Bond Rating: See Ratings herein

Transcription

1 SERIAL BONDS Bond Rating: See Ratings herein In the opinion of Hodgson Russ LLP, Albany, New York, Bond Counsel, based on existing statutes, regulations, rulings and court decisions and assuming the accuracy of certain representations and continuing compliance with certain covenants described in Tax Exemption herein, interest on the Bonds is excluded from gross income for federal income tax purposes under Section 103 of the Internal Revenue Code of 1986, as amended (the "Code"). Bond Counsel is further of the opinion that interest on the Bonds is not treated as a specific preference item for purposes of the federal alternative minimum tax imposed on individuals and corporations; however, such interest will be included in adjusted current earnings for purposes of calculation the alternative minimum tax on certain corporations. Interest on the Bonds is exempt from personal income taxes imposed by the State of New York or any political subdivision thereof (including The City of New York). Bond Counsel expresses no opinion regarding any other tax consequences related to the ownership or disposition of, or the accrual or receipt of interest on, the Bonds. See "TAX EXEMPTION" herein. The Bonds will not be designated by the District as "qualified tax-exempt obligations" pursuant to Section 265(b)(3) of the Code. CITY SCHOOL DISTRICT OF THE CITY OF ELMIRA CHEMUNG COUNTY, NEW YORK $21,570,000 SCHOOL DISTRICT SERIAL BONDS 2013A (the Bonds ) Date of Issue: Date of Delivery Maturity Date: February 1, The Bonds are general obligations of the City School District of the City of Elmira, in Chemung County, New York (the District ), for the payment of which the District has pledged its faith and credit. All of the taxable real property within the District is subject to the levy of ad valorem taxes without limitation as to rate or amount to pay both principal of and interest on the Bonds (subject to certain recently enacted statutory limitations imposed by Chapter 97 of the 2011 Laws of New York [the "Tax Levy Limit Law"]; see "TAX INFORMATION-Tax Levy Limit Law, herein). The Bonds will be issued as registered bonds, registered to the Depository Trust Company ( DTC or the Securities Depository ). The Bonds are registered to DTC, will be registered in the name of Cede & Co., as nominee of DTC in New York, New York, which will act as Securities Depository for the Bonds. Individual purchases will be made in book-entry-only form, in the principal amount of $5,000 or integral multiples thereof. Purchasers of the Bonds will not receive certificates representing their ownership interest in the Bonds. Payments of principal of and interest on the Bonds will be made by the District to DTC, which will in turn remit such principal and interest to its Participants, for subsequent distribution to the Beneficial Owners of the Bonds. The scheduled payment of principal 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 ( BAM ). The Bonds will be dated their date of delivery and will bear interest from that date until maturity at the annual rate or rates as shown on the inside cover page hereof, payable on February 1, 2014, August 1, 2014 and semiannually thereafter on each February 1 and August 1 until maturity. The Bonds will mature on February 1, 2014, and annually on February 1 thereafter until maturity, as shown on the inside cover page hereof. The Bonds will be subject to optional redemption prior to maturity as described herein. The Bonds are offered when, as and if issued and received by the purchaser and subject to the approval of the legality thereof by Hodgson Russ LLP, Albany, New York, Bond Counsel. Capital Markets Advisors, LLC has served as Financial Advisor to the District in connection with the issuance of the Bonds. It is anticipated that the Bonds will be available for delivery through the facilities of DTC on or about December 11, THE REVISED COVER DATED NOVEMBER 26, 2013 SUPPLEMENTS THE OFFICIAL STATEMENT DATED NOVEMBER 18, 2013 RELATING TO THE OBLIGATIONS DESCRIBED THEREIN BY INCLUDING CERTAIN INFORMATION OMITTED FROM SUCH OFFICIAL STATEMENT IN ACCORDANCE WITH SECURITIES AND EXCHANGE COMMISSION RULE 15c2-12 (THE RULE ). OTHER THAN AS SET FORTH ON THE REVISED COVER AND INSIDE COVER PAGES, THE RATINGS SECTION, AND AN ADDITIONAL BOND INSURANCE SECTION, THERE HAVE BEEN NO REVISIONS TO SAID OFFICIAL STATEMENT. THE DISTRICT WILL COVENANT IN AN UNDERTAKING TO PROVIDE CONTINUING DISCLOSURE FOR THE BONDS AND THE NOTES AS DEFINED IN THE RULE. SEE DISCLOSURE UNDERTAKING FOR THE BONDS HEREIN.

2 The Bonds will mature annually on February 1 until maturity, as set forth below, and are subject to redemption prior to maturity as described herein: Year Amount Interest Rate Yield CUSIP** Year Amount Interest Rate Yield CUSIP** 2014 $ 2,235, % 0.200% XL $ 1,760, % 2.100% XS ,540, % 0.340% XM ,790, % 2.490% XT ,535, % 0.540% XN ,830, % 2.810% XU ,690, % 0.810% XP ,870, % 3.050% XV ,710, % 1.180% XQ5 2024* 1,915, % 3.230% XW ,730, % 1.630% XR3 2025* 1,965, % 3.500% XX0 * The Bonds maturing in year 2024, through final maturity, will be subject to redemption prior to maturity as described herein. (See Optional Redemption herein). ** CUSIP numbers have been assigned by an independent company not affiliated with the District and are included solely for the convenience of the holders of the Bonds. The District is not responsible for the selection or uses of these CUSIP numbers and no representation is made to their correctness on the Bonds or as indicated above.

3 CITY SCHOOL DISTRICT OF THE CITY OF ELMIRA CHEMUNG COUNTY, NEW YORK BOARD OF EDUCATION Ms. Sara Lattin President Edward Cleary Jr.... Vice President Lynn Grottenthaler... Board Member Scott Moore... Board Member Claude Oliver... Board Member Randy Reid... Board Member Kevin Sullivan... Board Member Mary Tucker... Board Member Hillary Austin... Interim Superintendent of Schools Daniel DoBell... School District Business Administrator Joette Traver... District Treasurer Janet Mustico... District Clerk BOND COUNSEL HODGSON RUSS LLP Albany, New York FINANCIAL ADVISOR Capital Markets Advisors, LLC Orchard Park, New York New York, New York Great Neck, New York Elmira, New York Hopewell Junction, New York

4 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 Bond Insurance and Appendix D Specimen Municipal Bond Insurance Policy. No dealer, broker, salesman or other person has been authorized by the District to give any information or to make any representations, other than those contained in this Official Statement and if given or made, such other information or representations must not be relied upon as having been authorized by the foregoing. This Official Statement does not constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of the Bonds by any person in any jurisdiction in which it is unlawful for such person to make such offer, solicitation or sale. The information set forth herein has been obtained by the District from sources which are believed to be reliable but it is not guaranteed as to accuracy or completeness. The information and expressions of opinion herein are subject to change without notice and neither the delivery of this Official Statement nor any sale made hereunder shall, under any circumstances, create any implication that there has been no change in the affairs of the District since the date hereon. THE BONDS... 1 Description... 1 Authority for and Purpose of the Bonds... 1 Optional Redemption for the Bonds... 2 NATURE OF THE OBLIGATION... 2 BOOK-ENTRY ONLY SYSTEM... 2 MARKET FACTORS... 4 LITIGATION... 5 BOND INSURANCE... 5 TAX EXEMPTION... 5 Tax Requirements... 5 Not Bank Qualified... 6 Other Impacts... 6 Information Reporting and Backup Withholding... 6 TABLE OF CONTENTS APPENDIX A Future Legislation... 6 New York State Taxes... 7 Miscellaneous... 7 DOCUMENTS ACCOMPANYING DELIVERY OF THE BONDS... 7 Absence of Litigation... 7 Legal Matters... 7 Closing Certificates... 7 DISCLOSURE UNDERTAKING FOR THE BONDS... 8 FINANCIAL ADVISOR... 9 RATINGS... 9 ADDITIONAL INFORMATION THE DISTRICT... A-1 General Information... A-1 District Organization... A-1 District Facilities... A-1 Financial Organization... A-2 Employees... A-2 Employee Pension Benefits... A-2 Investment Policy/Permitted Investments... A-4 FINANCIAL FACTORS... A-5 Revenues... A-5 Property Tax... A-5 State Aid... A-5 Recent Events Affecting New York School Districts... A-6 Independent Audit... A-7 Fund Structure and Accounts... A-7 Basis of Accounting... A-7 Budgetary Procedure... A-7 TAX INFORMATION... A-7 Real Property Tax Assessments and Rates... A-7 Tax Limit... A-9 Tax Levy Limit Law... A-9 Tax Collection Procedure... A-10 STAR School Tax Exemption... A-11 Largest Taxpayers for the Fiscal Year... A-12 DISTRICT INDEBTEDNESS... A-12 Constitutional and Statutory Requirements... A-12 Purpose and Pledge... A-12 Payment and Maturity... A-12 General... A-13 Statutory Procedure... A-13 Debt Limit... A-13 Statutory Debt Limit and Net Indebtedness... A-14 Remedies Upon Default... A-14 Short Term Debt... A-15 Authorized but Unissued Indebtedness... A-15 Trend of Outstanding Indebtedness... A-16 Overlapping and Underlying Debt... A-16 Debt Ratios... A-17 Debt Service Schedule... A-17 ECONOMIC AND DEMOGRAPHIC DATA... A-18 School Enrollment Trends... A-18 Population... A-18 Employment and Unemployment... A-18 APPENDIX B - SUMMARY OF BUDGET AND FINANCIAL STATEMENTS APPENDIX C - AUDITED FINANCIAL STATEMENT FOR FISCAL YEAR ENDING JUNE 30, 2013 APPENDIX D SPECIMEN MUNICIPAL BOND INSURANCE POLICY

5 OFFICIAL STATEMENT CITY SCHOOL DISTRICT OF THE CITY OF ELMIRA CHEMUNG COUNTY, NEW YORK relating to $21,570,000 SCHOOL DISTRICT SERIAL BONDS 2013A (the Bonds ) This Official Statement (the "Official Statement"), which includes the cover page and appendices hereto, presents certain information relating to the City School District of the City of Elmira, in the State of New York (the District and "State" respectively), in connection with the sale of $21,570,000 School District Serial Bonds 2013A (the Bonds ). All quotations from and summaries and explanations of provisions of the Constitution and laws of the State and acts and proceedings of the District contained herein do not purport to be complete and are qualified in their entirety by reference to the official compilations thereof and all references to the Bonds and the proceedings of the District relating thereto are qualified in their entirety by reference to the definitive form of the Bonds and such proceedings. The presentation of information is intended to show recent historical trends and is not intended to indicate future or continuing trends in the financial or other information presented herein has been provided by the District. Description THE BONDS The Bonds are dated December 11, 2013, and will bear interest payable on February 1, 2014, August 1, 2014 and semiannually thereafter on February 1 and August 1 in each year until maturity. The Bonds shall mature on February 1 in each year in the principal amounts specified on the cover page hereof. The Bonds are subject to redemption prior to maturity. (See Optional Redemption for the Bonds herein.) The Bonds will be issued as fully registered bonds and, when issued, will be registered in the name of Cede & Co., as nominee of the Depository Trust Company, New York, New York ( DTC or the Securities Depository ). DTC will act as Securities Depository for the Bonds. Individual purchases may be made in book-entry-only form, in the principal amount of $5,000 or integral multiples thereof. Purchasers will not receive certificates representing their interest in the Bonds. Principal of and interest on the Bonds will be paid by the District to DTC, which will in turn remit such principal and interest to its Participants (defined herein), for subsequent disbursement to the Beneficial Owners (defined herein) of the Bonds as described herein. The Bonds may be transferred or exchanged in the manner described on the Bonds and as referenced in certain proceedings of the District referred to therein. The record dates for payment of principal and interest on the Bonds is the fifteenth day of the calendar month preceding each respective interest payment date. Authority for and Purpose of the Bonds The Bonds are authorized to be issued pursuant to the Constitution and laws of the State, including the Education Law and the Local Finance Law. 1

6 The Bonds are issued pursuant to the Constitution and Laws of the State, including the Local Finance Law and a bond resolution dated August 30, 2006 and a public vote of the qualified voters of the District dated October 19, 2006, authorizing a maximum aggregate amount of $94,458,318 in serial bonds along with $5,520,000 in capital reserves for various purposes. The District received consent of the State Comptroller on February 13, 2007 to issue bonds and/or bond anticipation notes in an amount not to exceed $94,458,318 for school buildings and additions for the projects approved by the qualified voters of the District on October 19, The proceeds of the Bonds will be used to redeem bond anticipation notes maturing on December 12, Optional Redemption for the Bonds The Bonds maturing on or before February 1, 2023 will not be subject to redemption prior to maturity. The Bonds maturing on or after February 1, 2024 will be subject to redemption prior to maturity at the option of the District on any date on or after February 1, 2023, as a whole or in part at par. The District may select the maturities of the Bonds to be redeemed and the amount to be redeemed of each maturity selected, as the District shall determine to be in the best interest of the District at the time of such redemption. If less than all of the Bonds of any maturity are to be redeemed prior to maturity, the particular Bonds of such maturity to be redeemed shall be selected by the District by lot in any customary manner of selection as determined by the District. Notice of such call for redemption shall be given by mailing such notice to the registered owner not less than thirty (30) days nor more than sixty (60) days prior to such date. Notice of redemption having been given as aforesaid, the Bonds so called for redemption shall, on the date of redemption set forth in such call for redemption, become due and payable, together with accrued interest to such redemption date, and interest shall cease to be paid thereon after such redemption date. NATURE OF THE OBLIGATION Each of the Bonds which have been duly issued and paid for constitutes a contract between the District and the holder thereof. The Bonds will be general obligations of the District and will contain a pledge of the faith and credit of the District for the payment of the principal thereof and the interest thereon. For the payment of such principal and interest the District has the power and statutory authorization to levy ad valorem taxes on all taxable real property in the District without limitation as to rate or amount (subject to certain recently-enacted statutory limitations imposed by Chapter 97 of the 2011 Laws of New York [the "Tax Levy Limit Law"]; see "TAX INFORMATION-Tax Levy Limit Law, herein). Under the Constitution of the State, the District is required to pledge its faith and credit for the payment of the principal of and interest on the Bonds and the State is specifically precluded from restricting the power of the District to levy taxes on real estate therefore. BOOK-ENTRY ONLY SYSTEM DTC will act as securities depository for the Bonds. The Bonds will be issued as fully-registered bonds and fullyregistered notes 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 and fully-registered note certificates will be issued for each maturity of the Bonds and will be deposited with DTC. DTC, the world s largest depository, is a limited-purpose trust company organized under the New York Banking Law, a banking organization within the meaning of the New York Banking Law, a member of the Federal Reserve System, a clearing corporation within the meaning of the New York Uniform Commercial Code, and a clearing agency registered pursuant to the provisions of Section 17A of the Securities Exchange Act of DTC holds and provides asset servicing for over 3.5 million issues of U.S. and non-u.s. equity 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 2

7 facilitates the post-trade settlement among Direct Participants of sales and other securities transactions in deposited securities, through electronic computerized book-entry transfers and pledges between Direct Participants accounts. This eliminates the need for physical movement of securities certificates. Direct Participants include both U.S. and non-u.s. securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations. DTC is a wholly-owned subsidiary of The Depository Trust & Clearing Corporation ( DTCC ). DTCC is the holding company for DTC, National Securities Clearing Corporation and Fixed Income Clearing Corporation, all of which are registered clearing agencies. DTCC is owned by the users of its regulated subsidiaries. Access to the DTC system is also available to others such as both U.S. and non-u.s. securities brokers and dealers, banks, trust companies, and clearing corporations that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly ( Indirect Participants ). The DTC Rules applicable to its Participants are on file with the Securities and Exchange Commission. More information about DTC can be found at and Purchases of the 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 and note ( 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 the Bonds, except in the event that use of the book-entry system for the Bonds is discontinued. To facilitate subsequent transfers, all the 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 the 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 Securities 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 the Bonds unless authorized by a Direct Participant in accordance with DTC s MMI Procedures. Under its usual procedures, DTC mails an Omnibus Proxy to the County as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co. s consenting or voting rights to those Direct Participants to whose accounts the Bonds are credited on the record date (identified in a listing attached to the Omnibus Proxy). Principal and interest payments on the Bonds will be made to Cede & Co., or such other nominee as may be requested by an authorized representative of DTC. DTC s practice is to credit Direct Participants accounts upon DTC s receipt of funds and corresponding detail information from the County, 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 or the District, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of principal and interest payments to Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) is the responsibility of the District, disbursement of such payments to Direct 3

8 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. Under such circumstances, in the event that a successor depository is not obtained, bond and note certificates are required to be printed and delivered. The District may decide to discontinue use of the system of book-entry-only transfers through DTC (or a successor securities depository). In that event, bond and note certificates will be printed and delivered to DTC. 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 thereof. THE DISTRICT CANNOT AND DOES NOT GIVE ANY ASSURANCE THAT DTC DIRECT PARTICIPANTS OR INDIRECT PARTICIPANTS OF DTC WILL DISTRIBUTE TO THE BENEFICIAL OWNERS OF THE BONDS (1) PAYMENTS OF PRINCIPAL OF OR INTEREST OR REDEMPTION PREMIUM ON THE BONDS (2) CONFIRMATIONS OF THEIR OWNERSHIP INTERESTS IN THE BONDS OR (3) OTHER NOTICES SENT TO DTC OR CEDE & CO., ITS PARTNERSHIP NOMINEE, AS THE REGISTERED OWNER OF THE BONDS, OR THAT THEY WILL DO SO ON A TIMELY BASIS, OR THAT DTC, DIRECT PARTICIPANTS OR INDIRECT PARTICIPANTS WILL SERVE AND ACT IN THE MANNER DESCRIBED IN THIS OFFICIAL STATEMENT. THE DISTRICT WILL NOT HAVE ANY RESPONSIBILITY OR OBLIGATION TO DTC, THE DIRECT PARTICIPANTS, THE INDIRECT PARTICIPANTS OF DTC OR THE BENEFICIAL OWNERS WITH RESPECT TO (1) THE ACCURACY OF ANY RECORDS MAINTAINED BY DTC OR ANY DIRECT PARTICIPANTS OR INDIRECT PARTICIPANTS OF DTC (2) THE PAYMENT BY DTC OR ANY DIRECT PARTICIPANTS OR INDIRECT PARTICIPANTS OF DTC OF ANY AMOUNT DUE TO ANY BENEFICIAL OWNER IN RESPECT OF THE PRINCIPAL AMOUNT OF OR INTEREST OR REDEMPTION PREMIUM ON THE BONDS; (3) THE DELIVERY BY DTC OR ANY DIRECT PARTICIPANTS OR INDIRECT PARTICIPANTS OF DTC OF ANY NOTICE TO ANY BENEFICIAL OWNER THAT IS REQUIRED OR PERMITTED TO BE GIVEN TO OWNERS; OR (4) ANY CONSENT GIVEN OR OTHER ACTION TAKEN BY DTC AS THE REGISTERED HOLDER OF THE BONDS. THE INFORMATION CONTAINED HEREIN CONCERNING DTC AND ITS BOOK-ENTRY SYSTEM HAS BEEN OBTAINED FROM DTC AND THE DISTRICT MAKES NO REPRESENTATION AS TO THE COMPLETENESS OR THE ACCURACY OF SUCH INFORMATION OR AS TO THE ABSENCE OF MATERIAL ADVERSE CHANGES IN SUCH INFORMATION SUBSEQUENT TO THE DATE HEREOF. Source: The Depository Trust Company MARKET FACTORS The financial condition of the District as well as the market for the Bonds could be affected by a variety of factors, some of which are beyond the District's control. There can be no assurance that adverse events in the State, including, for example, the seeking by a municipality of remedies pursuant to the Federal Bankruptcy Act or otherwise, will not occur which might affect the market price of and the market for the Bonds. If a significant default or other financial crisis should occur in the affairs of the State or at any of its agencies or political subdivisions thereby further impairing the acceptability of obligations issued by borrowers within the State, both the ability of the District to arrange for additional borrowings and the market for and market value of outstanding debt obligations, including the Bonds, could be adversely affected. The District is dependent, in part, on financial assistance from the State. However, if the State should experience difficulty in borrowing funds in anticipation of the receipt of the State taxes in order to pay State aid to municipalities and school districts in the State, including the District, in this year or future years, the District may be 4

9 affected by a delay, until sufficient State taxes have been received by the State to make State aid payments to the District. Should the District fail to receive monies expected from the State in the amounts and at the times expected, the District is permitted to issue revenue anticipation notes in anticipation of the receipt of delayed State aid. LITIGATION The District is subject to a number of lawsuits in the ordinary conduct of its affairs. The District does not believe, however, that such suits, individually or in the aggregate, are likely to have a material adverse effect on the financial condition of the District. There is no action, suit, proceedings or investigation, at law or in equity, before or by any court, public board or body pending or, to the best knowledge of the District, threatened against or affecting the District to restrain or enjoin the issuance, sale or delivery of the Bonds or the levy and collection of taxes or assessments to pay same, or in any way contesting or affecting the validity of the Bonds or any proceedings or authority of the District taken with respect to the authorization, issuance or sale of the Bonds or contesting the corporate existence or boundaries of the District. BOND INSURANCE 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 of (or, in the case of Capital Appreciation Bonds, the accreted value) and interest on the Bonds when due as set forth in the form of the Policy included as an exhibit to this Official Statement. TAX EXEMPTION In the opinion of Hodgson Russ LLP, Albany, New York, Bond Counsel, under existing law, interest on the Bonds is excludable from the gross income of the owners thereof for federal income tax purposes, assuming compliance with certain covenants and the accuracy of certain representations. Further, (a) the District or another Person, by failing to comply with the requirements contained in the Code, may cause interest on the Bonds to become subject to federal income taxation from the date of issuance thereof, (b) interest on the Bonds is not an item of tax preference for purposes of the individual and corporate alternative minimum taxes imposed by the Code, and (c) interest on the Bonds is included in adjusted current earnings for purposes of computing the alternative minimum tax on corporations under Section 56 of the Code and the branch profits tax under Section 884 of the Code. Tax Requirements In rendering the foregoing opinions, Bond Counsel noted that exclusion of the interest on the Bonds from gross income for federal income tax purposes may be dependent, among other things, on compliance with the applicable requirements of Sections 141, 142, 148 and 149 of the Code and the regulations thereunder (collectively, the Tax Requirements ). In the opinion of Bond Counsel, the Tax Regulatory Agreement establishes requirements and procedures, compliance with which will satisfy the Tax Requirements. In the Tax Regulatory Agreement, the District has covenanted to comply with the Tax Requirements, and refrain from taking any action which would cause the interest on the Bonds to be includable in gross income for federal income tax purposes. Any violation of the Tax Requirements may cause the interest on the Bonds to be included in gross income for federal income tax purposes from the date of issuance of the Bonds. Hodgson Russ LLP expresses no opinion regarding other federal tax consequences arising with respect to the Bonds. 5

