845 for grades K-3; (ii) $6,947 for grades 4-6; (iii) $7,154 for grades 7-8; and (iv) $8,289 for grades In each subsequent year, the Base Grants are to be adjusted for cost-of-living increases by applying the implicit price deflator for government goods and services. Following full implementation of the LCFF, the provision of COLAs will be subject to appropriation for such adjustment in the annual State budget. The differences among Base Grants are linked to differentials in statewide average revenue limit rates by district type, and are intended to recognize the generally higher costs of education at higher grade levels. The Base Grants for grades K-3 and 9-12 are subject to adjustments of 10.4% and 2.6%, respectively, to cover the costs of class size reduction in early grades and the provision of career technical education in high schools. Following full implementation of the LCFF, and unless otherwise collectively bargained for, school districts serving students in grades K-3 must maintain an average class enrollment of 24 or fewer students in grades K-3 at each school site in order to continue receiving the adjustment to the K-3 Base Grant. Such school districts must also make progress towards this class size reduction goal in proportion to the growth in their funding over the implementation period. Additional add-ons are also provided to school districts that received categorical block grant funding pursuant to the Targeted Instructional Improvement and Home-to-School Transportation programs during fiscal year School districts that serve students of limited English proficiency ( EL students), students from low income families that are eligible for free or reduced priced meals ( LI students) and foster youth are eligible to receive additional funding grants. Enrollment counts are unduplicated, such that students may not be counted as both EL and LI (foster youth automatically meet the eligibility requirements for free or reduced priced meals). A supplemental grant add-on (each, a Supplemental Grant ) is authorized for school districts that serve EL/LI students, equal to 20% of the applicable Base Grant multiplied by such districts percentage of unduplicated EL/LI student enrollment. School districts whose EL/LI populations exceed 55% of their total enrollment are eligible for a concentration grant add-on (each, a Concentration Grant ) equal to 50% of the applicable Base Grant multiplied the percentage of such district s unduplicated EL/LI student enrollment in excess of the 55% threshold. 35

42 The following table shows a breakdown of the District s ADA by grade span, total enrollment, and the percentage of EL/LI student enrollment, for fiscal years and (1) ADA, ENROLLMENT AND EL/LI ENROLLMENT PERCENTAGE Fiscal Years and Baldwin Park Unified School District Average Daily Attendance (1) Enrollment Fiscal Year K Total ADA Total Enrollment (2) % of EL/LI Enrollment (2) ,443 3,256 2,228 4,329 14,256 14,796 87% ,349 3,187 2,182 4,238 13,956 14, Projected P-2 ADA. (2) As of October report submitted to the California Basic Educational Data System ( CBEDS ). For purposes of calculating Supplemental and Concentration Grants, a school district s fiscal year percentage of unduplicated EL/LI students will be expressed solely as a percentage of its total fiscal year total enrollment. For fiscal year , the percentage of unduplicated EL/LI enrollment will be based on the two-year average of EL/LI enrollment in fiscal years and Beginning in fiscal year , a school district s percentage of unduplicated EL/LI students will be based on a rolling average of such district s EL/LI enrollment for the then-current fiscal year and the two immediately preceding fiscal years. Source: Baldwin Park Unified School District. For certain school districts that would have received greater funding levels under the prior revenue limit system, the LCFF provides for a permanent economic recovery target ( ERT ) add-on, equal to the difference between the revenue limit allocations such districts would have received under the prior system in fiscal year , and the target LCFF allocations owed to such districts in the same year. To derive the projected funding levels, the LCFF assumes the discontinuance of deficit revenue limit funding, implementation of a 1.94% COLA in fiscal years through , and restoration of categorical funding to pre-recession levels. The ERT add-on will be paid incrementally over the implementing period of the LCFF. The District does not qualify for the ERT add-on. The sum of a school district s adjusted Base, Supplemental and Concentration Grants will be multiplied by such district s P-2 ADA for the current or prior year, whichever is greater (with certain adjustments applicable to small school districts). This funding amount, together with any applicable ERT or categorical block grant add-ons, will yield a district s total LCFF allocation. Generally, the amount of annual State apportionments received by a school district will amount to the difference between such total LCFF allocation and such district s share of applicable local property taxes. Most school districts receive a significant portion of their funding from such State apportionments. As a result, decreases in State revenues may significantly affect appropriations made by the Legislature to school districts. Certain schools districts, known as basic aid districts, have allocable local property tax collections that equal or exceed such districts total LCFF allocation, and result in the receipt of no State apportionment aid. Basic aid school districts receive only special categorical funding, which is deemed to satisfy the basic aid requirement of $120 per student per year guaranteed by Article IX, Section 6 of the State Constitution. The implication for basic aid districts is that the legislatively determined allocations to school districts, and other politically determined factors, are less significant in determining their primary funding sources. Rather, property tax growth and the local economy are the primary determinants. The District does not currently qualify as a basic aid district. Accountability. The State Board of Education is required to promulgate regulations on or before January 31, 2014 regarding the expenditure of supplemental and concentration funding. These regulations will include a requirement that school districts increase or improve services for EL/LI students 36

43 in proportion to the increase in funds apportioned to such districts on the basis of the number and concentration of such EL/LI students, as well as the conditions under which school districts can use supplemental or concentration funding on a school-wide or district-wide basis. School districts are also required to adopt local control and accountability plans ( LCAPs ) disclosing annual goals for all students, as well as certain numerically significant student subgroups, to be achieved in eight areas of State priority identified by the LCFF. LCAPs may also specify additional local priorities. LCAPs must specify the actions to be taken to achieve each goal, including actions to correct identified deficiencies with regard to areas of State priority. LCAPs are required to be adopted every three years, beginning in fiscal year , and updated annually thereafter. The State Board of Education is required to develop and adopt a template LCAP on or before March 31, 2014 for use by school districts. Support and Intervention. AB 97, as amended by SB 91, establishes a new system of support and intervention to assist school districts meet the performance expectations outlined in their respective LCAPs. School districts must adopt their LCAPs (or annual updates thereto) in tandem with their annual operating budgets, and not later than five days thereafter submit such LCAPs or updates to their respective county superintendents of schools. On or before August 15 of each year, a county superintendent may seek clarification regarding the contents of a district s LCAP or annual update thereto, and the district is required to respond to such a request within 15 days. Within 15 days of receiving such a response, the county superintendent can submit non-binding recommendations for amending the LCAP or annual update, and such recommendations must be considered by the respective school district at a public hearing within 15 days. A district s LCAP or annual update must be approved by the county superintendent by October 8 of each year if the superintendent determines that (i) the LCAP or annual update adheres to the State template, and (ii) the district s budgeted expenditures are sufficient to implement the actions and strategies outlined in the LCAP. A school district is required to receive additional support if its respective LCAP or annual update thereto is not approved, if the district requests technical assistance from its respective county superintendent, or if the district does not improve student achievement across more than one State priority for one or more student subgroups. Such support can include a review of a district s strengths and weaknesses in the eight State priority areas, or the assignment of an academic expert to assist the district identify and implement programs designed to improve outcomes. Assistance may be provided by the California Collaborative for Educational Excellence, a state agency created by the LCFF and charged with assisting school districts achieve the goals set forth in their LCAPs. On or before October 1, 2015, the State Board of Education is required to develop rubrics to assess school district performance and the need for support and intervention. The State Superintendent of Public Instruction (the State Superintendent ) is further authorized, with the approval of the State Board of Education, to intervene in the management of persistently underperforming school districts. The State Superintendent may intervene directly or assign an academic trustee to act on his or her behalf. In so doing, the State Superintendent is authorized (i) to modify a district s LCAP, (ii) impose budget revisions designed to improve student outcomes, and (iii) stay or rescind actions of the local governing board that would prevent such district from improving student outcomes; provided, however, that the State Superintendent is not authorized to rescind an action required by a local collective bargaining agreement. Other State Sources. In addition to State allocations determined pursuant to the LCFF, the District receives other State revenues consisting primarily of restricted revenues designed to implement State mandated programs. Beginning in fiscal year , categorical spending restrictions associated 37

44 with a majority of State mandated programs were eliminated, and funding for these programs was folded into the LCFF. Categorical funding for 14 programs was excluded from the LCFF including, among others, child nutrition, after school education and safety, special education, and State preschool and school districts will continue to receive restricted State revenues to fund these programs. Other Funding Sources The federal government provides funding for several school district programs, including specialized programs such as No Child Left Behind, special education programs, and programs under the Educational Consolidation and Improvement Act. In addition, a small part of a school district s budget is from local sources other than property taxes, including but not limited to interest income, leases and rentals, educational foundations, donations and sales of property. State Dissolution of Redevelopment Agencies On December 30, 2011, the California Supreme Court issued its decision in the case of California Redevelopment Association v. Matosantos ( Matosantos ), finding ABx1 26, a trailer bill to the State budget, to be constitutional. As a result, all Redevelopment Agencies in California ceased to exist as a matter of law on February 1, The Court in Matosantos also found that ABx1 27, a companion bill to ABx1 26, violated the California Constitution, as amended by Proposition 22. See CONSTITUTIONAL AND STATUTORY PROVISIONS AFFECTING DISTRICT REVENUES AND APPROPRIATIONS Proposition 1A and Proposition 22 herein. ABx1 27 would have permitted redevelopment agencies to continue operations provided their establishing cities or counties agreed to make specified payments to K-14 school districts and county offices of education, totaling $1.7 billion statewide. ABx1 26 was modified by Assembly Bill No (Chapter 26, Statutes of ) ( AB 1484 ), which, together with ABx1 26, is referred to herein as the Dissolution Act. The Dissolution Act provides that all rights, powers, duties and obligations of a redevelopment agency under the California Community Redevelopment Law that have not been repealed, restricted or revised pursuant to ABx1 26 will be vested in a successor agency, generally the county or city that authorized the creation of the redevelopment agency (each, a Successor Agency ). All property tax revenues that would have been allocated to a redevelopment agency, less the corresponding county auditor-controller s cost to administer the allocation of property tax revenues, are now allocated to a corresponding Redevelopment Property Tax Trust Fund ( Trust Fund ), to be used for the payment of pass-through payments to local taxing entities, and thereafter to bonds of the former redevelopment agency and any enforceable obligations of the Successor Agency, as well as to pay certain administrative costs. The Dissolution Act defines enforceable obligations to include bonds, loans, legally required payments, judgments or settlements, legal binding and enforceable obligations, and certain other obligations. Among the various types of enforceable obligations, the first priority for payment is tax allocation bonds issued by the former redevelopment agency; second is revenue bonds, which may have been issued by the host city, but only where the tax increment revenues were pledged for repayment and only where other pledged revenues are insufficient to make scheduled debt service payments; third is administrative costs of the Successor Agency, equal to at least $250,000 in any year, unless the oversight board reduces such amount for any fiscal year or a lesser amount is agreed to by the Successor Agency; then, fourth tax revenues in the Trust Fund in excess of such amounts, if any, will be allocated as residual distributions to local taxing entities in the same proportions as other tax revenues. Moreover, all unencumbered cash and other assets of former redevelopment agencies will also be allocated to local taxing entities in the same proportions as tax revenues. Notwithstanding the foregoing portion of this paragraph, the order of payment is subject to modification in the event a Successor Agency timely reports to the Controller and 38

45 the Department of Finance that application of the foregoing will leave the Successor Agency with amounts insufficient to make scheduled payments on enforceable obligations. If the county auditorcontroller verifies that the Successor Agency will have insufficient amounts to make scheduled payments on enforceable obligations, it shall report its findings to the Controller. If the Controller agrees there are insufficient funds to pay scheduled payments on enforceable obligations, the amount of such deficiency shall be deducted from the amount remaining to be distributed to taxing agencies, as described as the fourth distribution above, then from amounts available to the Successor Agency to defray administrative costs. In addition, if a taxing agency entered into an agreement pursuant to Health and Safety Code Section for payments from a redevelopment agency under which the payments were to be subordinated to certain obligations of the redevelopment agency, such subordination provisions shall continue to be given effect. As noted above, the Dissolution Act expressly provides for continuation of pass-through payments to local taxing entities. Per statute, 100% of contractual and statutory two percent passthroughs, and 56.7% of statutory pass-throughs authorized under the Community Redevelopment Law Reform Act of 1993 (AB 1290, Chapter 942, Statutes of 1993) ( AB 1290 ), are restricted to educational facilities without offset against revenue limit apportionments by the State. Only 43.3% of AB 1290 passthroughs are offset against State aid so long as the affected local taxing entity uses the moneys received for land acquisition, facility construction, reconstruction, or remodeling, or deferred maintenance as provided under Education Code Section 42238(h). ABX1 26 states that in the future, pass-throughs shall be made in the amount which would have been received... had the redevelopment agency existed at that time, and that the county auditorcontroller shall determine the amount of property taxes that would have been allocated to each redevelopment agency had the redevelopment agency not been dissolved pursuant to the operation of [ABX1 26] using current assessed values... and pursuant to statutory [pass-through] formulas and contractual agreements with other taxing agencies. Successor Agencies continue to operate until all enforceable obligations have been satisfied and all remaining assets of the Successor Agency have been disposed of. AB 1484 provides that once the debt of the Successor Agency is paid off and remaining assets have been disposed of, the Successor Agency shall terminate its existence and all pass-through payment obligations shall cease. The District can make no representations as to the extent to which its base apportionments from the State may be offset by the future receipt of residual distributions or from unencumbered cash and assets of former redevelopment agencies any other surplus property tax revenues pursuant to the Dissolution Act. State Budget Measures The following information concerning the State s budgets has been obtained from publicly available information which the District believes to be reliable; however, the District does not guarantee the accuracy or completeness of this information and has not independently verified such information. Furthermore, it should not be inferred from the inclusion of this information in this Official Statement that the principal and Accreted Value of or interest on the Bonds is payable from the general fund of the District. The Bonds are payable from the proceeds of an ad valorem tax required to be levied by the County on taxable property within the District in an amount sufficient for the payment thereof Budget. On June 27, 2013, the Governor signed into law the State budget for fiscal year (the Budget ). In July 2013, the Legislative Analyst s Office (the LAO ) released a preliminary version of a report entitled California Spending Plan which outlined key provisions of the 39

46 Budget. The LAO released the final version of the California Spending Plan in November of 2013, updated to reflect various budget-related bills signed by the Governor between July and October of The following information is drawn from the final version of the California Spending Plan. The Budget generally adopts the revenue projections included in the Governor s May revision to the proposed budget. However, the Budget also adopts certain LAO estimates regarding tax increment revenue collections and baseline property tax revenues. The Budget projects total general fund revenues for fiscal year of $98.2 billion, and general fund expenditures of $95.7 billion. The Budget projects that the State will end the fiscal year with a $254 million general fund surplus. For fiscal year , general fund revenues are projected at $97.1 billion and expenditures at $96.3, leaving the State with a projected general fund surplus for fiscal year of approximately $1.1 billion. As adopted, the Budget did not reflect the adoption of Senate Bill 105 in September of 2013, which appropriated $315 million of general fund support to the State Department of Corrections and Rehabilitation. After accounting for this legislation, the LAO estimates the projected general fund surplus for fiscal year to be approximately $700 million. For fiscal year , the Proposition 98 minimum funding guarantee is set at $56.5 billion, including $40.5 billion of support from the State general fund. This funding level is approximately $2.9 billion higher than that set by the adopted budget for fiscal year , due largely to an increase in State general fund revenues that count towards the minimum funding guarantee, as well as a growth in baseline property tax revenues. Although the minimum funding guarantee is higher, fiscal year local property tax collections are $734 million lower than projected by the prior State budget, largely as a result of lower-than projected tax increment revenue collections. As a result, the State general fund cost to support the fiscal year minimum funding guarantee increases by approximately $3.7 billion. For fiscal year , the Proposition 98 minimum funding guarantee is set at $55.3 billion, including $39.1 billion of support from the State general fund. This funding level reflects a total decline of $1.2 billion from the prior year, and results largely from certain provisions of Proposition 98 that exclude a portion of the prior-year appropriation from the calculation of the minimum funding guarantee in fiscal year These provisions are designed to prevent funding appropriations from permanently increasing the minimum funding guarantee in future years, and are implemented when, as in fiscal year , the minimum funding guarantee increased at a much faster rate than per capita personal income. The Budget also projects that property tax collections will be approximately $215 million higher than the prior year, such that the State general fund cost to support the fiscal year minimum funding guarantee is reduced. The budget package authorizes a general fund backfill for school districts and community college districts if redevelopment agency property tax revenues come in lower than anticipated. The Budget provides $48.6 billion of Proposition 98 funding for K-12 education, including $34.7 billion from the State general fund. Significant features related to funding of K-12 education include the following: Local Control Funding Formula $2.1 billion of Proposition 98 funding for school districts and charter schools to support the first-year implementation of the LCFF. This amount is expected to close approximately 12% of funding gap between each district s current revenue limit entitlement and the target funding rates set by the LCFF. See also DISTRICT FINANCIAL INFORMATION State Funding of Education Local Control Funding Formula herein. The Budget also provides $32 million to fund implementation of the LCFF for county offices of education, amounting to almost two-thirds of their LCFF target levels. 40

47 Common Core Implementation $1.25 billion in one-time funding to support the implementation of the new Common Core standards for evaluating student achievement in English-language, arts and math. Of this amount, the Budget counts $250 million towards meeting the minimum funding guarantee. Funding must be spent in fiscal years or for professional development, instructional materials and technology that assist schools align instruction with the Common Core standards. Local governing boards will be required, in a series of public meetings, to discuss and adopt a plan for spending the funds, and must report such expenditures to the California Department of Education by July 1, To begin the transition to Common Core, the State legislature adopted AB 484, which authorizes the suspension of most California standardized tests in fiscal year Career Technical Education Pathways Grant Program $250 million in one-time Proposition 98 funding to create the California Career Pathways Trust, the primary purpose of which will be to improve linkages between career technical (vocational) programs and schools and community colleges, as well as between K-14 education and local businesses. The program authorizes several types of activities, such as creating new technical programs and curriculum. The program is open to school districts, county offices of education, charter schools and community college districts. Funds will be allocated through a competitive grant process, and the State Superintendent of Instruction, in consultation with the Community College Chancellor s Office and interested business organizations, is charged with reviewing grant applications. Grant funds will be available for expenditure in fiscal years through By December 1, 2014, grant recipients must report to the State Legislature and the Governor of program outcomes. K-12 Mandates Block Grant The Budget increases funding for the K-12 mandates block grant by $50 million, for a total of $217 million, to account for the inclusion of the Graduation Requirements mandate within the block grant program. Since the mandate pertains only to high schools, the augmentation will only be available on a per-student basis in grades All other block grant funding continues to be distributed across all students without regard to grade level. Repayment of K-12 Deferrals Since 2002, the State has engaged in the practice of deferring certain apportionments to school districts in order to manage the State s cash flow. This practice has included deferring certain apportionments from one fiscal year to the next. The Budget includes $1.6 billion in Proposition 98 funding to reduce such apportionment deferrals attributable to fiscal year , and $242 million to reduce such deferrals attributable to fiscal year When combined, total funding over the two-year period will reduce outstanding deferrals to $5.6 billion by the end of the fiscal year. Adult Education $25 million of Proposition 98 funding for a new Adult Education Consortium Program. School districts and community college districts that form regional consortia are eligible to apply for funds. While the funds are allocated to the State budget for community college districts, the Budget charges both the State Department of Education and the Community College Chancellor s Office with awarding grants to consortium applicants. The grants, which may be spent over two years, are to be used by consortium members to develop joint plans for serving adult learners in their area. In a related action, the Budget eliminates school district adult education categorical programs and consolidates the associated funding within the LCFF. However, school districts (through their adult schools) are required to spend no less on adult education in fiscal years and than such districts did in fiscal year The

48 Budget maintains the Adults in Correctional Facilities categorical program separate from the LCFF, and provides $15 million in Proposition 98 funding to reimburse program costs. Proposition 39 Implementation Proposition 39 (approved at the November 2012 general election) increases state corporate tax revenues and requires that, for a five year period beginning in fiscal year , a portion of these revenues be applied to energy efficiency and alternative energy projects. The Budget allocates the entire increase associated with these supplemental corporate tax revenues to the calculation of the minimum funding guarantee, and appropriates a total of $467 million for Proposition 39-related programs and support. This includes $381 million for a new energy project grant program for school districts, charter schools and county offices of education. Of this amount, 85% will be distributed based on a per-student basis, and 15% will be distributed based on student eligibility for free and reduced-price meals. In lieu of the per-student allocation, local education agencies with fewer than 2,000 students will receive a minimum grant amount ranging from $15,000 to $100,000, depending on their size. Local education agencies must prioritize projects according to certain criteria, such as the age of facilities to be improved, and must receive approval from the California Energy Commission ( CEC ) for projects prior to expending funds. The Budget also provides $28 million to the CEC to provide low and no-interest loans to school districts, charter schools, community college districts, and county offices of education for eligible energy projects and technical assistance. Special Education Funding Reform Under the Budget, the State s approach to distributing funding for special education local plan areas ( SELPAs ) is simplified by delinking State and federal allocation formulas. The Budget also mitigates federal sequestration cuts by providing $2.6 million in Proposition 98 funding for preschoolers and infants/toddlers with disabilities and allocating $2.1 million of federal carryover funds to K- 12 students with disabilities. The Budget also consolidates 11 special education grants into five larger grants. Redevelopment The Budget anticipates Proposition 98 general fund savings resulting from the dissolution of redevelopment agencies. For fiscal years and , these savings are projected to be $2.1 billion and $1.5 billion, respectively. On an ongoing basis, the Budget estimates annual savings of $825 million. For additional information regarding the State s budgets and revenue projections and a more detailed description of the Budget, see the State Department of Finance website at and the LAO s website at However, the information presented on such websites is not incorporated herein by reference. Fiscal Outlook Report. In November 2013, the LAO released a summary of its revised projections for State general fund tax revenues and related spending (the Fiscal Outlook Report ). The following information is drawn from the Fiscal Outlook Report. The Fiscal Outlook Report provided the LAO s projections of the State s general fund revenues and expenditures for fiscal years through under current law. The LAO s projections primarily reflected current-law spending requirements and tax provisions, while relying on the LAO s independent assessment of the outlook for the State s economy, demographics, revenues, and expenditures. The LAO projects that the State will have a $5.6 billion general fund reserve at the end of fiscal year This projected reserve is the sum of (i) a $234 million ending reserve for fiscal year

49 13, (ii) a $2.2 billion projected operating surplus in fiscal year and (iii) a $3.2 billion projected operating surplus in fiscal year The LAO currently projects that general fund revenue for fiscal year will be $99.8 billion (approximately $1.65 billion higher than projected in the State s Budget). This increase is principally due to higher than expected personal income tax collections. As a result the LAO currently projects that the Proportion 98 minimum funding guarantee for fiscal year will be $58.2 billion (approximately $1.74 billion more than was projected in the Budget), including $42.2 billion of support from the State s general fund (approximately $1.75 billion more than was assumed in the Budget). The higher State revenues result in more than a dollar-for-dollar increase in the Proposition 98 minimum funding guarantee due to the State s decision to make maintenance factor payments under Test 1 of Proposition 98. The State will be making a $5.4 billion maintenance factor payment in fiscal year , which will leave approximately $5.6 billion in outstanding maintenance factor). See CONSTITUTIONAL AND STATUTORY PROVISIONS AFFECTING DISTRICT REVENEUES AND APPROPRIATIONS Proposition 98 and 111 herein. For fiscal year , the LAO currently projects an operating surplus of approximately $1.1 billion higher than was assumed in the Budget. This projection is based primarily on $4.7 billion in higher revenues, largely due to (i) approximately $5.2 billion in higher-than-assumed personal income tax collections, (ii) approximately $3.1 billion in higher-than-assumed general fund Proposition 98 spending, and (iii) $300 million in higher-than-assumed non-proposition 98 general fund spending. The LAO currently projects that Proposition 98 minimum funding guarantee for fiscal year will be $57.96 billion (approximately $2.67 billion more than was projected in the Budget), including $42.1 billion of support from the State s general fund (approximately $3.07 billion more than was assumed in the Budget). This projected increase in the general fund Proposition 98 funding is due in part to the LAO s forecast that local property taxes will be $393 million lower than assumed in Budget. In fiscal year , the LAO estimates that a $941 million maintenance factor will be created (increasing the State s outstanding maintenance factor to approximately $6.8 billion). For fiscal year , the LAO projects an operating surplus of approximately $3.2 billion. This projection is based primarily on the LAO s assumption that: (i) general fund revenues will increase to $ billion ($5.8 billion more than projected general fund revenues of $ billion), (ii) approximately $3.3 billion in higher general fund Proposition 98 minimum funding spending over the projected fiscal year levels and (iii) $1.5 billion in higher non-proposition 98 general fund spending over projected fiscal year levels. The LAO currently projects that Proposition 98 minimum funding guarantee for fiscal year will be $62.2 billion, including $45.4 billion of support from the State s general fund. The Fiscal Outlook Report provides projections through fiscal year While the LAO projects that the Proposition 98 minimum funding guarantee will increase to $73.7 billion in fiscal year , the LAO currently projects that the general fund contribution to Proposition 98 funding over that period will only increase to $49.1 billion due to expected increases in property tax revenues. The LAO also notes that under their current forecast, the State will be unable to meet the time frame it set for full implementation of the LCFF. By , the LAO currently forecasts that the State can fund approximately 90% of the full LCFF cost. See DISTRICT FINANCIAL INFORMAITON State Funding of Education Local Control Funding Formula herein. Additional information regarding the Fiscal Outlook Report may be obtained from the LAO at However, such information is not incorporated herein by any reference. 43

50 Future Actions. The District cannot predict what actions will be taken in the future by the State legislature and the Governor to address changing State revenues and expenditures. The District also cannot predict the impact such actions will have on State revenues available in the current or future years for education. The State budget will be affected by national and State economic conditions and other factors over which the District will have no control. Certain actions or results could produce a significant shortfall of revenue and cash, and could consequently impair the State s ability to fund schools. Continued State budget shortfalls in future fiscal years may also have an adverse financial impact on the financial condition of the District. Budget Process State Budgeting Requirements. The District is required by provisions of the State Education Code to maintain a balanced budget each year, in which the sum of expenditures and the ending fund balance cannot exceed the sum of revenues and the carry-over fund balance from the previous year. The State Department of Education imposes a uniform budgeting and accounting format for school districts. The budget process for school districts was substantially amended by Assembly Bill 1200 ( AB 1200 ), which became State law on October 14, Portions of AB 1200 are summarized below. School districts must adopt a budget on or before July 1 of each year. The budget must be submitted to the county superintendent within five days of adoption or by July 1, whichever occurs first. A district may be on either a dual or single budget cycle. The dual budget option requires a revised and readopted budget by September 1 that is subject to State-mandated standards and criteria. The revised budget must reflect changes in projected income and expenses subsequent to July 1. The single budget is only readopted if it is disapproved by the county office of education, or as needed. The District is on a single budget cycle and adopts its budget on or before July 1. For both dual and single budgets submitted on July 1, the county superintendent will examine the adopted budget for compliance with the standards and criteria adopted by the State Board of Education and identify technical corrections necessary to bring the budget into compliance, will determine if the budget allows the district to meet its current obligations and will determine if the budget is consistent with a financial plan that will enable the district to meet its multi-year financial commitments. On or before August 15, the county superintendent will approve, conditionally approve or disapprove the adopted budget for each school district. Budgets will be disapproved if they fail the above standards. The district board must be notified by August 15 of the county superintendent s recommendations for revision and reasons for the recommendations. The county superintendent may assign a fiscal advisor or appoint a committee to examine and comment on the superintendent s recommendations. The committee must report its findings no later than August 20. Any recommendations made by the county superintendent must be made available by the district for public inspection. No later than August 20, the county superintendent must notify the Superintendent of Public Instruction of all school districts whose budget has been disapproved. For all dual budget options and for single and dual budget option districts whose budgets have been disapproved, the district must revise and readopt its budget by September 8, reflecting changes in projected income and expense since July 1, including responding to the county superintendent s recommendations. The county superintendent must determine if the budget conforms with the standards and criteria applicable to final district budgets and not later than October 8, will approve or disapprove the revised budgets. If the budget is disapproved, the county superintendent will call for the formation of a budget review committee pursuant to Education Code Section Until a district s budget is approved, the district will operate on the lesser of its proposed budget for the current fiscal year or the last budget adopted and reviewed for the prior fiscal year. 44

