$16,507, NORRIS SCHOOL DISTRICT (Kern County, California) 2012 ELECTION GENERAL OBLIGATION BONDS 2012 SERIES A Consisting of

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1 NEW ISSUE BOOK-ENTRY-ONLY RATINGS: Moody s: Aa3 Fitch: AA (See RATINGS herein.) In the opinion of Fulbright & Jaworski L.L.P., Los Angeles, California, Bond Counsel, under existing law, interest on the Bonds is exempt from personal income taxes of the State of California, and, assuming continuing compliance after the date of initial delivery of the Bonds with certain covenants contained in the Resolution authorizing the Bonds and subject to the matters set forth under TAX MATTERS herein, interest on the Bonds for federal income tax purposes under existing statutes, regulations, published rulings, and court decisions will be excludable from the gross income of the owners thereof pursuant to section 103 of the Internal Revenue Code of 1986, as amended, to the date of initial delivery of the Bonds, and will not be included in computing the alternative minimum taxable income of individuals or, except as described herein, corporations. See TAX MATTERS herein. Dated: Date of Delivery $10,790,000 Current Interest Bonds $16,507, NORRIS SCHOOL DISTRICT (Kern County, California) 2012 ELECTION GENERAL OBLIGATION BONDS 2012 SERIES A Consisting of and $2,538, Capital Appreciation Bonds $3,179, Convertible Capital Appreciation Bonds Due: November 1, as shown on inside cover. The Bonds (the Bonds ) offered hereunder on behalf of Norris School District (the District ) were authorized at a bond election conducted in the District on June 5, 2012 (the Election ), at which more than 55% of the voters within the District voting on the measure voted to approve the issuance by the District of $149,000,000 aggregate principal amount of bonds, as more fully described herein under the caption INTRODUCTION. The Bonds are being issued to finance the construction, acquisition, furnishing and equipping of District facilities, and to pay certain costs of issuance associated therewith, as more fully described herein under the caption THE PROJECT. The Bonds will be issued in denominations of $5,000 principal amount or maturity value, as applicable, or integral multiples thereof, and are payable as to principal amount, maturity value or redemption price at the office of Zions First National Bank, Paying Agent for the Bonds (the Paying Agent ). The Bonds are the first series of bonds issued pursuant to the authorization approved by the voters at the Election, and, following the issuance thereof, $132,492, of authorization under the Election will remain. The Bonds are issued on a parity with all other general obligation bonds of the District, including general obligation bonds issued pursuant to previous authorizations. The Bonds will be issued as current interest bonds (the Current Interest Bonds ), capital appreciation bonds (the Capital Appreciation Bonds ) and capital appreciation bonds that will convert to current interest bonds (the Convertible CABs ). The Bonds will mature on the dates and in the amounts and bear or accrete interest at the rates shown on the inside cover hereof. Interest on the Bonds that are Current Interest Bonds is payable commencing May 1, 2013, and semiannually thereafter on May 1 and November 1 of each year. The Capital Appreciation Bonds accrete interest from their date of delivery, compounded semiannually on May 1 and November 1 of each year, commencing November 1, 2012 and will be payable solely at maturity. The Convertible CABs will initially be issued as capital appreciation bonds and will convert to current interest bonds on November 1, 2022 (the Conversion Date ). Prior to the Conversion Date, the Convertible CABs will not pay current interest, but will accrete in value from their initial principal amounts on the date of delivery thereof to the Conversion Date (the Conversion Value ). Prior to the Conversion Date, interest on the Convertible CABs will be compounded on each May 1 and November 1, commencing November 1, No payment of interest will be made to the owners of Convertible CABs prior to or on the Conversion Date. From and after the Conversion Date, the Convertible CABs will pay current interest, such interest to accrue based upon the Conversion Value of the Convertible CABs. Following the Conversion Date, interest on the Convertible CABs will be payable semiannually on each May 1 and November 1, commencing May 1, See THE BONDS herein. The Bonds are issued in fully registered form and, when delivered, will be registered in the name of Cede & Co., as nominee of The Depository Trust Company, New York, New York ( DTC ). DTC will act as securities depository of the Bonds as described herein under the caption THE BONDS Book- Entry-Only System. The Bonds are subject to redemption prior to maturity as described herein. See THE BONDS Optional Redemption and Mandatory Sinking Fund Redemption herein. The Bonds are general obligations of the District only and are not obligations of the County of Kern, the State of California or any of its other political subdivisions. The Board of Supervisors of the County of Kern has the power and is obligated to levy and collect ad valorem property taxes for each fiscal year upon the taxable property of the District in an amount at least sufficient, together with other moneys available for such purpose, to pay the principal of, and premium, if any, and interest on each Bond as the same becomes due and payable. MATURITY SCHEDULE On Inside Cover THIS COVER PAGE CONTAINS CERTAIN INFORMATION FOR QUICK REFERENCE ONLY. IT IS NOT A SUMMARY OF THIS ISSUE. INVESTORS MUST READ THE ENTIRE OFFICIAL STATEMENT TO OBTAIN INFORMATION ESSENTIAL TO THE MAKING OF AN INFORMED INVESTMENT DECISION. The Bonds will be offered when, as and if issued and received by the Underwriter subject to the approval of legality by Fulbright & Jaworski L.L.P., Los Angeles, California, Bond Counsel, and certain other conditions. Fulbright & Jaworski L.L.P., Los Angeles, California, is acting as Disclosure Counsel for the issue. Certain matters will be passed upon for the District by Schools Legal Service, Bakersfield, California and for the Underwriter by McFarlin & Anderson LLP, Laguna Hills, California. It is anticipated that the Bonds will be available for delivery in definitive form in New York, New York, through the facilities of DTC on or about September 19, Dated: August 29, 2012

2 MATURITY SCHEDULE $10,790,000 Current Interest Bonds Maturity Date (November 1) Principal Amount Interest Rate Yield CUSIP No. * (656347) 2014 $ 80, % 0.59% CP , CQ , CR , CS , CT , CU3 $1,600, % Current Interest Term Bonds Maturing November 1, 2032, Priced to Yield 3.75%; CUSIP No. * DH1 $8,385, % Current Interest Term Bonds Maturing November 1, 2042, Priced to Yield 4.12%; CUSIP No. * CV1 Maturity Date (November 1) $2,538, Capital Appreciation Serial Bonds Denominational Amount Accretion Rate Reoffering Yield Maturity Amount CUSIP No. * (656347) 2018 $ 4, % 2.44% $ 10,000 DA , ,000 CW , ,000 CX , ,000 CY , ,000 DB , ,000 CZ , ,000 DD , ,000 DE , ,000 DF , ,040,000 DJ , ,170,000 DK , ,325,000 DL , ,510,000 DG , ,275,000 DM0 Maturity Date (November 1) $3,179, Convertible Capital Appreciation Term Bonds Initial Principal Amount Accretion Rate Conversion Date (November 1) Interest Rate After Conversion Conversion Value CUSIP No. * (656347) 2040 $3,179, % % $5,345,000 DN8 * CUSIP is a registered trademark of the American Bankers Association. Copyright Standard & Poor s, a Division of The McGraw-Hill Corporation, Inc. CUSIP data herein is provided by CUSIP Global Services, managed by Standard & Poor s Financial Services LLC on behalf of The American Bankers Association. This data is not intended to create a database and does not serve in any way as a substitute for the CUSIP Services. Neither the Underwriter, the District nor the Financial Advisor is responsible for the selection or correctness of the CUSIP numbers set forth herein

3 This Official Statement does not constitute an offer to sell, the solicitation of an offer to buy, nor shall there be any sale of the Bonds by a person in any jurisdiction in which it is unlawful for such person to make such an offer, solicitation or sale. No dealer, broker, salesperson or other person has been authorized by the Norris School District (the District ) to provide any information or to make any representations other than as contained herein and, if given or made, such other information or representation must not be relied upon as having been authorized by the District. This Official Statement is not to be construed as a contract with the purchasers of the Bonds. Statements contained in this Official Statement which involve estimates, forecasts or matters of opinion, whether or not expressly described herein, are intended solely as such and are not to be construed as a representation of facts. The information set forth herein, other than that provided by the District, has been obtained from sources which are believed to be reliable, but is not guaranteed as to accuracy or completeness, and is not to be construed as a representation by the District. The information and expressions of opinion herein are subject to change without notice and neither delivery of this Official Statement nor any sale made hereunder shall, under any circumstances, create any implication that there has been no change in the affairs of the District since the date hereof. Although certain information set forth in this Official Statement has been provided by the County of Kern (the County ), the County has not approved this Official Statement and is not responsible for the accuracy or completeness of the statements contained in this Official Statement except for the information set forth under the caption THE KERN COUNTY TREASURY POOL. The Underwriter has provided the following sentence for inclusion in this Official Statement. The Underwriter has reviewed the information in this Official Statement in accordance with, and as part of, its responsibilities to investors under the federal securities laws as applied to the facts and circumstances of this transaction, but the Underwriter does not guarantee the accuracy or completeness of such information. IN CONNECTION WITH THIS OFFERING, THE UNDERWRITER MAY OVER- ALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE BONDS OFFERED HEREBY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED MAY BE DISCONTINUED AT ANY TIME. THE UNDERWRITER MAY OFFER AND SELL THE BONDS TO CERTAIN DEALERS, INSTITUTIONAL INVESTORS, BANKS OR OTHERS AT PRICES LOWER OR HIGHER THAN THE PUBLIC OFFERING PRICES STATED ON THE INSIDE COVER PAGE HEREOF AND SAID PUBLIC OFFERING PRICES MAY BE CHANGED FROM TIME TO TIME BY THE UNDERWRITER. This Official Statement is submitted in connection with the sale of the Bonds referred to herein and may not be reproduced or used, in whole or in part, for any other purpose

4 NORRIS SCHOOL DISTRICT Kern County, State of California Board of Trustees Bob Beechinor, President Sue Dodgin, Clerk Jim Bowles, Member John Genter, Member Jeff Stone, Member District Administrators Steven Shelton, Superintendent Kelly Miller, Assistant Superintendent Kade Duey, Director of Business Services SPECIAL SERVICES Bond Counsel and Disclosure Counsel Fulbright & Jaworski L.L.P. Los Angeles, California Financial Advisor Dolinka Group LLC Irvine, California Paying Agent Zions First National Bank Los Angeles, California

5 TABLE OF CONTENTS Page INTRODUCTION... 1 THE BONDS... 2 Authority for Issuance and Security for the Bonds... 2 Purpose of Issue... 2 Description of the Bonds... 2 Payment of the Bonds... 3 Estimated Sources and Uses of Funds... 4 Optional Redemption... 4 Mandatory Sinking Fund Redemption... 5 Selection of Bonds for Redemption... 6 Notice of Redemption... 6 Partial Redemption of Bonds... 6 Effect of Notice of Redemption... 7 Transfer and Exchange... 7 Defeasance... 7 Book-Entry-Only System... 8 Continuing Disclosure Agreement... 8 Debt Service Schedule... 9 SECURITY FOR THE BONDS General THE PROJECT FUNDING OF SCHOOL DISTRICTS IN CALIFORNIA State Funding of Education State Assistance Jarvis v. Connell Recent Litigation Regarding State Funding of Education Significant Accounting Policies and Audited Financial Statements Ad Valorem Property Taxes Proposition Proposition 1A Financial Statements Budgets of District CONSTITUTIONAL AND STATUTORY LIMITATIONS ON TAXES AND APPROPRIATIONS Article XIIIA of the California Constitution Legislation Implementing Article XIIIA Article XIIIB of the California Constitution Unitary Property California Lottery Proposition Proposition Article XIIIC and XIIID of the California Constitution Future Initiatives i

6 TABLE OF CONTENTS (continued) Page THE KERN COUNTY TREASURY POOL LEGAL MATTERS TAX MATTERS Tax Accounting Treatment of Discount and Premium on Certain Bonds LEGALITY FOR INVESTMENT RATINGS UNDERWRITING NO LITIGATION OTHER INFORMATION APPENDIX A THE DISTRICT... A-1 APPENDIX B FORM OF BOND COUNSEL OPINION... B-1 APPENDIX C SELECTED INFORMATION FROM NORRIS SCHOOL DISTRICT AUDITED FINANCIAL STATEMENTS FOR FISCAL YEAR ENDED JUNE 30, C-1 APPENDIX D FORM OF CONTINUING DISCLOSURE AGREEMENT... D-1 APPENDIX E BOOK-ENTRY-ONLY SYSTEM... E-1 APPENDIX F ACCRETED VALUE TABLE... F ii

7 $16,507, NORRIS SCHOOL DISTRICT (Kern County, California) 2012 ELECTION GENERAL OBLIGATION BONDS, 2012 SERIES A $10,790,000 Current Interest Bonds and $2,538, Capital Appreciation Bonds $3,179, Convertible Capital Appreciation Bonds INTRODUCTION The Norris School District (the District ) proposes to issue $16,507, aggregate principal amount of its 2012 Election General Obligation Bonds, 2012 Series A (the Bonds ), under and pursuant to a bond authorization for the issuance and sale of not more than $149,000,000 of general obligation bonds (the Authorization ) approved by more than 55% of the voters of the District voting at an election held on June 5, 2012 (the Election ). The Bonds are the first issue under the Authorization, after which $132,492, of the District s Authorization will remain for issuance of subsequent series of the District s general obligation bonds under the Election. All general obligation bonds issued by or on behalf of the District are or will be issued on a parity with the Bonds. See the caption Proposition 39 under the heading CONSTITUTIONAL AND STATUTORY LIMITATIONS ON TAXES AND APPROPRIATIONS herein. THE BONDS ARE GENERAL OBLIGATION BONDS OF THE DISTRICT, SECURED BY AND PAYABLE FROM AD VALOREM PROPERTY TAXES ASSESSED ON TAXABLE PROPERTIES WITHIN THE DISTRICT, WITHOUT LIMITATION AS TO RATE OR AMOUNT. THE BONDS ARE NOT AN OBLIGATION OF THE GENERAL FUND OF THE DISTRICT OR OF THE COUNTY. SEE SECURITY FOR THE BONDS HEREIN. Proceeds from the sale of the Bonds will be used for the acquisition, construction, furnishing and equipping of District facilities (collectively, the Projects ), and the payment of costs of issuance, all as further described herein under THE PROJECT and as provided in the bond proposition approved at the Election, in accordance with the Constitution and laws of the State of California. Norris School District, a school district of the State of California (the State ), was established in The District is located in the County of Kern (the County ), immediately west of the City of Bakersfield, approximately 100 miles north of Los Angeles and encompasses approximately 18 square miles. The District operates four elementary schools (kindergarten through 5th grade) and one middle school (6th through 8th grade). See APPENDIX A THE DISTRICT. Since June 2000, the number of single family residences has increased in the Norris area and school enrollment in the District has grown from 1,400 to 3,775. During the same period, three new elementary campuses were built in the Norris area (Norris Elementary, William B. Bimat Elementary, and Veterans Elementary), Olive Drive Elementary added nine new classrooms, and Norris Middle School added eight permanent classrooms for science, math, and art, as well as a new gym. The District owns one undeveloped site that is planned for an elementary school, and is presently searching for additional school sites, in an effort to implement the District s plan to grow its enrollment to 10,000 students to be served by 12 elementary schools and three middle schools at build-out. See APPENDIX A THE DISTRICT District Growth. The District has certain existing lease financing obligations as set forth in APPENDIX A under the caption Certain Existing Obligations and direct and overlapping bonded indebtedness as set forth in APPENDIX A under the caption Direct and Overlapping Debt. Excerpts from the District s

8 audited financial statements for the fiscal year ended June 30, 2011, are attached hereto as APPENDIX C. For further information concerning the District, see APPENDIX A THE DISTRICT. THE BONDS Authority for Issuance and Security for the Bonds The Bonds are general obligations of the District. The Bonds are being issued by the District under the provisions of Article 4.5 of Chapter 3 of Part 1 of Division 2 of Title 5 of the Government Code of the State, as amended and pursuant to a resolution of the Board of Trustees of the District adopted on July 11, 2012 (the Resolution ). Purpose of Issue The District submitted a project list (the Project List ) to the voters at the Election, specifying a number of capital improvements to District facilities, as well as equipment and furnishings to be used in such facilities, from which a number of components will be financed with the proceeds of the Bonds. Details regarding the Project List and the proposed components to be financed are set forth under the caption THE PROJECT herein. The net proceeds of sale of the Bonds shall be deposited into the Building Fund of the District and applied to pay the costs of the projects. Any excess proceeds of the Bonds not needed for the authorized purposes for which the Bonds are being issued shall be transferred to the Debt Service Fund and applied to the payment of the principal of and interest on the Bonds. Moneys in the Debt Service Fund are expected to be invested through the Kern County Treasury Pool. See THE KERN COUNTY TREASURY POOL herein. Description of the Bonds The following provisions apply equally to the various tranches of the Bonds, except where specified. The Current Interest Bonds will be issued in denominations of $5,000 or any integral multiple thereof, and the Capital Appreciation Bonds and the Convertible CABs will be issued in initial principal amounts corresponding to $5,000, Maturity Value or Conversion Value at maturity or any integral multiple thereof and in each case, will mature on the dates and in the amounts and bear or accrete interest at the rates per annum, all as set forth on the inside cover page of this Official Statement. The Bonds are not subject to acceleration. The Bonds will be issued in fully registered form and, when issued, will be registered in the name of Cede & Co., as registered owner and nominee of The Depository Trust Company, New York, New York ( DTC ). DTC will act as securities depository for the Bonds. So long as Cede & Co. is the registered owner of the Bonds, as nominee of DTC, references herein to the Owners or registered owners shall mean Cede & Co. as aforesaid, and shall not mean the Beneficial Owners (as defined herein) of the Bonds. So long as Cede & Co. is the registered owner of the Bonds, principal of and interest or premium, if any, on the Bonds are payable by wire transfer of New York Clearing House or equivalent next-day funds or by wire transfer of same day funds by Zions First National Bank, as paying agent (the Paying Agent ), to Cede & Co., as nominee for DTC. DTC is obligated, in turn, to remit such amounts to the DTC Participants ( DTC Participants ) for subsequent disbursement to the Beneficial Owners. Payments

