$6,820,000 ST. HELENA UNIFIED SCHOOL DISTRICT (Napa County, California) 2015 General Obligation Refunding Bonds

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1 NEW ISSUE - FULL BOOK-ENTRY BANK QUALIFIED RATING: S&P: AAA See RATING herein In the opinion of Jones Hall, A Professional Law Corporation, San Francisco, California, Bond Counsel, subject, however to certain qualifications described in this Official Statement, under existing law, interest on the Refunding Bonds is excluded from gross income for federal income tax purposes, and such interest is not an item of tax preference for purposes of the federal alternative minimum tax imposed on individuals and corporations, although for the purpose of computing the alternative minimum tax imposed on certain corporations, interest on the Refunding Bonds is taken into account in determining certain income and earnings, and the Refunding Bonds are qualified tax-exempt obligations within the meaning of section 265(b)(3) of the Internal Revenue Code of In the further opinion of Bond Counsel, interest on the Refunding Bonds is exempt from California personal income taxes. See TAX MATTERS. $6,820,000 ST. HELENA UNIFIED SCHOOL DISTRICT (Napa County, California) 2015 General Obligation Refunding Bonds Dated: Date of Delivery Due: August 1, as shown on inside cover Authority and Purpose. The St. Helena Unified School District (Napa County, California) 2015 General Obligation Refunding Bonds (the Refunding Bonds ) are being issued by the St. Helena Unified School District (the District ) pursuant to certain provisions of the California Government Code and a resolution of the Board of Trustees of the District adopted on April 16, 2015 (the Bond Resolution ). The Refunding Bonds are being issued to refund on a current basis some or all maturities of the District s General Obligation Refunding Bonds, 2005 Series A, and to pay costs of issuance. See THE REFUNDING BONDS Authority for Issuance and THE REFINANCING PLAN. Security for the Refunding Bonds. The Refunding Bonds are general obligations of the District, payable solely from ad valorem property taxes levied and collected by Napa County (the County ). The County Board of Supervisors is empowered and is obligated to annually levy ad valorem taxes for the payment of interest on, and principal of, the Refunding Bonds upon all property subject to taxation by the District, without limitation as to rate or amount (except certain personal property which is taxable at limited rates). The District has other series of general obligation bonds outstanding which are similarly secured by tax levies. See SECURITY FOR THE REFUNDING BONDS. Payments. Interest on the Refunding Bonds accrues from the date of delivery and is payable semiannually on February 1 and August 1 of each year, commencing August 1, 2015, by check mailed to the person in whose name the Refunding Bond is registered. Payments of principal of and interest on the Refunding Bonds will be paid by U.S. Bank Trust National Association, San Francisco, California, as Paying Agent, to The Depository Trust Company ( DTC ) for subsequent disbursement to DTC Participants who will remit such payments to the beneficial owners of the Refunding Bonds. See THE REFUNDING BONDS - Description of the Refunding Bonds. No Redemption. The Refunding Bonds are not subject to redemption prior to maturity. See THE REFUNDING BONDS No Redemption. Book-Entry Only. The Refunding Bonds will be issued in book-entry form only, and will be initially issued and registered in the name of Cede & Co. as nominee of The Depository Trust Company, New York, New York ( DTC ). Purchasers will not receive physical certificates representing their interests in the Refunding Bonds. See THE REFUNDING BONDS Description of the Refunding Bonds - Book-Entry Form and APPENDIX F - Book-Entry Only System. MATURITY SCHEDULE (see inside front cover) _ Cover Page. This cover page contains information for quick reference only. It is not a summary of all the provisions of the Refunding Bonds. Investors must read the entire official statement to obtain information essential in making an informed investment decision. The Refunding Bonds are offered when, as and if issued, subject to the approval as to their legality by Jones Hall, A Professional Law Corporation, San Francisco, California, Bond Counsel. Certain legal matters also will be passed upon for the District by Jones Hall, A Professional Law Corporation, San Francisco, California, as Disclosure Counsel. It is anticipated that the Refunding Bonds will be available for delivery to Cede & Co., as nominee of DTC, on or about May 27, The date of this Official Statement is: April 30, 2015

2 MATURITY SCHEDULE BASE CUSIP ( ) : ST. HELENA UNIFIED SCHOOL DISTRICT (Napa County, California) 2015 General Obligation Refunding Bonds Maturity Date (August 1) Principal Amount Interest Rate Yield Price CUSIP ( ) 2015 $125, % 0.200% % HU ,535, HV ,670, HW ,900, HX ,590, HY6 Copyright 2015, American Bankers Association. CUSIP data herein are provided by Standard & Poor's CUSIP Service Bureau, a division of The McGraw-Hill Companies, Inc., and are provided for convenience of reference only. Neither the District nor the Underwriter assumes any responsibility for the accuracy of these CUSIP data.

3 ST. HELENA UNIFIED SCHOOL DISTRICT NAPA COUNTY STATE OF CALIFORNIA BOARD OF TRUSTEES Jeannie Kerr, President Jeff Conwell, Vice President Maria Haug, Clerk Alex Shantz, Trustee Cynthia Smith, Trustee DISTRICT ADMINISTRATIVE STAFF Marylou Wilson, Ed.D., Superintendent Andrea Stubbs, Chief Business Official FINANCIAL ADVISOR Caldwell Flores Winters Inc. Emeryville, California BOND COUNSEL and DISCLOSURE COUNSEL Jones Hall, A Professional Law Corporation San Francisco, California PAYING AGENT and ESCROW BANK U.S. Bank Trust National Association San Francisco, California VERIFICATION AGENT Causey Demgen & Moore P.C. Denver, Colorado

4 GENERAL INFORMATION ABOUT THIS OFFICIAL STATEMENT Use of Official Statement. This Official Statement is submitted in connection with the sale of the Refunding Bonds referred to herein and may not be reproduced or used, in whole or in part, for any other purpose. This Official Statement is not a contract between any Refunding Bond owner and the District or the Underwriter. No Offering Except by This Official Statement. No dealer, broker, salesperson or other person has been authorized by the District or the Underwriter to give any information or to make any representations other than those contained in this Official Statement and, if given or made, such other information or representation must not be relied upon as having been authorized by the District or the Underwriter. No Unlawful Offers or Solicitations. This Official Statement does not constitute an offer to sell or the solicitation of an offer to buy nor may there be any sale of the Refunding Bonds by a person in any jurisdiction in which it is unlawful for such person to make such an offer, solicitation or sale. Estimates and Projections. When used in this Official Statement and in any continuing disclosure by the District, in any press release and in any oral statement made with the approval of an authorized officer of the District, the words or phrases will likely result, are expected to, will continue, is anticipated, estimate, project, forecast, expect, intend and similar expressions identify forward looking statements within the meaning of the Private Securities Litigation Reform Act of Such statements are subject to risks and uncertainties that could cause actual results to differ materially from those contemplated in such forward-looking statements. Any forecast is subject to such uncertainties. Inevitably, some assumptions used to develop the forecasts will not be realized and unanticipated events and circumstances may occur. Therefore, there are likely to be differences between forecasts and actual results, and those differences may be material. Information in Official Statement. The information set forth in this Official Statement has been furnished by the District and other sources which are believed to be reliable, but it is not guaranteed as to accuracy or completeness. Document Summaries. All summaries of the Bond Resolution or other documents referred to in this Official Statement are made subject to the provisions of such documents and qualified in their entirety to reference to such documents, and do not purport to be complete statements of any or all of such provisions. Involvement of Underwriter. The Underwriter has provided the following statement for inclusion in this Official Statement: The Underwriter has reviewed the information in this Official Statement pursuant to its responsibilities to investors under the federal securities laws, but the Underwriter does not guarantee the accuracy or completeness of such information. No Securities Laws Registration. The Refunding Bonds have not been registered under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, in reliance upon exceptions therein for the issuance and sale of municipal securities. The Refunding Bonds have not been registered or qualified under the securities laws of any state. Effective Date. This Official Statement speaks only as of its date, and the information and expressions of opinion contained in this Official Statement are subject to change without notice. Neither the delivery of this Official Statement nor any sale of the Refunding Bonds will, under any circumstances, give rise to any implication that there has been no change in the affairs of the District, counties described herein, the other parties described in this Official Statement, or the condition of the property within the District since the date of this Official Statement. In connection with the offering of the Refunding Bonds, the Underwriter may over allot or effect transactions which stabilize or maintain the market price of such Refunding Bonds at a level above that which might otherwise prevail in the open market. Such stabilization, if commenced, may be discontinued at any time. Website. The District maintains a website. However, the information presented on the website is not a part of this Official Statement and should not be relied upon in making an investment decision with respect to the Refunding Bonds.

5 TABLE OF CONTENTS Page INTRODUCTION... 1 THE REFINANCING PLAN... 3 Description of Prior Bonds... 3 The Refunded Bonds... 3 Deposits in Escrow Fund... 3 SOURCES AND USES OF FUNDS... 4 THE REFUNDING BONDS... 5 Authority for Issuance... 5 Description of the Refunding Bonds... 5 Redemption... 6 Registration, Transfer and Exchange of Refunding Bonds... 6 Defeasance... 6 DEBT SERVICE SCHEDULES... 8 SECURITY FOR THE REFUNDING BONDS Ad Valorem Taxes Debt Service Fund Not a County Obligation PROPERTY TAXATION Property Tax Collection Procedures Taxation of State-Assessed Utility Property Historic Assessed Valuations Parcels by Land Use Per Parcel Assessed Valuation of Single-Family Homes Appeals of Assessed Value Teeter Plan; Property Tax Collections Tax Rates Top Twenty Property Owners Direct and Overlapping Debt Obligations CONTINUING DISCLOSURE VERIFICATION OF MATHEMATICAL ACCURACY CERTAIN LEGAL MATTERS Absence of Material Litigation Legal Opinion TAX MATTERS Tax Exemption Other Tax Considerations RATING UNDERWRITING ADDITIONAL INFORMATION APPENDIX A - Audited Financial Statements of the District For Fiscal Year Ending June 30, A-1 APPENDIX B - General and Financial Information About the District... B-1 APPENDIX C - General Information About the City of St. Helena and Napa County... C-1 APPENDIX D - Form of Opinion of Bond Counsel... D-1 APPENDIX E - Form of Continuing Disclosure Certificate... E-1 APPENDIX F - Book-Entry Only System... F-1 APPENDIX G - Napa County Investment Policy and Monthly Report... G-1 -i-

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7 $6,820,000 ST. HELENA UNIFIED SCHOOL DISTRICT (Napa County, California) 2015 General Obligation Refunding Bonds The purpose of this Official Statement, which includes the cover page, inside cover page and attached appendices, is to set forth certain information concerning the sale and delivery of the St. Helena Unified School District (Napa County, California) 2015 General Obligation Refunding Bonds (the Refunding Bonds ) by the St. Helena Unified School District (the District ). INTRODUCTION This Introduction is not a summary of this Official Statement. It is only a brief description of and guide to, and is qualified by, more complete and detailed information contained in the entire Official Statement and the documents summarized or described in this Official Statement. A full review should be made of the entire Official Statement. The offering of Refunding Bonds to potential investors is made only by means of the entire Official Statement. The District. The District encompasses territory in the central portion of Napa County (the County ), including the City of St. Helena and adjacent unincorporated area of the County. The District currently operates one primary school, one elementary school, one middle school and one high school. The District s current enrollment is estimated to be 1,269 students. For more information regarding the District and its finances, see Appendix A and Appendix B attached hereto. See also Appendix C hereto for demographic and other information regarding the City of St. Helena and the County. Purpose. The Refunding Bonds are being issued by the District to refund some outstanding maturities of the District s General Obligation Refunding Bonds, 2005 Series A issued in the aggregate original principal amount of $15,520,000 (the 2005 Series A Bonds ). The 2005 Series A Bonds to be refunded with the proceeds of the Refunding Bonds consist of those 2005 Series Bonds which mature on August 1 in each of the years 2016 through 2019, inclusive. Such maturities are referred to herein as the Refunded Bonds. See THE REFINANCING PLAN. Authority for Issuance of the Refunding Bonds. The Refunding Bonds will be issued under the provisions of Articles 9 and 11 of Chapter 3 of Part 1 of Division 2 of Title 5 of the Government Code of the State of California (the Bond Law ) and under a resolution adopted by the Board of Trustees of the District on April 16, 2015 (the Bond Resolution ). See THE REFUNDING BONDS - Authority for Issuance. Payment and Registration of the Refunding Bonds. The Refunding Bonds are being issued as current interest bonds. The Refunding Bonds will be dated their date of original issuance and delivery (the Dated Date ) and will be issued as fully registered bonds, without coupons, in the denominations of $5,000 or any integral multiple of $5,000, registered in the name of Cede & Co. as nominee of The Depository Trust Company, New York, New York ( DTC ), and will be available under the book-entry system maintained by DTC, only through brokers and dealers who are or act through DTC Participants as described below. Beneficial

8 Owners will not be entitled to receive physical delivery of the Refunding Bonds. See THE REFUNDING BONDS and APPENDIX F Book-Entry Only System. Interest on the Refunding Bonds accrues from the Dated Date and is payable semiannually on February 1 and August 1 of each year, commencing August 1, See THE REFUNDING BONDS - Description of the Refunding Bonds. No Redemption. The Refunding Bonds are not subject to redemption prior to their maturity as described in THE REFUNDING BONDS - No Redemption. Security and Sources of Payment for the Refunding Bonds. The Refunding Bonds are general obligation bonds of the District payable solely from ad valorem property taxes levied and collected by the County. The County is empowered and is obligated to annually levy ad valorem taxes for the payment of interest on, and principal of, the Refunding Bonds upon all property subject to taxation by the District, without limitation as to rate or amount (except with respect to certain personal property which is taxable at limited rates). See SECURITY FOR THE REFUNDING BONDS. The District has other series of general obligation bonds that are payable from ad valorem taxes levied on taxable property in the District. For a schedule of the debt service due on the outstanding general obligation bonds issued by the District, see DEBT SERVICE SCHEDULES. See also APPENDIX B - GENERAL AND FINANCIAL INFORMATION ABOUT THE DISTRICT - DISTRICT FINANCIAL INFORMATION - Long Term Borrowing. Legal Opinion; Bank Qualified. Upon delivery of the Refunding Bonds, Jones Hall, A Professional Law Corporation, San Francisco, California, Bond Counsel ( Bond Counsel ) will release its final approving legal opinion with respect to the Refunding Bonds, regarding the validity and tax-exempt status of the Refunding Bonds, in the form attached hereto as Appendix D. In addition, Bond Counsel will opine that the Refunding Bonds are qualified tax-exempt obligations within the meaning of section 265(b)(3) of the Internal Revenue Code of 1986, subject to certain limitations as set forth in such opinion. Continuing Disclosure. The District will execute a Continuing Disclosure Certificate in connection with the issuance of the Refunding Bonds in the form attached hereto as Appendix E. See CONTINUING DISCLOSURE. Other Information. This Official Statement speaks only as of its date, and the information contained in this Official Statement is subject to change. Copies of documents referred to in this Official Statement and information concerning the Refunding Bonds are available by request to the Office of the District Superintendent at St. Helena Unified School District, 465 Main Street, St. Helena, California 94574, Phone: (707) The District may impose a charge for copying, mailing and handling. END OF INTRODUCTION -2-

9 THE REFINANCING PLAN As described herein, the proceeds of the Refunding Bonds will be used to refund the Refunded Bonds, and to pay related costs of issuance. Description of 2005 Series A Bonds In 1997 and 1998, respectively, the District issued its General Obligation Bonds Election of 1997, Series 1997 (the 1997 Bonds ) and its General Obligation Bonds Election of 1997, Series 1998 (the 1998 Bonds ). The 1997 Bonds and the 1998 Bonds were authorized at an election held on June 3, 1997, when more than 2/3 of the votes cast by eligible voters within the District were affirmative for the District s issuance of general obligation bonds in an amount not to exceed $18,800,000 (the 1997 Authorization ). In order to refund the 1997 Bonds and the 1998 Bonds, on June 16, 2005 the District issued $15,520,000 General Obligation Refunding Bonds 2005, Series A (the 2005 Series A Bonds ). The 2005 Series A Bonds are currently outstanding in the aggregate principal amount of $8,530,000, and the 2005 Series A Bonds maturing on or after August 1, 2016 are subject to optional redemption on August 1, 2015 at a price of 100.0% of the principal amount being redeemed. The Refunded Bonds The Refunding Bonds are being issued by the District to refund on a current basis the following maturities of the 2005 Series A Bonds (the Refunded Bonds ), as identified in the following table. ST. HELENA UNIFIED SCHOOL DISTRICT Identification of Refunded Bonds Maturities to be Redeemed (1) CUSIP Principal Amount Redemption Date Redemption Price 08/01/ S1 $1,680,000 8/1/ % 08/01/ T9 1,830,000 8/1/ /01/ U6 1,935,000 8/1/ /01/ V4 1,585,000 8/1/ $7,030,000 CUSIP Copyright American Bankers Association. CUSIP data herein is provided by Standard & Poor s CUSIP Service Bureau, a division of McGraw Hill Companies, Inc. Neither the District nor the Underwriter is responsible for the accuracy of such data. (1) The August 1, 2015 maturity will not be refunded with the proceeds of the Refunding Bonds. Deposits in Escrow Fund The District will deliver the net proceeds of the Refunding Bonds to U.S. Bank National Association, San Francisco, California, as paying agent for the 2005 Series A Bonds (the Prior Paying Agent ), for deposit in an escrow fund (the "Escrow Fund") established under an Escrow Agreement (the Escrow Agreement ), between the District and U.S. Bank National Association (the Escrow Bank ). The Escrow Bank will hold such funds in cash, uninvested, and will apply such funds to pay the redemption price of the Refunded Bonds, as set forth above, together with accrued interest to the redemption dates identified above. -3-

10 Sufficiency of the deposits in the Escrow Fund for those purposes will be verified by Causey Demgen & Moore P.C., certified public accountants, Denver, Colorado (the Verification Agent ). See VERIFICATION OF MATHEMATICAL ACCURACY herein. The amounts held by the Escrow Bank in the Escrow Fund are pledged solely to the payment of the Refunded Bonds. The funds deposited in the Escrow Fund will not be available for the payment of debt service with respect to the Refunding Bonds. SOURCES AND USES OF FUNDS The estimated sources and uses of funds with respect to the Refunding Bonds are as follows: Sources of Funds Principal Amount of Refunding Bonds $6,820, Net Original Issue Premium 553, Total Sources $7,373, Uses of Funds Deposit to Escrow Fund $7,205, Costs of Issuance* 167, Total Uses $7,373, *All estimated costs of issuance including, but not limited to, Underwriter s discount, printing costs, and fees of Bond Counsel, Disclosure Counsel, the Financial Advisor, Escrow Bank, verification agent and the rating agency. -4-

11 THE REFUNDING BONDS Authority for Issuance The Refunding Bonds will be issued under the Bond Law and the Bond Resolution. Description of the Refunding Bonds Book-Entry Form. The Refunding Bonds will be issued in book-entry form only, and will be initially issued and registered in the name of Cede & Co. as nominee of The Depository Trust Company, New York, New York ( DTC ). Purchasers of the Refunding Bonds (the Beneficial Owners ) will not receive physical certificates representing their interest in the Refunding Bonds. Payments of principal of and interest on the Refunding Bonds will be paid by U.S. Bank Trust National Association, San Francisco, California (the Paying Agent ) to DTC for subsequent disbursement to DTC Participants which will remit such payments to the Beneficial Owners of the Refunding Bonds. As long as DTC s book-entry method is used for the Refunding Bonds, the Paying Agent will send any notices to owners only to DTC. Any failure of DTC to advise any DTC Participant, or of any DTC Participant to notify any Beneficial Owner, of any such notice and its content or effect will not affect the validity or sufficiency of the related proceedings. See APPENDIX F Book-Entry Only System. The Paying Agent, the District, and the Underwriter of the Refunding Bonds have no responsibility or liability for any aspects of the records relating to or payments made on account of beneficial ownership, or for maintaining, supervising or reviewing any records relating to beneficial ownership, of interests in the Refunding Bonds. Principal and Interest Payments. The Refunding Bonds will be dated the Dated Date and will bear interest payable semiannually each February 1 and August 1 (each, an Interest Payment Date ), commencing August 1, 2015, at the interest rates shown on the inside front cover page of this Official Statement. The Refunding Bonds will mature on August 1 in each of the years and in the principal amounts shown on the inside front cover page of this Official Statement. Interest on the Refunding Bonds will be computed on the basis of a 360-day year of twelve 30-day months. Each Bond authenticated on or before July 15, 2015, shall bear interest from the date of the Refunding Bonds. Each Bond authenticated during the period between the 15th day of the month preceding any Interest Payment Date (the Record Date ) and that Interest Payment Date shall bear interest from that Interest Payment Date. Any other Bond shall bear interest from the Interest Payment Date immediately preceding the date of its authentication. If an Interest Payment Date does not fall on a business day, the interest or principal payment due on such Interest Payment Date will be paid on the next business day. The Refunding Bonds will be issued in the denomination of $5,000 principal amount each or any integral multiple thereof. See the maturity schedule on the inside cover page of this Official Statement and DEBT SERVICE SCHEDULES. -5-