51 Interim Financial Reports. Under the provisions of AB 1200, each school district is required to file interim certifications with the county office of education as to its ability to meet its financial obligations for the remainder of the then-current fiscal year and, based on current forecasts, for the subsequent fiscal year. The county office of education reviews the certification and issues either a positive, negative or qualified certification. A positive certification is assigned to any school district that will meet its financial obligations for the current fiscal year and subsequent two fiscal years. A negative certification is assigned to any school district that will be unable to meet its financial obligations for the remainder of the fiscal year or subsequent fiscal year. A qualified certification is assigned to any school district that may not meet its financial obligations for the current fiscal year or two subsequent fiscal years. The District is not aware that any adopted budget adopted by the District has been disapproved by the County Superintendent of Schools or that the District has ever elected to report a qualified or negative certification in any interim financial report filed pursuant to AB General Fund Budgeting. The table on the following page summarizes the District s adopted general fund budgets for fiscal years through , ending results for fiscal years through , and projections for fiscal year [REMAINDER OF PAGE LEFT BLANK] 45

52 Fiscal Year GENERAL FUND BUDGETING Fiscal Years through Baldwin Park Unified School District Fiscal Year Fiscal Year Fiscal Year Budget Audited Budget Audited Budgeted Unaudited Budgeted Projected (1) REVENUES LCFF/Revenue Limit Sources (2) $76,750,478 $80,447,907 $74,926,717 $78,678,134 $78,083,927 $77,543,960 $81,166,974 $100,480,236 (3) Federal Sources 12,670,107 17,541,343 11,800,990 13,210,760 10,650,723 10,848,867 9,199,929 10,838,881 Other State Sources 26,010,150 46,442,068 32,143,395 39,005,980 22,836,226 36,434,670 22,650,948 11,889,153 (3) Other Local Sources 977,765 1,749,746 1,531,525 10,454,455 10,586,259 9,947,537 10,897,507 11,254,589 TOTAL REVENUES 116,408, ,181, ,402, ,349, ,157, ,775, ,915, ,462,859 EXPENDITURES Certificated Salaries 62,824,977 65,457,059 59,468,363 64,201,231 59,432,582 60,953,268 60,976,108 64,088,756 Classified Salaries 19,228,260 18,634,102 16,682,325 17,405,987 17,243,736 17,008,732 17,265,719 18,139,824 Employee Benefits 24,528,210 27,032,992 24,829,587 28,527,335 25,919,210 28,438,738 25,097,756 24,494,963 Books & Supplies 3,295,474 2,916,760 7,608,146 4,390,222 5,088,406 3,750,861 4,454,386 9,305,970 Services & Other Operating Expenses 11,972,624 11,823,092 11,298,893 11,160,067 9,842,159 9,489,277 10,845,838 13,448,406 Other Outgo 3,145,478 9,342,163 9,441,997 8,416,513 11,009,617 8,797,492 11,792,375 12,023,519 Capital Outlay 137, , , , , ,956 23,000 37,142 Transfers of Indirect Costs (251,662) (216,861) Debt Service Principal 1,368, , , , Interest , , , TOTAL EXPENDITURES 126,500, ,815, ,532, ,725, ,728, ,546, ,203, ,321,719 EXCESS (DEFICIENCY) OF REVENUES OVER EXPENDITURES (10,092,081) 9,365,451 (9,129,684) 5,623,782 (6,571,575) 5,228,190 (6,288,162) (6,858,860) OTHER FINANCING SOURCES/(USES) Transfers In 8,300,000 4,380,000 5,500,000 3,917,573 5,770, ,500, Transfers Out (700,000) (11,004,584) (1,017,038) (12,060,711) (725,790) (6,175,819) (705,790) (305,790) TOTAL OTHER FINANCING SOURCES/(USES) 7,600,000 (6,624,584) 4,482,962 (8,143,138) 5,044,210 (6,175,819) 3,794,210 (305,790) NET INCREASE (DECREASE) IN FUND (2,492,081) 2,740,867 (4,646,722) (2,519,356) (1,527,365) (947,629) (2,493,952) (7,164,650) BALANCE Fund Balance - Beginning 10,902,931 10,902,931 13,643,798 13,643,798 12,618,630 12,618,630 11,671,001 11,671,001 Fund Balance - Ending $8,410,850 $13,643,798 $8,997,076 $11,124,442 $11,091,265 $11,671,001 $9,177,049 $4,506,351 (1) From the District s first interim financial report for fiscal year , dated as of December 10, (2) Beginning with the first interim financial report for fiscal year , this category of funds is coded as LCFF/Revenue Limit Sources. (3) Variances between budgeted and projected amounts for these funding sources reflects the transition of most categorical program funding to the LCFF. Source: Baldwin Park Unified School District. 46

53 Accounting Practices The accounting practices of the District conform to generally accepted accounting principles in accordance with policies and procedures of the California School Accounting Manual. This manual, according to Section of the California Education Code, is to be followed by all California school districts. The District s expenditures are accrued at the end of the fiscal year to reflect the receipt of goods and services in that year. Revenues generally are recorded on a cash basis, except for items that are susceptible to accrual (measurable and/or available to finance operations). Current taxes are considered susceptible to accrual. Delinquent taxes not received after the fiscal year end are not recorded as revenue until received. Revenues from specific state and federally funded projects are recognized when qualified expenditures have been incurred. State block grant apportionments are accrued to the extent that they are measurable and predictable. The State Department of Education sends the District updated information from time to time explaining the acceptable accounting treatment of revenue and expenditure categories. The District s accounting is organized on the basis of fund groups, with each group consisting of a separate set of self-balancing accounts containing assets, liabilities, fund balances, revenues and expenditures. The major fund classification is the general fund which accounts for all financial resources not requiring a special type of fund. The District s fiscal year begins on July 1 and ends on June 30. Comparative Financial Statements The District s general fund finances the legally authorized activities of the District for which restricted funds are not provided. General fund revenues are derived from such sources as State school fund apportionments, taxes, use of money and property, and aid from other governmental agencies. Certain information from the financial statements follows. Excerpts from the District s audited financial statements for the year ended June 30, 2012 are included for reference in APPENDIX B hereto. For fiscal years ended June 30, 2003 and later, the District has implemented GASB Statements Nos. 34 and 35. Among the changes implemented under these revised accounting rules is a change in the financial reporting format. While historical total revenue and expenditures figures are comparably consistent to prior years, the breakdown of revenues and expenditures follows functional categories rather than object-oriented categories. The table on the following page reflects the District s general fund revenues, expenditures and changes in fund balance for fiscal years through under the revised reporting format. [REMAINDER OF PAGE LEFT BLANK] 47

54 AUDITED STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES GENERAL FUND Fiscal Years through Baldwin Park Unified School District (Revised Reporting Format) Fiscal Year Fiscal Year Fiscal Year Fiscal Year Fiscal Year REVENUES: Revenue Limit $93,658,360 $90,066,554 $78,377,862 $80,447,907 $78,678,134 Federal Revenue 11,504,431 19,001,274 16,526,293 17,541,343 13,210,760 Other State Revenue 34,840,682 30,752,875 42,742,029 46,442,068 39,005,980 Other Local Revenue 2,910,029 1,608,010 1,746,506 1,749,746 10,454,455 Total Revenues 142,913, ,428, ,392, ,181, ,349,329 EXPENDITURES: Current Instruction 92,029,214 91,253,733 85,970,993 85,790,898 85,089,640 Instruction Related Activities: Supervision of Instruction 9,560,323 8,518,407 6,810,741 6,268,761 7,395,469 Instructional Library, Media, 1,694,847 1,597,918 1,530,553 1,617,152 1,585,952 Technology School Site Administration 8,887,615 8,653,407 8,905,464 8,483,426 8,121,435 Pupil Services: Home-to-School Transportation 1,886,131 1,745,424 1,491,087 1,494,412 1,453,580 Food Services (7,874) 7, All Other Pupil Services 4,580,480 4,692,664 4,843,940 4,944,673 4,689,326 General Administration: Data Processing 1,800,099 1,841,494 1,769,237 1,245,753 1,243,245 All Other General Administration 3,680,730 3,099,045 2,999,478 2,746,473 2,602,848 Plant Services 13,408,719 14,688,387 13,996,430 12,503,634 12,674,637 Facility Acquisition & Construction 368, ,678 47, ,850 33,899 Ancillary Services Other (Outgo) 3,541,446 3,936,349 4,868,108 10,393,221 9,487,659 Debt Service: Principal 777, , , , ,510 Interest & Other 203, , , , ,347 Total Expenditures 142,410, ,159, ,662, ,815, ,725,547 EXCESS OF REVENUES OVER (UNDER) EXPENDITURES 503, ,958 4,730,688 9,365,451 5,623,782 OTHER FINANCING SOURCES (USES) Operating Transfers In 351,822 1,000,000 3,100,000 4,380,000 3,917,573 Other Sources ,000, ,494,188 Operating Transfers Out (897,847) (1,584,019) (12,289,897) (11,004,584) (12,060,711) Total Other Sources & Uses (546,025) (584,019) (8,189,897) (6,624,584) (6,648,950) TOTAL CHANGE IN FUND BALANCE (42,992) (315,061) (3,459,209) 2,740,867 (1,025,168) FUND BALANCE JULY 1 14,720,193 14,677,201 14,362,140 10,902,931 13,643,798 FUND BALANCE JULY 30 $14,677,201 $14,362,140 $10,902,931 $13,643,798 $12,618,630 Source: Baldwin Park Unified School District. 48

55 BALDWIN PARK UNIFIED SCHOOL DISTRICT The information in this section concerning the operations of the District and the District s finances are provided as supplementary information only, and it should not be inferred from the inclusion of this information in this Official Statement that the principal and Accreted Value of or interest on the Bonds is payable from the general fund of the District. The Bonds are payable only from the revenues generated by an ad valorem tax levied by the County on properties within the District for the payment thereof. See THE BONDS Security and Sources of Payment herein. Introduction The Baldwin Park Unified School District covers approximately nine square miles in the eastern part of Los Angeles County, and serves the City of Baldwin Park, portions of the Cities of Irwindale, Industry and West Covina, and unincorporated areas of the County. The District currently maintains 13 elementary schools, four middle schools, two high schools, plus a continuation high school, an adult education program and an alternative education school. For fiscal year , the District s ADA is projected to be 13,956 students, and taxable property within the District has an assessed valuation of $3,997,842,998. Unless otherwise indicated, the following financial, statistical and demographic data has been provided by the District. Additional information concerning the district and copies of the most recent and subsequent audited financial reports of the District may be obtained by contacting: Baldwin Park Unified School District, 3699 N. Holly Avenue, Baldwin Park, California 91706, Attention: Chief Business Officer/Senior Director of Fiscal Services. Administration The District is governed by a five-member Board of Education, each member of which is elected to a four-year term. Elections for positions to the Board are held every two years, alternating between two and three available positions. Current members of the Board, together with their office and the date their term expires, are listed below: BOARD OF EDUCATION Baldwin Park Unified School District Name Office Term Expires Blanca Estela Rubio President November 2015 Teresa I. Vargas Vice President/Clerk November 2017 Christina M. Lucero Member November 2015 Carlos Lopez Member November 2017 Jack B. White Member November 2015 The Superintendent of the District is responsible for administering the affairs of the District in accordance with the policies of the Board. Brief biographies of key personnel follow: Mark M. Skvarna, Superintendent. Mr. Skvarna has served the District for 14 years. Prior to being appointed Superintendent/Chief Financial Officer, he served as the Deputy Superintendent for the District. Other positions held include Chief School Business Officer, School Business Services Division, for Vicenti, Lloyd, and Stutzman, a California CPA firm; Assistant Superintendent, Business/Chief Business Officer, La Cañada Unified School District; Director of Facilities and Business Services, Temple City Unified School District; Director of Facilities, Bonita Unified School District; Director of 49

56 Maintenance and Operations, Bonita Unified School District; and Construction Inspector, California Division of the State Architect. Mr. Skvarna holds a Bachelor of Science degree in aeronautical engineering, Master of Science degree in strategic leadership, and a Doctorate of Philosophy in international business. Shirley Chang, Chief Business Officer/Senior Director of Fiscal Services. Ms. Chang has served as the Chief Business Officer/Senior Director of Fiscal Services of the District since Ms. Chang previously served the District for 16 years in the capacities of Director of Fiscal Services, Assistant Director of Fiscal Services, and Accounting Supervisor. Ms. Chang has also held several accounting positions in the private sector. Ms. Chang received her Bachlor of Arts degree in business administration from the National Cheng-Kung University in Taiwan, and a Master of Business Administration degree, with an emphasis on management information systems, from the California State University. Ms. Chang has also earned credentials in adult education from the California State University, Pomona and in school business management from the California State University, Fullerton. District Enrollment The following table shows the 10-year enrollment history for the District, and a projection for the current year. ANNUAL ENROLLMENT Fiscal Years through Baldwin Park Unified School District Year Enrollment Annual Change Annual % Change , ,472 (163) (0.92)% ,142 (330) (1.89) ,855 (287) (1.67) ,590 (265) (1.57) ,302 (288) (1.74) ,996 (306) (1.88) ,566 (430) (2.69) ,178 (388) (2.49) ,796 (382) (2.52) ,489 (307) (2.07) Note: Enrollment as of October report submitted to CBEDS in each school year. Source: Baldwin Park Unified School District. Labor Relations As of November 2013, the District employed 823 full-time certificated professionals and 417 fulltime classified employees. The District also employs 445 part-time faculty and staff. District employees, except management and some part-time employees, are represented by two employee bargaining units as follows: 50

57 LABOR BARGAINING UNITS Baldwin Park Unified School District Labor Organization Number of Employees In Organization Contract Expiration Date Baldwin Park Education Association 696 June 30, 2014 California School Employees Association, 788 June 30, 2014 Source: Baldwin Park Unified School District. District Retirement Systems The information set forth below regarding the District s retirement programs, other than the information provided by the District regarding its annual contributions thereto, has been obtained from publicly available sources which are believed to be reliable but are not guaranteed as to accuracy or completeness, and should not to be construed as a representation by either the District or the Underwriter. STRS. All full-time certificated employees, as well as certain classified employees, are members of the State Teachers Retirement System ( STRS ). STRS provides retirement, disability and survivor benefits to plan members and beneficiaries. Benefit provisions are established by State statutes, as legislatively amended, within the State Teachers Retirement Law. The District is currently required by such statutes to contribute 8.25% of eligible salary expenditures, while participants contribute 8% of their respective salaries. The State also contributes to STRS, currently in an amount equal to 3.041% of teacher payroll. The State s contribution reflects a base contribution rate of 2.017%, and a supplemental contribution rate of 0.774% that will vary based on statutory criteria. The District s contribution to STRS was $5,623,666 for fiscal year , $5,530,592 for fiscal year , and $5,314,242 for fiscal year The District has budgeted $5,473,752 as its contribution to STRS for fiscal year PERS. Classified employees working four or more hours per day are members of the Public Employees Retirement System ( PERS ). PERS provides retirement and disability benefits, annual costof-living adjustments, and death benefits to plan members and beneficiaries. Benefit provisions are established by the State statutes, as legislatively amended, with the Public Employees Retirement Laws. The District is currently required to contribute to PERS at an actuarially determined rate, which is % for fiscal year , while participants enrolled in PERS prior to the Implementation Date (defined herein) contribute 7% of their respective salaries. Participants enrolled after the Implementation Date contribute at an actuarially determined rate, which is 6% of their respective salaries for fiscal year See California Public Employees Pension Reform Act of 2013 herein. The District s contribution to PERS was $3,261,416 for fiscal year , $3,173,898 for fiscal year , and $3,188,885 for fiscal year The District has budgeted $3,522,519 as its contribution to PERS for fiscal year State Pension Trusts. Each of STRS and PERS issues a separate comprehensive financial report that includes financial statements and required supplemental information. Copies of such financial reports may be obtained from each of STRS and PERS as follows: (i) STRS, P.O. Box 15275, Sacramento, California ; (ii) PERS, P.O. Box , Sacramento, California Moreover, each of STRS and PERS maintains a website, as follows: (i) STRS: (ii) PERS: However, the information presented in such financial reports or on such websites is not incorporated into this Official Statement by any reference. 51

58 Both STRS and PERS have substantial statewide unfunded liabilities. The amount of these unfunded liabilities will vary depending on actuarial assumptions, returns on investments, salary scales and participant contributions. The following table summarizes information regarding the actuariallydetermined accrued liability for both STRS and PERS. FUNDED STATUS CalSTRS (Defined Benefit Program) and CalPERS (Dollar Amounts in Millions) (1) Plan Accrued Liability Value of Trust Assets Unfunded Liability Public Employees Retirement Fund (CalPERS) $59,439 $44,854 (2) $(14,585) State Teachers Retirement Fund Defined Benefit 215, ,232 (3) (70,957) Program (CalSTRS) (1) Amounts may not add due to rounding. (2) Reflects market value of assets as of June 30, (3) Reflects actuarial value of assets as of June 30, Source: CalPERS State & Schools Actuarial Valuation; CalSTRS Defined Benefit Program Actuarial Valuation. On April 17, 2013, the PERS board of administration (the PERS Board ) approved new actuarial policies aimed at returning PERS to fully-funded status within 30 years. The policies include a rate smoothing method with a 30-year amortization period for gains and losses and a five-year ramp-up of rates of rates at the start and a five year ramp-down of rates at the end. The PERS Board delayed the implementation of the new policies until fiscal year for the State, schools and all other public agencies. Unlike PERS, STRS contribution rates for participant employers and employees hired after the Implementation Date, as well as the State s base contribution rate, are set by statute and do not currently vary from year-to-year based on actuarial valuations. In recent years, the combined employer, employee and State contributions to STRS have been significantly less than actuarially required amounts. As a result, and due in part to investment losses, the unfunded liability of STRS has increased significantly. This unfunded liability is expected to continue to increase in the absence of legislation requiring additional or increased contributions. The District can make no representations regarding the future program liabilities of STRS, or whether the District will be required to make larger contributions to STRS in the future. The District can also provide no assurances that the District s required contributions to PERS will not increase in the future. California Public Employees Pension Reform Act of On September 12, 2012, the Governor signed into law the California Public Employee s Pension Reform Act of 2013 (the Reform Act ), which makes changes to both STRS and PERS, most substantially affecting new employees hired after January 1, 2013 (the Implementation Date ). For STRS participants hired after the Implementation Date, the Reform Act changes the normal retirement age by increasing the eligibility for the 2% age factor (the age factor is the percent of final compensation to which an employee is entitled to for each year of service) from age 60 to 62 and increasing the eligibility of the maximum age factor of 2.4% from age 63 to 65. Similarly, for non-safety PERS participants hired after the Implementation Date, the Reform Act changes the normal retirement age by increasing the eligibility for the 2% age factor from age 55 to 62 and increases the eligibility requirement for the maximum age factor of 2.5% to age 67. Among the other changes to PERS and STRS, the Reform Act also: (i) requires all new participants enrolled in PERS and STRS after the Implementation Date to contribute at least 50% of the total annual normal cost of their pension benefit each year as determined by an actuary, (ii) requires STRS and PERS to determine the final compensation amount for employees based upon the highest annual compensation earnable averaged over a consecutive 36-month period as the basis for calculating retirement benefits for new participants 52

59 enrolled after the Implementation Date (currently 12 months for STRS members who retire with 25 years of service), and (iii) caps pensionable compensation for new participants enrolled after the Implementation Date at 100% of the federal Social Security contribution and benefit base for members participating in Social Security or 120% for members not participating in social security, while excluding previously allowed forms of compensation under the formula such as payments for unused vacation, annual leave, personal leave, sick leave, or compensatory time off. Supplemental Employee Retirement Plan. The District has offered an early retirement incentive to certain employees pursuant to a defined-contribution pension plan under to Section 401(a) of the Internal Revenue Code. Employees at least 55 years of age, and with at least 10 years of service to the District, are eligible to receive an annual benefit payment for a term of two to three years. Currently, there are 90 employee participating in this retirement plan. As of June 30, 2012, the District s outstanding obligation with respect to these retirees was $1,610,165. Other Post-Employment Benefits Benefits Plan. The District operates a single-employer defined benefit healthcare program that provides certain District-paid medical benefits (the Post-Employment Benefits ) to retirees of the District and, under certain circumstances, eligible dependents. The Post-Employment Benefits vary with age and service requirements. See also APPENDIX B EXCERPTS FROM THE DISTRICT'S AUDITED FINANCIAL STATEMENTS Note 11 herein. As of June 30, 2012, there were 192 retirees receiving Post-Employment Benefits, and 1,717 active plan members. Funding Policy. The District funds the Plan on a pay-as-you-go basis for the cost of providing coverage to current retirees. For fiscal year , the District paid $1,348,007 for Post-Employment Benefits provided under the District s plan. The District has budgeted $1,552,037 for such expenditures in fiscal year Accrued Liability. The District has implemented Governmental Accounting Standards Board Statement #45, Accounting and Financial Reporting by Employers for Postemployment Benefit Plans Other Than Pension Plans, pursuant to which the District has commissioned and received several actuarial studies of its outstanding liabilities with respect to the Post-Employment Benefits. The most recent of these studies (the Study ), dated as of July 1, 2012, determined that the unfunded actuarial accrued liability (the UAAL ) with respect to the Post-Employment Benefits, as of a July 1, 2011 valuation date, was $29,408,570. The Study also concluded that the annual required contribution ( ARC ) for fiscal year was $3,336,419. The ARC is the amount that would be necessary to fund the value of future benefits earned by current employees during each fiscal year (the Normal Cost ) and the amount necessary to amortize the UAAL, in accordance with the Governmental Accounting Standards Board Statements Nos. 43 and 45. As of June 30, 2012, the District recognized a long-term obligation (the Net OPEB Obligation ) of $9,003,741 with respect to its accrued liability for the Post-Employment Benefits. The Net OPEB Obligation is based on the District s contributions towards the ARC during fiscal year See DISTRICT FINANCIAL INFORMATION District Debt Structure Long-Term Debt herein and APPENDIX B EXCERPTS FROM THE DISTRICT'S AUDITED FINANCIAL STATEMENTS Note 11 herein. 53

60 Risk Management The District participates in the San Gabriel Valley School District Self-Insurance Authority ( SGVSIA ), which arranges for and provides workers compensation, property and liability insurance. The relationship between the District and SGVSIA is such that the latter is not component unit of the District for financial reporting purposes. For more information regarding the District s risk management, see APPENDIX B EXCERPTS FROM THE DISTRICT'S AUDITED FINANCIAL STATEMENTS Note 12 herein. District Debt Structure Short-Term Debt. On July 31, 2013, the District issued $6,000,000 of its Tax and Revenue Anticipation Notes (the TRANs ) to fund seasonal cashflow deficits. The TRANs mature on February 28, 2014 and bear interest at a rate of 2.00%, with a yield to maturity of 0.45%. The TRANs are a general obligation of the District, payable from taxes, income, revenue, cash receipts and other monies of the District, and lawfully available for the payment of the TRANs. Long-Term Debt. A schedule of changes in long-term debt for the year ended June 30, 2012, is shown below: Balance July 30, 2011 Additions Deductions Balance July 30, 2012 General Obligation Bonds $101,802,166 $3,368,544 $4,700,000 $100,470,710 Premium on issuance 458, , ,167 Bond Anticipation Note 22,119,636 1,193, ,312, Lease Revenue Bonds QZAB 432, , Lease Revenue Bonds QZAB 1,009, , , Lease Revenue Bonds 3,980, ,000 3,950, Lease Revenue Bonds Series A 265, , Lease Revenue Bonds Series B 25,000, ,000,000 Discount on issuance (570,353) -- (35,647) (534,706) Compensated Absences 63,506 8, ,561 Capital Leases 711, , ,144 Supplemental Employee Retirement Plan 2,029, ,552 1,191,637 1,610,165 OPEB Obligation net (1) 7,620,230 3,717,431 2,333,920 9,003,741 Total Long-Term liabilities $164,920,287 $9,059,936 $9,746,651 $164,233,572 (1) Reflects the change in the District s net OPEB obligation, based on its contributions towards the ARC. See Other Post-Employment Benefits herein. Source: Baldwin Park Unified School District. Lease Revenue Bonds. The Baldwin Park/Monrovia School Facilities Grant Finance Authority (the Authority ) is a joint exercise of powers authority organized and operating pursuant to Article 1 (commencing with Section 6500) of Chapter 5 of Division 7 of Title 1 of the Government Code of the State. The Authority is composed of the District and the Monrovia Unified School District (collectively, the Member Districts ) pursuant to a joint exercise of powers agreement by and between the Member Districts, and dated as of April 18, 2000, as amended from time to time to the date hereof. The Authority was established to facilitate capital improvement financings by the Member Districts. On November 12, 2002, the Authority issued $4,065,000 of its 2002 Lease Revenue Bonds (the 2002 Lease Revenue Bonds ) on behalf of the District. The 2002 Lease Revenue Bonds are payable from lease payments to be made by the District pursuant to a lease agreement by and between the District and the Authority for the use and possession of certain District school facilities. The 2002 Lease Revenue Bonds have a final maturity on October 1,