10 Not Bank Qualified The Bonds will not be designated as qualified tax exempt obligations pursuant to Section 265(b)(3) of the Code. Other Impacts Prospective purchasers of the Bonds should be aware that ownership of, accrual or receipt of interest on, or disposition of, the Bonds may have collateral federal income tax consequences for certain taxpayers, including financial institutions, property and casualty insurance companies, S Corporations, certain foreign corporations, individual recipients of Social Security or Railroad Retirement benefits and taxpayers who may be deemed to have incurred or continued indebtedness to purchase or carry such obligations. Prospective purchasers should consult their tax advisers as to any possible collateral consequences from their ownership of, or receipt of interest on, or disposition of, the Bonds. Bond Counsel expresses no opinion regarding any such collateral federal income tax consequences. Information Reporting and Backup Withholding In general, information reporting requirements will apply to non-corporate holders with respect to payments of principal, payments of interest and the proceeds of the sale of a bond before maturity within the United States. Backup withholding may apply to holders of the Bonds under Section 3406 of the Code. Any amounts withheld under the backup withholding rules from a payment to a beneficial owner, and which constitutes over-withholding, would be allowed as a refund or a credit against such beneficial owner s United States Federal income tax provided the required information is furnished to the Internal Revenue Service (the Service ). Future Legislation Bond Counsel has not undertaken to advise in the future whether any events occurring after the date of issuance of the Bonds may affect the tax status of interest on the Bonds. The Code has been continuously subject to legislative modifications, amendments and revisions and proposals for further changes are regularly submitted by leaders of the legislative and executive branches of the federal government. No representation is made as to the likelihood of such proposals being enacted in their current or similar form, or if enacted, the effective date of any such legislation and no assurances can be given that such proposals or amendments will not materially and adversely affect the economic value of the Bonds or the tax consequences of ownership of the Bonds. The recently enacted American Taxpayer Relief Act of 2012 (responding to the so-called "fiscal cliff' situation) did not include any restrictions on the tax exemption for interest on municipal debt. However, the agreement set up additional rounds of negotiations in 2013 focused on deficit reduction, spending, and the debt limit. President Obama stated on December 31, 2012 that deficit reduction would not be accomplished solely by spending cuts but would include taxes. Therefore, these additional rounds of negotiations continue the risk to the tax-exempt status of municipal interest. It is impossible to predict at this time the actual outcome of the complex and ongoing negotiations at the federal level with respect to the federal government's taxation and spending policies. The treatment, at least prospectively, of interest on municipal debt could be affected by the outcome of such negotiations. For example, in early April of 2013, President Obama released his budget proposals. The President included a number of bond-related proposals in his budget, most of which have been proposed (but not adopted) in previous budgets. As expected, the President included in his budget the so-called "28 percent cap" on the benefit of certain tax preferences, including tax-exempt interest on municipal bonds and notes. If approved, the measure would mean that investors in tax brackets higher than 28% would have to pay income taxes on municipal bond interest at a marginal rate equal to their tax bracket minus 28%. For an investor in the 35% federal tax bracket, this means that municipal bond interest would be taxed at an effective rate of 7%. The 28% cap proposal was originally introduced in September of as part of the President's proposed American Jobs Act. While that bill failed to advance in Congress, it put on the table the possibility that municipal interest could be a target for administration budget writers. The proposed cap would apply to single taxpayers with income greater than $200,000 and joint filers with income greater than $250,000. As before, the proposal would apply to interest paid on all bonds and notes, even 6

11 those issued before the effective date of the provision. State and local governments and their supporters in Congress have recently stepped up their efforts to defend the exemption. New York State Taxes In the opinion of Bond Counsel, interest on the Bonds is exempt, under existing statutes, from New York State and New York City personal income taxes. Miscellaneous All quotations from and summaries and explanations of provisions of laws do not purport to be complete and reference is made to such laws for full and complete statements of their provisions. ALL PROSPECTIVE PURCHASERS OF THE BONDS SHOULD CONSULT WITH THEIR TAX ADVISORS IN ORDER TO UNDERSTAND THE IMPLICATIONS OF THE CODE AS TO THE TAX CONSEQUENCES OF PURCHASING OR HOLDING THE BONDS. Absence of Litigation DOCUMENTS ACCOMPANYING DELIVERY OF THE BONDS Upon delivery of the Bonds, the District shall furnish a certificate of the District, dated the date of delivery of the Bonds to the effect that there is no controversy or litigation of any nature pending or threatened to restrain or enjoin the issuance, sale, execution or delivery of the Bonds, or in any way contesting or affecting the validity of the Bonds or any of the proceedings taken with respect to the issuance and sale thereof or the application of moneys to the payment of the Bonds, and further stating that there is no controversy or litigation of any nature now pending or threatened by or against the District wherein an adverse judgment or ruling could have a material adverse impact on the financial condition of the District or adversely affect the power of the District to levy, collect and enforce the collection of taxes or other revenues for the payment of its Bonds, which has not been disclosed in this Official Statement. Legal Matters Legal matters incident to the authorization, issuance and sale of the Bonds will be subject to the final approving opinion of Hodgson Russ LLP, Bond Counsel. Such opinion will be available at the time of delivery of the Bonds and will be to the effect that the Bonds are valid and legally binding general obligations of the District for which the District has validly pledged its faith and credit, and all the taxable real property within the District is subject to the levy of ad valorem real estate taxes to pay the Bonds and interest thereon without limitation of rate or amount (subject to certain recently enacted statutory limitations imposed by the Tax Levy Limit Law; see "TAX INFORMATION-Tax Levy Limit Law, herein). Said opinions shall also contain further statements to the effect that (a) the enforceability of rights or remedies with respect to such Bonds may be limited by bankruptcy, insolvency, or other laws affecting creditors rights or remedies heretofore or hereafter enacted, and (b) said law firm has not been requested to examine or review and has not examined or reviewed the accuracy or sufficiency of the Official Statement, or any additional proceedings, reports, correspondence, financial statements or other documents, containing financial or other information relative to the District which have been or may have furnished or disclosed to purchasers of the Bonds, and expresses no opinion with respect to such financial or other information, or the accuracy or sufficiency thereof. Closing Certificates Upon the delivery of the Bonds, the Purchasers will be furnished with the following items: (i) a Certificate of the President of the Board of Education to the effect that as of the date of this Official Statement and at all times subsequent thereto, up to and including the time of the delivery of the Bonds, this Official Statement did not and does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the 7

12 statements herein, in the light of the circumstances under which they were made, not misleading, and further stating that there has been no adverse material change in the financial condition of the District since the date of this Official Statement to the date of issuance of the Bonds; and having attached thereto a copy of this Official Statement; (ii) a Certificate signed by the President of the Board of Education evidencing payment for the Bonds; (iii) a Signature Certificate evidencing the due execution of the Bonds, including statements that (a) no litigation of any nature is pending or, to the knowledge of the signers, threatened, restraining or enjoining the issuance and delivery of the Bonds or the levy and collection of taxes to pay the principal of and interest thereon, nor in any manner questioning the proceedings and authority under which the Bonds were authorized or affecting the validity of the Bonds thereunder, (b) neither the corporate existence or boundaries of the District nor the title of the signers to their respective offices is being contested, (c) no authority or proceedings for the issuance of the Bonds have been repealed, revoked or rescinded; and (iv) a Tax Regulatory Agreement executed by the President, as described under "Tax Exemption" herein. DISCLOSURE UNDERTAKING FOR THE BONDS At the time of the delivery of the Bonds, the District will provide an executed copy of its Undertaking to Provide Continuing Disclosure (the Undertaking ). Said Undertaking will constitute a written agreement or contract of the District for the benefit of holders of and owners of beneficial interests in the Bonds, to provide, or cause to be provided to the Electronic Municipal Market Access ( EMMA ) System implemented by the Municipal Securities Rulemaking Board established pursuant to Section 15B(b)(1) of the Securities Exchange Act of 1934, or any successor thereto or to the functions of such Board contemplated by the Undertaking,: (1) (i) certain annual financial information, in a form generally consistent with the information contained or cross-referenced in this Official Statement under the headings Litigation and in Appendix A under the headings : The District, Financial Factors, Tax Information, District Indebtedness and Economic and Demographic Data ; and in Appendix B, on or prior to the 180th day following the end of each fiscal year, commencing with the fiscal year ending June 30, 2012 and (ii) the audited financial statement, if any, of the District for each fiscal year commencing with the fiscal year ending June 30, 2012 unless such audited financial statement, if any, shall not then be available in which case the unaudited financial statement shall be provided and an audited financial statement shall be provided within 30 days after it becomes available and in no event later than 360 days after the end of each fiscal year; (2) timely notice, not in excess of ten (10) business days after the occurrence of such event, of the occurrence of any of the following events: (i) principal and interest payment delinquencies; (ii) non-payment related defaults, if material; (iii) unscheduled draws on debt service reserves reflecting financial difficulties; (iv) unscheduled draws on credit enhancements reflecting financial difficulties; (v) substitution of credit or liquidity providers, or their failure to perform; (vi) adverse tax opinions, the issuance by the Internal Revenue Service of proposed or final determinations of taxability, Notices of Proposed Issue (IRS Form 5701-TEB) or other material notices of determinations with respect to the tax status of the Bonds, or other material events affecting the tax status of the Bonds; (vii) modifications to rights of Bondholders, if material; (viii) Bond calls, if material, and tender offers; (ix) defeasances; (x) release, substitution, or sale of property securing repayment of the Bonds, if material; (xi) rating changes; (xii) bankruptcy, insolvency, receivership or similar event of the District; [note to clause (xii): For the purposes of the event identified in clause (xii) above, 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 government 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 governing body and officials or officers in possession but subject to the supervision and orders of a court or 8

13 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]; (xiii) the consummation of a merger, consolidation, or acquisition involving the Issuer 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, if material; and (xiv) appointment of a successor or additional trustee or the change of name of a trustee, if material. The District may provide notice of the occurrence of certain other events, in addition to those listed above, if it determines that any such other event is material with respect to the Bonds; but the District does not undertake to commit to provide any such notice of the occurrence of any event except those events listed above; and (3) in a timely manner, notice of a failure to provide the annual financial information by the date specified. The District s Undertaking shall remain in full force and effect until such time as the principal of, redemption premiums, if any, and interest on the Bonds shall have been paid in full or in the event that those portions of the Rule which require the Undertaking, or such provision, as the case may be, do not or no longer apply to the Bonds. The sole and exclusive remedy for breach or default under the Undertaking is an action to compel specific performance of the undertakings of the District, and no person or entity, including a Holder of the Bonds, shall be entitled to recover monetary damages thereunder under any circumstances. Any failure by the District to comply with the Undertaking will not constitute a default with respect to the Bonds. The District reserves the right to amend or modify the Undertaking under certain circumstances set forth therein; provided that any such amendment or modification will be done in a manner consistent with Securities and Exchange Commission Rule 15c2-12 (the Rule ), as amended. The District is in compliance with undertakings made pursuant to the Rule prior to the 180th day following the end of each fiscal year for each of the last three fiscal years ended June 30. The District s undertakings for fiscal year ended 2008 were filed 191 days after the fiscal year ended. FINANCIAL ADVISOR Capital Markets Advisors, LLC has acted as Financial Advisor to the District in connection with the sale of the Bonds. In preparing the Official Statement, the Financial Advisor has relied upon governmental officials, and other sources who have access to relevant data to provide accurate information for the Official Statement, and the Financial Advisor has not been engaged, nor has it undertaken, to independently verify the accuracy of such information. The Financial Advisor is not a public accounting firm and has not been engaged by the District to compile, review, examine or audit any information in the Official Statement in accordance with accounting standards. The Financial Advisor is an independent advisory firm and is not engaged in the business of underwriting, trading or distributing municipal securities or other public securities and therefore will not participate in the underwriting of the Bonds. RATINGS S&P has assigned a rating of A (Stable) long-term underlying rating of the District, based on the District's eligibility and participation in the New York State Aid Intercept program and has assigned an A (Stable) issuer credit rating for the District. 9

14 Standard & Poor s Corporation is expected to assign a rating of AA (with a stable outlook) to the Bonds based on the understanding that the insurance policy of BAM insuring the scheduled payment of principal and interest on the Bonds when due will be issued concurrently with the issuance of the Bonds. Such rating reflects only the view of such organization and any desired explanation of the significance of such rating should be obtained from the rating agency furnishing the same, at the following addresses: Standard & Poor's Corporation, 55 Water Street, New York, New York Generally, a rating agency bases its rating on the information and materials furnished to it and on investigations, studies and assumptions of its own. There is no assurance such rating will continue for any given period of time or that such rating will not be revised downward or withdrawn entirely by the rating agency, if in the judgment of such rating agency, circumstances so warrant. Any such downward revision or withdrawal of any of the rating may have an adverse effect on the market price of the Bonds. ADDITIONAL INFORMATION Additional information may be obtained from the School Business Administrator and Paying Agent Contact, Mr. Daniel DoBell, City School District of the City of Elmira, 951 Hoffman Street, Elmira, New York, 14905, phone: (607) , ddobell@gstboces.org or from the District's Financial Advisor, Capital Markets Advisors, LLC, (716) Any statements in this Official Statement involving matters of opinion or estimates, whether or not expressly so stated, are intended as such and not as representations of fact. No representation is made that any of such statements will be realized. This Official Statement is not to be construed as a contract or agreement between the District and the original purchasers or holders of any of the Bonds. Capital Markets Advisors, LLC may place a copy of this Official Statement on its website at Unless this Official Statement specifically indicates otherwise, no statement on such website is included by specific reference or constitutes a part of this Official Statement. Capital Markets Advisors, LLC has prepared such website information for convenience, but no decisions should be made in reliance upon that information. Typographical or other errors may have occurred in converting original source documents to digital format, and neither the District nor Capital Markets Advisors, LLC assumes any liability or responsibility for errors or omissions on such website. Further, Capital Markets Advisors, LLC and the District disclaim any duty or obligation either to update or to maintain that information or any responsibility or liability for any damages caused by viruses in the electronic files on the website. Capital Markets Advisors, LLC and the District also assume no liability or responsibility for any errors or omissions or for any updates to dated website information. CITY SCHOOL DISTRICT OF THE CITY OF ELMIRA CHEMUNG COUNTY, NEW YORK By: /s/ _Sara Lattin Ms. Sara Lattin Board of Education President Dated: November 26,

15 APPENDIX A THE DISTRICT

16 THE DISTRICT General Information The District, with a population of approximately 48,734 according to the 2010 U.S. Census, is located in the City of Elmira (the City ). The District has a land area of approximately 110 square miles and is situated in the County of Chemung. Elmira is located at the crossroads of Interstate 86, the east-west Southern Tier Expressway and NYS Route 14, which runs north-south. The District is served by airlines operating out of the Elmira-Corning Regional Airport. Rail service is provided by Conrail. Public utilities serving the District include NYS Electric & Gas Corporation and Verizon New York Inc. Major employers of the city are the Arnot Ogden Medical Center, the District, Hardinge Brothers, Inc. and St. Joseph s Hospital. Residents of the District also commute to nearby Corning, working for Corning Inc. and Ingersoll Rand. District Organization Subject to the provisions of the State Constitution, the District operates pursuant to the Education Law, the Local Finance Law, other laws generally applicable to the District, and any special laws applicable to the District. Under such laws, there is no authority for the District to have a charter or adopt local laws. The legislative power of the District is vested in the Board of Education, which consists of nine members including the President and Vice President. Board members are elected for overlapping terms of three years. The administrative officers of the District, whose duty it is to implement the policies of the Board of Education and who are appointed by such Board, include the Superintendent of Schools, School Business Official (which is currently vacant), District Clerk and District Treasurer. District Facilities The District currently operates the following facilities: Name of School Grades TABLE 1 School Statistics Year of Construction Year of Last Addition State Rated Capacity Thomas K. Beecher Pre-K Arthur W. Booth Pre-K Parley Coburn Pre-K George M. Diven Pre-K Pine City Elementary Pre-K Riverside School Pre-K Hendy Avenue Pre-K George Washington* K Broadway School Pre-K ,331 Ernie Davis J. Sloat Fassett Elmira Free Academy ,447 Southside High School ,479 Total Capacity 8,712 * George Washington School is no longer used for students. Source: School Officials A-1

17 Financial Organization Pursuant to the Local Finance Law, the President of the Board is the chief fiscal officer of the District. However, certain of the financial functions of the District are the responsibility of the Superintendent of Schools, the District Treasurer, and the Business Official. Employees There are approximately 1,071 people employed by the District including approximately 346 part-time temporary employees and personnel not represented by any bargaining group. The collective bargaining agents, if any, which represent District employees and the dates of expirations of the various collective bargaining agreements are as follows: TABLE 2 Employees Approximate # Contract of Employees Union Expiration Date 501 Elmira Teachers Association (NYSUT) 6/30/12* 282 Instructional Support Employee s Association (NYSUT) 6/30/12* 152 Custodial, Maintenance & Cafeteria Workers (NYSUT) 6/30/12* 29 Elmira Schools Supervisory & Administrative Counsel (SAANYS) 6/30/13* 70 Communication Workers of America (CWA) 6/30/12* *Currently under negotiations. Source: School Officials Employee Pension Benefits All non-teaching and non-certified administrative employees of the District are eligible for pension or retirement benefits under the Retirement and Social Security Law of the State of New York are members of the New York and Local Employees Retirement System ( ERS ). Teachers and certified administrators are members of the New York State Teachers Retirement System ( TRS ). Payments to the Retirement System (ERS and TRS) are deducted from the School District s State aid payments. Both the New York State and Local Employees Retirement System and the New York State Teachers Retirement System are non-contributing with respect to members hired prior to July 27, The Retirement Systems are non-contributory with respect to members working ten or more years. All members working less than ten years must contribute 3% of gross annual salary toward the cost of retirement programs. The following table details the actual contributions to ERS and TRS for the past three audited fiscal years and the budgeted contributions for the current year: Year Ended ERS TRS 2014 Budgeted $2,443,762 $5,062, ,836,913 4,139, ,630,000 4,664, ,350,000 4,116,000 In 2003, Chapter 49 of the Laws of 2003 amended the Retirement and Social Security Law and the Local Finance Law. The amendments empowered the State Comptroller to implement a comprehensive structural reform program for the ERS. The reform program established a minimum contribution for any local governmental employer equal to 4.5% of pensionable salaries for bills which were due December 15, 2003 and for all fiscal years thereafter, as a minimum annual contribution where the actual rate would otherwise be 4.5% or less due to the investment performance of the fund. In addition, the reform program instituted a billing system to match the budget cycle of municipalities and school districts that will advise such employers over one year in advance concerning actual A-2

18 pension contribution rates for the next annual billing cycle. Under the previous method, the requisite ERS contributions for a fiscal year could not be determined until after the local budget adoption process was complete. Under the new system, a contribution for a given fiscal year will be based on the valuation of the pension fund on the prior April 1 of the calendar year proceeding the contribution due date instead of the following April 1 in the year of contribution so that the exact amount may now be included in a budget. On December 10, 2009, the Governor signed into law pension reform legislation that will provide (according to a Division of the Budget analysis) more than $35 billion in long-term savings to State taxpayers over the next thirty years. The legislation creates a new Tier V pension level, the most significant reform of the State s pension system in more than a quarter-century. Key components of Tier V for ERS include: Raising the minimum age of which most civilians can retire without penalty from 55 to 62 and imposing a penalty of up to 38 percent for any civilian who retires prior to age 62. Requiring employees to continue contributing three percent of their salaries toward pension costs so long as they accumulate additional pension credits. Increasing the minimum years of service required to draw a pension from five years to 10 years. Capping the amount of overtime that can be considered in the calculation of pension benefits for civilians at $15,000 per year, and for police and firefighters at 15 percent of non-overtime wages. Members of the NYS Teachers Retirement System will have a separate Tier V benefit structure that will achieve equivalent savings as other civilian public employees. It includes: Raising the minimum age an individual can retire without penalty from 55 to 57 years. Contributing 3.5 percent of their annual wages to pension costs rather than 3.0 percent and continuing this increased contribution so long as they accumulate additional pension credits. Increasing the two percent multiplier threshold for final pension calculations from 20 to 25 years. In accordance with constitutional requirements, these new pension reforms would apply only to public employees hired in the future. On March 16, 2012, the Governor signed into law the new Tier VI pension program, effective for new ERS and TRS employees hired after April 1, The Tier VI legislation provides, among other things, for increased employee contribution rates of between 3% and 6%, an increase in the retirement age from 62 to 63 years, a readjustment of the pension multiplier, and a change in the time period for final average salary calculation from 3 years to 5 years. Tier VI employees will vest in the system after ten years of employment and will continue to make employee contributions throughout employment. The investment of monies, and assumptions underlying same, of the Retirement Systems covering the District s employees is not subject to the direction of the District. Thus, it is not possible to predict, control or prepare for future unfunded accrued actuarial liabilities of the Retirement Systems ( UAALs ). The UAAL is the difference between total actuarially accrued liabilities and actuarially calculated assets available for the payment of such benefits. The UAAL is based on assumptions as to retirement age, mortality, projected salary increases attributed to inflation, across-the-board raises and merit raises, increases in retirement benefits, cost-of-living adjustments, valuation of current assets, investment return and other matters. Such UAALs could be substantial in the future, requiring significantly increased contributions from the District which could affect other budgetary matters. Concerned investors should contact the Retirement Systems administrative staff for further information on the latest actuarial valuations of the Retirement Systems. School Districts and Boards of Cooperative Education Services, unlike other municipal units of government in the State, have been prohibited from reducing retiree health benefits or increasing health care contributions received or paid by retirees below the level of benefits or contributions afforded to or required from active employees since the implementation of Chapter 729 of the Laws of Legislative attempts to provide similar protection to retirees of other local units of government in the State have not succeeded as of this date. Nevertheless, many such retirees of all varieties of municipal units in the State do presently receive such benefits. A-3