12 No Redemption The Refunding Bonds are not subject to optional or mandatory sinking fund redemption prior to maturity. Registration, Transfer and Exchange of Refunding Bonds If the book-entry system as described above and in Appendix F is no longer used with respect to the Refunding Bonds, the following provisions will govern the registration, transfer, and exchange of the Refunding Bonds. Registration Books. The Paying Agent will keep or cause to be kept sufficient books for the registration and transfer of the Refunding Bonds (the Registration Books ), which will at all times be open to inspection by the District upon reasonable notice; and, upon presentation for such purpose, the Paying Agent shall, under such reasonable regulations as it may prescribe, register or transfer or cause to be registered or transferred, on said books, the Refunding Bonds. Transfer. Any Refunding Bond may, in accordance with its terms, be transferred, upon the Registration Books, by the person in whose name it is registered, in person or by his duly authorized attorney, upon surrender of such Refunding Bond for cancellation at the principal office of the Paying Agent, accompanied by delivery of a written instrument of transfer in a form approved by the Paying Agent, duly executed. Whenever any Refunding Bond or Refunding Bonds are surrendered for transfer, the District will execute and the Paying Agent will authenticate and deliver a new Refunding Bond or Refunding Bonds, for like aggregate principal amount. Exchange. Refunding Bonds may be exchanged at the principal office of the Paying Agent for a like aggregate principal amount of Refunding Bonds of authorized denominations and of the same maturity. The District may charge a reasonable sum for each new Refunding Bond issued upon any exchange. Defeasance The Refunding Bonds may be paid by the District, in whole or in part, in any one or more of the following ways: (a) (b) (c) by paying or causing to be paid the principal or redemption price of and interest on such Refunding Bonds, as and when the same become due and payable; by irrevocably depositing, in trust, at or before maturity, money or securities in the necessary amount (as provided in the Bond Resolution) to pay or redeem such Refunding Bonds; or by delivering such Refunding Bonds to the Paying Agent for cancellation by it. Whenever in the Bond Resolution it is provided or permitted that there be deposited with or held in trust by the Paying Agent money or securities in the necessary amount to pay or -6-

13 redeem any Refunding Bonds, the money or securities so to be deposited or held may be held by the Paying Agent or by any other fiduciary. Such money or securities may include money or securities held by the Paying Agent in the funds and accounts established under the Bond Resolution and will be: (i) lawful money of the United States of America in an amount equal to the principal amount of such Refunding Bonds and all unpaid interest thereon to maturity, except that, in the case of Refunding Bonds which are to be redeemed prior to maturity and in respect of which notice of such redemption is given as provided in the Bond Resolution or provision satisfactory to the Paying Agent is made for the giving of such notice, the amount to be deposited or held will be the principal amount or redemption price of such Refunding Bonds and all unpaid interest thereon to the redemption date; or (ii) Federal Securities (not callable by the issuer thereof prior to maturity) the principal of and interest on which when due, in the opinion of a certified public accountant delivered to the District, will provide money sufficient to pay the principal or redemption price of and all unpaid interest to maturity, or to the redemption date, as the case may be, on the Refunding Bonds to be paid or redeemed, as such principal or redemption price and interest become due, provided that, in the case of Refunding Bonds which are to be redeemed prior to the maturity thereof, notice of such redemption has been given as provided in the Bond Resolution or provision satisfactory to the Paying Agent has been made for the giving of such notice. Upon the deposit, in trust, at or before maturity, of money or securities in the necessary amount (as described above) to pay or redeem any outstanding Refunding Bond (whether upon or prior to its maturity or the redemption date of such Refunding Bond), then all liability of the County and the District in respect of such Refunding Bond will cease and be completely discharged, except only that thereafter the owner thereof will be entitled only to payment of the principal of and interest on such Refunding Bond by the District, and the District will remain liable for such payment, but only out of such money or securities deposited with the Paying Agent for such payment. Federal Securities means: (a) any direct general obligations of the United States of America (including obligations issued or held in book entry form on the books of the Department of the Treasury of the United States of America), for which the full faith and credit of the United States of America are pledged; (b) obligations of any agency, department or instrumentality of the United States of America, the timely payment of principal and interest on which are directly or indirectly secured or guaranteed by the full faith and credit of the United States of America. -7-

14 DEBT SERVICE SCHEDULES Refunding Bonds Debt Service. The following table shows the semi-annual debt service schedule with respect to the Refunding Bonds (assuming no optional redemptions). ST. HELENA UNIFIED SCHOOL DISTRICT Debt Service Schedule 2015 General Obligation Refunding Bonds Date Refunding Bonds Principal Refunding Bonds Interest Refunding Bonds Semi-Annual Total Refunding Bonds Annual Total 8/1/15 $125, $48, $173, $173, /1/16-133, , /1/16 1,535, , ,668, ,802, /1/17-103, , /1/17 1,670, , ,773, ,876, /1/18-69, , /1/18 1,900, , ,969, ,039, /1/19-31, , /1/19 1,590, , ,621, ,653, Total $6,820, $725, $7,545, $7,545, [Remainder of page intentionally left blank] -8-

15 Combined General Obligation Bonds Debt Service. The following table shows the combined debt service schedule with respect to the District s outstanding general obligation bonds and refunding bonds, together with the Refunding Bonds. See Appendix B District General and Financial Information Long-Term Debt for additional information. ST. HELENA UNIFIED SCHOOL DISTRICT Combined General Obligation Bond Debt Service Schedule Period Ending (August 1) 2010 Election 2012 Election Series C Bonds Debt Service Series A-1 Bonds Debt Service Series A-2 Bonds Debt Service 2015 Refunding Bonds Debt Service 2005 Bonds Series A Bonds Series B Bonds Total Annual Debt Service (1) Debt Service Debt Service Debt Service 2015 (2) $1,537, $345, $252, $887, $173, $3,196, , , ,011, ,802, ,025, , , ,050, ,876, ,163, , , ,091, ,039, ,391, ,051, $15, , ,133, ,653, ,446, ,778, , , ,180, ,589, ,753, , , ,263, ,639, ,734, , , ,276, ,689, ,711, , , ,330, ,750, ,688, , ,100, ,809, ,215, $450, , ,181, ,867, ,660, , ,271, ,952, ,770, , ,360, ,151, ,880, , ,454, ,355, ,995, , ,551, ,567, ,112, , ,653, ,787, ,236, , ,763, ,021, ,366, , ,874, ,262, ,502, , ,988, ,511, ,644, , ,108, ,777, ,791, , ,816, ,941, , ,971, ,130, ,130, Total $1,537, $19,353, $36,350, $4,504, $33,356, $10,226, $7,545, $112,875, (1) 2005 Bonds are being refunded with the proceeds of the Refunding Bonds. Upon issuance of the Refunding Bonds, debt service on the 2005 Bonds will be paid from amounts on deposit in the escrow fund, except with respect to the August 1, 2015 maturity which is expected to remain outstanding until paid at maturity. See THE REFINANCING PLAN. (2) Debt service presented excludes February 1, 2015 interest payments, which have already been made. [Remainder of page intentionally left blank] -9-

16 SECURITY FOR THE REFUNDING BONDS Ad Valorem Taxes Refunding Bonds Payable from Ad Valorem Property Taxes. The Refunding Bonds are general obligations of the District, payable solely from ad valorem property taxes levied and collected by the County. The County is empowered and is obligated to annually levy ad valorem taxes for the payment of the Refunding Bonds and the interest thereon upon all property within the District subject to taxation by the District, without limitation as to rate or amount (except certain personal property which is taxable at limited rates). Other Bonds Payable from Ad Valorem Property Taxes. The District has previously issued other general obligation bonds, which are payable from ad valorem taxes on a parity basis. In addition to the general obligation bonds issued by the District, there is other debt issued by entities with jurisdiction in the District, which is payable from ad valorem taxes levied on parcels in the District. See PROPERTY TAXATION Direct and Overlapping Debt below. Levy and Collection. The County will levy and collect such ad valorem taxes in such amounts and at such times as is necessary to ensure the timely payment of debt service. Such taxes, when collected, will be deposited into a debt service fund for the Refunding Bonds, which is maintained by the County and which is irrevocably pledged for the payment of principal of and interest on the Refunding Bonds when due. District property taxes are assessed and collected by the County in the same manner and at the same time, and in the same installments as other ad valorem taxes on real property, and will have the same priority, become delinquent at the same times and in the same proportionate amounts, and bear the same proportionate penalties and interest after delinquency, as do the other ad valorem taxes on real property. See -Teeter Plan; Property Tax Collections below. Annual Tax Rates. The amount of the annual ad valorem tax levied by the County to repay the Refunding Bonds will be determined by the relationship between the assessed valuation of taxable property in the District and the amount of debt service due on the Refunding Bonds. Fluctuations in the annual debt service on the Refunding Bonds and the assessed value of taxable property in the District may cause the annual tax rate to fluctuate. Economic and other factors beyond the District s control, such as economic recession, deflation of land values, a relocation out of the District or financial difficulty or bankruptcy by one or more major property taxpayers, or the complete or partial destruction of taxable property caused by, among other eventualities, earthquake, flood, fire or other natural disaster, could cause a reduction in the assessed value within the District and necessitate a corresponding increase in the annual tax rate. Debt Service Fund The County will establish a Debt Service Fund (the Debt Service Fund ) for the Refunding Bonds, which will be established as a separate fund to be maintained distinct from all other funds of the County. All taxes levied by the County for the payment of the principal of and interest and premium (if any) on the Refunding Bonds will be deposited in the Debt Service -10-

17 Fund by the County promptly upon receipt. The Debt Service Fund is pledged for the payment of the principal of and interest on the Refunding Bonds when and as the same become due. The District will transfer amounts in the Debt Service Fund to the Paying Agent to the extent necessary to pay the principal of and interest on the Refunding Bonds as the same become due and payable. If, after payment in full of the Refunding Bonds, any amounts remain on deposit in a Debt Service Fund, the District shall transfer such amounts to its General Fund, to be applied solely in a manner which is consistent with the requirements of applicable state and federal tax law. Not a County Obligation The Refunding Bonds are payable solely from the proceeds of an ad valorem tax levied and collected by the County, for the payment of principal and interest on the Refunding Bonds. Although the County is obligated to collect the ad valorem tax for the payment of the Refunding Bonds, the Refunding Bonds are not a debt of the County. [Remainder of page intentionally left blank] -11-

18 Property Tax Collection Procedures PROPERTY TAXATION In California, property which is subject to ad valorem taxes is classified as secured or unsecured. The secured roll is that part of the assessment roll containing (1) state assessed public utilities property and (2) property the taxes on which are a lien on real property sufficient, in the opinion of the county assessor, to secure payment of the taxes. A tax levied on unsecured property does not become a lien against such unsecured property, but may become a lien on certain other property owned by the taxpayer. Every tax which becomes a lien on secured property has priority over all other liens arising pursuant to State law on such secured property, regardless of the time of the creation of the other liens. Secured and unsecured property are entered separately on the assessment roll maintained by the county assessor. The method of collecting delinquent taxes is substantially different for the two classifications of property. Property taxes on the secured roll are due in two installments, on November 1 and February 1 of each fiscal year. If unpaid, such taxes become delinquent after December 10 and April 10, respectively, and a 10% penalty attaches to any delinquent payment. In addition, property on the secured roll with respect to which taxes are delinquent is declared tax defaulted on or about June 30 of the fiscal year. Such property may thereafter be redeemed by payment of the delinquent taxes and a delinquency penalty, plus a redemption penalty of 1-1/2% per month to the time of redemption. If taxes are unpaid for a period of five years or more, the property is subject to sale by the County. Property taxes are levied for each fiscal year on taxable real and personal property situated in the taxing jurisdiction as of the preceding January 1. A bill enacted in 1983, SB813 (Statutes of 1983, Chapter 498), however, provided for the supplemental assessment and taxation of property as of the occurrence of a change of ownership or completion of new construction. Thus, this legislation eliminated delays in the realization of increased property taxes from new assessments. As amended, SB813 provided increased revenue to taxing jurisdictions to the extent that supplemental assessments of new construction or changes of ownership occur subsequent to the January 1 lien date and result in increased assessed value. Property taxes on the unsecured roll are due on the January 1 lien date and become delinquent, if unpaid on the following August 31. A 10% penalty is also attached to delinquent taxes in respect of property on the unsecured roll, and further, an additional penalty of 1-1/2% per month accrues with respect to such taxes beginning the first day of the third month following the delinquency date. 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 record 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 or possessory interests belonging or assessed to the assessee. The exclusive means of enforcing the payment of delinquent taxes in respect of property on the secured roll is the sale of the property securing the taxes for the amount of taxes which are delinquent. -12-

19 Taxation of State-Assessed Utility Property The State Constitution provides that most classes of property owned or used by regulated utilities be assessed by the State Board of Equalization ( SBE ) and taxed locally. Property valued by the SBE as an operating unit in a primary function of the utility taxpayer is known as unitary property, a concept designed to permit assessment of the utility as a going concern rather than assessment of each individual element of real and personal property owned by the utility taxpayer. State-assessed unitary and operating nonunitary property (which excludes nonunitary property of regulated railways) is allocated to the counties based on the situs of the various components of the unitary property. Except for unitary property of regulated railways and certain other excepted property, all unitary and operating nonunitary property is taxed at special county-wide rates and tax proceeds are distributed to taxing jurisdictions according to statutory formulae generally based on the distribution of taxes in the prior year. Historic 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, as described above. Assessed valuations are reported at 100% of the full value of the property, as defined in Article XIIIA of the California Constitution. For a discussion of how properties currently are assessed, see Appendix B under the heading CONSTITUTIONAL AND STATUTORY PROVISIONS AFFECTING DISTRICT REVENUES AND APPROPRIATIONS. 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 sets forth recent history of the assessed value in the District. ST. HELENA UNIFIED SCHOOL DISTRICT Assessed Valuations Fiscal Years through Fiscal Year Local Secured Utility Unsecured Total % Change $4,213,808,229 $7,118,836 $169,261,656 $4,390,188, ,513,507,065 6,921, ,026,911 4,706,455, % ,900,628,506 1,320, ,700,862 5,080,650, ,206,277,124 1,320, ,408,039 5,443,006, ,521,993,109 1,320, ,222,622 5,784,536, ,665,538,766 1,320, ,377,715 5,915,237, ,815,464, , ,180,956 6,074,016, ,057,084, , ,718,338 6,322,174, ,517,757, , ,069,842 6,786,083, ,716,076, , ,628,589 6,992,961, Source: California Municipal Statistics, Inc. -13-

20 Parcels by Land Use The following table shows a breakdown of local secured property assessed value and parcels within the District by land use for fiscal year ST. HELENA UNIFIED SCHOOL DISTRICT Local Secured Property Assessed Valuation and Parcels by Land Use Fiscal Year % of No. of % of No. of Taxable % Ass. Valuation (1) Total Parcels Total Parcels Total Non-Residential: Agricultural/Vineyards $2,089,543, % % % Commercial 410,315, Vacant Commercial 3,130, Industrial/Winery 1,356,592, Vacant Industrial 917, Government/Vacant Non-taxable Subtotal Non-Residential $3,860,499, % 1, % 1, % Residential: Single Family Residence $ 958,283, % 1, % 1, % Condominium/Townhouse 58,181, Rural Residential 1,485,465, , , Mobile Home 11,215, Mobile Home Park 7,967, Residential Units 75,499, Residential Units/Apartments 41,918, Vacant Residential 217,046, Subtotal Residential $2,855,577, % 4, % 4, % Total $6,716,076, % 5, % 5, % (1) Local Secured Assessed Valuation; excluding tax-exempt property. Source: California Municipal Statistics, Inc. -14-

21 Per Parcel Assessed Valuation of Single-Family Homes The following table sets forth the per parcel assessed valuation of single-family homes in fiscal year ST. HELENA UNIFIED SCHOOL DISTRICT Per Parcel Assessed Valuation of Single-Family Homes No. of Average Median Parcels Assessed Valuation Assessed Valuation Assessed Valuation Single Family Residential 1,518 $ 958,283,407 $ 631,280 $476,661 Rural Residential 1,373 1,485,465,257 1,081, ,291 Total 2,891 $2,443,748,664 $ 845,295 $477, No. of % of Cumulative Total % of Cumulative Assessed Valuation Parcels (1) Total % of Total Valuation Total % of Total $0 - $99, % % $ 20,550, % 0.841% $100,000 - $199, ,342, $200,000 - $299, ,396, $300,000 - $399, ,641, $400,000 - $499, ,945, $500,000 - $599, ,202, $600,000 - $699, ,558, $700,000 - $799, ,573, $800,000 - $899, ,667, $900,000 - $999, ,981, $1,000,000 - $1,099, ,219, $1,100,000 - $1,199, ,058, $1,200,000 - $1,299, ,070, $1,300,000 - $1,399, ,878, $1,400,000 - $1,499, ,500, $1,500,000 - $1,599, ,491, $1,600,000 - $1,699, ,196, $1,700,000 - $1,799, ,223, $1,800,000 - $1,899, ,785, $1,900,000 - $1,999, ,603, $2,000,000 and greater ,858, , % $2,443,748, % (1) Improved single family residential parcels. Excludes condominiums and parcels with multiple family units. Source: California Municipal Statistics, Inc. Appeals of Assessed Value There are two types of appeals of assessed values that could adversely impact property tax revenues within the District. Appeals may be based on Proposition 8 of November 1978, which requires that for each January 1 lien date, the taxable value of real property must be the lesser of its base year value, annually adjusted by the inflation factor pursuant to Article XIIIA of the State Constitution, or its full cash value, taking into account reductions in value due to damage, destruction, depreciation, obsolescence, removal of property or other factors causing a decline in value. See CONSTITUTIONAL AND STATUTORY PROVISIONS AFFECTING DISTRICT REVENUES AND APPROPRIATIONS in Appendix B. Under California law, property owners may apply for a reduction of their property tax assessment by filing a written application, in form prescribed by the State Board of Equalization, with the County board of equalization or assessment appeals board. In most cases, the appeal -15-

22 is filed because the applicant believes that present market conditions (such as residential home prices) cause the property to be worth less than its current assessed value. Proposition 8 reductions may also be unilaterally applied by the County Assessor. Any reduction in the assessment ultimately granted as a result of such appeal applies to the year for which application is made and during which the written application was filed. These reductions are subject to yearly reappraisals and are adjusted back to their original values when market conditions improve. Once the property has regained its prior value, adjusted for inflation, it once again is subject to the annual inflationary factor growth rate allowed under Article XIIIA. See CONSTITUTIONAL AND STATUTORY PROVISIONS AFFECTING DISTRICT REVENUES AND APPROPRIATIONS in Appendix B. A second type of assessment appeal involves a challenge to the base year value of an assessed property. Appeals for reduction in the base year value of an assessment, if successful, reduce the assessment for the year in which the appeal is taken and prospectively thereafter. The base year is determined by the completion date of new construction or the date of change of ownership. Any base year appeal must be made within four years of the change of ownership or new construction date. The District cannot predict the changes in assessed values that might result from pending or future appeals by taxpayers. Any reduction in aggregate District assessed valuation due to appeals, as with any reduction in assessed valuation due to other causes, will cause the tax rate levied to repay the Refunding Bonds to increase accordingly, so that the fixed debt service on the Refunding Bonds (and other outstanding general obligation bonds, if any) may be paid. Teeter Plan; Property Tax Collections The Board of Supervisors of the County has adopted the Alternative Method of Distribution of Tax Levies and Collections and of Tax Sale Proceeds (the Teeter Plan ), as provided for in Section 4701 et seq. of the California Revenue and Taxation Code. Under the Teeter Plan, each entity levying property taxes in the County may draw on the amount of uncollected secured taxes credited to its fund, in the same manner as if the amount credited had been collected. The County assumes the responsibility for pursuing late and delinquent taxes and is therefore entitled to any penalties and interest collected. The District participates in the Teeter Plan, and thus receives 100% of secured property taxes levied, in exchange for foregoing any interest and penalties collected on delinquent taxes to the County. The County s Teeter Plan currently covers the one percent general fund apportionment levy, and also other ad valorem taxes, such as those levied to repay the Refunding Bonds. The plan does not include special assessments. So long as the Teeter Plan remains in effect, the District s receipt of revenues with respect to the levy of ad valorem property taxes will not be dependent upon actual collections of the ad valorem property taxes by the County. However, under the statute creating the Teeter Plan, the Board of Supervisors can under certain circumstances terminate the Teeter Plan in part or in its entirety with respect to the entire County and, in addition, the Board of Supervisors can terminate the Teeter Plan with respect to the District if the delinquency rate for all ad valorem property taxes levied within the District in any year exceeds 3%. In the event that the Teeter Plan were terminated, the amount of the levy of ad valorem property 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. -16-