61 On July 15, 2010, the Authority issued $525,000 of its 2010 Lease Revenue Bonds, Series A (the 2010 Series A Lease Revenue Bonds ) and $25,000,000 of its 2010 Lease Revenue Bonds, Series B (Qualified School Construction Bonds) (the 2010 Series B Lease Revenue Bonds, and together with the 2010 Series A Lease Revenue Bonds, the 2010 Lease Revenue Bonds ). The 2010 Lease Revenue Bonds are payable from lease payments to be made by the District pursuant to a lease agreement by and between the District and the Authority for the use and possession of certain District school facilities. The 2010 Series A Lease Revenue Bonds have been fully retired; the 2010 Series B Lease Revenue Bonds have a final maturity of October 1, The remaining annual lease payments obligations of the District with respect to the 2002 Lease Revenue Bonds and 2012 Series B Lease Revenue Bonds are listed below: Year Ending October Lease Revenue Bonds 2010 Series B Lease Revenue Bonds (1) 2014 $243, $1,750, $1,993, , ,750, ,996, , ,750, ,998, , ,750, ,005, , ,750, ,011, , ,750, ,012, , ,750, ,018, , ,750, ,024, , ,750, ,028, , ,750, ,038, , ,750, ,041, , ,750, ,044, , ,750, ,052, , ,750, ,058, , , , , , , , , , , , , , , , , , , $6,875, $49,500, $56,375, (1) Reflects gross debt service on the 2010 Series B Lease Revenue Bonds, which were designated as federally-taxable Qualified School Construction Bonds pursuant to an irrevocable election by the District to have Section 6431(f)(3)(B) of the Internal Revenue Code apply thereto. As a result, the Authority expects to receive a cash subsidy payment (the Subsidy Payment ) from the United States Treasury (the Treasury ) equal to the interest that would be payable on the 2010 Series B Lease Revenue Bonds if such interest were determined at a federal tax credit rate of 5.27%. The Authority is obligated to deposit any Subsidy Payment received in a debt service account for the 2010 Series B Lease Revenue Bonds. The Subsidy Payment does not constitute a full faith and credit guarantee of the United States Government, but is required to be paid by the Treasury. Subsidy Payments are subject to reduction (each, a Sequestration Reduction ) pursuant to the federal Balanced Budget and Emergency Deficit Control Act of 1985, as amended, which currently includes provisions reducing the Subsidy Payments by 7.2% through the end of the current federal fiscal year (September 30, 2014). In the absence of action by the U.S. Congress, the rate of the Sequestration Reduction is subject to change in the following federal fiscal year. The District cannot predict whether or how subsequent sequestration actions may affect Subsidy Payments currently scheduled for receipt in future federal fiscal years. However, notwithstanding any such reduction, the District obligated to make lease payments in an amount sufficient to pay the principal of and interest on the 2010 Series B Lease Revenue Bonds. Total 55

62 Qualified Zone Academy Bonds. In June 2001, the Authority issued $12,000,000 of lease revenue bonds on behalf of the District which were designated as Qualified Zone Academy Bonds under Section 54E of the Internal Revenue Code of 1986 (the 2001 QZABs ). The 2001 QZABs were issued as tax credit bonds, such that they do not bear any interest through their maturity date. Rather, eligible taxpayers who hold the 2001 QZABs are eligible to receive annual credit towards their federal income tax liability. Principal with respect to the 2001 QZABs is payable from lease payments to be made by the District pursuant to a lease agreement by and between the District and the Authority for the use and possession of certain District school facilities. The 2001 QZABs mature on June 14, Bond Anticipation Notes. On August 25, 2009, the District issued the 2009 Notes in an aggregate principal amount of $19,998, The 2009 Notes mature on August 1, 2014 and accrete in value at a rate of 5.395%. The 2009 Notes were issued to finance the repair, upgrading, construction and equipping of certain District sites and facilities, in anticipation of the issuance of bonds pursuant to the Authorization. The 2009 Notes are general obligations of the District payable from (i) proceeds of a future sale of such bonds, or (ii) from other funds of the District lawfully available for the purpose of repaying the 2009 Notes, including State grants. Following the application of the proceeds of the Bonds as described in THE BONDS Application and Investment of Bond Proceeds, the 2009 Notes will be defeased and the obligation of the District to make payments of principal thereof and interest thereon will terminate. General Obligation Bonds. The District has issued general obligation bonds pursuant to three voter-approved authorizations, as well as two series of general obligation refunding bonds to refinance portions thereof. The following table summarizes the current outstanding general obligation bond issuances by the District. OUTSTANDING GENERAL OBLIGATION BONDS Baldwin Park Unified School District Principal Bond Issuance Initial Principal Amount Currently Outstanding (1) Date of Delivery Election of 1996 $14,999, $1,508, August 28, 1996 Election of 2002, Series ,787, ,208, June 16, 2004 Election of 2002, Series ,998, ,813, November 2, 2005 Election of 2002, Series ,633, ,959, October 5, 2006 Election of 2006, Series ,000, ,025, May 17, 2007 Election of 2006, Series ,995, ,914, July 10, Refunding General Obligation Bonds (2) 9,120, ,540, November 6, General Obligation Refunding Bonds (3) 13,479, ,415, June 16, 2005 (1) (2) (3) As of August 1, Refunded a portion of the General Obligation Bonds, Election of Refunded portions of the General Obligation Bonds, Election of 2002, Series 2003 and General Obligation Bonds, Election of 2002, Series The unrefunded portion of the Series 2003 Bonds has since matured. The table on the following page shows the combined debt service schedule with respect to the total outstanding general obligation debt of the District, including the Bonds (and assuming no optional redemptions). 56

63 Period Ending (August 1) Election of 1996 Bonds 2001 Refunding Bonds COMBINED GENERAL OBLIGATION BOND DEBT SERVICE Baldwin Park Unified School District 2005 Refunding Bonds Series 2004 Bonds Series 2005 Bonds Series 2006 Bonds Series 2007 Bonds Series 2008 Bonds The Bonds Total Annual Debt Service 2014 $1,100, $693, $690, $1,817, $305, $1,602, $340, $274, $6,822, ,150, , , ,892, , ,602, , , ,245, ,200, , , ,977, , ,606, , , ,526, ,255, , , ,057, , ,603, , , ,824, , , ,149, , ,605, , , ,829, , , ,241, , ,603, , , ,107, , , $597, ,240, ,605, , , ,471, , , , ,340, ,605, , , ,773, ,015, , ,445, ,603, ,052, , ,399, ,065, , ,555, ,604, ,156, , ,734, ,115, , ,670, ,604, ,270, , ,077, ,170, , ,790, ,602, ,385, , ,445, ,225, , ,915, ,604, ,503, , ,825, ,285, , ,045, ,604, ,626, , ,218, ,160, ,185, ,605, ,755, , ,632, ,260, ,325, ,603, ,894, , ,065, ,360, ,475, ,604, ,029, ,047, ,516, ,100, ,602, ,180, ,112, ,994, ,375, ,602, ,330, ,177, ,485, ,604, ,484, ,252, ,341, ,603, ,649, ,327, ,580, ,604, ,816, ,407, ,828, ,606, ,995, ,492, ,094, ,625, ,637, ,262, ,412, ,412, ,701, ,701, ,003, ,003, ,317, ,317, ,647, ,647, ,990, ,990, ,349, ,349, ,724, ,724, ,118, ,118, ,528, ,528, ,960, ,960, ,405, ,405, ,874, ,874, ,365, ,365, ,873, ,873, ,410, ,410, Total $4,705, $5,541, $13,460, $12,135, $12,264, $45,575, $36,892, $36,806, $168,405, $335,786,

64 TAX MATTERS In the opinion of Stradling Yocca Carlson & Rauth, a Professional Corporation, San Francisco, California ( Bond Counsel ), under existing statutes, regulations, rulings and judicial decisions, and assuming the accuracy of certain representations and compliance with certain covenants and requirements described herein, interest on the Bonds is excluded from gross income for federal income tax purposes and is not an item of tax preference for purposes of calculating the federal alternative minimum tax imposed on individuals and corporations. In the further opinion of Bond Counsel, interest on the Bonds is exempt from State of California personal income tax. Bond Counsel notes that, with respect to corporations, interest on the Bonds may be included as an adjustment in the calculation of alternative minimum taxable income which may affect the alternative minimum tax liability of corporations. The difference between the issue price of a Bond (the first price at which a substantial amount of the Bonds of the same series and maturity is to be sold to the public) and the stated redemption price at maturity with respect to such Bond constitutes original issue discount. Original issue discount accrues under a constant yield method, and original issue discount will accrue to a Bond Owner before receipt of cash attributable to such excludable income. The amount of original issue discount deemed received by the Bond Owner will increase the Bond Owner s basis in the Bond. In the opinion of Bond Counsel, the amount of original issue discount that accrues to the owner of the Bond is excluded from the gross income of such owner for federal income tax purposes, is not an item of tax preference for purposes of the federal alternative minimum tax imposed on individuals and corporations, and is exempt from State of California personal income tax. Bond Counsel s opinion as to the exclusion from gross income of interest (and original issue discount) on the Bonds 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, as amended (the Code ), that must be satisfied subsequent to the issuance of the Bonds to assure that interest (and original issue discount) on the Bonds will not become includable in gross income for federal income tax purposes. Failure to comply with such requirements of the Code might cause the interest (and original issue discount) on the Bonds to be included in gross income for federal income tax purposes retroactive to the date of issuance of the Bonds. The District has covenanted to comply with all such requirements. The amount by which a Bond Owner s original basis for determining loss on sale or exchange in the applicable Bond (generally, the purchase price) exceeds the amount payable on maturity (or on an earlier call date) constitutes amortizable Bond premium, which must be amortized under Section 171 of the Code; such amortizable Bond premium reduces the Bond Owner s basis in the applicable Bond (and the amount of tax-exempt interest received), and is not deductible for federal income tax purposes. The basis reduction as a result of the amortization of Bond premium may result in a Bond Owner realizing a taxable gain when a Bond is sold by the Owner for an amount equal to or less (under certain circumstances) than the original cost of the Bond to the Owner. Purchasers of the Bonds should consult their own tax advisors as to the treatment, computation and collateral consequences of amortizable Bond premium. The Internal Revenue Service (the IRS ) has initiated an expanded program for the auditing of tax-exempt bond issues, including both random and targeted audits. It is possible that the Bonds will be selected for audit by the IRS. It is also possible that the market value of the Bonds might be affected as a result of such an audit of the Bonds (or by an audit of similar bonds). No assurance can be given that in the course of an audit, as a result of an audit, or otherwise, Congress or the IRS might not change the 58

65 Code (or interpretation thereof) subsequent to the issuance of the Bonds to the extent that it adversely affects the exclusion from gross income of interest on the Bonds or their market value. SUBSEQUENT TO THE ISSUANCE OF THE BONDS, THERE MIGHT BE FEDERAL, STATE OR LOCAL STATUTORY CHANGES (OR JUDICIAL OR REGULATORY INTERPRETATIONS OF FEDERAL, STATE OR LOCAL LAW) THAT AFFECT THE FEDERAL, STATE OR LOCAL TAX TREATMENT OF THE INTEREST ON THE BONDS OR THE MARKET VALUE OF THE BONDS. LEGISLATIVE CHANGES HAVE BEEN PROPOSED IN CONGRESS, WHICH, IF ENACTED, WOULD RESULT IN ADDITIONAL FEDERAL INCOME TAX BEING IMPOSED ON CERTAIN OWNERS OF TAX-EXEMPT STATE OR LOCAL OBLIGATIONS SUCH AS THE BONDS. THE INTRODUCTION OR ENACTMENT OF ANY SUCH CHANGES COULD ADVERSELY AFFECT THE MARKET VALUE OR LIQUIDITY OF THE BONDS, SUCH CHANGES (OR OTHER CHANGES) WILL NOT BE INTRODUCED OR ENACTED OR INTERPRETATIONS WILL NOT OCCUR. BEFORE PURCHASING ANY OF BONDS, ALL POTENTIAL PURCHASERS SHOULD CONSULT THEIR TAX ADVISORS REGARDING POSSIBLE STATUTORY CHANGES OR JUDICIAL OR REGULATORY CHANGES OR INTERPRETATIONS, AND THEIR COLLATERAL TAX CONSEQUENCES RELATING TO THE BONDS. Bond Counsel s opinions may be affected by actions taken (or not taken) or events occurring (or not occurring) after the date hereof. Bond Counsel has not undertaken to determine, or to inform any person, whether any such actions or events are taken or do occur. The Resolution and the Tax Certificate relating to the Bonds permit certain actions to be taken or to be omitted if a favorable opinion of bond counsel is provided with respect thereto. Bond Counsel expresses no opinion as to the effect on the exclusion from gross income of interest (and original issue discount) on the Bonds for federal income tax purposes with respect to any Bond if any such action is taken or omitted based upon the advice of counsel other than Stradling Yocca Carlson & Rauth. Although Bond Counsel has rendered an opinion that interest (and original issue discount) on the Bonds is excluded from gross income for federal income tax purposes provided that the District continues to comply with certain requirements of the Code, the ownership of the Bonds and the accrual or receipt of interest (and original issue discount) with respect to the Bonds may otherwise affect the tax liability of certain persons. Bond Counsel expresses no opinion regarding any such tax consequences. Accordingly, before purchasing any of the Bonds, all potential purchasers should consult their tax advisors with respect to collateral tax consequences relating to the Bonds. A copy of the proposed form of opinion of Bond Counsel is attached hereto as APPENDIX A. Legality for Investment in California LEGAL MATTERS Under provisions of the California Financial Code, the Bonds are legal investments for commercial banks in California to the extent that the Bonds, in the informed opinion of the bank, are prudent for the investment of funds of depositors, and, under provisions of the Government Code of the State, are eligible for security for deposits of public moneys in the State. 59

66 Expanded Reporting Requirements On May 17, 2006, the President signed the Tax Increase Prevention and Reconciliation Act of 2005 ( TIPRA ). Under Section 6049 of the Internal Revenue Code of 1986, as amended by TIPRA, interest paid on tax-exempt obligations will be subject to information reporting in a manner similar to interest paid on taxable obligations. The effective date for this provision is for interest paid after December 31, 2005, regardless of when the tax-exempt obligations were issued. The purpose of this change was to assist in relevant information gathering for the IRS relating to other applicable tax provisions. TIPRA provides that backup withholding may apply to such interest payments made after March 31, 2007 to any bondholder who fails to file an accurate Form W-9 or who meets certain other criteria. The information reporting and backup withholding requirements of TIPRA do not affect the excludability of such interest from gross income for federal income tax purposes. Continuing Disclosure The District has covenanted for the benefit of Owners and Beneficial Owners of the Bonds to provide certain financial information and operating data relating to the District (the Annual Report ) by not later than nine months following the end of the District s fiscal year (which currently ends June 30), commencing with the report for the Fiscal Year, and to provide notices of the occurrence of certain listed events. The Annual Report and notices of listed events will be filed by the District in accordance with the requirements of S.E.C. Rule 15c2-12(b)(5) (the Rule ). The specific nature of the information to be contained in the Annual Report or the notices of listed events is included in APPENDIX C FORM OF CONTINUING DISCLOSURE CERTIFICATE. These covenants have been made in order to assist the Underwriter in complying with the Rule. The District has, in the past five years, failed to file the annual reports for fiscal years and in a timely manner, and failed to file a portion of the annual report for fiscal year , as required by its prior continuing disclosure undertakings. The District, within the past five years, also failed to file certain material event notices regarding rating downgrades of municipal bond insurers that have issued policies in connection with its long-term debt. The District is currently in material compliance with all of its outstanding continuing disclosure undertakings. Beginning with the report for fiscal year , the District has employed and expects to continue employing a dissemination agent to assist it with the preparation and filing of annual reports and material event notices as required by its existing continuing disclosure obligations. No Litigation No litigation is pending or threatened concerning the validity of the Bonds, and a certificate to that effect will be furnished to purchasers at the time of the original delivery of the Bonds. The District is not aware of any litigation pending or threatened questioning the political existence of the District or contesting the District s ability to receive ad valorem taxes or to collect other revenues or contesting the District s ability to issue and retire the Bonds. There are a number of claims pending against the District. In the opinion of the District, the aggregate amount of the uninsured liabilities of the District under these claims will not materially affect the finances of the District. 60

67 Financial Statements Portions of the financial statements with supplemental information for the year ended June 30, 2012, the independent auditor s report of the District, and the related statements of activities and of cash flows for the year then ended, and the report dated December 12, 2012 of Vavrinek, Trine, Day & Co. LLP (the Auditor ), are included in this Official Statement as APPENDIX B. In connection with the inclusion of the financial statements and the report of the Auditor herein, 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. Legal Opinion The legal opinion of Bond Counsel, approving the validity of the Bonds, will be supplied to the original purchasers of the Bonds without cost. A copy of the proposed form of such legal opinion is attached to this Official Statement as APPENDIX A. Ratings MISCELLANEOUS The Bonds have been assigned a rating of AA (stable) by S&P, based upon the issuance of the Policy by BAM. The Bonds have also been assigned an underlying rating of A by S&P. The ratings reflects only the views of S&P, and any explanation of the significance of such ratings should be obtained therefrom at the following address: Standard & Poor s, a Division of The McGraw-Hill Companies, 55 Water Street, 45th Floor, New York, NY There is no assurance that the ratings will be retained for any given period of time or that the same will not be revised downward or withdrawn entirely by S&P if, in its judgment, circumstances so warrant. The District undertakes no responsibility to oppose any such revision or withdrawal. Any such downward revision or withdrawal of a rating obtained may have an adverse effect on the market price of the Bonds. Underwriting Piper Jaffray & Co. (the Underwriter ) will purchase all of the Bonds for a purchase price of $26,433, (consisting of the initial principal amount of the Bonds of $23,736,779.75, plus net original issue premium of $3,371,737.45, less the Underwriter s discount of $237,367.80, and less $437, to be used by the Underwriter to pay the premium on the Policy). The purchase contract provides that the Underwriter will purchase all of the Bonds, if any are purchased. The initial offering prices stated on the inside cover of this Official Statement may be changed from time to time by the Underwriter. The Underwriter may offer and sell Bonds to certain dealers and others at prices lower than such initial offering prices. The Underwriter has entered into a distribution agreement with Charles Schwab & Co., Inc. ( CS&Co. ) for the retail distribution of certain securities offerings at the original issue prices. Pursuant to the agreement, CS&Co. will purchase Bonds from the Underwriter at the original issue price less a negotiated portion of the selling concession applicable to any Bonds that CS&Co. sells. 61

68 The Underwriter has provided the following sentence for inclusion in the Official Statement: Piper Jaffray & Co. made a voluntary contribution to the committee that was formed to support the election authorizing the Bonds. Additional Information The purpose of this Official Statement is to supply information to prospective buyers of the Bonds. Quotations from and summaries and explanations of the Bonds, the Resolution providing for issuance of the Bonds, and the constitutional provisions, statutes and other documents referenced herein, do not purport to be complete, and reference is made to said documents, constitutional provisions and statutes for full and complete statements of their provisions. All data contained herein has been taken or constructed from District records. Appropriate District officials, acting in their official capacities, have reviewed this Official Statement and have determined that, as of the date hereof, the information contained herein is, to the best of their knowledge and belief, true and correct in all material respects and does not contain an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements made herein, in light of the circumstances under which they were made, not misleading. This Official Statement has been approved by the District. BALDWIN PARK UNIFIED SCHOOL DISTRICT By: /s/ Mark M. Skvarna Superintendent 62

69 APPENDIX A FORM OF OPINION OF BOND COUNSEL Upon issuance and delivery of the Bonds, Stradling Yocca Carlson & Rauth, Bond Counsel, proposes to render its final approving opinion with respect to the Bonds substantially in the following form: Board of Education Baldwin Park Unified School District Members of the Board of Education: December 18, 2013 We have examined a certified copy of the record of the proceedings relative to the issuance and sale of $23,736, Baldwin Park Unified School District General Obligation Bonds, Election of 2006, Series 2013 (the Bonds ). As to questions of fact material to our opinion, we have relied upon the certified proceedings and other certifications of public officials furnished to us without undertaking to verify the same by independent investigation. Based on our examination as bond counsel of existing law, certified copies of such legal proceedings and such other proofs as we deem necessary to render this opinion, we are of the opinion, as of the date hereof and under existing law, that: 1. Such proceedings and proofs show lawful authority for the issuance and sale of the Bonds pursuant to Article 4.5 of Chapter 3 of Part 1 of Division 2 of Title 5 of the California Government Code of the State of California (the Act ), commencing with Section et seq., a fifty-five percent vote of the qualified electors of the Baldwin Park Unified School District (the District ) voting at an election held on November 7, 2006, and a resolution of the Board of Education of the District (the Resolution ). 2. The Bonds constitute valid and binding general obligations of the District, payable as to both principal and interest from the proceeds of a levy of ad valorem taxes on all property subject to such taxes in the District, which taxes are unlimited as to rate or amount. 3. Under existing statutes, regulations, rulings and judicial decisions, interest on the Bonds is excluded from gross income for federal income tax purposes and is not an item of tax preference for purposes of calculating the federal alternative minimum tax imposed on individuals and corporations. It should be noted that, with respect to corporations, such interest may be included as an adjustment in the calculation of alternative minimum taxable income, which may affect the federal income tax liability of corporations. 4. Interest on the Bonds is exempt from State of California personal income tax. 5. The difference between the issue price of a Bond (the first price at which a substantial amount of the Bonds of a maturity is to be sold to the public) and the stated redemption price at maturity with respect to such Bonds constitutes original issue discount. Original issue discount accrues under a constant yield method, and original issue discount will accrue to a Bond Owner before receipt of cash attributable to such excludable income. The amount of original issue discount deemed received by a Bond Owner will increase the Bond A-1

70 Owner s basis in the applicable Bond. Original issue discount that accrues to the Bond Owner is excluded from the gross income of such owner for federal income tax purposes, is not an item of tax preference for purposes of the federal alternative minimum tax imposed on individuals and corporations, and is exempt from State of California personal income tax. 6 The amount by which a Bond Owner s original basis for determining loss on sale or exchange in the applicable Bond (generally, the purchase price) exceeds the amount payable on maturity (or on an earlier call date) constitutes amortizable Bond premium, which must be amortized under Section 171 of the Code; such amortizable Bond premium reduces the Bond Owner s basis in the applicable Bond (and the amount of tax-exempt interest received), and is not deductible for federal income tax purposes. The basis reduction as a result of the amortization of Bond premium may result in a Bond Owner realizing a taxable gain when a Bond is sold by the Bond Owner for an amount equal to or less (under certain circumstances) than the original cost of the Bond to the Bond Owner. Purchasers of the Bonds should consult their own tax advisors as to the treatment, computation and collateral consequences of amortizable Bond premium. The opinions expressed herein may be affected by actions taken (or not taken) or events occurring (or not occurring) after the date hereof. We have not undertaken to determine, or to inform any person, whether any such actions or events are taken or do occur. The Resolution and the Tax Certificate relating to the Bonds permit certain actions to be taken or to be omitted if a favorable opinion of Bond Counsel is provided with respect thereto. No opinion is expressed herein as to the effect on the exclusion from gross income of interest (and original issue discount) for federal income tax purposes with respect to any Bond if any such action is taken or omitted based upon the advice of counsel other than ourselves. Other than expressly stated herein, we express no opinion regarding tax consequences with respect to the Bonds. The opinions expressed herein as to the exclusion from gross income of interest (and original issue discount) on the Bonds are based upon certain representations of fact and certifications made by the District and others and are subject to the condition that the District complies with all requirements of the Internal Revenue Code of 1986, as amended (the Code ), that must be satisfied subsequent to the issuance of the Bonds to assure that such interest (and original issue discount) will not become includable in gross income for federal income tax purposes. Failure to comply with such requirements of the Code might cause interest (and original issue discount) on the Bonds to be included in gross income for federal income tax purposes retroactive to the date of issuance of the Bonds. The District has covenanted to comply with all such requirements. It is possible that subsequent to the issuance of the Bonds there might be federal, state, or local statutory changes (or judicial or regulatory interpretations of federal, state, or local law) that affect the federal, state, or local tax treatment of the Bonds or the market value of the Bonds. No assurance can be given that subsequent to the issuance of the Bonds such changes or interpretations will not occur. The rights of the owners of the Bonds and the enforceability thereof may be subject to bankruptcy, insolvency, reorganization, moratorium and other similar laws affecting creditors rights heretofore or hereafter enacted to the extent constitutionally applicable and their enforcement may also be subject to the exercise of judicial discretion in appropriate cases. Respectfully submitted, Stradling Yocca Carlson & Rauth A-2

71 APPENDIX B EXCERPTS FROM THE DISTRICT S AUDITED FINANCIAL STATEMENTS

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73 BALDWIN PARK UNIFIED SCHOOL DISTRICT ANNUAL FINANCIAL REPORT JUNE 30, 2012

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75 BALDWIN PARK UNIFIED SCHOOL DISTRICT TABLE OF CONTENTS JUNE 30, 2012 FINANCIAL SECTION Independent Auditors' Report 2 Management's Discussion and Analysis 4 Basic Financial Statements Government-Wide Financial Statements Statement of Net Assets 14 Statement of Activities 15 Fund Financial Statements Governmental Funds - Balance Sheet 16 Reconciliation of the Governmental Funds Balance Sheet to the Statement of Net Assets 17 Governmental Funds - Statement of Revenues, Expenditures, and Changes in Fund Balances 18 Reconciliation of Governmental Funds Statement of Revenues, Expenditures, and Changes in Fund Balances to the Statement of Activities 19 Fiduciary Funds - Statement of Net Assets 21 Notes to Financial Statements 22 REQUIRED SUPPLEMENTARY INFORMATION General Fund - Budgetary Comparison Schedule 56 Schedule of Other Postemployment Benefits (OPEB) Funding Progress 57 SUPPLEMENTARY INFORMATION Schedule of Expenditures of Federal Awards 59 Summary of School Community Violence Prevention 62 Local Education Agency Organization Structure 63 Schedule of Average Daily Attendance 64 Schedule of Instructional Time 65 Reconciliation of Annual Financial and Budget Report With Audited Financial Statements 66 Schedule of Financial Trends and Analysis 67 Schedule of Charter Schools 68 Combining Statements - Non-Major Governmental Funds Combining Balance Sheet 69 Combining Statement of Revenues, Expenditures, and Changes in Fund Balances 70 Note to Supplementary Information 71 INDEPENDENT AUDITORS' REPORTS Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance With Government Auditing Standards 74 Report on Compliance With Requirements That Could Have a Direct and Material Effect on Each Major Program and on Internal Control Over Compliance in Accordance With OMB Circular A Report on State Compliance 78

76 BALDWIN PARK UNIFIED SCHOOL DISTRICT TABLE OF CONTENTS JUNE 30, 2012 SCHEDULE OF FINDINGS AND QUESTIONED COSTS Summary of Auditors' Results 81 Financial Statement Findings 82 Federal Awards Findings and Questioned Costs 83 State Awards Findings and Questioned Costs 84 Summary Schedule of Prior Audit Findings 85 Management Letter 86

77 FINANCIAL SECTION 1

78 Vavrinek, Trine, Day & Co., LLP Certified Public Accountants VALUE THE DIFFERENCE INDEPENDENT AUDITORS' REPORT Governing Board Baldwin Park Unified School District Baldwin Park, California We have audited the accompanying financial statements of the governmental activities, each major fund, and the aggregate remaining fund information of the Baldwin Park Unified School District (the District) as of and for the year ended June 30, 2012, which collectively comprise the District's basic financial statements as listed in the table of contents. These financial statements are the responsibility of the District's management. Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America; the standards applicable to financial audits contained in Government Auditing Standards,issuedbythe Comptroller General of the United States; and Standards and Procedures for Audits of California K-12 Local Educational Agencies , issued by the California Education Audit Appeals Panel as regulations. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinions. In our opinion, the financial statements referred to previously present fairly, in all material respects, the respective financial position of the governmental activities, each major fund, and the aggregate remaining fund information of the Baldwin Park Unified School District, as of June 30, 2012, and the respective changes in financial position, thereof for the year then ended in conformity with accounting principles generally accepted in the United States of America. As discussed in the Notes to the basic financial statements, the State of California continues to suffer the effects of a recessionary economy, which directly impacts the funding requirements of the State of California to the K-12 educational community. In accordance with Government Auditing Standards, we have also issued our report dated December 12, 2012, on our consideration of the District's internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be considered in assessing the results of our audit Aspen Street Rancho Cucamonga, CA Tel: Fax: FRESNO LAGUNA HILLS PALO ALTO PLEASANTON RANCHO CUCAMONGA RIVERSIDE SACRAMENTO