19 It should also be noted that the District provides post-retirement healthcare benefits to various categories of former employees. These costs may be expected to rise substantially in the future. There is now an accounting rule that will require governmental entities, such as the District, to account for post-retirement healthcare benefits as it accounts for vested pension benefits. GASB 45 and OPEB. OPEB refers to "other post-employment benefits," meaning benefits other than pension benefits. OPEB consist primarily of health care benefits, and may include other benefits such as disability benefits and life insurance. Until now, these benefits have generally been administered on a pay-as-you-go basis and have not been reported as a liability on governmental financial statements. GASB 45 will require municipalities and school districts to account for OPEB liabilities much like they already account for pension liabilities, generally adopting the actuarial methodologies used for pensions, with adjustments for the different characteristics of OPEB and for the fact that most municipalities and school districts have not set aside any funds against this liability. Unlike GASB 27, which covers accounting for pensions, GASB 45 does not require municipalities or school districts to report a net OPEB obligation at the start. Under GASB 45, based on actuarial valuation, an annual required contribution ("ARC") will be determined for each municipality or school district. The ARC is the sum of (a) the normal cost for the year (the present value of future benefits being earned by current employees) plus (b) amortization of the unfunded accrued liability (benefits already earned by current and former employees but not yet provided for), using an amortization period of not more than 30 years. If a municipality or school district contributes an amount less than the ARC, a net OPEB obligation will result, which is required to be recorded as a liability on its financial statements. GASB 45 does not require that the unfunded liability actually be amortized nor that it be advance funded, only that the municipality or school district account for its unfunded accrued liability and its compliance in meeting its ARC. Actuarial valuation will be required every two years for OPEB plans with more than 200 members, and every three years if there are less than 200 members. See Note 7 of the District s Financial Statements for the Fiscal Year ended June 30, 2013 for a presentation of the District s OPEB valuation. The following table summarizes the District s annual OPEB for the years ending June 30, 2013 and 2012: Annual required contribution Annual Required Contribution Normal Cost $9,036,437 $8,688,882 Amortization of unfunded actuarial accrued liability 14,587,027 14,007,793 Interest adjustment 944, ,867 Annual Required Contribution 24,568,403 23,604,542 Increase in net OPEB obligation (as of beginning of year) 2,725,067 2,160,432 Annual Required Contribution adjustment (3,939,780) (3,123,456) Annual OPEB costs (expense) 23,353,690 22,641,518 Contributions made (9,149,000) (8,525,644) Increase in net OPEB obligation 14,204,690 14,115,874 Net OPEB obligation beginning of the year 68,126,671 54,010,797 Net OPEB obligation end of year $82,331,361 $68,126,671 Source: Audited Financial Statements Investment Policy/Permitted Investments Pursuant to State law, including Sections 10 and 11 of the General Municipal Law (the "GML"), the District is generally permitted to deposit monies in banks and trust companies located and authorized to do business in the State. All such deposits, including special time deposit accounts and certificates of deposit, in excess of the amount insured under the Federal Deposit Insurance Act, are required to be secured in accordance with the provisions of and subject to the limitations of Section 10 of the GML. A-4

20 The District may also temporarily invest monies in: (1) obligations of the United States of America; (2) obligations guaranteed by agencies of the United States of America where the payment of principal and interest are guaranteed by the United States of America; (3) obligations of the State of New York; (4) with the approval of the New York State Comptroller, tax anticipation notes or revenue anticipation notes issued by any municipality, school district, or district corporation, other than those notes issued by the District; (5) certificates of participation issued by political subdivisions of the State pursuant to Section 109-b(10) of the GML; (6) obligations of a New York public benefit corporation which are made lawful investments for municipalities pursuant to the enabling statute of such public benefit corporation; or (7) in the case of monies held in certain reserve funds established by the District pursuant to law, in obligations of the District. All of the foregoing instruments and investments are required to be payable or redeemable at the option of the owner within such times as the proceeds will be needed to meet expenditures for purposes for which the monies were provided and, in the case of instruments and investments purchased with the proceeds of bonds or notes, shall be payable or redeemable in any event, at the option of the owner, within two years of the date of purchase. Unless registered or inscribed in the name of the District, such instruments and investments must be purchased through, delivered to and held in custody of a bank or trust company in the State pursuant to a written custodial agreement as provided in Section 10 of the GML. Revenues FINANCIAL FACTORS The District receives most of its revenue from a real property tax on all non-exempt real property situated within the District and State aid. Property Tax The following table sets forth total general fund revenues and real property tax revenues including other property tax items during the last five audited fiscal years and budgeted for the previous and current fiscal years. TABLE 3 Property Taxes Real Property Real Property Total Taxes and Taxes to Fiscal Year Revenues Tax Items Revenues 2009 $111,220,822 $28,885, % ,937,499 28,804, % ,077,315 28,768, % ,516,915 30,869, % ,785,021 31,556, % 2014 Budget 113,982,977 31,928, % Source: District s audited financial statements and 2013 adopted budget. State Aid The District also receives a portion of its revenues in the form of State aid. However, there is no assurance that the State appropriation for State aid to school districts will continue, either pursuant to existing formulas or in any form whatsoever. The State is not constitutionally obligated to maintain or continue such aid. State budgetary restrictions which eliminate or substantially reduce State aid could have a material adverse effect upon the District, requiring either a counterbalancing increase in revenues from other sources to the extent available, or a curtailment of expenditures. A-5

21 In addition to the amount of State Aid budgeted by the District in its fiscal year, the State is expected to make payments of STAR aid representing tax savings provided by school districts to their taxpayers under the STAR (see STAR-School Tax Exemption ) Program. The District expects to receive timely receipt of STAR aid for the remainder of the current fiscal year. In January 2001, the State Supreme Court issued a decision in Campaign for Fiscal Equity ( CFE ) v. New York mandating that the system of apportionment of State aid to school districts within the State be restructured by the Governor and the State Legislature. On June 25, 2002, the Appellate Division of the State Supreme Court reversed that decision. On June 26, 2003, the State Court of Appeals, the highest court in the State, reversed the Appellate Division, holding that the State must, by July 30, 2004, ascertain the actual cost of providing a sound basic education, enact reforms to the system of school funding and ensure a system of accountability for such reforms. The Court of Appeals further modified the decision of the Appellate Division by deciding against a Statewide remedy and instead limited its ruling solely to the New York City school system. While the increases in State aid following this case have been targeted to high needs schools and other schools did share in the overall increase of State aid. The District is unable to predict whether this pattern of distribution will continue beyond that which is included in later legislation dealing with foundation aid. Increased State aid for New York City schools and other high needs schools may result in reductions in the future of State aid to certain school districts, including the District. In any event, the outcome of this matter does not affect the validity of any obligations issued by the District, including the Bond, nor the ability of the District to levy taxes on the taxable real property in the District to pay the Bonds and the interest thereon as the same shall become due and payable. There can be no assurance that the State appropriation for State aid to school districts will be continued in future years, either pursuant to existing formulas or in any form whatsoever. The State aid appropriated and apportioned to the District can be paid only if the State has such monies available therefore. The availability of such monies and the timeliness of such payment could be affected by a delay in the adoption of the State budget. In any event, State aid appropriated and apportioned to the District can be paid only if the State has such monies available therefor. The following table sets forth total general fund revenues and State aid revenues during the last five fiscal years and budgeted for the previous and current fiscal years. TABLE 4 State Aid Revenue Total State State Aid Fiscal Year Revenues Aid to Revenues 2009 $111,220,822 $77,464, % ,937,499 78,823, % ,077,315 74,373, % ,516,915 75,007, % ,785,021 75,823, % 2014 Budget 113,982,977 76,499, % Source: District s audited financial statements and 2013 adopted budget. Recent Events Affecting New York School Districts On March 29, 2012, New York State Governor Andrew M. Cuomo signed into law the State s fiscal year budget (the Enacted State Budget ). The Enacted State Budget provides for school aid of $20 billion, which represents an increase of $805 million, or 4%, from the amount budgeted by the State in fiscal year Most of this $805 million increase will be allocated to high-need school districts. The Enacted State Budget continues a two-year appropriation methodology established in the State fiscal year and limits future school aid increases to growth as measured by the total personal income of residents of the State. Such two-year appropriation provides for an approximate 3% increase in school aid for State fiscal year based on A-6

22 estimated growth of New York State personal income. The Enacted State Budget also continues programs established in the State fiscal year for education performance and efficiency grants, with $50 million in total appropriations for districts that demonstrate significant student performance improvements or that undertake long-term structural changes to reduce costs and improve efficiency. The Enacted State Budget also provides the linking of the provision of additional State Aid to compliance with a new teacher evaluation process which provides that school districts will not be eligible for aid unless they have fully implemented the new teacher evaluation process by January 17, Independent Audit The District retains Buffamante Whipple Buttafaro, P.C. as independent certified public accountants to audit its financial statements. Appendix C to the Official Statement presents a copy of the District s most recent audited financial report. In addition, the District is subject to audit by the State Comptroller to review compliance with legal requirements and the rules and regulations established by the State. Fund Structure and Accounts The General Fund is the general operating fund for the District and is used to account for substantially all revenues and expenditures of the District. The District also maintains a special aid fund, school lunch fund and debt service fund. In addition, a capital projects fund is used to record capital facilities while a trust and agency fund accounts for assets received by the District in a fiduciary capacity. Basis of Accounting The District's governmental funds are accounted for on a modified accrual basis whereby revenues, other than those susceptible ("measurable" and "available" to finance current operations) to accrual, are recorded when received in cash. Revenues susceptible to accrual include real property taxes and State aid. The District generally records expenditures on the accrual basis when fund liabilities are incurred, except as follows: Interest on general obligation debt which is recorded when it becomes due. Unfunded pension costs are recognized as expenditure when billed by the State. Accumulated vacation and sick leave are also accounted for in the general long-term debt account group. Inventories are generally not recorded but expensed at the time of purchase; food and supplies in school lunch are inventoried and carried at values which approximate market. Fixed assets are recorded at replacement cost as determined by appraisal; there is no provision for depreciation expense. Budgetary Procedure The District s fiscal year begins on July 1 and ends on June 30. Starting in the fall or winter of each year, the District s financial plan and enrollment projection are reviewed and updated and the first draft of the next year s proposed budget is developed by the central office staff. During winter and early spring the budget is developed and refined in conjunction with the school building principals and department supervisors. Under current law, the budget is submitted to voter referendum on the third Tuesday in May each year. A summary of the District s and adopted budgets are shown in Appendix B. The budget was approved by the qualified voters of the District on May 21, Real Property Tax Assessments and Rates TAX INFORMATION The District derives its power to levy an ad valorem real property tax from the State Constitution; methods and procedures to levy, collect and enforce this tax are governed by the Real Property Tax Law. Real property assessment rolls used by the District are prepared by the City of Elmira. Assessment valuations are determined by the City assessor and the State Board of Equalization and Assessment which is responsible for certain utility and railroad property. In addition, the State Office of Equalization and Assessment annually establishes State A-7

23 Equalization Rates for all localities in the State, which are determined by statistical sampling of market sales/assessment studies. The equalization rates are used in the calculation and distribution of certain State aids and are used by many localities in the calculation or debt contracting and real property taxing limitations. The District is not subject to constitutional real property taxing limitations. Table 5 Assessed and Full Valuation (Fiscal Years Ending June 30) Based on 2013 Special Equalization Rates Assessment Roll Year: For Fiscal Year Ended: City of Elmira Assessed Value $575,481,318 $575,762,708 $586,615,805 $583,249,631 $588,035,171 Equalization Rate 89.93% 90.14% 90.05% 89.24% 88.55% Full Value 639,921, ,742, ,433, ,574, ,071,339 Town of Ashland Assessed Value 1,069,068 1,084,543 1,081,925 1,064,406 1,061,472 Equalization Rate 1.96% 1.82% 1.67% 1.59% 1.52% Full Value 54,544,286 59,590,275 64,785,928 66,943,774 69,833,684 Town of Baldwin Assessed Value 630, , , , ,096 Equalization Rate 1.96% 1.79% 1.66% 1.55% 1.44% Full Value 32,188,673 44,423,631 42,950,120 44,903,032 43,617,778 Town of Big Flats Assessed Value 32,385,549 33,830,680 35,067,092 35,450,425 35,743,027 Equalization Rate 95.98% 97.20% 98.95% 97.31% 96.44% Full Value 33,741,976 34,805,226 35,439,204 36,430,403 37,062,450 Town of Caton Assessed Value 429, , , , ,453 Equalization Rate 63.49% 64.71% % % % Full Value 675, , , , ,121 Town of Chemung Assessed Value 8,677,801 7,533,135 7,550,256 7,668,884 7,721,997 Equalization Rate 98.03% 96.37% 92.51% 91.29% 88.98% Full Value 8,852,189 7,816,888 8,161,557 8,400,574 8,678,351 Town of Elmira Assessed Value 227,554, ,635, ,260, ,634, ,673,595 Equalization Rate 71.90% 99.22% 98.57% 96.99% 96.17% Full Value 316,487, ,108, ,877, ,522, ,603,821 Town of Erin Assessed Value 119, , , , ,863 Equalization Rate 68.64% 87.38% 80.57% 92.18% 91.40% Full Value 174, , , , ,220 A-8

24 Town of Horseheads Assessed Value 51,600 47,100 51,400 51,400 51,400 Equalization Rate 96.18% 97.28% 95.46% 95.32% 95.21% Full Value 53,649 48,417 53,845 53,924 53,986 Town of Southport Assessed Value 392,014, ,124, ,972, ,872, ,932,872 Equalization Rate 98.66% % 94.46% 93.12% 91.70% Full Value 397,338, ,533, ,313, ,898, ,774,124 Total: Assessed Value $1,238,413,957 $1,335,427,346 $1,348,300,413 $1,340,843,318 $1,344,064,946 Full Value $1,483,978,612 $1,501,971,187 $1,548,013,645 $1,561,898,424 $1,581,918,875 Source: School Officials and State Office of Real Property Services. Tax Limit The Constitution does not limit the amount that may be raised by the District-wide tax levy on real estate in any fiscal year. The District is not subject to constitutional real property taxing limitations. See, however, the discussion under the sub-heading Tax Levy Limit Law, below. Tax Levy Limit Law On June 24, 2011, the State Senate and the State Assembly both enacted, and Governor Andrew Cuomo signed (as Chapter 97 of the 2011 Laws of the State), significant and complex legislation relating to real property tax levies, rent regulation, exemption from local taxation and mandate relief (the "Legislation"). Part A of the Legislation amends the General Municipal Law and the Education Law in order to impose a limit upon real property tax levies by local governments (excluding the City of New York and the counties contained therein) and almost all school districts in the State, including the District (the "Tax Levy Limit Law"). The District is subject to the new Legislation, with the Tax Levy Limit Law first applying to the District s budget for its fiscal year. The Tax Levy Limit Law will restrict, among other things, the amount of real property taxes that may be levied by or on behalf of the District in a particular year. Under the Legislation, the tax levy of the District may not increase by more than the lesser of (i) two percent (2%) or (ii) the annual increase in a designated measure of the consumer price index ("CPI") over the amount of the District s prior year s tax levy. The exceptions for a tax levy above two percent or the CPI increase are (i) funds needed to pay judgments arising out of tort actions that exceed 5% of the total tax levied by the District in the prior fiscal year, (ii) required pension payments (but only that portion of such payments attributable to the average actuarial contribution rate exceeding two percentage points) and (iii) a capital tax levy. Capital tax levy" is defined to mean the tax levy necessary to support capital local expenditures by a school district. "Capital local expenditures" means the taxes associated with budgeted expenditures resulting from the financing, refinancing, acquisition, design, construction, reconstruction, rehabilitation, improvement, furnishing and equipping of, or otherwise providing for school district capital facilities or school district capital equipment, including debt service and lease expenditures, and transportation capital debt service, subject to the approval of the qualified voters where required by law. The Tax Levy Limit Law also allows for growth in the District s tax levy due to physical and quantitative changes in the District. If the District does not levy an amount up to the cap in any one year, it would be allowed to carry over unused tax levy capacity into future years. However, this carryover levy capacity may not be used to increase its tax levy by more than an additional 1.5 percent above the cap in any single year. If the District actual tax levy exceeds its authorized levy due to clerical or technical errors, the erroneous excess levy must be placed in reserve to offset the levy for the next budget year. The Board of Education of the District may propose a budget that requires a tax levy that exceeds the tax levy limit for a given fiscal year, but such proposed budget must then be adopted by the District s voters by at least a 60% A-9

25 supermajority. In the event that the original proposed budget is not approved by the voters, the Board of Education has the option of levying a tax no greater than the tax that was levied for the prior school year or re-submitting the same or a revised budget. If a proposed budget is defeated in the second vote, the Board of Education must adopt a final budget that includes a tax levy no greater than the tax that was levied for the prior school year. In such a situation involving two budget defeats, the Tax Levy Limit Law does not provide for the exclusion of a capital tax levy (or for the other allowed exceptions). It is reasonably certain that the Legislation will come under legal challenge alleging that the Legislation violates several provisions of Article VIII of the New York State Constitution. Although the Constitution recognizes the power of the State Legislature to restrict local government taxation of property, it also expressly states that the legislature shall not, however, restrict the power to levy taxes on real estate for the payment of interest on or principal of indebtedness theretofore contracted. Although New York courts (including the State s highest court the Court of Appeals) have traditionally been very protective of the rights of the holders of municipal debt obligations, the outcome of any such legal challenge cannot be predicted. In any event, certain special protective procedures and remedies available to holders of school district debt remain in place and are not affected by the Tax Levy Limit Law. See DISTRICT INDEBTEDNESS--Remedies Upon Default herein. Prospective investors in the Bonds are encouraged to consult with their own legal and tax advisors and review the provisions of the Tax Levy Limit Law in its entirety. Tax Collection Procedure Taxes of the District on all properties are collected by the Receiver of Taxes of the District during the collection periods. Taxes remaining uncollected after the expiration of the second collection period are returned to the Chemung and Steuben County Treasurers and the Elmira City Chamberlain, who by law must reimburse the District in full for uncollected taxes prior to the end of the second fiscal year for which the taxes are levied. School tax is due October 1, and may be paid in full until October 31 without penalty. This tax may be paid in two equal installments, with the first installment payable from October 1 through October 31 inclusive without penalty. After October 31, a penalty will be added to the first installment. The penalties on the first installment are 2% in November, 3% in December, 4% in January, 5% in February and 6% in March. The second installment may be paid any time between October 1 and March 31 inclusive without penalty. Uncollected taxes are returned to the County Treasurer and City Chamberlain on or about April 15 of each year. The burden of delinquent tax collection is placed on the Counties and City subsequent to advancing the school taxes to the District. The Counties and City may pay moneys due to the District from funds on hand or may borrow moneys pursuant to the Local Finance Law. A-10

26 STAR School Tax Exemption The STAR (School Tax Relief) program provides State-funded exemptions from school property taxes to homeowners for their primary residences. School districts are reimbursed by the State for real property taxes exempted pursuant to the STAR Program. TABLE 6 Municipality Enhanced Exemption Basic Exemption City of Elmira $56,970 $27,000 Town of Ashland 1, Town of Baldwin 1, Town of Big Flats 63,300 30,000 Town of Caton 63,300 30,000 Town of Chemung 63,300 30,000 Town of Elmira 63,300 30,000 Town of Erin 58,240 30,000 Town of Horseheads 63,300 30,000 Town of Southport 60,140 28,500 Date Certified: 04/09/2013 The enhanced or basic STAR exemption is the amount that an assessment will be reduced prior to the levy of school taxes. For example, if a home is assessed at $150,000 and the enhanced STAR exemption for a municipality is $50,000, the school taxes on the property would be paid on a taxable assessment of $100,000 ($150,000 - $50,000 = $100,000). The District expects to receive full reimbursement of such exempt taxes from the State during the current fiscal year. Since the school tax bills, there has been a 2% limit on STAR savings increases, the savings results from the Basic or Enhanced STAR exemptions are limited to a 2% increase over the prior year. When school district initially calculates their tax bills, for each municipal segment they will compare the amount of STAR savings to the maximum. If the STAR savings exceeded the maximum, the school district will use the maximum when calculating tax bills for the segment. The maximum savings for each of the municipalities are as follows: Basic Maximum Savings A-11 Enhanced Maximum Savings Municipality City of Elmira $607 $1,215 Town of Ashland 632 1,264 Town of Baldwin 631 1,263 Town of Big Flats 607 1,215 Town of Caton 607 1,215 Town of Chemung 607 1,215 Town of Elmira 607 1,215 Town of Erin 625 1,252 Town of Horseheads 607 1,215 Town of Southport 607 1,215 Date Updated: 03/27/2013 The District expects to receive full reimbursement of such exempt taxes from the State during the current fiscal year.