23 Tax Rates The table below summarizes the total ad valorem tax rates levied by all taxing entities in Tax Rate Area (a typical tax rate area in the District) for fiscal years through ST. HELENA UNIFIED SCHOOL DISTRICT Typical Total Tax Rates per $100 of Assessed Valuation (TRA ) Fiscal Years through TRA General Tax Rate Napa Valley Joint Community College Dist Saint Helena Unified School District Total Tax Rate Source: California Municipal Statistics Inc. [Remainder of page intentionally left blank] -17-

24 Top Twenty Property Taxpayers General. The top twenty taxpayers in the District with the greatest combined assessed valuation of taxable property on the fiscal year tax roll, and the assessed valuations thereof, are shown below. The more property (by assessed value) which is owned by a single taxpayer in the District, the greater amount of tax collections are exposed to weaknesses in the taxpayer s financial situation and ability or willingness to pay property taxes. Each taxpayer listed below is a unique name listed on the tax rolls. The District cannot determine from County assessment records whether individual persons, corporations or other organizations are liable for tax payments with respect to multiple properties held in various names that in aggregate may be larger than is suggested by the table below. ST. HELENA UNIFIED SCHOOL DISTRICT Top Twenty Secured Property Taxpayers Fiscal Year % of Property Owner Primary Land Use Assessed Valuation Total (1) 1. Realty Income Properties 2 LLC Winery/Vineyards $173,925, % 2. Sutter Home Winery Inc. Winery/Vineyards 107,880, Treasury Wine Estates Americas Company Winery/Vineyards 103,622, Jackson Family Estates I LLC Winery/Vineyards 75,554, Hall Highway 29 Winery LLC Winery/Vineyards 61,249, Robert Mondavi Winery Winery/Vineyards 55,247, Franciscan Vineyards Inc. Winery/Vineyards 53,128, Opus One Winery/Vineyards 50,132, Beckstoffer Vineyards Winery/Vineyards 50,086, Nickel & Nickel LLC Winery/Vineyards 48,092, Culinary Institute of America Commercial 47,778, RME Inc. Winery/Vineyards 44,315, Round Pond Winery/Vineyards 40,182, Joseph P. and Nancy J. Schoendorf Residence 38,962, Meadowood Associates Winery/Vineyards 37,843, Trevor Foster and Kelly Shea Winery/Vineyards 37,608, Rutherford Wine Studios LLC Winery/Vineyards 37,249, Kodo Inc. Winery/Vineyards 36,149, Diageo Chateau & Estates Wine Company Winery/Vineyards 36,042, Villa Amorosa Inc. Winery/Vineyards 35,672, $1,170,725, % (1) Local Secured Assessed Valuation: $6,716,076,876. Source: California Municipal Statistics, Inc. Concentration of Ownership. The District derives a portion of its revenues from its share of the one percent levy for general purposes. In addition, the Refunding Bonds are secured by the levy and collection of voter-approved ad valorem property taxes. The top twenty property owners in the District account for 17.43% of the total assessed valuation in the District, with the top ten secured taxpayers accounting for over eleven percent of the District s secured assessed valuation. Because the County has adopted the Teeter Plan, whereby taxing entities such as the District are paid the full amount of taxes levied on their behalf, notwithstanding delinquencies or non-payment, failure by a large property taxpayer in the District to pay property taxes is unlikely to have a negative impact on the District s tax collections. Should the County remove tax levies such as ad valorem taxes levied for general obligation bonds from the Teeter Plan, or terminate the Teeter Plan, the District s receipt of its share of property taxes could become subject to delinquencies, although the District would then be entitled to interest and -18-

25 penalties accruing on such delinquencies. Notwithstanding the foregoing, the County is under a statutory duty to levy and collect sufficient taxes for payment of the Refunding Bonds. Direct and Overlapping Debt Obligations Set forth below is a direct and overlapping debt report (the Debt Report ) prepared by California Municipal Statistics, Inc. and dated April 1, The Debt Report is included for general information purposes only. The District has not reviewed the Debt Report for completeness or accuracy and makes no representation in connection therewith. The Debt Report generally includes long-term obligations sold in the public credit markets by public agencies whose boundaries overlap the boundaries of the District in whole or in part. Such long-term obligations generally are not payable from revenues of the District (except as indicated) nor are they necessarily obligations secured by land within the District. In many cases, long-term obligations issued by a public agency are payable only from the general fund or other revenues of such public agency Assessed Valuation: $6,992,961,640 ST. HELENA UNIFIED SCHOOL DISTRICT Statement of Direct and Overlapping Bonded Debt Dated As of April 1, 2015 DIRECT AND OVERLAPPING TAX AND ASSESSMENT DEBT: % Applicable Debt 4/1/15 Napa Joint Community College District % $27,981,025 Saint Helena Unified School District ,071,232 City of Saint Helena ,000 Lake Berryessa Resort Improvement District Assessment District No ,734 TOTAL DIRECT AND OVERLAPPING TAX AND ASSESSMENT DEBT $90,476,991 (1) OVERLAPPING GENERAL FUND DEBT: Napa County Certificates of Participation % $8,083,999 Napa County Board of Education Certificates of Participation ,781 TOTAL OVERLAPPING GENERAL FUND DEBT $8,753,780 COMBINED TOTAL DEBT $99,230,771 (2) (1) Excludes Refunding Bonds to be sold. (2) Excludes tax and revenue anticipation notes, enterprise revenue, mortgage revenue and non-bonded capital lease obligations. Ratios to Assessed Valuation: Direct Debt ($62,071,232) % Total Direct and Overlapping Tax and Assessment Debt % Combined Total Debt % Source: California Municipal Statistics, Inc. -19-

26 CONTINUING DISCLOSURE The District will execute a Continuing Disclosure Certificate in connection with the issuance of the Refunding Bonds in the form attached hereto as Appendix E. The District has covenanted therein, for the benefit of holders and beneficial owners of the Refunding Bonds to provide certain financial information and operating data relating to the District (an Annual Report ) to the Municipal Securities Rulemaking Board not later than nine months after the end of the District s fiscal year (which currently would be March 31), commencing March 31, 2016 with the report for the Fiscal Year, and to provide notices of the occurrence of certain enumerated events. Such notices will be filed by the District with the Municipal Securities Rulemaking Board. The specific nature of the information to be contained in an Annual Report or the notices of enumerated events is set forth in APPENDIX E FORM OF CONTINUING DISCLOSURE CERTIFICATE. These covenants have been made in order to assist the Underwriter of the Refunding Bonds in complying with S.E.C. Rule 15c2-12(b)(5) (the Rule ). The District has existing disclosure undertakings that have been made pursuant to the Rule in connection with the issuance of other outstanding general obligation bonds and refunding general obligation bonds. See Appendix B under the heading FINANCIAL INFORMATION Long-Term Debt. Specific instances of non-compliance in the previous five years are: (i) the District s audited financial statements for fiscal years ending June 30, 2009 through June 30, 2014 were filed for the 2005 Bonds, but late by 3 to 120 days, and such audits, although available, were not linked on the Electronic Municipal Market Access website to each of the District s other outstanding bonds, (ii) certain supplemental information such as assessed valuation and top secured property taxpayers that was not contained in the audited financial statements but was required to be provided by the related continuing disclosure undertakings was not filed or was filed late, and (iii) insured and underlying rating upgrades were not filed or were filed late. The District has made remedial filings with respect to such instances of non-compliance. Identification of the foregoing instances of non-compliance does not constitute a representation that the District has determined that such non-compliance is material. Under the Securities and Exchange Commission s Municipalities Continuing Disclosure Cooperation Initiative (the Initiative ), issuers and underwriters of municipal securities were encouraged to self-report possible violations involving materially inaccurate statements relating to prior compliance with their continuing disclosure undertakings. Pursuant to the Initiative, an underwriting firm has reported the occurrence of possible materially inaccurate statements relating to compliance by the District with its prior undertakings, although the District did not elect to file a report under the Initiative. The District is currently serving as its own dissemination agent, and is in the process of determining whether it will engage an outside firm to serve this role on behalf of the District. Neither the County nor any other entity other than the District shall have any obligation or incur any liability whatsoever with respect to the performance of the District s duties regarding continuing disclosure. -20-

27 VERIFICATION OF MATHEMATICAL ACCURACY The Verification Agent, upon delivery of the Refunding Bonds, will deliver a report of the mathematical accuracy of certain computations, contained in schedules provided to them on behalf of the District, relating to (a) the sufficiency of the anticipated amount of proceeds of the Refunding Bonds and other funds available to pay, when due, the principal, whether at maturity or upon prior redemption, interest and redemption premium requirements of the Refunded Bonds and (b) the yields on the amount of proceeds held and invested prior to redemption of the Refunded Bonds and on the Refunding Bonds considered by Bond Counsel in connection with the opinion rendered by Bond Counsel that the Refunding Bonds are not arbitrage bonds within the meaning of Section 148 of the Internal Revenue Code of 1986, as amended. The report of the Verification Agent will include the statement that the scope of their engagement is limited to verifying mathematical accuracy, of the computations contained in such schedules provided to them, and that they have no obligation to update their report because of events occurring, or data or information coming to their attention, subsequent to the date of their report. Absence of Material Litigation CERTAIN LEGAL MATTERS No litigation is pending or threatened concerning the validity of the Refunding Bonds, and a certificate to that effect, executed by an authorized officer of the District, will be furnished to purchasers at the time of the original delivery of the Refunding Bonds. The District is not aware of any litigation pending or threatened that (i) questions the political existence of the District, (ii) contests the District's ability to receive ad valorem taxes or to collect other revenues or (iii) contests the District's ability to issue and retire the Refunding Bonds. The District is routinely subject to lawsuits and claims. In the opinion of the District, the aggregate amount of the uninsured liabilities of the District under these lawsuits and claims will not materially affect the financial position or operations of the District. Legal Opinion The proceedings in connection with the issuance of the Refunding Bonds are subject to the approval as to their legality of Jones Hall, A Professional Law Corporation, San Francisco, California, Bond Counsel for the District ( Bond Counsel ). The opinion of Bond Counsel with respect to the Refunding Bonds will be delivered in substantially the form attached hereto as Appendix D. Certain legal matters will also be passed upon for the District by Jones Hall as Disclosure Counsel ( Disclosure Counsel ). The fees of Bond Counsel and Disclosure Counsel are contingent upon the issuance and delivery of the Refunding Bonds. -21-

28 TAX MATTERS Tax Exemption Federal Tax Status. In the opinion of Jones Hall, A Professional Law Corporation, San Francisco, California, Bond Counsel, subject, however to the qualifications set forth below, under existing law, the interest on the Refunding Bonds is excluded from gross income for federal income tax purposes and such interest is not an item of tax preference for purposes of the federal alternative minimum tax imposed on individuals and corporations, although for the purpose of computing the alternative minimum tax imposed on certain corporations, such interest is taken into account in determining certain income and earnings. The Refunding Bonds are "qualified tax-exempt obligations" within the meaning of Section 265(b)(3) of the Internal Revenue Code of 1986 (the Tax Code ) such that, in the case of certain financial institutions (within the meaning of section 265(b)(5) of the Tax Code), a deduction for federal income tax purposes is allowed for 80 percent of that portion of such financial institution's interest expense allocable to interest payable on the Refunding Bonds. The opinions set forth in the preceding paragraph are subject to the condition that the District comply with all requirements of the Tax Code that must be satisfied subsequent to the issuance of the Refunding Bonds. The District has covenanted to comply with each such requirement. Failure to comply with certain of such requirements may cause the inclusion of such interest in gross income for federal income tax purposes to be retroactive to the date of issuance of the Refunding Bonds, or may cause the Refunding Bonds to lose their status as "qualified tax-exempt obligations" within the meaning of Section 265(b)(3) of the Tax Code. Bond Counsel expresses no opinion regarding other federal tax consequences arising with respect to the Refunding Bonds. Tax Treatment of Original Issue Discount and Premium. If the initial offering price to the public (excluding bond houses and brokers) at which a Refunding Bond is sold is less than the amount payable at maturity thereof, then such difference constitutes "original issue discount" for purposes of federal income taxes and State of California personal income taxes. If the initial offering price to the public (excluding bond houses and brokers) at which a Refunding Bond is sold is greater than the amount payable at maturity thereof, then such difference constitutes "original issue premium" for purposes of federal income taxes and State of California personal income taxes. De minimis original issue discount and original issue premium is disregarded. Under the Tax Code, original issue discount is treated as interest excluded from federal gross income and exempt from State of California personal income taxes to the extent properly allocable to each owner thereof subject to the limitations described in the first paragraph of this section. The original issue discount accrues over the term to maturity of the Refunding Bond on the basis of a constant interest rate compounded on each interest or principal payment date (with straight-line interpolations between compounding dates). The amount of original issue discount accruing during each period is added to the adjusted basis of such Refunding Bonds to determine taxable gain upon disposition (including sale, redemption, or payment on maturity) of such Refunding Bond. The Tax Code contains certain provisions relating to the accrual of original issue discount in the case of purchasers of the Refunding Bonds who purchase the Refunding Bonds after the initial offering of a substantial amount of such maturity. Owners of such Refunding Bonds should consult their own tax advisors with respect to the tax consequences of ownership of Refunding Bonds with original issue discount, including the treatment of purchasers who do not purchase in the original offering, the allowance of a -22-

29 deduction for any loss on a sale or other disposition, and the treatment of accrued original issue discount on such Refunding Bonds under federal individual and corporate alternative minimum taxes. Under the Tax Code, original issue premium is amortized on an annual basis over the term of the Refunding Bond (said term being the shorter of the Refunding Bond's maturity date or its call date). The amount of original issue premium amortized each year reduces the adjusted basis of the owner of the Refunding Bond for purposes of determining taxable gain or loss upon disposition. The amount of original issue premium on a Refunding Bond is amortized each year over the term to maturity of the Refunding Bond on the basis of a constant interest rate compounded on each interest or principal payment date (with straight-line interpolations between compounding dates). Amortized bond premium is not deductible for federal income tax purposes. Owners of premium Refunding Bonds, including purchasers who do not purchase in the original offering, should consult their own tax advisors with respect to State of California personal income tax and federal income tax consequences of owning such Refunding Bonds. California Tax Status. In the further opinion of Bond Counsel, interest on the Refunding Bonds is exempt from California personal income taxes. Other Tax Considerations. Owners of the Refunding Bonds should also be aware that the ownership or disposition of, or the accrual or receipt of interest on, the Refunding Bonds may have federal or state tax consequences other than as described above. Bond Counsel expresses no opinion regarding any federal or state tax consequences arising with respect to the Refunding Bonds other than as expressly described above. Form of Opinion. A copy of the proposed form of opinion of Bond Counsel is attached hereto as Appendix D. Other Tax Considerations Owners of the Refunding Bonds should also be aware that the ownership or disposition of, or the accrual or receipt of interest on, the Refunding Bonds may have federal or state tax consequences other than as described above. Bond Counsel expresses no opinion regarding any federal or state tax consequences arising with respect to the Refunding Bonds other than as expressly described above. Future legislation, if enacted into law, or clarification of the Tax Code may cause interest on the Refunding Bonds to be subject to, directly or indirectly, to federal income taxation, or otherwise prevent owners of the Refunding Bonds from realizing the full current benefit of the tax status of such interest. The introduction or enactment of any such future legislation or clarification of the Tax Code may also affect the market price for, or marketability of, the Refunding Bonds. Prospective purchasers of the Refunding Bonds should consult their own tax advisors regarding any pending or proposed federal tax legislation, as to which Bond Counsel expresses no opinion. -23-

30 RATING Standard & Poor s Investors Services ( S&P ) has assigned its rating of AAA to the Refunding Bonds. The District has provided certain additional information and materials to S&P (some of which may not appear in this Official Statement to the extent it has been determined to not be material to the Refunding Bonds). Such rating reflects only the views of S&P and an explanation of the significance of such rating and outlooks may be obtained only from S&P. There is no assurance that any credit ratings given to the Refunding Bonds will be maintained for any period of time or that the rating may not be lowered or withdrawn entirely by S&P if, in its judgment, circumstances so warrant. Any such downward revision or withdrawal of a rating may have an adverse effect on the market price of the Refunding Bonds. UNDERWRITING The Refunding Bonds are being purchased by Piper Jaffray & Co. (the Underwriter ). The Underwriter has agreed to purchase the Refunding Bonds at a price of $7,339, (which is equal to the initial principal amount of the Refunding Bonds, plus net original issue premium of $553, and less Underwriter's discount of $34,100.00). The purchase contract relating to the Refunding Bonds provides that the Underwriter will purchase all of the Refunding Bonds (if any are purchased), and provides that the Underwriter's obligation to purchase is subject to certain terms and conditions, including the approval of certain legal matters by counsel. The Underwriter may offer and sell Refunding Bonds to certain dealers and others at prices lower than the offering prices stated on the inside cover page hereof. The offering prices may be changed by the Underwriter. The Underwriter has entered into a separate distribution agreement (the Distribution Agreement ) with Charles Schwab & Co., Inc. ( CS&Co ) that enables CS&Co to distribute certain new issue municipal securities underwritten by or allocated to the Underwriter which could include the Refunding Bonds. Under the Distribution Agreement, the Underwriter will share with CS&CO a portion of the fee or commission paid to the Underwriter. ADDITIONAL INFORMATION The discussions herein about the Bond Resolution, the Escrow Agreement and the Continuing Disclosure Certificate are brief outlines of certain provisions thereof. Such outlines do not purport to be complete and for full and complete statements of such provisions reference is made to such documents. Copies of these documents mentioned are available from the Underwriter and following delivery of the Refunding Bonds will be on file at the offices of the Paying Agent in Los Angeles, California. References are also made herein to certain documents and reports relating to the District; such references are brief summaries and do not purport to be complete or definitive. Copies of such documents are available upon written request to the District. The District may impose charges for copying, mailing and handling. -24-

31 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 to be construed as a contract or agreement between the District and the purchasers or Owners of any of the Refunding Bonds. The execution and delivery of this Official Statement have been duly authorized by the District. ST. HELENA UNIFIED SCHOOL DISTRICT By: /s/ Marylou Wilson, Ed.D. Superintendent -25-

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33 APPENDIX A AUDITED FINANCIAL STATEMENTS OF THE DISTRICT FOR FISCAL YEAR ENDING JUNE 30, 2014 A-1

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35 ST. HELENA UNIFIED SCHOOL DISTRICT COUNTY OF NAPA ST. HELENA, CALIFORNIA ANNUAL FINANCIAL REPORT JUNE 30, 2014

36 ST. HELENA UNIFIED SCHOOL DISTRICT JUNE 30, 2014 TABLE OF CONTENTS FINANCIAL SECTION Independent Auditor's Report Management's Discussion and Analysis 1 3 Basic Financial Statements: Government-wide Financial Statements: Statement of Net Position Statement of Activities Fund Financial Statements: Balance Sheet- Governmental Funds Reconciliation of the Governmental Funds Balance Sheet to the Statement of Net Position Statement of Revenues, Expenditures, and Changes in Fund Balances -Governmental Funds Reconciliation of the Governmental Funds Statement of Revenues, Expenditures, and Changes in Fund Balances of Governmental Funds to the Statement of Activities Statement of Net Position- Fiduciary Funds Statement of Changes in Fiduciary Net Position- Fiduciary Funds Notes to Financial Statements REQUIRED SUPPLEMENTARY INFORMATION Statement of Revenues, Expenditures, and Changes in Fund Balance Budget (GAAP) and Actual- General Fund Schedule of Other Postemployment Benefits (OPEB) Notes to Required Supplementary Information SUPPLEMENTARY INFORMATION SECTION Organization/ Governing Board/ Administration Schedule of Average Daily Attendance i