79 Accounting principles generally accepted in the United States of America require that the required supplementary information, such as management's discussion and analysis on pages 4 through 13, budgetary comparison information and other postemployment benefits information on pages 56 and 57 be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management's responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the District's financial statements. The Schedule of Expenditures of Federal Awards, as required by Office of Management and Budget Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations (Circular A-133) and other supplementary information listed in the table of contents are presented for purposes of additional analysis and are not a required part of the financial statements. Such information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the financial statements. The information has been subjected to the auditing procedures applied in the audit of the financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the financial statements or to the financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the supplementary information is fairly stated in all material respects in relation to the financial statements as a whole. Rancho Cucamonga, California December 12,

80 Baldwin Park Unified School District P.O. Box North Holly Avenue, Baldwin Park, California (626) Fax (626) This section of Baldwin Park Unified School District's (the District) ( ) annual financial report presents our discussion and analysis of the District's financial performance during the fiscal year that ended on June 30, 2012 with comparative information from Please read it in conjunction with the District's financial statements, which immediately follow this section. FINANCIAL HIGHLIGHTS The District's financial status remained positive. Total government-wide net assets were recorded at $84,911,165 (see page 14). Overall government-wide revenues were $177,036,777; overall government-wide expenses were $187,387,607. The District expended approximately $11.2 million on various construction projects with Election 2006 Measure K General Obligation Bonds. QSCB project completed approximately $9.4 million for solar projects. The District exercised the State Flexibility Option Program to transfer eligible State restricted program funds into the General Fund to offset losses in Revenue Limit Funding. The District plans to continue using the Flexibility Option through ADA continued to decline by 339 average daily attendance (ADA) for grades Kindergarten through Twelve, with overall enrollment dropping 403 at CBEDs enrollment as of October 2011 for the fiscal year. The District offered an early retirement incentive for a net savings to the General Fund of approximately 1.5 million for the future years. 4 BOARD OF EDUCATION Christina Lucero, President Jack B. White, Clerk/Vice President Hugo Antonio Tzec, Esq., Member Blanca Estela Rubio., Member Teresa Vargas, Member Mark M. Skvarna, Superintendent

81 BALDWIN PARK UNIFIED SCHOOL DISTRICT MANAGEMENT'S DISCUSSION AND ANALYSIS JUNE 30, 2012 OVERVIEW OF THE FINANCIAL STATEMENTS This annual report consists of three parts - management's discussion and analysis (this section), the basic financial statements, and required supplementary information. The basic financial statements include two kinds of statements that present different views of the District: The first two statements are District-wide financial statements that provide both short-term and long-term information about the District's overall financial status. The remaining statements are fund financial statements that focus on individual parts of the District, reporting the District's operations in more detail than the District-wide financial statements. The governmental funds statements tell how basic services like regular and special education were financed in the short-term, as well as what remains for future spending. Fiduciary funds statements provide information about the financial relationships in which the District acts solely as a trustee or agent for the benefit of others. The financial statements also include Notes that explain some of the information in the statements and provide more detailed data. The statements are followed by a section of required supplementary information that further explains and supports the financial statements with a comparison of the District's budget for the year. District-Wide Financial Statements The District-wide financial statements report information about the District as a whole using accounting methods similar to those used by private-sector companies. The Statement of Net Assets includes all of the District's assets and liabilities with the exception of other postemployment benefits. All of the current year's revenues and expenses are accounted for in the Statement of Activities regardless of when cash is received or paid. The two District-wide financial statements report the District's net assets and how they have changed. Net assets, the difference between the District's assets and liabilities, are one way to measure the District's financial health or position. Over time, increases or decreases in the District's net assets are an indicator of whether its financial position is improving or deteriorating, respectively. To assess the overall health of the District, you need to consider additional non-financial factors such as changes in the District's condition of school buildings and other facilities. In the District-wide financial statements, the District's activities are reported as governmental activities. Governmental Activities Most of the District's basic services are included here, such as regular and special education, transportation, and administration. Property taxes and State formula aid finance most of these activities. 5

82 BALDWIN PARK UNIFIED SCHOOL DISTRICT MANAGEMENT'S DISCUSSION AND ANALYSIS JUNE 30, 2012 Fund Financial Statements The fund financial statements provide more detailed information about the District's funds,focusingonitsmost significant or "major" funds not the District as a whole. Funds are accounting devices the District uses to keep track of specific sources of funding and spending on particular programs: Some funds are required by State law and by bond covenants. The District establishes other funds to control and manage money for particular purposes (like repaying its long-term obligations) or to show that it is properly using certain revenues (like State grants for building projects). The District has two kinds of funds: Governmental Funds Most of the District's basic services are included in governmental funds, which generally focus on (1) how cash and other financial assets can readily be converted to cash flow in and out, and (2) the balances left at year-end that are available for spending. Consequently, the governmental funds statements provide a detailed short-term view that helps you determine whether there are more or fewer financial resources that can be spent in the near future to finance the District's programs. Because this information does not encompass the additional long-term focus of the District-wide financial statements, we provide additional information with the governmental funds statements that explain the relationship (or differences) between them. Fiduciary Funds The District is the trustee, or fiduciary, for assets that belong to others, such as the scholarship fund and the student activities funds. The District is responsible for ensuring that the assets reported in these funds are used only for their intended purposes and by those to whom the assets belong. We exclude these activities from the District-wide financial statements because the District cannot use these assets to finance its operations. 6

83 BALDWIN PARK UNIFIED SCHOOL DISTRICT MANAGEMENT'S DISCUSSION AND ANALYSIS JUNE 30, 2012 FINANCIAL ANALYSIS OF THE DISTRICT AS A WHOLE Net Assets The District's net assets were $84,911,165 for the fiscal year ended June 30, Of this amount $24,210,778 was restricted. Restricted net assets are reported separately to show legal constraints from debt covenants and enabling legislation that limit the District's ability to use those net assets for day-to-day operations. Our analysis below focuses on the net assets (Table 1) and change in net assets (Table 2) of the District's governmental activities. Table 1 Governmental Activities Assets Current and other assets $ 85,139,994 $ 112,430,892 Capital assets, net 197,236, ,754,432 Total Assets 282,376, ,185,324 Liabilities Current liabilities 33,232,254 40,003,042 Long-term obligations 164,233, ,920,287 Total Liabilities 197,465, ,923,329 Net Assets Invested in capital assets, net of related debt 54,861,459 73,638,186 Restricted 24,210,778 19,754,886 Unrestricted 5,838,928 1,868,923 Total Net Assets $ 84,911,165 $ 95,261,995 The $5,838,928 in unrestricted net assets of governmental activities represents accumulated results of all past years' operations. 7

84 BALDWIN PARK UNIFIED SCHOOL DISTRICT MANAGEMENT'S DISCUSSION AND ANALYSIS JUNE 30, 2012 Changes in Net Assets The results of this year's operations for the District as a whole are reported in the Statement of Activities on page 15. Table 2 takes the information for the Statement and rearranges them slightly so you can see our revenues for the year. Table 2 Governmental Activities Revenues Program revenues: Charges for services $ 958,365 $ 1,107,064 Operating grants and contributions 50,240,670 52,293,049 Capital grants and contributions 1,810,016 14,901,961 General revenues: Federal and State sources 99,919, ,855,449 Property taxes 12,679,854 12,834,983 Other general revenues 12,923,039 9,029,245 Total Revenues 178,530, ,021,751 Expenses Instruction-related 128,526, ,924,960 Student support services 15,504,956 15,765,947 Administration 4,755,749 6,140,015 Plant services 19,674,173 17,241,227 Other 20,420,217 25,517,867 Total Expenses 188,881, ,590,016 Change in Net Assets $ (10,350,830) $ 1,431,735 The total cost of all programs was $188,881,795. The District's expenses are predominately related to educating and caring for students (76.25 percent), with percent of expenditures attributable to maintenance projects. The purely administrative activities of the District accounted for 2.52 percent of total costs and the remaining percent for operations. Total expenses exceeded revenues, decreasing net assets by $10,350,830. 8

85 BALDWIN PARK UNIFIED SCHOOL DISTRICT MANAGEMENT'S DISCUSSION AND ANALYSIS JUNE 30, 2012 Governmental Activities As reported on the Statement of Activities on page 15, the cost of all our governmental activities this year was $188,881,795. However, the amount that our taxpayers ultimately financed for these activities through local taxes was only $12,841,461, because the cost was paid by those who benefited from the programs $958,365 or by other governments and organizations who subsidized certain programs with grants and contributions of $52,050,686. We paid for the remaining "public benefit" portion of our governmental activities with $112,680,453 in Federal and State funds, and with our revenues, like interest and general entitlements. The Federal and State governments subsidized many programs' costs with entitlements and grants. The City of Baldwin Park property taxpayers and the State apportionment financed the larger portion of the program cost. In Table 3, we have presented the cost of each of the District's largest functions instruction, which includes both regular and special instructional programs, pupil services, pupil transportation, administration, plant services, and other, as well as each program's net cost (total cost less revenues generated by the activities). Providing this information allows our citizens to consider the cost of each function in comparison to the benefits they believe are provided by that function. Table Total Cost Net Cost Total Cost Net Cost of Services of Services of Services of Services Instruction and related activities $ 128,526,700 $ 92,988,279 $ 128,924,960 $ 78,557,558 Pupil services 13,961,457 4,319,468 14,158,160 4,478,622 Pupil transportation 1,543,499 1,310,325 1,607,787 1,404,047 Administration 4,755,749 4,039,946 6,140,015 5,350,500 Plant services 19,674,173 17,630,503 17,241,227 14,895,368 Other 20,420,217 15,584,223 25,517,867 20,601,847 Total $ 188,881,795 $ 135,872,744 $ 193,590,016 $ 125,287,942 9

86 BALDWIN PARK UNIFIED SCHOOL DISTRICT MANAGEMENT'S DISCUSSION AND ANALYSIS JUNE 30, 2012 FINANCIAL ANALYSIS OF THE DISTRICT'S FUNDS As the District completed this year, our governmental funds reported a combined fund balance of $51,135,722, which is a decrease of $20,373,875 from last year. Table 4 Balances and Activity July 1, 2011 Revenues Expenditures June 30, 2012 General Fund $ 13,643,798 $ 146,761,090 $ 147,786,258 $ 12,618,630 Building Fund 20,515,863 9,664,519 23,454,801 6,725,581 Capital Projects Fund for Blended Component Units 21,009,856 7,807 9,494,252 11,523,411 Non-Major Governmental Funds 16,340,080 50,282,086 46,354,066 20,268,100 Total $ 71,509,597 $ 206,715,502 $ 227,089,377 $ 51,135,722 General Fund Budgetary Highlights Over the course of the year, the District revised the annual operating budget several times. These budget amendments fall into the following categories: Changes made in the first interim period in revenues were mainly due to recognition of deferred revenue from last year and the addition of restricted grants. Expenses increased for textbook adoptions to correspond with increases for restricted fund balance and costs associated with the carryovers and receipt of restricted grants. Changes made in the second interim period in revenues were mainly due to the decrease of the State revenue limit apportionment for a change in the net funded Cost of Living Adjustment (COLA) of 3.24 percent. Restricted revenues were decreased by the flexibility transfers to unrestricted revenues. Expenses decreased mainly due to the reduction of budgets associated with the reduction and flexibility transfer of restricted grants. The estimated Actuals reflected an increase in revenues and decrease in expenditures from the final budget as reported in the Budgetary Comparison Schedule. 10

87 BALDWIN PARK UNIFIED SCHOOL DISTRICT MANAGEMENT'S DISCUSSION AND ANALYSIS JUNE 30, 2012 CAPITAL ASSET AND DEBT ADMINISTRATION Capital Assets By the end of 2012, the District had invested $197,236,997 in a broad range of capital assets. This amount represents a net increase of $9,482,565, or 5.05 percent, from last year. (More detailed information about capital assets can be found in Note 4 to the financial statements.) Total depreciation expense for the year was $8,681,745, while additions to construction in progress, land, and building improvements, and furniture and equipment amounted to $18,171,344. Table 5 Governmental Activities Land $ 17,267,467 $ 17,267,467 Construction in progress 94,721,310 77,115,411 Land improvements 2,489,827 2,792,269 Buildings and improvements 79,260,890 87,213,529 Furniture and equipment 3,280,076 3,205,476 Vehicles 217, ,280 Total Capital Assets, Net $ 197,236,997 $ 187,754,432 The District's fiscal year capital budget anticipates spending another $7.6 million for capital projects, principally. 11

88 BALDWIN PARK UNIFIED SCHOOL DISTRICT MANAGEMENT'S DISCUSSION AND ANALYSIS JUNE 30, 2012 Long-Term Obligations At year-end, the District had $164,233,572 in general obligation bonds and other long-term obligations outstanding - a decrease of 0.4 percent from last year as shown in Table 6. (More detailed information about the District's long-term obligations is presented in Note 9 to the financial statements.) Table 6 Governmental Activities General obligation bonds $ 100,470,710 $ 101,802,166 Premium on issuance 441, ,135 Bond anticipation notes 23,312,990 22,119,636 Lease revenue bonds QZAB 672,800 1,441,310 Lease revenue bonds 28,950,000 29,245,000 Discount on issuance (534,706) (570,353) Compensated absences 71,561 63,506 Capital leases 235, ,407 Supplemental employee retirement plan 1,610,165 2,029,250 OPEB obligation - net 9,003,741 7,620,230 Total $ 164,233,572 $ 164,920,287 The District continues to pay down its existing debt. The District reported approximately $9 million in OPEB obligation - net as a result of implementing GASB Statement No. 45 in FACTORS BEARING ON THE DISTRICT'S FUTURE At the time these financial statements were prepared and audited, the District has the following existing circumstances that could significantly affect its financial health in the future: The State of California's budget deficit is unresolved. The District's enrollment decline continues, and with the reduction in State Revenue Limit funding, the District will be forced to downsize their expenditure budget. The Governor has proposed a not so favorable education budget for but with the passage of Proposition 30 in the November 2012 election. 12

89 BALDWIN PARK UNIFIED SCHOOL DISTRICT MANAGEMENT'S DISCUSSION AND ANALYSIS JUNE 30, 2012 Key Assumptions ADA is declining by approximately 141, and the District will be funded on prior year ADA. This also will affect the fiscal year. The Governor's May Revision Budget was used by the District and based on the passage of the tax initiative. The District plans to participate in a TRANS for approximately $30 million in December Total reduction of salary costs for seven furlough days is approximately $2.6 million for the District's General Fund. A decrease of approximately $2.3 million in Federal Revenues due to reductions with Title I, Title II Teacher Quality, Smaller Learning Communities, Title III and no longer receiving Federal Education Jobs Fund monies. A decrease in State Revenues of approximately $600,000 due to cuts in State programs and no budgeted funding for Mandated Costs reimbursements because of uncertainty of receipts. As the net General Fund Contributions decrease to restricted programs, the unrestricted revenue is increased. The net decrease in General Fund Contributions of approximately $348,000 is primarily due to the salary and benefit reductions from the implementation of the seven furlough days and retirement incentives in the restricted programs supported by General Fund Contributions. Continued deficit factor of percent revenue limit calculation. CONTACTING THE DISTRICT'S FINANCIAL MANAGEMENT This financial report is designed to provide our citizens, taxpayers, customers, and investors and creditors with a general overview of the District's finances and to demonstrate the District's accountability for the money it receives. If you have questions about this report or need additional financial information, contact the District's Business Office at Baldwin Park Unified School District, 3699 North Holly Avenue, Baldwin Park, California, 91706, or at: mbhamilton873@bpusd.net. 13

90 BALDWIN PARK UNIFIED SCHOOL DISTRICT STATEMENT OF NET ASSETS JUNE 30, 2012 Governmental Activities ASSETS Deposits and investments $ 38,127,480 Receivables 44,195,059 Stores inventories 400,212 Other current assets 613,512 Deferred charge on issuance 1,803,731 Capital assets Land and construction in process 111,988,777 Other capital assets 204,628,855 Less: Accumulated depreciation (119,380,635) Total Capital Assets 197,236,997 Total Assets 282,376,991 LIABILITIES Accounts payable 18,564,159 Interest payable 1,031,713 Deferred revenue 636,382 Current loans 13,000,000 Long-term obligations Current portion of long-term obligations 6,533,807 Noncurrent portion of long-term obligations 157,699,765 Total Long-Term Obligations 164,233,572 Total Liabilities 197,465,826 NET ASSETS Invested in capital assets, net of related debt 54,861,459 Restricted for: Debt service 6,097,622 Capital projects 5,603,816 Educational programs 5,787,948 Other activities 6,721,392 Unrestricted 5,838,928 Total Net Assets $ 84,911,165 The accompanying notes are an integral part of these financial statements. 14

91 BALDWIN PARK UNIFIED SCHOOL DISTRICT STATEMENT OF ACTIVITIES FOR THE YEAR ENDED JUNE 30, 2012 Net (Expenses) Revenues and Changes in Program Revenues Net Assets Charges for Operating Capital Services and Grants and Grants and Governmental Functions/Programs Expenses Sales Contributions Contributions Activities Governmental Activities: Instruction $ 103,064,437 $ 120,673 $ 23,332,885 $ 1,810,016 $ (77,800,863) Instruction-related activities: Supervision of instruction 12,973,890 52,357 9,054,385 - (3,867,148) Instructional library, media, and technology 2,019, ,837 - (1,397,553) School site administration 10,468,987 5, ,797 - (9,922,715) Pupil services: Home-to-school transportation 1,543, ,174 - (1,310,325) Food services 7,780, ,115 6,714,259 - (388,786) All other pupil services 6,181,297 9,164 2,241,451 - (3,930,682) Administration: Data processing 1,378, (1,378,517) All other administration 3,377,232 20, ,773 - (2,661,429) Plant services 19,674,173 66,303 1,977,367 - (17,630,503) Community services 119,407 6, ,730 - (1,425) Interest on long-term obligations 9,318, (9,318,963) Other outgo 10,981,847-4,718,012 - (6,263,835) Total Governmental Activities $ 188,881,795 $ 958,365 $ 50,240,670 $ 1,810,016 (135,872,744) General revenues and subventions: Property taxes, levied for general purposes 6,219,122 Property taxes, levied for debt service 6,460,732 Taxes levied for other specific purposes 161,607 Federal and State aid not restricted to specific purposes 99,919,021 Interest and investment earnings 799,223 Miscellaneous 11,962,209 Subtotal, General Revenues 125,521,914 Change in Net Assets (10,350,830) Net Assets - Beginning 95,261,995 Net Assets - Ending $ 84,911,165 The accompanying notes are an integral part of these financial statements. 15

92 BALDWIN PARK UNIFIED SCHOOL DISTRICT GOVERNMENTAL FUNDS BALANCE SHEET JUNE 30, 2012 Capital Projects Fund for Blended Non-Major Total General Building Component Governmental Governmental Fund Fund Units Funds Funds ASSETS Deposits and investments $ 4,512,622 $ 9,899,307 $ 12,649,807 $ 11,065,744 $ 38,127,480 Receivables 38,400,574 26,182-5,768,303 44,195,059 Due from other funds - 1,126,396-5,684,001 6,810,397 Stores inventories 204, , ,212 Other current assets 613, ,512 Total Assets $ 43,731,489 $ 11,051,885 $ 12,649,807 $ 22,713,479 $ 90,146,660 LIABILITIES AND FUND BALANCES Liabilities: Accounts payable $ 11,792,476 $ 4,326,304 $ - $ 2,445,379 $ 18,564,159 Due to other funds 5,684,001-1,126,396-6,810,397 Deferred revenue 636, ,382 Current loans 13,000, ,000,000 Total Liabilities 31,112,859 4,326,304 1,126,396 2,445,379 39,010,938 Fund Balances: Nonspendable 279, , ,212 Restricted 5,787,948 6,725,581 11,523,411 19,404,947 43,441,887 Committed , ,553 Assigned 26, ,169 27,623 Unassigned 6,524, ,524,447 Total Fund Balances 12,618,630 6,725,581 11,523,411 20,268,100 51,135,722 Total Liabilities and Fund Balances $ 43,731,489 $ 11,051,885 $ 12,649,807 $ 22,713,479 $ 90,146,660 The accompanying notes are an integral part of these financial statements. 16

93 BALDWIN PARK UNIFIED SCHOOL DISTRICT RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET TO THE STATEMENT OF NET ASSETS JUNE 30, 2012 Total Fund Balance - Governmental Funds $ 51,135,722 Amounts Reported for Governmental Activities in the Statement of Net Assets are Different Because: Capital assets used in governmental activities are not financial resources and, therefore, are not reported as assets in governmental funds. The cost of capital assets is: $ 316,617,632 Accumulated depreciation is: (119,380,635) Net Capital Assets 197,236,997 Expenditures relating to issuance of debt were recognized in modified accrual basis, but should not be recognized in accrual basis. Under accrual basis, these expenditures are capitalized and amortized over the life of the debt as an adjustment to interest expense. 1,803,731 In governmental funds, unmatured interest on long-term obligations is recognized in the period when it is due. On the government-wide financial statements, unmatured interest on long-term obligations is recognized when it is incurred. (1,031,713) Long-term obligations, including general obligation bonds, lease revenue bonds, capital lease obligations, compensated absences, and postemployment benefits are not due and payable in the current period and, therefore, are not reported as liabilities in the funds. Long-term obligations at year-end consist of: General obligation bonds 123,783,700 Premium on issuance, net of amortization 441,167 Lease revenue bonds 29,622,800 Discount on issuance, net of amortization (534,706) Compensated absences - accumulated vacation 71,561 Capital lease obligations 235,144 Supplemental employee retirement plan 1,610,165 OPEB obligation 9,003,741 Total Long-Term Obligations (164,233,572) Total Net Assets - Governmental Activities $ 84,911,165 The accompanying notes are an integral part of these financial statements. 17

94 BALDWIN PARK UNIFIED SCHOOL DISTRICT GOVERNMENTAL FUNDS STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES FOR THE YEAR ENDED JUNE 30, 2012 Capital Projects Fund for Blended General Building Component Fund Fund Units REVENUES Revenue limit sources $ 78,678,134 $ - $ - Federal sources 13,210, Other State sources 39,005, Other local sources 10,454, ,267 7,807 Total Revenues 141,349, ,267 7,807 EXPENDITURES Current Instruction 85,089, Instruction-related activities: Supervision of instruction 7,395, Instructional library, media, and technology 1,585, School site administration 8,121, Pupil services: Home-to-school transportation 1,453, Food services All other pupil services 4,689, Administration: Data processing 1,243, All other administration 2,602, Plant services 12,674, ,868 - Facility acquisition and construction 33,899 19,975,286 - Community services Other outgo 9,487, Debt service Principal 768, ,333 - Interest and other 579,347 22,313 - Total Expenditures 135,725,547 20,747,800 - Excess (Deficiency) of Revenues Over Expenditures 5,623,782 (20,582,533) 7,807 Other Financing Sources (Uses): Transfers in 3,917,573 9,499,252 - Other sources 1,494, Transfers out (12,060,711) (2,707,001) (9,494,252) Other uses Net Financing Sources (Uses) (6,648,950) 6,792,251 (9,494,252) NET CHANGE IN FUND BALANCES (1,025,168) (13,790,282) (9,486,445) Fund Balances - Beginning 13,643,798 20,515,863 21,009,856 Fund Balances - Ending $ 12,618,630 $ 6,725,581 $ 11,523,411 The accompanying notes are an integral part of these financial statements. 18

95 Non-Major Governmental Funds Total Governmental Funds $ - $ 78,678,134 19,094,140 32,304,900 4,178,402 43,184,382 12,241,832 22,869,361 35,514, ,036,777 11,591,338 96,680,978 5,023,357 12,418, ,830 1,917,782 1,671,300 9,792,735-1,453,580 7,726,579 7,726,579 1,202,300 5,891,626-1,243, ,703 3,094,551 3,651,306 16,621, ,764 20,142, , ,407-9,487,659 3,571,294 4,794,137 5,436,127 6,037,787 40,937, ,410,652 (5,422,931) (20,373,875) 14,767,712 28,184,537-1,494,188 (3,922,573) (28,184,537) (1,494,188) (1,494,188) 9,350,951-3,928,020 (20,373,875) 16,340,080 71,509,597 $ 20,268,100 $ 51,135,722 18

96 BALDWIN PARK UNIFIED SCHOOL DISTRICT RECONCILIATION OF THE GOVERNMENTAL FUNDS STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES TO THE STATEMENT OF ACTIVITIES FOR THE YEAR ENDED JUNE 30, 2012 Total Net Change in Fund Balances - Governmental Funds $ (20,373,875) Amounts Reported for Governmental Activities in the Statement of Activities are Different Because: Capital outlays to purchase or build capital assets are reported in governmental funds as expenditures, however, for governmental activities, those costs are shown in the Statement of Net Assets and allocated over their estimated useful lives as annual depreciation expenses in the Statement of Activities. This is the amount by which capital outlay exceeds depreciation expense in the period. Capital outlay $ 18,171,344 Depreciation expense (8,681,745) Net expense adjustment 9,489,599 In governmental funds, the entire proceeds from disposal of capital assets are reported as revenue. In the Statement of Activities, only the resulting gain or loss is reported. The difference between the proceeds from disposal of capital assets and the resulting loss is: (7,034) In the Statement of Activities, certain operating expenses - compensated absences (vacations) and special termination benefits (early retirement) are measured by the amounts earned during the year. In the governmental funds, however, expenditures for these items are measured by the amount of financial resources used (essentially, the amounts actually paid). This year, early retirement payments paid were more than amounts earned by $419,085. Vacation used was less than the amounts earned by $8, ,030 Repayment of bond principal is an expenditure in the governmental funds, but it reduces long-term obligations in the Statement of Net Assets and does not affect the Statement of Activities: General obligation bonds 4,700,000 Lease revenue bonds 1,063,510 Capital lease obligations 476,263 Under the modified basis of accounting used in the governmental funds, expenditures are not recognized for transactions that are not normally paid with expendable available financial resources. In the Statement of Activities, however, which is presented on the accrual basis, expenses and liabilities are reported regardless of when financial resources are available: Amortization of debt premium 16,968 Amortization of debt discount (35,647) Amortization of cost of issuance (162,986) Combined adjustment (181,665) 19

97 BALDWIN PARK UNIFIED SCHOOL DISTRICT RECONCILIATION OF THE GOVERNMENTAL FUNDS STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES TO THE STATEMENT OF ACTIVITIES (Continued) FOR THE YEAR ENDED JUNE 30, 2012 In the Statement of Activities, other Postemployment benefit obligations (OPEB) are measured by an actuarially determined Annual Required Contribution (ARC). In the governmental funds, however, expenditures for these items are measured by the amount of financial resources used (essentially, the amounts actually paid). This year, amounts contributed toward the OPEB obligation were less than the ARC by $1,383,511. $ (1,383,511) Interest on long-term obligations in the Statement of Activities differs from the amount reported in the governmental funds because interest is recorded as an expenditure in the funds when it is due, and thus requires the use of current financial resources. In the Statement of Activities, however, interest expense is recognized as the interest accrues, regardless of when it is due. The additional interest reported in the Statement of Activities is the result of two factors. First, accrued interest on the general obligation bonds decreased by $16,751, and second, $4,561,898 of additional accumulated interest was accreted on the District's "capital appreciation" general obligation bonds and bond anticipation notes. (4,545,147) Change in Net Assets of Governmental Activities $ (10,350,830) 20