9 of principal, and premium, if any, for any Bonds shall be made only upon the surrender of such Bonds to the Paying Agent. See APPENDIX E BOOK ENTRY ONLY SYSTEM herein. Payment of the Bonds Current Interest Bonds Interest on the Bonds that are Current Interest Bonds is payable commencing May 1, 2013, and semiannually thereafter on May 1 and November 1 of each year (each, an Interest Payment Date ). The Bonds issued as Current Interest Bonds shall be issued in fully registered form in denominations of $5,000 or any integral multiple thereof. Interest on each Current Interest Bond shall accrue from its dated date. Interest on Current Interest Bonds shall be computed using a year of 360 days comprised of twelve 30-day months and shall be payable on each Interest Payment Date to the registered owner (each, an Owner ) thereof as of the close of business on the fifteenth calendar day of the month preceding any Interest Payment Date (a Record Date ). Interest with respect to each Current Interest Bond will be payable from the Interest Payment Date next preceding the date of registration thereof, unless (i) it is registered after the close of business on any Record Date and before the close of business on the immediately following Interest Payment Date, in which event interest with respect thereto shall be payable from such following Interest Payment Date; or (ii) it is registered prior to the close of business on the first Record Date, in which event interest shall be payable from its dated date; provided, however, that if at the time of registration of any Current Interest Bond interest with respect thereto is in default, interest with respect thereto shall be payable from the Interest Payment Date to which interest has previously been paid or made available for payment. Payments of interest on the Current Interest Bonds will be made on each Interest Payment Date by check or draft of the Paying Agent sent by first-class mail, postage prepaid, to the Owner thereof on the Record Date, or by wire transfer to any Owner of $1,000,000 or more of such Current Interest Bonds, to the account specified by such Owner in a written request delivered to the Paying Agent on or prior to the Record Date for such Interest Payment Date; provided, however, that payments of defaulted interest shall be payable to the person in whose name such Current Interest Bond is registered at the close of business on a special record date fixed therefor by the Paying Agent, which shall not be more than 15 days and not less than ten days prior to the date of the proposed payment of defaulted interest. Capital Appreciation Bonds The Capital Appreciation Bonds will not bear current interest, but will accrete in value from their Denominational Amounts to their respective Maturity Amounts on their respective maturity dates on the basis of a constant interest rate (with straight line interpolations between compounding interest dates) compounded commencing November 1, 2012, and semiannually thereafter on May 1 and November 1 in each year and shall be payable only upon maturity. The Bonds issued as Capital Appreciation Bonds shall be issued in fully registered form in their principal amounts but shall reflect denominations of $5,000 Maturity Amount or any integral multiple thereof. The Capital Appreciation Bonds shall be dated the date of their issuance, shall be issued in the aggregate initial principal amounts, shall mature on the dates, in the years and in the Maturity Amounts, and shall accrete interest at the accretion rates, all as set forth on the inside cover of this Official Statement. See also APPENDIX F ACCRETED VALUE TABLE. Convertible CABs The Convertible CABs will initially be issued as capital appreciation bonds and will convert to current interest bonds on November 1, 2022 (the Conversion Date ). Prior to the Conversion Date, the Convertible CABs will not pay current interest but will accrete in value from their initial principal amount

10 on the date of delivery thereof to the Conversion Date (the Conversion Value ). Prior to the Conversion Date, interest on the Convertible CABs will be compounded on each May 1 and November 1, commencing November 1, No payment of interest will be made to the Owners of Convertible CABs prior to or on the Conversion Date. From and after the Conversion Date, the Convertible CABs will pay current interest, such interest to accrue based upon the Conversion Value of the Convertible CABs. Following the Conversion Date, interest on the Convertible CABs will be payable semiannually on each May 1 and November 1, commencing May 1, Principal, Accreted Value, Conversion Value and premium, if any, is payable upon surrender thereof at maturity or earlier redemption at the office designated by the Paying Agent in Los Angeles, California. Estimated Sources and Uses of Funds The proceeds of the Bonds are expected to be applied as follows: Sources of Funds Principal and Issue Amount of Bonds $16,507, Net Original Issue Discount (5,271.35) Total Sources $16,502, Uses of Funds Deposit to Building Fund $16,000, Deposit to Costs of Issuance Account (1) 324, Underwriter s Discount 178, Total Uses $16,502, (1) Includes payment of Bond and Disclosure Counsel fees, Financial Advisor fees, Paying Agent fees, rating agency fees, Preliminary Official Statement and Official Statement printing and other costs of issuance. Optional Redemption (a) Current Interest Bonds. The Current Interest Bonds maturing on or before November 1, 2022 are not subject to optional redemption prior to their respective stated maturity dates. The Current Interest Bonds maturing on or after November 1, 2023, may be redeemed before maturity, at the option of the District, from any source of available funds, in whole or in part on any date on or after November 1, 2022, at par, together with interest accrued thereon to the date of redemption, without premium. (b) Capital Appreciation Bonds. The Capital Appreciation Bonds maturing on or prior to November 1, 2022 are not subject to optional redemption prior to their respective stated maturity dates. The Capital Appreciation Bonds maturing on or after November 1, 2023, may be redeemed prior to maturity, at the option of the District, from any source of available funds, in whole or in part on any date on or after November 1, 2022, at 100% of their Accreted Value to the date of redemption, without premium. (c) Convertible CABs. The Convertible CABs may be redeemed prior to maturity at the option of the District, from any source of available funds, in whole or in part on November 1, 2027, or on any date thereafter, at a redemption price equal to 100% of the Conversion Value thereof, together with interest accrued thereon to the date fixed for redemption, without premium

11 Mandatory Sinking Fund Redemption The Current Interest Bonds maturing on November 1, 2032, are subject to mandatory sinking fund redemption prior to their stated maturity in part (by lot) from Mandatory Sinking Fund Payments on any November 1 on or after November 1, 2031, at a redemption price equal to 100% of their principal amount, together with accrued interest thereon to the date fixed for redemption, without premium, on the dates and in the aggregate principal amounts listed below: Mandatory Sinking Fund Payment Date (November 1) Mandatory Sinking Fund Payment (1) Maturity $720, (1) 880,000 The Current Interest Bonds maturing on November 1, 2042, are subject to mandatory sinking fund redemption prior to their stated maturity in part (by lot) from Mandatory Sinking Fund Payments on any November 1 on or after November 1, 2040, at a redemption price equal to 100% of their principal amount, together with accrued interest thereon to the date fixed for redemption, without premium, on the dates and in the aggregate principal amounts listed below: Mandatory Sinking Fund Payment Date (November 1) Mandatory Sinking Fund Payment (1) Maturity $2,070, ,975, (1) 3,340,000 The Convertible CABs maturing on November 1, 2040, are subject to mandatory sinking fund redemption prior to their stated maturity in part (by lot) from Mandatory Sinking Fund Payments on any November 1 on or after November 1, 2037, at a redemption price equal to 100% of their conversion value, together with accrued interest thereon to the date fixed for redemption, without premium, on the dates and in the aggregate amounts listed below: Mandatory Sinking Fund Payment Date (November 1) (1) Maturity. Conversion Value Sinking Fund Payment 2037 $ 455, ,985, ,315, (1) 590,000 5

12 Selection of Bonds for Redemption Whenever provision is made for the redemption of Bonds and less than all Outstanding Bonds are to be redeemed, the Paying Agent, upon written instruction from the District given at least 60 days prior to the date designated for such redemption, shall select Bonds for redemption in such order as the District may direct. Within a maturity, the Paying Agent shall select Bonds for redemption by lot. Redemption by lot shall be in such manner as the Paying Agent shall determine; provided, however, that the portion of any Bond to be redeemed in part shall be in the principal amount of $5,000 or any integral multiple thereof. Notice of Redemption When redemption is authorized or required pursuant to the Resolution, the Paying Agent, upon written instruction from the District given at least 60 days prior to the date designated for such redemption, shall give notice (each, a Redemption Notice ) of the redemption of the Bonds. Such Redemption Notice shall specify: (a) the Bonds or designated portions thereof (in the case of any Bond to be redeemed in part but not in whole) which are to be redeemed, (b) the date of redemption, (c) the place or places where the redemption will be made, including the name and address of the Paying Agent, (d) the redemption price, (e) the CUSIP numbers assigned to the Bonds to be redeemed, (f) the Bond numbers of the Bonds to be redeemed in whole or in part and, in the case of any Bond to be redeemed in part only, the principal amount of such Bond to be redeemed, and (g) the original issue date, interest rate and stated maturity date of each Bond to be redeemed in whole or in part. Such Redemption Notice shall further state that on the specified date there shall become due and payable upon each Bond or portion thereof being redeemed the redemption price thereof, and that from and after such date, interest on Bonds shall cease to accrue. The Paying Agent shall take the following actions with respect to such Redemption Notice: (i) at least 20 but not more than 45 days prior to the redemption date, such Redemption Notice shall be given to the respective Owners of Bonds designated for redemption by first class mail, postage prepaid, at their addresses appearing on the Bond Register; (ii) in the event the Bonds are no longer held in book-entryonly form, at least two days before the date of the publication, such Redemption Notice shall be given by (1) first class mail, postage prepaid, (2) telephonically confirmed facsimile transmission, or (3) overnight delivery service, to each of the Securities Depositories; and (iii) in the event the Bonds are no longer held in book-entry-only form, at least two days before the date of the publication, such Redemption Notice shall be given by (1) first class mail, postage prepaid, or (2) overnight delivery service, to one of the Information Services. Neither failure to receive any Redemption Notice nor any defect in any such Redemption Notice so given shall affect the sufficiency of the proceedings for the redemption of the affected Bonds. Each check issued or other transfer of funds made by the Paying Agent for the purpose of redeeming Bonds shall bear the CUSIP number identifying, by series and maturity, the Bonds being redeemed with the proceeds of such check or other transfer. Partial Redemption of Bonds Upon the surrender of any Bond redeemed in part only, the Paying Agent shall execute and deliver to the Owner thereof a new Bond or Bonds of like series, tenor and maturity and of authorized denominations equal in transfer amounts to the unredeemed portion of the Bond surrendered. Such partial redemption shall be valid upon payment of the amount required to be paid to such Owner, and the County and the District shall be released and discharged thereupon from all liability to the extent of such payment

13 Effect of Notice of Redemption Notice having been given as required in the County Resolution, and the moneys for redemption (including the interest to the applicable date of redemption) having been set aside in the District s Debt Service Fund, the Bonds to be redeemed shall become due and payable on such date of redemption. If on such redemption date, money for the redemption of all the Bonds to be redeemed, together with interest to such redemption date, shall be held by the Paying Agent so as to be available therefor on such redemption date, and if notice of redemption thereof shall have been given, then from and after such redemption date, interest on the Bonds to be redeemed shall cease to accrue and become payable. Transfer and Exchange Any Bond may be exchanged for Bonds of like tenor, series, maturity and principal amount upon presentation and surrender at the principal office of the Paying Agent, together with a request for exchange signed by the Owner or by a person legally empowered to do so in a form satisfactory to the Paying Agent. A Bond may be transferred on the Bond Register only upon presentation and surrender of such Bond at the principal office of the Paying Agent together with an assignment executed by the Owner or a person legally empowered to do so in a form satisfactory to the Paying Agent. Upon exchange or transfer, the Paying Agent shall complete, authenticate and deliver a new Bond or Bonds of like tenor and of any authorized denomination or denominations requested by the Owner equal to the principal amount of the Bond surrendered and bearing or accreting interest at the same rate and maturing on the same date. Defeasance All or any portion of the outstanding maturities of the Bonds may be defeased prior to maturity in the following ways: (a) Cash: by irrevocably depositing with the Paying Agent an amount of cash which together with amounts then on deposit in the Debt Service Fund is sufficient to pay all Bonds outstanding and designated for defeasance, including all principal and interest, or Maturity Value, as applicable and premium, if any; or (b) United States Obligations: by irrevocably depositing with an independent escrow agent selected by the District noncallable United States Obligations, together with cash, if required, in such amount as will, in the opinion of an independent certified public accountant, together with interest to accrue thereon and moneys then on deposit in the Debt Service Fund together with the interest to accrue thereon, be fully sufficient to pay and discharge all Bonds outstanding and designated for defeasance (including all principal and interest, or Maturity Value, as applicable represented thereby and prepayment premiums, if any) at or before their maturity date; then, notwithstanding that any of such Bonds shall not have been surrendered for payment, all obligations of the District with respect to all such designated outstanding Bonds shall cease and terminate, except only the obligation of the Paying Agent or an independent escrow agent selected by the District to pay or cause to be paid from funds deposited pursuant to paragraph (a) or (b) above, to the Owners of such designated Bonds not so surrendered and paid all sums due with respect thereto. For purposes of the above provisions, United States Obligations shall mean: Direct and general obligations of the United States of America, or obligations that are unconditionally guaranteed as to principal and interest by the United States of America, including (in the

14 case of direct and general obligations of the United States of America) evidences of direct ownership of proportionate interests in future interest or principal payments of such obligations. Investments in such proportionate interests must be limited to circumstances wherein (a) a bank or trust company acts as custodian and holds the underlying United States obligations; (b) the owner of the investment is the real party in interest and has the right to proceed directly and individually against the obligor of the underlying United States obligations; and (c) the underlying United States obligations are held in a special account, segregated from the custodian s general assets, and are not available to satisfy any claim of the custodian, any person claiming through the custodian, or any person to whom the custodian may be obligated; provided that such obligations are rated or assessed AAA by Standard & Poor s, a division of The McGraw-Hill Companies, Inc., or Aaa by Moody s Investors Service. Book-Entry-Only System The Bonds will be issued under a book-entry system, evidencing ownership of the Bonds in principal amounts or Maturity Value, applicable, of $5,000 or integral multiples thereof, with no physical distribution of Bonds made to the public. DTC will act as depository for the Bonds, which will be immobilized in their custody. The Bonds will be registered in the name of Cede & Co., as nominee for DTC. For further information regarding DTC and the book-entry system, see APPENDIX E hereto. Continuing Disclosure Agreement In accordance with the requirements of Rule 15c2-12 (the Rule ) promulgated by the Securities and Exchange Commission, the District will enter into a Continuing Disclosure Agreement (the Continuing Disclosure Agreement ) in the form of APPENDIX D hereto, on or prior to the sale of the Bonds in which the District will undertake, for the benefit of the Beneficial Owners of the Bonds, to provide certain information as set forth therein. The District did not submit its continuing disclosure filings in connection with its General Obligation Bonds, 1987 Election, Series D, issued on July 6, The District has since corrected these discrepancies and is currently in compliance with respect to filings required by such obligations for the last five years. The District has engaged the services of a Dissemination Agent to assist in future continuing disclosure filings. [Remainder of this page intentionally left blank]

15 Debt Service Schedule The following table summarizes the debt service requirements for the Bonds: Period Ending November 1 Principal Interest Accreted Interest (1) Total Debt Service 2013 $ -- $ 464, $ -- $ 464, , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , ,009, , , , ,114, , , , ,254, , , ,389, , , ,524, , , , ,653, , , , ,783, , , , ,938, , , ,118, ,123, , , ,151, ,343, ,180, , , ,574, ,377, , , ,801, ,420, , , ,026, ,975, , ,227, ,340, , ,473, Total $16,507, $15,784, $7,927, $40,219, (1) Reflects accreted interest on Capital Appreciation Bonds subject to mandatory sinking fund payments in the years indicated. 9