37 ST. HELENA UNIFIED SCHOOL DISTRICT JUNE 30, 2014 TABLE OF CONTENTS SUPPLEMENTARY INFORMATION SECTION (CONCLUDED) Schedule of Instructional Time Schedule of Charter Schools Schedule of Expenditures of Federal Awards Reconciliation of Unaudited Actuals Financial Report with Audited Financial Stat~ments Schedule of Financial Trends and Analysis Combining Statements - Non-Major Governmental Funds: Combining Balance Sheet Combining Statement of Revenues, Expenditures, and Changes in Fund Balances Combining Statement of Changes in Net Position and Liabilities Agency Fund - Student Body Notes to Supplementary Information OTHER INDEPENDENT AUDITOR'S REPORT SECTION Independent Auditor's Report on Internal Control over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards Independent Auditor's Report on Compliance for each Major Program and on Internal Control over Compliance Required by OMB Circular A-133 Independent Auditor's Report on Compliance with State Laws and Regulations FINDINGS AND QUESTIONED COSTS SECTION Schedule of Audit Findings and Questioned Costs Section I-Summary of Auditor's Results ii

38 ST. HELENA UNIFIED SCHOOL DISTRICT JUNE 30, 2014 TABLE OF CONTENTS FINDINGS AND QUESTIONED COSTS SECTION (CONCLUDED) Section II - Financial Statement Findings Section III- Federal Award Findings and Questioned Costs Section IV - State Award Findings and Questioned Costs Summary Schedule of Prior Year Audit Findings iii

39 FINANCIAL SECTION

40 OODELL, PoRTER, SANCHEZ& BRIGHT, LLP CERTIFIED P U B L C ACCOUNTANTS JOHN L. GOODELL, CPA VIRGINIA K. PORTER. CPA BEVERLY A. SANCHEZ, CPA UZY H. BRIGHT, CPA RICHARD J. GOODELL, CPA MICHELLE M. HAN ON. CPA INDEPENDENT AUDITOR'S REPORT Board of Trustees St Helena Unified School District St. Helena, California Report on the Financial Statements We have audited the accompanying financial statements of the governmental activities, each major fund, and the aggregate remaining fund information of St Helena Unified School District as of and for the year ended June 30, 2014, and the related notes to the financial statements, which collectively comprise the St. Helena Unified School District's basic financial statements as listed in the table of contents. Management's Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor's Responsibility Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatements of the financial statements, whether due to fraud or error. In making those risk assessments the auditor considers internal control relevant to the entity's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions. Opinions In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, each major fund, and the aggregate remaining fund information of the St. Helena Unified School District, as of June 30, 2014, and the respective changes in financial position for the year then ended in accordance with accounting principles generally accepted in the United States of America Folsom Boulevard t Suite 301 t Sacramenrcl. CA (916) t FAX (916)

41 Board of Trustees St. Helena Unified School District Page Two Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that the management's discussion and analysis on pages 3 through 11 and budgetary comparison information and accounting by employer for postemployment benefits on pages 48 through 50 be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management's responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Other Information Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the St. Helena Unified School District's basic financial statements. The financial and statistical information listed as supplementary information in the table of contents, is presented for purposes of additional analysis and is not a required part of the basic financial statements. The schedule of expenditures of federal awards is presented for purposes of additional analysis as required by U.S. Office of Management and Budget Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations, and is also not a required part of the basic financial statements. The financial and statistical information listed as supplementary information and the schedule of expenditures of federal awards are the responsibility of management and were derived from and relate directly to the underlying accounting and other records used to prepare the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the financial and statistical information listed as supplementary information and the schedule of expenditures of federal awards is fairly stated, in all material respects in relation to the basic financial statements as a whole. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated December 12, 2014, on our consideration of the St. Helena Unified School District's internal control over financial reporting and our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering St. Helena Unified School District's internal control over financial reporting and compliance. December 12, 2014 ~.~.~r~llp GOODELL, PORTER, SANCHE. & BRIGHT, LLP Certified Public Accountants 2

42 ST. HELENA UNIFIED SCHOOL DISTRICT MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2014 This Management Discussion and Analysis of St. Helena Unified School District's financial performance provides an overall review of the District's financial activities for the fiscal year ended June 30, The intent of this discussion and analysis is to look at the District's financial performance as a whole. To provide a complete understanding of the District's financial performance, please read it in conjunction with the Independent Auditor's Report on page 1, notes to the basic financial statements and the District's financial statements. The Management's Discussion and Analysis (MD&A) is an element of the reporting model adopted by the Governmental Accounting Standards Board (GASB) in their Statement No. 34 Basic Financial Statements - and Management's Discussion and Analysis - for State and Local Governments issued June Certain comparative information is required to be presented in themd&a. FINANCIAL HIGHLIGHTS )> The increase in Property Taxes received for general purposes from to was $1,257,307 or 5.8% compared with an increase of $1,062,489 (5.1 %) between and )> The State requires the District maintain a 3% Unrestricted General Fund reserve. The District Board Policy 3100 requires a further 7% reserve for a total reserve of 10%, plus 33% of excess property taxes in a given year. The District meets the State required 3% reserve. The June 30, 2014 the reserve amount reported in the General Fund is $3,246,549 (13% of total General Fund outgo). OVERVIEW OF THE FINANCIAL STATEMENTS This annual report consists of three parts: Management's discussion and analysis (this section), the basic financial statements, and required supplementary information. These statements are organized so the reader can understand the St. Helena Unified School District as a financial whole, an entire operating entity. The statements then proceed to provide an increasingly detailed look at specific financial activities. 3

43 ST. HELENA UNIFIED SCHOOL DISTRICT MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2014 OVERVIEW OF THE FINANCIAL STATEMENTS (CONTINUED) Components of the Financial Section I I Management's Basic Required Discussion Financial Supplementary and Analysis Statements Information I I I I District-wide Fund Notes to the Financial Financial Financial Statements Statements Statements I I Summary Detail The first two statements are district-wide financial statements, the Statement of Net Position and Statement of Activities. These statements provide information about the activities of the whole District, presenting both an aggregate view of the District's finances and a longer-term view of those finances. Fund financial statements provide the next level of detail. For governmental funds, these statements tell how services were financed in the short-term as well as what remains for future spending. The fund financial statements also look at the District's more significant funds with all other non-major funds presented in total in one column. A comparison of the District's general fund budget is included. The financial statements also include notes that explain some of the information in the statements and provide more detailed data. The statements are followed by a section of required supplementary information that further explains and supports the financial statements. Reporting the School District as a Whole Statement of Net Position and the Statement of Activities These two statements provide information about the District as a whole using accounting methods similar to those used by private-sector companies. The statement of net position includes all of the District's assets and liabilities using the accrual basis of accounting. This basis of accounting takes into account all of the current year's revenues and expenses regardless of when cash is received or paid. These statements report information on the district as a whole and its activities in a way that helps answer the question, "How did we do financially during ?" 4

44 ST. HELENA UNIFIED SCHOOL DISTRICT MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2014 OVERVIEW OF THE FINANCIAL STATEMENTS (CONTINUED) Reporting the School District as a Whole (Concluded) Statement of Net Position and the Statement of Activities (Concluded) These two statements report the District's net position and changes in that position. This change in net position is important because it tells the reader that, for the District as a whole, the financial position of the District has improved or diminished. The causes of this change may be the result of many factors, some financial, some not. Over time, the increases or decreases in the District's net position, as reported in the Statement of Activities, are one indicator of whether its financial health is improving or deteriorating. The relationship between revenues and expenses indicates the District's operating results. However, the District's goal is to provide services to our students, not to generate profits as commercial entities. One must consider many other non-financial factors, such as the quality of education provided and the safety of the schools to assess the overall health of the District. + Increases or decreases in the net position of the District over time are indications of whether its financial position is improving or deteriorating, respectively. + Additional non-financial factors such as condition of school buildings and other facilities, and changes to the property tax base of the District need to be considered in assessing the overall health of the District. Reporting the School District's Most Significant Funds Fund Financial Statements The fund financial statements provide more detailed information about the District's most significant funds - not the District as a whole. Funds are accounting devices the District uses to keep track of specific sources of funding and spending on particular programs. Some funds are required to be established by State law. However, the District establishes other funds to control and manage money for specific purposes. + Governmental Funds Most of the School District's activities are reported in governmental funds. The major governmental funds of the District are the General Fund and the Building Fund. Governmental funds focus on how money flows into and out of the funds and the balances that remain at the end of the year. They are reported using an accounting method called modified accrual accounting, which measures cash and all other financial assets that can readily be converted to cash. The governmental fund statements provide a detailed short-term view of the District's operations and services that help determine whether there are more or fewer financial resources that can be spent in the near future to finance the District's programs. 5

45 ST. HELENA UNIFIED SCHOOL DISTRICT MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2014 OVERVIEW OF THE FINANCIAL STATEMENTS (CONCLUDED) Reporting the School District's Most Significant Funds (Concluded) Fund Financial Statements (Concluded) + Fiduciary Funds The District is the trustee, or fiduciary, for its student activity funds. All of the District's fiduciary activities are reported in separate Statements of Fiduciary Net Position. We exclude these activities from the District's other financial statements because the District cannot use these assets to finance its operations. The District is responsible for ensuring that the assets reported in these funds are used for their intended purposes. FINANCIAL ANALYSIS OF THE GOVERNMENT-WIDE STATEMENTS The School District as a Whole The District's net position was $34.6 million at June 30,2014. Of this amount $196 thousand was unrestricted. Net investment in capital assets account for $29.1 million of the total net position. A comparative analysis of government-wide data is presented in Table 1. (Table 1) Comparative Statement of Net Position Governmental Activities Assets Cash and invesbnents $ 40,434,709 $ 45,911,376 Receivables 530, ,111 Stores inventory 4,396 4,396 Unamortized bond issuance costs 310,479 Capital assets 65,426,403 61,955,839 Total assets $ 106,395,866 $ 108,997,201 Liabilities Accounts payable and other current liabilities $ 1,796,808 $ 2,548,698 Unearned revenue 369, ,209 Unamortized bond premiums 1,382,977 1,489,943 Long-term liabilities 68,247,490 68,529,295 T otalliabilities $ 71,797,115 $ 72,792,145 Net Position Net invesbnent in capital assets $ 29,124,663 $ 32,097,082 Restricted 5,277,706 3,347,055 Unrestricted 196, ,919 Total net position $ 34,598,751 $ 36,205,056 6

46 ST. HELENA UNIFIED SCHOOL DISTRICT MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2014 FINANCIAL ANALYSIS OF THE GOVERNMENT-WIDE STATEMENTS (CONTINUED) The District's expenses for instructional and pupil services represented 65% of total expenses. The purely administrative activities of the District accounted for 8% of total costs. The remaining 27% was spent in the area of plant services and in miscellaneous areas. (See Figure 2). (Table 2) Comparative Statement of Change in Net Position Governmental Activities Revenues Program revenues $ 1,929,379 $ 2,263,526 General revenues Taxes levied for general purposes 23,042,367 21,785,060 Taxes levied for debt service 3,287,381 1,695,365 Federal and State Aid not restricted to specific purposes 1,294,946 1,054,784 Interest and investment earnings 48,279 45,665 Miscellaneous 767, ,248 Special item 18,229 Total revenues 30,388,539 27,584,648 Expenses Instruction 16,291,226 15,143,923 Instruction related services 2,434,522 2,508,316 Pupil support services 2,099,434 2,091,938 General administration 2,517,672 2,647,120 Plant services 5,444,018 2,293,182 Other 3,207,972 2,703,537 Total expenses 31,994,844 27,388,016 Increase (Decrease) in net position $ (1,606,305) $ 196,632 7

47 ST. HELENA UNIFIED SCHOOL DISTRICT MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2014 FINANCIAL ANALYSIS OF THE GOVERNMENT-WIDE STATEMENTS (CONCLUDED) Governmental Activities As reported in the Statement of Activities, the cost of all of the District's governmental activities this year was $32 million (see Table 2). The amount that our local taxpayers financed for these activities through property taxes was $26.3 million. Federal and State aid not restricted to specific purposes totaled $1.3 million. Federal and State Categorical aid totaled $1.9 million, and all other revenue totaled $834 thousand. (See Figure 1). Sources of Revenue for the Fiscal Year Figure 1 Federal and State Federal and State Aid Other 3% Property Taxes 87% Expenses for the Fiscal Year Figure 2 Plant Services 17% Other 10% General Administration Instruction 50% Pupil Support Services 7% Services 8% 8

48 ST. HELENA UNIFIED SCHOOL DISTRICT MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2014 FINANCIAL ANALYSIS OF THE FUND STATEMENTS The fund financial statements focus on individual parts of the District's operations in more detail than the government-wide statements. The District's individual fund statements provide information on inflows and outflows and balances of expendable resources. The District's Governmental Funds reported a combined fund balance of $39,579,992, a decrease of $5,095,207 from the previous fiscal year's combined ending balance of $44,675,199. The General Fund increased $811,807 and the Building Fund decreased $7,711,215. All other governmental funds increased $1,804,201. General Fund Budgetary Highlights Over the course of the year, the District reviews the annual operating budget monthly, and normally goes through a formal budget revision process monthly. The District may make changes at other times if there are significant changes in current budget assumptions. Significant budget decisions responded to the following situations: + Budget revisions to the adopted budget to incorporate prior year carryover and Deferred Revenue. + Budget revisions to update expenditures for actual staffing. + Budget revisions to update revenues to reflect the County Tax Assessor's projections of current year property taxes. + Other budget revisions were routine in nature, including adjustments to categorical revenues and expenditures based on final awards, and adjustments between expenditure categories for school and department budgets. The final revised budget for the General Fund projected a net increase to the ending balance of $75,563. The actual increase was $811,807. CAPITAL ASSET AND DEBT ADMINISTRATION Capital Assets By the end of the fiscal year, the District had invested $96 million in a broad range of capital assets, including school buildings, athletic facilities, administrative buildings, site improvements, vehicles and equipment. The capital assets net of depreciation are $65.4 million at June 30, 2014, which is an increase of $3.4 million from the previous year due to net acquisitions totaling $5.8 million and depreciation expense of $2.4 million. 9

49 ST. HELENA UNIFIED SCHOOL DISTRICT MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2014 CAPITAL ASSET AND DEBT ADMINISTRATION (CONTINUED) Capital Assets (Concluded) Table3 Comparative Schedule of Capital Assets (net of depreciation) June 30, 2014 and Difference Increase (Decrease) Land Site Improvements Buildings Machinery and Equipment Work in Progress $ 202,134 $ 2,546,674 57,065, ,525 5,379, ,134 2,656,171 55,788, ,087 2,915,347 $ (109,497) 1,277,656 (161,562) 2,463,967 Totals $ 61,955,839 65,426,403 =$========== $ 3,470,564 The District completed several projects during including SHHS Restroom Project, RLS Modernization Project II and various small projects. Long-Term Debt At June 30, 2014, the District had $68,247,490 in long-term debt outstanding. Table4 Comparative Schedule of Outstanding Debt June 30, 2014 and General Obligation Bonds Accreted Interest Capital Lease Obligations Early Retirement Incentives Public Agency Retirement Service Other Post-employment Benefits Compensated Absences $ 64,606,233 $ 2,951, , ,155 21,983 65,816,233 1,820, ,044 50, , ,473 32,641 Totals $ 68,247,490 =$==6=8=,5=29=,2=95= 10

50 ST. HELENA UNIFIED SCHOOL DISTRICT MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2014 CAPITAL ASSET AND DEBT ADMINISTRATION (CONCLUDED) Long-Term Debt (Concluded) The District continues to maintain excellent credit ratings on all its debt issues. The long-term debt paid by the District was approximately $1.8 million in FACTORS BEARING ON THE DISTRICT'S FUTURE The District receives tremendous support from the community through Parent Group, Community Clubs and the St. Helena Public Schools Foundation. These contributions provide for experiences and opportunities to the students of St. Helena. In addition, the community continues to support the District's facilities programs. Although the vast majority of the District's General Fund revenues are derived from property taxes, the State budget still has an effect on the District's general educational program. From through , the State enacted Fair Share reductions to Basic Aid districts resulting in a reduction of funding. Future predictions and uncertainties with the changes to the State funding formula require management to plan carefully and prudently to provide the necessary resources to meet student's needs and continue to keep pace with inflation increases over the next several years. CONTACTING THE DISTRICT'S FINANCIAL MANAGEMENT This financial report is designed to provide our citizens, taxpayers, parents, investors, and creditors with a general overview of the District's finances and to show the District's accountability for the money it receives. H you have questions about this report or need additional financial information, please contact either the District Superintendent, Bill McGuire or Chief Business Official, Greg Medici at St. Helena Unified School District, 465 Main St., St. Helena, CA

51 ST. HELENA UNIFIED SCHOOL DISTRICT STATEMENT OF NET POSITION JUNE 30, 2014 Assets Cash (Note 2) Accounts Receivable (Note 4) Stores Inventory (Note 1H) Capital Assets, Net of Depreciation (Note 6) $ Governmental Activities 40,434, ,358 4,396 65,426,403 Total Assets Liabilities Accounts Payable and Other Current Liabilities Unearned Revenue (Note 1H) Unamortized Bond Premiums (Note 7) Long-term Liabilities (Note 12) Due Within One Year $ 2,617,374 Due After One Year 65,630,116 Total Long-Term Liabilities Total Liabilities Net Position Net Investment in Capital Assets Restricted For: Capital Projects Debt Service Education Programs Other Purposes (Expendable) Unrestricted $ $ $ $ 106,395,866 1,796, ,840 1,382,977 68,247,490 71,797,115 29,124,663 1,575,570 3,328, ,698 62, ,382 Total Net Position $ 34,598,751 THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS 12

52 ST. HELENA UNIFIED SCHOOL DISTRICT STATEMENT OF ACTIVITIES FOR THE FISCAL YEAR ENDED JUNE 30, 2014 Program Revenues Net (Expense) Revenue and Changes in Net Position Operating Charges for Grants and Governmental Governmental Activities Expenses Services Contributions Activities Instruction $ 16,291,226 $ 765,957 $ (15,525,269) Instruction-Related Services: Supervision of Instruction 213,679 3,165 (210,514) Instructional Library, Media and Technology 488, (487,447) School Site Administration 1,732, (1,731,555) Pupil Services: Home-To-School Transportation 338,252 (338,252) Food Services 508,605 $ 61, ,394 (207,225) All Other Pupil Services 1,252, ,217 (1,123,360) General Administration: Data Processing 806,548 (806,548) All Other General Administration 1,711,124 1,829 (1,709,295) Plant Services 5,444, ,273 (4,728,508) Ancillary Services 400, (400,028) Community Services 105,453 8,119 (97,334) Interest on Long-Term Debt 2,575,204 (2,575,204) Other Outgo 127,155 2,229 (124,926) Total Governmental Activities $ 31,994,844 $ 62,223 $ 1,867,156 (30,065,465) General Revenues: Property Taxes Levied For: General Purposes 23,042,367 Debt Service 3,287,381 Federal and State Aid Not Restricted to Specific Purposes 1,294,946 Interest and Investment Earnings 48,279 Miscellaneous 767,958 Special Items 18,229 Total General Revenues 28,459,160 Change (Decrease) in Net Position (1,606,305) Net Position Beginning 36,205,056 Net Position Ending $ 34,598,751 THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS 13

53 ST. HELENA UNIFIED SCHOOL DISTRICT BALANCE SHEET GOVERNMENTAL FUNDS JUNE 30, 2014 Assets Cash (Note 2) Accounts Receivable (Note 4) Stores Inventory (Note 1H) Total Assets Liabilities and Fund Balances Other Governmental General Fund Buildin~ Fund Funds $ 4,780,655 $ 29,115,652 $ 6,538, , ,552 4,396 $ 5,259,452 $ 29,115,661 $ 6,594,350 Total Governmental Funds $ 40,434, ,358 4,396 $ 40,969,463 Liabilities: Accounts Payable Unearned Revenue (Note 1H) Total Liabilities Fund Balances (Note 1H): Nonspendable Restricted Assigned Unassigned Total Fund Balances $ 589,338 $ 429,356 $ , , , ,000 4, ,698 28,686,305 4,961, ,027 1,627,405 3,246,549 4,300,274 28,686,305 6,593,413 $ 1,019, ,840 1,389,471 24,396 33,959,615 2,349,432 3,246,549 39,579,992 Total Liabilities and Fund Balances $ 5,259,452 $ 29,115,661 $ 6,594,350 $ 40,969,463 THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS 14