98 BALDWIN PARK UNIFIED SCHOOL DISTRICT FIDUCIARY FUNDS STATEMENT OF NET ASSETS JUNE 30, 2012 Agency Funds ASSETS Deposits and investments $ 604,565 LIABILITIES Due to student groups $ 604,565 21

99 BALDWIN PARK UNIFIED SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS JUNE 30, 2012 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Financial Reporting Entity The Baldwin Park Unified School District (the District) was unified on July 1, 1960, under the laws of the State of California. The District operates under a locally-elected five member Board form of government and provides educational services to grades K - 12 as mandated by the State and/or Federal agencies. The District operates thirteen elementary schools, two middle schools, two junior high schools, two high schools, a continuation, and an adult program. A reporting entity is comprised of the primary government, component units, and other organizations that are included to ensure the financial statements are not misleading. The primary government of the District consists of all funds, departments, boards, and agencies that are not legally separate from the District. For Baldwin Park Unified School District, this includes general operations, food service, and student related activities of the District. Charter School The District has approved charters for two Opportunities for Learning Charter Schools pursuant to Education Code Section The Opportunities for Learning Charter Schools are operated by the Opportunities for Learning Corporation and are not considered component units of the District. Component Units Component units are legally separate organizations for which the District is financially accountable. Component units may include organizations that are fiscally dependent on the District in that the District approves their budget, the issuance of their debt or the levying of their taxes. In addition, component units are other legally separate organizations for which the District is not financially accountable but the nature and significance of the organization's relationship with the District is such that exclusion would cause the District's financial statements to be misleading or incomplete. For financial reporting purposes, the component unit discussed below is reported in the District's financial statements because of its relationship with the District. The Baldwin Park/Monrovia School Facilities Authority Corporation's financial activity is presented in the financial statements within the Capital Projects Fund for Blended Component Units and the Debt Service Fund for Blended Component Units. Lease Revenue Bonds issued by the Authority are included as long-term obligations in the government-wide financial statements. Basis of Presentation - Fund Accounting The accounting system is organized and operated on a fund basis. A fund is defined as a fiscal and accounting entity with a self-balancing set of accounts, which are segregated for the purpose of carrying on specific activities or attaining certain objectives in accordance with special regulations, restrictions, or limitations. The District's funds are grouped into two broad fund categories: governmental and fiduciary. 22

100 BALDWIN PARK UNIFIED SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS JUNE 30, 2012 Governmental Funds Governmental funds are those through which most governmental functions typically are financed. Governmental fund reporting focuses on the sources, uses, and balances of current financial resources. Expendable assets are assigned to the various governmental funds according to the purposes for which they may or must be used. Current liabilities are assigned to the fund from which they will be paid. The difference between governmental fund assets and liabilities is reported as fund balance. The following are the District's major and non-major governmental funds: Major Governmental Funds General Fund The General Fund is the chief operating fund for all districts. It is used to account for the ordinary operations of the District. All transactions except those accounted for in another fund are accounted for in this fund. Building Fund The Building Fund exists primarily to account separately for proceeds from the sale of bonds (Education Code Section 15146) and may not be used for any purposes other than those for which the bonds were issued. Capital Project Fund for Blended Component Units The Capital Project Fund for Blended Component Units is used to account for capital projects financed by Mello-Roos Community Facilities Districts and similar entities that are considered blended component units of the District under generally accepted accounting principles (GAAP). Non-Major Governmental Funds Special Revenue Funds The Special Revenue funds are established to account for the proceeds from specific revenue sources (other than trusts, major capital projects, or debt service) that are restricted or committed to the financing of particular activities and that compose a substantial portion of the inflows of the fund. Additional resources that are restricted, committed, or assigned to the purpose of the fund may also be reported in the fund. Adult Education Fund The Adult Education Fund is used to account separately for Federal, State, and local revenues for adult education programs and is to be expended for adult education purposes only.. Child Development Fund The Child Development Fund is used to account separately for Federal, State, and local revenues to operate child development programs and is to be used only for expenditures for the operation of child development programs. Cafeteria Fund The Cafeteria Fund is used to account separately for Federal, State, and local resources to operate the food service program (Education Code Sections ) and is used only for those expenditures authorized by the governing board as necessary for the operation of the District's food service program (Education Code Sections and 38100). Deferred Maintenance Fund The Deferred Maintenance Fund is used to account separately for State apportionments and the District's contributions for deferred maintenance purposes (Education Code Sections ) and for items of maintenance approved by the State Allocation Board. Deductible Insurance Fund The Deductible Insurance Fund is used to set aside money for insurance premiums payments. 23

101 BALDWIN PARK UNIFIED SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS JUNE 30, 2012 Capital Project Funds The Capital Project funds are used to account for and report financial resources that are restricted, committed, or assigned to the acquisition or construction of major capital facilities and other capital assets (other than those financed by proprietary funds and trust funds). Capital Facilities Fund The Capital Facilities Fund is used primarily to account separately for monies received from fees levied on developers or other agencies as a condition of approving a development (Education Code Sections ). Expenditures are restricted to the purposes specified in Government Code Sections or to the items specified in agreements with the developer (Government Code Section 66006). County School Facilities Fund The County School Facilities Fund is established pursuant to Education Code Section to receive apportionments from the 1998 State School Facilities Fund (Proposition la), the 2002 State School Facilities Fund (Proposition 47), or the 2004 State School Facilities Fund (Proposition 55) authorized by the State Allocation Board for new school facility construction, modernization projects, and facility hardship grants, as provided in the Leroy F. Greene School Facilities Act of 1998 (Education Code Section et seq.). Special Reserve Fund for Capital Outlay Projects The Special Reserve Fund for Capital Outlay Projects exists primarily to provide for the accumulation of General Fund monies for capital outlay purposes (Education Code Section 42840). Debt Service Funds The Debt Service funds are used to account for the accumulation of restricted, committed, or assigned resources for and the payment of principal and interest on general long-term obligations. Bond Interest and Redemption Fund The Bond Interest and Redemption Fund is used for the repayment of bonds issued for a District (Education Code Sections ). Tax Override Fund The Tax Override Fund is used for the repayment of voted indebtedness (other than Bond Interest and Redemption Fund repayments) to be financed from ad valorem tax levies. Debt Service Fund for Blended Component Units The Debt Service Fund for Blended Component Units is used to account for the accumulation of resources for the payment of principal and interest on bonds issued by Mello-Roos Community Facilities Districts and similar entities that are considered blended component units of the District under generally accepted accounting principles (GAAP). Fiduciary Funds Fiduciary funds are used to account for assets held in trustee or agent capacity for others that cannot be used to support the District's own programs. The fiduciary fund category is split into four classifications: pension trust funds, investment trust funds, private-purpose trust funds, and agency funds. The key distinction between trust and agency funds is that trust funds are subject to a trust agreement that affects the degree of management involvement and the length of time that the resources are held. Trust funds are used to account for the assets held by the District under a trust agreement for individuals, private organizations, or other governments and are therefore not available to support the District's own programs. The District has no trust funds. Agency funds are custodial in nature (assets equal liabilities) and do not involve measurement of results of operations. Such funds have no equity accounts since all assets are due to individuals or entities at some future time. The District's agency funds account for associated student body (ASB) activities. 24

102 BALDWIN PARK UNIFIED SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS JUNE 30, 2012 BasisofAccounting-MeasurementFocus Government-Wide Financial Statements The government-wide financial statements are prepared using the economic resources measurement focus and the accrual basis of accounting. This is the same approach used in the preparation of the proprietary fund financial statements, but differs from the manner in which governmental fund financial statements are prepared. The government-wide financial Statement of Activities presents a comparison between expenses, both direct and indirect, and for each governmental program. Direct expenses are those that are specifically associated with a service, program, or department and are therefore clearly identifiable to a particular function. The District does not allocate indirect expenses to functions in the Statement of Activities. Program revenues include charges paid by the recipients of the goods or services offered by the programs and grants and contributions that are restricted to meeting the operational or capital requirements of a particular program. Revenues that are not classified as program revenues are presented as general revenues. The comparison of program revenues and expenses identifies the extent to which each program is self-financing or draws from the general revenues of the District. Net assets should be reported as restricted when constraints placed on net asset use are either externally imposed by creditors (such as through debt covenants), grantors, contributors, or laws or regulations of other governments or imposed by law through constitutional provisions or enabling legislation. The net assets restricted for other activities result from special revenue funds and the restrictions on their net asset use. Fund Financial Statements Fund financial statements report detailed information about the District. The focus of governmental fund financial statements is on major funds rather than reporting funds by type. Each major fund is presented in a separate column. Non-major funds are aggregated and presented in a single column. Governmental Funds All governmental funds are accounted for using a flow of current financial resources measurement focus and the modified accrual basis of accounting. With this measurement focus, only current assets and current liabilities generally are included on the balance sheet. The Statement of Revenues, Expenditures, and Changes in Fund Balances reports on the sources (revenues and other financing sources) and uses (expenditures and other financing uses) of current financial resources. This approach differs from the manner in which the governmental activities of the government-wide financial statements are prepared. Governmental fund financial statements therefore include reconciliation with brief explanations to better identify the relationship between the government-wide financial statements and the statements for the governmental funds on a modified accrual basis of accounting and the current financial resources measurement focus. Under this basis, revenues are recognized in the accounting period in which they become measurable and available. Expenditures are recognized in the accounting period in which the fund liability is incurred, if measurable. Fiduciary Funds Fiduciary funds are accounted for using the flow of economic resources measurement focus and the accrual basis of accounting. Fiduciary funds are excluded from the government-wide financial statements because they do not represent resources of the District. 25

103 BALDWIN PARK UNIFIED SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS JUNE 30, 2012 Revenues - Exchange and Non-Exchange Transactions Revenue resulting from exchange transactions, in which each party gives and receives essentially equal value, is recorded on the accrual basis when the exchange takes place. On a modified accrual basis, revenue is recorded in the fiscal year in which the resources are measurable and become available. Available means that the resources will be collected within the current fiscal year or are expected to be collected soon enough thereafter, to be used to pay liabilities of the current fiscal year. Generally, available is defined as collectible within 60 days. However, to achieve comparability of reporting among California districts and so as not to distort normal revenue patterns, with specific respect to reimbursement grants and corrections to State-aid apportionments, the California Department of Education has defined available for Districts as collectible within one year. The following revenue sources are considered to be both measurable and available at fiscal year-end: State apportionments, interest, certain grants, and other local sources. Non-exchange transactions, in which the District receives value without directly giving equal value in return, include property taxes, certain grants, entitlements, and donations. Revenue from property taxes is recognized in the fiscal year in which the taxes are received. Revenue from certain grants, entitlements, and donations is recognized in the fiscal year in which all eligibility requirements have been satisfied. Eligibility requirements include time and purpose requirements. On a modified accrual basis, revenue from non-exchange transactions must also be available before it can be recognized. Deferred Revenue Deferred revenue arises when potential revenue does not meet both the "measurable" and "available" criteria for recognition in the current period or when resources are received by the District prior to the incurrence of qualifying expenditures. In subsequent periods, when both revenue recognition criteria are met, or when the District has a legal claim to the resources, the liability for deferred revenue is removed from the combined balance sheet and revenue is recognized. Certain grants received that have not met eligibility requirements are recorded as deferred revenue. On the governmental fund financial statements, receivables that will not be collected within the available period are also recorded as deferred revenue. Expenses/Expenditures On the accrual basis of accounting, expenses are recognized at the time they are incurred. The measurement focus of governmental fund accounting is on decreases in net financial resources (expenditures) rather than expenses. Expenditures are generally recognized in the accounting period in which the related fund liability is incurred, if measurable, and typically paid within 90 days. Principal and interest on longterm obligations, which has not matured, are recognized when paid in the governmental funds as expenditures. Allocations of costs, such as depreciation and amortization, are not recognized in the governmental funds but are recognized in the government-wide statements. Investments Investments held at June 30, 2012, with original maturities greater than one year are stated at fair value. Fair value is estimated based on quoted market prices at year-end. All investments not required to be reported at fair value are stated at cost or amortized cost. Fair values of investments in the county investment pool are determined by the program sponsor. 26

104 BALDWIN PARK UNIFIED SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS JUNE 30, 2012 Prepaid Expenditures Prepaid expenditures (expenses) represent amounts paid in advance of receiving goods or services. The District has the option of reporting an expenditure in governmental funds for prepaid items either when purchased or during the benefiting period. Stores Inventories Inventories consist of expendable food and supplies held for consumption. Inventories are stated at cost, on the weighted average basis. The costs of inventory items are recorded as expenditures in the governmental type funds. Capital Assets and Depreciation The accounting and reporting treatment applied to the capital assets associated with a fund are determined by its measurement focus. General capital assets are long-lived assets of the District. The District maintains a capitalization threshold of $5,000. The District does not possess any infrastructure. Improvements are capitalized; the costs of normal maintenance and repairs that do not add to the value of the asset or materially extend an asset's life are not. When purchased, such assets are recorded as expenditures in the governmental funds and capitalized in the government-wide financial Statement of Net Assets. The valuation basis for general capital assets are historical cost, or where historical cost is not available, estimated historical cost based on replacement cost. Donated capital assets are capitalized at estimated fair market value on the date donated. Capital assets in the proprietary funds are capitalized in the fund in which they are utilized. The valuation basis for proprietary fund capital assets is the same as those used for the capital assets of governmental funds. Depreciation of capital assets is computed and recorded by the straight-line method. Estimated useful lives of the various classes of depreciable capital assets are as follows: buildings and portables, 25 to 50 years; improvements, 20 years; equipment, 5 to 15 years. Interfund Balances On fund financial statements, receivables and payables resulting from short-term interfund loans are classified as "interfund receivables/payables." These amounts are eliminated in the governmental activities columns of the Statement of Net Assets. Compensated Absences Compensated absences are accrued as a liability as the benefits are earned. The entire compensated absence liability is reported on the government-wide Statement of Net Assets. For governmental funds, the current portion of unpaid compensated absences is recognized upon the occurrence of relevant events such as employee resignations and retirements that occur prior to year end that have not yet been paid with expendable available financial resources. These amounts are reported in the fund from which the employees who have accumulated leave are paid. 27

105 BALDWIN PARK UNIFIED SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS JUNE 30, 2012 Sick leave is accumulated without limit for each employee at the rate of one day for each month worked. Leave with pay is provided when employees are absent for health reasons; however, the employees do not gain a vested right to accumulated sick leave. Employees are never paid for any sick leave balance at termination of employment or any other time. Therefore, the value of accumulated sick leave is not recognized as a liability in the District's financial statements. However, credit for unused sick leave is applicable to all classified school members who retire after January 1, At retirement, each member will receive.004 year of service credit for each day of unused sick leave. Credit for unused sick leave is applicable to all certificated employees and is determined by dividing the number of unused sick days by the number of base service days required to complete the last school year, if employed full-time. Accrued Liabilities and Long-Term Obligations All payables, accrued liabilities, and long-term obligations are reported in the government-wide financial statements. In general, governmental fund payables and accrued liabilities that, once incurred, are paid in a timely manner and in full from current financial resources are reported as obligations of the funds. However, claims and judgments, compensated absences, special termination benefits, and contractually required pension contributions that will be paid from governmental funds are reported as a liability in the governmental fund financial statements only to the extent that they are due for payment during the current year. Bonds, capital leases are recognized as liabilities in the governmental fund financial statements when due. Deferred Issuance Costs, Premiums and Discounts In the government-wide financial statements and in the proprietary fund type financial statements, long-term obligations are reported as liabilities in the applicable governmental activities Statement of Net Assets. Bond premiums and discounts, as well as issuance costs, are deferred and amortized over the life of the bonds using the straight line method. Current Loans Current loans consist of amounts outstanding at June 30, 2012, for Tax Revenue and Anticipation Notes. The notes were issued as short-term obligations to provide cash flow needs. This liability is offset with cash deposits in the County Treasurer, which have been set aside to repay the notes. Fund Balances - Governmental Funds As of June 30, 2012, fund balances of the governmental funds are classified as follows: Nonspendable - amounts that cannot be spent either because they are in nonspendable form or because they are legally or contractually required to be maintained intact. Restricted - amounts that can be spent only for specific purposes because of constitutional provisions or enabling legislation or because of constraints that are externally imposed by creditors, grantors, contributors, or the laws or regulations of other governments. 28

106 BALDWIN PARK UNIFIED SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS JUNE 30, 2012 Committed - amounts that can be used only for specific purposes determined by a formal action of the governing board. The governing board is the highest level of decision-making authority for the District. Commitments may be established, modified, or rescinded only through resolutions or other action as approved by the governing board. Assigned - amounts that do not meet the criteria to be classified as restricted or committed but that are intended to be used for specific purposes. Under the District's adopted policy, only the governing board or chief business officer/assistant superintendent of business services may assign amounts for specific purposes. Unassigned - all other spendable amounts. Spending Order Policy When an expenditure is incurred for purposes for which both restricted and unrestricted fund balance is available, the District considers restricted funds to have been spent first. When an expenditure is incurred for which committed, assigned, or unassigned fund balances are available, the District considers amounts to have been spent first out of committed funds, then assigned funds, and finally unassigned funds, as needed, unless the governing board has provided otherwise in its commitment or assignment actions. Minimum Fund Balance Policy The governing board adopted a minimum fund balance policy for the General Fund in order to protect the District against revenue shortfalls or unpredicted one-time expenditures. The policy requires a Reserve for Economic Uncertainties consisting of unassigned amounts equal to no less than three percent of General Fund expenditures and other financing uses. Net Assets Net assets represent the difference between assets and liabilities. Net assets invested in capital assets, net of related debt consists of capital assets, net of accumulated depreciation, reduced by the outstanding balances of any borrowings used for the acquisition, construction or improvement of those assets. Net assets are reported as restricted when there are limitations imposed on their use either through the enabling legislation adopted by the District or through external restrictions imposed by creditors, grantors, or laws or regulations of other governments. The District applies restricted resources when an expense is incurred for purposes for which both restricted and unrestricted net assets are available. The government-wide financial statements report $25,704,966 of restricted net assets. Estimates The preparation of the financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results may differ from those estimates. 29

107 BALDWIN PARK UNIFIED SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS JUNE 30, 2012 Budgetary Data The budgetary process is prescribed by provisions of the California Education Code and requires the governing board to hold a public hearing and adopt an operating budget no later than July 1 of each year. The District governing board satisfied these requirements. The adopted budget is subject to amendment throughout the year to give consideration to unanticipated revenue and expenditures primarily resulting from events unknown at the time of budget adoption with the legal restriction that expenditures cannot exceed appropriations by major object account. The amounts reported as the original budgeted amounts in the budgetary statements reflect the amounts when the original appropriations were adopted. The amounts reported as the final budgeted amounts in the budgetary statements reflect the amounts after all budget amendments have been accounted for. For budget purposes, on behalf payments have not been included as revenue and expenditures as required under generally accepted accounting principles. Property Tax Secured property taxes attach as an enforceable lien on property as of January 1. Taxes are payable in two installments on November 1 and February 1 and become delinquent on December 10 and April 10, respectively. Unsecured property taxes are payable in one installment on or before August 31. The County of Los Angeles bills and collects the taxes on behalf of the District. Local property tax revenues are recorded when received. New Accounting Pronouncements In November 2010, the GASB issued Statement No. 61, The Financial Reporting Entity: Omnibus-an amendment of GASB Statements No. 14 and No. 34. The objective of this Statement is to improve financial reporting for a governmental financial reporting entity. The requirements of GASB Statement No. 14, The Financial Reporting Entity, and the related financial reporting requirements of GASB Statement No. 34, Basic Financial Statementsand Management's Discussion and Analysis-for State and Local Governments, were amended to better meet user needs and to address reporting entity issues that have arisen since the issuance of those Statements. This Statement modifies certain requirements for inclusion of component units in the financial reporting entity. For organizations that previously were required to be included as component units by meeting the fiscal dependency criterion, a financial benefit or burden relationship also would need to be present between the primary government and that organization for it to be included in the reporting entity as a component unit. Further, for organizations that do not meet the financial accountability criteria for inclusion as component units but that, nevertheless, should be included because the primary government's management determines that it would be misleading to exclude them, this Statement clarifies the manner in which that determination should be made and the types of relationships that generally should be considered in making the determination. This Statement also amends the criteria for reporting component units as if they were part of the primary government (that is, blending) in certain circumstances. For component units that currently are blended based on the "substantively the same governing body" criterion, it additionally requires that (1) the primary government and the component unit have a financial benefit or burden relationship or (2) management (below the level of the elected officials) of the primary government have operational responsibility (as defined in paragraph 8a) for the activities of the component unit. New criteria also are added to require blending of component units whose total debt outstanding is expected to be repaid entirely or almost entirely with resources of the primary government. 30

108 BALDWIN PARK UNIFIED SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS JUNE 30, 2012 The blending provisions are amended to clarify that funds of a blended component unit have the same financial reporting requirements as a fund of the primary government. Lastly, additional reporting guidance is provided for blending a component unit if the primary government is a business-type activity that uses a single column presentation for financial reporting. This Statement also clarifies the reporting of equity interests in legally separate organizations. It requires a primary government to report its equity interest in a component unit as an asset. The provisions of this Statement are effective for financial statements for periods beginning after June 15, Early implementation is encouraged. In June 2012, the GASB issued Statement No. 68, Accounting and Financial Reporting for Pensions an amendment of Statement No. 27. The primary objective of this Statement is to improve accounting and financial reporting by state and local governments for pensions. It also improves information provided by State and local governmental employers about financial support for pensions that is provided by other entities. This Statement results from a comprehensive review of the effectiveness of existing standards of accounting and financial reporting for pensions with regard to providing decision-useful information, supporting assessments of accountability and inter-period equity, and creating additional transparency. This Statement replaces the requirements of Statement No. 27, Accounting for Pensions by State and Local Governmental Employers, as well as the requirements of Statement No. 50, Pension Disclosures, as they relate to pensions that are provided through pension plans administered as trusts or equivalent arrangements (hereafter jointly referred to as trusts) that meet certain criteria. The requirements of Statements 27 and 50 remain applicable for pensions that are not covered by the scope of this Statement. This Statement establishes standards for measuring and recognizing liabilities, deferred outflows of resources, and deferred inflows of resources, and expense/expenditures. For defined benefit pensions, this Statement identifies the methods and assumptions that should be used to project benefit payments, discount projected benefit payments to their actuarial present value, and attribute that present value to periods of employee service. This Statement is effective for fiscal years beginning after June 15, Early implementation is encouraged. NOTE 2 - DEPOSITS AND INVESTMENTS Summary of Deposits and Investments Deposits and investments as of June 30, 2012, were classified in the accompanying financial statements as follows: Governmental activities $ 38,127,480 Fiduciary funds 604,565 Total Deposits and Investments $ 38,732,045 31

109 BALDWIN PARK UNIFIED SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS JUNE 30, 2012 Deposits and investments as of June 30, 2012, consisted of the following: Cash on hand and in banks $ 14,369,489 Cash in revolving 80,000 Investments 24,282,556 Total Deposits and Investments $ 38,732,045 Policies and Practices The District is authorized under California Government Code to make direct investments in local agency bonds, notes, or warrants within the State; U.S. Treasury instruments; registered State warrants or treasury notes; securities of the U.S. Government, or its agencies; bankers acceptances; commercial paper; certificates of deposit placed with commercial banks and/or savings and loan companies; repurchase or reverse repurchase agreements; medium term corporate notes; shares of beneficial interest issued by diversified management companies, certificates of participation, obligations with first priority security; and collateralized mortgage obligations. Investment in County Treasury - The District is considered to be an involuntary participant in an external investment pool as the District is required to deposit all receipts and collections of monies with their County Treasurer (Education Code Section 41001). The fair value of the District's investment in the pool is reported in the accounting financial statements at amounts based upon the District's pro-rata share of the fair value provided by the County Treasurer for the entire portfolio (in relation to the amortized cost of that portfolio). The balance available for withdrawal is based on the accounting records maintained by the County Treasurer, which is recorded on the amortized cost basis. 32

110 BALDWIN PARK UNIFIED SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS JUNE 30, 2012 General Authorizations Limitations as they relate to interest rate risk, credit risk, and concentration of credit risk are indicated in the schedules below: Maximum Maximum Maximum Authorized Remaining Percentage Investment Investment Type Maturity of Portfolio In One Issuer Local Agency Bonds, Notes, Warrants 5 years None None Registered State Bonds, Notes, Warrants 5 years None None U.S. Treasury Obligations 5 years None None U.S. Agency Securities 5 years None None Banker's Acceptance 180 days 40% 30% Commercial Paper 270 days 25% 10% Negotiable Certificates of Deposit 5 years 30% None Repurchase Agreements 1 year None None Reverse Repurchase Agreements 92 days 20% of base None Medium-Term Corporate Notes 5 years 30% None Mutual Funds N/A 20% 10% Money Market Mutual Funds N/A 20% 10% Mortgage Pass-Through Securities 5 years 20% None County Pooled Investment Funds N/A None None Local Agency Investment Fund (LAIF) N/A None None Joint Powers Authority Pools N/A None None Interest Rate Risk Interest rate risk is the risk that changes in market interest rates will adversely affect the fair value of an investment. Generally, the longer the maturity of an investment, the greater the sensitivity of its fair value to changes in market interest rates. The District manages its exposure to interest rate risk by investing in the Los Angeles County Investment Pool. The District monitors the interest rate risk inherent in its portfolio by measuring the weighted average maturity of its portfolio. Information about the weighted average maturity of the District's portfolio is presented in the following schedule: Fair Weighted Average Investment Type Value Maturity In Days Los Angeles County Investment Pool $ 24,357,

111 BALDWIN PARK UNIFIED SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS JUNE 30, 2012 Credit Risk Credit risk is the risk that an issuer of an investment will not fulfill its obligation to the holder of the investment. This is measured by the assignment of a rating by a nationally recognized statistical rating organization. The District's investment in the Los Angeles County Investment Pool is not required to be rated, nor has been rated as of June 30, Custodial Credit Risk Deposits This is the risk that in the event of a bank failure, the District's deposits may not be returned to it. The District does not have a policy for custodial credit risk for deposits. However, the California Government Code requires that a financial institution secure deposits made by State or local governmental units by pledging securities in an undivided collateral pool held by a depository regulated under State law (unless so waived by the governmental unit). The market value of the pledged securities in the collateral pool must equal at least 110 percent of the total amount deposited by the public agency. California law also allows financial institutions to secure public deposits by pledging first trust deed mortgage notes having a value of 150 percent of the secured public deposits and letters of credit issued by the Federal Home Loan Bank of San Francisco having a value of 105 percent of the secured deposits. As of June 30, 2012, the District's bank balance of $14,450,839 was exposed to custodial credit risk because it was uninsured and collateralized with securities held by the pledging financial institution's trust department or agent, but not in the name of the District. NOTE 3 - RECEIVABLES Receivables at June 30, 2012, consisted of intergovernmental grants, entitlements, interest and other local sources. All receivables are considered collectible in full. Non-Major Total General Building Governmental Governmental Fund Fund Funds Activities Federal Government Categorical aid $ 3,060,859 $ - $ 5,216,511 $ 8,277,370 State Government Apportionment 26,940, ,019 27,089,132 Categorical aid 6,985, ,480 7,357,034 Lottery 1,400, ,400,066 Local Government Interest - 26,182 8,346 34,528 Other Local Sources 13,982-22,947 36,929 Total $ 38,400,574 $ 26,182 $ 5,768,303 $ 44,195,059 34