16 SECURITY FOR THE BONDS General The Bonds are general obligations of the District, and the Board of Supervisors of the County of Kern has the power and is obligated to levy and collect ad valorem taxes upon all property within the District subject to taxation by the County, without limitation as to rate or amount (except certain personal property which is taxable at limited rates) for payment of both principal or Maturity Value of and interest on the Bonds. Subsequent to the issuance of the Bonds, $132,492, will remain for issuance of additional general obligation bonds under the Authorization. All general obligation bonds of the District are issued on a parity with one another. See APPENDIX A THE DISTRICT for further information regarding the assessed valuation and property tax collection information within the District. THE PROJECT The District intends to apply the net proceeds of sale of the Bonds to some of the capital improvements included on the Project List approved by the voters at the Election. The Project List includes the following components. The Board of Trustees retains the ability to set priorities among listed projects, in order to meet the needs of the District and its students. Classroom Computer and Technology Improvements Acquire/update/upgrade campus, library, and classroom computers, instructional technology and school district technology systems Update/upgrade servers, wiring and data systems to support 21 st Century learning and information systems Install/repair/replace/upgrade security and communication systems, including hardware and electronics, for student, teacher and staff safety Operational Efficiency and Cost-Saving Improvements Add/repair/reconfigure/replace energy management and heating/cooling systems for improved functionality and efficiency, including renewable technology Add/repair/reconfigure/replace utility infrastructure for improved functionality and efficiency, including renewable technology Upgrade/replace/install plumbing, lighting, and electrical systems for improved functionality and efficiency Make lease payments and refinance lease obligations to secure better terms for taxpayers and/or free up operational funding Upgrade/replace/improve irrigation, water management and turf systems for improved resource efficiency and/or cost savings Upgrade/replace/improve aging and inefficient windows, insulation, doors, roofs and other systems/structures for improved functionality and efficiency Improve landscaping for safety, drainage, and resource efficiency Classroom, Science Lab and Library Improvements to Support Instruction Modernize/reconfigure/expand/construct classroom buildings

17 Modernize/reconfigure/expand/construct science labs Modernize/reconfigure/expand/construct computer labs Modernize/reconfigure/expand/construct school libraries and media centers Modernize/reconfigure/expand/construct art and music classrooms and other multi-use facilities Modernize/reconfigure/expand existing buildings to improve functionality Modernize/reconfigure/expand existing multipurpose rooms to improve functionality Construct/purchase new classrooms, buildings, and structures to prevent school overcrowding Construct joint-use facilities that are available for school and community use Repair/replace building interior surfaces including walls, ceilings, floors and floor coverings Repair/replace building exterior surfaces such as roofs, siding, painted surfaces and other fascia to protect building integrity and prevent dry rot/other infestations Modernize/reconfigure/expand/construct support facilities including libraries, technology labs, fields/facilities for physical education and staff/administrative facilities that support teachers, students and instruction Remove/repair/replace existing modular/portable classroom buildings Upgrade/replace/install storage space for efficient and accurate record-keeping Modernize/reconfigure/expand/construct facilities that support safe and reliable student transportation Provide safe and modern furniture and equipment for all classrooms and related school facilities Provide modern equipment and instructional technology to enable 21 st Century instruction in science, engineering, technology and related subjects Student and Teacher Safety and Accessibility Improvements Make school facilities accessible for students, parents, teachers and staff with disabilities by updating/reconfiguring/constructing schools and classrooms that are compliant with Americans with Disabilities Act Ensure classrooms and schools meet current fire, earthquake and other safety codes Remove any hazardous materials from District facilities/school sites, if necessary Install/repair/replace shade structures for safety Install/repair/replace sidewalks, walkways, asphalt pavement, parking lots, driveways, and/or playground surfaces/equipment for student safety Improve/reconfigure/expand school parking and drop off/pick up zones to ensure student safety and alleviate traffic congestion Deferred Maintenance and Upkeep Repair/maintain/upgrade classrooms/facilities/furnishings and equipment on an ongoing basis to protect school district assets and taxpayer investments Update technology and related systems at regular intervals to remain up-to-date Each project is assumed to include its share of furniture, equipment, architectural, engineering, and similar planning costs, program/project management, staff training expenses and a customary contingency for unforeseen design and construction costs. In addition to the projects listed above, the Project List also includes the acquisition of needed land, prefabricated buildings and a variety of

18 instructional, maintenance and operational equipment, including the reduction or retirement of outstanding lease obligations and interim funding incurred to advance fund projects from the Project List; installation of signage and fencing; payment of the costs of preparation of all facility planning, facility studies, assessment reviews, facility master plan preparation and updates, environmental studies (including environmental investigation, remediation and monitoring), design and construction documentation, and temporary housing of dislocated District activities caused by construction projects. In addition to the projects listed above, the repair and renovation of each of the existing school facilities may include, but not be limited to, some or all of the following: renovation of student and staff restrooms; repair and replacement of heating and ventilation systems; upgrade of facilities for energy efficiencies; repair and replacement of worn-out and leaky roofs, windows, walls, doors and drinking fountains; installation of wiring and electrical systems to safely accommodate computers, technology and other electrical devices and needs; upgrades or construction of support facilities, including administrative, physical education and performing arts buildings and maintenance yards; repair and replacement of fire alarms, emergency communications and security systems; resurfacing or replacing of hard courts, turf and irrigation systems and campus landscaping; expand parking; install interior and exterior painting and floor covering; demolition; and construction of various forms of storage and support spaces, upgrade classrooms, repair, upgrade and install interior and exterior lighting systems; replace outdated security fences and security systems. The upgrading of technology infrastructure includes, but is not limited to, computers, flat screen monitors, portable interface devices, servers, switches, routers, modules, sound projection systems, laser printers, digital white boards, document projectors, upgrade voice-over-ip, call manager and network security/firewall, wireless technology systems and other miscellaneous equipment and software. State Funding of Education FUNDING OF SCHOOL DISTRICTS IN CALIFORNIA The State Constitution requires that from all State revenues there will first be set apart the moneys to be applied by the State for support of the public school system and public institutions of higher education. As discussed below, school districts in the State receive a significant portion of their funding from State appropriations. Annual State apportionments of basic and equalization aid to school districts for general purposes are computed up to a revenue limit (as described below) per unit of average daily attendance ( ADA ). Generally, such apportionments will amount to the difference between the District s revenue limit and the District s local property tax allocation. Revenue limit calculations are adjusted annually in accordance with a number of factors designed primarily to provide cost of living increases and to equalize revenues among all of the same type of California school districts (i.e., unified, high school or elementary). State law also provides for State support of specific school-related programs, including summer school, adult education, deferred maintenance of facilities, pupil transportation, portable classrooms and other capital outlays and various categorical aids. The State revenue limit is calculated three times a year for each school district. The first calculation is performed for the February 20th First Principal Apportionment, the second calculation for the June 25th Second Principal Apportionment, and the final calculation for the end of the year Annual Principal Apportionment. Calculations are reviewed by the County Office of Education and submitted to the State Department of Education to review the calculations for accuracy, calculate the amount of State aid owed to such school district and notify the State Controller of the amount, who then distributes the State aid. The calculation of the amount of State aid a school district is entitled to receive each year is a five step process. First, the prior year State revenue limit per pupil represented by Average Daily Attendance

19 ( ADA ) numbers is established, with recalculations as are necessary for adjustments for equalization or other factors. Second, the adjusted prior year State revenue limit per ADA is inflated according to formulas based on the implicit price deflator for government goods and services and the statewide average State revenue limit per ADA for the school districts. Third, the current year s State revenue limit per ADA for each school district is multiplied by such school district s ADA for either the current or prior year. Fourth, revenue limit add-ons are calculated for each school district if such school district qualifies for the add-ons. Add-ons include the necessary small school district adjustments, meals for needy pupils and small school district transportation, and are added to the State revenue limit for each qualifying school district. Finally, local property tax revenues are deducted from the State revenue limit to arrive at the amount of state aid based on the State revenue limit each school district is entitled to for the current year. See APPENDIX A THE DISTRICT District Growth for the District s ADA record. State Assistance The District s principal funding formulas and revenue sources are derived from the budget of the State of California. The following information concerning the State of California s budgets has been obtained from publicly available information which the District believes to be reliable; however, the State has not entered into any contractual commitment with the District, the Underwriter, Bond and Disclosure Counsel or the owners of the Bonds to provide State budget information to the District or the owners of the Bonds. Although they believe the State sources of information listed above are reliable, none of the District, Disclosure Counsel or the Underwriter assumes any responsibility for the accuracy of the State budget information set forth or referred to herein or incorporated by reference herein. Additional information regarding State budgets is available at various State-maintained websites including which website is not incorporated herein by reference State Budget. The State budget for Fiscal Year (the Budget ) was signed by Governor Brown on June 27, 2012, and assumes voters will approve the Governor s tax initiative on the November 2012 ballot (the November Tax Initiative ). The Budget includes a $92 billion State spending plan and includes significant welfare and social service cuts, restructuring the State s welfare program, streamlining health insurance for low-income children, and reducing childcare coverage and aid to California Community Colleges ( CCCs ). The Budget reforms CalWORKs by establishing a 2-year time limit for parents who are not meeting federal work requirements and merges the delivery of services for those who are eligible for both Medi-Cal and Medicare to reduce costs and improve the coordination of services. In addition, the Budget includes the following changes: (i) eliminates the Healthy Families Program and transitions children to Medi-Cal; (ii) restructures funding for trial courts; (iii) prohibits CCCs and universities that are unable to meet minimum performance standards from participating in the Cal Grant Program; (iv) reforms the State process for K-14 education mandates by providing a block grant as an alternative to the existing claiming process; (v) reduces the cost of State employee compensation by five percent (5%); (vi) implements various reductions to hospital and nursing home funding to lower Medi-Cal costs; (vii) reduces funding for child care programs and eliminates 14,000 child care slots; (viii) creates a framework to transfer cash assets previously held by redevelopment agencies to cities, counties, and special districts to fund core public services; and (ix) uses a Fiscal Year over appropriation of the minimum guarantee to prepay Proposition 98 funding required by a court settlement. K-14 education funding would increase by approximately $17.2 billion, or 37%, and per pupil funding would increase by over $2,500 in the next four years. If the Governor s November Tax Initiative is not approved by voters, trigger cuts totaling $6 billion would go into effect on January 1, 2013, including funding for schools and CCCs which would be reduced by $5.4 billion and the State would reduce funding for a variety of public safety programs

20 The Budget includes total funding of $68.4 billion ($37.9 billion General Fund and $30.5 billion from other funds) for all K-12 education programs, including the following specific items: Redevelopment Agency Asset Liquidation -- An increase of $1.3 billion in local property taxes for Fiscal Year to reflect the distribution of cash assets previously held by redevelopment agencies. The increase in local revenue reduces Proposition 98 General Fund by an identical amount. Proposition 98 Adjustments -- A decrease of approximately $630 million due to (1) eliminating the hold-harmless adjustment provided to schools from the elimination of the sales tax on gasoline in Fiscal Year , and (2) using a consistent current value methodology to rebench the guarantee for the exclusion of child care programs, the inclusion of special education mental health services, as well as new and existing property tax shifts. Additionally, the Budget reduces current year appropriations for a number of different programs by $220.1 million, backfilling those programs with one-time Proposition 98 General Fund. Quality Education Investment Act ( QEIA ) -- decrease of $450 million General Fund for Fiscal Year The over-appropriation in Fiscal Year will be used to prepay the $450 million required to be provided on top of the minimum guarantee in Fiscal Year pursuant to the California Teachers Association v. Schwarzenegger settlement agreement. The program will be funded within the guarantee to achieve onetime savings of $450 million for Fiscal Year Additionally, savings of $181 million in Fiscal Year and $40.8 million in Fiscal Year are achieved by using the remainder of the current year over appropriation to prepay a portion of the Fiscal Years and QEIA obligations. K-12 Deferrals -- An increase of $2.1 billion Proposition 98 General Fund to reduce K-12 inter-year budgetary deferrals from $9.5 billion to $7.4 billion. Charter Schools -- An increase of $53.7 million Proposition 98 General Fund for charter school categorical programs to fund growth in charter school enrollment. In addition to funding growth, legislation expands the ability of school districts to convey surplus property to charter schools, while also increasing financial assistance to charters by allowing county treasurers to provide them with short-term cash loans, and by authorizing charter schools to participate in the temporary revenue anticipation note mechanism already available to schools and county offices of education. Mandates Block Grant -- An increase of $86.2 million over the Fiscal Year funding level to provide a total of $166.6 million for K-12 mandates through a new voluntary block grant. Participating school districts and county offices of education would receive $28 per student, while participating charter schools would receive $14 per student. Districts and county offices of education that choose not to participate in the block grant program would retain their right to submit claims for reimbursement, subject to audit by the State Controller. Reduce Child Care Costs -- The Budget reflects total child care savings of $294.3 million in non-proposition 98 General Fund, resulting in the elimination of 14,000 child care slots

21 Funding for the State Preschool Program -- An increase of $163.9 million in Proposition 98 General Fund to cover the cost of part-day preschool services for 44, and 4-year olds. Reduce Provider Contracts -- A decrease of $30 million in Proposition 98 General Fund to reflect the 8.7% across the board reduction to general child care programs. Both preschool and general child care programs are administered by centers that contract directly with the Department of Education. Suspend Statutory Cost-of-Living Adjustment -- A decrease of $11.9 million in Proposition 98 General Fund. The District cannot predict how State income or State education funding will vary over the term of the Bonds, and the District takes no responsibility for informing owners of the Bonds as to actions the State Legislature or Governor may take affecting the current year s budget after its adoption. Information about the State budget and State spending for education is regularly available at various State-maintained websites. Text of proposed and adopted budgets may be found at the website of the Department of Finance, under the heading California Budget or An impartial analysis of the budget is posted by the Office of the Legislative Analyst at In addition, various State official statements, many of which contain a summary of the current and past State budgets and the impact of those budgets on school districts in the State, may be found at the website of the State Treasurer, The information referred to is prepared by the respective State agency maintaining each website and not by the District, and the District can take no responsibility for the continued accuracy of these internet addresses or for the accuracy, completeness or timeliness of information posted there, and such information is not incorporated herein by these references. Cash Management Legislation. Since 2003, the State has engaged in the practice of deferring certain apportionments to school districts in order to manage the State s cash flow. This practice has included deferring certain apportionments within a fiscal year from one month to a subsequent month and deferring certain apportionments from one fiscal year to the next. These cross-year deferrals have been codified and are expected to be on-going. Legislation enacted with respect to Fiscal Year provides for additional inter-fiscal year deferrals. On March 24, 2011, the Governor signed into law Senate Bill 82 ( SB 82 ), which extended into fiscal year provisions of existing law designed to manage the State s cash resources. With respect to K-12 schools, SB 82 set forth a specific deferral plan for K-12 education payments (the Deferral Plan ). SB 82 deferred both the July 2011 and August 2011 K-12 payments and the October 2011 payment. In September 2011, $700 million of the July deferral was due for payment, in January 2012, $4.5 billion from the remaining July, August and October deferrals were due for payment, and in March 2012, $1.4 billion was scheduled for deferral and due for payment in April Unlike the Cash Management Bill, SB 82 did not authorize the Deferral Plan to be accelerated or delayed. However, SB 82 did provide similar exemption provisions for school districts that would be unable to meet expenditure obligations if its State apportionments were delayed. On May 23, 2012, the Governor signed into law Assembly Bill 103 (Chapter 13, Statutes of 2012) ( AB 103 ) which extends certain provisions of SB 82 into Fiscal Year AB 103 addressed the State s ongoing cash crisis by deferring a variety of K-14 payments within Fiscal Year and requires that Fiscal Year K-14 payments that would otherwise be made in four separate months be deferred and repaid later in Fiscal Year Specifically, Government Code Section 16326(a)(2) requires that $1.2 billion in K-12 payments be deferred from July 2012, with $700 million paid in September 2012 and $500 million paid in January 2013; $600 million be deferred from

22 August 2012 to January 2013; $800 million be deferred from October 2012 to January 2013; and $900 million be deferred from March 2013 to April AB 103 permits schools to apply for an exemption from the July, August, and October 2012 and the March 2013 deferrals. Due to the late enactment of AB 103, the State Department of Finance has agreed to accept applications as late as June 15, The District has not filed an application for an exemption. AB 103 provides a second opportunity to apply by January 4, 2013, for exemption from the March 2013 to April 2013 deferral. The second application process for the March 2013 exemption will be available in December The District is authorized to borrow temporary funds to cover annual cash flow deficits and, as a result of this legislation, the District might find it necessary to increase the size or frequency of its cash flow borrowings in Fiscal Year Future State Budgets. Under State law, the State Legislature is required to adopt its budget by June 15 of each year for the upcoming fiscal year, with approval by the Governor to occur on June 30. The State Legislature failed to pass a State budget for Fiscal Year until October 8, Accordingly, State payments were held until the State Budget was adopted, including those scheduled to be made to school districts under Proposition 98 and receipt of State categorical funds by the District were delayed until the State budget was adopted for the Fiscal Year. The events leading to the inability of the State Legislature to pass a budget in a timely fashion are not unique, and the District cannot predict what circumstances may cause a similar failure in future years. In each year where the State budget lags adoption of the District s budget, it will be necessary for the District s staff to review the consequences of the changes, if any, at the State level from the proposals in the Governor s May Revision for that year, and determine whether the District s budget will have to be revised. The State has in past years experienced budgetary difficulties and has balanced its budget by requiring local political subdivisions to fund certain costs theretofore borne by the State. No prediction can be made as to whether the State will take further measures which would, in turn, adversely affect the District. Further State actions taken to address its budgetary difficulties could have the effect of reducing District support indirectly, and the District is unable to predict the nature, extent or effect of such reductions. The District cannot predict whether the State will continue to encounter budgetary difficulties in the current or future fiscal years. The District also cannot predict the impact future State Budgets will have on District finances and operations or what actions the State Legislature and the Governor may take to respond to changing State revenues and expenditures. Current and future State Budgets will be affected by national and State economic conditions and other factors which the District cannot control. In addition, the District cannot predict the effect that the general economic conditions within the State and the State s budgetary problems may have in the future on the District budget or operations. Jarvis v. Connell On May 29, 2002, the California Court of Appeal for the Second District decided the case of Howard Jarvis Taxpayers Association, et al. v. Kathleen Connell (as Controller of the State of California). The Court of Appeal held that a final budget bill, an emergency appropriation, a selfexecuting authorization pursuant to state statutes (such as continuing appropriations) or the California Constitution or a federal mandate is necessary for the State Controller to disburse funds. The foregoing requirement could apply to amounts budgeted by the District as being received from the State. To the extent the holding in such case would apply to State payments reflected in the District s budget, the requirement that there be either a final budget bill or an emergency appropriation may result in the delay of such payments to the District if such required legislative action is delayed, unless the payments are self-executing authorizations or are subject to a federal mandate. On May 1, 2003, the California