54 ST. HELENA UNIFIED SCHOOL DISTRICT RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET TO THE STATEMENT OF NET POSmON JUNE 30, 2014 Total fund balance- governmental funds $ 39,579,992 Amounts reported for governmental activities in the statement of net position are different because: Capital assets: In governmental funds, only current assets are reported. In the statement of net position, all assets are reported, including capital assets and accumulated depreciation. Capital assets, at historical cost: $ 96,030,615 Accumulated depreciation: (30,604,212) Net: Unmatured interest on long-term debt: In governmental funds, interest on long-term debt is not recognized until the period in which it matures and is paid. In the government-wide statement of activities, it is recognized in the period that it is incurred. The additional liability for unmatured interest owing at the end of the period was: Unamortized debt issue premium: In governmental funds, if debt is issued at a premium, the premium is recognized as an Other Financing Source in the period it is incurred. In the government-wide statements, the premium is amortized as a reduction in annual interest expense over the life of the debt. Unamortized premium at year-end was: 65,426,403 (777,177) (1,382,977) Long-term liabilities: In governmental funds, only current liabilities are reported. In the statement of net position, all liabilities, including long-term liabilities, are reported. Long-term liabilities relating to governmental activities consist of: Total net position- governmental activities General obligation bonds $ 64,606,233 Accreted interest 2,951,307 Capital lease obligations 381,812 Other post-employment benefits 286,155 Compensated absences 21,983 Total ~68,247,490} $ 34,598,751 THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS 15

55 ST HELENA UNIFIED SCHOOL DISTRICT STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES GOVERNMENTAL FUNDS FOR FISCAL YEAR ENDED JUNE 30, 2014 Revenues Local Control Funding Formula Sources State Apportionments $ 926,319 Local Sources 23,042,367 Total Local Control Funding Formula Sources 23,968,686 Other Governmental General Fund Building Fund Funds Federal Revenue 446,383 $ 857,825 Other State Revenue 863,925 22,620 Other Local Revenue 695,771 $ 141,720 3,373,763 Total Revenues 25,974, ,720 4,254,208 Expenditures Certificated Salaries 11,094,119 Classified Salaries 3,254, ,645 Employee Benefits 4,629, ,525 Books and Supplies 1,770, , ,855 Services and Other Operating Expenditures 3,492, ,166 15,847 Capital Outlay 267,537 7,151,609 7,412 Debt Service: Principal Retirement 58,232 1,210,000 Interest and Fiscal Charges 92,635 1,086,116 Other Outgo 127,156 2,558 Total Expenditures 24,787,007 7,871,164 2,825,958 Excess of Revenues Over (Under) Expenditures 1,187,758 (7,729,444) 1,428,250 Other Financing Sources (Uses): Operating Transfers In (Note 5) 375,951 Operating Transfers Out (Note 5) (375,951) Other Sources 18,229 Total Other Financing Sources (Uses) (375,951) 18, ,951 Excess of Revenues and Other Financing Sources Over Expenditures and Other Uses 811,807 (7,711,215) 1,804,201 Fund Balances -July 1, ,488,467 36,397,520 4,789,212 Fund Balances- June 30,2014 $ 4,300,274 $ 28,686,305 $ 6,593,413 Total Governmental Funds $ 926,319 23,042,367 23,968,686 1,304, ,545 4,211,254 30,370,693 11,094,119 3,507,316 4,739,919 2,095,786 4,043,734 7,426,558 1,268,232 1,178, ,714 35,484,129 (5,113,436) 375,951 (375,951) 18,229 18,229 (5,095,207) 44,675,199 $ 39,579,992 THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS 16

56 ST HELENA UNIFIED SCHOOL DISTRICT RECONCILIATION OF THE GOVERNMENTAL FUNDS STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE OF GOVERNMENTAL FUNDS TO THE STATEMENT OF ACTIVITIES FOR THE FISCAL YEAR ENDED JUNE 30, 2014 Net change (decrease) in fund balances- total governmental funds Amounts reported for governmental activities in the statement of activities are different because: $ (5,095,207) Capital outlay: In governmental funds, the costs of capital assets are reported as expenditures in the period when the assets are acquired. In the statement of activities, costs of capital assets are allocated over their estimated useful lives as depreciation expense. The difference between capital outlay expenditures and depreciation expense for the period is: Expenditures for capital outlay: $ Depreciation expense: Net 5,847,508 (2,376,944) 3,470,564 Debt service: In governmental funds, repayments of long-term debt are reported as expenditures. In government-wide statements, repayments of long-term debt are reported as reductions of liabilities. Expenditures for repayment of the principal portion of long-term debt were: Debt issue costs: In governmental funds, debt issue costs are recognized as expenditures in the period they are incurred. In the government-wide statements, prior to GASB Statement 65, issue costs were amortized over the life of the debt. The District is recognizing the June 30, 2013 unamortized bond issuance cost as an expense in the current period to conform to the reporting requirements of GASB Statement 65. 1,268,232 (310,479) Unmatured interest on long-term debt: In governmental funds, interest on long-term debt is recognized in the period that it becomes due. In the government-wide statement of activities, it is recognized in the period that it is incurred. Unmatured interest owing at the end of the period, less matured interest paid during the period but owing from the prior period, was: Compensated absences: In governmental funds, compensated absences are measured by the amounts paid during the period. In the statement of activities, compensated absences are measured by the amounts earned. The difference between compensated absences paid and compensated absences earned was: Other expenditures relating to prior periods: Certain expenditures recognized in governmental funds relate to prior periods. These expenditures are recognized in the government-wide statement of activities in the period in which the obligations are first incurred, so they must not be recognized again in the current period. Expenditures relating to retirement incentives offered in a prior period were: Postemployment benefits other than pensions (OPEB): In governmental funds, OPEB costs are recognized when employer contributions are made. In the statement of activities, OPEB costs are recognized on the accrual basis. This year, the difference between OPEB costs and actual employer contributions was: Amortization of debt issue premium: In governmental funds, if debt is issued at a premium, the premium is recognized as an Other Financing Source in the period it is incurred. In the government-wide statements, the premium is amortized as interest over the life of the debt. Amortization of premium for the period is: (1,190,763) 10, ,406 (110,682) 106,966 Total change (decrease) in net position- governmental activities $ (1,606,305) THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS 17

57 ST HELENA UNIFIED SCHOOL DISTRICT STATEMENT OF NET POSITION FIDUCIARY FUNDS JUNE 30, 2014 Assets Private Purpose Trusts Community Playground Scholarship Maintenance Total Private Fund Fund Purpose Trusts Agency Fund Checking (Note 2) Savings (Note 2) $ 2, $ ,983 $ 2,507 12,154 Certificate of Deposit (Note 2) 1,001 1,001 Investments (Note 2) 11,730 11,730 Total Assets $ 3,317 $ 24,075 $ 27,392 $ 97,940 $ 97,940 Liabilities Due to Student Groups Total Liabilities $ 97,940 $ 97,940 Net Position Held in Trust $ 3,317 $ 24,075 $ 27,392 Total Net Position $ 3,317 $ 24,075 $ 27,392 $ 0 THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS 18

58 ST HELENA UNIFIED SCHOOL DISTRICT STATEMENT OF CHANGES IN NET POSITION FIDUCIARY FUNDS FOR THE YEAR ENDED JUNE 30, 2014 Private Purpose Trusts Scholarship Fund Community Playground Maintenance Fund Total Private Purpose Trusts Additions Interest and Investment Earnings $ 1 $ 2 $ 3 Deductions Scholarships 245 Change in Net Position (Decrease) (244) 2 Total Net Position- July 1, ,561 24,073 Total Net Position- June 30, 2014 $ 3,317 $ (242) 27,634 $ THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS 19

59 ST. HELENA UNIFIED SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30,2014 NOTE 1-SIGNIFICANT ACCOUNTING POLICIES The District accounts for its financial transactions in accordance with the policies and procedures of the Department of Education's California School Accounting Manual. The accounting policies of the District conform to accounting principles generally accepted in the United States of America as prescribed by the Governmental Accounting Standards Board (GASB) and the American Institute of Certified Public Accountants (AICP A). A. Reporting Entity A reporting entity is comprised of the primary government, component units, and other organizations that are included to ensure the financial statements are not misleading. The primary government of the District consists of all funds, departments, boards, and agencies that are not legally separate from the District. For St. Helena Unified School District, this includes general operations, food service, and student related activities of the District. The District has considered all potential component units in determining how to define the reporting entity, using criteria set forth in generally accepted accounting principles. The District determined that there are no potential component units that meet the criteria for inclusion within the reporting entity. B. Basis of Presentation Government-wide Financial Statements: The government-wide financial statements (i.e., the statement of net position and the statement of activities) report information on all of the nonfiduciary activities of the District. The government-wide statements are prepared using the economic resources measurement focus and the accrual basis of accounting. This is the same approach used in the preparation of the fiduciary fund financial statements but differs from the manner in which governmental fund financial statements are prepared. Governmental fund financial statements, therefore, include a reconciliation with brief explanations to better identify the relationship between the government-wide statements and the statements for the governmental funds. ' The government-wide statement of activities presents a comparison between direct expenses and program revenues for each function or program of the district's governmental activities. Direct expenses are those that are specifically associated with a service, program, or department and are therefore clearly identifiable to a particular function. The District does not allocate indirect expenses to functions in the statement of activities. Program revenues include charges paid by the recipients of goods or services offered by a program, as well as grants and contributions that are restricted to meeting the operational or capital requirements of a particular program. Revenues which are not classified as program revenues are presented as general revenues of the District, with certain exceptions. The comparison of direct expenses with program revenues identifies the extent to which each governmental function is self-financing or draws from the general revenues of the District. Eliminations have been made to minimize the double counting of internal activities. 20

60 ST. HELENA UNIFIED SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30,2014 NOTE 1-SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) B. Basis of Presentation (Concluded) Fund Financial Statements: Fund financial statements report detailed information about the District. The focus of governmental fund financial statements is on major funds rather than reporting funds by type. Each major governmental fund is presented in a separate column, and all non-major funds are aggregated into one column. Fiduciary funds are reported by fund type. The accounting and financial treatment applied to a fund is determined by its measurement focus. All governmental funds are accounted for using a flow of current financial resources measurement focus and the modified accrual basis of accounting. With this measurement focus, only current asset and current liabilities are generally included on the balance sheet. The Statement of Revenues, Expenditures, and Changes in Fund Balances for these funds present increases (i.e., revenues and other financing sources) and decreases (i.e., expenditures and other financing uses) in net current assets. Fiduciary funds are reported using the economic resources measurement focus and the accrual basis of accounting. C. Basis of Accounting Basis of accounting refers to when revenues and expenditures are recognized in the accounts and reported in the financial statements. Government-wide financial statements are prepared using the accrual basis of accounting. Governmental funds use the modified accrual basis of accounting. Fiduciary funds use the accrual basis of accounting. Revenues - exchange and non-exchange transactions: Revenue resulting from exchange transactions, in which each party gives and receives essentially equal value, is recorded under the accrual basis when the exchange takes place. On a modified accrual basis, revenue is recorded in the fiscal year in which the resources are measurable and become available. "Available" means the resources will be collected within the current fiscal year or are expected to be collected soon enough thereafter to be used to pay liabilities of the current fiscal year. For the District, "available" means collectible within the current period or within 60 days after year-end. Non-exchange transactions, in which the District receives value without directly giving equal value in return, include property taxes, grants, and entitlements. Under the accrual basis, revenue from property taxes is recognized in the fiscal year for which the taxes are levied. Revenue from grants and entitlements is recognized in the fiscal year in which all eligibility requirements have been satisfied. Eligibility requirements include timing requirements, which specify the year when the resources are to be used or the fiscal year when use is first permitted; matching requirements, in which the District must provide local resources to be used for a specific purpose; and expenditure requirements, in which the resources are provided to the District on a reimbursement basis. Under the modified accrual basis, revenue from non-exchange transactions must also be available before it can be recognized. 21

61 ST. HELENA UNIFIED SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30,2014 NOTE 1 -SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) C. Basis of Accounting (Concluded) Unearned revenue: Unearned revenue arises when assets are received before revenue recognition criteria have been satisfied. Grants and entitlements received before eligibility requirements are met are recorded as unearned revenue. On governmental fund financial statements, receivables associated with non-exchange transactions that will not be collected within the availability period have also been recorded as unearned revenue. Expenses/ expenditures: On the accrual basis of accounting, expenses are recognized at the time a liability is incurred. On the modified accrual basis of accounting, expenditures are generally recognized in the accounting period in which the related fund liability is incurred, as under the accrual basis of accounting. However, under the modified accrual basis of accounting, debt service expenditures, as well as expenditures related to compensated absences and claims and judgments, are recorded only when payment is due. Allocations of cost, such as depreciation and amortization, are not recognized in the governmental funds. When both restricted and unrestricted resources are available for use, it is the District's policy to use restricted resources first, then unrestricted resources as they are needed. Expenditures incurred in the unrestricted resources shall be reduced first from the committed resources, then from assigned resources and lastly, the unassigned resources. D. Fund Accounting The accounts of the District are organized on the basis of funds, each of which is considered to be a separate accounting entity. The operations of each fund are accounted for with a separate set of self-balancing accounts that comprise its assets, liabilities, fund equity, revenues, and expenditures or expenses, as appropriate. District resources are allocated to and accounted for in individual funds based upon the purpose for which they are to be spent and the means by which spending activities are controlled. The District's accounts are organized into major, non-major and fiduciary funds as follows: MAJOR GOVERNMENTAL FUNDS: 1. General Fund is the general operating fund of the District. It is used to account for all financial resources except those required to be accounted for in another fund. The District accounted for the Deferred Maintenance Fund, Adult Education Fund, Special Reserve Fund for Other Than Capital Outlay Projects and Special Reserve Fund for Post-Employment Benefits separately, but they have been included with the General Fund to comply with GASB

62 ST. HELENA UNIFIED SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30,2014 NOTE 1-SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) D. Fund Accounting (Continued) MAJOR GOVERNMENTAL FUNDS (CONCLUDED): 2. Building Fund is used to account for proceeds from General Obligation Bonds for the design and construction of various District capital facilities and buildings. NON-MAJOR GOVERNMENTAL FUNDS: Special Revenue Funds are used to report the proceeds of specific revenue sources that are restricted or committed for purposes other than debt service and capital outlay, and that comprise a substantial portion of the fund's resources. The District maintains one nonmajor special revenue fund: 1. Cafeteria Fund is used to account separately for federal, state, and local resources received and expenditures authorized by the Board to operate the District's food service program. Debt Service Funds are used to account for and report financial resources that are restricted, committed, or assigned to expenditures for principal and interest. The District maintains one non-major debt service fund: 1. Bond Interest and Redemption Fund which is used to account for the accumulation of resources for and the debt service payments related to the District's General Obligation Bonds. Capital Projects Funds are used to account for and report financial resources that are restricted, committed, or assigned to expenditures for capital outlays, including the acquisition or construction of capital facilities and other capital assets. The District maintains three non-major capital projects funds: 1. Capital Facilities Fund is used to account for resources received from developer impact fees assessed under provisions of the California Environmental Quality Act (CEQA). Expenditures are restricted to the purposes specified in Government Code Sections County School Facilities Fund is used to account for the state allocation and District matches and related expenditures made for modernization, new construction and hardship projects. 3. Special Reserve Fund for Capital Outlay Projects was established for accumulation of revenue and expenditures for Board assigned capital projects. 23

63 ST. HELENA UNIFIED SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30,2014 NOTE 1 -SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) D. Fund Accounting (Concluded) FIDUCIARY FUNDS: Private Purpose Trust Funds are used to account for assets held by the District as trustee for individuals, private organizations, or other governments and are therefore not available to support the District's own "programs. The District maintains two private purpose trust funds: 1. Scholarship Fund is used to provide financial assistance to students of the District. 2. Community Playground Maintenance Fund is used to account for revenues received and expenditures made to maintain the community playground. Agency Funds are used to account for assets of others for which the District acts as an agent. The District maintains student body funds, which are used to account for the raising and expending of money to promote the general welfare, morale, and educational experience of the student body. Agency funds are custodial in nature and do not involve measurement of results of operations. Such funds have no equity accounts since all assets are due to individuals or entities at some future time. The District maintains two agency funds for Robert Louis Stevenson Middle School and St. Helena High School. E. Budgets and Budgetary Accounting Annual budgets are adopted on a basis consistent with generally accepted accounting principles for all governmental funds. By state law, the District 1 s governing board must adopt a final budget no later than July 1. A public hearing must be conducted to receive comments prior to adoption. The District 1 s governing board satisfied these requirements. These budgets are revised by the District 1 s Board of Trustees and District Superintendent during the year to give consideration to unanticipated income and expenditures. The original and final revised budgets are presented for the General Fund as required supplementary information in the financial statements. The District does not adopt a budget for Bond Interest and Redemption Fund because this fund is operated by the Napa County Treasurer's office. Formal budgetary integration was employed as a management control device during the year for all budgeted funds. The District employs budget control by minor object and by individual appropriation accounts. Expenditures cannot legally exceed appropriations by major object account. 24

64 ST. HELENA UNIFIED SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30,2014 NOTE 1-SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) F. Encumbrances Encumbrance accounting is used in all budgeted funds to reserve portions of applicable appropriations for which commitments have been made. Encumbrances are recorded for purchase orders, contracts, and other commitments when they are written. Encumbrances are liquidated when the commitments are paid. All encumbrances are liquidated at June 30. G. Estimates The preparation of the financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results may differ from those estimates. H. Assets, Liabilities and Equity 1. Deposits and Investments Cash balances held in commercial bank accounts are insured to $250,000 by the Federal Deposit Insurance Corporation. In accordance with Education Code Section 41001, the District maintains substantially all of its cash in the County Treasury. The county pools these funds with those of other districts in the county and invests the cash. These pooled funds are carried at cost, which approximates market value. Interest earned is deposited quarterly into participating funds. Any investments losses are proportionately shared by all funds in the pool. The county is authorized to deposit cash and invest excess funds by California Government Code Section et seq. The funds maintained by the county either are secured by federal depository insurance or are collateralized. Investments Valuation- In accordance with GASB Statement No. 31, Accounting and Financial Reporting for Certain Investments and for External Investment Pools, highly liquid market investments with maturities of one year or less at time of purchase are stated at amortized cost. All other investments are stated at fair value. Market value is used as fair value for those securities for which market quotations are readily available. However, the District's financial statements do not reflect the fair value of investments as the differences between total investment cost and fair value has been determined to be immaterial. 2. Stores Inventory and Prepaid Expenditures Inventories are recorded using the consumption method, in that inventory acquisitions are initially recorded in inventory (asset) accounts, and are charged as expenditures when used. Reported inventories are equally offset by nonspendable fund balance, which indicates that these amounts are not "available for appropriation and expenditure" even though they are a component of net current assets. The District's cafeteria inventory valuation is First-in-First-out (FIFO). 25

65 ST. HELENA UNIFIED SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30,2014 NOTE 1-SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) H. Assets, Liabilities and Equity (Continued) 2. Stores Inventory and Prepaid Expenditures (Concluded) Prepaid expenditures (expenses) represent amounts paid in advance of receiving goods or services. The District has the option of reporting an expenditure in governmental funds for prepaid items either when purchased or during the benefiting period. The District has chosen to report the expenditures in the period when purchased. 3. Capital Assets Capital assets purchased or acquired with an original cost of $5,000 or more are reported at historical cost or estimated historical cost. Contributed assets are reported at fair market value as of the date received. Additions, improvements, and other capital outlays that significantly extend the useful life of an asset are capitalized. Other costs incurred for repairs and maintenance are expensed as incurred. Depreciation on all assets is provided on the straight-line basis over an estimated useful life of 5 to 50 years depending on the asset class. 4. Unearned Revenue Cash received for federal and state special projects and programs is recognized as revenue to the extent that qualified expenditures have been incurred. Unearned revenue is recorded to the extent that cash received on specific projects and programs exceeds qualified expenditures. 5. Interfund Balances On the fund financial statements receivable and payables resulting from short-term interfund loans are classified as "interfund receivables/payables." These amounts are eliminated in the governmental statements of net position. 6. Compensated Absences All vacation pay is accrued when incurred in the government-wide financial statements. A liability for these amounts is reported in the governmental funds only if they have matured, for example, as a result of employee resignations and retirements. Accumulated sick leave benefits are not recognized as liabilities of the District. The District's policy is to record sick leave as an operating expense in the period taken, since such benefits do not vest, nor is payment probable; however, unused sick leave is added to the creditable service period for calculation of retirement benefits when the employee retires. 26