112 BALDWIN PARK UNIFIED SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS JUNE 30, 2012 NOTE 4 - CAPITAL ASSETS Capital asset activity for the fiscal year ended June 30, 2012, was as follows: Balance Balance July 1, 2011 Additions Deductions June 30, 2012 Governmental Activities Capital assets not being depreciated: Land $ 17,267,467 $ - $ - $ 17,267,467 Construction in progress 77,115,411 17,605,899-94,721,310 Total Capital Assets Not Being Depreciated 94,382,878 17,605, ,988,777 Capital assets being depreciated: Land improvements 7,221, ,221,138 Buildings and improvements 186,207, ,207,972 Furniture and equipment 7,931, ,488 53,631 8,343,289 Vehicles 2,756,499 99,957-2,856,456 Total Capital Assets Being Depreciated 204,117, ,445 53, ,628,855 Less Accumulated Depreciation: Land improvements 4,428, ,442-4,731,311 Buildings and improvements 98,994,443 7,952, ,947,082 Furniture and equipment 4,725, ,854 46,597 5,063,213 Vehicles 2,596,219 42,810-2,639,029 Total Accumulated Depreciation 110,745,487 8,681,745 46, ,380,635 Total Capital Assets Being Depreciated 93,371,554 (8,116,300) 7,034 85,248,220 Governmental Activities Capital Assets, Net $ 187,754,432 $ 9,489,599 $ 7,034 $ 197,236,997 Depreciation expense was charged to governmental functions as follows: Governmental Activities Instruction $ 5,826,857 Supervision of instruction 538,225 Instructional library, media, and technology 100,743 School site administration 557,177 Home-to-school transportation 89,882 All other pupil services 256,728 Data processing 124,609 All other general administration 199,758 Plant services 987,766 Total Depreciation Expenses Governmental Activities $ 8,681,745 35

113 BALDWIN PARK UNIFIED SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS JUNE 30, 2012 NOTE 5 - INTERFUND TRANSACTIONS Interfund Receivables/Payables (Due To/Due From) Interfund receivable and payable balances arise from interfund transactions and are recorded by all funds affected in the period in which transactions are executed. Interfund receivable and payable balances at June 30, 2012, between major and non-major governmental funds are as follows: Due From Capital Projects General Fund for Blended Due To Fund Component Units Total Building Fund $ - $ 1,126,396 $ 1,126,396 Non-Major Governmental Funds 5,684,001-5,684,001 Total $ 5,684,001 $ 1,126,396 $ 6,810,397 The Balance of $1,126,396 is due to the Building Fund from the Capital Projects Fund for Blended Compnent Units as a reimbursement for construction costs. $ 1,126,396 The Balance of $800,000 is due to the Adult Education Fund from the General Fund as a temporary loan for cash flow purposes. The Balance of $247,000 is due to the Capital Facilities Fund from the General Fund as a temporary loan for cash flow purposes. The Balance of $4,637,001 is due to the County School Facilities Fund from the General Fund 800, ,000 for two temporary loans for cash flow purposes. 4,637,001 Total $ 6,810,397 36

114 BALDWIN PARK UNIFIED SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS JUNE 30, 2012 Operating Transfers Interfund transfers for the year ended June 30, 2012, consisted of the following: Transfer From Capital Projects Non-Major General Building Fund for Blended Governmental Transfer To Fund Fund Component Units Funds Total General Fund $ - $ - $ - $ 3,917,573 $ 3,917,573 Building Fund - - 9,494,252 5,000 9,499,252 Non-Major Governmental Funds 12,060,711 2,707, ,767,712 Total $ 12,060,711 $ 2,707,001 $ 9,494,252 $ 3,922,573 $ 28,184,537 The General Fund transferred to the Adult Education Fund (Non-Major) for revenue limit pass-through. The General Fund transferred to the Cafeteria Fund (Non-Major) to cover costs as the first installment payment of a five year repayment plan. The Special Reserve Fund for Other Capital Outlay Projects Fund (Non-Major) transferred to the General Fund for to meet the four percent reserve. The County School Facilities Fund (Non-Major) transferred to the Building Fund to reimburse for prior year bond project costs. The Adult Education Fund (Non-Major) transferred to the General Fund for apportionment. The County School Facilities Fund transferred to the Building Fund to reimburse prior year bond project costs. The General Fund transferred to the Deferred Maintenance Fund to cover costs. The Capital Projects for Blended Component Units Fund transferred to the Building Fund for lease revenue bonds. $ 9,464, ,789 12,408 2,707,001 3,900,000 5, ,190 9,494,252 The General Fund transferred to the Debt Service for Blended Component Units Fund (Non-Major) to cover interest expense related to debt. 1,547,281 The Self-Insurance Fund transferred to the General Fund remaining balance to close the fund at year-end. 21 The Tax Override Fund transferred to the General Fund remaining balance to close the fund at year-end. 5,144 Total $ 28,184,537 Interfund transfers are used to (1) move revenues from the fund that statute or budget requires to collect them to the fund that statute or budget requires to expend them, (2) move receipts restricted to debt service from the funds collecting the receipts to the debt service fund as debt service payments become due, and (3) use unrestricted revenues collected in the General Fund to finance various programs accounted for in other funds in accordance with budgetary authorizations. 37

115 BALDWIN PARK UNIFIED SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS JUNE 30, 2012 NOTE 6 - ACCOUNTS PAYABLE Accounts payable at June 30, 2012, consisted of the following: Non-Major Total General Building Governmental Governmental Fund Fund Funds Activities Vendor payables $ 3,581,677 $ - $ 1,520,521 $ 5,102,198 Salaries and benefits 8,210,799 27, ,858 9,162,901 Construction - 4,299,060-4,299,060 Total $ 11,792,476 $ 4,326,304 $ 2,445,379 $ 18,564,159 NOTE 7 - DEFERRED REVENUE Deferred revenue at June 30, 2012, consisted of the following: General Fund State categorical aid $ 62,257 Other local 574,125 Total $ 636,382 NOTE 8 - TAX AND REVENUE ANTICIPATION NOTES (TRANS) On March 31, 2011, the District issued $16,850,000 of Tax and Revenue Anticipation Notes bearing interest at 2.00 percent. The notes were issued to supplement cash flows. Interest and principal were due and payable on February 1, By December 2011, the District was required to have placed 100 percent of principal and interest in an irrevocable trust for the sole purpose of satisfying the notes. As of June 30, 2012, the outstanding balance has been paid. On June 22, 2011, The District issued $13,500,000 of Tax and Revenue Anticipation Notes. The notes mature on March 30, 2012, and bearing 2.00 percent interest. The notes were sold to supplement cash flow. Repayment requirements were that a percentage of principal and interest be deposited with the fiscal agent each month beginning December 2011, until 100 percent of principal and interest due was on account in February As of June 30, 2012, the outstanding balance has been paid. On February 23, 2012, the District issued $13,000,000 of Tax and Revenue Anticipation Notes bearing interest at 2.00 percent. The notes were issued to supplement cash flows. Interest and principal are due and payable on January 31, By December 2012, the District is required to have placed 100 percent of principal and interest in an irrevocable trust for the sole purpose of satisfying the notes. The District has recorded the liability as a current loan. 38

116 BALDWIN PARK UNIFIED SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS JUNE 30, 2012 Changes in the outstanding liabilities for the Tax and Revenue Anticipation Notes are as follows: Interest Outstanding Outstanding Issue Date Rate Maturity Date July 1, 2011 Additions Payments June 30, 2012 March % 2/1/2012 $ 16,850,000 $ - $ 16,850,000 $ - June % 3/30/ ,500,000 13,500,000 - February % 1/31/ ,000,000-13,000,000 $ 16,850,000 $ 26,500,000 $ 30,350,000 $ 13,000,000 NOTE 9 - LONG-TERM OBLIGATIONS Summary The changes in the District's long-term obligations during the year consisted of the following: Balance Balance Due in July 1, 2011 Additions Deductions June 30, 2012 One Year General Obligation Bonds $ 101,802,166 $ 3,368,544 $ 4,700,000 $ 100,470,710 $ 4,679,533 Premium on issuance 458,135-16, ,167 - Bond Anticipation Notes 22,119,636 1,193,354-23,312, Lease Revenue Bonds QZAB 432, , Lease Revenue Bonds QZAB 1,009, , , , Lease Revenue Bonds 3,980,000-30,000 3,950,000 35, Lease Revenue Bonds Series A 265, , Lease Revenue Bonds Series B 25,000, ,000,000 - Discount on issuance (570,353) - (35,647) (534,706) - Compensated absences 63,506 8,055-71,561 - Capital leases 711, , , ,144 Supplemental Employee Retirement Plan 2,029, ,552 1,191,637 1,610, OPEB obligation 7,620,230 3,717,431 2,333,920 9,003,741 - $ 164,920,287 $ 9,059,936 $ 9,746,651 $ 164,233,572 $ 6,533,807 Payments on the General Obligation Bonds are made in the Bond Interest and Redemption Fund. Payments on the Bond Anticipation Notes will be made by the Building Fund. Payments on the 2000 Lease Revenue Bonds QZAB, the 2001 Lease Revenue Bonds QZAB are made by the General Fund. 39

117 BALDWIN PARK UNIFIED SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS JUNE 30, 2012 Payments on the 2002 Lease Revenue Bonds and the 2010 Lease Revenue Bonds are made by the Debt Service Fund for Blended Component Units. Payments for Compensated Absences are typically liquidated in the fund in which the employee was paid. Payments for the Capital Lease Obligations are made by the Building Fund and Child Development Fund. Payments on the Supplemental Employee Retirement Plan are made by the General Fund. Payments for the OPEB Obligation are made by the General Fund. General Obligation Bonds The outstanding general obligation bonded debt is as follows: Bonds Bonds Issue Maturity Interest Original Outstanding Accretion / Outstanding Date Date Rate Issue July 1, 2011 Issued Adjustments Redeemed June 30, /1/ % $ 5,324,869 $ 6,361,200 $ - $ 331,208 $ 950,000 $ 5,742,408 11/1/ % 9,120,000 5,890, ,000 5,455,000 4/1/ % 14,180, , , ,000 6/1/ % 9,787,598 9,191, , ,000 9,073,397 6/1/ % 13,479,403 12,381, ,635 1,050,000 11,830,903 10/19/ % 4,998,699 5,885, ,221-6,110,903 9/21/ % 17,633,384 22,140,470-1,144, ,000 23,039,877 5/3/ % 25,000,000 23,600, ,000 23,095,000 6/26/ % 14,995,182 15,977, , ,000 15,918,222 $ 101,802,166 $ - $ 3,368,544 $ 4,700,000 $ 100,470, General Obligations Bonds In August 1996, the District issued $5,324,869 in 1996 General Obligations Bonds. Proceeds from the bonds will be used to finance the addition and modernization of school facilities. At June 30, 2012, the principal balance outstanding was $5,742, Refunding General Obligation Bonds In November 2001, the District issued $9,120,000 in 2001 Refunding General Obligation Bonds. Proceeds from the bonds will be used to refund a portion of the District's 1996 General Obligation Bonds. At June 30, 2012, the principal balance outstanding was $5,455,000. Election 2002, Series 2003 General Obligation Bonds In April 2003, the District issued $14,180,000 in Election 2002, Series 2003 General Obligation Bonds. Proceeds from the bonds will be used to finance the addition and modernization of school facilities. At June 30, 2012, the principal balance outstanding was $205,

118 BALDWIN PARK UNIFIED SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS JUNE 30, 2012 Election 2002, Series 2004 General Obligation Bonds In June 2004, the District issued $9,787,598 in Election 2002, Series 2004 General Obligation Bonds. Proceeds from the bonds will be used to finance the addition and modernization of school facilities. At June 30, 2012, the principal balance outstanding was $9,073, General Obligation Refunding Bonds In June 2005, the District issued $13,479,403 in 2005 General Obligation Refunding Bonds. Proceeds from the bonds will be used to repay portions of the previously issued General Obligation Bonds, Election of 2002, Series 2003 and Series At June 30, 2012, the principal balance outstanding was $11,830,903. Election 2002, Series 2005 General Obligation Bonds In October 2005, the District issued $4,998,699 in Election 2002, Series 2005 General Obligation Bonds. Proceeds from the bonds will be used to finance the construction and modernization of school facilities. At June 30, 2012, the principal balance outstanding was $6,110,903. Election 2002, Series 2006 General Obligation Bonds In September 2006, the District issued $17,633,384 in Election 2002, Series 2006 General Obligation Bonds. Proceeds from the bonds will be used to finance the construction and modernization of school facilities. At June 30, 2012, the principal balance outstanding was $23,039,877. Election 2006, Series 2007 General Obligation Bonds In May 2007, the District issued $25,000,000 in Election 2006, Series 2007 General Obligation Bonds. Proceeds from the bonds will be used to finance the construction and modernization of school facilities. At June 30, 2012, the principal balance outstanding was $23,095,000. Election 2006, Series 2008 General Obligation Bonds In June 2008, the District issued $14,995,182 in Election 2006, Series 2008 General Obligation Bonds. Proceeds from the bonds will be used to finance the construction and modernization of school facilities. At June 30, 2012, the principal balance outstanding was $15,918,

119 BALDWIN PARK UNIFIED SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS JUNE 30, 2012 Debt Service Requirements to Maturity The bonds mature through 2042 as follows: Interest to Principal Fiscal Year Principal Maturity Accretion Total 2013 $ 4,942,749 $ 1,984,935 $ 3,273,107 $ 10,200, ,067,934 1,941,362 3,195,916 9,205, ,068,669 1,898,264 3,094,700 9,061, ,057,823 1,850,729 2,952,782 8,861, ,737,243 1,760,092 2,889,191 9,386, ,734,088 6,712,275 15,040,617 50,486, ,077,054 4,752,424 14,047,182 37,876, ,886,579 3,592,500 8,649,046 29,128, ,398,571 1,579,875 2,811,750 15,790, ,500,000 62,500-2,562,500 Total $ 100,470,710 $ 26,134,955 $ 55,954,290 $ 182,559,956 Bond Anticipation Notes (BANs) On August 25, 2009, the District issued General Obligation Bond Anticipation Notes in the amount of $19,998,365, which mature on August 1, The notes are being issued in anticipation of the sale of general obligation bonds of the District authorized under and pursuant to a bond authorization approved by the voters of the District voting at an election held on November 7, The notes are being issued as capital appreciation notes and accrete interest at the rate of percent from the date of delivery, compounded on February 1 and August 1 of each year, commencing February 1, The notes mature through 2015 as follows: Year Ending Principal June 30, Principal Accretion Total 2013 $ - $ 1,257,736 $ 1,257, ,325,591 1,325, ,312, ,683 23,421,673 Total $ 23,312,990 $ 2,692,010 $ 26,005,000 42

120 BALDWIN PARK UNIFIED SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS JUNE 30, Lease Revenue Bonds QZAB On August 8, 2000, the District, pursuant to a lease/purchase agreement with the Baldwin Park/Monrovia School Facilities Financing Authority, issued $12,000,000, 2000 Lease Revenue Bonds, Qualified Zone Academy Bonds (QZAB) to provide funds to finance certain capital improvements and equipment and to pay certain costs of issuance. The Bonds mature on August 8, 2012, with the entire principal amount of $12,000,000 due at this date. The Bonds do not bear interest. In lieu of receiving periodic interest payments, eligible taxpayers who are bondholders will receive an annual Federal income tax credit. Payment of principal on the Bonds is secured by an initial lease payment of $2,000,000 made by the District on the date of issuance and annual lease payments of $432,000, which will be made by the District through August 8, The Trustee, State Street Bank, has been authorized to invest the lease payments in an investment agreement with AIG Match Funding Corporation. Assuming all annual lease payments are made, the amount expected to be available on the maturity date from the Guaranteed Invest Agreement is calculated to be sufficient to pay the Bonds on the maturity date. As of June 30, 2012, AIG Match Funding Corporation held $10,047,039 for payment of principal. At June 30, 2012, the principal balance outstanding was $12,000,000. The District is not required to make any further lease payments Lease Revenue Bonds QZAB On June 14, 2001, the District, pursuant to a lease/purchase agreement with the Baldwin Park/Monrovia School Facilities Financing Authority, issued $12,000,000, 2000 Lease Revenue Bonds, Qualified Zone Academy Bonds (QZAB) to provide funds to finance certain capital improvements, equipment and other educational development programs of the District and to pay certain costs of issuance. The Bonds mature on June 14, 2014, with the entire principal amount of $12,000,000 due at this date. The Bonds do not bear interest. In lieu of receiving periodic interest payments, eligible taxpayers who are bondholders will receive an annual Federal income tax credit. Payment of principal on the Bonds is secured by an initial lease payment of $2,000,000 made by the District on the date of issuance and annual lease payments of $336,400, which will be made by the District through June 14, The Trustee, State Street Bank, has been authorized to invest the lease payments in an investment agreement with AIG Match Funding Corporation. Assuming all annual lease payments are made, the amount expected to be available on the maturity date from the Guaranteed Invest Agreement is calculated to be sufficient to pay the Bonds on the maturity date. As of June 30, 2012, AIG Match Funding Corporation held $7,883,924 for payment of principal. At June 30, 2012, the principal balance outstanding was $12,000,000. Annual lease payments are as follows: Year Ending June 30, 2013 $ 336, ,400 Total $ 672,800 43

121 BALDWIN PARK UNIFIED SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS JUNE 30, Lease Revenue Bonds The District issued $4,065,000 to provide funds to finance certain capital improvements, equipment and other educational development programs of the District and to pay certain costs of issuance. The bonds mature in annual installments due on April 1. The stated interest on the bonds range from 3.00 to 5.00 percent per annum with interest payments made each April 1 and October 1. At June 30, 2012, the outstanding balance was $3,950,000. The payment schedule for these bonds is as follows: Year Ending Interest to June 30, Principal Maturity Total 2013 $ 35,000 $ 195,618 $ 230, , , , , , , , , , , , , , ,830 1,311, , ,250 1,437, ,055, ,875 1,574, ,520, ,250 1,721,250 Total $ 3,950,000 $ 3,293,543 $ 7,243, Lease Revenue Bonds - Qualified School Construction Bond Series 2010 A and Series 2010 B (QZAB) The District issued $25,525,000 of Lease Revenue Bonds dated July 15, The Bonds mature on June 1, 2027, and yield interest ranging between 2.00 and 7.00 seven percent. The Bonds are being issued to finance certain public capital improvements, fund capitalized interest on a portion of the Bond and pay the costs of issuance of the Bonds. Interest on a portion of the Bonds is payable semi-annually on June 1 and December 1, commencing on December 1, At June 30, 2012, the outstanding balance was $25,000,

122 BALDWIN PARK UNIFIED SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS JUNE 30, 2012 The payment schedule for these bonds is as follows: Year Ending Interest to June 30, Principal Maturity Total 2013 $ - $ 1,750,000 $ 1,750, ,750,000 1,750, ,750,000 1,750, ,750,000 1,750, ,750,000 1,750, ,750,000 8,750, ,000,000 8,750,000 33,750,000 Total $ 25,000,000 $ 26,250,000 $ 51,250,000 Accumulated Unpaid Employee Vacation The long-term portion of accumulated unpaid employee vacation for the District at June 30, 2012, amounted to $71,561. Capital Leases The District has entered into agreements to lease various facilities and equipment. Such agreements are, in substance, purchases (capital leases) and are reported as capital lease obligations. The District's liability on lease agreements with options to purchase is summarized below: Relocatable Buildings Buses Total Balance, July 1, 2011 $ 714,970 $ 22,989 $ 737,959 Payments 476,646 22, ,635 Balance, June 30, 2012 $ 238,324 $ - $ 238,324 The capital leases have minimum lease payments as follows: Year Ending Relocatable June 30, Buildings 2013 $ 238,324 Less: Amount Representing Interest 3,180 Present Value of Minimum Lease Payments $ 235,144 45

123 BALDWIN PARK UNIFIED SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS JUNE 30, 2012 Leased land, buildings, and equipment under capital leases in capital assets at June 30, 2012, include the following: Equipment $ 3,886,250 Less: Accumulated depreciation (3,695,347) Total $ 190,903 Amortization of leased buildings and equipment under capital assets is included with depreciation expense. Supplemental Employee Retirement Plan (SERP) The District offered an early retirement incentive to qualified employees under a qualified plan of Section 401 A of the Internal Revenue Code. Eligibility requirements are that the employees attain age 55 with at least ten years of service with the District. The retirees receive annual benefit payments for a term of 2 or 3 years. Currently, there are 90 employees participating in the Plan and the District's obligation to those retirees as of June 30, 2012, is $1,610,165. Future payments are as follows: Year Ending Annual June 30, Payment 2013 $ 1,247, ,435 Total $ 1,610,165 Other Postemployment Benefit (OPEB) Obligation The District's annual required contribution for the year ended June 30, 2012, was $3,336,419, and contributions made by the District during the year were $1,838,199. Interest on the net OPEB obligation and adjustments to the annual required contribution were $381,012 and $(495,721), respectively, which resulted in an increase to the net OPEB obligation of $1,383,511. As of June 30, 2012, the net OPEB obligation was $9,003,741. See Note 11 for additional information regarding the OPEB obligation and the postemployment benefits plan. 46

124 BALDWIN PARK UNIFIED SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS JUNE 30, 2012 NOTE 10 - FUND BALANCES Fund balances were composed of the following elements: Capital Projects Fund for Blended Non-Major Total General Building Component Governmental Governmental Fund Fund Units Funds Funds Nonspendable Revolving cash $ 75,000 $ - $ - $ 5,000 $ 80,000 Stores inventories 204, , ,212 Total Nonspendable 279, , ,212 Restricted Legally restricted programs 5,787, $ 6,721,392 12,509,340 Capital projects - 6,725,581 11,523,411 12,683,555 30,932,547 Total Restricted 5,787,948 6,725,581 11,523,411 19,404,947 43,441,887 Committed Adult education program , ,829 Deferred maintenance program , ,724 Total Committed , ,553 Assigned Interest set aside for center-based reserve ,169 1,169 Reserve for school site carryovers 26, ,454 Total Assigned 26, ,169 27,623 Unassigned Economic uncertainties 6,524, ,524,447 Total $ 12,618,630 $ 6,725,581 $ 11,523,411 $ 20,268,100 $ 51,135,722 NOTE 11 - POSTEMPLOYMENT HEALTH CARE PROGRAM AND OTHER POSTEMPLOYMENT BENEFITS (OPEB) OBLIGATION Plan Description The Baldwin Park Unified School District Retiree Health Plan (the Plan) is a single-employer defined benefit healthcare program administered by the Baldwin Park Unified School District. The Plan provides retiree health benefits to eligible retirees. Membership of the Plan consists of 192 retirees currently receiving benefits and 1,717 active plan members. The District provides employer paid medical benefits to eligible retirees and their eligible dependents. 47

125 BALDWIN PARK UNIFIED SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS JUNE 30, 2012 Retirees with at least 10 years of District service may retire at age 62 and receive a District contribution equal to the lowest single-party health plan premium at the time of retirement. Dental, vision, and spousal coverage may be self-paid by the retiree. Benefits end at age 65. Retirees with at least 20 years of District service may retire at or after age 55 and receive a District contribution of up to the lowest two-party health plan premium at the time of retirement. A single retiree may elect a higher plan option and receive a District contribution up to the lowest-two party rate. Benefits end at age 65. Retirees with at least 25 years of District service may retire at or after age 55 and receive the same benefits as described for a 20 year service retiree, plus a District-paid Medical Supplement plan for retiree and spouse, beginning at the retiree's age 65 and ending at retiree's age 70. Retirees with at least 30 years of District service may retire at any time (regardless of age) and be eligible to receive all benefits described for 25-year retirees. Board Members elected prior to January 1, 1995, with at least three terms of office (12 years) by the time of retirement, will be eligible for all benefits described for 25-year retirees. Part-time District employees are eligible to receive a pro-rate District contribution based on the number of hours worked per day. After retirement, they are eligible to receive a pro-rate share of the District contribution amounts for retirees, as described above. Contribution Information The contribution requirements of Plan members and the District are established and may be amended by the District and the Baldwin Park Education Association (BPEA/CTA/NEA), the local California School Employees Association (CSEA), and unrepresented groups. The required contribution is based on projected pay-as-you-go financing requirements. For fiscal year , the District contributed $1,838,199 to the Plan, all of which was used for current premiums. Annual OPEB Cost and Net OPEB Obligation The District's annual other postemployment benefit (OPEB) cost (expense) is calculated based on the annual required contribution of the employer (ARC), an amount actuarially determined in accordance with the parameters of GASB Statement No. 45. The ARC represents a level of funding that, if paid on an ongoing basis, is projected to cover normal cost each year and amortize any unfunded actuarial accrued liabilities (UAAL) (or funding excess) over a period not to exceed thirty years. The following table shows the components of the District's annual OPEB cost for the year, the amount actually contributed to the plan, and changes in the District's net OPEB obligation to the Plan: Annual required contribution $ 3,336,419 Interest on net OPEB obligation 381,012 Adjustment to annual required contribution (495,721) Annual OPEB cost (expense) 3,221,710 Contributions made (1,838,199) Increase in net OPEB obligation 1,383,511 Net OPEB obligation, beginning of year 7,620,230 Net OPEB obligation, end of year $ 9,003,741 48

126 BALDWIN PARK UNIFIED SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS JUNE 30, 2012 Trend Information Trend information for annual OPEB cost, the percentage of annual OPEB cost contributed to the Plan, and the net OPEB obligation is as follows: Annual Actual Year Ended OPEB Employer Percentage Net OPEB June 30, Cost Contribution Contributed Obligation 2010 $ 2,745,740 $ 947, % $ 6,021, $ 2,705,012 $ 1,106, % $ 7,620, $ 3,221,710 $ 1,838, % $ 9,003,741 Funded Status and Funding Progress The schedule of funding progress presented as required supplementary information following the notes to the financial statements, presents multiyear trend information that shows whether the actuarial value of plan assets is increasing or decreasing over time relative to the actuarial accrued liabilities for benefits. As of July 1, 2011, the most recent actuarial valuation date, the plan was not funded. The actuarial accrued liability for benefits was $29,408,570, and the actuarial value of assets was zero, resulting in an UAAL of $29,408,570. The covered payroll (annual payroll of active employees covered by the plan) was $85,389,477, and the ratio of the UAAL to the covered payroll was 34 percent. Actuarial valuations of an ongoing plan involve estimates of the value of reported amounts and assumptions about the probability of occurrence of events far into the future. Examples include assumptions about future employment, mortality, and the healthcare cost trend. Amounts determined regarding the funded status of the plan and the annual required contributions of the employer are subject to continual revision as actual results are compared with past expectations and new estimates are made about the future. The schedule of funding progress, presented as required supplementary information following the notes to the financial statements, presents multiyear trend information about whether the actuarial value of plan assets is increasing or decreasing over time relative to the actuarial accrued liabilities for benefits. Since this is the first year of implementation, only the current year information is presented. Actuarial Methods and Assumptions Projections of benefits for financial reporting purposes are based on the substantive plan (the plan as understood by the employer and the plan members) and include the types of benefits provided at the time of each valuation and the historical pattern of sharing of benefit costs between the employer and plan members to that point. The actuarial methods and assumptions used include techniques that are designed to reduce the effects of short-term volatility in actuarial accrued liabilities and the actuarial value of assets, consistent with the long-term perspective of the calculations. 49