23 Supreme Court upheld the holding of the Court of Appeal, stating that the Controller is not authorized under State law to disburse funds prior to the enactment of a budget or other proper appropriation, but under federal law, the Controller is required, notwithstanding a budget impasse and the limitations imposed by State law, to timely pay those State employees who are subject to the minimum wage and overtime compensation provisions of the federal Fair Labor Standards Act. Recent Litigation Regarding State Funding of Education On May 20, 2010, more than 60 individual students and their respective families, nine California school districts, the California Congress of Parents Teachers & Students, the Association of California School Administrators, and the California School Boards Association filed a complaint for declaratory and injunctive relief, entitled Maya Robles-Wong, et al. v. State of California, et al., (the Robles Complaint ) in the Alameda County Superior Court. The Robles Complaint alleges, among other things, that the State s current system of funding public education is not designed to support core education programs and that the State has failed to meet its constitutional duties to maintain and support a system of common schools. The Robles Complaint further alleges that the State s system for funding education is not rationally or demonstrably aligned with the goals and objectives of the State s prescribed educational program, and the costs of ensuring that children of all needs have the opportunity to become proficient in accordance with State academic standards. The Robles Complaint requests that the court enter a permanent injunction to, among other things, require the State to align its school finance system with its prescribed educational program, as well as to direct the defendants to cease operating the existing public school finance system or any other system of public finance that does not meet the requirements of the State Constitution. On January 14, 2011, the Superior Court dismissed major portions of the case, allowing the plaintiffs to proceed only on the question of whether the State s public education funding scheme provides equal opportunities to students throughout the State, but rejecting the claim that the State Constitution mandates an overall qualitative standard for public education. On July 26, 2011, the Superior Court issued a ruling sustaining demurrer to the complaint but granting leave to amend the complaint on or before August 25, On November 3, 2011, the court dismissed the case. On July 18, 2011, the California Redevelopment Association, the League of California Cities, and the Cities of Union City and San Jose filed petition for a writ of mandate (the CRA Petition ) with the Supreme Court of California (the Court ) alleging that ABx1 26 and ABx1 27 violate the California Constitution, as amended by Proposition 22. See Proposition 1A Prohibitions on Diverting Local Revenues for State Purposes. The petitioners alleged, among other things, that ABx1 26 and ABx1 27 seek to divert tax increment revenue illegally from redevelopment agencies by threatening such agencies with dissolution if payments are not made to support the State s obligation to fund education. The CRA Petition was accompanied by an application for a stay, seeking to delay implementation of the provisions of ABx1 26 and ABx1 27 until the claims are adjudicated. On December 29, 2011, the Supreme Court upheld the legality of ABx1 26, reasoning that the Legislature has broad powers to establish or dissolve local agencies as it sees fit. The Court, however, invalidated ABx1 27 on the grounds that the payments required of redevelopment agencies in order to remain in existence could not be characterized as voluntary, and thus violated Proposition 22. On September 28, 2011, the California School Boards Association, the Association of California School Administrators, the Los Angeles Unified School District, the San Francisco Unified School District and the Turlock Unified School District filed a petition for a writ of mandate in the Superior Court of the State of California in and for the County of San Francisco (the CSBA Petition ). The petitioners alleged that the Budget improperly diverted sales tax revenues away from the State general fund, resulting in a reduction to the minimum funding guarantee of approximately $2.1 billion. See Proposition 1A Prohibitions on Diverting Local Revenues for State Purposes. The CSBA Petition sought an order from the Court compelling the State Director of Finance, Superintendent of Public Instruction and the State Controller to recalculate the minimum funding guarantee in accordance

24 with the provisions of the California Constitution. On March 28, 2012, the superior court issued a tentative ruling asserting that the State s constitution and the language of the Proposition 98 ballot measure did not guarantee a certain level of base funding for schools under Proposition 98 s Test 1. On June 1, 2012, such court adopted the tentative ruling as an order, ruling against CSBA. On July 27, 2012, the petitioners filed a notice of appeal of the Court s decision. The District makes no representations as to how any final decision by the respective courts would affect the State s ability to fund education in Fiscal Year , or in future fiscal years. Significant Accounting Policies and Audited Financial Statements The California State Department of Education imposes by law uniform financial reporting and budgeting requirements for K-12 school districts. Financial transactions are accounted for in accordance with the California School Accounting Manual. Linger, Peterson, Shrum & Co., Fresno, California, serves as independent auditor to the District and excerpts of their report for the Fiscal Year Ended June 30, 2008, are attached hereto as APPENDIX C. The District s auditor has not specifically approved the inclusion of such excerpts herewith. California Assembly Bill 1200 ( A.B ), effective January 1, 1992, tightened the budget development process and interim financial reporting for school districts, enhancing the authority of the county schools superintendents offices and establishing guidelines for emergency State aid apportionments. Many provisions affect District operations directly, while others create a foundation from which outside authorities (primarily state and county school officials) may impose actions on the District. Under the provisions of A.B. 1200, each school district is required to file interim certifications with the county office of education as to its ability to meet its financial obligations for the remainder of the then-current fiscal year and, based on current forecasts, for the subsequent fiscal year. The county office of education reviews the certification and issues either a positive, negative or qualified certification. A positive certification is assigned to any school district that will meet its financial obligations for the current fiscal year and subsequent two fiscal years. A negative certification is assigned to any school district that will be unable to meet its financial obligations for the remainder of the fiscal year or subsequent fiscal year. A qualified certification is assigned to any school district that may not meet its financial obligations for the current fiscal year or two subsequent fiscal years. Each certification is based on then-current projections. The District currently holds a positive certification from the Kern County Office of Education for its budget submissions. Independently audited financial reports are prepared annually in conformity with generally accepted accounting principles for educational institutions. The annual audit report is generally available about six months after the June 30 close of each fiscal year. For the District s most recent available audited financial statements, see APPENDIX C. Ad Valorem Property Taxes Taxes are levied for each fiscal year on taxable real and personal property which is situated in the County as of the preceding January 1, effective with the lien date of January 1, However, upon a change in ownership of property or completion of new construction, State law permits an accelerated recognition and taxation of increases in real property assessed valuation (known as a floating lien date ). For assessment and collection purposes, property is classified either as secured or unsecured and is listed accordingly on separate parts of the assessment roll. The secured roll is that part of the assessment roll containing State assessed property secured by a lien which is sufficient, in the opinion of the assessor, to secure payment of the taxes. Other property is assessed on the unsecured roll

25 The County levies a 1% property tax on behalf of all taxing agencies in the County. The taxes collected are allocated on the basis of a formula established by State law enacted in Under this formula, the County and all other taxing entities receive a base year allocation plus an allocation on the basis of situs growth in assessed value (new construction, change of ownership, inflation) prorated among the jurisdictions which serve the tax rate areas within which the growth occurs. Tax rate areas are specifically defined geographic areas which were developed to permit the levying of taxes for less than county-wide or less than city-wide special and school districts. In addition, the County levies and collects additional approved property taxes and assessments on behalf of any taxing agency within the County. Property taxes on the secured roll are due in two installments, on November 1 and February 1. If unpaid, such taxes become delinquent after December 10 and April 10, respectively, and a ten percent (10%) penalty attaches to any delinquent payment. In addition, property on the secured roll secured by the assessee s fee ownership of land with respect to which taxes are delinquent is declared tax-defaulted on or about June 30. Those properties on the secured roll that become tax-defaulted on June 30 of the fiscal year that are not secured by the assessee s fee ownership of land are transferred to the unsecured roll and are then subject to the Treasurer s enforcement procedures (i.e., seizures of money and property, liens and judgments). Such property may thereafter be redeemed by payment of the delinquent taxes and the delinquency penalty, plus costs and redemption penalty of one and one-half percent per month to the time of redemption. If taxes are unpaid for a period of five years or more, the tax-defaulted property is subject to sale by the Treasurer. Property taxes on the unsecured roll are currently due as of the January 1 lien date prior to the commencement of a fiscal year and become delinquent, if unpaid, on August 31. A ten percent (10%) penalty attaches to delinquent taxes on property on the unsecured roll and an additional penalty of one and one-half percent (1½%) per month begins to accrue on November 1. The taxing authority has four ways of collecting unsecured personal property taxes: (1) a civil action against the taxpayer; (2) filing a certificate in the office of the County Clerk specifying certain facts in order to obtain a judgment lien on certain property of the taxpayer; (3) filing a certificate of delinquency for recordation in the County Recorder s office in order to obtain a lien on certain property of the taxpayer; and (4) seizure and sale of personal property, improvements, bank accounts or possessory interests belonging or assessed to the taxpayer. Proposition 98 General. In 1988, California voters approved Proposition 98, an initiative that amended Article XVI of the State Constitution and provided specific procedures to determine a minimum guarantee for annual grade kindergarten to 14 ( K-14 ) funding. The constitutional provision links the K-14 funding formulas to growth factors that are also used to compute the State appropriations limit. Proposition 111 (Senate Constitutional Amendment 1), adopted in June 1990, among other things, revised certain funding provisions of Proposition 98 relating to the treatment of revenues in excess of the State spending limit and added a third funding test to calculate the annual funding guarantee. This third calculation is operative in years in which general fund tax revenue growth is weak. The amendment also specified that under Test 2 (see below), the annual cost of living adjustment ( COLA ) for the minimum guarantee would be the change in California s per-capita personal income, which is the same COLA used to make annual adjustments to the State appropriations limit (Article XIII B). Calculating Minimum Funding Guarantee. There are currently three tests which determine the minimum level of K-14 funding. Test 1 guarantees that K-14 education will receive at least the same funding share of the State general fund budget it received in Initially, that share was just over 40%. Because of the major shifts of property tax from local government to community colleges and K-12 which began in and increased in , the percentage dropped to 33.0%

26 Under implementing legislation (AB 198 and SB 98 of 1989), each segment of public education (K-12 districts, community college districts, and direct elementary and secondary level instructional services provided by the State of California) has separately calculated amounts under the Proposition 98 tests. The base year for the separate calculations is Each year, each segment is entitled to the greater of the amounts separately computed for each under Test 1 or 2. Should the calculated amount Proposition 98 guarantee (K-14 aggregated) be less than the sum of the separate calculations, then the Proposition 98 guarantee amount shall be prorated to the three segments in proportion to the amount calculated for each. This statutory split has been suspended in every year beginning with In those years, community colleges received less than was required from the statutory split. Test 2 provides that K-14 education will receive as a minimum, its prior-year total funding (including State general fund and local revenues) adjusted for enrollment growth ( ADA ) and per-capita personal income COLA. A third formula, established pursuant to Proposition 111 as Test 3, provides an alternative calculation of the funding base in years in which State per-capita General Fund revenues grow more slowly than per-capita personal income. When this condition exists, K-14 minimum funding is determined based on the prior-year funding level, adjusted for changes in enrollment and COLA where the COLA is measured by the annual increase in per-capita general fund revenues, instead of the higher per-capita personal income factor. The total allocation, however, is increased by an amount equal to onehalf of one percent of the prior-year funding level as a funding supplement. In order to make up for the lower funding level under Test 3, in subsequent years K-14 education receives a maintenance allowance equal to the difference between what should have been provided if the revenue conditions had not been weak and what was actually received under the Test 3 formula. This maintenance allowance is paid in subsequent years when the growth in per-capita State tax revenue outpaces the growth in per-capita personal income. The enabling legislation to Proposition 111, Chapter 60, Statutes of 1990 (SB 88, Garamendi), further provides that K-14 education shall receive a supplemental appropriation in a Test 3 year if the annual growth rate in non-proposition 98 per-capita appropriations exceeds the annual growth rate in perpupil total spending. Proposition 1A Proposition 1A (SCA 4), proposed by the Legislature in connection with the Budget Act and approved by the voters in November 2004, provides that the State may not reduce any local sales tax rate, limit existing local government authority to levy a sales tax rate or change the allocation of local sales tax revenues, subject to certain exceptions. Proposition 1A generally prohibits the State from shifting to schools or community colleges any share of property tax revenues allocated to local governments for any Fiscal Year, as set forth under the laws in effect as of November 3, Any change in the allocation of property tax revenues among local governments within a county must be approved by two-thirds of both houses of the State Legislature. Proposition 1A provides, however, that beginning in Fiscal Year , the State may shift to schools and community colleges up to 8% of local government property tax revenues, which amount must be repaid, with interest, within three years, if the Governor proclaims that the shift is needed due to a severe state financial hardship, the shift is approved by two-thirds of both houses of the State Legislature and certain other conditions are met. The State may also approve voluntary exchanges of local sales tax and property tax revenues among local governments within a county. Pursuant to Proposition 1A, if the State reduces the Vehicle License Fee rate below 0.65 percent of vehicle value, the State must provide local governments with equal replacement revenues. Further, Proposition 1A required the State, beginning March 1, 2006, to suspend mandates affecting cities, counties and special districts, schools or community colleges, excepting

27 mandates relating to employee rights, in any year that the State does not fully reimburse local governments for their costs of compliance with such mandates. Prohibitions on Diverting Local Revenues for State Purposes. Beginning in , the State satisfied a portion of its Proposition 98 obligations by shifting part of the property tax revenues otherwise belonging to cities, counties, special districts, and redevelopment agencies, to school and college districts through a local Educational Revenue Augmentation Fund (ERAF) in each county. Local agencies, objecting to invasions of their local revenues by the State, sponsored a statewide ballot initiative intended to eliminate the practice. In response, the Legislature proposed an amendment to the State Constitution, which the State s voters approved as Proposition 1A at the November 2004 election. See Proposition 1A herein. That measure was generally superseded by the passage of a new initiative constitutional amendment at the November 2010 election, known as Proposition 22. The effect of Proposition 22 is to prohibit the State, even during a period of severe fiscal hardship, from delaying the distribution of tax revenues for transportation, redevelopment, or local government projects and services. It prevents the State from redirecting redevelopment agency property tax increment to any other local government, including school districts, or from temporarily shifting property taxes from cities, counties and special districts to schools, as in the ERAF program. This is intended to, among other things, stabilize local government revenue sources by restricting the State s control over local property taxes. One effect of this amendment will be to deprive the State of fuel tax revenues to pay debt service on most State bonds for transportation projects, reducing the amount of State general fund resources available for other purposes, including education. Prior to the passage of Proposition 22, the State invoked Proposition 1A to divert $1.935 billion in local property tax revenues in from cities, counties, and special districts to the State to offset State general fund spending for education and other programs, and included another diversion in the adopted State budget of $1.7 billion in local property tax revenues from local redevelopment agencies. Because Proposition 22 reduces the State s authority to use or reallocate certain revenue sources, fees and taxes for State general fund purposes, the State will have to take other actions to balance its budget, such as reducing State spending or increasing State taxes, and school and college districts that receive Proposition 98 or other funding from the State will be more directly dependent upon the State s general fund. On December 30, 2011, the California Supreme Court issued its decision in the case of California Redevelopment Association v. Matosantos, finding ABx1 26, a trailer bill to the State Budget, to be constitutional. As a result, all redevelopment agencies in California were dissolved as of February 1, 2012, and all net tax increment revenues, after payment of redevelopment bonds debt service and administrative costs, will be distributed to cities, counties, special districts and K-14 school districts. The Court also found that ABx1 27, a companion bill to ABx1 26, violated the California Constitution, as amended by Proposition 22. ABx1 27 would have permitted redevelopment agencies to continue operations provided their establishing cities or counties agreed to make specified payments to K-14 school districts and county offices of education, totaling $1.7 billion statewide. The District is unable to predict what affect the implementation of ABx1 26 will have on the District s future receipt of tax increment revenues. As a result of the dissolution of California redevelopment agencies and ABx1 26, the tax increment previously paid to redevelopment agencies shall first be used to pay pass-through payments to other taxing entities and second to pay the redevelopment agencies enforceable obligations; with the remaining revenue (if any) paid to the taxing entities by the County Auditor-Controller in the same proportion as other tax revenue. The District does not expect to have any of its property tax payments deferred as a result of the dissolution of area redevelopment agencies

