NOTICE $5,000,000* SILVER CONSOLIDATED SCHOOL DISTRICT NO. 1 GRANT COUNTY, NEW MEXICO GENERAL OBLIGATION SCHOOL BUILDING BONDS SERIES 2017

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1 NOTICE $5,000,000* GRANT COUNTY, NEW MEXICO GENERAL OBLIGATION SCHOOL BUILDING BONDS SERIES 2017 Preliminary Official Statement, subject to completion, June 9, 2017 The Preliminary Official Statement, dated June 9, 2017 (the "Preliminary Official Statement"), relating to the above-described bonds (the "Bonds") of the Silver Consolidated School District No. 1 (the "District"), has been posted as a matter of convenience. The posted version of the Preliminary Official Statement has been formatted in Adobe Portable Document Format. Although this format should replicate the Preliminary Official Statement available from the District, appearance may vary for a number of reasons, including electronic communication difficulties or particular user software or hardware. Using software other than Adobe Acrobat may cause the Preliminary Official Statement that you view or print to differ in appearance from the Preliminary Official Statement. The Preliminary Official Statement and the information contained therein are subject to completion or amendment or other change without notice. Under no circumstances shall the Preliminary Official Statement constitute an offer to sell or the solicitation of an offer to buy nor shall there be any sale of the Bonds in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction. For purposes of Rule 15c2-12 promulgated by the Securities and Exchange Commission, the Preliminary Official Statement alone, and no other document or information on the internet, constitutes the "Official Statement" that the District has deemed "final" as of its date in respect of the Bonds, except for certain information permitted to be omitted therefrom. No person has been authorized to give any information or to make any representations other than those contained in the Preliminary Official Statement in connection with the offer and sale of the Bonds and, if given or made, such information or representations must not be relied upon as having been authorized. The information and expressions of opinion in the Preliminary Official Statement are subject to change without notice and neither the delivery of the Official Statement nor any sale made thereunder shall, under any circumstances, create any implication that there has been no change in the affairs of the District since the date of the Preliminary Official Statement. By choosing to proceed and view the electronic version of the Preliminary Official Statement, you acknowledge that you have read and understood this Notice. Preliminary Official Statement June 9, *Preliminary, subject to change

2 BOOK-ENTRY ONLY MOODY S RATING: Baa2 MOODY S ENHANCED RATING: Aa2 BANK QUALIFIED The delivery of the Bonds is subject to the opinions of Rodey, Dickason, Sloan, Akin, & Robb, P.A., Bond Counsel. On the initial date of delivery of the Bonds, Rodey, Dickason, Sloan, Akin, & Robb, P.A. will render its opinion that, under existing laws, regulations, rulings, and judicial decisions, and assuming continuing compliance with the covenants described herein, interest on the Bonds is excluded from gross income for federal income tax purposes and is not a specific preference item for purposes of the federal alternative minimum tax. The interest on the Bonds may be subject to certain federal taxes imposed only on certain corporations, including imposition of the corporate alternative minimum taxes on a portion of that interest. Also on the initial date of delivery of the Bonds, Bond Counsel will render its opinion that interest on the Bonds is exempt, under existing law, from personal income taxation by the State of New Mexico. See "Legal Matters" and "Tax Matters" herein for a discussion of Bond Counsel s opinion, including a description of certain alternative minimum tax consequences for corporations. See "TAX MATTERS" regarding certain other tax considerations. Dated: Date of Delivery $5,000,000* GRANT COUNTY, NEW MEXICO GENERAL OBLIGATION SCHOOL BUILDING BONDS SERIES 2017 Due: August 1, as shown below The Series 2017 Bonds (the Bonds ) are issuable 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 to which principal and interest payments on the Bonds will be made. Individual purchases will be made in book-entry form only, in the principal amount of $5,000 or any whole multiple thereof. Purchasers of the Bonds will not receive physical delivery of bond certificates. So long as Cede & Co. is the registered owner of the Bonds, reference herein to the holders of the Bonds or registered owner of the Bonds shall mean Cede & Co. and shall not mean the Beneficial Owners of the Bonds. So long as Cede & Co. is the registered owner of the Bonds, the principal and interest (first payable on February 1, 2018 and thereafter semiannually on each August 1 and February 1) are payable to Cede & Co., which will in turn remit such principal and interest to the DTC Participants (as defined herein) for subsequent disbursement to the Beneficial Owners of the Bonds. See "Book Entry Only System" herein. The Bonds maturing on and after August 1, 2026 are subject to optional redemption on August 1, 2025, or any date thereafter at par plus accrued interest to the redemption date. Proceeds of the Bonds will be used for the purpose of erecting, remodeling, making additions to and furnishing school buildings; purchasing or improving school grounds, purchasing computer software and hardware for student use in public schools, providing matching funds for capital outlay projects funded pursuant to the Public School Capital Outlay Act; or any combination of these purposes, and to pay the cost of issuance of the Bonds, and to reimburse the District for expenditures made for the foregoing purposes, said Bonds are to be payable from general (ad valorem) taxes and to be issued and sold at such time or times upon such terms and conditions as the Board may determine. MATURITIES, INTEREST RATES AND YIELDS* Year Maturing Interest Year Maturing Interest (August 1) Principal Rate Yield Cusip # (August 1) Principal Rate Yield Cusip # 2018 $1,180, , , , , , , , , , , , , , , , , , , ,000 The Bonds are offered for delivery when, as, and if issued, subject to the approval of legality by Rodey, Dickason, Sloan, Akin, & Robb, P.A., Santa Fe, New Mexico, Bond Counsel, and certain other conditions. The written approval of the New Mexico Attorney General of the Bonds as to form and legality will be supplied. It is expected that the Bonds will be available for delivery through the facilities of The Depository Trust Company, New York, New York on or about June 30, 2017*. Dated: June, 2017 *Preliminary, subject to change. BAIRD

3 USE OF INFORMATION IN THIS OFFICIAL STATEMENT No dealer, salesman or other person has been authorized by the Silver Consolidated School District No. 1 (the "District") to give any information or to make any statements or representations, other than those contained in this Official Statement, and, if given or made, such other information, statements or representations must not be relied upon as having been authorized. This Official Statement does not constitute an offer to sell or solicitation of an offer to buy any of the Bonds in any jurisdiction in which such offer or solicitation is not authorized, or in which any person making such offer or solicitation is not qualified to do so, or to any person to whom it is unlawful to make such offer or solicitation in such jurisdiction. The information set forth or included in this Official Statement has been provided by the District and from other sources believed by the District to be reliable. The information and expressions of opinion herein are subject to change without notice, and neither the delivery of this Official Statement nor any sale hereunder shall create any implication that there has been no change in the financial condition or operations of the District described herein since the date hereof. This Official Statement contains, in part, estimates and matters of opinion that are not intended as statements of fact, and no representation or warranty is made as to the correctness of such estimates and opinions or that they will be realized. The Bonds have not been registered under the Securities Act of 1933, in reliance upon exemptions contained in such Act. The registration and qualification of the Bonds in accordance with applicable provisions of the securities law of the states in which the Bonds have registered or qualified and the exemption from registration or qualification in other states cannot be regarded as a recommendation thereof. Neither the Securities and Exchange Commission nor any other federal, state, municipal or other governmental entity, nor any agency or department thereof, has passed upon the merits of the Bonds or the accuracy or completeness of this Official Statement. Any representation to the contrary may be a criminal offense. This Official Statement is "deemed final" by the District for purposes of Rule 15c2-12 of the Municipal Securities Rulemaking Board. The District has covenanted to provide such annual financial statements and other information in the manner as may be required by regulations of the Securities and Exchange Commission or other regulatory body. IN MAKING AN INVESTMENT DECISION INVESTORS MUST RELY ON THEIR OWN EXAMINATION OF THE DISTRICT AND THE TERMS OF THE OFFERING, INCLUDING THE MERITS AND RISKS INVOLVED. THESE SECURITIES HAVE NOT BEEN RECOMMENDED BY ANY FEDERAL OR STATE SECURITIES COMMISSION OR REGULATORY AUTHORITY. FURTHERMORE, THE FOREGOING AUTHORITIES HAVE NOT CONFIRMED THE ACCURACY OR DETERMINED THE ADEQUACY OF THIS DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. This Official Statement contains statements that are "forward-looking statements" as defined in the Private Securities Litigation Reform Act of When used in this Official Statement, the words "estimate," "project," "intend," "expect," and similar expressions are intended to identify forward-looking statements. Such statements are subject to risks and uncertainties that could cause actual results to differ materially from those contemplated in such forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof.