127 BALDWIN PARK UNIFIED SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS JUNE 30, 2012 In the July 1, 2011, actuarial valuation, a standard set of assumptions are used with modifications made as appropriate for the District. Under this method, the Actuarial Accrued Liability is the present value of projected benefits multiplied by the ratio of benefit service as of the valuation date to the projected benefit service at retirement, termination, disability or death. The Normal Cost for a plan year is the expected increase in the Accrued Liability during the plan year. All employees eligible as of the measurement date in accordance with the provisions of the Plan listed in the data provided by the employer were included in the valuation. NOTE 12 - RISK MANAGEMENT The District is exposed to various risks of loss related to torts; theft, damage and destruction of assets; errors and omissions; injuries to employees; life and health of employees; and natural disasters. The District purchases commercial insurance for property damage with coverage up to a maximum of $300 million, subject to various policy sublimits generally ranging from $1 million to $50 million and deductibles ranging from $25,000 to $300,000 per occurrence. The District also purchases commercial insurance for general liability claims with coverage up to $1 million per occurrence and $2 million aggregate, with excess liability coverage over $25 million, all subject to various deductibles up to $20,000 per occurrence and per employee policy limit, subject to a deductible of $100,000 per occurrence per claim, up to a maximum of $1.5 million for Employee health benefits are covered by a commercial insurance policy purchased by the District. The District provides health insurance benefits to District employees electing to participate in the plan by paying a monthly premium based on the number of District employees participating in the plan. The District's risk management activities are recorded in the General Fund. Employee life, health, and disability programs are administered by the General Fund through the purchase of commercial insurance. The District participates in the San Gabriel Valley School Districts' Self-Insurance Authority for liability and property coverage, the East San Gabriel Valley Regional Occupational Program and the San Gabriel Valley School Districts' Self-Insurance Authority public entity risk pools (JPAs) for the workers' compensation programs and purchases excess liability coverage through the JPAs. Refer to Note 15 for additional information regarding the JPAs. NOTE 13 - EMPLOYEE RETIREMENT SYSTEMS Qualified employees are covered under multiple-employer retirement plans maintained by agencies of the State of California. Certificated employees are members of the California State Teachers' Retirement System (CalSTRS) and classified employees are members of the California Public Employees' Retirement System (CalPERS). 50

128 BALDWIN PARK UNIFIED SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS JUNE 30, 2012 CalSTRS Plan Description The District contributes to CalSTRS, a cost-sharing multiple-employer public employee retirement system defined benefit pension plan administered by CalSTRS. The plan provides retirement and disability benefits, annual cost-of-living adjustments, and survivor benefits to beneficiaries. Benefit provisions are established by State statutes, as legislatively amended, within the California State Teachers' Retirement Law. CalSTRS issues a separate comprehensive annual financial report that includes financial statements and required supplementary information. Copies of the CalSTRS annual financial report may be obtained from CalSTRS, 7919 Folsom Blvd., Sacramento, California Funding Policy Active plan members are required to contribute 8.0 percent of their salary and the District is required to contribute an actuarially determined rate. The actuarial methods and assumptions used for determining the rate are those adopted by CalSTRS Teachers' Retirement Board. The required employer contribution rate for fiscal year was 8.25 percent of annual payroll. The contribution requirements of the plan members are established by State statute. The District's contributions to CalSTRS for the fiscal years ending June 30, 2012, 2011, and 2010, were $5,530,592, $5,623,666, and $5,759,350, respectively, and equal 100 percent of the required contributions for each year. CalPERS Plan Description The District contributes to the School Employer Pool under CalPERS, a cost-sharing multiple-employer public employee retirement system defined benefit pension plan administered by CalPERS. The plan provides retirement and disability benefits, annual cost-of-living adjustments, and survivor benefits to plan members and beneficiaries. Benefit provisions are established by State statutes, as legislatively amended, within the California Public Employees' Retirement Laws. CalPERS issues a separate comprehensive annual financial report that includes financial statements and required supplementary information. Copies of the CalPERS' annual financial report may be obtained from the CalPERS Executive Office, 400 P Street, Sacramento, California Funding Policy Active plan members are required to contribute 7.0 percent of their salary and the District is required to contribute an actuarially determined rate. The actuarial methods and assumptions used for determining the rate are those adopted by the CalPERS Board of Administration. The required employer contribution rate for fiscal year was percent of covered payroll. The contribution requirements of the plan members are established by State statute. The District's contributions to CalPERS for the fiscal years ending June 30, 2012, 2011, and 2010, were $3,173,898, $3,261,416, and $3,062,756, respectively, and equal 100 percent of the required contributions for each year. 51

129 BALDWIN PARK UNIFIED SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS JUNE 30, 2012 On Behalf Payments The State of California makes contributions to CalSTRS on behalf of the District. These payments consist of State General Fund contributions to CalSTRS in the amount of $3,554,597 (4.855 percent of annual payroll). Under accounting principles generally accepted in the United States of America, these amounts are to be reported as revenues and expenditures. Accordingly, these amounts have been recorded in these financial statements. On behalf payments have been excluded from the calculation of available reserves, and have not been included in the budgeted amounts reported in the General Fund - Budgetary Comparison Schedule. NOTE 14 - COMMITMENTS AND CONTINGENCIES Grants The District received financial assistance from Federal and State agencies in the form of grants. The disbursement of funds received under these programs generally requires compliance with terms and conditions specified in the grant agreements and are subject to audit by the grantor agencies. Any disallowed claims resulting from such audits could become a liability of the General Fund or other applicable funds. However, in the opinion of management, any such disallowed claims will not have a material adverse effect on the overall financial position of the District at June 30, Litigation The District is involved in various litigation arising from the normal course of business. In the opinion of management and legal counsel, the disposition of all litigation pending is not expected to have a material adverse effect on the overall financial position of the District at June 30,

130 BALDWIN PARK UNIFIED SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS JUNE 30, 2012 Construction Commitments As of June 30, 2012, the District had the following commitments with respect to the unfinished capital projects: Remaining Expected Construction Dates of CAPITAL PROJECTS Commitments Completion Baldwin Park High School Appliance Repair/HVAC $ 426,947 * Baldwin Park Adult Education Culinary Building 750,000 November 2012 Baldwin Park High School Auto Tech Center 4,060 April 2012 Baldwin Park High School Field House Classroom 148,835 December 2008 Baldwin Park High School Library Teacher 622,200 * Baldwin Park High School Various Classrooms 274,127 * DeAnza Elementary School Redevelopment 331,263 * District-Wide Solar Panel 5,304,677 December 2013 District-Wide Kitchen Metering 59,062 December 2013 Geddes Elementary School Phase 2 Redevelopment 728,475 * Holland Middle School 2 Story Charter 1,890,000 * Holland Middle School Gymnasium 786,281 * Holland Middle School Redevelopment 455,068 * Jones Junior High School Gymnasium 786,281 * Jones Junior High School Redevelopment 592,110 * North Park High School Auto Center 632,128 December 2013 Olive Middle School Athletic Stadium 116,311 * Olive Middle School Gymnasium 762,874 * Olive Middle School Redevelopment 306,904 * Pleasant View Elementary School Redevelopment 379,505 * Santa Fe Elementary School Redevelopment 672,118 * Sierra Vista High School 2 Story Adult Education 1,960,969 * Sierra Vista High School 3 Story Science 4,129,509 * Sierra Vista High School Small Learning 2,469,600 * $ 24,589,304 *Expected Date of Completion was not determinable at the time of audit. 53

131 BALDWIN PARK UNIFIED SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS JUNE 30, 2012 NOTE 15 - PARTICIPATION IN PUBLIC ENTITY RISK POOLS The District is a member of the San Gabriel Valley School Districts' Self-Insurance Authority, the East San Gabriel Valley Regional Occupational Program, and the San Gabriel Valley School Districts' Self-Insurance Authority for liability protection public entity risk pools. The District pays an annual premium to each entity for its health, workers' compensation, and property liability coverage. The relationships between the District, the pools, and the JPAs are such that they are not component units of the District for financial reporting purposes. These entities have budgeting and financial reporting requirements independent of member units and their financial statements are not presented in these financial statements; however, fund transactions between the entities and the District are included in these statements. Audited financial statements are available from the respective entities. The San Gabriel Valley School Districts' Self-Insurance Authority JPA reported a deficit retained earnings balance for the District of $4,458,162 as of June 30, During the year ended June 30, 2012, the District made payments of $735,296 and $3,167,935 to San Gabriel Valley School Districts' Self-Insurance Authority for liability protection, and San Gabriel Valley School Districts' Self-Insurance Authority, respectively, for its property liability and workers' compensation coverage. NOTE 16 - SUBSEQUENT EVENTS Tax and Revenue Anticipation Notes (TRANS) The District issued $7,000,000 of Tax and Revenue Anticipation Notes. The notes mature on June 30, 2013, and pay 2.00 percent interest. The notes were sold to supplement cash flow. Repayment requirements are that a percentage of principal and interest be deposited with the fiscal agent each month beginning December 2012, until 100 percent of principal and interest due is on account in June NOTE 17 - FISCAL ISSUES RELATING TO BUDGET REDUCTIONS The State of California continues to suffer the effects of a recessionary economy. California school districts are reliant on the State of California to appropriate the funding necessary to continue the level of educational services expected by the State constituency. With the implementation of education trailer bill Senate Bill 70 (Chapter 7, Statutes of 2011), 39 percent of current year funding has now been deferred to a subsequent period, creating significant cash flow management issues for districts in addition to requiring substantial budget reductions, ultimately impacting the ability of California school districts to meet their goals for educational services. 54

132 REQUIRED SUPPLEMENTARY INFORMATION 55

133 BALDWIN PARK UNIFIED SCHOOL DISTRICT GENERAL FUND BUDGETARY COMPARISON SCHEDULE FOR THE YEAR ENDED JUNE 30, 2012 Variances - Positive (Negative) Budgeted Amounts Actual Final Original Final (GAAP Basis) to Actual REVENUES Revenue limit sources $ 74,926,717 $ 78,938,255 $ 78,678,134 $ (260,121) Federal sources 11,800,990 14,691,820 13,210,760 (1,481,060) Other State sources 32,143,395 24,438,351 39,005,980 14,567,629 Other local sources 1,531,525 10,720,109 10,454,455 (265,654) Total Revenues 1 120,402, ,788, ,349,329 12,560,794 EXPENDITURES Current Certificated salaries 59,468,363 64,765,059 64,201, ,828 Classified salaries 16,682,325 17,767,133 17,405, ,146 Employee benefits 24,829,587 24,743,177 28,527,335 (3,784,158) Books and supplies 7,608,146 10,509,470 4,390,222 6,119,248 Services and operating expenditures 11,298,893 12,244,266 11,160,067 1,084,199 Other outgo 9,441,997 10,652,966 8,416,513 2,236,453 Capital outlay 203, , ,335 59,310 Debt service Principal ,510 (768,510) Interest ,347 (579,347) Total Expenditures 1 129,532, ,017, ,725,547 5,292,169 Excess (Deficiency) of Revenues Over Expenditures (9,129,684) (12,229,181) 5,623,782 17,852,963 Other Financing Sources (Uses) Transfers in 5,500,000 4,005,226 3,917,573 (87,653) Transfers out (1,017,038) (1,219,602) (12,060,711) (10,841,109) Net Financing Sources (Uses) 4,482,962 2,785,624 (8,143,138) (10,928,762) NET CHANGE IN FUND BALANCE (4,646,722) (9,443,557) (2,519,356) 6,924,201 Fund Balance - Beginning 13,643,798 13,643,798 13,643,798 - Fund Balance - Ending $ 8,997,076 $ 4,200,241 $ 11,124,442 $ 6,924,201 1 On behalf payments of $3,554,597 are included in the actual revenues and expenditures, but have not been included in the budgeted amounts. 56

134 BALDWIN PARK UNIFIED SCHOOL DISTRICT SCHEDULE OF OTHER POSTEMPLOYMENT BENEFITS (OPEB) FUNDING PROGRESS FOR THE YEAR ENDED JUNE 30, 2012 Actuarial Accrued Liability Unfunded UAAL as a Actuarial (AAL) - AAL Percentage of Valuation Actuarial Value Unprojected (UAAL) Funded Ratio Covered Covered Payroll Date of Assets (a) Unit Credit (b) (b - a) (a / b) Payroll (c) ([b - a] / c) July 1, 2007 $ - $ 21,909,496 $ 21,909,496 0% $ 88,744,033 25% July 1, 2011 $ - $ 29,408,570 $ 29,408,570 0% $ 85,389,477 34% 57

135 APPENDIX C FORM OF CONTINUING DISCLOSURE CERTIFICATE This Continuing Disclosure Certificate (the Disclosure Certificate ) is executed and delivered by the Baldwin Park Unified School District (the District ) in connection with the issuance of $23,736, of the District s General Obligation Bonds, Election of 2006, Series 2013 (the Bonds ). The Bonds are being issued pursuant to a resolution of the Board of Education of the District adopted on November 12, 2013 (the Resolution ). 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 Holders and Beneficial Owners of the Bonds and in order to assist the Participating Underwriter in complying with S.E.C. Rule 15c2-12(b)(5). SECTION 2. Definitions. In addition to the definitions set forth in the Resolution, which apply to any capitalized term used in this Disclosure Certificate unless otherwise defined in this Section, the following capitalized terms shall have the following meanings: Annual Report shall mean any Annual Report provided by the District pursuant to, and as described in, Sections 3 and 4 of this Disclosure Certificate. Beneficial Owner shall mean any person which (a) has the power, directly or indirectly, to vote or consent with respect to, or to dispose of ownership of, any Bonds (including persons holding Bonds through nominees, depositories or other intermediaries), or (b) is treated as the owner of any Bonds for federal income tax purposes. Dissemination Agent shall mean initially Annette Yee and Company, LLC, or any successor Dissemination Agent designated in writing by the District (which may be the District) and which has filed with the District a written acceptance of such designation. Holders shall mean registered owners of the Bonds. Listed Events shall mean any of the events listed in Section 5(a) or 5(b) of this Disclosure Certificate. Participating Underwriter shall mean the original underwriters of the Bonds required to comply with the Rule in connection with offering of the Bonds. Repository shall mean the Municipal Securities Rulemaking Board, which can be found at or any other repository of disclosure information that may be designated by the Securities and Exchange Commission as such for purposes of the Rule in the future. Rule shall mean Rule 15c2-12(b)(5) adopted by the Securities and Exchange Commission under the Securities Exchange Act of 1934, as the same may be amended from time to time. State shall mean the State of California. C-1

136 SECTION 3. Provision of Annual Reports. (a) The District shall, or shall cause the Dissemination Agent to, not later than nine months after the end of the District s fiscal year (presently ending June 30), commencing with the report for the Fiscal Year, provide to the Repository an Annual Report which is consistent with the requirements of Section 4 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 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. 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(b). (b) Not later than 30 days (nor more than 60 days) prior to said date the Dissemination Agent shall give notice to the District that the Annual Report shall be required to be filed in accordance with the terms of this Disclosure Certificate. Not later than 15 Business Days prior to said date, the District shall provide the Annual Report in a format suitable for reporting to the Repository to the Dissemination Agent (if other than the District). If the District is unable to provide to the Repository an Annual Report by the date required in subsection (a), the District shall send a notice to the Repository in substantially the form attached as Exhibit A with a copy to the Dissemination Agent. The Dissemination Agent shall not be required to file a Notice to Repository of Failure to File an Annual Report. (c) The Dissemination Agent shall file a report with the District stating it has filed the Annual Report in accordance with its obligations hereunder, stating the date it was provided to the Repository. SECTION 4. Content and Form of Annual Reports. (a) The District s Annual Report shall contain or include by reference the following: 1. The audited financial statements of the District for the prior fiscal year, prepared in accordance with generally accepted accounting principles as promulgated to apply to governmental entities from time to time by the Governmental Accounting Standards Board. If the District s audited financial statements are not available by the time the Annual Report is required to be filed pursuant to Section 3(a), 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. 2. Material financial information and operating data with respect to the District of the type included in the Official Statement in the following categories (to the extent not included in the District s audited financial statements): (a) (b) (c) (d) State funding received by the District for the last completed fiscal year; average daily attendance of the District for the last completed fiscal year; outstanding District indebtedness; and summary financial information on revenues, expenditures and fund balances for the District s general fund reflecting adopted budget for the then-current fiscal year; C-2

137 (e) (f) (g) assessed valuation of taxable property within the District for the then-current fiscal year; secured tax charges and delinquencies for property within the District for the then-current year, except to the extent the County of Los Angeles adopts the Teeter Plan in connection with ad valorem tax levies for bonded debt of the District; and a list of the largest 20 secured taxpayers within the District for the then-current year. 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 Repository 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. (b) The Annual Report shall be filed in an electronic format accompanied by identifying information prescribed by the Municipal Securities Rulemaking Board. SECTION 5. Reporting of Significant Events. (a) Pursuant to the provisions of this Section 5(a), the District shall give, or cause to be given, notice of the occurrence of any of the following events with respect to the Bonds in a timely manner not in excess of 10 business days after the occurrence of the event: 1. principal and interest payment delinquencies. 2. tender offers. 3. defeasances. 4. rating changes. 5. adverse tax opinions, the issuance by the Internal Revenue Service of proposed or final determinations of taxability, or Notices of Proposed Issue (IRS Form 5701-TEB). 6. unscheduled draws on the debt service reserves reflecting financial difficulties. 7. unscheduled draws on credit enhancement reflecting financial difficulties. 8. substitution of the credit or liquidity providers or their failure to perform. 9. bankruptcy, insolvency, receivership or similar event of the District. For the purposes of the event identified in this Section 5(a)(9), the event is considered to occur when any of the following occur: the appointment of a receiver, fiscal agent or similar officer for the District in a proceeding under the U.S. Bankruptcy Code or in any other proceeding under state or federal law in which a court or governmental authority has assumed jurisdiction over substantially all of the assets or business of the District, or if such jurisdiction has been assumed by leaving the existing governmental body and officials or officers in possession but subject to C-3

138 the supervision and orders of a court or governmental authority, or the entry of an order confirming a plan of reorganization, arrangement or liquidation by a court or governmental authority having supervision or jurisdiction over substantially all of the assets or business of the District. (b) Pursuant to the provisions of this Section 5(b), the District shall give, or cause to be given, notice of the occurrence of any of the following events with respect to the Bonds, if material: 1. non-payment related defaults. 2. modifications to rights of Bondholders. 3. optional, contingent or unscheduled Bond calls. 4. unless described under Section 5(a)(5) above, material notices or determinations with respect to the tax status of the Bonds, or other material events affecting the tax status of the Bonds. 5. release, substitution or sale of property securing repayment of the Bonds. 6. the consummation of a merger, consolidation, or acquisition involving the District or the sale of all or substantially all of the assets of the District, other than in the ordinary course of business, the entry into a definitive agreement to undertake such an action or the termination of a definitive agreement relating to any such actions, other than pursuant to its terms. 7. Appointment of a successor or additional trustee or paying agent with respect to the Bonds or the change of name of such a trustee or paying agent. (c) Whenever the District obtains knowledge of the occurrence of a Listed Event under Section 5(b) hereof, the District shall as soon as possible determine if such event would be material under applicable federal securities laws. (d) If the District determines that knowledge of the occurrence of a Listed Event under Section 5(b) hereof would be material under applicable federal securities laws, the District shall (i) file a notice of such occurrence with the Repository in a timely manner not in excess of 10 business days after the occurrence of the event or (ii) provide notice of such reportable event to the Dissemination Agent in format suitable for filing with the Repository in a timely manner not in excess of 10 business days after the occurrence of the event. The Dissemination Agent shall have no duty to independently prepare or file any report of Listed Events. The Dissemination Agent may conclusively rely on the District s determination of materiality pursuant to Section 5(c). 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 Bonds. If such termination occurs prior to the final maturity of the Bonds, the District shall give notice of such termination in the same manner as for a Listed Event under Section 5(a). SECTION 7. Dissemination Agent. The District may, from time to time, appoint or engage a Dissemination Agent (or substitute 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. The Dissemination Agent may resign upon 15 days written notice to the District. Upon such resignation, the District shall act as its own Dissemination Agent until it appoints a successor. C-4

139 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 and shall not be responsible to verify the accuracy, completeness or materiality of any continuing disclosure information provided by the District. The District shall compensate the Dissemination Agent for its fees and expenses hereunder as agreed by the parties. Any entity succeeding to all or substantially all of the Dissemination Agent s corporate trust business shall be the successor Dissemination Agent without the execution or filing of any paper or further act. SECTION 8. Amendment; Waiver. Notwithstanding any other provision of this Disclosure Certificate, the District may amend this Disclosure Certificate, and any provision of this Disclosure Certificate may be waived, provided that the following conditions are satisfied: (a) If the amendment or waiver relates to the provisions of Sections 3(a), 4, or 5(a) or 5(b), it may only be made in connection with a change in circumstances that arises from a change in legal requirements, change in law, or change in the identity, nature or status of an obligated person with respect to the Bonds, or the type of business conducted; (b) The undertaking, as amended or taking into account such waiver, would, in the opinion of nationally recognized bond counsel, have complied with the requirements of the Rule at the time of the original issuance of the Bonds, after taking into account any amendments or interpretations of the Rule, as well as any change in circumstances; (c) The amendment or waiver does not, in the opinion of nationally recognized bond counsel, materially impair the interests of the Holders or Beneficial Owners of the Bonds; and (d) No duties of the Dissemination Agent hereunder shall be amended without its written consent thereto. In the event of any amendment or waiver of a provision of this Disclosure Certificate, the District shall describe such amendment in the next 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(a), 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 Holder or Beneficial Owner of the Bonds may take such actions as may be necessary and appropriate, including seeking mandate or specific performance by court order, to cause the C-5

140 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 Resolution, and the sole remedy under this Disclosure Certificate 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. The Dissemination Agent acts hereunder solely for the benefit of the District; this Disclosure Certificate shall confer no duties on the Dissemination Agent to the Participating Underwriter, the Holders and the Beneficial Owners. 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 gross negligence or willful misconduct. The obligations of the District under this Section shall survive resignation or removal of the Dissemination Agent and payment of the Bonds. The Dissemination Agent shall have no liability for the failure to report any event or any financial information as to which the District has not provided an information report in format suitable for filing with the Repository. The Dissemination Agent shall not be required to monitor or enforce the District s duty to comply with its continuing disclosure requirements hereunder. SECTION 12. Beneficiaries. This Disclosure Certificate shall inure solely to the benefit of the District, the Dissemination Agent, the Participating Underwriter and Holders and Beneficial Owners from time to time of the Bonds, and shall create no rights in any other person or entity. Dated: December 18, 2013 BALDWIN PARK UNIFIED SCHOOL DISTRICT By: Mark M. Skvarna Superintendent C-6

141 EXHIBIT A NOTICE TO REPOSITORY OF FAILURE TO FILE ANNUAL REPORT Name of District: BALDWIN PARK UNIFIED SCHOOL DISTRICT Name of Bond Issue: General Obligation Bonds, Election of 2006, Series 2013 Date of Issuance: December 18, 2013 NOTICE IS HEREBY GIVEN that the District has not provided an Annual Report with respect to the above-named Bonds as required by the Continuing Disclosure Certificate relating to the Bonds. The District anticipates that the Annual Report will be filed by. Dated: BALDWIN PARK UNIFIED SCHOOL DISTRICT By [form only; no signature required] C-7

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143 APPENDIX D LOS ANGELES COUNTY TREASURY POOL The following information concerning the Los Angeles County Treasury Pool (the Treasury Pool ) has been provided by the Treasurer, and has not been confirmed or verified by the District, the Financial Advisor or the Underwriter. The District, the Financial Advisor and the Underwriter have not made an independent investigation of the investments in the Treasury Pool and have made no assessment of the current County investment policy. The value of the various investments in the Treasury Pool will fluctuate on a daily basis as a result of a multitude of factors, including generally prevailing interest rates and other economic conditions. Additionally, the Treasurer, with the consent of the County Board of Supervisors may change the County investment policy at any time. Therefore, there can be no assurance that the values of the various investments in the Treasury Pool will not vary significantly from the values described herein. Finally, neither the District, the Financial Advisor nor the Underwriter make any representation as to the accuracy or adequacy of such information or as to the absence of material adverse changes in such information subsequent to the date hereof, or that the information contained or incorporated hereby by reference is correct as of any time subsequent to its date. Additional information regarding the Treasurer Pool may be obtained from the Treasurer at however, the information presented on such website is not incorporated herein by any reference. [REMAINDER OF PAGE LEFT BLANK]

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145 THE LOS ANGELES COUNTY POOLED SURPLUS INVESTMENTS The Treasurer and Tax Collector (the Treasurer) of Los Angeles County has the delegated authority to invest funds on deposit in the County Treasury (the Treasury Pool). As of October 31, 2013, investments in the Treasury Pool were held for local agencies including school districts, community college districts, special districts and discretionary depositors such as cities and independent districts in the following amounts: Local Agency County of Los Angeles and Special Districts Schools and Community Colleges Discretionary Participants Total Invested Funds (in billions) $ $ The Treasury Pool participation composition is as follows: Non-discretionary Participants Discretionary Participants: Independent Public Agencies County Bond Proceeds and Repayment Funds Total 89.62% 8.33% 2.05% % Decisions on the investment of funds in the Treasury Pool are made by the County Investment Officer in accordance with established policy, with certain transactions requiring the Treasurer's prior approval. In Los Angeles County, investment decisions are governed by Chapter 4 (commencing with Section 53600) of Part 1 of Division 2 of Title 5 of the California Government Code, which governs legal investments by local agencies in the State of California, and by a more restrictive Investment Policy developed by the Treasurer and adopted by the Los Angeles County Board of Supervisors on an annual basis. The Investment Policy adopted on March 19, 2013, reaffirmed the following criteria and order of priority for selecting investments: 1. Safety of Principal 2. Liquidity 3. Return on Investment The Treasurer prepares a monthly Report of Investments (the Investment Report) summarizing the status of the Treasury Pool, including the current market value of all investments. This report is submitted monthly to the Board of Supervisors. According to D-1