28 Financial Statements The District s financial statements are prepared on a modified accrual basis of accounting in accordance with generally accepted accounting principles as set forth by the Governmental Accounting Standards Board. Funds used by the District are categorized as follows: Governmental Funds General Fund Special Revenue Funds Debt Service Funds Capital Project Funds Fiduciary Funds Trust and Agency Funds Proprietary Funds Internal Service Funds The General Fund of the District, as shown herein, is a combined fund comprised of moneys which are unrestricted and available to finance the legally authorized activities of the District not financed by restricted funds and moneys which are restricted to specific types of programs or purposes. General Fund revenues shown thereon are derived from such sources as taxes, aid from other government agencies, charges for current services and other revenue. The financial statements included herein were prepared by the District using information from the Annual Financial Reports which are prepared by the Director of Fiscal Services for the District and audited by independent certified public accountants each year. Excerpts from the District s audited financial statements for the year ending June 30, 2011, are attached hereto as APPENDIX C. Budgets of District The fiscal year of the District begins on the first day of July of each year and ends on the 30th day of June of the following year. The District adopts on or before July 1 of each year a fiscal line-item budget setting forth expenditures in priority sequence so that appropriations during the fiscal year can be adjusted if revenues do not meet projections. The District is required by provisions of the California Education Code to maintain a balanced budget each year, where the sum of expenditures plus the ending fund balance cannot exceed the revenues plus the carry-over fund balance from the previous year

29 CONSTITUTIONAL AND STATUTORY LIMITATIONS ON TAXES AND APPROPRIATIONS Article XIIIA of the California Constitution Article XIIIA of the California Constitution limits the amount of any ad valorem tax on real property, to one percent (1%) of the full cash value thereof, except that additional ad valorem taxes may be levied to pay debt service on indebtedness approved by the voters prior to July 1, 1978 and on bonded indebtedness for the acquisition or improvement of real property which has been approved on or after July 1, 1978 by two-thirds of the voters on such indebtedness. Article XIIIA defines full cash value to mean the county assessor s valuation of real property as shown on the tax bill under full cash value, or thereafter, the appraised value of real property when purchased, newly constructed, or a change in ownership have occurred after the 1975 assessment. The full cash value may be increased at a rate not to exceed two percent per year to account for inflation. Article XIIIA has subsequently been amended to permit reduction of the full cash value base in the event of declining property values caused by damage, destruction or other factors, to provide that there would be no increase in the full cash value base in the event of reconstruction of property damaged or destroyed in a disaster and in other minor or technical ways. Legislation Implementing Article XIIIA Legislation has been enacted and amended a number of times since 1978 to implement Article XIIIA. Under current law, local agencies are no longer permitted to levy directly any property tax (except to pay voter-approved indebtedness). The one percent (1%) property tax is automatically levied by the county and distributed according to a formula among taxing agencies. The formula apportions the tax roughly in proportion to the relative shares of taxes levied prior to Increases of assessed valuation resulting from reappraisals of property due to new construction, change in ownership or from the two percent annual adjustment are allocated among the various jurisdictions in the taxing area based upon their respective situs. Any such allocation made to a local agency continues as part of its allocation in future years. All taxable property is shown at full market value on the tax rolls, with tax rates expressed as $1 per $100 of taxable value. All taxable property value included in this Official Statement is shown at 100% of market value (unless noted differently) and all tax rates reflect the $1 per $100 of taxable value. Article XIIIB of the California Constitution Under Article XIIIB of the California State Constitution state and local government entities have an annual appropriations limit and are not permitted to spend certain moneys which are called appropriations subject to limitation (consisting of tax revenues, state subventions and certain other funds) in an amount higher than the appropriations limit. Article XIIIB does not affect the appropriations of moneys which are excluded from the definition of appropriations subject to limitation, including debt service on indebtedness existing or authorized as of January 1, 1979, or bonded indebtedness subsequently approved by the voters. In general terms, the appropriations limit is to be based on certain expenditures, and is to be adjusted annually to reflect changes in consumer prices, populations, and services provided by these entities. Among other provisions of Article XIIIB, if these entities revenues in any year exceed the amounts permitted to be spent, the excess would have to be returned by revising tax rates or fee schedules over the subsequent two years

30 Unitary Property AB 454 (Chapter 921, Statutes of 1986) provides that revenues derived from most utility property assessed by the State Board of Equalization ( Unitary Property ), commencing with the Fiscal Year, will be allocated as follows: (1) each jurisdiction will receive up to 102% of its prior year Stateassessed revenue; and (2) if county-wide revenues generated from Unitary Property are less than the previous year s revenues or greater than 102% of the previous year s revenues, each jurisdiction will share the burden of the shortfall or excess revenues by a specified formula. This provision applies to all Unitary Property except railroads, whose valuation will continue to be allocated to individual tax rate areas. The provisions of AB 454 do not constitute an elimination of the assessment of any Stateassessed properties nor a revision of the methods of assessing utilities by the State Board of Equalization. Generally, AB 454 allows valuation growth or decline of Unitary Property to be shared by all jurisdictions in a county. California Lottery In the November 1984 general election, the voters of the State approved a Constitutional Amendment establishing a California State Lottery (the State Lottery ), the net revenues (revenues less expenses and prizes) of which shall be used to supplement other moneys allocated to public education. The legislation further requires that the funds shall be used for the education of pupils and students and cannot be used for the acquisition of real property, the construction of facilities or the financing of research. Allocation of State Lottery net revenues is based upon the average daily attendance of each school and community college district; however, the exact allocation formula may vary from year to year. The District budgeted $457,856 for State Lottery aid in and, as of June 30, 2012, the District received $417,538. At this time, the amount of additional revenues that may be generated by the State Lottery in any given year cannot be predicted. Proposition 46 On June 3, 1986, California voters approved Proposition 46, which added an additional exemption to the 1% tax limitation imposed by Article XIIIA. Under this amendment to Article XIIIA, local governments and school and community college districts may increase the property tax rate above 1% for the period necessary to retire new, general obligation bonds, if two-thirds of those voting in a local election approve the issuance of such bonds and the money raised through the sale of the bonds is used exclusively to purchase or improve real property. Proposition 39 On November 7, 2000, California voters approved Proposition 39, called the Smaller Classes, Safer Schools and Financial Accountability Act (the Smaller Classes Act ) which amends Section 1 of Article XIIIA, Section 18 of Article XVI of the California Constitution and Section of the California Education Code and allows an alternative means of seeking voter approval for bonded indebtedness by 55% of the vote, rather than the two-thirds majority required under Section 18 of Article XVI of the Constitution. The 55% voter requirement applies only if the bond measure submitted to the voters includes, among other items: (1) a restriction that the proceeds of the bonds may be used for the construction, reconstruction, rehabilitation, or replacement of school facilities, including the furnishing and equipping of school facilities, or the acquisition or lease of real property for school facilities, (2) a list of projects to be funded and a certification that the school district board has evaluated

31 safety, class size reduction, and information technology needs in developing that list and (3) that annual, independent performance and financial audits will be conducted regarding the expenditure and use of the bond proceeds. Section 1(b)(3) of Article XIIIA has been added to exempt the one percent (1%) ad valorem tax limitation that Section 1(a) of Article XIIIA of the Constitution levies, to pay bonds approved by 55% of the voters, subject to the restrictions explained above. The Legislature enacted AB 1908, Chapter 44, which became effective upon passage of Proposition 39 and amends various sections of the Education Code. Under amendments to Section and of the Education Code, the following limits on ad valorem taxes apply in any single election: (1) for an elementary and high school district, indebtedness shall not exceed $30 per $100,000 of taxable property, (2) for a unified school district, indebtedness shall not exceed $60 per $100,000 of taxable property, and (3) for a community college district, indebtedness shall not exceed $25 per $100,000 of taxable property. Finally, AB 1908 requires that a citizens oversight committee must be appointed who will review the use of the bond funds and inform the public about their proper usage. Article XIIIC and XIIID of the California Constitution On November 5, 1996, an initiative to amend the California Constitution known as the Right to Vote on Taxes Act ( Proposition 218 ) was approved by a majority of California voters. Proposition 218 added Articles XIIIC and XIIID to the State Constitution and requires majority voter approval for the imposition, extension or increase of general taxes and 2/3 voter approval for the imposition, extension or increase of special taxes by a local government, which is defined in Proposition 218 to include counties. Proposition 218 also provides that any general tax imposed, extended or increased without voter approval by any local government on or after January 1, 1995, and prior to November 6, 1996 shall continue to be imposed only if approved by a majority vote in an election held within two years following November 6, All local taxes and benefit assessments which may be imposed by public agencies will be defined as general taxes (defined as those used for general governmental purposes) or special taxes (defined as taxes for a specific purpose even if the revenues flow through the local government s general fund) both of which would require a popular vote. New general taxes require a majority vote and new special taxes require a two-thirds vote. Proposition 218 also extends the initiative power to reducing or repealing local taxes, assessments, fees and charges, regardless of the date such taxes, assessments or fees or charges were imposed, and lowers the number of signatures necessary for the process. In addition, Proposition 218 limits the application of assessments, fees and charges and requires them to be submitted to property owners for approval or rejection, after notice and public hearing. The District has no power to impose taxes except property taxes associated with a general obligation bond election, following approval by 55% or 2/3 of the District s voters, depending upon the Article of the Constitution under which it is passed. Under previous law, the District could apply provisions of the Landscape and Lighting Act of 1972 to create an assessment district for specified purposes, based on the absence of a majority protest. Proposition 218 significantly reduces the ability of the District to create such special assessment districts. Any assessments, fees or charges levied or imposed by any assessment district created by the District will become subject to the election requirements of Proposition 218 as described above, a more elaborate notice and balloting process and other requirements. Proposition 218 also expressly extends the initiative power to give voters the power to reduce or repeal local taxes, assessments, fees and charges, regardless of the date such taxes, assessments, fees or charges were imposed, and reduces the number of signatures required for the initiative process. This extension of the initiative power to some extent constitutionalizes the March 6, 1995 State Supreme Court

32 decision in Rossi v. Brown, which upheld an initiative that repealed a local tax and held that the State constitution does not preclude the repeal, including the prospective repeal, of a tax ordinance by an initiative, as contrasted with the State constitutional prohibition on referendum powers regarding statutes and. ordinances which impose a tax. Generally, the initiative process enables California voters to enact legislation upon obtaining requisite voter approval at a general election. Proposition 218 extends the authority stated in Rossi v. Brown by expanding the initiative power to include reducing or repealing assessments, fees and charges, which had previously been considered administrative rather than legislative matters and therefore beyond the initiative power. This extension of the initiative power is not limited by the terms of Proposition 218 to fees imposed after November 6, 1996, and absent other legal authority could result in retroactive reduction in any existing taxes, assessments or fees and charges. Such legal authority could include the limitations imposed on the impairment of contracts under the contract clause of the United States Constitution. Proposition 218 has no effect upon the District s ability to pursue approval of a general obligation bond issue or a Mello-Roos Community Facilities District bond issue in the future, both of which are already subject to a 2/3 vote, although certain procedures and burdens of proof may be altered slightly. The District is unable to predict the nature of any future challenges to Proposition 218 or the extent to which, if any, Proposition 218 may be held to be unconstitutional. Future Initiatives Article XIIIA, Article XIIIB, Article XIIIC, Article XIIID and Propositions 98, 46 and 39 were each adopted as measures that qualified for the ballot pursuant to the State s initiative process. From time to time, other initiative measures could be adopted, further affecting the District s revenues or their ability to expend revenues. THE KERN COUNTY TREASURY POOL The following information concerning the Kern County Treasury Pool (the Investment Pool or Pool ) has been provided by the Treasurer and has not been confirmed or verified by the District or the Underwriter. No representation is made herein as to the accuracy or adequacy of such information or as to the absence of material adverse changes in such information subsequent to the date hereof or that the information contained or incorporated hereby by reference is correct as of any time subsequent to its date. Under the California Education Code, the District is required to pay all moneys received from any source into the County of Kern Treasury to be held on behalf of the District. The Pool consists of monies deposited with the Treasurer by County departments and agencies, school districts, certain non-county governmental agencies and special assessment districts. Most of the Pool s depositors are required by State law to invest their excess moneys in the Pool. Each depositor is assigned a distinct fund number within the Investment Pool. Cash represented by the fund balances is commingled in a Pooled Cash Portfolio for investment purposes; no funds are segregated for separate investment. Investments are selected from those authorized by California Government Code Section ( Code ). Authorized investments include obligations of the United States Treasury, agencies of the United States government, federally sponsored enterprises, local and State bond issues, bankers acceptances, commercial paper of prime quality, collateralized and negotiable certificates of deposit, repurchase and reverse repurchase agreements, medium term corporate notes, shares of beneficial interest in diversified management companies (mutual funds), and asset backed (including mortgage related) and pass-through securities

33 Each calendar year the Treasurer prepares an Annual Statement of Investment Policy (the Investment Policy ) that sets the framework for the investment practices relating to the County treasury. Legislation enacted in 1996 and effective January 1, 1997, requires that the Investment Policy be filed and approved by the Board in open session. Additionally, the Board must determine whether to delegate investment authority to the Treasurer each year. Failure to so delegate transfers investment responsibility to the Board itself. The Board of Supervisors approved the current Investment Policy as presented by the Treasurer and delegated investment responsibility to the Treasurer on November 30, Having been so approved, the Investment Policy may not be changed without Board approval. The approved Investment Policy provides that the County s investment objectives are safety and liquidity of all investments, while obtaining a reasonable return within established investment guidelines. The Investment Policy provides that no more than 6% of the assets in the Pool can be invested in the securities of any single issuer other than the United States Treasury and agencies of the United States government. Investments in reverse repurchase agreements are limited to 10% of the total Pool and must always be matched in maturity to the reinvestment. Additionally, no investment will be made in any security whose coupon rate varies inversely with general credit market rates. In accordance with California law, the Kern County Board of Supervisors created an elevenmember Treasury Oversight Committee (the TOC ) on April 2, The statutory role of the TOC is to review the Investment Policy as prepared by the Treasurer and make recommendations to the Board, to monitor policy compliance as well as investment performance and to cause an annual independent audit to be performed. The TOC meets semi-annually to accomplish its tasks. The following tables present information with respect to the Pool as of June 30, As described above, a wide range of investments is authorized under State law and the Investment Policy. Therefore, there can be no assurance that the investments in the Pool will not vary significantly from the investments described below. In addition, the value of various investments in the Pool will fluctuate on a daily basis as a result of several factors, including generally prevailing interest rates and other economic conditions. For further information concerning County investments, access the County s website: [Remainder of this page intentionally left blank.]