4 GRANT COUNTY, NEW MEXICO 2810 N. Swan Street Silver City, New Mexico (575) BOARD OF EDUCATION President Vice President Secretary Member Member Mike McMillan Frances Vasquez Ashley Montenegro Patrick Cohn Justin Wecks ADMINISTRATION Superintendent Associate Superintendent Director of Finance Audie Brown Candy Milam Michele McCain MUNICIPAL ADVISOR George K. Baum & Company 6565 Americas Parkway NE, Suite 860 Albuquerque, New Mexico (505) BOND COUNSEL Rodey, Dickason, Sloan, Akin, & Robb, P.A rd Street NW, Suite 2200 Albuquerque, New Mexico (505) PAYING AGENT/REGISTRAR BOKF, NA 100 Sun Avenue NE, Suite 500 Albuquerque, NM (505) UNDERWRITER Robert W. Baird & Co., Inc. 210 University Blvd., Suite 460 Denver, Colorado (303)

5 TABLE OF CONTENTS Page INTRODUCTORY INFORMATION... 1 SUMMARY INFORMATION... 2 DEBT SERVICE REQUIREMENTS... 3 DESCRIPTION OF THE BONDS... 4 AUTHORIZATION AND USE OF PROCEEDS... 4 PAYING AGENT/REGISTRAR... 4 PAYMENT OF PRINCIPAL AND INTEREST; RECORD DATE... 4 REGISTRATION, TRANSFER AND EXCHANGE... 5 PRIOR REDEMPTION... 5 BOOK ENTRY ONLY SYSTEM... 5 General... 6 SECURITY AND SOURCE OF PAYMENT... 7 TAX MATTERS... 7 NEW MEXICO INCOME TAX OPINION... 8 QUALIFIED TAX-EXEMPT OBLIGATIONS... 9 LEGALITY... 9 REGISTRATION... 9 LITIGATION... 9 CONTINUING DISCLOSURE Annual Reports Material Event Notices Availability of Information from MSRB and SID Limitations and Amendments COMPLIANCE WITH PRIOR UNDERTAKINGS RATING NEW MEXICO SCHOOL DISTRICT ENHANCEMENT PROGRAM TRANSCRIPT AND CLOSING DOCUMENTS MUNICIPAL ADVISOR i

6 UNDERWRITING ADDITIONAL INFORMATION OFFICIAL STATEMENT CERTIFICATION BORROWING CAPACITY FINANCIAL INFORMATION Reassessment Comparison of Assessed Value Assessed Valuation of the Largest Centrally Assessed Taxpayers in the District TAX RATES Yield Control TAX DATA Method of Tax Collection Interest On Delinquent Taxes Delinquent Taxes Penalty Remedies Available for Non-Payment of Taxes OUTSTANDING GENERAL OBLIGATION BONDS Authorized but Unissued General Obligation Bonds General Board of Education Administrative Staff Enrollment History Finances of the Educational Program General Fund APPENDIX A General Information Grant County APPENDIX B Form of Opinion of Bond Counsel APPENDIX C Excerpt of District s 2016 Audited Financial Report APPENDIX D Form of Continuing Disclosure Undertaking ii

7 INTRODUCTORY INFORMATION This Official Statement has been prepared by George K. Baum & Company, employed by the Silver Consolidated School District No. 1 (the "District") to perform professional services in the capacity of Municipal Advisor. The purpose of this Official Statement is to provide information concerning the offering by the District of General Obligation School Building Bonds, Series 2017, dated June 30, 2017* in the principal amount of $5,000,000* (the "Bonds") approved by the voters at a regular school bond election held February 7, All financial and other information presented in this Official Statement has been obtained from the District, the Grant County Assessor s and Treasurer s offices, the State of New Mexico Public Education Department and other sources which are believed to be reliable, but such information is not guaranteed as to accuracy or completeness and its inclusion is not to be construed as a representation on the part of the Board of Education of the District (the Board ). No person, including any broker, dealer or salesman, has been authorized 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 Board. Any information or expressions of opinion herein are subject to change without notice and neither the delivery of the Official Statement nor any supplement to the Official Statement nor any sale hereunder shall, under any circumstances, create any implication that there has been no change as to the affairs of the District. *Preliminary, subject to change. 1

8 SUMMARY INFORMATION The following information is not a full description of the Bonds and is subject to the more complete information contained elsewhere in this Official Statement, including the appendices. Date of Issue: The Bonds are dated June 30, 2017.* Purpose: Authorization: Proceeds of the Bonds will be used for the purpose of erecting, remodeling, making additions to and furnishing school buildings; purchasing or improving school grounds, purchasing computer software and hardware for student use in public schools, providing matching funds for capital outlay projects funded pursuant to the Public School Capital Outlay Act; or any combination of these purposes, and to pay the cost of issuance of the Bonds, and to reimburse the District for expenditures made for the foregoing purposes, said Bonds to be payable from general (ad valorem) taxes and to be issued and sold at such time or times upon such terms and conditions as the Board may determine. The Bonds were authorized at a regular election held within the District on February 7, 2017, and by Resolution of the Board ( Bond Resolution ) adopted on May 25, 2017, and are issued pursuant to NMSA 1978, Sections through , as amended. Interest Payments: Interest is payable February 1 and August 1, commencing February 1, Maturity: The Bonds mature annually on August 1, 2018 through Redemption: Security: Designation: Tax Status: The Bonds maturing on and after August 1, 2026 are subject to optional redemption on August 1, 2025, or any date thereafter at par plus accrued interest to the redemption date. The Bonds are General Obligation School Building Bonds of the District and are payable from general ad valorem taxes which may be levied against all taxable property within the District without limitation as to rate or amount. In a resolution authorizing the issuance of the Bonds, the District expects to designate the Bonds as qualified tax-exempt obligations for purposes of Section 265(b)(3)(B) of the Internal Revenue Code of 1986, as amended. Interest on the Bonds is excludable from gross income for federal income tax purposes and is exempt from taxation by the State of New Mexico. (See Tax Matters herein.) Delivery: Delivery of the Bonds to the Underwriter is expected on June 30, 2017.* Registrar/ Paying Agent: BOKF, NA, Albuquerque, New Mexico. *Preliminary, subject to change. 2

9 DEBT SERVICE REQUIREMENTS Series 2017 Bonds* Calendar Year Outstanding Debt Service Principal Interest 2017 $1,475, $1,180, , , , , , , , , , , , , , , , , , , ,000 Est. Total Debt Service (REMAINDER OF PAGE INTENTIONALLY LEFT BLANK) *Preliminary, subject to change. 3

10 DESCRIPTION OF THE BONDS The Bonds will be dated June 30, 2017*, will mature annually on August 1, 2018 through 2037, and will bear interest at the rates set forth on the cover page of the Final Official Statement. AUTHORIZATION AND USE OF PROCEEDS The Bonds are being issued pursuant to the Board's powers under NMSA 1978, Sections through , as amended and supplemented, the Constitution of the State of New Mexico and other laws of the State, and the Bond Resolution, and constitute the first installment of $5,000,000 of $20,000,000 of General Obligation School Building Bonds authorized by the qualified voters of the District at a regular school district election held on February 7, Pursuant to NMSA 1978, Section , the written approval of the New Mexico Attorney General will be supplied as to the form and legality of the Bonds. Proceeds of the Bonds will be used for the purpose of erecting, remodeling, making additions to and furnishing school buildings; purchasing or improving school grounds, purchasing computer software and hardware for student use in public schools, providing matching funds for capital outlay projects funded pursuant to the Public School Capital Outlay Act; or any combination of these purposes, and to pay the cost of issuance of the Bonds, and to reimburse the District for expenditures made for the foregoing purposes, said Bonds are to be payable from general (ad valorem) taxes and to be issued and sold at such time or times upon such terms and conditions as the Board may determine. PAYING AGENT/REGISTRAR BOKF, NA, Albuquerque, New Mexico will serve as the Bond Paying Agent/Registrar (the "Paying Agent/Registrar") for the Bonds. PAYMENT OF PRINCIPAL AND INTEREST; RECORD DATE Subject to "Book Entry Only System" below, interest on the Bonds is payable by check mailed on or before each Interest Payment Date by the Paying Agent/Registrar (defined below) to the registered owner at the last known address as it appears on the bond registration books (the "Registration Books") kept by the Paying Agent/Registrar on the Record Date (as defined below), except that the interest on any Bond payable at the maturity thereof shall be paid only upon presentation of such Bond at the office of the Paying Agent/Registrar. At the request and expense of a person entitled to a payment of interest on the Bonds, payment of interest may be made by any other method acceptable to the Paying Agent/Registrar. The record date (the "Record Date") for the interest payable on any Interest Payment Date is the fifteenth day of the month next preceding such Interest Payment Date. In the event of a non-payment of interest on a scheduled payment date, and for 30 days thereafter, a new record date for such interest payment (a "Special Record Date") will be established by the Paying Agent/Registrar, if and when funds for the payment of such interest have been received from the District. Notice of the Special Record Date and of the scheduled payment date of the past due interest (which shall be 15 days after the Special Record Date) shall be sent at least five business days prior to the Special Record Date by United States mail, first class postage prepaid, to the address of each registered owner of a Bond appearing on the registration books of the Paying Agent/Registrar at the close of business on the last business day next preceding the date of mailing of such notice. If the date for any payment due on any Bond shall be a Saturday, Sunday, a legal holiday or a day on which the Paying Agent/Registrar is located is authorized or required by law or executive order to close, *Preliminary, subject to change. 4