27 Largest Taxpayers for the Fiscal Year The following table presents the taxable assessments of the District's largest taxpayers from the June 1, 2013 tax roll for the fiscal year. TABLE 7 Top Ten Largest Taxable Properties Name Type Assessed Valuation Taxable Assessed Valuation (1) NYS Electric & Gas Corporation Utility $68,996, % Chemung County IDA Development 9,561, % Verizon New York Inc. Utility 6,503, % Chemung Canal Trust Company Commercial Bank 6,322, % Arnot Ogden Medical Center Hospital 6,313, % Wegmans Food Markets Inc. Food 5,650, % Hilliard Real Properties LLC Real Estate 5,015, % McWane, Inc. Manufacturing 3,851, % Mark Twain Properties LLC Housing 3,619, % Pennsylvania Lines LLC Utility 3,555, % $119,388, % (1) The District's total assessed valuation for the roll year is $1,344,064,946. Source: Assessor s Office Constitutional and Statutory Requirements DISTRICT INDEBTEDNESS The New York State Constitution limits the power of the District (and other municipalities and school districts of the State) to issue obligations and to otherwise contract indebtedness. Such constitutional limitations include the following, in summary form, and are generally applicable to the District and the Bonds. Purpose and Pledge The District shall not give or loan any money or property to or in aid of any individual or private corporation or private undertaking or give or loan its credit to or in aid of any of the foregoing or any public corporation. The District may contract indebtedness only for a District purpose and shall pledge its faith and credit for the payment of principal of and interest thereon. Payment and Maturity Except for certain short-term indebtedness contracted in anticipation of taxes or to be paid within three fiscal year periods, indebtedness shall be paid in annual installments commencing no later than two years after the date such indebtedness shall have been contracted and ending no later than the period of probable usefulness of the object or purpose determined by statute; no installment may be more than fifty per centum in excess of the smallest prior installment, unless the District has authorized the issuance of indebtedness having substantially level or declining annual debt service. The District is required to provide an annual appropriation for the payment of interest due during the year on its indebtedness and for the amounts required in such year for amortization and redemption of its serial bonds, bond anticipation notes and capital notes. A-12

28 General The District is further subject to constitutional limitation by the general constitutionally imposed duty on the State Legislature to restrict the power of taxation and contracting indebtedness to prevent abuses in the exercise of such power; however, as has been noted previously under "Nature of Obligations", the State Legislature is prohibited by a specific constitutional provision from restricting the power of the District to levy taxes on real estate for the payment of interest on or principal of indebtedness theretofore contracted. (Subject to certain recently enacted statutory limitations imposed by Chapter 97 of the 2011 Laws of New York). Statutory Procedure In general, the State Legislature has, by enactment of the Local Finance Law, authorized the power and procedure for the District to borrow and incur indebtedness subject, of course, to the constitutional provisions set forth above. The power to spend money, however, generally derives from other law, including the Education Law. The Board of Education may adopt a bond resolution authorizing the expenditure of money for capital purposes and the issuance of bonds and notes in anticipation of the bonds, but such bond resolution shall be subject to the approval of the qualified electors of the District. With respect to certain school building construction projects, the District is not permitted to spend in excess of $100,000 until the plans and specifications for such projects have been approved by the Commissioner of Education of the State. The Local Finance Law also provides a twenty-day statute of limitations after publication of a bond resolution, together with a statutory form of notice which, in effect, estops legal challenges to the validity of obligations authorized by such bond resolution except for alleged constitutional violations. The Board of Education, as the finance board of the District, has the power to authorize the sale and issuance of bonds and notes, including the Bonds. However, such finance board may delegate the power to sell the Bonds to the President of the Board of Education, the chief fiscal officer of the District, pursuant to the Local Finance Law. Debt Limit The District has the power to contract indebtedness for any District purpose so long as the principal amount thereof shall not exceed five per centum of the average full valuation of taxable real estate of the District. The constitutional and statutory method for determining full valuation is by taking the assessed valuation of taxable real estate for the last completed assessment roll and applying thereto the special equalization ratio which such assessed valuation bears to the full valuation as determined by the State Office of Real Property Services. The State Legislature is required to prescribe the manner by which such ratio shall be determined. Table 8 Computation of Debt Limit Tax Year: Full Valuation (1) 2009 $1,483,978, ,501,971, ,548,013, ,561,898, ,581,918,875 Total Five Year Valuation $7,677,780,743 Average Five Year Full Valuation $1,535,556,149 Debt Limit - 5% of Average Full Valuation $76,777,807 (1) The amounts shown as full valuation have been computed with the use of Special Equalization Ratios (See Table 5). Chapter 280 of the Laws of 1978 provides for the determination of special equalization ratios for city school districts, which normally has the effect of increasing the tax base of a city school district for the purpose of computing debt limits of such city school districts. Regular state equalization rates are also established by the State Board of Real Property Services and are used for all other purposes. A-13

29 Statutory Debt Limit and Net Indebtedness The following table sets forth the computation of the debt limit of the District and its debt contracting margin. TABLE 9 Statutory Debt Limit and Net Indebtedness (as of November 15, 2013) Average Full Valuation of Taxable Real Property $1,535,556,149 Debt Limit (5% of Average Full Valuation) 76,777,807 Inclusions: Outstanding Bonds $91,250,000 BANs 23,450,000 Gross Indebtedness $114,700,000 Exclusions and Deductions: Bond Appropriations 9,160,000 BAN Appropriations 1,985,000 Estimated Building Aid (1) 0 Gross Exclusions and Deductions $ 11,145,000 Total Net Indebtedness $103,555,000 Net Debt-Contracting Margin (2) ($26,777,193) Percentage of Debt Contracting Margin Exhausted % (1) The District has received and expects to continue to receive State Aid on a portion of existing indebtedness contracted for school building purposes pursuant to Section of the Local Finance Law, but, under the Local Finance Law, as a small city school district, it is not permitted to deduct such anticipated State building aid from its outstanding indebtedness. However, as a matter of information, State aid for building purposes is currently estimated by District officials at 98.0%. (2) The District was the subject of special legislation and has received orders of the Board of Regents and the State Comptroller, dated April 17, 2003, September 13, 2006, September 14, 2006, November 26, 2007, August 11, 2008, August 17, 2009, April 29, 2011, and August 19, 2013 consenting to an increase in authority to issue debt. On February 12, 2007, the District received consent of the State Comptroller to issue bonds and/or bond anticipation notes in an amount not to exceed $94,458,318 for school buildings and additions for the projects approved by the qualified voters of the District on October 19, Additionally, on August 11, 2008, August 17, 2009, April 29, 2011, and August 19, 2013 the District received consent to issue $667,000, $835,000, $861,830, and $1,110,000 respectively for the purchase of buses. Remedies Upon Default Section 99-b of the State Finance Law (the "SFL") provides for a covenant between the State of New York (the "State") and the purchasers and the holders and owners from time to time of the bonds and notes issued by school districts in the State for school purposes that it will not repeal, revoke or rescind the provisions of Section 99-b of the SFL, or amend or modify the same so as to limit, impair or impede the rights and remedies granted thereby. Said section provides that in the event a holder or owner of any bond or note issued by a school district for school purposes shall file with the State Comptroller, a verified statement describing such bond or note and alleging default in the payment thereof or the interest thereon or both, it shall be the duty of the State Comptroller to immediately investigate the circumstances of the alleged default and prepare and file in his office a certificate setting forth his determinations with respect thereto and to serve a copy thereof by registered mail upon the chief fiscal officer of the school district which issued the bond or note. Such investigation by the State Comptroller shall set forth a description of all such bonds and notes of the school district found to be in default and the amount of principal and interest thereon past due. Upon the filing of such a certificate in the office of the State Comptroller, he shall thereafter deduct and withhold from the next succeeding allotment, apportionment or payment of such State aid or assistance due to such school district such amount thereof as may be required to pay (a) the school district's contribution to the State Teachers' Retirement System, and (b) the principal of and interest on such bonds and notes of such school district then in default. In the event such State aid or assistance initially so withheld shall be insufficient to pay the amounts in full, the State Comptroller shall similarly deduct and withhold from each succeeding allotment, apportionment or A-14

30 payment of such State aid or assistance due such school district such amount or amounts thereof as may be required to cure such default. Allotments, apportionments and payments of such State aid so deducted or withheld by the State Comptroller for the payment of principal and interest on the bonds and notes shall be forwarded promptly to the paying agent or agents for the bonds and notes in default of such school district for the sole purpose of the payment of defaulted principal of and interest on such bonds or notes. If any such successive allotments, apportionments or payment of such State aid so deducted or withheld shall be less than the amount of all principal and interest on the bonds and notes in default with respect to which the same was so deducted or withheld, then the State Comptroller shall promptly forward to each paying agent an amount in the proportion that the amount of such bonds and notes in default payable to such paying agent bears to the total amount of the principal and interest then in default on such bonds and notes of such school district. The State Comptroller shall promptly notify the chief fiscal officer of such school district of any payment or payments made to any paying agent or agents of defaulted bonds or notes pursuant to said section SFL. Under current law, provision is made for contract creditors (including the holders of the Bonds) of the District to enforce payments upon such contracts, if necessary, through court action, although the present statute limits interest on the amount adjudged due to creditors to nine per centum per annum from the date due to the date of payment. As a general rule, property and funds of a municipal corporation servicing the public welfare and interest have not been judicially subjected to execution or attachment to satisfy a judgment, although judicial mandates have been issued to officials to appropriate and pay judgments out of current funds or the proceeds of a tax levy. Remedies for enforcement of payment are not expressly included in the District's contract with holders of its bonds and notes, although any permanent repeal by statute or constitutional amendment of a Bondholder remedial right to judicial enforcement of the contract should, in the opinion of Bond Counsel, be held unconstitutional. In recent times, certain events and legislation affecting remedies on default have resulted in litigation. While courts of final jurisdiction have upheld and sustained the rights of bondholders, such courts might hold that future events including financial crises as they may occur in the State and in municipalities of the State require the exercise by the State of its emergency and police powers to assure the continuation of essential public services. No principal or interest payment on District indebtedness is past due. The District has never defaulted in the payment of the principal of and interest on any indebtedness. Short-Term Debt The Bonds will redeem in full $21,570,000 of bond anticipation notes maturing on December 12, The District also had $525,000 and $1,355,000 of bond anticipation notes outstanding which will mature on June 13, 2014 and October 15, 2014, respectively. The District anticipates renewing these outstanding bond anticipation notes until they are paid off in full. Authorized but Unissued Indebtedness The District has $1,866,225 in authorized but unissued debt. The District does not have current plans to issue obligations to finance this unissued amount. A-15

31 Trend of Outstanding Indebtedness The following table provides information relating to direct capital outstanding indebtedness as follows: FYE June 30: Source: Audited Financial Statements for Overlapping and Underlying Debt TABLE 10 Outstanding Long-Term Bond Indebtedness Bond Anticipation Notes Total Bonds Outstanding 2009 $71,710,000 $62,632,000 $134,342, ,315,000 60,295, ,610, ,010,000 51,171, ,181, ,505,000 37,930, ,435, ,390,000 35,565, ,955,000 In addition to the District, other political subdivisions have the power to issue bonds and to levy taxes or cause taxes to be levied on taxable real property in the District. The real property taxpayers of the District are responsible for a proportionate share of outstanding debt obligations of these subdivisions. Such taxpayers' share of overlapping and underlying debt is based on the amount of the District's equalized property values taken as a percentage of each separate unit's total values. The following table presents the amount of overlapping and underlying debt and the District's share of this debt. Authorized but unissued debt has not been included. TABLE 11 Statement of Direct and Overlapping Indebtedness Overlapping Units Total Net Indebtedness Percentage Applicable Applicable Net Indebtedness County of Chemung $33,896, % $15,219,591 County of Steuben 27,066, % 5,413 City of Elmira 19,481, % 19,481,807 Town of Ashland % 0 Town of Baldwin % 0 Town of Big Flats 4,700, % 266,490 Town of Caton 56, % 420 Town of Chemung % 0 Town of Elmira 705, % 613,350 Town of Erin 110, % 265 Town of Horseheads % 0 Town of Southport % 0 Total Net Overlapping Debt $35,587,336 Net Direct Debt 103,555,000 Total Net Direct and Overlapping Debt $139,142,336 Source: State Comptroller's Special Report on Municipal Affairs or more recently published Official Statements. A-16

32 Debt Ratios The following table presents certain debt ratios relating to the District's direct and overlapping indebtedness. TABLE 12 Debt Ratios Debt Per Debt to Amount Capita (1) Full Value (2) Net Direct Debt $103,555,000 $2, % Net Direct and Overlapping Debt $139,142,336 $2, % (1) The population of the District is estimated by District officials to be approximately 48,734. (2) The District's full value of taxable real property based on Special Equalization Rates for fiscal year is $1,581,918,875. Debt Service Schedule The following table shows the debt service requirements to maturity on the District s outstanding bonded indebtedness as of November 15, TABLE 13 Schedule of Principal and Interest on Long-Term Bond Indebtedness Fiscal Year Ending June 30 Total Principal Total Interest Total 2014 $ 9,160,000 $ 2,265,570 $ 11,425, ,235,000 2,815,764 13,050, ,695,000 2,212,734 12,907, ,940,000 1,881,561 12,821, ,615,000 1,560,655 10,175, ,240,000 1,283,588 9,523, ,000,000 1,014,190 8,014, ,160, ,669 6,940, ,840, ,805 6,421, ,085, ,324 5,479, ,545, ,681 4,788, ,290, ,559 4,402, ,000 12, ,794 Total $91,250,000 $15,159,892 $106,409,892 Note: Columns may not sum due to rounding. Source: District Officials. A-17

33 School Enrollment Trends ECONOMIC AND DEMOGRAPHIC DATA The following table presents the past and projected school enrollment for the District. Source: District Officials. TABLE 14 School Enrollment Trends Actual Projected Fiscal Year Enrollment Fiscal Year Enrollment , , , , , ,800 Source: District Officials. Population TABLE 15 Largest Employers Business Type Approx. # of Employees Elmira City School District Education 1,516 Arnot Ogden Medical Center Health Care Facility 1,400 State of New York Correctional Facilities 1,250 Chemung County Municipality 950 St. Joseph s Hospital Health Care Facility 780 The District estimates its population to be approximately 48,734. The following table presents population trends for the City, County and State, based upon recent census data. Source: U.S. Census Bureau TABLE 16 Population Trend Percentage Change /10 City 30,940 29,200 (5.6%) County 91,070 88,830 (2.4%) State 18,976,457 19,378, % Employment and Unemployment The following tables provide information concerning employment and unemployment in the County. provided for the County is not necessarily representative of the District. Data TABLE 17 Civilian Labor Force (Thousands) Chemung County New York State 9, , , , ,587.2 Source: New York State Department of Labor A-18

34 Unemployment rates are not compiled for the District, but are available for the County and State. The following table is not necessarily representative of the District. Source: New York State Department of Labor Source: New York State Department of Labor TABLE 18 Yearly Average Unemployment Rates Year County State % 5.3% % 8.4% % 8.6% % 8.2% % 8.5% TABLE 19 Monthly Unemployment Rates Month County State September % 8.1% October 8.5% 8.1% November 8.2% 7.9% December 8.9% 8.2% January % 9.3% February 10.2% 8.8% March 9.3% 8.0% April 8.4% 7.3% May 8.2% 7.4% June 8.1% 7.6% July 7.8% 7.6% August 7.7% 7.5% END OF APPENDIX A A-19

35 APPENDIX B FINANCIAL STATEMENT SUMMARIES (This summary is not audited.)

36 CITY SCHOOL DISTRICT OF THE CITY OF ELMIRA General Fund Balance Sheets Fiscal Year Ended June 30: Assets: Cash and cash equivalents $10,702,859 $7,157,829 Restricted Cash 1,947,993 3,511,621 Taxes Receivable 1,511,996 1,225,478 Accounts Receivable 605,332 1,053,312 Due From Other Funds 4,668,569 1,834,496 State and Federal Aid Receivable 5,175,385 6,071,688 Due From Other Governments 34,725 57,103 Prepaids 0 31,149 Total Assets $24,646,859 $20,942,676 Liabilities: Accounts Payable $857,700 $375,965 Accured Liabilities 3,773,498 5,082,528 Revenue Anticipation Notes Payable 10,000,000 0 Due to Other Governments 925,230 1,696,556 Due to Retirement Systems 5,134,584 4,598,183 Unearned Revenues 1,553,507 22,369 Total Liabilities $22,244,519 $11,775,601 Deferred Inflows of Resources Taxes receivable 0 1,225,478 Total deferred inflows of resources 0 1,225,478 Fund Balance: Nonspendable $0 $31,149 Restricted 1,947,993 3,511,621 Assigned 26,053 2,541,312 Unassigned (deficit) 428,284 1,857,515 Total Fund Balance $2,402,330 $7,941,597 Total Liabilities, Deferred Inflows and Fund Balance $24,646,849 $20,942,676 Source: Audited Financial Statements B-1

37 CITY SCHOOL DISTRICT OF THE CITY OF ELMIRA General Fund Statement of Revenues, Expenditures, and Changes in Fund Balance Fiscal Year Ended June 30: Revenues: Real Property Taxes & Tax Items $28,885,783 $28,804,108 $28,768,118 $30,869,161 $31,556,550 Charges for Services 241, , , , ,303 Use of Money & Property 425, , , , ,873 Sale of Prop. & Comp. for Loss 102,178 58,603 36, ,237 21,214 Miscellaneous 3,134,400 2,669,548 2,345,138 2,565,533 2,247,756 State Aid 77,464,251 78,823,558 74,373,715 75,007,956 75,823,827 Federal Aid 967,547 4,136,060 2,154, , ,498 Total Revenues 111,220, ,937, ,077, ,516, ,785,021 Expenditures: General Support $15,335,943 $15,401,611 $15,333,988 $14,307,796 $14,198,299 Instruction 56,384,032 54,823,023 55,368,958 49,238,030 45,568,924 Pupil Transportation 2,819,392 2,811,609 2,805,975 2,667,597 2,585,566 Community Services 172, , , , ,698 Employee Benefits 25,181,023 25,450,297 27,675,103 30,068,904 27,828,164 Debt Service 11,514,380 12,906,854 14,869,315 12,603,461 12,590,666 Total Expenditures 111,407, ,640, ,384, ,269, ,248,317 Excess of Revenues (Expenditures) (186,226) 3,296,610 (8,306,846) 247,844 7,536,704 Other Financing Sources (Uses) Operating Transfer In 0 0 1,565,000 2,243, ,571 Operating Transfer Out (2,337,756) (1,849,367) (100,585) (2,658,137) (2,514,008) Total Other Financing Sources (Uses) (2,337,756) (1,849,367) 1,464,415 (415,059) (1,997,437) Net Change in Fund Balances (2,523,982) 1,447,243 (6,842,431) (167,215) 5,539,267 Adjustments 960, Fund Balance - Beg. of Year 9,528,415 7,964,733 9,411,976 2,569,545 2,402,330 Fund Balance - End of Year $7,964,733 $9,411,976 $2,569,545 $2,402,330 $7,941,597 Source: Audited Financial Statements Summary not Audited B-2

38 CITY SCHOOL DISTRICT OF THE CITY OF ELMIRA General Fund Statement of Estimated Revenues and Budget Appropriations Fiscal Year Ending June 30: Adopted Adopted Budget Budget Estimated Revenues: Real Property Tax $30,802,950 $31,928,147 Real Property Tax Items 468, ,106 Charges for Services 174, ,000 Use of money and property 184, ,000 Sale of Property and Compensation for Loss 20,000 20,000 Miscellaneous 3,265,000 2,195,000 State Aid 76,711,234 76,749,628 Federal Aid 250, ,000 Interfund Transfers 2,085,096 2,185,096 Total Estimated Revenues: $113,960,883 $113,982,977 Appropriations: General Support $14,592,719 $14,290,238 Instruction 48,931,723 46,136,165 Public Safety and Transportation 2,917,824 2,817,564 Community Services 287, ,177 Employee Benefits 32,027,288 34,289,170 Debt Service 15,204,045 15,724,663 Total Appropriations : $113,960,883 $113,982,977 Source: School District Officials B-3

39 APPENDIX C FINANCIAL STATEMENTS FOR FISCAL YEAR ENDED JUNE 30, 2013

40 ELMIRA CITY SCHOOL DISTRICT SCHOOL DISTRICT, NEW YORK Basic Financial Statements, Required Supplementary Information, Supplemental and Federal Financial Assistance Schedules for the Year Ended June 30, 2013 and Independent Auditors Reports

41 ELMIRA CITY SCHOOL DISTRICT Table of Contents Year Ended June 30, 2013 Independent Auditors Report... 1 Management s Discussion and Analysis... 3 Basic Financial Statements: Government-wide Financial Statements: Statement of Net Position Statement of Activities Fund Financial Statements Balance Sheet Governmental Funds Reconciliation of the Balance Sheet of Governmental Funds to the Statement of Net Position Statement of Revenues, Expenditures and Changes in Fund Balances Governmental Funds Reconciliation of the Statement of Revenues, Expenditures and Changes in Fund Balances(Deficits) of Governmental Funds to the Statement of Activities Statement of Revenues, Expenditures and Changes in Fund Balances Budget and Actual General Fund Statement of Fiduciary Net Position Fiduciary Funds Statement of Changes in Fiduciary Net Position Fiduciary Funds Notes to Financial Statements Supplemental Schedules: Schedule of Changes from Adopted Budget to Final Budget and the Real Property Tax Limit General Fund Schedule of Revenues, Expenditures and Encumbrances Budget and Actual General Fund Schedule of Capital Project Expenditures, Financing and Fund Balance Schedule of Funding Progress Other Post Employment Benefits Plan Federal Awards Schedules and Reports: Schedule of Expenditures of Federal Awards Notes to the Schedule of Expenditures of Federal Awards Independent Auditors Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of the Financial Statements Performed in Accordance with Government Auditing Standards Independent Auditors Report on Compliance with Requirements for each Major Program and Report on Internal Control Over Compliance Required by OMB A Schedule of Findings and Questioned Costs Schedule of Prior Federal Awards Audit Findings Page