146 the Investment Report dated November 27, 2013, the October 31, 2013 book value of the Treasury Pool was approximately $ billion and the corresponding market value was approximately $ billion. An internal controls system for monitoring cash accounting and investment practices is in place. The Treasurer's Compliance Auditor, who operates independently from the Investment Officer, reconciles cash and investments to fund balances daily. The Compliance Auditor's staff also reviews each investment trade for accuracy and compliance with the Board adopted Investment Policy. On a quarterly basis, the County's outside independent auditor (External Auditor) reviews the cash and investment reconciliations for completeness and accuracy. Additionally, the External Auditor reviews investment transactions on a quarterly basis for conformance with the approved Investment Policy and annually accounts for all investments. The following table identifies the types of securities held by the Treasury Pool as of October 31, 2013: Type of Investment U.S. Government and Agency Obligations Certificates of Deposit Commercial Paper Bankers Acceptances Municipal Obligations Corporate Notes & Deposit Notes Asset Backed Instruments Repurchase Agreements Other % of Pool The Treasury Pool is highly liquid. As of October 31, 2013 approximately 47.94% of the investments mature within 60 days, with an average of 643 days to maturity for the entire portfolio. TreasPool Update 10/31/2013 D-2

147 APPENDIX E ECONOMIC AND DEMOGRAPHIC PROFILE OF THE CITY OF BALDWIN PARK AND THE COUNTY OF LOS ANGELES The following information concerning the City of Baldwin Park and the County of Los Angeles is included only for the purpose of supplying general information regarding the community. The Bonds are not an obligation of the City of Baldwin Park or the County of Los Angeles. General The City of Baldwin Park (the City ) is located in the central portion of the San Gabriel Valley and was incorporated in 1956 as a general law city. The City Council is comprised of four members elected at large for four years and the Mayor, elected at large for two years. The City Council also serves as the governing board of the City s Community Development Commission, Housing Authority and Financing Authority. Los Angeles County (the County ) was incorporated on February 18, 1850 and is one of the original counties of California. With 4,061 square miles, Los Angeles County borders 70 miles of coast on the Pacific Ocean. The County is home to 88 incorporated cities and many unincorporated areas. In between the large desert portions of the county which make up around 40 percent of its land area and the heavily urbanized central and southern portions sits the San Gabriel Mountains containing Angeles National Forest. Most of the County is heavily urbanized. Population The following table summarizes historical population estimates for the City, County and State of California (the State ). POPULATION ESTIMATES City of Baldwin Park, County of Los Angeles and State of California Year (1) City of Baldwin Park County of Los Angeles State of California ,576 9,590,080 34,256, ,002 9,679,212 34,725, ,477 9,756,914 35,163, ,516 9,806,944 35,570, ,383 9,816,153 35,869, ,765 9,798,609 36,116, ,264 9,780,808 36,399, ,066 9,785,474 36,704, ,666 9,801,096 36,966, ,490 9,818,605 37,223, ,582 9,847,712 37,427, ,868 9,889,520 37,668, ,315 9,958,091 37,966,471 (1) January 1 data. Source: State of California, Department of Finance, E-4 Population Estimates for Cities, Counties and the State, March 2010 Benchmark. E-1

148 Personal Income The following tables summarize personal income and per capita personal income for the County, the State and United States from 2005 through PERSONAL INCOME County of Los Angeles, State of California, and United States (Dollars in Thousands) Year County of Los Angeles California United States 2005 $357,186,377 $1,387,661,013 $10,476,669, ,724,212 1,495,533,388 11,256,516, ,366,343 1,566,400,134 11,900,562, ,454,378 1,610,697,843 12,451,660, ,579,855 1,516,676,660 11,852,715, ,144,483 1,564,209,194 12,308,496, ,913,463 1,645,138,372 12,949,905,000 Source: U.S. Department of Commerce, Bureau of Economic Analysis. (1) PER CAPITA PERSONAL INCOME (1) County of Los Angeles, State of California, and United States Year County of Los Angeles California United States 2005 $36,498 $38,767 $35, ,610 41,567 37, ,273 43,240 39, ,881 43,853 40, ,111 42,395 38, ,025 42,514 39, ,564 44,481 41,560 Per capita personal income is the total personal income divided by the total mid-year population estimates of the U.S. Bureau of the Census. Estimates for reflect county population estimates available as of January All dollar estimates are in current dollars (not adjusted for inflation). Source: U.S. Department of Commerce, Bureau of Economic Analysis. E-2

149 Employment The following table summarizes the labor force, employment and unemployment figures for the City, County and State from 2008 through CIVILIAN LABOR FORCE, EMPLOYMENT AND UNEMPLOYMENT City of Baldwin Park, Los Angeles County and State of California (1) Year and Area Labor Force Employment (2) Unemployment (3) Rate (%) Unemployment 2008 City of Baldwin Park 33,500 30,400 3, % Los Angeles County 4,934,800 4,565, , State of California 18,203,100 16,890,000 1,313, City of Baldwin Park 33,700 28,800 4, Los Angeles County 4,904,300 4,335, , State of California 18,208,300 16,144,500 2,063, City of Baldwin Park 33,800 28,600 5, Los Angeles County 4,910,500 4,291, , State of California 18,316,400 16,051,500 2,264, City of Baldwin Park 33,900 28,700 5, Los Angeles County 4,927,200 4,323, , State of California 18,404,500 16,237,300 2,167, City of Baldwin Park 33,500 28,900 4, Los Angeles County 4,879,700 4,345, , State of California 18,494,900 16,560,300 1,934, (1) (2) (3) Data is based on annual averages, unless otherwise specified, and is not seasonally adjusted. Includes persons involved in labor-management trade disputes. Includes all persons without jobs who are actively seeking work. Source: U.S. Department of Labor Bureau of Labor Statistics, California Employment Development Department. March 2012 Benchmark. E-3

150 Industry The City is included in the Los Angeles-Long Beach-Glendale Metropolitan Statistical Area (the MSA ). The distribution of employment in the MSA is presented in the following table for the calendar years 2008 through These figures are multi county-wide statistics and may not necessarily accurately reflect employment trends in the County. INDUSTRY EMPLOYMENT & LABOR FORCE Los Angeles-Long Beach-Glendale Metropolitan Division (1) Category Total Farm 6,900 6,200 6,200 5,600 5,400 Total Nonfarm 4,070,700 3,824,100 3,772,500 3,797,100 3,864,300 Total Private 3,467,000 3,228,300 3,193,000 3,231,600 3,307,500 Goods Producing 584, , , , ,700 Mining and Logging 4,400 4,100 4,100 4,000 4,200 Construction 145, , , , ,800 Manufacturing 434, , , , ,700 Durable Goods 243, , , , ,300 Nondurable Goods 191, , , , ,400 Service Providing 3,486,700 3,313,500 3,290,700 3,321,300 3,385,600 Private Service Providing 2,883,000 2,717,700 2,711,200 2,755,800 2,828,800 Trade, Transportation and Utilities 803, , , , ,000 Wholesale Trade 223, , , , ,900 Retail Trade 416, , , , ,800 Transportation, Warehousing and Utilities 163, , , , ,300 Information 210, , , , ,300 Financial Activities 233, , , , ,200 Professional and Business Services 582, , , , ,200 Educational and Health Services 505, , , , ,300 Leisure and Hospitality 401, , , , ,100 Other Services 146, , , , ,700 Government 603, , , , ,800 Total, All Industries 4,077,600 3,830,300 3,778,700 3,802,700 3,869,700 (1) Annual averages, unless otherwise specified Note: Items may not add to total due to independent rounding. Source: California Employment Development Department, Labor Market Information Division. March 2012 Benchmark. E-4

151 Largest Employers The following tables rank the largest employers in the County and City. LARGEST PRIVATE-SECTOR EMPLOYERS County of Los Angeles 2012 Rank Company Employees Description 1. Kaiser Permanente 36,508 Non-profit health plan 2. Northrop Grumman Corp. 18,000 Defense contractor 3. University of Southern California 16,623 Private university 4. Target 14,250 Retailer 5. Ralph/Food 4 Less (Kroger Co.) 13,200 Grocery Retailer 6. Cedars-Sinai 12,000 Medical center 7. Bank of America 12,000 Banking and financial services 8. Providence Health and Services 11,403 Health care 9. Boeing Co. 11,249 Integrated aerospace and defense systems 10. Walt Disney Co. 10,500 Entertainment 11. Home Depot 10,250 Home improvement specialty retailer 12. Wells Fargo 9,520 Diversified financial services 13. Edison International 8,979 Electric utility 14. AT&T Inc. 8,900 Telecommunications 15. California Institute of Technology 8,900 Private university, operator of Jet Propulsion Laboratory 16. ABM Industries 8,300 Facility services, security and engineering 17. Raytheon Co. 8,200 Aerospace and defense contractor 18. Warner Bros. Entertainment Co. 8,000 Entertainment 19. Vons 7,747 Retail grocer 20. FedEx Corp. 7,500 Shipping and logistics 21. Dignity Health 7,300 Hospitals 22. JPMorgan Chase 6,600 Banking and financial services 23. Amgen Inc. 6,000 Biotechnology 24. Sony Pictures Entertainment 6,000 Entertainment 25. Costco Wholesale 5,667 Membership chain of warehouse stores Source: Los Angeles Business Journal 2012, The List Published September,2012. LARGEST EMPLOYERS City of Baldwin Park As of June 30, 2012 (1) Rank Company Employees 1. Baldwin Park Unified School District (1) 1, Baldwin Park City Hall Walmart Supercenter Durham School Services Esther Snyder Community Center Los Angeles Department of Public Health Los Angeles County Department of Parks Morgan Park Waste Management Inc Target 200 For updated information regarding the District s employee counts, see BALDWIN PARK UNIFIED SCHOOL DISTRICT Labor Relations in the front part of this Official Statement. Source: City of Baldwin Park Comprehensive Annual Financial Report for Fiscal Year Ended June 30, E-5

152 Commercial Activity The following tables summarize taxable sales in the City and County from 2007 through Retail Permits TAXABLE SALES County of Los Angeles (Dollars in Thousands) Retail Stores Taxable Transactions Total Outlets Taxable Transactions Year Total Permits ,380 $96,095, ,344 $137,820, ,999 89,810, , ,881, ,461 78,444, , ,744, ,491 82,175, , ,942, ,872 89,251, , ,440,737 Note: In 2009, retail permits expanded to include permits for food services. Source: Taxable Sales in California (Sales & Use Tax), California Board of Equalization. Retail Permits TAXABLE SALES City of Baldwin Park (Dollars in Thousands) Retail Stores Taxable Transactions Total Outlets Taxable Transactions Year Total Permits $470,948 1,191 $566, ,666 1, , ,196 1, , ,241 1, , ,664 1, ,620 Note: In 2009, retail permits expanded to include permits for food services. Source: Taxable Sales in California (Sales & Use Tax), California Board of Equalization. E-6

153 Building Activity The following tables summarize new building permits and valuations in the County and City from 2008 through BUILDING PERMITS AND VALUATIONS County of Los Angeles Valuation ($000 s) Residential $3,954,516 $2,393,257 $2,824,463 $3,415,434 $3,821,324 Non-Residential 4,490,637 2,673,544 2,699,913 3,126,956 3,682,730 Total $8,445,153 $5,066,801 $5,494,375 $6,542,390 $7,504,054 Units Single Family 3,539 2,120 2,417 2,370 2,820 Multiple Family 10,165 3,521 5,056 8,098 8,895 Total 13,704 5,641 7,473 10,468 11,715 Note: Totals may not add to sum because of rounding. Source: Construction Industry Research Board. BUILDING PERMITS AND VALUATIONS City of Baldwin Park Valuation ($000 s) Residential $5,332 $7,673 $4,207 $9,142 $1,679 Non-Residential 5,153 1, Total $10,485 $9,313 $5,124 $9,403 $1,809 Units Single Family Multiple Family Total Note: Totals may not add to sum because of rounding. Source: Construction Industry Research Board. E-7

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155 APPENDIX F TABLE OF ACCRETED VALUES

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157 Dec 16, :47 pm Prepared by Piper Jaffray & Co (Baldwin Park USD:121013P-2013GOTA,2013GOTA) Page 1 BOND ACCRETED VALUE TABLE Baldwin Park Unified School District Election of 2006, Series 2013 Final Numbers Serial CAB Serial CAB Serial CAB Serial CAB Serial CAB Serial CAB Serial CAB Serial CAB Serial CAB (non-callable (non-callable (non-callable (non-callable (non-callable (non-callable (non-callable (non-callable (non-callable ) ) ) ) ) ) ) ) ) 08/01/ /01/ /01/ /01/ /01/ /01/ /01/ /01/ /01/2024 Date 12% 12% 12% 12% 12% 12% 12% 12% 12% F-1 12/18/2013 3, , , , , , , , , /01/2014 3, , , , , , , , , /01/2014 3, , , , , , , , , /01/2015 4, , , , , , , , , /01/2015 4, , , , , , , , , /01/2016 4, , , , , , , , , /01/2016 5, , , , , , , , , /01/2017 4, , , , , , , , /01/2017 5, , , , , , , , /01/2018 4, , , , , , , /01/2018 5, , , , , , , /01/2019 4, , , , , , /01/2019 5, , , , , , /01/2020 4, , , , , /01/2020 5, , , , , /01/2021 4, , , , /01/2021 5, , , , /01/2022 4, , , /01/2022 5, , , /01/2023 4, , /01/2023 5, , /01/2024 4, /01/2024 5, /01/ /01/ /01/ /01/ /01/ /01/ /01/ /01/ /01/ /01/ /01/2030

158 Dec 16, :47 pm Prepared by Piper Jaffray & Co (Baldwin Park USD:121013P-2013GOTA,2013GOTA) Page 2 BOND ACCRETED VALUE TABLE Baldwin Park Unified School District Election of 2006, Series 2013 Final Numbers Serial CAB Serial CAB Serial CAB Serial CAB Serial CAB Serial CAB Serial CAB Serial CAB Serial CAB (non-callable (non-callable (non-callable (non-callable (non-callable (non-callable (non-callable (non-callable (non-callable ) ) ) ) ) ) ) ) ) 08/01/ /01/ /01/ /01/ /01/ /01/ /01/ /01/ /01/2024 Date 12% 12% 12% 12% 12% 12% 12% 12% 12% F-2 08/01/ /01/ /01/ /01/ /01/ /01/ /01/ /01/ /01/ /01/ /01/ /01/ /01/ /01/ /01/ /01/ /01/ /01/ /01/ /01/ /01/ /01/ /01/ /01/ /01/ /01/ /01/ /01/ /01/ /01/ /01/ /01/ /01/ /01/2047

159 Dec 16, :47 pm Prepared by Piper Jaffray & Co (Baldwin Park USD:121013P-2013GOTA,2013GOTA) Page 3 BOND ACCRETED VALUE TABLE Baldwin Park Unified School District Election of 2006, Series 2013 Final Numbers Serial CAB Serial CAB Serial CAB Serial CAB Serial CAB Serial CAB Serial CAB Serial CAB Serial CAB (non-callable (non-callable (non-callable (non-callable (non-callable (non-callable (non-callable (non-callable (non-callable ) ) ) ) ) ) ) ) ) 08/01/ /01/ /01/ /01/ /01/ /01/ /01/ /01/ /01/2024 Date 12% 12% 12% 12% 12% 12% 12% 12% 12% F-3 08/01/ /01/ /01/ /01/ /01/ /01/ /01/ /01/ /01/ /01/ /01/ /01/ /01/2053

160 Dec 16, :47 pm Prepared by Piper Jaffray & Co (Baldwin Park USD:121013P-2013GOTA,2013GOTA) Page 4 BOND ACCRETED VALUE TABLE Baldwin Park Unified School District Election of 2006, Series 2013 Final Numbers Serial CAB Serial CAB Serial CAB Serial CAB Serial CAB Serial CAB Serial CAB Serial CAB Serial CAB (non-callable (non-callable (non-callable (non-callable (non-callable (non-callable (non-callable (non-callable (non-callable ) ) ) ) ) ) ) ) ) 08/01/ /01/ /01/ /01/ /01/ /01/ /01/ /01/ /01/2033 Date 12% 12% 12% 12% 12% 12% 12% 12% 12% F-4 12/18/2013 1, , , /01/2014 1, , , /01/2014 1, , , /01/2015 1, , , , /01/2015 1, , , , /01/2016 1, , , , , /01/2016 1, , , , , /01/2017 1, , , , , , /01/2017 1, , , , , , /01/2018 2, , , , , , , /01/2018 2, , , , , , , /01/2019 2, , , , , , , , /01/2019 2, , , , , , , , /01/2020 2, , , , , , , , , /01/2020 2, , , , , , , , , /01/2021 2, , , , , , , , , /01/2021 3, , , , , , , , , /01/2022 3, , , , , , , , , /01/2022 3, , , , , , , , , /01/2023 3, , , , , , , , , /01/2023 3, , , , , , , , , /01/2024 4, , , , , , , , , /01/2024 4, , , , , , , , , /01/2025 4, , , , , , , , , /01/2025 5, , , , , , , , , /01/2026 4, , , , , , , , /01/2026 5, , , , , , , , /01/2027 4, , , , , , , /01/2027 5, , , , , , , /01/2028 4, , , , , , /01/2028 5, , , , , , /01/2029 4, , , , , /01/2029 5, , , , , /01/2030 4, , , ,325.25

161 Dec 16, :47 pm Prepared by Piper Jaffray & Co (Baldwin Park USD:121013P-2013GOTA,2013GOTA) Page 5 BOND ACCRETED VALUE TABLE Baldwin Park Unified School District Election of 2006, Series 2013 Final Numbers Serial CAB Serial CAB Serial CAB Serial CAB Serial CAB Serial CAB Serial CAB Serial CAB Serial CAB (non-callable (non-callable (non-callable (non-callable (non-callable (non-callable (non-callable (non-callable (non-callable ) ) ) ) ) ) ) ) ) 08/01/ /01/ /01/ /01/ /01/ /01/ /01/ /01/ /01/2033 Date 12% 12% 12% 12% 12% 12% 12% 12% 12% F-5 08/01/2030 5, , , , /01/2031 4, , , /01/2031 5, , , /01/2032 4, , /01/2032 5, , /01/2033 4, /01/2033 5, /01/ /01/ /01/ /01/ /01/ /01/ /01/ /01/ /01/ /01/ /01/ /01/ /01/ /01/ /01/ /01/ /01/ /01/ /01/ /01/ /01/ /01/ /01/ /01/ /01/ /01/ /01/2047

162 Dec 16, :47 pm Prepared by Piper Jaffray & Co (Baldwin Park USD:121013P-2013GOTA,2013GOTA) Page 6 BOND ACCRETED VALUE TABLE Baldwin Park Unified School District Election of 2006, Series 2013 Final Numbers Serial CAB Serial CAB Serial CAB Serial CAB Serial CAB Serial CAB Serial CAB Serial CAB Serial CAB (non-callable (non-callable (non-callable (non-callable (non-callable (non-callable (non-callable (non-callable (non-callable ) ) ) ) ) ) ) ) ) 08/01/ /01/ /01/ /01/ /01/ /01/ /01/ /01/ /01/2033 Date 12% 12% 12% 12% 12% 12% 12% 12% 12% F-6 08/01/ /01/ /01/ /01/ /01/ /01/ /01/ /01/ /01/ /01/ /01/ /01/ /01/2053

163 Dec 16, :47 pm Prepared by Piper Jaffray & Co (Baldwin Park USD:121013P-2013GOTA,2013GOTA) Page 7 BOND ACCRETED VALUE TABLE Baldwin Park Unified School District Election of 2006, Series 2013 Final Numbers Serial CAB Serial CAB Serial CAB Serial CAB Serial CAB (non-callable (non-callable (non-callable (non-callable (non-callable ) ) ) ) ) 08/01/ /01/ /01/ /01/ /01/2038 Term CAB 2042 Term CAB 2048 Term CAB 2053 Date 12% 12% 12% 12% 9.97% 6.87% 7.13% 7.25% F-7 12/18/ /01/ /01/ /01/ /01/ /01/ /01/ /01/ /01/ /01/ /01/ /01/ , /01/ , /01/ , /01/ , /01/2021 1, , /01/2021 1, , /01/2022 1, , , , /01/2022 1, , , , /01/2023 1, , , , , /01/2023 1, , , , , /01/2024 1, , , , , , /01/2024 1, , , , , , /01/2025 1, , , , , , /01/2025 1, , , , , , /01/2026 1, , , , , , , /01/2026 1, , , , , , , /01/2027 2, , , , , , , /01/2027 2, , , , , , , /01/2028 2, , , , , , , /01/2028 2, , , , , , , /01/2029 2, , , , , , , /01/2029 2, , , , , , , /01/2030 2, , , , , , ,

164 Dec 16, :47 pm Prepared by Piper Jaffray & Co (Baldwin Park USD:121013P-2013GOTA,2013GOTA) Page 8 BOND ACCRETED VALUE TABLE Baldwin Park Unified School District Election of 2006, Series 2013 Final Numbers Serial CAB Serial CAB Serial CAB Serial CAB Serial CAB (non-callable (non-callable (non-callable (non-callable (non-callable ) ) ) ) ) 08/01/ /01/ /01/ /01/ /01/2038 Term CAB 2042 Term CAB 2048 Term CAB 2053 Date 12% 12% 12% 12% 9.97% 6.87% 7.13% 7.25% F-8 08/01/2030 3, , , , , , , /01/2031 3, , , , , , , , /01/2031 3, , , , , , , , /01/2032 3, , , , , , , , /01/2032 3, , , , , , , , /01/2033 4, , , , , , , , /01/2033 4, , , , , , , , /01/2034 4, , , , , , , , /01/2034 5, , , , , , , , /01/2035 4, , , , , , , /01/2035 5, , , , , , , /01/2036 4, , , , , , /01/2036 5, , , , , , /01/2037 4, , , , , /01/2037 5, , , , , /01/2038 4, , , , /01/2038 5, , , , /01/2039 3, , , /01/2039 4, , , /01/2040 4, , , /01/2040 4, , , /01/2041 4, , , /01/2041 4, , , /01/2042 4, , , /01/2042 5, , , /01/2043 3, , /01/2043 3, , /01/2044 3, , /01/2044 3, , /01/2045 3, , /01/2045 4, , /01/2046 4, , /01/2046 4, , /01/2047 4, ,147.20

165 Dec 16, :47 pm Prepared by Piper Jaffray & Co (Baldwin Park USD:121013P-2013GOTA,2013GOTA) Page 9 BOND ACCRETED VALUE TABLE Baldwin Park Unified School District Election of 2006, Series 2013 Final Numbers Serial CAB Serial CAB Serial CAB Serial CAB Serial CAB (non-callable (non-callable (non-callable (non-callable (non-callable ) ) ) ) ) 08/01/ /01/ /01/ /01/ /01/2038 Term CAB 2042 Term CAB 2048 Term CAB 2053 Date 12% 12% 12% 12% 9.97% 6.87% 7.13% 7.25% F-9 08/01/2047 4, , /01/2048 4, , /01/2048 5, , /01/2049 3, /01/2049 3, /01/2050 3, /01/2050 4, /01/2051 4, /01/2051 4, /01/2052 4, /01/2052 4, /01/2053 4, /01/2053 5,000.00

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167 APPENDIX G SPECIMEN MUNICIPAL BOND INSURANCE POLICY

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169 MUNICIPAL BOND INSURANCE POLICY ISSUER: [NAME OF ISSUER] Policy No: MEMBER: [NAME OF MEMBER] BONDS: $ in aggregate principal amount of [NAME OF TRANSACTION] [and maturing on] Effective Date: Risk Premium: $ Member Surplus Contribution: $ Total Insurance Payment: $ BUILD AMERICA MUTUAL ASSURANCE COMPANY ( BAM ), for consideration received, hereby UNCONDITIONALLY AND IRREVOCABLY agrees to pay to the trustee (the Trustee ) or paying agent (the Paying Agent ) for the Bonds named above (as set forth in the documentation providing for the issuance and securing of the Bonds), for the benefit of the Owners or, at the election of BAM, directly to each Owner, subject only to the terms of this Policy (which includes each endorsement hereto), that portion of the principal of and interest on the Bonds that shall become Due for Payment but shall be unpaid by reason of Nonpayment by the Issuer. On the later of the day on which such principal and interest becomes Due for Payment or the first Business Day following the Business Day on which BAM shall have received Notice of Nonpayment, BAM will disburse (but without duplication in the case of duplicate claims for the same Nonpayment) to or for the benefit of each Owner of the Bonds, the face amount of principal of and interest on the Bonds that is then Due for Payment but is then unpaid by reason of Nonpayment by the Issuer, but only upon receipt by BAM, in a form reasonably satisfactory to it, of (a) evidence of the Owner s right to receive payment of such principal or interest then Due for Payment and (b) evidence, including any appropriate instruments of assignment, that all of the Owner s rights with respect to payment of such principal or interest that is Due for Payment shall thereupon vest in BAM. A Notice of Nonpayment will be deemed received on a given Business Day if it is received prior to 1:00 p.m. (New York time) on such Business Day; otherwise, it will be deemed received on the next Business Day. If any Notice of Nonpayment received by BAM is incomplete, it shall be deemed not to have been received by BAM for purposes of the preceding sentence, and BAM shall promptly so advise the Trustee, Paying Agent or Owner, as appropriate, any of whom may submit an amended Notice of Nonpayment. Upon disbursement under this Policy in respect of a Bond and to the extent of such payment, BAM shall become the owner of such Bond, any appurtenant coupon to such Bond and right to receipt of payment of principal of or interest on such Bond and shall be fully subrogated to the rights of the Owner, including the Owner s right to receive payments under such Bond. Payment by BAM either to the Trustee or Paying Agent for the benefit of the Owners, or directly to the Owners, on account of any Nonpayment shall discharge the obligation of BAM under this Policy with respect to said Nonpayment. Except to the extent expressly modified by an endorsement hereto, the following terms shall have the meanings specified for all purposes of this Policy. Business Day means any day other than (a) a Saturday or Sunday or (b) a day on which banking institutions in the State of New York or the Insurer s Fiscal Agent (as defined herein) are authorized or required by law or executive order to remain closed. Due for Payment means (a) when referring to the principal of a Bond, payable on the stated maturity date thereof or the date on which the same 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 call for redemption (other than by mandatory sinking fund redemption), acceleration or other advancement of maturity (unless BAM shall elect, in its sole discretion, to pay such principal due upon such acceleration together with any accrued interest to the date of acceleration) and (b) when referring to interest on a Bond, payable on the stated date for payment of interest. Nonpayment means, in respect of a Bond, the failure of the Issuer to have provided sufficient funds to the Trustee or, if there is no Trustee, to the Paying Agent for payment in full of all principal and interest that is Due for Payment on such Bond. Nonpayment shall also include, in respect of a Bond, any payment made to an Owner by or on behalf of the Issuer of principal or interest that is Due for Payment, which payment has been recovered from such Owner pursuant to the United States Bankruptcy Code in accordance with a final, nonappealable order of a court having competent jurisdiction. Notice means delivery to BAM of a notice of claim and certificate, by certified mail, or telecopy as set forth on the attached Schedule or other acceptable electronic delivery, in a form satisfactory to BAM, from and signed by an Owner, the Trustee or the Paying Agent, which notice shall specify (a) the person or entity making the claim, (b) the Policy Number, (c) the claimed amount, (d) payment instructions and (e) the date such claimed amount becomes or became Due for Payment. Owner means, in respect of a Bond, the person or entity who, at the time of Nonpayment, is entitled under the terms of such Bond to payment thereof, except that Owner shall not include the Issuer, the Member or any other person or entity whose direct or indirect obligation constitutes the underlying security for the Bonds. G-1