11 then the date for such payment shall be the next succeeding business day, and payment on such date shall have the same force and effect as if made on the original date payment was due. REGISTRATION, TRANSFER AND EXCHANGE Subject to "Book Entry Only System" below, the Bonds may be transferred, registered and assigned only on the Registration Books, and such registration and transfer shall be without expense or service charge to the registered owner, except for any tax or other governmental charges required to be paid with respect to such registration and transfer. A Bond may be assigned by the execution of an assignment form on the Bonds or by other instrument of transfer and assignment acceptable to the Paying Agent/Registrar. A new Bond or Bonds will be delivered by the Paying Agent/Registrar in lieu of the Bond being transferred or exchanged at the principal corporate trust office of the Paying Agent/Registrar. To the extent possible, new Bonds issued in an exchange or transfer of Bonds will be delivered to the registered owner or assignee of the registered owner in not more than three business days after the receipt of the Bonds to be canceled in the exchange or transfer and the written instrument of transfer or request for exchange duly executed by the registered owner or its duly authorized agent, in form satisfactory to the Paying Agent/Registrar. New Bonds registered and delivered in an exchange or transfer shall be in denominations of $5,000 of principal amount or any integral multiple thereof for any one maturity, shall specify the same maturity date and be for a like aggregate amount as the Bond or Bonds surrendered for exchange or transfer. Neither the District nor the Paying Agent/Registrar shall be required to issue, transfer, or exchange any Bond during the period beginning on the Record Date or Special Record Date and ending on the day subsequent to the next following Interest Payment Date. PRIOR REDEMPTION The Bonds maturing on and after August 1, 2026 are subject to optional redemption on August 1, 2025, or any date thereafter at par plus accrued interest to the redemption date. BOOK ENTRY ONLY SYSTEM Unless otherwise noted, the information contained under the caption General below has been provided by The Depository Trust Company ("DTC"). The District makes no representation as to the accuracy or the completeness of such information. The Beneficial Owners of the Bonds should confirm the following information with DTC, the Direct Participants or the Indirect Participants. NEITHER THE DISTRICT NOR THE FISCAL AGENT WILL HAVE RESPONSIBILITY OR OBLIGATION TO DIRECT PARTICIPANTS, TO INDIRECT PARTICIPANTS, OR TO ANY BENEFICIAL OWNER WITH RESPECT TO (A) THE ACCURACY OF ANY RECORDS MAINTAINED BY DTC, ANY DIRECT PARTICIPANT, OR ANY INDIRECT PARTICIPANT; (B) ANY NOTICE THAT IS PERMITTED OR REQUIRED TO BE GIVEN TO THE OWNERS OF THE BONDS UNDER THE BOND RESOLUTION; (C) THE SELECTION BY DTC OR ANY DIRECT PARTICIPANT OR INDIRECT PARTICIPANT OF ANY PERSON TO RECEIVE PAYMENT IN THE EVENT OF A PARTIAL REDEMPTION OF THE BONDS; (D) THE PAYMENT BY DTC OR ANY DIRECT PARTICIPANT OR INDIRECT PARTICIPANT OF ANY AMOUNT WITH RESPECT TO THE PRINCIPAL OR INTEREST DUE WITH RESPECT TO THE OWNER OF THE BONDS; (E) ANY CONSENT GIVEN OR OTHER ACTION TAKEN BY DTC AS THE OWNERS OF THE BONDS; OR (F) ANY OTHER MATTER REGARDING DTC. 5

12 General The Depository Trust Company ( DTC ), New York, NY, will act as securities depository for the Bonds. The Bonds will be issued as fully-registered securities registered in the name of Cede & Co. (DTC s partnership nominee) or such other name as may be requested by an authorized representative of DTC. One fully-registered Bond certificate will be issued for each maturity of the Bonds, in the aggregate principal amount of such maturity, and will be deposited with DTC. DTC, the world s largest securities depository, is a limited-purpose trust company organized under the New York Banking Law, a banking organization within the meaning of the New York Banking Law, a member of the Federal Reserve System, a clearing corporation within the meaning of the New York Uniform Commercial Code, and a clearing agency registered pursuant to the provisions of Section 17A of the Securities Exchange Act of DTC holds and provides asset servicing for over 3.5 million issues of U.S. and non-u.s. equity issues, corporate and municipal debt issues, and money market instruments (from over 100 countries) that DTC s participants ( Direct Participants ) deposit with DTC. DTC also facilitates the post-trade settlement among Direct Participants of sales and other securities transactions in deposited securities, through electronic computerized book-entry transfers and pledges between Direct Participants accounts. This eliminates the need for physical movement of securities certificates. Direct Participants include both U.S. and non-u.s. securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations. DTC is a wholly-owned subsidiary of the Depository Trust & Clearing Corporation ( DTCC ). DTCC is the holding company for DTC, National Securities Clearing Corporation and Fixed Income Clearing Corporation, all of which are registered clearing agencies. DTCC is owned by the users of its regulated subsidiaries. Access to the DTC system is also available to others such as both U.S. and non-u.s. securities brokers and dealers, banks, trust companies, and clearing corporations that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly ( Indirect Participants ). DTC has a Standard & Poor s rating of AA+. The DTC Rules applicable to Direct Participants are on file with the Securities and Exchange Commission. More information about DTC can be found at The District undertakes no responsibility for and makes no representations as to the accuracy or the completeness of the content of such material contained on that website as described in the preceding sentence including, but not limited to, updates of such information or links to other Internet sites accessed through the aforementioned website. Purchases of the Bonds under the DTC system must be made by or through Direct or Indirect Participants, which will receive a credit for the Bonds on DTC s records. The ownership interest of each actual purchaser of each Bond ( Beneficial Owner ) is in turn to be recorded on the Direct and Indirect Participants records. Beneficial Owners will not receive written confirmation from DTC of their purchase. Beneficial Owners are, however, expected to receive written confirmations providing details of the transaction, as well as periodic statements of their holdings, from the Direct or Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers of ownership interests in the Bonds are to be accomplished by entries made on the books of Direct and Indirect Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interests in the Bonds, except in the event that use of book-entry system for the Bonds is discontinued. To facilitate subsequent transfers, all Bonds deposited by Direct Participants with DTC are registered in the name of DTC s partnership nominee, Cede & Co. or such other name as may be requested by an authorized representative of DTC. The deposit of Bonds with DTC and their registration in the name of Cede & Co. or such other DTC nominee do not affect 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 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. 6

13 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. While the Bonds are in the book-entry only system, redemption notices will be sent to DTC. If less than all of the Bonds 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 District as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co. s consenting or voting rights to those Direct Participants to whose accounts the Bonds are credited on the record date (identified in a listing attached to the Omnibus Proxy). Redemption proceeds, distributions, and dividend payments on the Bonds will be made to Cede & Co., or such other nominee as may be requested by an authorized representative of DTC. DTC s practice is to credit Direct Participants accounts, upon DTC s receipt of funds and corresponding detail information from the District or agent on payable date in accordance with their respective holdings shown on DTC s records. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered in street name, and will be the responsibility of such Participant and not of DTC, agent, or the District, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of redemption proceeds, distributions, and dividend payments to Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) is the responsibility of the District or agent, disbursement of such payments to Direct Participants will be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners will be the responsibility of Direct and Indirect Participants. DTC may discontinue providing its services as depository with respect to the Bonds at any time by giving reasonable notice to the District. Under such circumstances, in the event that a successor depository is not obtained, certificates representing the Bonds are required to be printed and delivered. The District may decide to discontinue the use of the system of book-entry transfers through DTC (or a successor securities depository). In that event, certificates representing the Bonds will be printed and delivered to DTC. The information in this Official Statement concerning DTC and DTC s book-entry system has been obtained from sources that the District believes to be reliable, but neither the District nor the Underwriter takes any responsibility for the accuracy thereof. SECURITY AND SOURCE OF PAYMENT The Bonds are a general obligation of the District. Annual ad valorem taxes will be levied on all taxable property within the District without limitation as to rate or amount for the purpose of paying principal and interest on the Bonds. TAX MATTERS In the opinion of Rodey, Dickason, Sloan, Akin, & Robb, P.A., Bond Counsel, to be delivered at the time of the original issuance of the Bonds, under existing laws, regulations, rulings and judicial 7

14 decisions, the interest on the Bonds is excludable from gross income for federal income tax purposes. Bond Counsel is further of the opinion that the interest on the Bonds is exempt from taxation by the State and its political subdivisions. The Internal Revenue Code of 1986, as amended (the Code ), imposes various restrictions, conditions and requirements relating to the exclusion from gross income for federal tax purposes of interest on obligations, such as the Bonds. The District has covenanted in the Resolution to comply with certain guidelines designed to assure that interest on the Bonds will not become includible in gross income. Failure to comply with these covenants may result in the interest on the Bonds being included in gross income from the date of issue of the Bonds. The opinion of Bond Counsel assumes compliance with such covenants. Bond Counsel has opined that the interest on the Bonds is not a specific preference item for purposes of the alternative minimum tax provisions contained in the Code; however, interest on the Bonds will be included in the adjusted current earnings of certain corporations in the calculation of alternative minimum tax. To the extent the issue price of any maturity of the Bonds is less than the amount to be paid at maturity of such Bonds (excluding amounts stated to be interest and payable at least annually over the term of such Bonds), the difference constitutes original issue discount, the accrual of which, to the extent properly allocable to each Beneficial Owner thereof, is treated as interest on the Bonds which is excluded from gross income for federal income tax purposes. Beneficial Owners of the Bonds should consult their own tax advisors with respect to the tax consequences of ownership of Bonds with original issue discount, including the treatment of Beneficial Owners who do not purchase such Bonds in the original offering to the public at the first price at which a substantial amount of such Bonds is sold to the public. Prospective purchasers of the Bonds should be aware that ownership of the Bonds may result in collateral federal income tax consequences to certain taxpayers, including, without limitation, financial institutions, property and casualty insurance companies, individual recipients of Social Security or Railroad Retirement benefits, certain S corporations with excess net passive income, foreign corporations subject to the branch profits tax, life insurance companies and taxpayers who may be deemed to have incurred or continued indebtedness to purchase or carry or have paid or incurred certain expenses allocable to the Bonds. Bond Counsel does not express any opinion regarding such collateral tax consequences. Prospective purchasers of the Bonds should consult their tax advisors regarding collateral federal income tax consequences. The opinion of Bond Counsel is based on existing law, which is subject to change. Such opinion is further based on factual representations made to Bond Counsel as of the date thereof. Bond Counsel assumes no duty to update or supplement its opinion to reflect any facts or circumstances that may thereafter come to its attention, or to reflect any changes in law that may thereafter occur or become effective. Moreover, the opinion of Bond Counsel is not a guarantee of a particular result, and is not binding on the IRS or the courts; rather, such opinion represents its professional judgment based on its review of existing law, and in reliance on the representations and covenants that it deems relevant to such opinion. NEW MEXICO INCOME TAX OPINION On the date of initial delivery of the Bonds, Rodey, Dickason, Sloan, Akin, & Robb, P.A. will render its opinion that interest on the Bonds will be excluded from net income for purposes of New Mexico state income tax. Rodey, Dickason, Sloan, Akin, & Robb, P.A. expresses no opinion as to any other federal, state or local tax consequences. (See the Forms of Opinion of Bond Counsel in Appendix B.) 8