34 The following table identifies the types of securities held by the Pool as of June 30, KERN COUNTY TREASURER TAX COLLECTOR Pooled Cash Portfolio Report (as of June 30, 2012 amounts in 1,000 s) Asset Par Market Cost Yield to Maturity Percent of Total Assets Policy Limit Average Maturity Effective Duration Pooled Funds $ 36,251 $ 36,251 $ 36, % 1.84% $50, Negotiable CD's 150, , , % Commercial Paper - Discount 539, , , % Federal Agency Issues - Coupon 622, , , % 1, Medium Term Notes 537, , , % Repurchase Agreements 45,750 45,750 45, % 1 0 Total Securities $ 1,931,718 $ 1,947,610 $ 1,959, Cash in Banks 11,155 11,155 11, Total Assets $ 1,942,873 $ 1,958,764 $ 1,970,215 Accrued Interest at Purchase Total Pooled Cash Portfolio $ 1,943,016 $ 1,958,908 $ 1, Source: Kern County Treasurer

35 table. The maturity distribution of the Pool s portfolio as of June 30, 2012, is presented in the following COUNTY OF KERN Treasury Pool Portfolio Liquidity (As of June 30, 2012) Term to Maturity % of Total days 55.30% 367 1,097 days ,098 1,827 days Source: Kern County Treasurer. None of the District, the Financial Advisor or the Underwriter has made an independent investigation of the investments in the Pool nor have they made any assessment of the current County Investment Policy. The value of the various investments in the Pool will fluctuate on a daily basis as a result of a multitude of factors, including generally prevailing interest rates and other economic conditions. Additionally, the Treasurer, with the consent of the Treasury Oversight Committee and the County Board of Supervisors, may change the County Investment Policy at any time. Therefore, there can be no assurance that the values of the various investments in the Pool will not vary significantly from the values described herein. LEGAL MATTERS The legal opinion of Fulbright & Jaworski L.L.P., Los Angeles, California, Bond Counsel to the District ( Bond Counsel ), attesting to the validity of the Bonds, will be supplied to the original purchasers of the Bonds without charge. A copy of the legal opinion will be attached to the Bonds. Bond Counsel will receive compensation contingent upon the sale and delivery of the Bonds. TAX MATTERS The delivery of the Bonds is subject to delivery of the opinion of Bond Counsel, to the effect that interest on the Bonds for federal income tax purposes under existing statutes, regulations, published rulings, and court decisions (1) will be excludable from the gross income, as defined in section 61 of the Internal Revenue Code of 1986, as amended to the date of initial delivery of the Bonds (the Code ), of the owners thereof pursuant to section 103 of the Code, and (2) will not be included in computing the alternative minimum taxable income of the owners thereof who are individuals or, except as hereinafter described, corporations. The delivery of the Bonds is also subject to the delivery of the opinion of Bond Counsel, based upon existing provisions of the laws of the State of California, that interest on the Bonds is exempt from personal income taxes of the State of California. A form of Bond Counsel s anticipated opinion is included as APPENDIX B. The statutes, regulations, rulings, and court decisions on which such opinions will be based are subject to change. Interest on the Bonds owned by a corporation will be included in such corporation s adjusted current earnings for purposes of calculating the alternative minimum taxable income of such corporation, other than an S corporation, a qualified mutual fund, a financial asset securitization investment trust, a real estate investment trust (REIT), or a real estate mortgage investment conduit (REMIC). A corporation s alternative minimum taxable income is the basis on which the alternative minimum tax imposed by section 55 of the Code will be computed

36 In rendering the foregoing opinions, Bond Counsel will rely upon the representations and certifications of the District made in a certificate of even date with the initial delivery of the Bonds pertaining to the use, expenditure, and investment of the proceeds of the Bonds and will assume continuing compliance with the provisions of the Resolution and the Tax Certificate by the District subsequent to the issuance of the Bonds. The Resolution and the Tax Certificate contain covenants by the District with respect to, among other matters, the use of the proceeds of the Bonds and the facilities and equipment financed or refinanced therewith by persons other than state or local governmental units, the manner in which the proceeds of the Bonds are to be invested, the calculation and payment to the United States Treasury of any arbitrage profits and the reporting of certain information to the United States Treasury. Failure to comply with any of these covenants may cause interest on the Bonds to be includable in the gross income of the owners thereof from the date of the issuance of the Bonds. Except as described above, Bond Counsel will express no other opinion with respect to any other federal, State or local tax consequences under present law, or proposed legislation, resulting from the receipt or accrual of interest on, or the acquisition or disposition of, the Bonds. Prospective purchasers of the Bonds should be aware that the ownership of tax-exempt obligations such as the Bonds may result in collateral federal tax consequences to, among others, financial institutions, life insurance companies, property and casualty insurance companies, S corporations with subchapter C earnings and profits, certain foreign corporations doing business in the United States, individual recipients of Social Security or Railroad Retirement benefits, individuals otherwise qualifying for the earned income tax credit, owners of an interest in a financial asset securitization investment trust, and taxpayers who may be deemed to have incurred or continued indebtedness to purchase or carry, or who have paid or incurred certain expenses allocable to, tax-exempt obligations. Prospective purchasers should consult their own tax advisors as to the applicability of these consequences to their particular circumstances. Bond Counsel s opinion is not a guarantee of a result, but represents its legal judgment based upon its review of existing statutes, regulations, published rulings and court decisions and the representations and covenants of the District described above. No ruling has been sought from the Internal Revenue Service (the Service ) or the State of California with respect to the matters addressed in the opinion of Bond Counsel, and Bond Counsel s opinion is not binding on the Service or the State of California. The Service has an ongoing program of auditing the tax-exempt status of the interest on municipal obligations. If an audit of the Bonds is commenced, under current procedures, the Service is likely to treat the Issuer as the taxpayer, and the owners of the Bonds would have no right to participate in the audit process. In responding to or defending an audit of the tax-exempt status of the interest on the Bonds, the District may have different or conflicting interests from the owners of the Bonds. Public awareness of any future audit of the Bonds could adversely affect the value and liquidity of the Bonds during the pendency of the audit, regardless of its ultimate outcome. Existing law may change to reduce or eliminate the benefit to bondholders of the exclusion of interest on the Bonds from gross income for federal income tax purposes. Any proposed legislation or administrative action, whether or not taken, could also affect the value and marketability of the Bonds. Prospective purchasers of the Bonds should consult with their own tax advisors with respect to any proposed or future changes in tax law. Tax Accounting Treatment of Discount and Premium on Certain Bonds The initial public offering price of certain of the Current Interest Bonds (the Discount Current Interest Bonds ) may be less than the amount payable on such Bonds at maturity. An amount equal to the difference between the initial public offering price of a Discount Current Interest Bond (assuming that a substantial amount of the Discount Bonds of that maturity are sold to the public at such price) and the amount payable at maturity constitutes original issue discount to the initial purchaser of such Discount

37 Current Interest Bond. Each of the Capital Appreciation Bonds and Convertible CABs (together with the Discount Current Interest Bonds, the Discount Bonds ) will be deemed to be issued with original issue discount for federal income tax purposes, because the initial interest payment date is more than twelve months after such Bonds will be delivered to the initial purchasers. Additional original issue discount will also result if the initial public offering price of a Capital Appreciation Bond or Convertible CAB (assuming that a substantial amount of the Capital Appreciation Bonds or Convertible CABs of that maturity are sold to the public at such price) is less than the amount payable on such Bond at its maturity. A portion of the original issue discount allocable to the holding period of such Discount Bond by the initial purchaser will, upon the disposition of such Discount Bond (including by reason of its payment at maturity), be treated as interest excludable from gross income, rather than as taxable gain, for federal income tax purposes, on the same terms and conditions as those for other interest on the Bonds described above. Such interest is considered to be accrued actuarially in accordance with the constant interest method over the life of a Discount Bond, taking into account the semiannual compounding of accrued interest, at the yield to maturity on such Discount Bond and generally will be allocated to an initial purchaser in a different amount from the amount of the payment denominated as interest actually received by the initial purchaser during the tax year. However, such interest may be required to be taken into account in determining the alternative minimum taxable income of a corporation, for purposes of calculating a corporation s alternative minimum tax imposed by Section 55 of the Code, and the amount of the branch profits tax applicable to certain foreign corporations doing business in the United States, even though there will not be a corresponding cash payment. In addition, the accrual of such interest may result in certain other collateral federal income tax consequences to, among others, financial institutions, life insurance companies, property and casualty insurance companies, S corporations with subchapter C earnings and profits, individual recipients of Social Security or Railroad Retirement benefits, individuals otherwise qualifying for the earned income tax credit, owners of an interest in a financial asset securitization investment trust, and taxpayers who may be deemed to have incurred or continued indebtedness to purchase or carry, or who have paid or incurred certain expenses allocable to, tax-exempt obligations. Moreover, in the event of the redemption, sale or other taxable disposition of a Discount Bond by the initial owner prior to maturity, the amount realized by such owner in excess of the basis of such Discount Bond in the hands of such owner (adjusted upward by the portion of the original issue discount and, with respect to the Convertible CABs, downward for the payments denominated as interest, allocable to the period for which such Discount Bond was held) is includable in gross income. Owners of Discount Bonds should consult with their own tax advisors with respect to the determination of accrued original issue discount on Discount Bonds for federal income tax purposes and with respect to the state and local tax consequences of owning and disposing of Discount Bonds. It is possible that, under applicable provisions governing determination of state and local income taxes, accrued interest on Discount Bonds may be deemed to be received in the year of accrual even though there will not be a corresponding cash payment. The initial offering price of certain Current Interest Bonds (the Premium Bonds ), may be greater than the amount payable on such bonds at maturity. An amount equal to the difference between the initial public offering price of a Premium Bond (assuming that a substantial amount of the Premium Bonds of that maturity are sold to the public at such price) and the amount payable at maturity constitutes premium to the initial purchaser of such Premium Bonds. The basis for federal income tax purposes of a Premium Bond in the hands of such initial purchaser must be reduced each year by the amortizable bond premium, although no federal income tax deduction is allowed as a result of such reduction in basis for amortizable bond premium. Such reduction in basis will increase the amount of any gain (or decrease the amount of any loss) to be recognized for federal income tax purposes upon a sale or other taxable disposition of a Premium Bond. The amount of premium which is amortizable each year by an initial

38 purchaser is determined by using such purchaser s yield to maturity. Purchasers of the Premium Bonds should consult with their own tax advisors with respect to the determination of amortizable bond premium with respect to the Premium Bonds for federal income purposes and with respect to the state and local tax consequences of owning and disposing of Premium Bonds. A copy of the proposed form of opinion of Bond Counsel is attached hereto as APPENDIX B. LEGALITY FOR INVESTMENT Under provisions of the California Financial Code, the Bonds are legal investments for commercial banks in California to the extent that the Bonds, in the informed opinion of the investing bank, are prudent for the investment of funds of depositors. Under provisions of the California Government Code, the Bonds are eligible to secure deposits of public moneys in California. RATINGS Moody s Investors Service ( Moody s ) and Fitch Ratings ( Fitch ) have assigned municipal bond ratings of Aa3 and AA, respectively, to the Bonds. Such ratings reflect only the views of Moody s and Fitch and an explanation of the significance of such ratings may be obtained as follows: Moody s, 7 World Trade Center at 250 Greenwich Street, New York, New York 10007, tel. (212) or Fitch, One State Street Plaza, New York, New York 10004, tel. (800) There is no assurance that such ratings will continue for any given period of time or that they will not be revised downward or withdrawn entirely if, in the judgment of the respective rating agency, circumstances so warrant. Any such downward revision or withdrawal of such ratings may have an adverse effect on the market price of the Bonds. UNDERWRITING Stifel, Nicolaus & Company, Incorporated, dba Stone & Youngberg, a Division of Stifel Nicolaus, as Underwriter, has agreed to purchase the Bonds at the purchase price of $16,324, (reflecting the aggregate initial principal and issue amount of $16,507,908.40, less a net original issue discount of $5, and less an Underwriter s discount of $178,285.41, at the rates and yields shown on the inside cover hereof. The Underwriter may offer and sell the Bonds to certain dealers and others at prices lower than the offering prices stated on the inside cover page. The offering prices may be changed from time to time by the Underwriter. NO LITIGATION No litigation is pending concerning the validity of the Bonds, and District Counsel, Schools Legal Service, will deliver an opinion to that effect at the time of delivery of the Bonds. The District is not aware of any litigation pending or threatened questioning the political existence of the District or contesting the District s ability to receive ad valorem taxes or to collect other revenues or contesting the District s ability to issue the Bonds. OTHER INFORMATION References are made herein to certain documents and reports which are brief summaries thereof which do not purport to be complete or definitive and reference is made such documents and reports for full and complete statements of the contents thereof. Additional information concerning the District and

39 copies of the most recent and subsequent audited financial statements of the District and the Resolution may be obtained by contacting: Norris School District, 6940 Calloway Drive, Bakersfield, California 93312, Attention: Superintendent. The District may impose a fee for copying, shipping and handling. [Remainder of this page intentionally left blank]

40 Any statements in this Official Statement involving matters of opinion, whether or not expressly so stated, are intended as such and not as representations of fact. This Official Statement is not be construed as a contract or agreement between the District and the purchasers or Owners of any of the Bonds. The execution and delivery of this Official Statement has been duly authorized by the District. NORRIS SCHOOL DISTRICT By: /s/ Steven Shelton Superintendent

41 APPENDIX A THE DISTRICT General The Norris School District (the District ), established on September 30, 1880, is located in the southern portion of the San Joaquin Valley of central California. The territory of the District, which includes unincorporated areas in Kern County (the County ) northwest of Bakersfield, California (the City ), encompasses approximately 18 square miles. The District has four elementary schools and one middle school enrollment in the District was 3,775 students with an average daily attendance of 3, at P-2 in The District is governed by a Board of Trustees (the Board ). The Board consists of 5 members who are elected at-large to overlapping four-year terms at elections held in staggered years. If a vacancy arises during any term, the vacancy is filled by either an appointment by the majority vote of the remaining Board members or by a special election. The years in which the current terms for each member of the Board expire are set forth below: BOARD OF TRUSTEES Name Office Term Expires (November) Bob Beechinor President December 2014 Sue Dodgin Clerk December 2012 Jim Bowles Member December 2012 John Genter Member December 2014 Jeff Stone Member December 2014 Unless otherwise indicated, the following financial, statistical and demographic data has been provided by the District. Key Personnel The Superintendent of Schools of the District is appointed by the Board and reports to the Board. The Superintendent is responsible for management of the District s day-to-day operations and supervises the work of other key District administrators. Mr. Steven K. Shelton, Superintendent. Mr. Shelton received a B.A. degree at California State University, Bakersfield ( CSUB ) in June 1977, his California Life Teaching Credential from CSUB in 1978, his California Administrative Services Credential in 1983 from California Lutheran University and his Master s Degree in Educational Administration in 1986 from Cal Lutheran. Prior to taking over as Superintendent to the District in 2012, Mr. Shelton served as Assistant Superintendent to the District beginning in July Prior to becoming Assistant Superintendent, he served the Norris School District as a teacher, coach and principal. Mr. Shelton began teaching in the Norris School District in August 1979 after one year teaching in the Bakersfield City School District. His first administrative position was as Principal at Norris Elementary School beginning the school year. He then served as Principal at Norris Middle School from August 1987 until opening William B. Bimat Elementary School in August of Mr. Shelton has served on the SISC Property and Liability Board as well as various committees related to elementary and middle schools. He has been very involved in county wide issues related to A-1

42 schools and was part of a team that wrote a drug abuse prevention curriculum for the Kern County Superintendent of Schools. Kelly Miller, Assistant Superintendent. Kelly Miller earned her Bachelor of Arts degree from California State University Northridge in In 1998, she received her Multiple Subject Teaching Credential from University of La Verne and her masters in Administrative Services from Fresno Pacific University in Mrs. Miller s career began in marketing, working at KGET-TV and serving as the Western Region Coordinator of Public Affairs for Contel from Her career in education began in the Norris School District in Utilizing her business and teaching background, Mrs. Miller has successfully served as an administrator for the past eight years: , Norris Middle School Vice Principal; , Olive Drive Elementary Principal; , Veterans Elementary Principal is Mrs. Miller s first year as Assistant Superintendent of the Norris School District. In addition to her career in the Norris School District, Mrs. Miller is a Norris alumna class of Kade M. Duey, Director of Business Services. Kade M. Duey has served as the District s Director of Fiscal Services since 2006 and starting in the Fiscal Year has been promoted to the newly created Director of Business Services position. Prior to his position with the Norris School District, he spent ten years with the City of Bakersfield's Economic and Community Development Department. Mr. Duey received a B.S. in Business/Economics from Willamette University in 1991 and a Masters in Business Administration from California State University Bakersfield in District Employees The District employs approximately 162 full-time equivalent certificated academic professionals as well as 76 full-time equivalent classified employees. The certificated employees of the District have assigned the California Teachers Association ( CTA ) as their exclusive bargaining agent. The certificated employees contract with CTA expires on June 30, Classified employees are represented by California School Employees Association ( CSEA ). The classified employees contract with CSEA expires on June 30, Assessed Valuations The assessed valuation of property in the District is established by the County Assessor, except for public utility property which is assessed by the State Board of Equalization. Assessed valuations are reported at 100% of the full value of the property, as defined in Article XIII A of the California Constitution. See CONSTITUTIONAL AND STATUTORY LIMITATIONS ON TAXES AND APPROPRIATIONS herein. The State-reimbursed exemption currently provides a credit of $7,000 of the full value of an owner-occupied dwelling for which application has been made to the County Assessor. The revenue estimated to be lost to local taxing agencies due to the exemption is reimbursed from State sources. Reimbursement is based upon total taxes due upon such exempt value and is not reduced by any amount for estimated or actual delinquencies. In addition, certain classes of property such as churches, colleges, not-for-profit hospitals and charitable institutions are exempt from property taxation and do not appear on the tax rolls. No reimbursement is made by the State for such exemptions. The following table represents a six-year history of assessed valuations within the District A-2

43 NORRIS SCHOOL DISTRICT SUMMARY OF ASSESSED VALUATIONS FISCAL YEARS THROUGH Fiscal Year Local Secured Utility Unsecured Total $2,350,996,518 $449,981 $ 31,020,355 $2,382,466, ,284,876,872 54,718 38,164,379 2,323,095, ,983,329,068 54,718 39,514,719 2,022,898, ,998,380,794 54,718 77,371,040 2,075,806, ,952,300, ,360 (1) 103,146,330 (1) 2,056,291, * 2,014,489, ,360 (1) 113,769,063 (1) 2,129,103,250 (1) The increase in Utility and Unsecured figures is a result of the reclassification of certain State assessed properties within the region. Sources: California Municipal Statistics, Inc. for through * County of Kern Auditor Controller County Clerk provided the figures. The following table presents the assessed valuation of single family homes within the District for Fiscal Year NORRIS SCHOOL DISTRICT ASSESSED VALUATION OF SINGLE FAMILY HOMES (1) No. of Average Median Parcels Assessed Valuation Assessed Valuation Assessed Valuation Single Family Residential 7,786 $1,654,048,894 $212,439 $194, Assessed Valuation No. of Parcels (1) % of Total Cumulative % of Total Total Valuation % of Total Cumulative % of Total $0 - $24, % 0.090% $ 116, % 0.007% $25,000 - $49, ,495, $50,000 - $74, ,419, $75,000 - $99, ,920, $100,000 - $124, ,137, $125,000 - $149, ,010, $150,000 - $174,999 1, ,273, $175,000 - $199,999 1, ,845, $200,000 - $224,999 1, ,003, $225,000 - $249, ,954, $250,000 - $274, ,390, $275,000 - $299, ,847, $300,000 - $324, ,265, $325,000 - $349, ,236, $350,000 - $374, ,043, $375,000 - $399, ,817, $400,000 - $424, ,422, $425,000 - $449, ,943, $450,000 - $474, ,549, $475,000 - $499, ,417, $500,000 and greater ,934, Total 7, % $1,654,048, % (1) Improved single family residential parcels. Excludes condominiums and parcels with multiple family units. Source: California Municipal Statistics, Inc A-3