42 MANAGEMENT DISCUSSION AND ANALYSIS

43 Drescher & Malecki LLP 3083 William Street, Suite 5 Cheektowaga, New York Telephone: Fax: s Certified Public Accountants INDEPENDENT AUDITORS REPORT The Board of Education Elmira City School District, New York Report on the Financial Statements We have audited the accompanying financial statements of the governmental activities, each major fund, and the aggregate remaining fund information of the Elmira City School District, New York (the District ), as of and for the year ended June 30, 2013, and the related notes to the financial statements, which collectively comprise the District s basic financial statements as listed in the table of contents. Management s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor s Responsibility Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions. Opinions In our opinion, the financial statements referred to above 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 District, as of June 30, 2013, and the respective changes in financial position thereof and the respective - 1 -

44 budgetary comparison for the General Fund for the year then ended in accordance with accounting principles generally accepted in the United States of America. Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that the Management s Discussion and Analysis as listed in the foregoing table of contents 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. Other Information Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the District s basic financial statements. The supplemental schedules and 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 are presented for purposes of additional analysis and are not a required part of the basic financial statements. The supplemental schedules and schedule of expenditures of federal awards are the responsibility of management and were derived from and relate directly to the underlying accounting and other records used to prepare the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the supplemental schedules and schedule of expenditures of federal awards are fairly stated, in all material respects, in relation to the basic financial statements as a whole. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated September 13, 2013 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 internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering District s internal control over financial reporting and compliance. September 13,

45 ELMIRA CITY SCHOOL DISTRICT Management s Discussion and Analysis Year Ended June 30, 2013 This management discussion and analysis of the Elmira City School District s (the District ) financial performance provides an overview of the District s financial activities for the year ended June 30, The results of the current year are presented in comparison with the prior year with an emphasis on the current year. Further, certain data from the prior year has been reclassified to conform with the current year presentation. This discussion should be read in conjunction with the financial statements and notes, which immediately follow this section to enhance the reader s understanding of the District s financial position and results of activities. Management s Discussion and Analysis (MD&A) is required supplementary information specified in the Governmental Accounting Standard Boards (GASB) Statement No. 34 Basic Financial Statements and Management s Discussion and Analysis for State and Local Governments. For the government-wide financial statements, comparative information for the years ended June 30, 2013 and 2012 has been presented. Financial Highlights During the year ended June 30, 2013, the District s total net position decreased by $5,980,996. At June 30, 2013, the District s assets exceeded its liabilities by $9,322,428 (net position). However, the District had an unrestricted deficit of $78,424,537. At the close of the current year fiscal year, the District s governmental funds reported a combined ending fund balance deficit of $6,895,394, an improvement of $7,540,276 as compared to the prior year. The improvement is primarily due to the planned decrease in instructional costs in the General Fund. The General Fund reported an unassigned fund balance of $1,857,515, which represents approximately 1.8% of operating expenditures. The Districts total expenses decreased 7.9% from the year ended June 30, 2012, primarily due to planned spending cuts implemented by the District. Total revenues decreased by 1.9% from the prior year which resulted primarily from a decrease in operating grants

46 Overview of Financial Statements Using This Annual Report This annual report consists of a series of financial statements and the notes to those statements. The financial statements are organized so that the reader can understand the District as a financial whole. Two statements portray information about the District as an entire operating entity with a broad overview of finances similar to a private sector business. The focus of these statements is a long-term view. Fund financial statements provide the next level of detail. These statements provide detailed look at the most significant governmental activities at the fund level. The fund statements show how services were financed in the short term as well as what remains for future spending. The remaining statements provide financial information about activities for which the District acts solely as a trustee or agent for the benefit of those outside the government. Reporting on the School District as a Whole (Government-wide) There are two statements that present an aggregate view of the District: Statement of Net Position and Statement of Activities. Both of the government-wide financial statements distinguish functions of the District, which are defined as governmental activities. These are activities principally supported by property taxes and other intergovernmental revenues such as state and federal grants and other fees. Statement of Net Position presents information on all of the District s assets and liabilities using the accrual basis of accounting, with the difference reported as net position. The most important aspect of accrual accounting is that all of the year s revenues and expenses are reported regardless of when cash is received or paid. Increases or decreases in net position serve as a useful indicator of whether the financial position is improving or deteriorating. Statement of Activities presents information showing how net position changed during the fiscal year. All changes in net position are reported as soon as the underlying event giving rise to the change occurs, regardless of the timing of the cash flows. Thus, there may be revenues and expenses reported in this statement for items that will result in cash flows in future fiscal periods. Reporting on the School District s Most Significant Funds (Fund level) Governmental Funds The governmental funds financial statements provide detail at the fund level, which is in contrast to the previously described government-wide reporting. A fund is a grouping of related accounts that is used to maintain control over resources that have been segregated for specific activities and objectives. The District uses fund accounting in its financial records to ensure and demonstrate compliance with finance related legal requirements and in accordance with the Uniform System of Accounts for New York State. All of the District s funds are reported in the governmental funds. Governmental funds are used to account for most of the same functions reported as governmental activities in the government-wide financial statements. However, the governmental funds financial statements focus on how money flows in and out of the funds and the balances remaining at the end of the fiscal year available for future spending. All financial information within the funds is reported using the modified accrual method of accounting and measures cash and all other financial assets that can be readily converted to cash. Therefore, these statements provide a detailed short-term view of District operations and the services it provides

47 There are relationship differences between the governmental funds and governmental activities as reported in the Statement of Net Position and the Statement of Activities and Changes in Net Position. These differences are the result of two distinct basis of accounting (accrual versus modified-accrual) and have been reconciled within the financial statements. The District s financial statements provide detailed information about the funds (significant is defined as major). Under the GASB definition of major versus non-major funds, the District s major funds have been presented separately and include the general (always a major fund by definition). The District has also elected to display the capital projects, debt service, special aid, and school lunch funds as major funds. Fiduciary Funds The District is the trustee, or fiduciary, for assets that belong to others, such as student activities funds, payroll, student scholarships and other third party withholdings. 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. All of the District s fiduciary activities are reported in a separate Statement of Fiduciary Net Position. The activities have been excluded from the District s other financial statements because the assets cannot be used to finance District operations. Notes to Financial Statements The notes to the financial statements follow the government-wide and fund financial statements in the report. They complement the financial statements by describing pertinent details as of year-end and other changes that occurred during the fiscal year. The notes are essential to a full understanding of the financial information provided in the statements. Supplementary Information This information further explains and supports the financial statements. Most of the schedules presented are required as part of reporting to the New York State Education Department. Government-wide Financial Statements As mentioned earlier, net position may serve as a useful indicator of the District s financial position. At the close of fiscal year June 30, 2013, assets exceeded liabilities by $9,322,

48 Condensed Statement of Net Position (Deficit) Change Current and other assets $ 42,167,783 $ 46,518, % Capital assets 180,557, ,280, % Total assets 222,725, ,799, % Deferred outflows 283,320 - n/a Total assets and deferred outflows of resources 223,008, ,799, % Current liabilities 47,904,562 59,305, % Long-term liabilities outstanding 165,781, ,190, % Total liabilities 213,686, ,495, % Net position (deficit): Net investment in capital assets 75,627,704 77,755, % Restricted 12,119,261 6,426, % Unrestricted (78,424,537) (68,878,478) -13.9% Total net position $ 9,322,428 $ 15,303, % The most significant part of the District s net position is represented by its investment in capital assets (e.g. land, buildings and improvements, furniture and equipment); less any related debt used to acquire those assets that is still outstanding. The District uses these capital assets to provide services to students; consequently, these assets are not available for future spending. It should be noted that although the investment in capital assets is reported net of related debt, the resources needed to repay this debt must be provided from other sources, since the capital assets themselves cannot be used to liquidate these liabilities. Restricted net position represent unspent amounts set aside for future debt, workers compensation, unemployment insurance, tax certiorari, insurance, and employee benefits. The remaining balance represents an unrestricted deficit. The key elements of the change in the District s net position for the years ended June 30, 2013 and 2012 are presented on the following page

49 Percentage Condensed Statement of Activities Change Revenues: Program revenues: Charges for services $ 895,546 $ 809, % Operating grants 9,353,088 14,147, % General revenues: Property taxes and other tax items 31,265,770 30,510, % Use of money and property 620, , % Sale of property and compensation for loss 605, , % Miscellaneous 3,431,449 2,923, % State aid - unrestricted 75,823,827 75,007, % Federal aid 332, , % Total revenues 122,328, ,705, % Expenses: General support 22,157,448 22,487, % Instruction 96,387, ,201, % Pupil transportation 4,512,134 4,606, % Community services 480, , % School food service 1,448,722 2,699, % Interest on long-term debt 3,322,983 3,994, % Total expenses 128,309, ,379, % Decrease in net position $ (5,980,996) $ (14,674,555) The figure above, presents the major sources of revenue of the District. Total revenue of the District totaled $122,328,286 for the year ended June 30, The most significant changes in the District s revenue are discussed below: Property taxes and other tax items which represent $31,265,770 or approximately 25.6% of the revenues of the District increased 2.5 percent from the prior year. The District s most significant revenue is state aid which represents $75,823,827 or approximately 61.9 percent of total revenues. This amount remained relatively stable in comparison with the prior year. Operating grants accounted for $9,353,088 or approximately 7.6 percent of total revenues for the year ended June 30, The Condensed Statement of Activities also presents the District s major expenses. Total expenses of the District totaled $128,309,282 for the year ended June 30, The most significant changes in the District s expenses are discussed on the following page. The most significant expense incurred was for instructional purposes and includes salaries for teachers and all other instructional costs, such as classroom materials, BOCES instruction, and special education costs. Instructional expenditures account for approximately 75.1 percent of the total District expenses. The instruction costs decreased by approximately 8.4 percent from the year ended June 30, This decrease was anticipated by the District due to spending cuts made in District personnel

50 General support expenses represent approximately 17.3 percent of the total expenses. General support decreased approximately 1.5 percent from the prior year due to staffing cuts implemented by the District in the summer of Financial Analysis of the District Funds Governmental funds provide information on near-term inflows, outflows and balances of spendable resources. Such information is useful in assessing the District s financing requirements. As of June 30, 2013, the District s governmental funds reported a combined ending fund balance deficit of $6,895,394, an improvement of $7,540,276 from the prior year. The improvement is primarily due to the planned decrease in instructional costs in the General Fund. General Fund: The General Fund is the chief operating fund of the District. It is controlled by a legally adopted budget and is financed primarily by real property tax revenues and State Aid. At the end of the current fiscal year, unassigned fund balance was $1,857,515 while the total fund balance was $7,941,597. Unassigned fund balance increased by $1,429,231 while the total fund balance increased by $5,539,267. Key factors in these changes are as follows: Expenditures were $10,611,114 lower than budgetary appropriations due to lower than expected costs primarily in human resource related categories. Actual revenues were relatively stable as compared to the prior year. Special Aid Fund: Special Aid Fund expenditures in 2013 amounted to $7,465,862, a decrease of $4,834,486 over the prior year mainly due to the end of federal funding from the American Recovery and Reinvestment Act. Capital Projects Fund: The Capital Projects Fund has a total fund deficit of $24,468,995 as a result of the issuance of bond anticipation notes to finance the acquisition, construction and reconstruction of capital assets and related expenditures. Food Service Fund: The Food Service Fund balance is $1,024,364 as of June 30, 2013 which represents an increase of $96,221 due to operations. GENERAL FUND BUDGETARY HIGHLIGHTS Over the course of the year, the District makes many budget transfers. Actual expenditures were approximately $10,611,114 below the revised budget. The most significant positive variances come from employee benefits which were below budget by approximately $4,952,015. Significant variances of revenue items consisted of state sources and other sources which were $1,137,719 and $1,568,525 below budget respectively

51 The table below presents a budget to actual comparison for revenues and expenditures: $ % Revised Revised Revised Revenue Category Budget Actual to Actual to Actual Local sources $ 33,816,061 $ 34,628,696 $ 812, % State sources 76,986,234 75,823,827 (1,162,407) 1.51% Federal sources 500, ,498 (167,502) 33.50% Other sources 2,085, ,571 (1,568,525) 75.23% Totals $ 113,387,391 $ 111,301,592 $ (2,085,799) 1.84% $ % Revised Revised Revised Expense Category Budget Actual to Actual to Actual General support $ 14,998,538 $ 14,198,299 $ 800, % Instruction 47,654,845 45,568,924 2,085, % Pupil transportation 2,723,725 2,585, , % Community services 518, ,698 41, % Employee benefits 32,780,180 27,828,164 4,952, % Debt service 15,183,665 12,590,666 2,592, % Operating transfers 149,008 2,514,008 (2,365,000) n/a Totals $ 114,008,439 $ 105,762,325 $ 8,246, % CAPITAL ASSETS AND DEBT ADMINISTRATION Capital Assets: The District s investment in capital assets amounts to $180,557,399 (net of accumulated depreciation). Capital assets at June 30, 2013 and 2012 are outlined below: Capital Assets (Net of depreciation) Land $ 1,371,867 $ 1,371,867 Construction in progress 40,544,401 52,556,801 Buildings and improvements 245,955, ,184,659 Machinery and equipment 10,005,675 10,128, ,877, ,241,432 Accumulated depreciation (117,320,227) (107,960,718) $ 180,557,399 $ 189,280,714 Additional information on the District s capital assets can be found in Note 4 to the basic financial statements

52 Debt Administration: At June 30, 2013, the District had $165,781,511 in outstanding bonds, net premiums, other postemployment benefits liability, judgments and claims, and compensated absences. This represents an increase of $4,591,110 as compared with the previous year. The most significant cause for the increase is the increase in the net OPEB obligation which results from another year of amortizing the actuarial liability which is not being funded Bonds payable $ 79,390,000 $ 88,505,000 Net premium on bonds payable 1,070, ,062 Other post employment benefits 82,331,361 68,126,671 Judgments and claims - 857,000 Compensated absences 2,989,450 2,934,668 $ 165,781,511 $ 161,190,401 Additional information on the District s debt can be found in Notes 9 and 10 to the financial statements. ECONOMIC FACTORS Current economic factors that have an impact on the District s budget include anticipated cuts to Federal and State aid, as well as hold backs, rising retirement system contribution rates and increasing personnel costs as outlined in the District s collective bargaining units and various employment policies. CONTACTING THE DISTRICT S FINANCIAL MANAGEMENT This report is designed to provide the District s citizens, taxpayers, customers, investors and creditors with a general overview of the District s finances and to demonstrate the District s accountability for the money it receives. Questions concerning this report or requests for additional financial information should be directed to Dr. Daniel DoBell, School Business Administrator, Elmira City School District, 951 Hoffman Street, Elmira, NY

53 BASIC FINANCIAL STATEMENTS

54 ELMIRA CITY SCHOOL DISTRICT, NEW YORK Statement of Net Position June 30, 2013 Primary Government Governmental Activities ASSETS Cash and cash equivalents $ 28,052,165 Restricted cash 3,511,621 Taxes receivable 1,225,478 Accounts receivable 1,072,933 Due from State and Federal 8,062,817 Due from other governments 57,103 Prepaid expenses 31,149 Inventory 154,517 Capital assets not being depreciated 41,916,268 Capital assets net of accumulated depreciation 138,641,131 Total assets 222,725,182 DEFERRED OUTFLOWS OF RESOURCES Deferred charge on refunding 283,320 Total deferred outflows of resources 283,320 LIABILITIES Accounts payable 613,044 Accrued liabilities 5,205,165 Bond anticipation notes payable 35,565,000 Due to other governments 1,712,366 Retainages payable 146,232 Due to NYS Teachers' Retirement System 4,139,055 Due to NYS Employees' Retirement System 459,128 Unearned revenue 64,573 Noncurrent liabilities: Due within one year 9,727,038 Due within more than one year 156,054,474 Total liabilities 213,686,074 NET POSITION Net investment in capital assets 75,627,704 Restricted 12,119,261 Unrestricted (78,424,537) Total net position $ 9,322,428 The notes to the financial statements are an integral part of this statement

55 ELMIRA CITY SCHOOL DISTRICT, NEW YORK Statement of Activities Year Ended June 30, 2013 Net (Expense) Revenue and Changes in Program Revenues Net Position Primary Operating Government Charges for Grants and Governmental Function/Program Expense Services Contributions Activities Primary Government: Governmental activities: General support $ 22,157,448 $ - $ - $ (22,157,448) Instruction 96,387, ,303 7,280,054 (88,883,552) Pupil transportation 4,512, (4,512,134) Community services 480, (480,086) School food service 1,448, ,243 2,073,034 1,295,555 Interest on long-term debt 3,322, (3,322,983) Total primary government $ 128,309,282 $ 895,546 $ 9,353,088 (118,060,648) General revenues: Real property taxes and other tax items 31,265,770 Use of money and property 620,953 Sale of property and compensation for loss 605,155 Miscellaneous 3,431,449 State sources unrestricted 75,823,827 Federal sources unrestricted 332,498 Total general revenues 112,079,652 Change in net position (5,980,996) Net position beginning 15,303,424 Net position ending $ 9,322,428 The notes to the financial statements are an integral part of this statement

56 Total Special Food Debt Capital Governmental General Aid Service Service Projects Funds ASSETS Cash and cash equivalents $ 7,157,829 $ 28,917 $ 845,709 $ 8,605,794 $ 11,413,916 $ 28,052,165 Restricted cash 3,511, ,511,621 Taxes receivable 1,225, ,225,478 Accounts receivable 1,053,312 13,874 5, ,072,933 Due from other funds 1,834, ,846-1,836,342 Due from State and federal 6,071,688 1,852, , ,062,817 Due from other governments 57, ,103 Prepaids 31, ,149 Inventory , ,517 Total assets $ 20,942,676 $ 1,895,591 $ 1,144,302 $ 8,607,640 $ 11,413,916 $ 44,004,125 LIABILITIES Liabilities: Accounts payable $ 375,965 $ 65,033 $ 14,313 $ - $ 157,733 $ 613,044 Accrued liabilities 5,082,528 23,116 32, ,138,301 Bond anticipation notes payable ,565,000 35,565,000 Due to other funds - 1,766,189 56,207-13,946 1,836,342 Due to other governments 1,696,556 15, ,712,366 Retainages , ,232 Due to NYS Teachers' Retirement System 4,139, ,139,055 Due to NYS Employees' Retirement System 459, ,128 Unearned revenue 22,369 25,990 16, ,573 Total liabilities 11,775,601 1,895, ,938-35,882,911 49,674,041 DEFERRED INFLOWS OF RESOURCES Taxes receivable 1,225, ,225,478 Total deferred inflows of resources 1,225, ,225,478 FUND BALANCES (DEFICIT): Nonspendable 31, , ,666 Restricted 3,511, ,607,640-12,119,261 Assigned 2,541, , ,411 3,868,570 Unassigned (deficit) 1,857, (24,926,406) (23,068,891) Total fund balances (deficit) 7,941,597-1,024,364 8,607,640 (24,468,995) (6,895,394) Total liabilities, deferred inflows of resources and fund balances (deficit) $ 20,942,676 $ 1,895,591 $ 1,144,302 $ 8,607,640 $ 11,413,916 $ 44,004,125 The notes to the financial statements are an integral part of this statement. ELMIRA CITY SCHOOL DISTRICT, NEW YORK Balance Sheet Governmental Funds June 30,

57 ELMIRA CITY SCHOOL DISTRICT, NEW YORK Reconciliation of the Balance Sheet of Governmental Funds to the Statement of Net Position June 30, 2013 Amounts reported for governmental activities in the statement of net assets are different because: Total fund balances (deficit) governmental funds $ (6,895,394) Capital assets used in governmental activities are not financial resources and, therefore, are not reported in the funds. The cost of the assets is $297,878,626 and the accumulated depreciation is $117,320, ,557,399 Long-term liabilities, including bonds payable, net premiums, judgments and claims, other post-employment benefits (OPEB) and compensated absences liabilities are not due and payable in the current period and therefore are not reported in the funds. Bonds payable $ (79,390,000) Net premiums on bonds payable (1,070,700) Net OPEB obligation (82,331,361) Compensated absences (2,989,450) (165,781,511) Net accrued interest expense for bond anticipation notes and bonds is not reported in the funds. Costs associated with the issuance of bonds are an asset in the government-wide statements which is amortized over the life of the bonds. These costs were expensed in the governmental funds in the year the bonds were issued. Amounts relating to taxes receivable have not met the revenue recognition criteria for fund financial purposes and, therefore, have been deferred. However, these revenues are recorded in the government-wide financial statements which report on the full accrual basis of accounting. The amounts deferred in the funds, but recognized as revenue in the government-wide presentation are: (66,864) 283,320 1,225,478 Total net position governmental activities $ 9,322,428 The notes to the financial statements are an integral part of this statement