15 QUALIFIED TAX-EXEMPT OBLIGATIONS The District intends to designate the Bonds as Qualified Tax-Exempt Obligations. Section 265(a) of the Internal Revenue Code of 1986 (the Code ) provides, in pertinent part, that interest paid or incurred by a taxpayer, including a "financial institution," on indebtedness incurred or continued to purchase or carry tax-exempt obligations is not deductible by such taxpayer in determining taxable income. Section 265(b) of the Code provides an exception to the disallowance of such deduction for any interest expense paid or incurred on indebtedness of a taxpayer which is a "financial institution" allocable to tax-exempt obligations, other than "private activity bonds," which are designated by a "qualified small issuer" as "qualified taxexempt obligations." A "qualified small issuer" is any governmental issuer (together with any subordinate issuers) who issues no more than $10,000,000 of tax-exempt obligations during the calendar year. Section 265(b)(5) of the Code defines the term "financial institution" as referring to any corporation described in Section 585(a)(2) of the Code, or any person accepting deposits from the public in the ordinary course of such person's trade or business which is subject to federal or state supervision as a financial institution. LEGALITY Rodey, Dickason, Sloan, Akin, & Robb, P.A., Albuquerque, New Mexico has been retained as Bond Counsel to the District ("Bond Counsel"). Bond Counsel will provide an unqualified opinion that the Bonds are legally issued under New Mexico law and that the interest income from the Bonds is exempt from Federal and State of New Mexico income taxes. Bond Counsel was not requested to and did not take part in the preparation of the Official Statement nor has it undertaken to independently verify any of the information contained herein. Bond Counsel has no responsibility for the accuracy or completeness of any information furnished in connection with any offer or sale of the Bonds, but such counsel prepared in cooperation with other persons and are partially responsible for the Official Notice of Meeting and Sale adopted by the Board on May 25, The legal fees to be paid to Bond Counsel for services rendered in connection with the issuance of the Bonds are contingent in part upon the sale and delivery of the Bonds. REGISTRATION The Bonds have not been registered under the Federal Securities Act of 1933 or the Securities Exchange Act of 1934, both as amended, in reliance upon the exemptions provided thereunder by Sections 3(a)(2) and 3(a)(12), respectively, for the issuance and sale of the Bonds; nor have the Bonds been qualified under the Securities Act of New Mexico. The District assumes no responsibility for qualification of the Bonds under the securities laws of any jurisdiction in which the Bonds may be sold, assigned, pledged, hypothecated or otherwise transferred. This disclaimer of responsibility for qualification for sale or other disposition of the Bonds shall not be construed as an interpretation of any kind with regard to the availability of any exemption from securities registration provisions. LITIGATION There is not now pending or threatened, to the best of the knowledge of the District, any litigation restraining or enjoining the issuance or delivery of the Bonds or questioning or affecting the validity of the Bonds or the proceedings or authority under which they are to be issued. Neither the creation, organization or existence, nor the title of a quorum of the present Board members or other officers of the District to their respective offices, is being questioned. At the time of delivery of the Bonds, the District will deliver a nolitigation certificate to that effect. 9

16 CONTINUING DISCLOSURE The District has made the following agreement for the benefit of the holders and beneficial owners of the Bonds. The District is required to observe the agreement for so long as it remains obligated to advance funds to pay the Bonds. Under the agreement, the District will be obligated to provide certain updated financial information and operating data annually, and timely notice of specified material events, to certain information vendors. This information will be available to securities brokers and others who subscribe to receive the information from the vendors. Annual Reports The District will provide certain updated financial information and operating data to certain information vendors annually. The information to be updated includes all quantitative financial information and operating data with respect to the District of the general type included in this Official Statement under the headings TAX RATES,, "FINANCIAL INFORMATION - Direct and Overlapping G.O. Bond Debt Ratios, and Analysis of Assessed Valuations, and in Appendix C. The District will update and provide this information by March 31 of each fiscal year beginning in The District will provide the updated information and operating data to the Municipal Securities Rulemaking Boards (the MSRB ) Electronic Market Access System ( EMMA ). The District may provide updated information in full text or may incorporate by reference certain other publicly available documents, as permitted by SEC Rule 15c2-12. The updated information will include audited financial statements, if the District commissions an audit and it is completed by the required time. If audited financial statements are not available by the required time, the District will provide unaudited financial statements by the required time, and will provide audited financial statements when and if the audit report becomes available. Any such financial statements will be prepared in accordance with the accounting principles described in Appendix C or such other accounting principles as the District may be required to employ from time to time pursuant to state law or regulation. The District's current fiscal year end is June 30th. Accordingly, it must provide updated financial information and operating data by March 31 in each year, unless the District changes its fiscal year. If the District changes its fiscal year, it will notify MSRB and any SID of the change. Material Event Notices The District will also provide timely notices of certain events to certain information vendors. The District will provide notice of any of the following events with respect to the Bonds, if such event is material to a decision to purchase or sell Bonds or Certificates, respectively: (1) principal and interest payment delinquencies; (2) non-payment related defaults; (3) unscheduled draws on debt service reserves reflecting financial difficulties; (4) unscheduled draws on credit enhancements reflecting financial difficulties; (5) substitution of credit or liquidity providers, or their failure to perform; (6) adverse tax opinions or events affecting the tax-exempt status of the Bonds; (7) modifications to rights of holders of the Bonds; (8) Bond calls; (9) defeasances; (10) release, substitution or sale of property securing repayment of the Bonds; (11) rating changes; (12) bankruptcy, insolvency, receivership or a similar event with respect to the District or an obligated person; (13) the consummation of a merger, consolidation, or acquisition involving an obligated person or the sale of all or substantially all of the assets of the obligated person, 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; (14) appointment of a successor or additional trustee, or a change of name of a trustee, if material, and (15) Tender offers. In addition, the District will provide, within 10 days, notice of any failure by the 10

17 District to provide information, data or financial statements in accordance with its agreement described above under "Annual Reports." The District will provide each notice described in this paragraph to the MSRB. Availability of Information from MSRB and SID The District has agreed to provide the foregoing information only to the MSRB and any SID. The information will be available to holders of Bonds only if the holders comply with the procedures and pay the charges established by such information vendors or obtain the information through securities brokers who do so. No SID has been designated in New Mexico at this time. Limitations and Amendments The District has agreed to update information and to provide notices of material events only as described above. The District has not agreed to provide other information that may be relevant or material to a complete presentation of its financial results of operations, condition or prospects or agreed to update any information that is provided, except as described above. The District makes no representation or warranty concerning such information or concerning its usefulness to a decision to invest in or sell bonds at any future date. The District disclaims any contractual or tort liability for damages resulting in whole or in part from any breach of its continuing disclosure agreement or from any statement made pursuant to its agreement, although holders of Bonds may seek a writ of mandamus to compel the District to comply with its agreement. This continuing disclosure agreement may be amended by the District from time to time to adapt to changed circumstances that arise from a change in legal requirements, a change in law or a change in the identity, nature, status or type of operations of the District, but only if (1) the provisions, as so amended, would have permitted an underwriter to purchase or sell Bonds or Certificates in the primary offering of the Bonds in compliance with the Rule, taking into account any amendments or interpretations of the Rule since such offering as well as such changed circumstances and (2) either (a) the Holders of a majority in aggregate principal amount (or any greater amount required by any other provision of the Resolution that authorizes such an amendment) of the outstanding Bonds consent to such amendment or (b) a person that is unaffiliated with the District (such as nationally recognized bond counsel) determined that such amendment will not materially impair the interest of the Holders and beneficial owners of the Bonds. The District may also amend or repeal the provisions of this continuing disclosure agreement if the SEC amends or repeals the applicable provision of the Rule or a court of final jurisdiction enters judgment that such provisions of the Rule are invalid, but only if and to the extent that the provisions of this sentence would not prevent an underwriter from lawfully purchasing or selling bonds in the primary offering of the Bonds. COMPLIANCE WITH PRIOR UNDERTAKINGS Pursuant to Securities and Exchange Commission Rule 15c2-12, the District will undertake to provide certain ongoing disclosure, including annual operating data and financial information, audited financial statements and notices of the occurrence of certain material events. The District previously has entered into such undertakings pursuant to such Rule with respect to bonds previously issued by it. The District s continuing disclosure undertakings provide that while the Series 2005 Bonds are outstanding, the District will provide certain annual financial information to the national securities repositories within six months after the end of each fiscal year. The District failed to file its audited financials and financial operating information for the Fiscal Year 2012 within six months of the 11