44 The following table presents the assessed valuation by land use within the District for Fiscal Year NORRIS SCHOOL DISTRICT Assessed Valuation and Parcels by Land Use Assessed Valuation (1) % of Total No. of Parcels % of Total Non-Residential: Agricultural $ 22,073, % % Commercial 91,474, Vacant Commercial 4,793, Industrial 71,932, Vacant Industrial 13,898, Oil & Gas/Mineral Rights 21,429, Recreational 5,005, Government/Social/Institutional 2,404, Subtotal Non-Residential $233,011, % % Residential: Single Family Residence $1,654,048, % 7, % Condominium/Townhouse 27, Mobile Home 125, Residential Units 17,980, Vacant Residential 47,105, Subtotal Residential $1,719,288, % 8, % Total $1,952,300, % 9, % (1) Local Secured Assessed Valuation; excluding tax-exempt property. Source: California Municipal Statistics, Inc A-4

45 The following table presents the largest local taxpayers based on secured assessed valuation within the District for Fiscal Year Property Owner NORRIS SCHOOL DISTRICT Largest Local Secured Taxpayers Land Use Assessed Valuation % of Total (1) 1. Halliburton Energy Services Inc. Industrial $ 25,294, % 2. Crimson Resource Mgmt Corp. Oil & Gas Production 20,965, Lennar Homes of California Inc. Residential Development 20,094, Olive & Jewetta LP Shopping Center 13,051, Downs Investments LLC Auto Sales 12,317, New Albertsons Inc. Supermarket 10,439, Estancia Valley LLC Residential Development 9,670, Spectrum Hotel 1 LLC Hotel/Motel 8,535, MD Vac Investments LLC Industrial 6,763, AGRP of Bakersfield LLC Industrial 6,679, C&S Chong Investment Corp. Hotel/Motel 6,411, CQ Landlord Multi LLC Industrial 6,400, Federal National Mortgage Assn. Residential Properties 5,507, Bidart Bros. Agricultural 5,365, Gardiner Family LLC Agricultural 5,297, Kern Schools Federal Credit Union Credit Union 5,082, Riverlakes Golf LLC Golf Course 5,005, DCM Assets Management LLC Commercial Land 4,673, Piute Properties North LP Auto Sales 4,352, Howard Land Co. LP Commercial 4,245, $186,154, % (1) Local Secured Assessed Valuation: $1,952,300,591 Source: California Municipal Statistics, Inc. Tax Rates The following table sets forth typical tax rates levied in Tax Rate Area (1-295) for Fiscal Years through : NORRIS SCHOOL DISTRICT Typical Total Tax Rates (TRA 1-295) Assessed Valuation: $370,437,815 (1) General % % % % % Kern County Water Agency Norris School District Kern High School District Kern Community College District SRID Total All Property Tax Rate % % % % % (1) 18.01% of total assessed valuation of the District. Source: California Municipal Statistics, Inc A-5

46 Tax Charges and Delinquencies. The County secured roll tax charges and corresponding delinquencies with respect to property located in the District for the five-year period from through are set forth in the following table: NORRIS SCHOOL DISTRICT Secured Tax Charges and Delinquencies (1) Fiscal Years through Secured Tax Charge (2) Amt. Del. June 30 % Del. June $2,553, $ 68, % ,145, , ,039, , ,638, , ,728, , (1) Kern County utilizes the Teeter Plan for assessment levy and distribution. This method guarantees distribution of 100% of the assessments levied to the taxing entity, with the County retaining all penalties and interest. (2) 1% General Fund apportionment. Source: California Municipal Statistics, Inc. NORRIS SCHOOL DISTRICT General Obligation Bond Debt Service Levy and Delinquencies Fiscal Years through Secured Tax Charge Amt. Del. June 30 % Del. June $289, $11, % , , , , , , , , Source: California Municipal Statistics, Inc. Teeter Plan The County has adopted the alternative method of secured property tax apportionment available under Chapter 3, Part 8, Division 1 (commencing with Section 4701) of the Revenue and Taxation Code of the State (also known as the Teeter Plan ). This alternative method provides for funding each taxing entity included in the Teeter Plan with its total secured property taxes during the year the taxes are levied, including any amount uncollected at Fiscal Year-end. Under the Teeter Plan, the County assumes an obligation under a debenture or similar demand obligation to advance funds to cover expected delinquencies, and, by such financing, its general fund receives the full amount of secured property taxes levied each year and, therefore, no longer experiences delinquent taxes. In addition, the County s general fund benefits from future collections of penalties and interest on all delinquent taxes collected on behalf of participants in this alternative method of apportionment. Upon adopting the Teeter Plan, the County was required to distribute to participating local agencies 95% of the then-accumulated, secured roll property tax delinquencies and to place the remain 5% in a tax losses reserve fund. Taxing entities that maintain funds in the County Treasury are all included in the Teeter Plan; other taxing entities may elect to be included in the Teeter Plan. Taxing A-6

47 entities that do not elect to participate in the Teeter Plan will be paid as taxes are collected. Since the District maintains funds in the County Treasury, the District is included in the Teeter Plan. The Teeter Plan is to remain in effect unless the Board of Supervisors orders its discontinuance or unless, prior to the commencement of any Fiscal Year of the County (which commences on July 1), the Board of Supervisors shall receive a petition for its discontinuance joined in by resolutions adopted by two thirds of the participating revenue districts in the County, in which event the Board of Supervisors is to order discontinuance of the Teeter Plan effective at the commencement of the subsequent Fiscal Year. In the event that the Teeter Plan was terminated, receipt of revenue of ad valorem taxes in the District would depend upon the collections of the ad valorem property taxes and delinquency rates experienced with respect to the parcels within the District. District Investments The Kern County Treasurer-Tax Collector (the Treasurer ) manages, in accordance with California Government Code Section et seq., funds deposited with the Treasurer by school and community college districts located in the County, various special districts, and some cities within the State of California. State law generally requires that all moneys of the County, school and community college districts and certain special districts located in the County be held in the County s Treasury Pool. All money held in any of the funds or accounts established pursuant to the Resolution shall be held in the Treasury Pool and disbursed in accordance with the Resolution. The composition and value of investments under management in the Treasury Pool vary from time to time depending on cash flow needs of the County and public agencies invested in the pool, maturity or sale of investments, purchase of new securities, and due to fluctuations in interest rates generally. For a further discussion of the Pooled Investment Fund, see the caption THE KERN COUNTY TREASURY POOL herein. Financial Statements of the District The following information, concerning the operations and finances of the District is not intended to and does not suggest that the Bonds are secured by the general revenues or General Fund of the District, nor is the County obligated in any way with respect to the Bonds. The Bonds are general obligation bonds of the District, secured and payable solely from ad valorem property taxes collected against taxable properties within the boundaries of the District. Prospective purchasers of the Bonds should be aware that the following discussion of the District s financial condition, its fund balances, budgets and other obligations, is intended as general information only, and no implication is made the payment of principal or Accreted Value of or interest on the Bonds is dependent in any way upon the District s financial condition. The District neither receives nor accounts for ad valorem property taxes collected by the County to pay debt service on the Bonds. Pursuant to Section of the Education Code, all tax revenues collected for payment of debt service on general obligation bonds, including the Bonds, must be deposited into the interest and sinking fund of the District maintained within the County Treasury Pool. See the body of this Official Statement under the caption SECURITY FOR THE BONDS. The District s General Fund finances the legally authorized activities of the District for which restricted funds are not provided. General Fund revenues are derived from such sources as State fund apportionments, taxes, use of money and property, and aid from other governmental agencies. The District has not requested its auditor to provide any review or update of such financial statements in connection with their inclusion in this Official Statement. Certain information from the District s financial statements follows. Selected information from the District s audited financial statements for the Fiscal Year is attached hereto as APPENDIX C A-7

48 General Fund The following table describes the District s audited financial results for the Fiscal Years ended 2009, 2010 and Audited 2009 Audited 2010 Audited 2011 Revenues Revenue Limit Sources State Apportionments $ 15,497,260 $ 13,788,189 $ 14,796,703 Local Sources 2,921,396 2,326,146 2,817,652 Total Revenue Limit 18,418,656 16,114,335 17,614,355 Federal Revenue 1,765,866 1,287,865 1,451,997 Other State Revenue 4,783,537 4,819,359 4,272,332 State on-behalf payments 492, , ,164 Other local revenue 1,192, ,206 1,203,145 Total Revenues 26,653,303 23,724,127 25,042,993 Expenditures Instruction 14,595,764 14,823,203 15,385,924 Supervision of instruction 215, , ,069 Instructional library, media and technology 421, , ,726 School site administration 1,169,168 1,180,223 1,243,218 Home-to-school transportation 458, , ,195 Food services All other pupil services 568, , ,190 Data processing 64, , ,300 All other general administration 1,581,163 1,752,893 1,751,709 Plant services 2,107,497 1,928,108 2,000,128 Facility acquisition and construction 33,418 17, Community services -- 1, Other outgo 2,278,343 1,835,175 1,715,727 Debt service Principal retirement 12,996 12,996 12,996 Interest on long-term debt - 9, Total Expenditures 23,508,226 23,424,093 24,518,392 Excess of Revenues Over Expenditures 3,145, , ,601 Other Financing Sources (Uses) Operating transfers in 12, ,188 49,116 Operating transfers out (505,394) - - Total Other Financing Sources (uses) (493,393) 271,188 49,116 Excess of Revenues and Other Financing Services Over Expenditures and Other Financing Uses 2,651, , ,717 Beginning Fund Balances, July 1 3,618,227 6,269,911 6,841,133 Ending Fund Balances, June 30 $ 6,269,911 $ 6,841,133 $ 7,414, A-8

49 The following table describes the District s adopted budget for the Fiscal Years and , and the District s estimated actual financial results for the Fiscal Year NORRIS SCHOOL DISTRICT ADOPTED BUDGETS Fiscal Years and , and Estimated Actuals Adopted Budget Estimated Actuals Adopted Budget (1) Revenues Revenue Limit Sources $16,401,367 $18,115,346 $16,670,419 Federal Revenue 649, , ,732 Other State Revenue 4,159,886 4,281,342 4,184,865 Other Local Revenue 61, ,260 61,685 Total Revenues $21,272,877 $23,310,982 $21,587,701 Expenditures Certificated Salaries 11,258,150 10,966,619 11,349,132 Classified Salaries 2,296,991 2,306,396 2,375,397 Employee Benefits 4,993,979 4,855,294 5,157,653 Books and Supplies 597, , ,748 Services and Other Operating Expenditures 1,624,306 1,671,529 1,595,492 Capital Outlay 49,847 62,843 75,000 Other Outgo (excluding Transfers of Indirect Costs) 1,626,660 1,613,664 1,634,558 Other Outgo Transfers of indirect costs Total Expenditures $22,447,501 $22,457,272 $22,789,981 Excess (Deficiency) of Revenues Over (Under) Expenditures Before Other Financing Sources and Uses (1,174,624) 853,610 (1,202,279) Other Financing Sources (Uses): Operating Transfers In 91,200 58,050 0 Operating Transfers Out Other Sources Other Uses Contributions Total Other Financing Sources (Uses) 91,200 58,050 0 Excess of Revenues and Other Financing Sources Over Expenditures and Other Financing Sources/Uses (1,083,424) 911,660 (1,202,279) Beginning Fund Balance, July 1 7,458,195 7,414,850 8,326,511 Ending Fund Balances, June 30 $ 6,374,771 $ 8,326,511 $ 7,124,231 (1) The Budget assumes a $441 per ADA reduction based on the assumption that the November Tax Initiative will not receive voter approval. Source: The District A-9

50 The following table compares the District s Board approved Budgets to Unaudited Actuals for Fiscal Years , , See APPENDIX C for the District s Audited Financial Statements for Fiscal Year ended June 30, A-10 NORRIS SCHOOL DISTRICT Comparison of Final Budgets, Unaudited Actuals and Projections based on the Second Interim Report (1) Final Budget Unaudited Actuals Final Budget Unaudited Actuals Final Budget Unaudited Actuals Revenues Revenue Limit Sources State apportionments $15,500,162 $15,497,260 $13,788,189 $13,788,189 $14,796,703 $14,796,703 Local sources 2,921,395 2,921,396 2,326,146 2,326,146 2,817,930 2,817,652 Total Revenue Limit 18,421,557 18,418,656 16,114,335 16,114,335 17,614,633 17,614,355 Federal revenue 1,765,866 1,765,866 1,287,865 1,287,865 1,451,997 1,451,997 Other state revenue 5,285,207 4,783,537 4,306,265 4,819,359 4,272,483 4,272,332 State on-behalf payments 492, , , , , ,164 Other local revenue 891,264 1,192, , , ,205 1,203,145 Total Revenues 26,856,584 26,653,303 23,030,600 23,724,127 24,788,482 25,042,993 Expenditures Certificated Salaries 11,038,217 11,038,031 11,320,971 11,319,772 11,252,699 11,245,759 Classified Salaries 2,241,734 2,240,990 2,242,228 2,241,789 2,298,842 2,297,973 Employee Benefits 4,483,217 4,482,521 4,587,729 4,575,411 4,800,477 4,799,738 State on-behalf payments 492, , , , , ,164 Books and Supplies 1,003,507 1,001, , ,626 1,529,321 1,518,135 Services and Other Operating Expenditures 1,740,926 1,740,681 1,869,882 1,852,987 2,046,059 2,043,929 Capital Outlay 224, , , , , ,971 Other Outgo (excluding Transfers of Indirect Costs) Payments to Districts or Charters - - 3,718 3, Payments to County Office 2,278,343 2,278,343 1,831,457 1,831,457 1,715,727 1,715,727 Debt service Principal retirement 12,996 12,996 12,996 12,996 12,996 12,996 Interest and fiscal charges Total Expenditures $23,516,508 $23,508,226 $23,457,683 $23,424,093 $24,543,417 $24,518,392 Excess (Deficiency) of Revenues Over Expenditures 3,340,076 3,145,077 (427,133) 300, , ,601 Other Financing Sources (Uses) Operating transfers in 310,001 12, , , ,785 49,116 Operating transfers out (505,394) (505,394) All other financing sources Flexibility transfer 6, All other financing uses Other (53) Total Other Financing Sources (Uses) (189,326) (493,393) 451, , ,785 49,116 Excess of Revenues and Other Financing Sources Over Expenditures and Other Financing Uses 3,150,750 2,651,684 24, , , ,717 Fund Balances, July 1 3,618,226 3,618,227 6,783,055 6,269,911 6,841,132 6,841,133 Fund Balances, June 30 $ 6,768,976 $ 6,269,911 $ 6,807,542 $ 6,841,133 $7,397,982 $7,414,850 (1) Totals may not add due to rounding. Source: The District. A-10

51 Certain Existing Obligations below: A schedule of the District s changes in long-term debt for the year ended June 30, 2011 is shown Balance July 1, 2010 Additions Deductions Balance June 30, 2011 General obligation bonds $ 2,378,351 $ - $206,414 $ 2,171,937 Accreted interest-general obligation bonds 4,027, , ,586 4,038,925 Limited obligation (Special tax) bonds 32,350, ,000 32,175,000 Post-employment health benefits 11,617-9,163 2,454 Compensated absences 83,555-9,570 73,985 Capital leases 15,164-15,164 - Totals $38,866,028 $455,170 $858,897 $38,462,301 Source: The District. Retirement System The District participates in the State of California Teachers Retirement System ( STRS ) which provides retirement benefits to certificated personnel. The District contributed $923,858 to STRS in Fiscal Year , $919,995 in Fiscal Year and estimates a contribution of $899,977 in Fiscal Year The District also participates in the State of California Public Employees Retirement System ( PERS ) which provides retirement benefits to classified personnel. The District contributed $244,276 to PERS in Fiscal Year , $276,300 in Fiscal Year and estimates a contribution of $235,432 in Fiscal Year Both PERS and STRS are operated on a statewide basis and, based on available information, STRS and PERS both have unfunded liabilities. PERS may issue certain pension obligation bonds to reach funded status. (Additional funding of STRS by the State and the inclusion of adjustments to such State contributions based on consumer price changes were provided for in 1979 Statutes, Chapter 282.) The amounts of the pension/award benefit obligation (PERS) or actuarially accrued liability (STRS) will vary from time to time depending upon actuarial assumptions, rates of return on investments, salary scales, and levels of contribution. The District is unable to predict what the amount of unfunded liabilities will be in the future or the amount of the contributions which the District may be required to make. The District also contributes to the Self-Insured Schools of California ( SISC ) Defined Benefit Plan, a cost-sharing multiple-employer public employee retirement system defined benefit pension plan. The plan provides workers compensation, excess medical, property and liability benefits for its member districts. Benefit provisions are established by the SISC Board. Active plan members are not required to contribute. The District is required to contribute an actuarially determined rate. The District s contributions to the SISC Defined Benefit Plan for the Fiscal Years ending June 30, 2010 and 2011 were $11,431 and $10,517, respectively, and equal 100% of the required contributions. The District s projected contribution for Fiscal Year ending June 30, 2012 is $11, A-11