66 ST. HELENA UNIFIED SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30,2014 NOTE 1-SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) H. Assets, Liabilities and Equity (Continued) 6. Compensated Absences (Concluded) At retirement, each classified member will receive.0038 year of service credit for each day of unused sick leave. Credit for unused sick leave is applicable to all certificated employees and is determined by dividing the number of unused sick days by the number of base service days required to complete the last school year, if employed full-time. 7. Long-Term Obligations In the government-wide financial statements, long-term debt and other long-term obligations are reported as liabilities in the Statement of Net Position. 8. Net Position Net position represent the differences between assets and liabilities. In the government-wide financial statements, net position is classified in the following categories: Net Investment in Capital Assets- This amount consists of capital assets net of accumulated depreciation and reduced by outstanding debt that attributed to the acquisition, construction, or improvement of the assets. Restricted Net Position- This amount is restricted by external creditors, grantors, contributors, laws or regulations of other governments. Umestricted Net Position- This amount is all net position that did not meet the definition of "net investment in capital assets" or "restricted net position". When an expense is incurred for purposes for which both restricted and unrestricted net position is available, the District's policy is to apply restricted net position first. 9. Fund Equity In the fund financial statements, governmental funds report fund balance as nonspendable, restricted, committed, assigned or unassigned, based primarily on the extent to which the District is bound to honor constraints on how specific amounts are to be spent: Nonspendable Fund Balance - Includes the portions of fund balance not appropriable for expenditures. Restricted Fund Balance - Includes amounts subject to externally imposed and legally enforceable constraints. Committed Fund Balance- Includes amounts subject to District constraints selfimposed by formal action of the District Governing Board. 27

67 ST. HELENA UNIFIED SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30,2014 NOTE 1-SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) H. Assets, Liabilities and Equity (Continued) 9. Fund Equity (Continued) Assigned Fund Balance - Includes amounts the District intends to use for a specific purpose. Assignments may be established by the District Governing Board, or the Chief Business Official of the District. Unassigned Fund Balance - Includes the residual balance that has not been assigned to other funds and is not restricted, committed, or assigned to specific purposes. Fund Balances The District's fund balances at June 30, 2014 consisted of the following: Nonspendable: Revolving Fund Stores Inventory Total Nonspendable Fund Balance Restricted For: Legally Restricted Categorical Funding Food Service Program Debt Service Purposes Specified in Govt Code Section and/ or Modernization Projects Total Restricted Fund Balance Assigned For: Facilities Maintenance Future OPEB Obligations Energy Retro-Fit Lease Payments Total Assigned Fund Balance Unassigned: Reserve for Economic Uncertainties Total Unassigned Fund Balance Total Fund Balances Other Governmental General Fund Building Fund Funds Total $ 20,000 20, ,698 $ 4,396 4,396 57,936 3,328,106 $ 20,000 4,396 24, ,698 57,936 3,328,106 1,263,011 1,263, ;;.$_.;;;,28;,.:..;,6;,;;.86;,.:..;,3;,;;.05; ;;3..;;,;12;;:.;,5;,;;,59;.;;;,28;,.:..;,9..;..98;,.:..;,8;,;;.64;_ 311,698 28,686,305 4,961,612 33,959, , , '-,0_27 3,246,549 3,246,549 o 519, ,259 1,627,405 1,627,405 1.:..,6_27..:...,4_05 2..:...,3_49..:...,4_32_ 3,246,549..;..o o 3.:...,2_46.:...,5_49_ $ 4,300,274 $ 28,686,305 $ 6,593,413 $ 39,579,992 Fund Balance Policy The District believes that sound financial management principles require that sufficient funds be retained by the District to provide a stable financial base at all times. To retain this stable financial base, the District needs to maintain unrestricted fund balance in its General Fund sufficient to fund cash flows of the District and to provide financial reserves for unanticipated expenditures and/ or revenue shortfalls of an emergency nature. 28

68 ST. HELENA UNIFIED SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30,2014 NOTE 1-SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) H. Assets, Liabilities and Equity (Continued) 9. Fund Equity (Concluded) Fund Balance Policy (Concluded) The purpose of the District's fund balance policy is to maintain a prudent level of financial resources to protect against reducing service levels because of temporary revenue shortfalls or unpredicted one-time expenditures. The District Board recognizes that good fiscal management comprises the foundational support of the entire District. To make that support as effective as possible, the Board intends to maintain a minimum fund balance of 10% of the District's General Fund annual operating expenditures plus 33% of excess property taxes in a given year. Additional detailed information, along with the complete Fund Balance Policy can be found in the District's Board Policy Local Control Funding Formula/Property Tax The District's local control funding formula sources are received from a combination of local property taxes, state apportionnients, and other local sources. The county is responsible for assessing, collecting, and apportioning property taxes. Taxes are levied for each fiscal year on taxable real and personal property in the county. The levy is based on the assessed values as of the preceding January 1, which is also the lien date. Property taxes on the secured roll are due on November 1 and February 1, and taxes become delinquent after December 10 and April10, respectively. Property taxes on the unsecured roll are due on the lien date Ganuary 1), and become delinquent if unpaid by August 31. Secured property taxes are recorded as revenue when apportioned, in the fiscal year of the levy. The county apportions secured property tax revenue in accordance with the alternate method of distribution prescribed by Section 4705 of the California Revenue and Taxation Code. This alternate method provides for crediting each applicable fund with its total secured taxes upon completion of the secured tax roll - approximately October 1 of each year. The County Auditor reports the amount of the District's allocated property tax revenue to the California Department of Education. Property taxes are recorded as local control funding formula revenue sources by the District. The California Department of Education reduces the District's entitlement by the District local property tax revenue. The balance is paid from the state General Fund, and is known as the State Apportionment. 29

69 ST. HELENA UNIFIED SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30,2014 NOTE 1-SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) H. Assets, Liabilities and Equity (Concluded) 10. Local Control Funding Formula/Property Tax (Concluded) The District's Base Local Control Funding Formula revenue is the amount of generalpurpose tax revenue, per average daily attendance (ADA), that the District is entitled to by law. This amount is multiplied by the second period ADA to derive the District's total entitlement. I. Impact of Recently Issued Accounting Principles The GASB issued Statement 65, Items Previously Reported as Assets and Liabilities in March, GASB 65 was intended to compliment Statement No. 63 by identifying items previously reported as assets and liabilities that should be classified as deferred outflows or deferred inflows going forward. The District was required to implement the Statement 65 in The GASB issued Statement 68, Accounting and Financial Reporting for Pensions in June 2012 to amend Statements 27 and 50 and improve accounting and financial reporting by state and local governments for pensions. The Statement details the recognition and disclosure requirements for employers with liabilities to a defined benefit pension plan. The Statement is effective beginning in fiscal year The GASB issued Statement 69, Government Combinations and Disposals of Government Operations in January 2013 to provide guidance for reporting mergers, acquisitions, transfers of operations, and disposals of government operations. The Statement is effective beginning in fiscal year The GASB issued Statement 70, Accounting and Financial Reporting for Nonexchange Financial Guarantees in April 2013 to improve accounting and financial reporting by governments that extend and receive nonexchange financial guarantees. The Statement is effective beginning in fiscal year The District does not have nonexchange financial guarantees and therefore the adoption of GASB 70 does not have any impact on the District's financial statements. The GASB issued Statement 71, Pension Transition for Contributions Made Subsequent to the Measurement Date which amends Statement 68 by requiring that, at transition, a government should recognize a beginning deferred outflow of resources for its pension contributions made after the measurement date of the beginning net pension liability. The Statement is effective beginning in fiscal year

70 ST. HELENA UNIFIED SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30,2014 NOTE 1-SIGNIFICANT ACCOUNTING POLICIES (CONCLUDED) I. Impact of Recently Issued Accounting Principles (Concluded) The Office of Management and Budget issued the guidance Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance for Federal Awards) on December 29, 2013 which supersedes and streamlines requirements from eight different circulars into one document. The new administrative requirements and cost principles are required to be implemented for all federal awards made after December 26,2014. NOTE 2- CASH AND INVESTMENTS A. Summary of Cash and Investments The following is a summary of cash and investments at June 30, 2014: Governmental Activities $ Fiduciary Funds $ $ The District had the following cash and investments at June 30, 2014: Fair Value Carrying Amount Cash in Commerical Banks Cash in Revolving Fund Cash in County Treasury Total Cash $ 113,602 20,000 40,350,866 40,484,468 $ 113,602 20,000 40,414,709 40,548,311 Investments Pacific Gas and Electric Common Stock (300 shares, $5 par value) Total Cash and Investments 14,344 ; 11,730 $ 40,498,812 $ 40,560,041 31

71 ST. HELENA UNIFIED SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30,2014 NOTE 2- CASH AND INVESTMENTS (CONTINUED) B. Policies and Practices The District is authorized by State statutes and in accordance with the District's Investment Policy (Policy) to invest in the following: ' - Securities issued or guaranteed by the Federal Government or its agencies - State Local Agency Investment Fund (LAIF) - Insured and/ or collateralized certificates of deposit The Policy, in addition to State statues, establishes that funds on deposit in banks must be federally insured or collateralized and investments shall (1) have maximum maturity not to exceed five years, (2) be laddered and based on cash flow forecasts; and (3) be subject to limitations to a certain percent of the portfolio for each of the authorized investments. The investments in the Community Playground Maintenance Fiduciary Fund are outside the District's normal investments, however, because this investment was a restricted donation, the Board has elected to maintain the investment as restricted until the funds are needed. Cash in Commercial Banks Cash balances held in commercial bank accounts are insured to $250,000 by the Federal Deposit Insurance Corporation. These amounts are held within various financial institutions. As of June 30, 2014 the carrying amount of the District's accounts was $133,602 all of which was insured. Cash in County Treasury In accordance with Education Code Section 41001, the District maintains substantially all of its cash with the County Treasury as an involuntary participant of a common investment pool, which totaled $524,207,102 as of June 30, The fair market value of this pool as of that date, as provided by the pool sponsor, was $523,379,015. Interest is deposited into participating funds. The balance available for withdrawal is based on the accounting records maintained by the county treasurer, which is recorded on the amortized cost basis. C. Risk Disclosures GASB Statement No. 40 requires a determination as to whether the District was exposed to the following specific investment risks at year end and if so, the reporting of certain related disclosures. 32

72 ST. HELENA UNIFIED SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30,2014 NOTE 2- CASH AND INVESTMENTS (CONTINUED) C. Risk Disclosures (Continued) Interest Rate Risk - Interest rate risk is the risk that changes in market interest rates will adversely affect the fair value of an investment. Generally, the longer the maturity of an investment, the greater the sensitivity of its fair value to changes in market interest rates. The District manages its exposure to interest rate risk by investing in the County Pool and having the pool purchase a combination of shorter term and longer term investments and by timing cash flows from maturities so that a portion of the portfolio is maturing or coming close to maturity evenly over time as necessary to provide the cash flow and liquidity needed for operations. At June 30, 2014 the District had the following investment maturities: Investment Maturities (In Years) Investment Type Fair Value Less than 1 1 to 4 More than 4 County Treasury $40,350,866 $ $ $ Credit Risk - Credit risk is the risk that an issuer or other counterparty to an investment will not fulfill its obligations. The county is restricted by Government Code Section pursuant to Section to invest only in time deposits, U.S. government securities, state registered warrants, notes or bonds, State Treasurer's investment pool, bankers' acceptances, commercial paper, negotiable certificates of deposit, and repurchase or reverse repurchase agreements. The ratings of securities by nationally recognized rating agencies are designed to give an indication of credit risk. At June 30, 2014, the District credit risks are as follows: Credit Quality distributions for Securities with Credit Exposure Moody's Credit S&P' s Investment Type Rating Rating Cash in County Treasury Pacific Gas and Electric Common Stock Not Rated A3 Not Rated BBB Custodial Credit Risk - Deposits are exposed to custodial credit risk if they are not covered by depository insurance and the deposits are uncollateralized, collateralized with securities held by the pledging financial institution, or collateralized with securities held by the pledging financial institution's trust department or agent but not in the District's name. Investment securities are exposed to custodial credit risk if the securities are uninsured, are not registered in the name of the government, and are held by either the counterparty or the counterparty' s trust department or agent but not in the District's name. At year end, the District was not exposed to custodial credit risk. Concentration of Credit Risk - This risk is the risk of loss attributed to the magnitude of a government's investment in a single issuer. At year end, the District was not exposed to concentration of credit risk. 33

73 ST. HELENA UNIFIED SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30,2014 NOTE 2- CASH AND INVESTMENTS (CONCLUDED) C. Risk Disclosures (Concluded) Foreign Currency Risk - This is the risk that exchange rate will adversely affect the fair value of an investment. At year end, the District was not exposed to foreign currency risk. NOTE 3- EXCESS OF EXPENDITURES OVER APPROPRIATIONS The District did not adopt a budget for the Bond Interest and Redemption Fund because this fund is operated by the Napa County Treasurer's office. As of June 30, 2014, there were no excess of expenditures over appropriations. NOTE 4- ACCOUNTS RECEIVABLE Accounts receivable at June 30, 2014 consist of the following: Other General Building Governmental Fund Fund Funds Total Federal Government Categorical Aid Programs $ 102,738 $ 32,661 $ 135,399 State Government Local Control Funding Formula 260, ,626 Lottery 63,788 63,788 Other 2,490 1,957 4,447 Total State Government 326,904 1, ,861 Local Government 40,000 16,920 56,920 Miscellaneous 9,155 $ ,178 Total Accounts Receivable $ 478?97 $ 9 $ 51,552 $ 530,358 NOTE 5- INTERFUND TRANSACTIONS Interfund transactions are reported as either loans, services provided, reimbursements, or transfers. Loans are reported as interfund receivables and payables, as appropriate, and are subject to elimination upon consolidation. Services provided, deemed to be at market or near market rates, are treated as revenues and expenditures/ expenses. Reimbursements occur when one fund incurs a cost, charges the appropriate benefiting fund, and reduces its related cost as a reimbursement. All other interfund transactions are treated as transfers. Transactions among governmental funds are netted as part of the reconciliation to the government-wide financial statements. Interfund Receivables/Payables (Due From/Due To) The District did not have any interfund receivable and payable balances at June 30,

74 ST. HELENA UNIFIED SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30,2014 NOTE 5- INTERFUND TRANSACTIONS (CONCLUDED) Interfund Transfers Interfund transfers consist of operating transfers from funds receiving revenue to funds through which the resources are to be expended. Interfund transfers for the fiscal year were as follows: Transfers In Transfers Out Major Governmental Funds: General Fund $ 375,951 Non-Major Governmental Funds: Cafeteria Fund $ 225,000 Special Reserve Fund for Capital Outlay Projects 150,951 Total $ ~ Transfer $225,000 from the General Fund to the Cafeteria Fund to support Healthy Food Program for students and provide positive cash flow. Transfer $150,951 from the General Fund to Special Reserve Fund for Capital Outlay Projects Fund to set aside money for future debt service payments for energy retro-fit capital lease payments and future capital improvements. NOTE 6- CAPITAL ASSETS AND DEPRECIATION Capital asset activity for the year ended June 30, 2014, is shown below: Balance Balance July 01, 2013 Additions Deductions June 30,2014 Capital assets, not being depreciated: Land $ 202,134 $ 202,134, Work in progress 2,915,347 $ 4,821,001 $ 2,357,034 5,379,314 Total capital assets, not being depreciated 3,117,481 4,821,001 2,357,034 5,581,448 Capital assets being depreciated: Buildings 78,138,975 3,383,541 81,522,516 Improvements of sites 6,962,143 6,962,143 Equipment 1,964,508 1,964,508 Total capital assets, being depreciated 87,065,626 3,383, ,449,167 Less accumulated depreciation for: Buildings 22,350,875 2,105,885 24,456,760 Improvements of sites 4,305, ,497 4,415,469 Equipment 1,570, ,562 1,731,983 Total accumulated depreciation 28,227,268 2,376, ,604,212 Total capital assets, being depreciated, net 58,838,358 1,006, ,844,955 Governmental activities capital assets, net $ 61,955,839 $ 5,827,598 $ 2,357,034 $ 65,426,403 35

75 ST. HELENA UNIFIED SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30,2014 NOTE 6- CAPITAL ASSETS AND DEPRECIATION (CONCLUDED) Depreciation expense was charged to governmental activities as follows: Governmental Activities: Instruction Instruction-related Services Pupil Services Plant Services Ancillary Services Centralized Data Processing Total NOTE 7- UNAMORTIZED BOND PREMIUM $ $ 1,830,247 71, ,386 23,769 71, ,925 2,376,944 The District sold its bonds at a premium. The premium is amortized using the straight-line method over the life of the related bond issue as a reduction in annual interest expense. The annual amortization of the bond premium is as follows: Year Ended June30 Annual Amortization 2015 $ 106, , , , , , , , ,871 Total $ 1,382,977 36

76 ST. HELENA UNIFIED SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30,2014 NOTE 8- BONDED DEBT The outstanding general obligation bonded debt at June 30, 2014 is: General Obligation Bonds Date Maturity Amount of Redeemed of Interest Date Original Outstanding Current Outstanding Issue Rate% August1 Issue July 1, 2013 Year June 30, $ 15,520,000 $ 11,035,000 $ 1,210,000 $ 9,825, ,860,000 13,860,000 13,860, ,450,421 9,450,421 9,450, ,471,336 1,471,336 1,471, ,345,000 13,345,000 13,345, ,654,476 6,654,476 6,654, ,000,000 10,000,000 10,000,000 Totals $ 70,301,233 $ 65,816,233 $ 1,210,000 $ 64,606,233 Accreted Interest Accretion Maturity Interest Outstanding Current Outstanding Series Date Rate July 1,2013 Year June 30, B $ 1,746,068 $ 779,863 $ 2,525, C ,569 73,677 89, A , , ,130 Totals $ 1,820,498 $ 1,130,809 $ 2,951,307 The annual requirements to amortize the general obligation bonds payable are as follows: Year Ended June30 Principal Interest Total 2015 $ 2,535, ,305, ,545, ,765, ,945, ,339, ,885, ,786, ,499,699 $ 1,826,635 1,748,846 1,664,446 1,568,562 1,465,174 5,635,443 15,364,743 14,490,947 9,400,372 $ 4,361,635 4,053,846 4,209,446 4,333,562 4,410,174 22,974,612 26,250,715 30,277,340 16,900,071 Totals $ 64,606,233 $ 53,165,168 $ 117,771,401 37

77 ST. HELENA UNIFIED SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30,2014 NOTE 9- CAPITAL LEASE OBLIGATIONS During fiscal year , the District obtained lease financing from Energy Retrofit to finance school facilities. Future minimum lease payments are as follows: Year Ended June Total payments Less amounts representing interest Present value of net minimum lease payments Lease Payment $ 75,600 75,599 75,600 75,598 75,599 55, ,336 (51,524) $ 381,812 The District has assigned a portion of the Special Reserve Fund for Capital Outlay Projects ending fund balance for the purpose of making these lease payments. NOTE 10- EARLY RETIREMENT INCENTIVE PROGRAMS In addition to the benefits described in Note 11 and Note 13, the District has offered incentives for employees to retire: A. State Teachers Retirement System (STRS) Golden Handshake The District has adopted an early retirement incentive program, pursuant to Education Code Sections 22714, , 44929, , and , whereby the service credit to eligible employees is increased by two years. Eligible employees must be either; 1) age 55 with at least five (5) years of service under State Teachers' Retirement System (STRS), or 2) age 50 with at least thirty (30) years of service under STRS, or 3) age 55 with fewer than five (5) years of service credit but eligible for concurrent retirement with another California Public Retirement System and retire during a period of not more than 120 days or less than 60 days from the date of the formal action taken by the District. The District has determined that the formal action taken would result in a net savings to the District. 38

78 ST. HELENA UNIFIED SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30,2014 NOTE 10- EARLY RETIREMENT INCENTIVE PROGRAMS (CONTINUED) A. State Teachers Retirement System (STRS) Golden Handshake (Continued) The District has also demonstrated and certified such results to the County Office of Education, as required pursuant to Education Code Section 22714, and The District's certification reconciles to the information confirmed in the audit. The District has made advance payments in current year to reduce liability to zero. Retiree Information Two employees retired in exchange for the additional two years of service credit during fiscal year : Position Service Retired Em:Qloyee Vacated Age Credit Salary Benefits Teacher $123,007 $30,837 Teacher ,067 28,935 Total $ $59,772 Financial Im12act The early retirement incentive program is expected to generate $127,310 in additional costs and payroll savings of $32,856. Additional Costs As a result of this early retirement incentive program, the District expects to incur $127,310 in additional costs. The breakdown in additional costs is presented below: Retirement costs STRS Administrative costs Total additional costs $126, $ The District has elected to pay this cost in a single payment and has reported the expense in the General Fund at June 30,