18 end of the fiscal year. The District made its 2012 audited financials and financial operating filings available on EMMA on March 21, The District has entered into a written agreement with George K. Baum & Company for limited clerical and ministerial assistance to help the District meet certain of its continuing disclosure filing obligations. Those limited clerical and ministerial services include reminders of filing dates and, upon request by the District, assistance with the process of posting information with the MSRB. RATING Moody s Investors Services, Inc. has assigned its municipal bond rating of Baa2 (stable outlook) to the Bonds. In addition, Moody s Investors Services, Inc. has assigned an Aa2 (negative outlook) enhanced rating to the Bonds based on the New Mexico School District Enhancement Program. The ratings reflect only the view of Moody s Investors Services, Inc., and an explanation of the significance of such ratings may be obtained only from Moody s Investors Services, Inc., 99 Church Street, New York, New York There is no assurance that such ratings will continue for any given period of time or that it will not be revised downward or withdrawn entirely by Moody s Investors Services, Inc. if, in its judgment, circumstances warrant. Any such downward revision or withdrawal of the ratings may have an adverse effect on the market price of the Bonds. NEW MEXICO SCHOOL DISTRICT ENHANCEMENT PROGRAM The New Mexico Legislature amended NMSA 1978, Section in the first session of 2007, which became effective on March 30, 2007, and is applicable to general obligation bonds issued after such date. Section provides that if the District s Paying Agent notifies the Department of Finance and Administration on the business day immediately prior to the payment date that a bond payment has not been received, the Department of Finance and Administration shall forward the amount necessary to make the payment due on the bonds to the Paying Agent. Such amount will be withheld by the Department of Finance and Administration from the District s monthly State Equalization Guarantee distribution (see Finances of the Educational Program State Equalization Guarantee ). If the amount of the next succeeding distribution is insufficient to pay the amount due, the Department of Finance and Administration shall withhold amounts from each succeeding payment of the State Equalization Guarantee distribution, including payments to be made in succeeding fiscal years, but no more than 12 consecutive months of payments, until the total amount of principal and interest is withheld. Withholding of the State Equalization Guarantee distribution may affect the District s ability to continue to operate. Section requires filing the Bond Resolution, bond offering documents and contact information for the Paying Agent with the Department of Finance and Administration. Failure to file such information will not invalidate the obligation of the State Treasurer to pay the bond payment and withhold the State Equalization distribution. Moody s Investors Service, Inc. has assigned an Aa2 (negative outlook) rating to New Mexico s School District Enhancement Program. By request, Moody s has assigned the Aa2 (negative outlook) rating to school district bonds upon verification of a requirement in the authorizing bond resolution that an independent, third-party paying agent will be appointed and maintained. Notwithstanding this fact, the Bonds are qualified and do receive the benefit of the New Mexico School District Enhancement Program. TRANSCRIPT AND CLOSING DOCUMENTS A complete transcript of proceedings and a no-litigation certificate (described above under "Litigation") will be delivered by the District to the purchaser when the Bonds are delivered. The District 12

19 will at that time also provide a certificate issued by the District relating to the accuracy and completeness of this Official Statement. MUNICIPAL ADVISOR George K. Baum & Company has been retained as Municipal Advisor to the District to assist in the issuance of the Bonds. In this capacity, the Municipal Advisor has compiled certain data relating to the Bonds that is contained in this Official Statement. The Municipal Advisor has not independently verified any of the data contained herein or conducted a detailed investigation of the affairs of the District to determine the accuracy or completeness of this Official Statement. Because of its limited participation, the Municipal Advisor assumes no responsibility for the accuracy or completeness of any of the information contained herein. The fee of the Municipal Advisor for services with respect to the Bonds is contingent upon the issuance and sale of the Bonds. The Municipal Advisor has provided the following sentence for inclusion in this Official Statement: The Municipal Advisor has reviewed the information in this Official Statement in accordance with, and as part of, its responsibilities to the District and, as applicable, to investors under the federal securities laws as applied to the facts and circumstances of this transaction, but the Municipal Advisor does not guarantee the accuracy or completeness of such information. UNDERWRITING The Bonds are being purchased by Robert W. Baird & Co., Inc. (the Underwriter ) pursuant to a Bond Purchase Agreement dated June, The Underwriter has agreed, subject to certain conditions, to purchase the Bonds from the District at a price of $ (representing the par amount of the Bonds of $5,000,000*, [plus a net original issue premium] [less a net original issue discount] of $, less an Underwriter s discount of $. The Bond Purchase Agreement provides that the Underwriter will purchase all of the Bonds if any are purchased, the obligation to make such purchase being subject to certain terms and conditions set forth in the Bond Purchase Agreement, including approval of certain legal matters by counsel and certain other conditions. The Underwriter has reviewed the information in this Official Statement pursuant to its responsibilities to investors under federal securities laws, but the Underwriter does not guarantee the accuracy or completeness of such information. The prices at which the Bonds are offered to the public (and the yields resulting therefrom) may vary from the initial public offering prices appearing on the cover page of this Official Statement. In addition, the Underwriter may allow commissions or discounts from such initial offering prices to dealers and others. ADDITIONAL INFORMATION Information concerning the Bonds, including the District's Official Statement, may be obtained from the District's Municipal Advisor, George K. Baum & Company, 6565 Americas Parkway, Suite 860, Albuquerque, New Mexico The Official Statement is deemed final by the District for purposes of SEC Rule 15c2-12(b)(1) except for the omission of the following information: the offering price, interest rate, selling compensation, aggregate principal amount, principal amount per maturity, delivery dates, any other terms or provisions required by an issuer of such securities to be specified in a competitive bid, ratings, other terms of the Bonds depending on such matters, and the identity of the underwriter(s). 13

20 The District will provide the Final Official Statement and any amendments or supplements thereto and will undertake all other obligations as contemplated by Rule 15c12-12 of the Securities and Exchange Commission. OFFICIAL STATEMENT CERTIFICATION As of the date hereof this Official Statement is true to the best of my knowledge, complete and correct in all material respects, and does not include any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements made herein, in light of the circumstances under which they are made, not misleading. The preparation of this Official Statement and its distribution has been authorized by the District. The Official Statement is hereby duly approved by the District as of the date on the cover page hereof. /s/ President, Board of Education /s/ Secretary, Board of Education 14

21 BORROWING CAPACITY 2016 Final Limitation (6% x $579,238,305*) $34,754,298 Less: Outstanding Direct General Obligation School Building Bonds (1,420,000) Less: 2017 Bonds (5,000,000)** Unused Borrowing Capacity $28,334,298 *Source: New Mexico Public Education Department. **Preliminary, subject to change. (REMAINDER OF PAGE INTENTIONALLY LEFT BLANK) 15

22 FINANCIAL INFORMATION Actual and Assessed Valuations 2016 Estimated Actual Valuation $1,737,714,915 (1) 2016 Final Assessed Valuation $579,238,305 (2) Outstanding Direct Debt $1,420,000 Plus: 2017 Bonds 5,000,000* Total Direct Debt $6,420,000 Overlapping G.O. Bonded Indebtedness Taxing Body 2016 Final Assessed Valuation Bonded Debt Percentage Applicable Net Amount State of New Mexico $56,608,163,615 $326,755, % $3,343,493 Grant County 841,061,500 2,845, % 1,959,349 Town of Silver City 207,101, % Total Overlapping Debt $5,302,842 Total Direct and Overlapping Debt $11,722,842 Direct and Overlapping G.O. Bond Debt Ratios Direct Debt to Assessed Value 1.11% Direct and Overlapping Debt to Assessed Value 2.02% Direct Debt to Actual Valuation 0.37% Direct and Overlapping Debt to Actual Valuation 0.67% Per Capita Direct Debt (3) $301 Per Capita Direct and Overlapping Debt $549 Per Capita Assessed Valuation $27,139 Per Capita Actual Valuation $81,418 (1) Estimated Actual Valuation is calculated by multiplying estimated assessed value times three plus estimated exemptions. (2) New Mexico assessed values represent 33-1/3% (the maximum assessment ratio permitted by the New Mexico Constitution) of the actual property value after deduction of certain exemptions. Property tax levies are based upon the certified assessed valuation. (3) Estimated District population is 21,343 (Source: Statistical Atlas). *Preliminary, subject to change. 16