58 Total Special Food Debt Capital Governmental General Aid Service Service Projects Funds REVENUES Real property taxes and other tax items $ 31,556,550 $ - $ - $ - $ - $ 31,556,550 Charges for services 224, ,303 Use of money and property 578,873-1,525 40, ,953 Sale of property and compensation for loss 21, , ,155 Miscellaneous 2,247,756 36,800 99, ,486-2,574,449 State sources 75,823,827 1,591,833 73, ,488,829 Federal sources 332,498 5,688,221 1,999, ,020,584 Surplus food , ,299 Sales (food service) , ,944 Total revenues 110,785,021 7,316,854 2,845, , , ,762,066 EXPENDITURES Current: General support 14,198, ,198,299 Instruction 45,568,924 5,602,477 1,300, ,471,667 Pupil transportation 2,585, ,585,566 Community services 476,698 3, ,086 Employee benefits 27,828,164 1,859, , ,105,933 Cost of sales (food service) - - 1,030, ,030,950 Debt service: Principal 9,105, ,105,000 Interest 3,485, ,485,666 Issuance costs Capital outlay: General support , ,265 Instruction , ,358 Total expenditures 103,248,317 7,465,862 2,748, , ,463,167 Excess (deficiency) of revenues over expenditures 7,536,704 (149,008) 96, ,041 (174,682) 8,298,899 OTHER FINANCING SOURCES (USES) Refunding bonds ,375,000-7,375,000 Bond premium , ,085 Payment to escrow agent (7,668,320) - (7,668,320) Bond issuance costs (118,765) - (118,765) Transfers in 516, ,008-3,897,806 2,365,000 6,928,385 Transfers out (2,514,008) (4,414,377) (6,928,385) Total other financing sources (uses) (1,997,437) 149,008-3,897,806 (2,049,377) - Net change in fund balances (deficit) 5,539,267-96,221 4,128,847 (2,224,059) 7,540,276 Fund balances (deficit) beginning 2,402, ,143 4,478,793 (22,244,936) (14,435,670) Fund balances (deficit) ending $ 7,941,597 $ - $ 1,024,364 $ 8,607,640 $ (24,468,995) $ (6,895,394) The notes to the financial statements are an integral part of this statement. ELMIRA CITY SCHOOL DISTRICT, NEW YORK Statement of Revenues, Expenditures and Changes in Fund Balances (Deficit) Governmental Funds Year Ended June 30,

59 ELMIRA CITY SCHOOL DISTRICT, NEW YORK Reconciliation of the Statement of Revenues, Expenditures and Changes in Fund Balances (Deficit) of Governmental Funds to the Statement of Activities Year Ended June 30, 2013 Amounts reported for governmental activities in the statement of activities are different because: Net change in fund balances (deficit) total governmental funds $ 7,540,276 Governmental funds report capital outlays as expenditures. However, in the statement of activities, assets with an initial, individual cost of more than $5,000 are capitalized and the cost is allocated over their estimated useful lives and reported as depreciation expense. This is the amount by which depreciation exceeded capital outlays in the current period. Capital outlays $ 758,623 Net disposals (122,430) Depreciation expense (9,359,508) (8,723,315) The issuance of long-term debt (e.g. serial bonds) provides current financial resources to governmental funds, while the repayment of the principal of longterm debt consumes the current financial resources of governmental funds. Neither transaction, however, has any effect on net assets. Interest is recognized as an expenditure in the governmental funds when it is due. In the statement of activities, interest expense is recognized as it accrues, regardless of when it is due. The net effect of these differences in the treatment of long-term debt and related items is as follows: Principal repayment of serial bonds $ 9,105,000 Issuance of serial bonds - Refunding bonds (7,375,000) Premiums and issuance costs (303,638) Payments to Escrow 7,385,000 Deferred charge on refunding 283,320 Change in interest expense 173,001 9,267,683 In the statement of activities, certain operating expenses (e.g. compensated absences, judgments and claims and other post employment benefits) are measured by the amounts earned or incurred by employees during the year. However, in the governmental funds expenditures for these items are measured by the amount of financial resources used (essentially, the amounts actually paid). The net effect of these differences is as follows: Governmental funds recognize revenues only if they are both measurable and available after the end of the fiscal year; however, the entity-wide statements recognize revenue on an accrual basis. The effect of the change in deferred revenue during the current year is: (13,774,860) (290,780) Change in net position of governmental activities $ (5,980,996) The notes to the financial statements are an integral part of this statement

60 ELMIRA CITY SCHOOL DISTRICT, NEW YORK Statement of Revenues, Expenditures and Changes in Fund Balances Budget and Actual General Fund Year Ended June 30, 2013 Budgeted Amounts Actual Variance with Adopted Final Amounts Final Budget REVENUES Real property taxes and other tax items $ 31,271,550 $ 31,271,550 $ 31,556,550 $ 285,000 Charges for services 174, , ,303 50,300 Use of money and property 184, , , ,873 Sale of property and compensation for loss 20,000 20,000 21,214 1,214 Miscellaneous 2,145,003 2,166,508 2,247,756 81,248 State sources 76,961,234 76,961,234 75,823,827 (1,137,407) Federal sources 500, , ,498 (167,502) Total revenues 111,255, ,277, ,785,021 (492,274) EXPENDITURES Current: General support 14,592,719 14,998,538 14,198, ,239 Instruction 48,931,723 47,654,845 45,568,924 2,085,921 Pupil transportation 2,917,824 2,723,725 2,585, ,159 Community services 287, , ,698 41,781 Employee benefits 32,027,288 32,780,179 27,828,164 4,952,015 Debt service: Principal 11,525,000 11,665,000 9,105,000 2,560,000 Interest 3,679,045 3,518,665 3,485,666 32,999 Total expenditures 113,960, ,859, ,248,317 10,611,114 Excess (deficiency) of revenues over expenditures (2,705,093) (2,582,136) 7,536,704 10,118,840 OTHER FINANCING SOURCES (USES) Transfers in 2,085,096 2,085, ,571 (1,568,525) Transfers out - (149,008) (2,514,008) (2,365,000) Total other financing sources (uses) 2,085,096 1,936,088 (1,997,437) (3,933,525) Net change in fund balances (619,997) (646,048) 5,539,267 6,185,315 Fund balances beginning 2,402,330 2,402,330 2,402,330 - Fund balances ending $ 1,782,333 $ 1,756,282 $ 7,941,597 $ 6,185,315 The notes to the financial statements are an integral part of this statement

61 ELMIRA CITY SCHOOL DISTRICT, NEW YORK Statement of Fiduciary Net Position Fiduciary Funds June 30, 2013 Private Purpose Agency Trusts Funds ASSETS Cash and cash equivalents $ - $ 53,688 Restricted cash and investments 55, ,685 Investments - 14,151 Total assets $ 55,111 $ 184,524 LIABILITIES Agency fund liabilities $ - $ 67,839 Extraclassroom activity funds - 116,685 Total liabilities - 184,524 NET POSITION Endowment scholarships 55,111 - Total net position $ 55,111 $ - The notes to the financial statements are an integral part of this statement

62 ELMIRA CITY SCHOOL DISTRICT, NEW YORK Statement of Changes in Fiduciary Net Position Fiduciary Funds Year Ended June 30, 2013 Private Purpose Trusts Additions: Gifts and contributions $ 1,760 Investment earnings 28 Total additions 1,788 Deductions: Scholarships and awards 4,169 Total deductions 4,169 Change in net position (2,381) Net position - beginning of year 57,492 Net position - end of year $ 55,111 The notes to the financial statements are an integral part of this statement

63 ELMIRA CITY SCHOOL DISTRICT Notes to Financial Statements Year Ended June 30, SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The financial statements of Elmira City School District, New York (the District ) have been prepared in conformity with accounting principles generally accepted in the United States of America as applied to government units. The Governmental Accounting Standards Board (the GASB ) is the accepted standard setting body for establishing governmental accounting and financial reporting principles. The more significant of the District s accounting policies are described below. Description of Government-wide Financial Statements The government-wide financial statements (i.e., statement of net position and the statement of activities) report information on all of the nonfiduciary activities of the primary government. All fiduciary activities are reported only in the fund financial statements. Governmental activities are supported by taxes and intergovernmental revenues. The District reports no business-type activities or component units. Financial Reporting Entity The District is governed by the Education Law and other laws of the State of New York. The governing body is the Board of Education. The scope of activities included within the accompanying financial statements are those transactions which comprise District operations, and are governed by, or significantly influenced by, the Board of Education. Essentially, the primary function of the District is to provide education for pupils. Support services such as transportation of pupils, food service, administration, finance, and plant maintenance are also included. The financial reporting entity includes all funds, functions and organizations over which the District officials exercise oversight responsibility. Oversight responsibility is determined on the basis of financial interdependency, selection of governing authority, designation of management, ability to significantly influence operations and accountability for fiscal matters. Extraclassroom Activity Funds The extraclassroom activity funds of the District represent funds of the students of the District. The Board of Education exercises general oversight of these funds. The extraclassroom activity funds are independent of the District with respect to their financial transactions and designation of student management. Separate audited financial statements (cash basis) of the extraclassroom activity funds can be found at the District s business office. The District accounts for assets held as an agent for various student organizations in the Agency Fund. Joint Venture The District is a participating school district in the Greater Southern Tier Board of Cooperative Education Services ( BOCES ). Formed under Section 1950 of Education Law, a BOCES is a voluntary cooperative association of school districts in a geographic area that shares planning, services, and programs, and also provides educational and support activities. There is no authority or

64 process by which the District can terminate its status as a component of BOCES. All BOCES property is held by the BOCES Board as a corporation under Section 1950(6) of Education Law. The component school district boards elect the members of the BOCES governing body. There are no equity interests and no single participant controls the financial or operating policies. In addition, BOCES Boards are considered municipal corporations to permit them to contract with other municipalities on a cooperative basis under Section 119-n(a) of General Municipal Law. The BOCES budget is comprised of separate spending plans for administrative, program, and capital costs. Each component school district shares in administrative and capital costs determined by its enrollment. Participating districts are charged a service fee for programs in which students participate, and for other shared contracted administrative services. Participating districts may also issue debt on behalf of BOCES. As of June 30, 2013, there was no debt issued by the District on behalf of BOCES. During the fiscal year ended June 30, 2013, the District was billed $16,493,754 for BOCES administrative and program costs. The District s share of BOCES aid and refunds amounted to $8,698,419 for the year ended June 30, Audited financial statements for the Greater Southern Tier BOCES are available at the BOCES administrative offices. Basis of Presentation Government-wide Financial Statements While separate government-wide and fund financial statements are presented, they are interrelated. The governmental activities column incorporates data from governmental funds. Separate financial statements are provided for governmental funds and fiduciary funds even though the latter are excluded from the government-wide financial statements. As a general rule, the effect of interfund activity has been eliminated from the government-wide financial statements. Exceptions to this general rule are payments and charges between the District s various functions. Elimination of these charges would distort the direct costs and program revenues reported for the various functions concerned. Private sector standards of accounting and financial reporting issued prior to December 1, 1989, generally are followed in the government-wide financial statements to the extent that those standards do not conflict with or contradict guidance of the Governmental Accounting Standards Board. Basis of Presentation Fund Financial Statements The fund financial statements provide information about the District s funds. Separate statements for each fund category governmental and fiduciary are presented. The emphasis of fund financial statements is on major governmental funds, each displayed in a separate column. All remaining governmental funds are aggregated and reported as nonmajor funds. The District reports the following major governmental funds: The General Fund is the District s primary operating fund. It accounts for all financial resources of the District, except those required to be accounted for in other funds. The Special Aid Fund is used to account for the proceeds of specific revenue sources such as Federal and State grants, which are legally restricted to expenditures for specified purposes, whose funds are restricted as to use. These legal restrictions may be imposed by either governments that provide the funds or outside parties

65 The Food Service Fund is used to account for all revenue and expenditures pertaining to the cafeteria operations. The Debt Service Fund accounts for the accumulation of resources and the payment of long-term debt principal and interest. The Capital Projects Fund is used to account for and report financial resources to be used for the acquisition, construction or renovation of major capital facilities. Additionally, the District reports the following fund type: Fiduciary Funds are used to account for assets held by the District in a trustee capacity or as an agent for individuals, private organizations and/or other governmental units. The Fiduciary Fund of the District includes a Private Purpose Trust Fund and an Agency Fund. The Private-Purpose Trust Fund accounts for assets held by the District for the benefit of third party awards and scholarships. The Agency Fund accounts for assets held by the District as an agent for individuals, private organizations, various student groups and clubs, and/or other governmental units. Funds include employee payroll withholdings. Also included is the Extraclassroom Activity Fund of the District, which represents funds of the students of the District. The Board of Education exercises general oversight of these funds. During the course of operations the government has activity between funds for various purposes. Any residual balances outstanding at year-end are reported as due from/to other funds and advances to/from other funds. While these balances are reported in the fund financial statements, certain eliminations are made in the preparation of the government-wide financial statements. Balances between the funds included in governmental activities are eliminated so that only the net amount is included as internal balances in the governmental activities column. Further, certain activity occurs during the year involving transfers of resources between funds. In the fund financial statements these amounts are reported at gross amounts as transfers in/out. While reported in the fund financial statements, certain eliminations are made in the preparation of the government-wide financial statements. Transfers between the funds included in governmental activities are eliminated so that only the net amount is included as transfers in the governmental activities column. Measurement Focus and Basis of Accounting The accounting and financial reporting treatment is determined by the applicable measurement focus and basis of accounting. Measurement focus indicates the type of resources being measured such as current financial resources or economic resources. The basis of accounting indicates the timing of transactions or events for recognition in the financial statements. The government-wide financial statements are reported using the economic resources measurement focus and the accrual basis of accounting. Revenues are recorded when earned and expenses are recorded when a liability is incurred, regardless of the timing of related cash flows. Property taxes are recognized as revenue in the year for which they are levied. Grants and similar items are recognized as revenue as soon as all eligibility requirements imposed by the provider have been met

66 The governmental fund financial statements are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Revenues are recognized as soon as they are both measurable and available. Revenues are considered to be available when they are collectible within the current period or soon enough thereafter to pay liabilities of the current period. For this purpose, the government considers revenues to be available if they are collected within 60 days of the end of the current fiscal period. Expenditures generally are recorded when a liability is incurred, as under accrual accounting. However, debt service expenditures, as well as expenditures related to compensated absences, and claims and judgments, are recorded only when payment is due. General capital asset acquisitions are reported as expenditures in governmental funds. Issuance of long-term debt and acquisitions under capital leases are reported as other financing sources. Property taxes, charges for services provided, and state and federal aid associated with the current fiscal period are all considered susceptible to accrual and have been recognized as revenues of the current fiscal period. Entitlements are recorded as revenues when all eligibility requirements are met and the amount is received during the period of availability. Expenditure driven grants are recognized as revenue when the qualifying expenditures have been incurred and all other eligibility requirements are met and amount is received during the period of availability. All other revenue items are considered to be measureable and available only when cash is received by the District. The Private Purpose Trust Fund is reported using the economic resources measurement focus and the accrual basis of accounting. The Agency Fund has no measurement focus, but utilizes the accrual basis of accounting for reporting assets and liabilities. Budgetary Information General Fund A formal annual budget is maintained for the General Fund. The District s policy relating to budgetary information as shown in the accompanying financial statements is as follows: The District administration culminates a proposed budget for approval by the District s Board of Education. The proposed appropriation budget is approved by the voters within the District. Appropriations established by adoption of the budget constitute a limitation on expenditures (and encumbrances) which may be incurred. The New York State Uniform System of Accounts requires that fixed budgetary control be used. Food Service and Special Aid and Funds No formal annual budget is adopted for the Food Service and Special Aid funds. Appropriation limits for the Special Aid Fund are maintained based on individual grants accepted by the Board of Education. The periods of such grants may vary from the District s fiscal year. A budget is maintained for the Food Service Fund as a management tool for internal control purposes. Capital Projects Fund Appropriations for capital projects are not included in the District s annual adopted budget. Appropriations are approved through a resolution of the Board of Education and by the voters within the District. Project length budgets do not coincide with, and may overlap, the District s fiscal years

67 Encumbrances Encumbrance accounting, under which purchase orders, contracts and other commitments for the expenditure of monies are recorded in order to reserve applicable appropriations, is employed as a control in preventing over expenditure of established appropriations. Encumbrances outstanding at year end are accounted for on the lapsing method, which reappropriates encumbrances in the subsequent year s budget. Accordingly, the District reserves fund balance for all encumbrances it intends to honor in the subsequent period. Encumbrances do not constitute expenditures or liabilities. Assets, Liabilities, Deferred Outflows/Inflows of Resources, and Net Position/Fund Balance Cash, Cash Equivalents and Investments The District s cash and cash equivalents consist of cash on hand, demand deposits, and short-term investments with original maturities of three months or less from date of acquisition. New York State law governs the District s investment policies. Permissible investments include obligations of the United States Treasury, United States Agencies, repurchase agreements and obligations of New York State or its localities. The District has no investments at June 30, 2013; however, it is the District s policy to state investments at fair value when applicable. Restricted Cash The District reports restricted fund balance as restricted cash. Inventory Inventories of food and/or supplies in the Food Service Fund are recorded at cost on a first-in, first-out basis or, in the case of surplus food, at stated value which approximates market. Purchases of inventory items in other funds are recorded as expenditures at the time of purchase, and year-end balances are not maintained. Capital Assets Capital assets, which include land, construction in progress, buildings and improvements, and equipment, are reported in the government-wide financial statements. Capital assets are defined by the District as assets with an initial individual cost of more than an established threshold for the type of asset and an estimated useful life in excess of one year. Such assets are recorded at historical cost or estimated historical cost if purchased or constructed. The reported value excludes normal maintenance and repairs, which are essentially amounts spent in relation to capital assets that do not increase the capacity or efficiency of the item or extend its useful life beyond the original estimate. Donated capital assets are recorded at estimated fair market value of the item at the date of its donation. Major outlays for capital assets and improvements are capitalized as projects are completed. Land and construction in progress are not depreciated. The other property, plant, equipment, and infrastructure of the primary government are depreciated using the straight line method over the following estimated useful lives: Capitalization Threshold Estimated Useful Life Buildings and improvements $ 5, years Machinery and equipment 5, years Unearned Revenue Certain revenues have not met the revenue recognition criteria for fund financial purposes

68 Deferred Outflows/Inflows of Resources In addition to assets, the statement of financial position will sometimes report a separate section for deferred outflows of resources. This separate financial statement element, deferred outflows of resources, represents a consumption of net position that applies to a future period(s) and so will not be recognized as an outflow of resources (expense/ expenditure) until then. At June 30, 2013, the District reported a deferred outflow of resources on the statement of net position in the amount of $283,320 resulting from a deferred charge on a debt refunding. In addition to liabilities, the statement of financial position will sometimes report a separate section for deferred inflows of resources. This separate financial statement element, deferred inflows of resources, represents an acquisition of net position that applies to a future period(s) and so will not be recognized as an inflow of resources (revenue) until that time. At June 30, 2013 the District reported a deferred inflow of resources on the governmental fund financial statements in the amount of $1,225,478, which represents taxes receivable that the District does not expect to receive within 60 days of year end, in accordance with the modified accrual basis of accounting. Net Position Flow Assumptions Sometimes the District will fund outlays for a particular purpose from both restricted (e.g., restricted bond or grant proceeds) and unrestricted resources. In order to calculate the amounts to report as restricted-net position and unrestricted-net position in the government-wide financial statements, a flow assumption must be made about the order in which the resources are considered to be applied. It is the District s policy to consider restricted-net position to have been depleted before unrestricted-net position is applied. Fund Balance Flow Assumptions Sometimes the District will fund outlays for a particular purpose from both restricted and unrestricted resources (the total of committed, assigned, and unassigned fund balance). In order to calculate the amounts to report as restricted, committed, assigned, and unassigned fund balance in the governmental fund financial statements, a flow assumption must be made about the order in which the resources are considered to be applied. It is the District s policy to consider restricted fund balance to have been depleted before using any of the components of unrestricted fund balance. Further, when the components of unrestricted fund balance can be used for the same purpose, committed fund balance is depleted first, followed by assigned fund balance. Unassigned fund balance is applied last. Fund Balance Policies Fund balance of governmental funds is reported in various categories based on the nature of any limitations requiring the use of resources for specific purposes. The District itself can establish limitations on the use of resources through either a commitment (committed fund balance) or an assignment (assigned fund balance). The committed fund balance classification includes amounts that can be used only for the specific purposes determined by a formal action of the District s highest level of decision-making authority. The Board Education is the highest level of decision-making authority for the District that can, by adoption of an ordinance prior to the end of the fiscal year, commit fund balance. Once adopted, the limitation imposed by the ordinance remains in place until a similar action is taken (the adoption of another ordinance) to remove or revise the limitation. Amounts in the assigned fund balance classification are intended to be used by the District for specific purposes, but do not meet the criteria to be classified as committed. The Board may assign fund balance, as it does when appropriating fund balance to cover a gap between estimated revenue and appropriations in the subsequent year s appropriated budget. Unlike commitments, assignments generally only exist temporarily. In other words, an additional action does not normally have to be

69 taken for the removal of an assignment. Conversely, as discussed above, an additional action is essential to either remove or revise a commitment. Revenues and Expenditures/Expenses Program Revenues Amounts reported as program revenues include 1) charges to customers or applicants who purchase, use, or directly benefit from goods, services, or privileges provided and 2) grants and contributions. All taxes, including those dedicated for specific purposes, and other internally dedicated resources are reported as general revenues rather than as program revenues. Property Taxes Real property taxes are levied annually by the Board of Education no later than October 1. For the year ended June 30, 2012, the tax lien was issued on September 21, 2011 for collection from October 1, 2011 to March 31, Property taxes are permitted to be paid in installments during the collection period with the first installment due on October 31 and the second on March 31. Retirement Benefits The District provides retirement benefits for substantially all of its regular fulltime employees through contributions to the New York State Teachers Retirement System and the New York State and Local Employees Retirement System. These systems provide various plans and options, some of which require employee contributions. In addition, the District maintains a single-employer defined healthcare plan that is administered by a third party. The plan provides lifetime post-employment medical and dental coverage to its retired employees and their survivors in accordance with the provisions of the employment contracts negotiated between the District and its employee groups. Substantially all of the District s employees may become eligible for these benefits if they reach normal retirement age while working for the District. Health care benefits are based on the benefits paid during the year. The District recognizes the cost of providing health insurance by recording its share of insurance premiums as an expenditure. Compensated Absences It is the District s policy to permit employees to accumulate earned but unused vacation and sick pay benefits. All vacation pay and sick pay are accrued when incurred in the government-wide financial statements. Other 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 reported amounts of revenues, expenditures, assets, liabilities, deferred outflows/inflows of resources, and disclosure of contingent assets and liabilities at the date of the financial statements during the reported period. Actual results could differ from those estimates. Adoption of New Accounting Pronouncements During the year ended June 30, 2013, the District implemented GASB Statement No. 63, Financial Reporting of Deferred Outflows of Resources, Deferred Inflows of Resources, and Net Position. This statement amends the net asset reporting requirements in GASB Statement No. 34, Basic Financial Statements and Management s Discussion and Analysis for State and Local Governments, and other pronouncements by incorporating deferred outflows of resources and deferred inflows of resources into the definitions of the required components of the residual measure and by renaming that measure as net position, rather than net assets. The District also elected to early implement the provisions of GASB Statement No. 65, Items Previously Reported as Assets and Liabilities. This statement establishes accounting and financial reporting standards that reclassify, as deferred outflows of resources or deferred inflows of