79 ST. HELENA UNIFIED SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30,2014 NOTE 10- EARLY RETIREMENT INCENTIVE PROGRAMS (CONCLUDED) A. State Teachers Retirement System (STRS) Golden Handshake (Concluded) Yearly Payroll Savings The District expects this early retirement program to generate yearly payroll savings of $32,856, which equal the difference in payroll costs for the retirees and their replacements. The retiree's yearly salary and benefits is presented below: Retired EmJ2loyee' s ReJ2lacement Em12loyee' s Position Vacated Salary Benefits Salary Benefits Teacher $123,007 $30,837 $ 93,748 $34,247 Teacher 106,067 28,935 93,748 34,247 Total $229,074 $59,772 $187,496 $68,494 B. Public Agency Retirement Services (PARS) In addition to the STRS Golden Handshake, the District purchased annuities for eight (8) employees through Public Agency Retirement Services (PARS) Group Tax Sheltered (403(B)) Annuity Contract. The District made the final payment of $193,587 during the fiscal year. C. The District offered qualified employees a cash incentive to retire in The offer was accepted by eight (8) classified and two (2) certified employees. The cash incentive was paid during at a total cost to the District of $120,000. NOTE 11-OTHER POSTEMPLOYMENT BENEFITS The St. Helena Unified School District accounts for postemployment benefits under GASB Statement 45, Accounting and Financial Re12orting by Em12loyers for Post-em12loyment Benefits Other than Pension. This accounting requires the District to report its liability for other postemployment benefits (OPEB) consistent with newly established generally accepted accounting principles by reflecting an actuarially determined liability for the present value of projected future benefits for retired and active employees on the financial statements. 40

80 ST. HELENA UNIFIED SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30,2014 NOTE 11- OTHER POSTEMPLOYMENT BENEFITS (CONTINUED) Plan Description The District provides retiree health benefits based on age and service. Following is a description of the current retiree benefit plan. Some retirees are entitled to benefits under prior grandfathered plans. Benefits types provided Duration of Benefits Required Service Minimum. Age Certificated Medical only To age 65 15years** 55 Dependent coverage No District Contribution % 100% District Cap Least costly plan*** Classified Medical only To age years**** 50 No 100% None Management Medical only Toage65 15 years** 55 No 100% Least costly plan*** * 10 years for those hired prior to July 1, 2005 ** 100% of the selected plan for those retired prior to August 3, 2007 *** 15 years of service and age 55 hired after January 2002, 20 years of service and age 60 hired after January Funding Polictj Employees are not required to contribute to the plan. In order to fully fund the plan, the District would be required to contribute the annual required contribution of the employer (ARC), an amount actuarially determined in accordance with the parameters of GASB Statement 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 (or funding excess) over a period not to exceed thirty years. The District's policy is to pay the benefits as a cash outlay after retirement (the pay-as-you-go method). However, at June 30, 2014, the District assigned $202,259 in the General Fund for the payment of future postemployment benefits. Annual OPEB Cost For fiscal year ended June 30,2014, the District's annual OPEB cost (expense) was $393,482. The District's annual OPEB cost, the percentage of annual OPEB cost contributed to the plan, and the net OPEB obligation for the last three years was as follows: Percentage of Annual Fiscal Year Annual Annual OPEBCost NetOPEB Ended June 30 OPEBCost Contribution Contributed Obligation 2014 $393,482 $282,800 72% $286, $487,503 $493, % $175, $478,398 $296,613 62% $181,886 41

81 ST. HELENA UNIFIED SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30,2014 NOTE 11- OTHER POSTEMPLOYMENT BENEFITS (CONTINUED) Annual OPEB Cost (Concluded) The following table shows the components of the District's annual OPEB cost for the year, the amount actually contributed to the Plan, and changes in the District's net OPEB obligation to the Plan: Annual required contribution Interest on OPEB Obligation Adjustment to annual required contribution Annual OPEB cost (expense) Payments made Increase in net OPEB obligation Net OPEB obligation-beginning of year Net OPEB obligation-end of year $396,611 7,019 (10,148) 393,482 (282,800) 110, ,473 $ Funding Status and Funding Progress As of July 1, 2013, the most recent actuarial valuation date, the plan was unfunded. The actuarial accrued liability for benefits was $3.5 million, all of which is unfunded. Actuarial valuations of an ongoing plan involve estimates of the value of reported amounts and assumptions about the probability of occurrence of events far into the future. Examples include assumptions about future employment, mortality, and the healthcare cost trend. Amounts determined regarding the funded status of the plan and the annual required contributions of the employer are subject to continual revision as actual results are compared with past expectations and new estimates are made about the future. The funded status of the plan as of July 1, 2013 was as follows: Actuarial accrued liability (AAL) Actuarial value of plan assets Unfunded actuarial accrued liability (UAAL) Funded ratio (actuarial value of plan assets/ AAL) $3,488,826 0 $ % 42

82 ST. HELENA UNIFIED SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30,2014 NOTE 11-OTHER POSTEMPLOYMENT BENEFITS (CONCLUDED) Actuarial Methods and Assumptions Projections of benefits for financial reporting purposes are based on the substantive plan (the plan as understood by the employer and the plan members) and include the types of benefits provided at the time of each valuation and the historical pattern of sharing of benefits costs between the employer and plan members to that point. The actuarial methods and assumptions used include techniques that are designed to reduce the effects of short-term volatility in actuarial accrued liabilities and the actuarial value of assets, consistent with the long-term perspective of the calculations. In the July 1, 2013, actuarial valuation, the "entry age normal" actuarial cost method was used. The actuarial assumptions included a 4.0% investment rate of return, an annual healthcare cost trend rate of 8% for 2012 to 2015 and down to an ultimate of 5% for 2016 and thereafter, and an assumed payroll increase rate of 3%. The UAAL is being amortized using the level percentage of projected payroll method using a 30 year amortization period. The remaining amortization period at June 30, 2014, was thirty years. NOTE 12- LONG-TERM DEBT A schedule of changes in long-term debt for the year ended June 30, 2014, is shown below: Balance July 1, 2013 Balance Due Within Additions Deductions June 30,2014 One Year General Obligation Bonds Accreted Interest Capital Lease Obligations Early Retirement Incentives Public Agency Retirement Service Other Post-Employment Benefits Compensated Absences $ 65,816,233 1,820, ,044 50, , ,473 32,641 $ 1,130, ,482 $ 1,210,000 $ 58,232 50, , ,800 10,658 64,606,233 2,951, , ,155 21,983 $ 2,535,000 60,391 21,983 Totals $ 68,529,295 $ 1,524,291 $ 1,806,096 $ 68,247,490 $ 2,617,374 Capital lease obligations, early retirement incentives, other post-employment benefits and compensated absences will be paid by the General Fund. Payments on the general obligation bonds are made by the Bond Interest and Redemption Fund with property tax assessments. 43

83 ST. HELENA UNIFIED SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30,2014 NOTE 13- EMPLOYEE RETIREMENT SYSTEMS Qualified employees are covered under cost-sharing multiple-employer contributory retirement plans maintained by agencies of the State of California. Certificated employees are members of the State Teachers' Retirement System (STRS) and classified employees are members of the California Public Employees' Retirement System (CalPERS). A. State Teachers' Retirement System (STRS) Plan Description. The St. Helena Unified School District contributes to the State Teachers' Retirement System (STRS), a cost-sharing multiple-employer public employee retirement system defined benefit pension plan administered by STRS. The plan provides retirement, disability, and survivor benefits to beneficiaries. Benefit provisions are established by state statutes, as legislatively amended, within the State Teachers' Retirement Law. STRS issues a separate comprehensive annual financial report that includes financial statements and required supplementary information. Copies of the STRS annual financial report may be obtained from the STRS, 100 Waterfront Place, West Sacramento, California Funding Policy. Active plan members are required to contribute 8.0% of their salary and the St. Helena Unified School District is required to contribute an actuarially determined rate. The actuarial methods and assumptions used for determining the rate are those adopted by the STRS Teachers' Retirement Board. The required employer contribution rate for fiscal year was 8.25% of annual payroll. The contribution requirements of the plan members are established by state statute. The St. Helena Unified School District's contributions to STRS for the fiscal year ending June 30, 2014, 2013, and 2012 were $890,891, $858,550 and $827,838, respectively, and equal100% of the required contributions for each year. B. California Public Employees Retirement System (CalPERS) Plan Description. The St. Helena Unified School District contributes to the School Employer Pool under the California Public Employees' Retirement System (CalPERS), a cost-sharing multiple-employer public employee retirement system defined benefit pension plan administered by CalPERS. The plan provides retirement and disability benefits, annual cost-of-living adjustments, and death benefits to plan members and beneficiaries. Benefit provisions are established by State statutes, as legislatively amended, within the Public Employees' Retirement Law. CalPERS issues a separate comprehensive annual financial report that includes financial statements and required supplementary information. Copies of the CalPERS' annual financial report may be obtained from the CalPERS Executive Office, 400 Q Street, Room 1820, Sacramento, CA

84 ST. HELENA UNIFIED SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30,2014 NOTE 13- EMPLOYEE RETIREMENT SYSTEMS (CONCLUDED) B. California Public Employees Retirement System (CalPERS) (Concluded) Funding Policy. Active plan members are required to contribute 7.0% of their salary and the St. Helena Unified School District is required to contribute an actuarially determined rate. The actuarial methods and assumptions used for determining the rate are those adopted by the CalPERS Board of Administration. The required employer contribution rate for fiscal was % of annual payroll. The contribution requirements of the plan members are established by State statute. The St. Helena Unified School District's contributions to CalPERS for the fiscal year ending June 30, 2014, 2013 and 2012 were $382,658, $364,237 and $349,085, respectively and equal100% of the required contributions for each year. C. Social Security As established by Federal law, all public sector employees who are not members of their employer's existing retirement system (STRS or PERS) must be covered by social security or an alternative plan. The District has elected to use Social Security. D. On Behalf Payment The State of California makes contributions to STRS and PERS on behalf of the District. These payments consist of State General Fund contributions to STRS and contributions to PERS for the year ended June 30, Under accounting principles generally accepted in the United States of America, these amounts are to be reported as revenues and expenditures, however, guidance received from the California Department of Education advises local education agencies not to record these amounts in the Annual Financial and Budget Report. These amounts also have not been recorded in these financial statements. NOTE 14-STUDENT BODY FUNDS The Student Body Funds often engage in activities, which involve cash transactions. These transactions are not subject to adequate internal accounting control prior to deposits being recorded in the bank accounts. It has been determined on a cost benefit basis that providing increased internal control in this area does not justify the additional costs that would be necessary to control receipts prior to the point of deposit. 45

85 ST. HELENA UNIFIED SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30,2014 NOTE 15- RISK MANAGEMENT Property and Liability and Workers' Compensation The District is self-insured for workers' compensation and property /liability exposures through its membership in North Bay Schools Insurance Authority (NBSIA). Workers' compensation benefits are provided at statutory limits. Property coverage limit is $300 million with a $5,000 deductible per occurrence. General liability protection is provided to $20 million per occurrence with no deductible excepting those activities identified as "high risk" events, which incur a $7,500 deductible should they result in a covered loss. The District is exposed to various risks of loss related to torts; theft of, damage to, and destruction of assets; errors and omissions; injuries to employees and natural disasters. During fiscal year ending June 30, 2014, the District contracted with North Bay Schools Authority for property, liability and theft insurance coverage. Settled claims have not exceeded this commercial coverage in any of the past three years. There has not been a significant change in coverage from the prior year. NOTE 16- COMMITMENTS AND CONTINGENCIES A. Litigation The District is involved in various litigation arising from the normal course of business. In the opinion of management and legal counsel, the disposition of all litigation pending is not expected to have a material adverse effect on the overall financial position of the District at June 30,2014. B. State and Federal Allowances, Awards and Grants The District has received state and federal funds for specific purposes that are subject to review and audit by the grantor agencies. If the review or audit discloses exceptions, the District may incur a liability to grantor agencies C. Joint Ventures (Joint Powers Agreements) The District participates in three joint ventures under joint powers agreements GPAs) with North Bay Schools Insurance Authority (NBSIA) for workers compensation and property and liability, Contra Costa County Schools Insurance Group (CCCSIG) and the Schools Self Insurance Authority of Contra Costa County (SSICCC) for dental and vision. The relationships between the District and the JP As are such that the JP As are not component units of the District for financial reporting purposes. 46

86 ST. HELENA UNIFIED SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30,2014 NOTE 16- COMMITMENTS AND CONTINGENCIES (CONCLUDED) C. Joint Ventures (Joint Powers Agreements) (Concluded) The JPA's arrange for and/ or provides coverage for their members. Each JPA is governed by a board consisting of a representative from each member district. Each board controls the operations of their JP A, including selection of management and approval of operating budgets independent of any influence by the member districts beyond their representation on the Board. Each member district pays a premium commensurate with the level of coverage requested and shares surpluses and deficits proportionately to their participation ineachjpa. NOTE 17-SUBSEQUENT EVENTS Management has evaluated subsequent events through December 12, 2014, the date on which the financial statements were available to be issued. 47

87 REQUIRED SUPPLEMENTARY INFORMATION SECTION

88 ST. HELENA UNIFIED SCHOOL DISTRICT STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES BUDGET (GAAP) AND ACTUAL GENERAL FUND FOR THE FISCAL YEAR ENDED JUNE 30, 2014 Budgeted Amounts Variance with Final Budget- Actual Amounts Positive Original Final (GAAP Basis) (Negative) Revenues Local Control Funding Formula Sources: State Apportionments $ 442,000 $ 926,319 $ 926,319 Local Sources 22,200,035 $ 23,890,296 23,042,367 {847,929} Total Local Control Funding Formula Sources 22,642,035 23,890,296 23,968,686 78,390 Federal Revenue 407, , ,383 (1,393) Other State Revenue 692, , , ,395 Other Local Revenue 106,800 1,035, ,771 {339,50~ Total Revenues 23,848,972 26,089,880 25,974,765 {115,115~ Expenditures Certificated Salaries 11,110,009 11,244,889 11,094, ,770 Classified Salaries 3,226,241 3,256,669 3,254,671 1,998 Employee Benefits 4,914,653 4,709,426 4,629,394 80,032 Books and Supplies 1,063,431 1,897,323 1,770, ,781 Services and Other Operating Expenditures 2,802,089 3,918,477 3,492, ,756 Capital Outlay 182, , , ,341 Debt Service: Principal Retirement 58,232 58,232 Interest and Fiscal Charges 30,000 92,635 92,635 Other Outgo 68, , ,156 3,681 Total Expenditures 23,397,541 25,688,366 24,787, ,359 Excess of Revenues Over (Under) Expenditures 451, ,514 1,187, ,244 Other Financing Sources (Uses): Operating Transfers In 164, ,723 (314,723) Operating Transfers Out {389,723~ {640,674~ {375,951~ 264,723 Total Other Financing Sources (Uses) {225,000~ {325,951~ {375,951~ {50,000~ Excess of Revenues and Other Sources Over (Under) Expenditures and Other Uses 226,431 75, , ,244 Fund Balances - July 1, ,233,588 3,488,467 3,488,467 0 Fund Balances- June 30, 2014 $ 3,460,019 $ 3,564,030 $ 4,300,274 $ 736,244 THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS 48

89 ST. HELENA UNIFIED SCHOOL DISTRICT SCHEDULE OF OTHER POSTEMPLOYMENT BENEFITS (OPEB) FOR THE FISCAL YEAR ENDED JUNE 30, 2014 Fiscal Year Ended Schedule of Funding Progress Unfunded Actuarial Actuarial Actuarial Actuarial Accrued Accrued Valuation Value of liability Liability Funded Covered Date Assets (AAL) (UAAL) Ratio Payroll UAALasa Percentage of Covered Payroll 6/30/12 6/30/13 6/30/14 July1,2011 $ - $ 3,713,714 $ 3,713,714 0% $ 11,767,899 July1,2011 $ - $ 3,713,714 $ 3,713,714 0% $ 13,381,416 July 1,2013 $ - $ 3,488,826 $ 3,488,826 0% $ 13,782,800 32% 28% 25% THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS 49

90 ST. HELENA UNIFIED SCHOOL DISTRICT NOTES TO REQUIRED SUPPLEMENTARY INFORMATION FOR THE FISCAL YEAR ENDED JUNE 30, 2014 NOTE 1-PURPOSE OF SCHEDULES A. Budgetary Comparison Schedule The District employs budget control by object codes and by individual appropriation accounts. Budgets are prepared on the modified accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America as prescribed by the Governmental Accounting Standards Board. The budgets are revised during the year by the Board of Trustees to provide for revised priorities. Expenditures cannot legally exceed appropriations by major object code. The originally adopted and final revised budgets for the General Fund are presented as Required Supplementary Information. The basis of budgeting is the same as GAAP. B. Schedule of Other Postemployment Benefits Funding Progress The Schedule of Funding Progress presents multi-year trend information which compares, over time, the actuarially accrued liability for benefits with the actuarial value of accumulated plan assets. 50

91 SUPPLEMENTARY INFORMATION SECTION

92 ST. HELENA UNIFIED SCHOOL DISTRICT ST. HELENA, CALIFORNIA JUNE 30, 2014 ORGANIZATION The St. Helena Unified School District is composed of an area of approximately 204 square miles. There was no change in District boundaries during the year. The District operates one primary school, one elementary school, one intermediate school and one high school. BOARD OF TRUSTEES Term Expires Jeannie Kerr Jeff Conwell MariaHaug Sean Maher Cynthia Smith President Vice President Clerk Member Member November, 2016 November, 2016 November, 2014 November, 2014 November, 2014 ADMINISTRATION Bob Ferguson Interim Superintendent Dr. Marylou Wilson Board Approved June 19, 2014 for July 1, 2014 Superintendency Greg Medici Chief Business Official 51

93 ST. HELENA UNIFIED SCHOOL DISTRICT SCHEDULE OF AVERAGE DAILY ATTENDANCE FOR THE FISCAL YEAR ENDED JUNE 30, 2014 Regular ADA Transitional Kindergarten through Third Fourth through Sixth Seventh and Eighth Ninth through Twelfth Special Education- Nonpublic, Nonsectarian Schools Transitional Kindergarten through Third Fourth through Sixth Seventh and Eighth Ninth through Twelfth ADA Totals Second Period Report ,195 Annual Report ,200 Average daily attendance is a measurement of the numbers of pupils attending classes of the District. The purpose of attendance accounting from a fiscal standpoint is to provide the basis on which apportionments of state funds are made to the school districts. This schedule provides information regarding the attendance of students at various grade levels and in different programs. SEE NOTES TO SUPPLEMENTARY INFORMATION 52

94 ST. HELENA UNIFIED SCHOOL DISTRICT SCHEDULE OF INSTRUCTIONAL TIME FOR THE FISCAL YEAR ENDED JUNE 30, 2014 Number of Minutes Days Minutes Requirement Actual Traditional Grade Level Requirement As Reduced Minutes Calendar Status Kindergarten 36,000 35,000 50, In Compliance Gradel 50,400 49,000 53, In Compliance Grade2 50,400 49,000 53, In Compliance Grade3 50,400 49,000 55, In Compliance Grade4 54,000 52,500 55, In Compliance GradeS 54,000 52,500 55, In Compliance Grade6 54,000 52,500 65, In Compliance Grade7 54,000 52,500 65, In Compliance GradeS 54,000 52,500 65, In Compliance Grade9 64,800 63,000 65, In Compliance GradelO 64,800 63,000 65, In Compliance Grade 11 64,800 63,000 65, In Compliance Grade 12 64,800 63,000 65, In Compliance The District has received incentive funding for increasing instructional time as provided by the Incentives for Longer Instructional Day. The District has not met its local control funding formula target. Districts that participate in Longer Day Incentive Funding or that met or exceed their local control funding formula target, must provide at least the number of instructional minutes specified in Education Code Section 46201(b) or 46207(a), shown as the minutes requirement above. For the and school years, a school district may reduce up to five days of instruction or equivalent number of minutes without incurring penalties pursuant to Education Code Sections (b) and 46207(c). SEE NOTES TO SUPPLEMENTARY INFORMATION 53

95 ST. HELENA UNIFIED SCHOOL DISTRICT SCHEDULE OF CHARTER SCHOOLS FOR THE FISCAL YEAR ENDED JUNE 30, 2014 This schedule is provided to list all charter schools chartered by the District and displays information for each charter school on whether or not the charter school is included in the District audit. There were no charter schools in the St. Helena Unified School District. SEE NOTES TO SUPPLEMENTARY INFORMATION 54