23 DEBT LIMITATIONS Article IX, Section 11 of the New Mexico Constitution and NMSA 1978, Section , as amended, limit the power of the District to incur general obligation debt extending beyond the fiscal year (e.g., by issuing additional bonds) in three ways: 1. The District can only incur such debt for the purpose of erecting, remodeling, making additions to and furnishing school buildings, or purchasing or improving school grounds, and purchasing computer software and hardware for student use in public schools, providing matching funds for capital outlay projects funded pursuant to the Public School Capital Outlay Act, or any combination of these purposes, and to pay the cost of issuance of the bonds, and to reimburse the District for expenditures made for the foregoing purposes, as well as to pay all legal, financial and other necessary costs connected with the sale and issuance of the Bonds. 2. The District must submit any proposition to create such a debt to a vote of the qualified electors of the District, and a majority of those voting must vote in favor of creating the debt. 3. The total direct general obligation indebtedness of the District may not exceed 6% of the assessed valuation of the taxable property within the District, as shown by the last preceding general assessment. ANALYSIS OF ASSESSED VALUATION Assessed Valuation of property within the District is calculated as follows: of the total estimated actual valuation of all taxable property in the District, 33-1/3% is legally subject to ad valorem taxes. After deduction of certain personal exemptions, the certified 2016 final assessed valuation is $579,238,305. The actual value of personal property within the District is determined by the Grant County Assessor, and is divided into Residential, Non-Residential and Oil, Gas and Copper categories. The actual value of corporate property within the District is determined by the New Mexico State Property Tax Department. The analysis of the District's Assessed Valuation for the past five years is as follows: Tax Year Residential Non-Residential Oil, Gas & Copper Total 2016 $337,050,712 $174,234,661 $67,952,932 $579,238, ,397, ,973,963 76,185, ,556, ,526, ,130,023 77,376, ,033, ,005, ,119,853 74,000, ,125, ,203, ,535,094 66,325, ,064,797 Source: New Mexico Public Education Department. Reassessment New Mexico has a state-wide property reassessment program. The program's objective is to keep property values close to their market values so that there will be a high correlation between the value of a property and its share of the tax burden. The first reassessment under this present program was in 1986, and such reassessments continue to occur biannually in the even numbered years. 17

24 Comparison of Assessed Value Tax Year Grant County District Assessed Value 2016 $841,061,500 $579,238, ,204, ,556, ,414, ,033, ,601, ,125, ,741, ,064,797 Source: New Mexico Public Education Department and New Mexico Department of Finance and Administration. Assessed Valuation of the Largest Centrally Assessed Taxpayers in the District 2016 Taxpayer Assessed Valuation Union Pacific $15,226,113 PNM Electric 5,792,922 El Paso Natural Gas 4,714,837 NM Gas Company 2,957,773 SFFP 2,688,435 Western Telephone 1,842,199 QWEST 1,325,255 Level 3 Communication 1,324,049 WNM Communication Corp. 1,007,874 Lordsburg Minerals 1,060,256 Source: New Mexico Department of Taxation and Revenue. Yield Control TAX RATES NMSA 1978, Section limits the allowable increase in property taxes from the preceding year. Specifically, no rate shall be set or assessment imposed which will produce current tax revenues in excess of the prior year's tax revenues, plus a percent that is determined by a growth control factor. The growth control factor is the sum of (1) the growth in the assessed valuation due to net new additions to the property tax rolls, expressed as a percent of the prior year's assessed ("G"), and (2) the percentage change, not in excess of 5%, in the annual business indicator index between the prior calendar year and the year next preceding the prior calendar year ("I"). The resulting yield control equation is: Current tax revenues = prior tax revenues X (G + I) Where: G is never less than 100%, and I is never less than 0% nor more than 5%. The annual business indicator index is defined as the "annual implicit price deflator index for state and local government purchases of goods and services, as published in the United States Department of Commerce monthly publication entitled 'Summary of Current Business' or any successor publication for the calendar year." The yield control formula applies to both residential and non-residential property, but the calculations for each property class are made separately. In addition, the yield control formula applies to any 18

25 authorized operating levy but not to any debt service levy. To the extent that the reassessment program, as discussed under "Reassessment" above, increased property values, the yield control formula operated to limit the growth in tax revenues resulting solely from reassessment, while not directly limiting the increase in tax revenues due to net new additions to the property tax rolls. TAX DATA Article VIII, Section 2 of the New Mexico Constitution provides that the total ad valorem tax levied by all overlapping units on taxable property within the boundaries of the District (i.e., the State of New Mexico and Grant County) shall not exceed the limitation of $20.00 per $1,000 of assessed valuation unless a majority of the voting qualified electors of the taxing district approve and authorize the additional levy. Such limitation does not apply in the case of special levies on special classes of property and levies for public debt, such as the levies required to pay this issue. The following tables summarize the tax rates in the District: Tax Rate Per $1,000 of Assessed Valuation Grant County Capital Building Tax Assessed Operating Debt Improvement Improvement Year Valuation Levy Service Levy Levy Levy Total 2016 $579,238,305 Residential Non-Residential $582,556,423 Residential Non-Residential $583,033,133 Residential Non-Residential $573,125,860 Residential Non-Residential $550,064,797 Residential Non-Residential Source: New Mexico Department of Finance and Administration. 19

26 SILVER CONSOLIDATED SCHOOL DISTRICT TAX RATES - TOTAL District Tax Rates Total R* NR** R* NR** R* NR** R* NR** R* NR** State of New Mexico Grant County Town of Silver City Silver Schools Historical Summary of Tax Rates for Bonds R* NR** R* NR** R* NR** R* NR** R* NR** State of New Mexico Grant County Town of Silver City Silver Schools *Residential **Non-Residential Source: State of New Mexico Department of Finance and Administration. Method of Tax Collection Current taxes for all units of government are collected by the Grant County Treasurer and distributed monthly to the various political subdivisions to which they are due. Property taxes are payable to the Grant County Treasurer in two equal annual installments. The first annual installment is due on November 10 and becomes delinquent on December 10. The second annual installment is due on April 10 and becomes delinquent on May 10. Pursuant to NMSA 1978, Section , property taxes are delinquent 30 days after the date on which they are due. Interest On Delinquent Taxes Pursuant to NMSA 1978, Section , if property taxes are not paid for any reason within thirty (30) days after the date they are due, interest on the unpaid taxes shall accrue from the thirtieth day after they are due until the date they are paid. Interest accrues at the rate of one percent (1%) per month or any fraction of a month. Delinquent Taxes Penalty Pursuant to NMSA 1978, Section , if property taxes become delinquent, a penalty of one percent (1%) of the delinquent tax for each month or any portion of a month they remain unpaid shall be imposed, but the total penalty shall not exceed five percent (5%) of the delinquent taxes. The minimum penalty imposed is $5.00. A county can suspend application of the minimum penalty requirement for any tax year. 20

27 If property taxes become delinquent because of an intent to defraud by the property owner, fifty percent (50%) of the property taxes due or fifty dollars ($50.00), whichever is greater, shall be added as a penalty. Remedies Available for Non-Payment of Taxes Pursuant to NMSA 1978, Section , property taxes are the personal obligation of the person owning the property on the date on which the property was subject to valuation for property taxation purposes. A personal judgment may be rendered against the taxpayer for payment of taxes that are delinquent, together with any penalty and interest on the delinquent taxes. Pursuant to NMSA 1978, Section , taxes on real property are a lien against the real property. Pursuant to NMSA 1978, Section , delinquent taxes on real property may be collected by selling the real property on which taxes are delinquent. Pursuant to NMSA 1978, Section , delinquent property taxes on personal property may be collected by asserting a claim against the owners of the personal property for which taxes are delinquent. Tax Collections on Local and Centrally Assessed Property in Grant County (as of March 2017) Tax Year Net Taxes Charged to Treasurer Taxes Collected Percentage Collected 2016 $11,738,031 $7,547, %* ,628,801 10,890, % ,643,462 11,010, % ,829,976 11,182, % ,555,982 11,117, % ,755,093 12,318, % ,707,505 11,312, % ,856,429 9,487, % ,074,341 9,049, % ,211,879 9,195, % *Partial collections through March Source: Grant County Treasurer. 21

28 OUTSTANDING GENERAL OBLIGATION BONDS Series Original Issue Amount Final Maturity Principal Outstanding 2005 $9,000, $1,420,000 Authorized but Unissued General Obligation Bonds The District had a General Obligation Bond Election on February 7, 2017 for $20,000,000. After this 2017 issue, the District will have $15,000,000* in authorized but unissued bonds. (REMAINDER OF PAGE INTENTIONALLY LEFT BLANK) *Preliminary, subject to change. 22

29 General The District is located in the southwestern part of the state, 131 miles northwest of El Paso, Texas and 238 miles southwest of Albuquerque, New Mexico. The District covers an area of about 2,970 square miles, which encompasses the western and southern portions of Grant County. The District includes nine separate schools with a current enrollment of 2,759 pupils. The total population of the District is estimated to be 21,343 (as of April 2015). Board of Education The Board, subject to regulations and the authority of the Secretary of Public Education and the Public Education Department of the State of New Mexico, supervises and controls all public schools and property within the District. The Board develops educational policies for the District, employs a superintendent of schools, fixes the salary of the superintendent of schools, has the capacity to sue and be sued, contracts, leases, purchases and sells for the District, acquires and disposes of property, and adopts regulations pertaining to the administration of all powers or duties of the Board. Members serve without compensation for four-year terms of office in non-partisan elections held every two years on the first Tuesday in February. The current members are: Administrative Staff Mike McMillan, President Frances Vasquez, Vice President Ashley Montenegro, Secretary Patrick Cohn, Member Justin Wecks, Member The Superintendent of Schools ( Superintendent ) is selected by and is under contract with the Board. All other employees are selected by the Superintendent. The current Superintendent is Audie Brown. Enrollment History The District operates five elementary schools, two middle schools, and three high schools, all of which are accredited by the North Central Association of Colleges and Secondary Schools as well as the Public Education Department of the State of New Mexico. An enrollment history for the District follows: Enrollment History Year Enrollment , , , , ,077 Source: New Mexico Public Education Department, 40-Day Count. 23