70 resources, certain items that were previously reported as assets and liabilities and recognizes, as outflows of resources or inflows of resources, certain items that were previously reported as assets and liabilities. GASB Statement Nos. 63 and 65 did not have a material impact on the District s financial position or results from operations. Additionally, during the year ended June 30, 2013, the District completed the process of evaluating the impact that will result from adopting GASB Statement No. 60, Accounting and Financial Reporting for Service Concession Arrangements, GASB Statement No. 61, The Financial Reporting Entity: Omnibus-an amendment of GASB Statements No. 14 and No. 34, and GASB Statement No. 62, Codification of Accounting and Financial Reporting Guidance Contained in Pre-November 30, 1989 FASB and AICPA Pronouncements. GASB Statement Nos. 60, 61, and 62 did not have a material impact on the District s financial position or results from operations. Future Impacts of Accounting Pronouncements The District has not completed the process of evaluating the impact that will result from adopting GASB Statement No. 66, Technical Corrections an amendment of GASB Statements No. 10 and No. 62, GASB Statement No. 67, Financial Reporting for Pension Plans-an amendment of GASB Statement No. 25, and GASB Statement No. 70, Accounting and Financial Reporting for Nonexchange Financial Guarantees, effective for the year ending June 30, 2014; and GASB Statement No. 68, Accounting and Financial Reporting for Pensions an amendment of GASB Statement No. 27, and GASB Statement No. 69, Government Combinations and Disposals of Government Operations, effective for the year ending June 30, The District is, therefore, unable to disclose the impact that adopting GASB Statements Nos. 66, 67, 68, 69 and 70 will have on its financial position and results of operations. 2. CASH, CASH EQUIVALENTS AND INVESTMENTS The District s investment policies are governed by the State statues. District monies must be deposited in FDIC-Insured commercial banks or trust companies located within New York State. The District s Treasurer is authorized to use demand accounts and certificates of deposit. Permissible investments include obligations of the U.S. Treasury and U.S. Agencies, repurchase agreements, and obligations of New York State or its localities. Collateral is required for demand deposits, time deposits and certificates of deposit in an amount equal to, or greater than, the amount of all deposits not covered by federal deposit insurance. Obligations that may be pledged as collateral are outlined in Chapter 623 of the laws of the State of New York. Total cash and cash equivalents reported by the District at June 30, 2013, are as follows: Governmental Funds $ 31,563,786 Private Purpose Trust Funds 55,111 Agency Funds 170,373 Total $ 31,789,270 Cash and cash equivalents consisted of the following at June 30, 2013: Bank deposits $ 31,789,

71 Deposits All deposits are carried at fair value, and are classified by custodial credit risk at June 30, 2013 as follows: Bank Carrying Balance Amount Insured (FDIC) $ 500,000 $ 500,000 Uninsured: Collateral held by bank's agent in the District's name 32,454,085 31,289,270 Total $ 32,954,085 $ 31,789,270 Custodial Credit Risk-Deposits Custodial credit risk is the risk that in the event of a bank failure, the District s deposits may not be returned to it. As noted above, by State statute all deposits in excess of FDIC insurance coverage must be collateralized. At June 30, 2013, the District s deposits were either FDIC insured or collateralized with securities held by the pledging bank s agent in the District s name. Restricted Cash and Cash Equivalents The District reports restricted fund balances as restricted cash and cash equivalents. At June 30, 2013, the District reported $3,511,621 of restricted cash within its governmental funds. Investments The District had no investments at June 30, Interest Rate Risk In accordance with its investment policy, the District manages exposures by limiting investments to low risk type investments governed by New York State statutes. 3. RECEIVABLES Major revenues accrued by the District at June 30, 2013 consisted of the following: Taxes Receivable Represents amounts due from District taxpayers that remain unpaid as of June 30, 2012 Accounts Receivable Represents amounts due from various sources for out of district tuition, commissions, fuel reimbursement, substitute teaching reimbursement and other services provided. Due from Other Governments Represents amounts due from other units of government, such as Federal, New York State and other local governments. Due from State and Federal Represents amounts due from other units of government, such as Federal and New York State. Amounts due to the District at June 30, 2013 are on the following page:

72 Due from State and Federal: General Fund: State - BOCES aid $ 3,722,365 State - Excess cost 1,746,613 State - Building aid 599,000 Other 3,710 $ 6,071,688 Special Aid Fund: Federal - Title I $ 753,655 Federal - IDEA Part B, Section ,189 Federal - IDEA Part B, Section ,701 Federal - ARRA - RTTT 52,571 Federal - Title IIA 92,424 State - Universal Pre-K 313,223 State - Summer Handicapped 167,234 Other 65,803 $ 1,852,800 Food Service Fund: State - Breakfast and Lunch Program $ 19,964 Federal - Breakfast, Lunch and Snack Program 118,365 $ 138, CAPITAL ASSETS Capital asset activity for governmental activities for the year ended June 30, 2013 is presented as follows: Balance Balance Governmental activities: 7/1/2012 Additions Reductions 6/30/2013 Capital assets, not being depreciated: Land $ 1,371,867 $ - $ - $ 1,371,867 Construction in progress 52,556, ,623 (12,771,023) 40,544,401 Total capital assets, not being depreciated 53,928, ,623 (12,771,023) 41,916,268 Capital assets, being depreciated: Buildings and improvements 233,184,659 12,771, ,955,683 Machinery and equipment 10,128,105 - (122,430) 10,005,675 Total capital assets, being depreciated 243,312,764 12,771,024 (122,430) 255,961,358 Less accumulated depreciation for: Buildings and improvements 101,642,882 8,723, ,366,762 Machinery and equipment 6,317, ,059 (122,430) 6,953,465 Total accumulated depreciation 107,960,718 9,481,939 (122,430) 117,320,227 Total capital assets, being depreciated, net 135,352,046 3,289, ,641,131 Governmental activities capital assets, net $ 189,280,714 $ 4,047,708 $ (12,771,023) $ 180,557,

73 Depreciation expense was charged to the functions and programs of governmental activities as follows: 5. ACCRUED LIABILITIES Allocated Function/Program Depreciation General government support $ 1,496,111 Instruction 6,917,076 Transportation $ 1,068,752 9,481,939 Accrued liabilities reported by governmental funds at June 30, 2013, were as follows: Total General Special Aid Food Service Governmental Fund Fund Fund Funds Salary and employee benefits $ 2,026,418 $ 12,748 $ 32,658 $ 2,071,824 Amounts due to vendors 464,501 10, ,869 Health claims 2,591, ,591,609 Total accrued liabilities $ 5,082,528 $ 23,116 $ 32,658 $ 5,138, PENSION PLANS New York State Teachers Retirement System ( NYSTRS ) Plan Description The District makes contributions to the NYSTRS, a cost sharing multipleemployer defined benefit pension plan administered by the New York State Teachers Retirement Board. The NYSTRS provides retirement, disability, withdrawal and death benefits to plan members and beneficiaries, as authorized by the Education Law and the Retirement and Social Security Law of the State of New York. The NYSTRS issues a publicly available financial report that contains financial statements and required supplementary information for the System. The report may be obtained by writing to the New York State Teachers Retirement System, 10 Corporate Woods Drive, Albany, New York Funding Policy Plan members who joined the System before July 27, 1976 are not required to make contributions. Those joining after July 27, 1976 and before January 1, 2010 with less than ten years of membership are required to contribute three percent of their annual salary. Those joining on or after January 1, 2010 and before April 1, 2012 are required to contribute three and one-half percent of their annual salary for their entire working career. Those joining on or after April1, 2012 are required to contribute between 3% and 6%, dependent upon their salary, for their entire working career. Employers are required to contribute at an actuarially determined rate, currently 11.84% of the annual covered payroll for the fiscal year ended June 30, Rates applicable to the fiscal years ended June 30, 2012 and 2011 were 11.11% and 8.62%, respectively

74 The required contributions for the current year and two preceding years were: Year Contributions 2013 $ 4,139, ,664, ,116,000 The District s contribution made to the NYSTRS was equal to 100 percent of the contributions required for each year. New York State Employees Retirement System ( NYSERS ) Plan Description The District participates in the NYSERS and the Public Employees Group Life Insurance Plan ( Systems ). This is a cost-sharing multiple-employer retirement system. The Systems provide retirement benefits as well as death and disability benefits. Obligations of employers and employees to contribute and benefits to employees are governed by the New York State Retirement and Social Security Law ( NYSRSSL ). As set forth in the NYSRSSL, the Comptroller of the State of New York ( Comptroller ) serves as sole trustee and administrative head of the Systems. The Comptroller shall adopt and may amend rules and regulations for the administration and transactions of the business of the NYSERS and for custody and control of their funds. The NYSERS issues a publicly available financial report that includes financial statements and required supplementary information. That report may be obtained by writing to the New York State and Local Retirement System, 110 State Street, Albany, New York Funding Policy The System is noncontributory except for employees who joined the New York State and Local Employees Retirement System after July 27, 1976 who contribute 3% of their salary for the first ten years of membership, and employees who joined on or after January 10, 2010 who generally contribute 3% of their salary for their entire length of service. Those joining after April 1, 2012 (Tier 6) are required to contribute three and one-half percent (3.5%) of their annual salary until March 31, 2013, after which the contribution percentage will be based on salary. Under the authority of the NYSRSSL, the Comptroller annually certifies the actuarially determined rates expressly used in computing the employers contributions based on salaries paid during the New York State Local Retirement Systems fiscal year ending March 31. The District is required to contribute at an actuarially determined rate. The required contribution for the current year and two preceding years were: Year Contributions 2013 $ 1,836, ,630, ,350,000 Legislation requires participating employers to make payments on a current basis. The District s contributions made to the Systems were equal to 100 percent of the contributions required for each year, and the District has not bonded or amortized any of the excess amounts

75 7. OTHER POST-EMPLOYMENT BENEFIT ( OPEB ) OBLIGATIONS Plan Description The District maintains a single-employer defined benefit healthcare plan (the Plan ). The Plan provides medical and dental insurance benefits to eligible retirees and their spouses. Benefit provisions are based on bargaining agreements as negotiated from time to time. The Plan does not issue a publicly available financial report. Eligibility for Plan benefits is established by the District and specified in the District s employment contracts. Funding Policy The District recognizes the cost of providing these benefits by expensing the costs as incurred (pay-as-you-go), with no funding of actuarial determined liabilities. For the fiscal year ended June 30, 2013 the District contributed $9,149,000 for plan benefits and Medicare-B reimbursements. Annual OPEB Cost and Net OPEB Obligation The District s annual other postemployment benefit ( OPEB ) cost is calculated based on the annual required contribution ( ARC ) of the District, 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 liabilities over a period not to exceed thirty years. The table on the following page shows the components of the District s annual OPEB cost for the past two years, the amount actually contributed to the plan, and changes in the net OPEB obligation. The table below shows the components of the District s annual OPEB cost for the past two years, the amount actually contributed to the plan, and changes in the net OPEB obligation Normal cost $ 9,036,437 $ 8,688,882 Amortization payment 14,587,027 14,007,793 Interest on net OPEB obligation (for the year) 944, ,867 Annual Required Contribution ("ARC") 24,568,403 23,604,542 Interest on net OPEB obligation (as of beginning of year) 2,725,067 2,160,432 Adjustment to annual required contribution (3,939,780) (3,123,456) Annual OPEB costs (expense) 23,353,690 22,641,518 Contributions made (9,149,000) (8,525,644) Increase in net OPEB obligation 14,204,690 14,115,874 Net OPEB obligation--beginning of year 68,126,671 54,010,797 Net OPEB obligation--end of year $ 82,331,361 $ 68,126,671 As of July 1, 2012, the most recent actuarial valuation date, the plan was not funded. Since there were no assets, the unfunded actuarial accrued liability for benefits for governmental activities was $262,328,714. 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 health care 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 is presented as required supplemental

76 information. This schedule presents multi-year trend information about whether the actuarial value of plan assets, if any, is increasing or decreasing over time relative to the actuarial accrued liabilities for benefits. Funding Status and Funding Progress Information from the most recent actuarial valuations is presented in the District s Schedule of Funding Progress and the Schedule of the District s Contributions. The District s schedule of funding progress is presented below: Actuarial Actuarial Accrued Unfunded Budget Vaulation Value of Liability AAL Funded Covered Covered Date Assets ("AAL") ("UAAL") Ratio Payroll Payroll July 1,2012 $ - $ 262,328,714 $ 262,328,714 - Not Available Not Available July 1, ,911, ,911,955 - Not Available Not Available July 1, ,026, ,026,574-56,485, % The schedule of the District s contributions is shown below: Year Annual Net Ended OPEB Contributions Percentage OPEB June 30, Cost Made Contributed Obligation 2013 $ 23,353,690 $ 9,149, % $ 82,331, ,641,518 8,525, % 68,126, ,619,245 8,114, % 54,010,797 Actuarial Methods and Assumptions Projection of benefits for financial reporting purposes are based on the Plan as understood by the District and the Plan members and include the types of benefits provided at the time of each valuation and the historical pattern of sharing benefit costs between the District and Plan members. The actuarial methods and assumptions used include techniques that are designed to reduce short-term volatility in actuarial accrued liabilities and the actuarial value of assets, consistent with the long-term perspective of the calculations. Valuation assumptions are as follows: Measurement date July 1, 2012 Discount rate 4% per year compounded annually Retirement age for active employees based on the schedule provided by the New York State and Local Employees Retirement System Disability rates probability of becoming disabled comes from 50% of the Railroad Retirement Board rates Opt-out rates All active employees assumed will elect medical and prescription coverage in retirement. Actual elections for current retirees used. Medicare Medicare is expected to continue to cover the same portion of costs as it currently does. Marital status assumed 80%of future retirees will be married, with male spouses assumed to be three years older than female spouses

77 Mortality life expectancies were based on the Sex Distinct Table prescribed by the IRS Regulation 1.412(1)(7) for 2007 pension valuations. Turnover the Vaughn Table was used as the basis for assigning active members a probability of remaining employed until the assumed retirement age and for developing an expected future working lifetime assumption for purposes of allocating to periods the present value of total benefits to be paid. Healthcare cost trend rate the expected rate of increase in healthcare premiums was estimated at a rate of 19.0% initially, reduced to an ultimate rate of 5.0% after six years. Based on historical and expected returns of the District s general assets, a discount rate of 4.0% was used. The projected unit credit actuarial cost method was used. The Unfunded actuarial liability is being amortized as a level dollar amount on an open basis. The unfunded actuarial accrued liability is being amortized over 30 years, therefore the remaining amortization period at June 30, 2013 was twenty-five years. 8. RISK MANAGEMENT The District is exposed to various risks of losses related to torts; theft of, damage to, and destruction of assets; injuries to employees; and natural disasters. The District purchases commercial insurance to cover such potential risks. There have not been any significant changes in any type of insurance coverage from the prior year, nor have there been any settlements which have exceeded insurance coverage in the past three fiscal years. 9. SHORT-TERM DEBT Liabilities for bond anticipation notes ( BANs ) are accounted for in the Capital Projects Fund. Principal payments on BANs must be made annually. State law requires that BANs issued for capital purposes be converted to long-term obligations within seven years after the original issue date. The following is a summary of the District s BAN activity for the fiscal year ended June 30, 2013: Date of Date of Interest Beginning Ending Description Issue Maturity Rate Balance Additions Reductions Balance Revenue Anticipation Notes - General Fund: RAN payable 06/19/12 03/20/ % $ 10,000,000 $ - $ 10,000,000 $ - Total revenue anticipation notes payable $ 10,000,000 $ - $ 10,000,000 $ - Bond Anticipation Notes - Capital Projects Fund: Buildings improvements 02/14/12 02/13/ % $ 22,570,000 $ - $ 22,570,000 $ - Buildings improvements 10/18/11 10/17/ % 14,665,000-14,665,000 - Buses 06/14/12 06/14/ % 695, ,000 - Buildings improvements 02/12/13 12/12/ % - 21,570,000-21,570,000 Buildings improvements 10/16/12 10/16/ % - 13,470,000-13,470,000 Buses 06/13/13 06/13/ % - 525, ,000 $ 37,930,000 $ 35,565,000 $ 37,930,000 $ 35,565,

78 10. LONG-TERM LIABILITIES In the government-wide financial statements long-term debt and other long-term obligations are reported as liabilities in the statement of net position. In the fund financial statements, governmental funds recognize bond premiums and discounts, as well as bond issuance costs, during the current period. The face amount of debt issued is reported as other financing sources. Premiums received on debt issuances are reported as other financing sources while discounts on debt issuances are reported as other financing uses. Issuance costs, whether or not withheld from the actual debt proceeds received, are reported as debt service expenditures. Further, the unmatured principal of general long-term debt does not require current appropriation and expenditure of governmental fund financial resources. The District s outstanding long-term liabilities include bonds payable, net premium on bonds payable, compensated absences and other post-employment benefits. The bonds payable of the District are secured by its general credit and revenue raising powers, as per State statute. A summary of the District s long term debt at June 30, 2013 follows: Balance Balance Due Within 7/1/2012 Additions Reductions Refunded 6/30/2013 One Year Government activities: Bonds payable $ 88,505,000 $ 7,375,000 $ 9,105,000 $ 7,385,000 $ 79,390,000 $ 9,485,000 Net premium on bonds payable 767, , ,070,700 92,565 Compensated absences 2,934,668 54, ,989, ,473 OPEB obligation 68,126,671 27,293,470 13,088,780-82,331,361 - Total $ 160,333,401 $ 35,026,890 $ 22,193,780 $ 7,385,000 $ 165,781,511 $ 9,727,038 The General Fund has typically been used to liquidate long-term liabilities such as compensated absences. Bonds Payable The District issues general obligation bonds to provide funds for construction renovations and improvements of major capital facilities. A summary of bond transactions for the year ended June 30, 2013 is presented on the following page

79 Date of Date of Interest Beginning Ending Description Issue Maturity Rate Balance Additions Reductions Refunded Balance Buildings % $ 8,765,000 $ - $ 1,380,000 $ 7,385,000 $ - Buildings % 12,520,000-1,255,000-11,265,000 Buildings % 7,350, ,000-6,880,000 Buildings % 6,175, ,000-5,675,000 QZAB Buildings % 15,555,000-1,140,000-14,415,000 QSCB Buildings % 5,000, ,000,000 Refunding bonds % 17,880,000-2,495,000-15,385,000 Refunding bonds % 5,345,000-1,115,000-4,230,000 Buildings % 9,915, ,000-9,245,000 Refunding bonds % - 7,375,000 80,000-7,295,000 Total $ 88,505,000 $ 7,375,000 $ 9,105,000 $ 7,385,000 $ 79,390,000 The annual debt service requirements to maturity for governmental activities general obligation bonds are as follows: Year Ending June 30 Principal Interest 2014 $ 9,485,000 $ 2,409, ,340,000 2,087, ,660,000 1,771, ,895,000 1,492, ,560,000 1,223, ,685,000 3,145, beyond 6,765, ,909 Total $ 79,390,000 $ 12,423,153 Compensated Absences The District records the value of compensated absences in the governmentwide financial statements. The liability for compensated absences consists of unpaid accumulated annual sick and vacation time. The liability has been calculated using the vesting method, in which leave amounts for both employees currently eligible to receive payments and other employees expected to become eligible in the future to receive such payments are included. The annual budgets of the operating funds provide for these benefits as they become due. OPEB Obligation As discussed in Note 7, the District provides health insurance coverage for retirees. The District s annual postemployment benefit ( OPEB ) cost is calculated based in the annual required contributions of the employer, an amount actuarially determined in accordance with the parameters of GASB Statement 45, Accounting and Financial Reporting by Employers for Postemployment Benefits Other Than Pensions. The estimated long-term OPEB liability is $82,331,361 at June 30, NET POSITION AND FUND BALANCE The government-wide financial statements utilize a net position presentation. Net position is categorized as net investment in capital assets, restricted and unrestricted. A reconciliation is provided below