52 Post-Employment Benefits The District does not offer any postemployment benefits to active employees that are paid by the District. Funding Policy The District has no invested plan assets accumulated for payment of future benefits. The District has established a Fund for retiree benefits. However, the assets in this Fund have not been contributed into an irrevocable trust, and are therefore not considered invested plan assets. This Fund (the Special Reserve Fund for Postemployment Benefits) has a current balance of $32. During the year, expenditures of $49,116 were transferred from this Fund to the General Fund by the District to pay for these benefits on a pay-as-you-go basis. Annual OPEB Cost and Net OPEB Obligation The District s annual other postemployment benefits ( OPEB ) cost/(expense) is calculated based on an annual required contribution ( ARC ), an amount actuarially determined in accordance with the parameters of GASB Statement No. 45. The ARC represents a level of funding that, if paid on an ongoing basis, is projected to cover normal cost each year, and amortize any unfunded actuarial liabilities over a period not to exceed thirty years. A table showing the components of the District s annual OPEB cost for the year, the amount actually paid from the plan, and changes in the District s net OPEB obligation is not presented because the District has opted to record the total unfunded actuarial liability at June 30, Funded Status and Funding Progress As of June 30, 2011, the most recent actuarial valuation date, the District had no unfunded actuarial accrued liability ( UAAL ). Because no active employees are covered by the plan, the ratio of the UAAL to covered payroll is not presented. Actuarial valuations of an ongoing plan involve estimates of the value of reported amounts and assumptions about future terminations, mortality, and healthcare cost trends. Actuarially determined amounts are subject to continual revision as actuarial value of plan assets is changing over time relative to the actuarial accrued liabilities for benefits. Actuarial Methods and Assumptions Projections of benefits for financial reporting purposes are based on the substantive plan (the plan as understood by the employer and plan members) and include the types of benefits provided at the time of each valuation and the historical pattern of sharing of benefit costs between the employer and plan members to that point. The actuarial methods and assumptions used include techniques that are designed to reduce the effect on short-term volatility in actuarial accrued liabilities and the actuarial value of assets, consistent with the long-term perspective of the calculations. In the June 30, 2011, actuarial valuation, the projected unit credit actuarial cost method was used. The actuarial assumptions included a rate of 0.0% to discount expected liabilities to the valuation date. The initial medical, prescription drug, and behavioral health trend rates were 13% with decrements to an ultimate rate of 8% in one year. The District elected to record the entire UAAL. The unfunded net obligation for postemployment health benefits is $2,454. The annual amount to amortize this debt was $2,454 for year ended June 30, A-12

53 Capital Leases The District leases buildings and equipment under agreements that provide for title to pass upon expiration of the lease period. Future minimum lease payments are as follows: Year Ending June 30 Lease Payments 2012 $39, ,962 Total $61,719 Direct and Overlapping Debt Numerous local agencies which provide public services overlap the District s service area. These local agencies have outstanding debt in the form of general obligation, lease revenue and special assessment bonds. The following table shows the District s estimated direct and overlapping bonded debt. The statement excludes self-supporting revenue bonds, tax allocation bonds and non-bonded capital lease obligations. The District has not reviewed this table and there can be no assurance as to the accuracy of the information contained in the table; inquiries concerning the scope and methodology of procedures carried out to compile the information presented should be directed to California Municipal Statistics, Inc. [Remainder of this page intentionally left blank.] A-13

54 The following table is a statement of the District s direct and estimated overlapping bonded debt as of July 1, 2012: NORRIS SCHOOL DISTRICT DIRECT AND OVERLAPPING BONDED INDEBTEDNESS Assessed Valuation: $2,056,291,281 DIRECT AND OVERLAPPING TAX AND ASSESSMENT DEBT: % Applicable Debt 7/1/12 Kern Community College District Safety, Repair and Improvement District 2.963% $ 3,085,738 Kern High School District ,628,294 Norris School District ,971,813 (1) Kern Delta Water District ,327 RNR School Facilities Financing Authority Community Facilities District No ,697,016 Kern Community College District Assessment District ,017 City of Bakersfield 1915 Act Bonds ,624,517 TOTAL DIRECT AND OVERLAPPING TAX AND ASSESSMENT DEBT $47,093,722 OVERLAPPING GENERAL FUND DEBT: Kern County Certificates of Participation 2.585% $ 3,299,882 Kern County Pension Obligations ,316,877 Kern County Board of Education Certificates of Participation ,105,217 Kern Community College District Certificates of Participation ,455,851 Kern Community College District Benefit Obligations ,180,016 Kern County Union High School District Certificates of Participation ,703,872 City of Bakersfield General Fund Obligations ,435,404 TOTAL OVERLAPPING GENERAL FUND DEBT $26,497,119 COMBINED TOTAL DEBT $73,590,841 (2) (1) (2) Excludes the Bonds to be sold. Excludes tax and revenue anticipation notes, enterprise revenue, mortgage revenue and tax allocation bonds and non-bonded capital lease obligations. Ratios to Assessed Valuation: Direct Debt ($1,971,813) % Total Direct and Overlapping Tax and Assessment Debt % Combined Total Debt % STATE SCHOOL BUILDING AID REPAYABLE AS OF 6/30/12: $0 Source: California Municipal Statistics, Inc. Insurance The District maintains insurance or self-insurance in such amounts and with such retentions and other terms providing coverages for property damage, fire and theft, general public liability and worker s compensation as are adequate, customary and comparable with such insurance maintained by similarly situated elementary school districts. In addition, based upon prior claims experience, the District believes that the recorded liabilities for self-insured claims are adequate. District Growth The table below sets forth the enrollment for Average Daily Attendance ( ADA ) for the District for the Fiscal Years through and projections for the Fiscal Year A-14

55 NORRIS SCHOOL DISTRICT Enrollment and Average Daily Attendance Fiscal Years through (1) Fiscal Year Enrollment ADA Base Revenue Limit ,160 3, $5, ,537 3, , ,545 3, , ,647 3, , ,775 3, , (1) 3,775 3, , (2) (1) Projections based on the District s Budget. (2) The District s Budget assumes a $441 per ADA reduction based on the assumption that the November Tax Initiative will not receive voter approval. Source: The District. Since June 2000, the number of single family residences has increased in the Norris area and school enrollment in the District has grown from 1,400 to 3,775. During the same period, three new elementary campuses were built in the Norris area (Norris Elementary, William B. Bimat Elementary, and Veterans Elementary), Olive Drive Elementary added nine new classrooms, and Norris Middle School added eight permanent classrooms for science, math, and art, as well as a new gym. The District owns one undeveloped site that is planned for an elementary school, and is presently searching for additional school sites, in an effort to implement the District s plan to grow its enrollment to 10,000 students to be served by 12 elementary schools and three middle schools at build-out. The projection of future student enrollment is based on 11,305 residential units that are currently planned within the District s boundaries. Additionally, there is a substantial amount of (i) vacant land that is zoned for future residential use and (ii) land that could be re-zoned for residential use in the future, which has the potential for significant additional enrollment growth. Based on this potential for future residential development, student generation rates, and current enrollment trends, the District prepared long-term enrollment projections to identify future facilities needs. Population tables. The population of the City of Bakersfield, the County and the State is set forth in the following POPULATION OF THE CITY OF BAKERSFIELD, THE COUNTY AND STATE Calendar Year (1) City of Bakersfield Kern County State , ,830 36,704, , ,503 36,966, , ,074 37,223, , ,480 37,427, , ,006 37,678,563 (1) Figures as of January of the year indicated. Source: California State Department of Finance A-15

56 Developer Fees The District collects developer fees to finance essential school facilities within the District. The following table of developer fee revenues reflects the collection of fees from Fiscal Year through Fiscal Year Year NORRIS SCHOOL DISTRICT Developer Fees Fiscal Years to Total Fees Received $470, , , , ,433.06* *Preliminary. Source: The District. [Remainder of this page intentionally left blank.] A-16

57 APPENDIX B FORM OF BOND COUNSEL OPINION [Closing Date] Board of Trustees Norris School District 6940 Calloway Drive Bakersfield, California Re: $16,507, Norris School District (Kern County, California) 2012 Election General Obligation Bonds, 2012 Series A Ladies and Gentlemen: We have acted as bond counsel for the Norris School District, Kern County, State of California (the District ), in connection with the issuance of $16,507, aggregate principal and issue amount of the District s 2012 Election General Obligation Bonds, 2012 Series A (the Bonds ). The Bonds are issued pursuant to Article 4.5 of Chapter 3 of Part 1 of Division 2 of Title 5 of the Government Code of the State, as amended, and the resolution adopted by the Board of Trustees of the District on July 11, 2012 (the Resolution ). All terms used herein and not otherwise defined shall have the meanings given to them in the Resolution. As bond counsel, we have examined copies certified to us as being true and complete copies of the proceedings of the District for the authorization and issuance of the Bonds, including the Resolution and the Tax Exemption Certificate of the District, dated the date hereof (the Tax Certificate ). Our services as such bond counsel were limited to an examination of such proceedings and to the rendering of the opinions set forth below. In this connection we have also examined such certificates of public officials and officers of the District and the County as we have considered necessary for the purposes of this opinion. Certain agreements, requirements and procedures contained or referred to in the Resolution, the Tax Certificate and other relevant documents may be changed and certain actions (including, without limitation, defeasance of Bonds) may be taken or omitted under the circumstances and subject to the terms and conditions set forth in such documents. No opinion is expressed herein as to any Bond or the interest thereon if any such change occurs or action is taken or omitted upon the advice or approval of counsel other than ourselves. The opinions expressed herein are based on an analysis of existing laws, regulations, rulings and court decisions and cover certain matters not directly addressed by such authorities. Such opinions may be affected by actions taken or omitted or events occurring after the date hereof. We have not undertaken to determine, or to inform any person, whether any such actions or events are taken or do occur. Our engagement with respect to the Bonds has concluded with their issuance, and we disclaim any obligation to update this letter. We have assumed the genuineness of all documents and signatures presented to us (whether as originals or as copies) and the due and legal execution and delivery thereof by any parties other than the District. We have not undertaken to verify independently, and have assumed, the accuracy of the factual matters represented, warranted or certified in the documents referred to in the second paragraph hereof. Furthermore, we have assumed compliance with all covenants and agreements B-1

58 contained in the Resolution and the Tax Certificate, including (without limitation) covenants and agreements compliance with which is necessary to assure that future actions, omissions or events will not cause interest on the Bonds to be included in gross income for federal income tax purposes. We call attention to the fact that the rights and obligations under the Bonds, the Resolution and the Tax Certificate may be subject to bankruptcy, insolvency, reorganization, arrangement, fraudulent conveyance, moratorium and other laws relating to or affecting creditors rights, to the application of equitable principles, to the exercise of judicial discretion in appropriate cases and to the limitations on legal remedies against public entities in the State of California. We express no opinion with respect to any indemnification, contribution, choice of law, choice of forum or waiver provisions contained in the foregoing documents. We express no opinion and make no comment with respect to the sufficiency of the security for the marketability of the Bonds. Finally, we undertake no responsibility for the accuracy, completeness or fairness of the Official Statement or other offering material relating to the Bonds and express no opinion with respect thereto. Based on and subject to the foregoing and in reliance thereon, as of the date hereof, we are of the following opinions: 1. The Bonds constitute valid and binding obligations of the District, payable as to both principal and interest from the proceeds of a levy of ad valorem taxes on all property subject to such taxes in the District, which taxes are unlimited as to rate or amount. 2. The Resolution has been duly adopted and constitutes a valid and binding obligation of the District. 3. It is further our opinion, based upon the foregoing, that pursuant to section 103 of the Internal Revenue Code of 1986, as amended and in effect on the date hereof (the Code ), and existing regulations, published rulings, and court decisions thereunder, and assuming continuing compliance with the provisions of the Resolution and the Tax Certificate and in reliance upon representations and certifications of the District made in the Tax Certificate pertaining to the use, expenditure, and investment of the proceeds of the Bonds, when the Bonds are delivered to and paid for by the initial purchasers thereof, interest on the Bonds (1) will be excludable from the gross income, as defined in section 61 of the Code, of the owners thereof for federal income tax purposes, and (2) will not be included in computing the federal alternative minimum taxable income of the owners thereof who are individuals or, except as hereinafter described, corporations. Interest on the Bonds owned by a corporation will be included in such corporation s adjusted current earnings for purposes of calculating the alternative minimum taxable income of such corporation, other than an S corporation, a qualified mutual fund, a real estate investment trust, a real estate mortgage investment conduit, or a financial asset securitization investment trust ( FASIT ). A corporation s alternative minimum taxable income is the basis on which the alternative minimum tax imposed by Section 55 of the Code will be computed. In our opinion, under existing law, interest on the Bonds is exempt from personal income taxes of the State of California. We express no other opinion with respect to any other federal, state, or local tax consequences under present law or any proposed legislation resulting from the receipt or accrual of interest on, or the acquisition or disposition of, the Bonds. Ownership of tax-exempt obligations such as the Bonds may result in collateral federal tax consequences to, among others, financial institutions, life insurance companies, property and casualty insurance companies, certain S corporations with subchapter C earnings and profits, certain foreign corporations doing business in the United States, owners of an interest in a FASIT, individuals otherwise qualifying for the earned income tax credit, individual recipients of Social Security or Railroad Retirement benefits, and taxpayers who may be deemed to have incurred or B-2

59 continued indebtedness to purchase or carry, or who have paid or incurred certain expenses allocable to, tax-exempt obligations. Our opinions are based on existing law, which is subject to change. Such opinions are further based on our knowledge of facts as of the date hereof. We assume no duty to update or supplement our opinions to reflect any facts or circumstances that may thereafter come to our attention or to reflect any changes in any law that may thereafter occur or become effective. Moreover, our opinions are not a guarantee of result and are not binding on the Internal Revenue Service; rather, such opinions represent our legal judgment based upon our review of existing law that we deem relevant to such opinions and in reliance upon the representations and covenants referenced above. The foregoing opinions represent our legal judgment based upon a review of existing legal authorities that we deem relevant to render such opinions and are not a guarantee of results. Respectfully submitted, B-3

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61 APPENDIX C SELECTED INFORMATION FROM NORRIS SCHOOL DISTRICT AUDITED FINANCIAL STATEMENTS FOR FISCAL YEAR ENDED JUNE 30, C-1

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138 NORRIS SCHOOL DISTRICT SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE--BUDGET AND ACTUAL (GAAP) (BY OBJECT)--GENERAL FUND YEAR ENDED JUNE 30, 2011 General Fund Actual Variance with Final Budget Budgeted Amounts (GAAP) Positive/ Original Final Basis (Negative) Revenues Revenue limit sources State apportionments $ 13,974,318 $ 14,796,703 $ 14,796,703 $ Local sources 2,339,062 2,817,930 2,817,652 (278) Total Revenue Limit 16,313,380 17,614,633 17,614,355 (278) Federal revenue 630,450 1,451,997 1,451,997 Other state revenue 4,277,437 4,272,483 4,272,332 (l51) State on-behalf payments 501, ,164 Other local revenue 101, ,205 1,203, ,940 Total Revenues 21,322,911 24,788,482 25,042, ,511 Expenditures Celtificated salaries 11,162,065 11,252,699 11,245,759 6,940 Classified salaries 2,315,895 2,298,842 2,297, Employee benefits 5,101,151 4,800,477 4,799, State on-behalf payments 501, ,164 Books and supplies 1,119,504 1,529,321 1,518,135 11,186 Services and other operating expenditures 1,455,575 2,046,059 2,043,929 2,130 Capital outlay 63, , ,971 3,161 Payments to County Office 1,780,948 1,715,727 1,715,727 Debt service Principal retirement 12,996 12,996 Total Expenditures 22,998,981 24,543,417 24,518,392 25,025 Excess (Deficiency) of Revenues Over Expenditures (1,676,070) 245, , ,536 Other Financing Sources (Uses) Operating transfers in 208, ,785 49,116 (262,669) Operating transfers out (l06,000) Total Other Financing Sources (Uses) 102, ,785 49,116 (262,669) Excess (Deficiency) of Revenues and Other Financing Sources Over Expenditures and Other Financing Uses (1,573,099) 556, ,717 16,867 Fund Balance, July 1,2010 6,841,132 6,841,132 6,841,133 Fund Balance, June 30, 2011 $ 5,268,033 $ 7,397,982 $ 7,414,850 $ 16,868 See notes to the basic financial statements. -65-

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