30 Finances of the Educational Program The basic educational programs of the District are funded in major part by the State of New Mexico Equalization Guarantee, a local ad valorem tax collection, and an amount provided by the State for pupil transportation and school textbooks. The method of distribution of State funds to local school districts guarantees that each school district will receive 100% of the calculated program cost. Program cost is funded by the State of New Mexico on a partnership basis with local and federal governments. All sums distributed by the State to the District are appropriated from the State's general fund. The State allocation to each district is determined by deducting from each district's program cost 95% of designated local revenues and 95% of designated federal revenues. The remainder is "State Equalization Guarantee" to insure that each district receives 100% of its program cost. In addition, the Legislature makes separate 100% appropriations for public school transportation and school textbooks on a dollar per student value. The State Equalization Guarantee does not apply to debt service funds. Prior to June 1 of each year, the Board approves the proposed operating budget of the fiscal year commencing the following July 1. The operating budget includes expenditures and the means of financing them. Budgets for all funds are approved by the State Public Education Department, School Budgeting Division. All budget increases, decreases and transfers must be approved by the Public School Finance Division. Expenditures may not be made out of a particular fund in excess of those budgeted. General Fund The General Fund is used to account for resources of the operational fund, student activity funds, and other resources not accounted for in another fund. The sources of revenue for the District's General Fund are: Local Revenues - Local revenues are a minor source of revenue to the District composed, in part, of a property tax annually levied on and against all of the taxable property within the District for operational purposes. The levy is limited by State law to a rate of 50 cents for each $1,000 of net taxable value of taxable property. Other sources of local revenues include interest income earned on the District's investments, rentals, and sale of property. In the fiscal year , the District s General Fund received $403,303 from local sources. Federal Revenues - Another source of annual revenue for the District's General Fund is derived from indirect costs of direct federal grant funds related to vocational, special education, and various other programs, and P.L. 874 federal impact moneys paid to the District in lieu of taxes on federal land located in the District. In fiscal year , the District s General Fund received $289,060 in federal revenues. State Revenues - The District's largest source of annual revenue is derived from the State Equalization Guarantee payments described above. During fiscal year , the District s General Fund received $24,569,278 from state sources. Such payments represented approximately 97% of actual fiscal year General Fund revenues. Other Funds maintained by the District in addition to the General Fund include: Special Revenue Funds - Special revenue funds are used to account for the proceeds of specific revenue sources that are legally restricted to expenditures for specified purposes. A list of specific special revenue funds is contained in the June 30, 2016 audited financial statements. 24

31 Debt Service Funds - Debt service funds are used to account for accumulation of resources for, and the payment of, general long-term debt principal, interest and related costs. Grant County remits taxes collected to the District as one lump sum and does not break down such amount as to principal or interest in accordance with instructions from the State Department. Since the County cannot provide a breakdown at the end of the fiscal year, the principal and interest funds are not combined and are shown under the single heading, Debt Service Funds. Capital Projects Funds - Capital projects funds are used to account for financial resources to be used for the acquisition or construction of major capital facilities. The Capital Projects Fund, which consists of the General Building Fund, accounts for the resources and major costs of capital improvements in the District, such as erecting, remodeling, making additions to and furnishing school buildings and purchasing and improving school grounds. Revenue is provided through general obligation school bonds and earnings on investments. Fiduciary Funds - Trust & Agency - Trust and agency funds are used to account for assets held by the District in a trustee capacity or as an agent for individuals, private organizations, other governments, and/or other funds. Agency funds are custodial in nature (assets equal liabilities) and do not involve measurement of results of operations. Non-expendable trust funds represent funds whose earnings may be expended. Nonexpendable trusts are accounted for in essentially the same manner as governmental funds. Following is a Summary Statement of Revenues, Expenditures, and Fund Balances for Fiscal Years 2012 through A complete copy of the audited annual report can be obtained from the District upon written request and after payment of a charge for copying. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] 25

32 STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE (GENERAL FUND) REVENUES: Property Taxes $151,258 $168,630 $173,954 $167,697 $156,531 Fees and charges 233, , , , ,480 State aid 24,569,278 24,839,847 24,420,914 23,512,881 22,474,693 Federal aid 289, , , , ,637 Investment income 5,411 7,021 1,119 1,500 3,093 Insurance 10, Miscellaneous 3, ,197 7,087 56,905 Total Revenues $25,261,641 $25,495,445 $25,110,244 $24,171,803 $23,259,339 EXPENDITURES: Current: Instruction $14,096,208 $14,340,138 $14,465,442 $14,343,022 13,863,018 Support services - students 2,955,941 3,176,756 3,009,333 3,081,938 2,725,429 Support services - instruction 719, , , , ,891 General administration 674, , , , ,943 School administration 1,748,591 1,786,692 1,783,148 1,644,470 1,574,588 Central services 554, , , , ,265 Operation of plant 2,847,524 2,969,452 3,030,992 2,877,407 2,767,195 Food services Transportation 1,238,436 1,188,248 1,155, , ,867 Other support services 83,344 75,974 57,637 31, ,690 Debt Service: Debt service - principal Debt service - interest Capital outlay - - 5, Total Expenditures $24,917,778 $25,466,685 $25,402,092 $24,620,469 $23,641,886 Net changes in fund balances $343,863 $28,760 ($291,848) ($448,666) ($382,547) Fund balances - beginning of year 410, , ,489 1,122,155 1,504,702 Fund balances - end of year $754,264 $410,401 $381,641 $673,489 $1,122,155 Source: The figures for fiscal years ended June 30, 2012 through 2016 have been excerpted from the District's audits. Such figures are excerpts and do not purport to be complete. The figures are presented for information purposes only. 26

33 APPENDIX A GENERAL INFORMATION GRANT COUNTY

34 Population U.S. Census Grant County State of New Mexico ,280 2,081, ,564 2,080, ,988 2,083, ,241 2,085, ,320 2,083,784 Source: U.S. Census Bureau, American FactFinder. Source: U.S. Census Bureau, American FactFinder. Percent of Population Age Grant County New Mexico Under 5 years 6.0% 6.6% % 6.8% % 6.8% % 6.9% % 7.2% % 13.3% % 11.8% % 13.0% % 6.7% % 6.1% % 8.6% % 4.5% 85 and older 2.5% 1.7% Per Capita Personal Income Year Grant County New Mexico ,011 24, ,411 23, ,755 23, ,415 23, ,726 23,537 Source: U.S. Census Bureau, 2015 American Community Survey.

35 The following two tables show median household buying income and percent of households by effective buying income groups for 2015 and earlier years. Median Household Buying Income Year Grant County State of New Mexico ,311 44, ,923 44, ,899 44, ,525 44, ,925 44,631 Source: U.S. Census Bureau, 2015 American Community Survey. Percent of Households by Effective Buying Income Groups Effective Buying Income Category Grant County Households Percent of New Mexico Households Under $10, % 9.6% 10,000-14, % 6.5% 15,000-24, % 12.8% 25,000-34, % 11.3% 35,000-49, % 14.2% 50,000-74, % 16.9% 75,000-99, % 11.4% 100, , % 10.6% 150, , % 3.8% 200,000 or more 1.5% 2.9% Source: U.S. Census Bureau, 2015 American Community Survey.

36 Non-Agricultural Employment in Grant County Industry Q Agriculture, forestry, fishing & hunting Mining * 1,643 * * * Utilities Construction Manufacturing Wholesale trade Retail trade 1,120 1,103 1,095 1,113 1,120 Transportation & warehousing Information Finance & insurance Real estate & rental & leasing Professional & technical services Management of companies & enterprises * 133 * * * Administrative & waste services Educational services Health care & social assistance Arts, entertainment & recreation Accommodation & food services Other services, except public admin Non-classifiable Total Private 6,356 6,278 6,208 6,245 6,159 Total Government 3,295 3,215 3,133 3,039 2,722 Federal State 1,090 1,140 1,116 1,067 1,032 Local 1,988 1,870 1,811 1,770 1,466 Total, All Industries 9,651 9,493 9,341 9,284 8,881 *Non-Disclosure sum of industries may not add to total due to Non-Disclosure Source: State of New Mexico Department of Labor.

37 Major Employers Some of the larger employers in the surrounding area are described below. No independent investigation of the stability or financial condition of the listed employers has been conducted and no representation can be made that these employers will maintain their status as major employers in the surrounding area. Employer Number of Employees Freeport McMoran Copper & Gold 1,400 Western New Mexico University 722 Gila Regional Medical Center 700 Silver Consolidated School District 418 Cobre Consolidated School District 219 Grant County 250 US Forest Service 200 W&N Enterprises 200 James Hamilton Construction 62 Source: Gila Economic Development Alliance. Employment/Unemployment Annual Average Grant County State of New Mexico 2017 Civilian Labor Force (Feb) 12, ,570 Employment (Feb) 11, ,392 Unemployment (Feb) ,178 Unemployment Rate (Feb) 6.86% 6.78% 2016 Civilian Labor Force 12, ,823 Employment 11, ,374 Unemployment ,449 Unemployment Rate 6.33% 6.72% 2015 Civilian Labor Force 12, ,889 Employment 11, ,242 Unemployment ,647 Unemployment Rate 6.75% 6.59% 2014 Civilian Labor Force 11, ,380 Employment 11, ,305 Unemployment ,075 Unemployment Rate 6.11% 6.75% 2013 Civilian Labor Force 12, ,684 Employment 11, ,428 Unemployment ,257 Unemployment Rate 6.64% 6.97% Source: US Department of Labor, Bureau of Labor Statistics.