80 Net Investment in Capital Assets This category groups all capital assets, including infrastructure, into one component of net position. Accumulated depreciation and the outstanding balances of debt that are attributable to the acquisition, construct or improvement of these assets reduce the balance in this category. The following presents a reconciliation of capital assets (net of accumulated depreciation), net of total indebtedness to net investment in capital assets: Capital assets, net of accumulated depreciation $ 180,557,399 Less related debt: Bonds payable (net) $ (79,390,000) Bond anticipation notes (35,565,000) Remaining capital cash from debt 10,025,305 (104,929,695) Net investment in capital assets $ 75,627,704 Restricted Net Position This category presents external restriction imposed by creditors, grantors, contributors, or laws and regulations of other governments and restrictions imposed by law through constitutional provisions or enabling legislation. Unrestricted Net Position This category represents net position of the District not restricted for any project or other purpose. In the fund financial statements, nonspendable amounts represent net current financial resources that cannot be spent because they are either not in spendable form or legally or contractually required to be maintained intact. Nonspendable fund balance maintained by the District at June 30, 2013 include: Prepaids Represents amounts prepaid for life insurance premiums. Inventory Represents the portion of fund balance of $154,517 composed of inventory. This balance is nonspendable as the inventory does not represent an available resource. In the fund financial statements, restrictions represent a portion of fund balance that has been legally segregated for a specific use or is not able to be appropriated for expenditure by the District at June 30, 2013, and include: Fund balance restricted for: Workers' compensation $ 1,001,622 Unemployment insurance 603,505 Retirement Contribution Reserve 400,000 Insurance recoveries 1,246,113 Tax certiorari 33,299 Employee benefits 227,082 Debt service 8,607,640 $ 12,119,261 Restricted for Workers Compensation Represents resources that have been restricted for the future use in fulfilling District obligations relating to workers compensation

81 Restricted for Unemployment Insurance Represents resources that have been restricted for the future use in fulfilling District obligations relating to unemployment insurance. Retirement Contribution Reserve Represents resources that have been restricted for the future use in fulfilling District obligations relating to employee retirement system contributions. Restricted for Insurance Recoveries Represents resources from unexpended proceeds of insurance recoveries. They are held pending action by the Board of Education on their disposition. Restricted for Tax Certiorari Representing funds that can be used to offset tax amounts to be refunded based on assessment challenges. Restricted for Employee Benefits Representing funds that have been reserved for the payment of accrued employee benefits due an employee upon termination of service. Restricted for Debt Service Represents resources that have been legally restricted for debt payments that will be made in future periods. In the fund financial statements, assignments are not legally required segregations but are segregated for a specific purpose by the District at June 30, 2013 and include: Assigned to Encumbrances Represents commitments related to unperformed (executory) contracts for goods and services. The District has $41,312 of fund balance assigned to encumbrances at June 30, Assigned for Debt Service Representing available fund balance of $2,500,000 being appropriated to meet future debt service requirements. Assigned to Food Service Represents remaining fund balance of $ 869,847 within the special revenue fund used to maintain school lunch operations. 12. INTERFUND BALANCES AND ACTIVITY Interfund receivables and payables are short term in nature and exist because of temporary advances or payments made on behalf of other funds. Transfers are used primarily to move various fund revenues that the District must account for in other funds in accordance with budgetary authorizations. Interfund receivables and payables and transfers of the District at and during the year ended June 30, 2013 are presented on the following page

82 Interfund Transfers Governmental Funds: Receivables Payables In Out General Fund $ 1,834,496 $ - $ 516,571 $ 2,514,008 Food Service - 56, Special Aid Fund - 1,766, ,008 - Capital Projects Fund - 13,946 2,365,000 4,414,377 Debt Service 1,846-3,897,806 - Total $ 1,836,342 $ 1,836,342 $ 6,928,385 $ 6,928, AGENCY FUNDS An agency fund exists for temporary deposit funds. The following is a summary of changes in assets and liabilities for the fiscal year ended June 30, 2013: Beginning Ending Balance Additions Reductions Balance Assets: Cash and cash equivalents $ 37,017 $ 78,180,947 $ 78,164,276 $ 53,688 Restricted cash and investments 154, , , ,836 Due from other funds - 22,563 22,563 - $ 191,029 $ 78,843,535 $ 78,850,040 $ 184,524 Liabilities: Agency fund liabilities $ 39,701 $ 19,532,883 $ 19,504,745 $ 67,839 Due to other funds 17,527 3,876 21,403 - Extraclassroom activity funds 133, , , ,685 $ 191,029 $ 19,939,273 $ 19,911,546 $ 184, LABOR RELATIONS District employees are represented primarily by five bargaining units, with the balance of employees governed by Board of Education rules and regulations. Four contracts expired on June 30, 2012, which are currently being negotiated, and one contract expired on June 30, CONTINGENCIES General Liability The District is exposed to various risks of losses related to torts; assessment challenges; theft of, damage to, and destruction of assets; and natural disasters. The District purchases commercial insurance to cover such potential risks. The liability insurance limits are as follows: Commercial property coverage with a blanket limit of $315,000,000, general liability coverage with a $1,000,000 limit per occurrence, commercial automobile coverage with a liability limit of $1,000,000, and commercial umbrella coverage with a general aggregate limit of $10,000,000. There have not been any significant changes in any type of insurance coverage from the prior year, nor have there been any material settlements which have exceeded insurance coverage in the past two fiscal years

83 Health Self-Insurance The District has elected to self-fund its health benefit program for its employees. The third-party benefits administrator is responsible for the approval, processing and payment of claims, which are paid from an account funded by the District. The District pays the third-party benefits administrator a monthly administrative fee. The healthcare costs are accounted for in the General Fund. As of June 30, 2013, the District recorded an accrued liability of $2,266,609 which includes an amount for estimated claims incurred but not report. The estimate is based on an analysis performed by the District. Health self-insurance claim activity for the current and prior year are: Current Claims and Beginning Changes in Claims End of Year Estimates Paid of Year 2013 $ 2,729,730 $ 19,255,366 $ 19,718,487 $ 2,266, $ 2,104,000 $ 23,593,896 $ 22,968,166 $ 2,729,730 Unemployment The District has elected to discharge any liability to the New York State Unemployment Insurance Fund by the benefit reimbursement method, a dollar-for-dollar reimbursement to the fund for benefits paid from the fund to former employees. Litigation Various legal actions are pending against the District. The outcome of these matters is not presently determinable but, in the opinion of management, the ultimate liability will not have a material adverse effect on the financial condition or results of operation of the District. Grants The District receives financial assistance from numerous federal and state agencies. The receipt of such assistance generally requires compliance with terms and conditions specified in the grant agreements and are subject to audit by the grantor agencies. Any disallowed expenditures resulting from such audits could become a liability of the District. Based on prior experience, the District expects any such amounts to be immaterial. 16. DEFICIT FUND BALANCE The Capital Projects Fund has a deficit fund balance totaling $24,468,995 at June 30, The deficit is due to project expenditures exceeding revenues and other sources to date and will be eliminated through the issuance of long-term debt and funding from operating transfers. 17. SUBSEQUENT EVENTS Management has evaluated subsequent events through September 13, 2013, which is the date the financial statements are available for issuance, and have determined there are no subsequent events that require disclosure under generally accepted accounting principles. ******

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87 ELMIRA CITY SCHOOL DISTRICT, NEW YORK Schedule of Change from Adopted Budget to Final Budget and the Real Property Tax Limit For the Year Ended June 30, 2013 Change from Adopted Budget to Final Budget Adopted budget $ 113,960,883 Add: Prior year's encumbrances (June 30, 2012) 26,053 Original budget ,986,936 Add: Budget revisions Gifts and donations 21,503 Final budget $ 114,008,439 Section 1318 of Real Property Tax Law Limit Calculation Voter-approved Budget $ 113,982,977 Maximum allowed (4% of budget) 4,559,319 General Fund Fund Balance subject to Section 1318 of Real Property Tax Law*: Unrestricted fund balance: Assigned fund balance $ 2,541,312 Unassigned fund balance 1,857,515 Total unrestricted fund balance 4,398,827 Less: Encumbrances included in assigned fund balance 41,312 Total adjustments $ 41,312 General Fund Fund Balance Subject to Section 1318 of Real Property Tax Law $ 4,357,515 Actual percentage 3.82% *Per Office of the State Comptroller's "Fund Balance Reporting and Governmental Fund Type Definitions", Updated April 2011 (Originally Issued November 2010), the portion of General Fund fund balance subject to Section 1318 of the Real Property Tax Law is: unrestricted fund balance, minus appropriated fund balance, amounts reserved for insurance recovery, amounts reserved for tax reduction, and encumbrances included in committed and assigned fund balance

88 ELMIRA CITY SCHOOL DISTRICT, NEW YORK Schedule of Revenues, Expenditures and Encumbrances - Budget and Actual - General Fund Year Ended June 30, 2013 Variance Adopted Revised with Final Budget Budget Actual Budget REVENUES Local sources: Real property taxes and other tax items $ 31,271,550 $ 31,271,550 $ 31,556,550 $ 285,000 Charges for services 174, , ,303 50,300 Use of money and property 184, , , ,873 Sale of property and compensation for loss 20,000 20,000 21,214 1,214 Miscellaneous 2,145,003 2,166,508 2,247,756 81,248 State sources: Basic formula 68,296,669 68,296,669 66,535,628 (1,761,041) BOCES aid 7,511,565 7,511,565 7,736, ,316 Textbook aid 435, , ,410 (10,590) All other aid 718, ,000 1,126, ,908 Federal sources 500, , ,498 (167,502) Total revenues 111,255, ,277, ,785,021 (492,274) OTHER FINANCING SOURCES Transfers in 2,085,096 2,085, ,571 (1,568,525) Total revenues and other financing sources 113,340, ,362, ,301,592 (2,060,799) Appropriated fund balance 619, ,048 Total revenues and appropriated fund balance $ 113,960,883 $ 114,008,439 Grand total $ 111,301,592 (Continued)

89 ELMIRA CITY SCHOOL DISTRICT, NEW YORK Schedule of Revenues, Expenditures and Encumbrances - Budget and Actual - General Fund Year Ended June 30, 2013 Adopted Revised Encum- Unencumbered Budget Budget Actual brances Balances EXPENDITURES General Support: Board of education $ 43,662 $ 44,184 $ 42,466 $ 730 $ 988 Central administration 206, , , Finance 1,388,817 1,313,531 1,307, ,583 Staff 733, , , ,667 Central services 10,009,811 10,375,095 9,610,802 15, ,895 Special items 2,210,619 2,262,714 2,259,581-3,133 Instruction: Instruction, administration and improvements 4,378,635 4,275,582 4,236, ,408 Teaching - regular school 25,546,025 23,693,173 23,239,537 21, ,013 Programs for pupils with handicapping conditions 11,018,539 11,305,005 10,055,978-1,249,027 Occupational education 2,071,594 2,092,305 2,092, Teaching - special school 368, , ,486-26,086 Instructional media 1,806,293 1,825,944 1,777,419-48,525 Pupil services 3,742,129 3,801,264 3,531,667 1, ,482 Pupil transportation 2,917,824 2,723,725 2,585, ,345 Community services 287, , ,698-41,781 Employee benefits 32,027,288 32,780,179 27,828,164-4,952,015 Debt service: Debt service - principal 11,525,000 11,665,000 9,105,000-2,560,000 Debt service - interest 3,679,045 3,518,665 3,485,666-32,999 Total expenditures 113,960, ,859, ,248,317 41,312 10,569,802 OTHER FINANCING USES Transfers out - 149,008 2,514,008 - (2,365,000) Total expenditures and other financing uses $ 113,960,883 $ 114,008, ,762,325 $ 41,312 $ 8,204,802 Excess of revenues and other financing sources over expenditures and other financing uses $ 5,539,267 (Concluded)

90 ELMIRA CITY SCHOOL DISTRICT, NEW YORK Schedule of Capital Projects Expenditures, Financing and Fund Balance Year Ended June 30, 2013 Original Revised Expenditures and Transfers Out Methods of Financing Fund Approp- Approp- Prior Current Transfers Proceeds of State Aid Insurance Local Balance Project Title riation riation Years Year out Total Obligations Excel recoveries Source Total 6/30/2013 Transportation $ 861,830 $ 861,830 $ 834,352 $ - $ - $ 834,352 $ 861,830 $ - $ - $ - $ 861,830 $ 27,478 District-wide (H-88) 85,400,000 20,973,789 21,008, ,008,807 20,904, ,011 20,973,789 (35,018) R-47 Projects 4,500,000 4,500,000 4,376, ,376, ,500,000 4,500, ,803 H-47 Projects 95,478,318 95,478,318 80,983, , ,571 82,259,168 79,800,000 5,454, ,127 7,104,240 93,238,910 10,979,742 Prior projects ,897,806 3,897, ,897,806 - $ 186,240,148 $ 121,813,937 $ 107,203,330 $ 758,623 $ 4,414,377 $ 112,376,330 $ 101,566,608 $ 5,454,543 $ 880,127 $ 11,673,251 $ 119,574,529 $ 11,096,005 Less: Proceeds recorded as a bond anticipation note liability (35,565,000) Fund balance (deficit) as of June 30, 2013 $ (24,468,995)

91 ELMIRA CITY SCHOOL DISTRICT, NEW YORK Schedule of Funding Progress Other Post Employment Benefits Plan For the Year Ended June 30, 2013 UAAL as Actuarial Unfunded AAL Percentage of Actuarial Actuarial Accrued (UAAL) Funded Covered Covered Valuation Value of Liability (AAL) in thousands Ratio Payroll Payroll Date Assets (a) (b) (b-a) (a-b) (c) ((b-a)/c) June 1, 2013 $ - $ 262,328,714 $ 262,328, % Not Available Not Available June 1, ,911,955 $ 251,911, % Not Available Not Available June 1, ,026,574 $ 211,026, % 56,485, %

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95 ELMIRA CITY SCHOOL DISTRICT Schedule of Expenditures of Federal Awards Year Ended June 30, 2013 CFDA Grantor's Federal Federal Grantor Program Title Number Number Expenditures U.S. Department of Agriculture: Passed through State Department of Agriculture: Child Nutrition Cluster: School Breakfast Program n/a 405,043 National School Lunch Program n/a 1,806,532 Total U.S. Department of Agriculture 2,211,575 U.S. Department of Education: Passed through State Department of Education: Special Education Cluster: Special Education-Grants to States (IDEA, Part B, Sec 611)) ,447,208 Special Education-Grants to States (IDEA, Part B, Sec 611)) ,783 Special Education-Preschool Grants (IDEA, Part B, Sec 619) ,117 Total Special Education- Program Cluster 1,539,108 Title I, Part A Cluster Title I Grants to Local Educational Agencies (LEAs) ,356,918 Title I Grants to Local Educational Agencies (LEAs) ,134 ARRA - Title I Grants to Local Educational Agencies (LEAs) Title I Grants to Local Educational Agencies (LEAs) ,458 Title I Grants to Local Educational Agencies (LEAs) ,014 Total Title I, Part A Cluster 2,516,524 Perkins VATEA st Century Learning Center ,458 Improving Teacher Quality - State Grants (Title II, Part A) ,770 Improving Teacher Quality - State Grants (Title II, Part A) , ,781 ARRA Race to the Top A ,222 Corporation for National and Community Service Learn and Serve America ,388 Total Expenditures of Federal Awards $ 6,929,171 The notes to this schedule of federal awards are an integral part of this statement

96 ELMIRA CITY SCHOOL DISTRICT Notes to the Schedule of Expenditures of Federal Awards Year Ended June 30, BASIS OF PRESENTATION The accompanying Schedule of Expenditures of Federal Awards presents the activity of all federal award programs administered by Elmira City School District (the District ), an entity as defined in Note 1 to the District s basic financial statements. Federal awards received directly from federal agencies, as well as federal awards passed through from other government agencies, are included on the Schedule of Expenditures of Federal Awards. 2. BASIS OF ACCOUNTING The basis of accounting varies by federal program consistent with the underlying regulations pertaining to each program. The amounts reported as federal expenditures generally were obtained from the appropriate federal financial reports for the applicable program and periods. The amounts reported in these federal financial reports are prepared from records maintained for each program, which are periodically reconciled with the District s financial reporting system. 3. INDIRECT COSTS The District s practice is not to charge federal programs with indirect costs. 4. NON-MONETARY FEDERAL PROGRAM The District is the recipient of a federal award program that does not result in cash receipts or disbursements termed a non-monetary program. During the year ended June 30, 2013, the District used $208,299 worth of commodities. ******

97 Drescher & Malecki LLP 3083 William Street, Suite 5 Cheektowaga, New York Telephone: Fax: s Certified Public Accountants INDEPENDENT AUDITORS 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 The Board of Education Elmira City School District, New York We have audited in accordance with the auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States, the financial statements of the governmental activities, each major fund, and the aggregate remaining fund information of Elmira City School District, New York (the District ), as of and for the year ended June 30, 2013, and the related notes to the financial statements, which collectively comprise District s basic financial statements, and have issued our report thereon dated September 13, Internal Control Over Financial Reporting In planning and performing our audit of the financial statements, we considered the District s internal control over financial reporting ( internal control ) to determine the audit procedures that are appropriate in the circumstances for the purpose of expressing our opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the District s internal control. Accordingly, we do not express an opinion on the effectiveness of the District s internal control. A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of the District s financial statements will not be prevented, or detected and corrected on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance. Our consideration of internal control was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies. Given these limitations, during our audit we did not identify any deficiencies in internal control that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified

98 Compliance and Other Matters As part of obtaining reasonable assurance about whether the District s financial statements are free from material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards. Purpose of this Report The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the District s internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the District s internal control and compliance. Accordingly, this communication is not suitable for any other purpose. September 13,

99 Drescher & Malecki LLP 3083 William Street, Suite 5 Cheektowaga, New York Telephone: Fax: s Certified Public Accountants INDEPENDENT AUDITORS REPORT ON COMPLIANCE WITH REQUIREMENTS FOR EACH MAJOR PROGRAM AND REPORT ON INTERNAL CONTROL OVER COMPLIANCE REQUIRED BY OMB CIRCULAR A-133 The Board of Education Elmira City School District, New York Report on Compliance for Each Major Federal Program We have audited the Elmira City School District, New York s (the District ) compliance with the types of compliance requirements described in the OMB Circular A-133 Compliance Supplement that could have a direct and material effect on each of the District s major federal programs for the year ended June 30, The District s major federal programs are identified in the summary of auditor s results section of the accompanying schedule of findings and questioned costs. Management s Responsibility Management is responsible for compliance with the requirements of laws, regulations, contracts, and grants applicable to its federal programs. Auditor s Responsibility Our responsibility is to express an opinion on compliance for each of the District s major federal programs based on our audit of the types of compliance requirements referred to above. We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States of America; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; and OMB Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations. Those standards and OMB Circular A-133 require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the types of compliance requirements referred to above that could have a direct and material effect on a major federal program occurred. An audit includes examining, on a test basis, evidence about the District s compliance with those requirements and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion on compliance for each major federal program. However, our audit does not provide a legal determination of the District s compliance. Opinion on Each Major Federal Program In our opinion, the District complied, in all material respects, with the types of compliance requirements referred to above that could have a direct and material effect on each of its major federal programs for the year ended June 30,

100 Report on Internal Control Over Compliance Management of the District is responsible for establishing and maintaining effective internal control over compliance with the types of compliance requirements referred to above. In planning and performing our audit of compliance, we considered the District s internal control over compliance with the types of requirements that could have a direct and material effect on each major federal program to determine the auditing procedures that are appropriate in the circumstances for the purpose of expressing n opinion on compliance for each major federal program and to test and report on internal control over compliance in accordance with OMB Circular A-133, but not for the purpose of expressing an opinion on the effectiveness of internal control over compliance. Accordingly, we do not express an opinion on the effectiveness of the District s internal control over compliance. A deficiency in internal control over compliance exists when the design or operation of a control over compliance does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, noncompliance with a type of compliance requirement of a federal program on a timely basis. A material weakness in internal control over compliance is a deficiency, or combination of deficiencies, in internal control over compliance, such that there is a reasonable possibility that material noncompliance with a type of compliance requirement of a federal program will not be prevented, or detected and corrected, on a timely basis. A significant deficiency in internal control over compliance is a deficiency, or combination of deficiencies, in internal control over compliance with a type of compliance requirement of a federal program that is less severe than a material weakness in internal control over compliance, yet important enough to merit attention by those charged with governance. Our consideration of internal control over compliance was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control over compliance that might be material weaknesses or significant deficiencies. We did not identify any deficiencies in internal control over compliance that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified. The purpose of this report on internal control over compliance is solely to describe the scope of our testing of internal control over compliance and the results of that testing based on the requirements of OMB Circular A-133. Accordingly, this report is not suitable for any other purpose. September 13,

101 ELMIRA CITY SCHOOL DISTRICT Schedule of Findings and Questioned Costs Year Ended June 30, 2013 Part I. SUMMARY OF AUDITORS RESULTS Financial Statements Type of auditors report issued: Unmodified Internal control over financial reporting: 1. Material weakness(es) identified? Yes No 2. Significant deficiency(ies) identified? Yes None Reported 3. Noncompliance material to financial statements noted? Yes No Federal Awards: Internal control over major programs: 4. Material weakness(es) identified? Yes No 5. Significant deficiency(ies) identified? Type of auditors report issued on compliance for major programs: 6. Any audit findings disclosed that are required to be reported in accordance with OMB Circular A-133 (section.510(a))? Yes None Reported Unmodified Yes No 7. The District s major programs were: Name of Federal Program CFDA Number Special Education Cluster: Special Education Grants to States Special Education Preschool Grants Title I, Part A Cluster: Title I Grants to Local Educational Agencies (LEAs) ARRA - Title I Grants to Local Educational Agencies (LEAs) Race to the Top, Recovery Act Dollar threshold used to distinguish between Type A and Type B programs? $ 300, Auditee qualified as low-risk auditee? Yes No

102 Part II. FINANCIAL STATEMENT FINDINGS SECTION No matters were reported. Part III. FEDERAL AWARD FINDINGS AND QUESTIONED COSTS SECTION No matters were reported

103 ELMIRA CITY SCHOOL DISTRICT Schedule of Prior Federal Awards Audit Findings Year Ended June 30, 2013 (Follow Up of June 30, 2012 Findings) No matters were reported in the prior year

104 APPENDIX D SPECIMEN MUNICIPAL BOND INSURANCE POLICY

105 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 of and interest on the Bonds when due as set forth in the form of the Policy included as an exhibit to 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.

106 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 BOND INSURANCE.

107 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.