38 APPENDIX B FORM OF OPINION OF BOND COUNSEL

39 BRUCE HALL JOHN P. SALAZAR JOHN P. BURTON CATHERINE T. GOLDBERG EDWARD RICCO W. MARK MOWERY ELLEN T. SKRAK CHARLES K. PURCELL ANDREW G. SCHULTZ SCOTT D. GORDON NELSON FRANSE THERESA W. PARRISH PAUL R. KOLLER CHARLES J. VIGIL THOMAS L. STAHL DAVID W. BUNTING LESLIE McCARTHY APODACA JEFFREY M. CROASDELL SUNNY J. NIXON JEFFREY L. LOWRY R. TRACY SPROULS DONALD B. MONNHEIMER ALAN HALL SETH L. SPARKS LISA CHAVEZ ORTEGA JOCELYN C. DRENNAN MICHAEL J. BRESCIA AARON C. VIETS KURT B. GILBERT RICK BEITLER JUSTIN A. HORWITZ SANDRA L. BEERLE VALERIE REIGHARD DENTON BRENDA M. SAIZ BRIAN P. BRACK TODD E. RINNER CHARLES R. HUGHSON JOSE R. BLANTON MICHAEL E. KAEMPER MARGOT A. HEFLICK KRYSTLE A. THOMAS GLENN A. BEARD DENISE M. CHANEZ PERRY E. BENDICKSEN III DAVID P. BUCHHOLTZ CRISTINA ADAMS TYLER M. CUFF SHANNON M. SHERRELL MELANIE B. STAMBAUGH JESSICA R. TERRAZAS STEPHANIE L. LATIMER LUIS G. CARRASCO JUAN M. MARQUEZ TAYLOR C. ZANGARA RODEY, DICKASON, SLOAN, AKIN & ROBB, P. A. ATTORNEYS AT LAW 201 THIRD STREET NW, SUITE 2200 ALBUQUERQUE, NEW MEXICO P.O. BOX 1888 ALBUQUERQUE, NEW MEXICO TELEPHONE (505) FACSIMILE (505) June 30, 2017 OF COUNSEL ROBERT M. ST. JOHN MARK K. ADAMS RICHARD C. MINZNER JO SAXTON BRAYER DEWITT M. MORGAN PATRICK M. SHAY CHARLES A. SEIBERT III CYNTHIA A. LOEHR JOHN N. PATTERSON DEBORA E. RAMIREZ BERNARD S. RODEY ( ) PEARCE C. RODEY ( ) DON L. DICKASON ( ) WILLIAM A. SLOAN ( ) JACKSON G. AKIN ( ) JOHN D. ROBB ( ) SANTA FE OFFICE 119 EAST MARCY STREET, SUITE 200 SANTA FE, NEW MEXICO P.O. BOX 1357 SANTA FE, NEW MEXICO TELEPHONE (505) FACSIMILE (505) WRITER S DIRECT NUMBER Silver Consolidated School District No. 1 $5,000,000 Silver Consolidated School District No. 1 General Obligation School Building Bonds Series 2017 Ladies and Gentlemen: We have acted as bond counsel to the Silver Consolidated School District No. 1 (the District ) in connection with the issuance of its $5,000,000 General Obligation School Building Bonds, Series 2017 (the Bonds ), dated June 30, The Bonds are issued pursuant to the Constitution and laws of the State of New Mexico (the State ) and the Authorizing Resolution adopted by the District s Board of Education on May 25, 2017, as supplemented by the Sale Resolution adopted by the District s Board of Education on June 20, In such capacity, we have examined the transcript of proceedings (the Transcript ) relating to the issuance of the Bonds and have also examined the law under authority of which the Bonds are issued. Based on our examination, we are of the opinion that, under the law existing on the date of this opinion, subject to the provisions of federal bankruptcy law and other laws affecting creditors rights and further subject to exercise of judicial discretion in accordance with general principles of equity: 1. The Bonds constitute valid and binding general obligations of the District and are to be paid from the proceeds of the levy of ad valorem taxes on all taxable property within the District without limitation as to rate or amount. 2. Assuming continuing compliance by the District with the requirements of the Internal Revenue Code of 1986, as amended (the Code ), and with the covenants contained in the

40 RODEY, DICKASON, SLOAN, AKIN & ROBB, P.A. June 30, 2017 Page 2 Transcript regarding the use, expenditure and investment of bond proceeds, interest on the Bonds is excludable from the gross income of owners of the Bonds for purposes of federal income taxation. Interest on the Bonds is not treated as an item of tax preference for purposes of the alternative minimum tax imposed on individuals and corporations. However, interest on the Bonds is included as an adjustment in calculating corporate alternative minimum taxable income and may therefore affect a corporation s alternative minimum tax. Failure of the District to comply with its covenants and with the requirements of the Code may cause interest on the Bonds to become includable in gross income for federal income tax purposes retroactive to their date of issuance. 3. The Bonds and the income from the Bonds are exempt from all taxation by the State or any political subdivision of the State. 4. The Bonds are qualified tax-exempt obligations within the meaning of Section 265(b)(3) of the Code. Other than as described herein, we have not addressed nor are we opining on the tax consequences to any person of the investment in, or the receipt of interest on, the Bonds. We express no opinion as of any date subsequent hereto, and our engagement with respect to the Bonds has concluded with their issuance. We disclaim any obligation to update this opinion. The opinions expressed herein represent our legal judgment based upon existing law, legislation, regulations and rulings as of the date of issuance and delivery of the Bonds that we deem relevant to render such opinions and are not a guarantee of a result. We express no opinion with respect to any pending legislation. We are passing upon only those matters set forth in this opinion and are not passing upon the accuracy or completeness of any statement made in connection with any sale of the Bonds. Very truly yours,

41 APPENDIX C EXCERPT OF DISTRICT S 2016 AUDITED FINANCIAL REPORT The information contained in this Appendix has been reproduced from the Silver Consolidated School District Annual Financial Report (the Report ) for the Fiscal Year Ended June 30, 2016, as prepared by Harshwal & Company LLP, Albuquerque, New Mexico. THE INFORMATION PRESENTED REPRESENTS ONLY A PART OF THE REPORT AND DOES NOT PURPORT TO BE A COMPLETE STATEMENT OF THE DISTRICT S FINANCIAL CONDITION. REFERENCE IS MADE TO THE COMPLETE REPORT FOR ADDITIONAL INFORMATION.

42 INDEPENDENT AUDITORS REPORT Mr. Tim Keller, State Auditor And Board of Education Silver Consolidated School District No. 1 Silver City, New Mexico Report on the Financial Statements We have audited the accompanying financial statements of the governmental activities, each major fund, the aggregate remaining fund information, and the budgetary comparisons for the general fund and major special revenue funds of Silver Consolidated School District No. 1 (the "District"), as of and for the year ended June 30, 2016, and the related notes to the financial statements which collectively comprise the District s basic financial statements as listed in the table of contents. We also have audited the financial statements of each of the District s nonmajor governmental funds and the budgetary comparisons for the major capital project funds, the debt service fund, and all nonmajor funds presented as supplementary information, as defined by the Government Accounting Standards Board, in the accompanying combining and individual fund financial statements as of and for the year ended June 30, 2016, 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 misstatements, 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. 3 ALBUQUERQUE 6739 Academy Road NE Suite 130 Albuquerque NM T F

43 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, 2016, and the respective changes in financial position, and the respective budgetary comparisons for the general fund and major special revenue funds for the year then ended in accordance with accounting principles generally accepted in the United States of America. In addition, in our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of each nonmajor governmental fund of the District as of June 30, 2016, and the respective changes in financial position and the respective budgetary comparisons for the major capital project funds, debt service funds and all nonmajor funds 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 the Schedule of the Proportionate Share of the Net Pension Liability on page 149, the Schedule of Contributions on page 150 and the notes to the required supplementary information on page 150 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 the 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. Management has omitted the MD&A which is required to be presented to supplement the basic financial statements. Such missing information, although not a part of the basic financial statements is required by the Government 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. Our opinion on the basic financial statements is not affected by this missing information. 4

44 Other Information Our audit was conducted for the purpose of forming opinions on the District's basic financial statements, the combining, and individual fund financial statements, and the budgetary comparisons. The schedule of expenditures of federal awards as required by Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, and the other schedules required by section NMAC are presented for purposes of additional analysis and are not a required part of the basic financial statements. The Schedule of Expenditures of federal awards and other schedules required by Section NMAC 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 Schedule of Expenditures and other schedules required by Section NMAC are fairly stated in all material respects in relation to the basic financial statements as a whole. The schedule of vendor information has not been subjected to the auditing procedures applied in the audit of the basic financial statements, and accordingly, we do not express an opinion or provide any assurance on it. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated November 04, 2016 on our consideration of the District's internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the District's internal control over financial reporting and compliance. Harshwal & Company LLP Certified Public Accountants Albuquerque, New Mexico November 04,