96 ST. HELENA UNIFIED SCHOOL DISTRICT SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS FOR THE FISCAL YEAR ENDED JUNE 30, 2014 Program Name: U.S. Deparbnent of Agriculture: Passed through the California Deparbnent of Education (CDE): Child Nutrition Cluster: National School Lunch (Sec 4 and Sec 11) SchoolBreakfastNeedy Meal Supplements Federal Catalog Number * * * Pass-Through Entity Identifying Number 13523/ Program Expenditures $ 151,467 55,398 14,329 Total U.S. Deparbnent of Agriculture ** 221,194 US. Deparbnent of Education: NCLB: Title I, Part A, Basic Grants Low Income and Neglected Special Education Cluster: IDEA, Basic Local Assistance, Part B, Section 611 IDEA, Mental Health Allocation Plan, Part B, Section 611 Subtotal Special Education Cluster Vocational Programs- Adult Sec 131 (Carl Perkins Act) NCLB: Title ill, Limited English Proficient (LEP) Student Program NCLB: Title II, Part A, Teacher Quality * A , ,510 23, ,700 13,880 30,257 46,951 Total U.S. Deparhnent of Education 446,383 Total Federal Programs * Programs considered major federal programs for the year ended June 30, ** The amounts presented do not include fair market value of all commodities received of $19,721. $ 667,577 SEE NOTES TO SUPPLEMENTARY INFORMATION 55

97 ST. HELENA UNIFIED SCHOOL DISTRICT RECONCILIATION OF UNAUDITED ACTUAL FINANCIAL REPORT WITH AUDITED FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2014 June 30,2014, Annual Unaudited Actual Financial Report Fund Balance Adjustments and Reclassifications Increasing (Decreasing) the Fund Balance: To conform with GAAP, activity reported separately by the District in certain Special Revenue Funds is reported in the General Fund in these financial statements. Net Adjustments and Reclassifications June 30,2014, Audited Financial Statement Fund Balance General Fund Adult Education Fund Special Reserve Special Reserve Deferred Fund for Other Fund for Other Maintenance Than Capital Postemployment Fund Outlay Projects Benefits $ 2,023A17 $ 13 $ 519,768 $ 1,554,817 $ 202, ,276,857 (13) (519,768) (1,554,817) (202,259) --"----' '- ;.; '- ;.;.. 2,276,857 (13) (519,768) (1,554,817) (202,259) $ 4,300,274 $ 0 $ 0 $ 0 $ 0 ==== ==== ========= Auditor's Comment The audited financial statements of all other funds were in agreement with the Unaudited Actual Financial Report for the year ended June 30, SEE NOTES TO SUPPLEMENTARY INFORMATION 56

98 ST. HELENA UNIFIED SCHOOL DISTRICT SCHEDULE OF FINANCIAL TRENDS AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2014 General Fund Revenues and Other Financial Sources Budget $ 25,677,123 $ 25,974,765 $ 24,799,551 $ 23,223,700 Expenditures 25,629,072 24,787,007 23,111,586 22,602,453 Other Uses and Transfers Out 1,079, , , ,097 Total Outgo 26,708,518 25,162,958 23,759,828 22,949,550 Change in Fund Balance (Deficit) (1,031,395) 811,807 1,039, ,150 Ending Fund Balance Available Reserves Reserve for Economic Uncertainties Unassigned Fund Balance Available Reserves as a Percentage of Total Outgo Total Long-Term Debt Average Daily Attendance at P-2 $ 3,950,658 $ 4,300,274 $ 3,488,467 $ 2,448,744 $ 3,364,241 $ 3,246,549 $ 2,677,804 $ 1,898,731 $ 3,364,241 $ 3,246,549 $ 2,677,804 $ 1,898,731 $ 0 $ 0 $ 0 $ 0 ========= ======== ======== ======== 12.6% 12.9% 11.3% 8.3% $ 65,630,116 $ 68,247,490 $ 68,529,295 $ 37,334,929 1,185 1,195 1,238 1,302 This schedule discloses the District's financial trends by displaying past years' data along with current year budget information. These financial trend disclosures are used to evaluate the District's ability to continue as a going concern for a reasonable period of time. The General Fund balance has increased $2,125,680 during the past three years. For a District this size, the state recommends available reserves of 3% of general fund expenditures, other uses and transfers out (total outgo). Available reserves consist of all unassigned fund balances and all funds reserved for economic uncertainty contained within the General Fund. Total long-term debt increased $30,912,561 during the past two years due to the sale of general obligation bonds in fiscal year Average daily attendance decreased by 108 during the past two years. The amounts reported as Budget are presented for additional analysis and has not been audited. SEE NOTES TO SUPPLEMENTARY INFORMATION 57

99 ST HELENA UNIFIED SCHOOL DISTRICT COMBINING BALANCE SHEET NON-MAJOR FUNDS JUNE 30, 2014 Assets Bond Interest and Redemption Capital County School Cafeteria Fund Fund Facilities Fund Facilities Fund Special Reserve Fund for Capital Outlay Projects Total Non-Major Governmental Funds Cash Accounts Receivable Stores Inventory Total Assets Liabilities and Fund Balances Liabilities: Accounts Payable Total Liabilities Fund Balances: Nonspendable Restricted Assigned Total Fund Balances Total Liabilities and Fund Balances $ 24,241 $ 3,311,186 $ 1,263,011 $ 312,559 34,632 16,920 4,396 $ 63,269 $ 3,328,106 $ 1,263,011 $ 312,559 $ ,396 57,936 $ 3,328,106 $ 1,263,011 $ 312,559 62,332 3,328,106 1,263, ,559 $ 63,269 $ 3,328,106 $ 1,263,011 $ 312,559 $ 1,627,405 $ 6,538,402 51,552 4,396 $ 1,627,405 $ 6,594,350 $ ,396 4,961,612 $ 1,627,405 1,627,405 1,627,405 6,593,413 $ 1,627,405 $ 6,594,350 THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS 58

100 ST. HELENA UNIFIED SCHOOL DISTRICT COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES NON-MAJOR FUNDS FOR THE FISCAL YEAR ENDED JUNE 30, 2014 Revenues Bond Interest Special and Reserve Fund Redemption Capital County School for Capital Cafeteria Fund Fund Facilities Fund Facilities Fund Outlay Projects Federal Revenue $ 221,194 $ 636,631 Other State Revenue 17,016 5,604 Other Local Revenue 64,328 2,652,855 $ 649,077 $ 1,608 $ 5,895 Total Revenues 302,538 3,295, ,077 1,608 5,895 Expenditures Classified Salaries 252,645 Employee Benefits 110,525 Books and Supplies 140,855 Services and Other Operating Expenditures 1,592 14,255 Capital Outlay 7,412 Debt Service: Principal Retirement 1,210,000 Interest and Fiscal Charges 381 1,085,735 Other Outgo 2,558 Total Expenditures 513,410 2,298, ,255 0 Excess of Revenues Over (Under) Expenditures (210,872) 996, ,077 (12,647) 5,895 Other Financing Sources: Operating Transfers In 225, ,951 Excess of Revenues and Other Sources Over (Under) Expenditures 14, , ,077 (12,647) 156,846 Fund Balances- July 1, ,204 2,331, , ,206 1,470,559 Fund Balances- June 30, 2014 $ 62,332 $ 3,328,106 $ 1,263,011 $ 312,559 $ 1,627,405 Total Non-Major Governmental Funds $ 857,825 22,620 3,373,763 4,254, , , ,855 15,847 7,412 1,210,000 1,086,116 2,558 2,825,958 1,428, ,951 1,804,201 4,789,212 $ 6,593,413 THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS 59

101 ST HELENA UNIFIED SCHOOL DISTRICT COMBINING STATEMENT OF CHANGES IN ASSETS AND LIABILITIES AGENCY FUND- STUDENT ACTIVITIES FOR THE FISCAL YEAR ENDED JUNE 30, 2014 Beginning Balances Additions Deductions Ending Balance St. Helena High School- Student Activities ASSETS Cash $ 67?52 $ 237,596 $ 208,858 $ LIABILITIES Due to Student Groups $ 67,752 $ 237,596 $ 208,858 $ 96,490 96,490 RLS Middle School- Student Activities ASSETS Cash $ 433 $ 1,714 $ 697 $ LIABILITIES Due to Student Groups $ 433 $ 1,714 $ 697 $ 1,450 1,450 Total- All Agency Funds ASSETS Cash $ 68,185 $ 239,310 $ 209,555 $ LIABILITIES Due to Student Groups $ 68,185 $ 239,310 $ 209,555 $ 97,940 97,940 THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS 60

102 ST. HELENA UNIFIED SCHOOL DISTRICT NOTES TO SUPPLEMENTARY INFORMATION FOR THE YEAR ENDED JUNE 30, 2014 NOTE 1- PURPOSE OF STATEMENTS AND SCHEDULES A. Schedule of Average Daily Attendance Average daily attendance is a measurement of the number of pupils attending classes of the District. The purpose of attendance accounting from a fiscal standpoint is to provide the basis on which apportionments of state funds are made to school districts. This schedule provides information regarding the attendance of students at various grade levels and in different programs. B. Schedule of Instructional Time This schedule presents information on the amount of instructional time and number of days offered by the District and whether the District complied with the provisions of Education Code Sections through The District has received incentive funding for increasing instructional time as provided by the Incentives for Longer Instructional Day, and has not met its local control funding formula target. C. Schedule of Charter Schools This schedule is provided to list all charter schools chartered by the District and displays information for each charter school on whether or not the charter school is included in the District audit. D. Schedule of Expenditures of Federal Awards The accompanying schedule of expenditures of Federal awards includes the Federal grant activity of the District and is presented on the modified accrual basis of accounting. The information in this schedule is presented in accordance with requirements of the United States Office of Management and Budget Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations. Federal revenue reported in the Bond Interest and Redemption Fund includes $636,631 of Qualified School Construction Bond Interest subsidy payments which are exempt from the OMB A-133 scope, and have been excluded from this schedule. E. Reconciliation of Unaudited Actual Financial Report with Audited Financial Statements This schedule provides the information necessary to reconcile the fund balances of all funds as reported on the Unaudited Actual Financial Report to the audited financial statements. F. Schedule of Financial Trends and Analysis This schedule is presented to improve the evaluation and reporting of the going concern status of the District. G. Combining Statements and Individual Fund Schedules Combining statements and individual fund schedules are presented for purposes of additional analysis, and are not a required part of the District's basic financial statements. These statements and schedules present more detailed information about the financial position and financial activities of the District's individual funds. 61

103 OTHER INDEPENDENT AUDITOR'S REPORTS SECTION

104 OODELL, PORTER, SANCHEZ& BRIGHT, LLP CERTIFIED P U B L C ACCOUNTANTS JOHN L. GOODELL, CPA VIRGINIA K. PORTER, CPA BEVERLY A. SANCHEZ, CP.'\ SUZY H. BRIGHT, CPA RICHARD]. GOODELL, CPA MICHELLE M. HANSON, CPA INDEPENDENT AUDITOR'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS Board of Trustees St. Helena Unified School District St. Helena, California We have audited, in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States, the financial statements of the governmental activities, each major fund, and the aggregate remaining fund information of St. Helena Unified School District, as of and for the year ended June 30, 2014, and the related notes to the financial statements, which collectively comprise St. Helena Unified School District's basic financial statements and have issued our report thereon dated December 12, Internal Control Over Financial Reporting In planning and performing our audit of the financial statements, we considered St. Helena Unified School District's, internal control over financial reporting (internal control) to determine the audit procedures that are appropriate in the circumstances for the purpose of expressing our opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of St. Helena Unified School District's internal control. Accordingly, we do not express an opinion on the effectiveness of St. Helena Unified School District's internal control. A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, misstatements on a timely basis. A materinl weakness is a deficiency, or combination of deficiencies in internal control, such that there is a reasonable possibility that a material misstatement of the entity's financial statements will not be prevented, or detected and corrected on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance Folsom Boulevard t Suite 301 t Sacramento, CA (916) t FAX (916)

105 Board of Trustees St. Helena Unified School District Page Two Our consideration of internal control was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control that might be material weaknesses or, significant deficiencies and therefore, material weaknesses or significant deficiencies, may exist that were not identified. Given these limitations, during our audit we did not identify any deficiencies in internal control that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified. We did identify a certain deficiency in internal control, described in the accompanying schedule of findings and questioned costs as item that we consider to be a significant deficiency. Compliance and Other Matters As part of obtaining reasonable assurance about whether St. Helena Unified School District's financial statements are free of material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards. St. Helena Unified School District's Responses to Findings St. Helena Unified School District's response to the findings identified in our audit is described in the accompanying schedule of findings and questioned costs. St. Helena Unified School District's response was not subjected to the auditing procedures applied in the audit of the financial statements and, accordingly, we express no opinion on it. Purpose of this Report The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the entity's internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the entity's internal control and compliance. Accordingly, this communication is not suitable for any other purpose. December 12, 2014 ~.P~. ~r-~ll~ GOODELL, PORTER, SANCHEZ & BRIGHT, LLP Certified Public Accountants 63

106 OODELL, PoRTER, SANCHEZ& BRIGHT, LLP CERTIFIED P U B L I C ACCOUNTANTS john L. GOODELL. CPA VIRGINIA K. PORTER, CPA BEVERLY A. SANCHEZ, CPA SUZY H. BRIGHT, CPA RICHARD J. GOODELL, CPA MICHELLE M. HANSON, CPA INDEPENDENT AUDITOR'S REPORT ON COMPLIANCE FOR EACH MAJOR PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE REQUIRED BY OMB CIRCULAR A-133 Board of Trustees St. Helena Unified School District St. Helena, California Report on Compliance for Each Major Federal Program We have audited St. Helena Unified School District's compliance with the types of compliance requirements described in the OMB Circular A-133 Compliance Supplement that could have a direct and material effect on each of St. Helena Unified School District's major federal programs for the year ended June 30, St. Helena Unified School District's major federal programs are identified in the summary of auditor's results section of the accompanying schedule of findings and questioned costs. Management's Responsibility Management is responsible for compliance with the requirements of laws, regulations, contracts, and grants applicable to its federal programs. Auditor's Responsibility Our responsibility is to express an opinion on compliance for each of St. Helena Unified School District's major federal programs based on our audit of the types of compliance requirements referred to above. We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States of America; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; and OMB Circular A-133, Audits of States, Local Governments, and Non Profit Organizations. Those standards and OMB Circular A-133 require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the types of compliance requirements referred to above that could have a direct and material effect on a major federal program occurred. An audit includes exa.ntiriing, on a test basis, evidence about St. Helena Unified School District's compliance with those requirements and performing such other procedures as we c_onsidered necessary in the circumstances. We believe that our audit provides reasonable basis for our opinion on compliance for each major federal program. However, our audit does not provide a legal determination of St. Helena Unified School District's compliance. Opinion on Each Major Federal Program In our opinion, St. Helena Unified School District, complied, in all material respects, with the types of compliance requirements referred to above that could have a direct and material effect on each of its major federal programs for the year ended June 30, Folsom Boulevard,. Suire 301 t Sacramenro, CA t (916) t FAX (916)

107 Board of Trustees St. Helena Unified School District Page Two Report on Internal Control Over Compliance Management of St. Helena Unified School District, is responsible for establishing and maintaining effective internal control over compliance with the types of compliance requirements referred to above. In planning and performing our audit of compliance, we considered St. Helena Unified School District's internal control over compliance with the types of requirements that could have a direct and material effect on each major federal program to determine the auditing procedures that are appropriate in the circumstances for the purpose of expressing an opinion on compliance for each major federal program and to test and report on internal control over compliance in accordance with OMB Circular A-133, but not for the purpose of expressing an opinion on the effectiveness of internal control over compliance. Accordingly, we do not express an opinion on the effectiveness of St. Helena Unified School District's internal control over compliance. Our consideration of internal control over compliance was for the limited purpose described in the preceding paragraph and was not designed to identify all deficiencies in internal control over compliance that might be material weaknesses or significant deficiencies and therefore, material weaknesses or significant deficiencies may exist that were not identified. However, as discussed below, we identified certain deficiencies in internal control over compliance that we consider to be material weaknesses and significant deficiencies. A deficienctj in internal control over compliance exists when the design or operation of a control over compliance does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, noncompliance with a type of compliance requirement of a federal program on a timely basis. A material weakness in the internal control over compliance is a deficiency, or a combination of deficiencies, in internal control over compliance, such that there is a reasonable possibility that material noncompliance with a type of compliance requirement of a federal program will not be prevented, or detected and corrected, on a timely basis. We did not identify any deficiencies in internal control over compliance that we consider to be material weaknesses, as defined above. A significant deficienctj in internal control over compliance is a deficiency, or a combination of deficiencies, in internal control over compliance with a type of compliance requirement of a federal program that is less severe than a material weakness in internal control over compliance, yet important enough to merit attention by those charged with governance. We consider the deficiency in internal control over compliance described in the accompanying schedule of findings and questioned costs as item to be a significant deficiency. St. Helena Unified School District's response to the internal control over compliance finding identified in our audit is described in the accompanying schedule of findings and questioned costs. St. Helena Unified School District's response was not subjected to the auditing procedures applied in the audit of compliance and, accordingly, we express no opinion on the response. The purpose of this report on internal control over compliance is solely to describe the scope of our testing of internal control over compliance and the results of that testing based on the requirements of OMB Circular A Accordingly, this report is not suitable for any other purpose. December 12, 2014 ~,P~,~~r~.LV GOODELL, PORTER, SANCHEZ & BRIGHT, LLP Certified Public Accountants 65

108 OODELL, PoRTER, SANCHEZ& BRIGHT, LLP CERTIFIED P U B L I C ACCOUNTANTS JOHN L. GOODELL, CPA VIRGINIA K. PORTER, CPA BEVERL\ A. SANCHEZ, CPA SUZY H. BRIGHT, CPA RICHARD]. GOODELL, CPA MICHELLE M. HANSON, CPA INDEPENDENT AUDITOR'S REPORT ON COMPLIANCE WTTII STATE LAWS AND REGULATIONS Board of Trustees St Helena Unified School District St Helena, California We have audited St Helena Unified School District's compliance with the types of compliance requirements described in the Standards and Procedures for Audits of California K-12 Local Education Agencies that could have a direct and material effect on each of St Helena Unified School District's State government programs as noted below for the year ended June 30, Management's Responsibility Management is responsible for compliance with the requirements of State laws and regulations. Auditor's Responsibility Our responsibility is to express an opinion on compliance with State laws and regulations of St Hele..;a Unified School District's State government programs based on our audit of the types of compliance requirements referred to below. We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States of America; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; and the Standards and Procedures for Audits of California K-12 Local Education Agencies Those standards require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the types of compliance requirements referred to above that could have a direct and material effect on the applicable State laws and regulations listed below occurred. An audit includes examining, on a test basis, evidence about St Helena Unified School District's compliance with those requirements and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. However, our audit does not provide a legal determination of St Helena Unified School District's compliance with those requirements. In connection with the audit referred to above, we selected and tested transactions and records to determine the DiStrict's compliance with the state laws and regulations applicable to the following items: Description Attendance Reporting Teacher Certification and Mis-assignments Kindergarten Continuance Independent Study Continuation Education Instructional Time for school districts Instructional Materials general requirements Ratio of Administrative Employees to Teachers Classroom Teacher Salaries Early Retirement Incentive GANN Limit Calculation Procedures in the Audit Guide Procedures Performed Yes Yes Yes No (see next page) Not Applicable Yes Yes Yes Yes Yes Yes 7801 Folsom Boulevard t Suite 301 t Sacramento, CA (916) t FAX (916)

109 Board of Trustees St. Helena Unified School District Page Two Description School Accountability Report Card Juvenile Court Schools Local Control Funding Formula Certification California Clean Energy Jobs Act After School Education and Safety Program: General Requirements After School Before School Education Protection Account Funds Common Core Implementation Funds Unduplicated Local Control Funding Formula Pupil Counts Charter Schools: Contemporaneous Records of Attendance Mode of Instruction Non Classroom-Based Instruction/Independent Study Determination of Funding for Non Classroom-Based Instruction Annual Instructional Minutes - Classroom Based Charter School Facility Grant Program Procedures in Procedures the Audit Guide Performed 3 Yes 8 Not Applicable 1 Yes 3 No (see below) 4 Not Applicable 5 Not Applicable 6 Not Applicable 1 Yes 3 Yes 3 Yes 8 Not Applicable 1 Not Applicable 15 Not Applicable 3 Not Applicable 4 Not Applicable 1 Not Applicable Procedures were not performed for Independent Study attendance because the average daily attendance generated by the program was below the level required for testing. Procedures were not performed for California Clean Energy Jobs Act because there were no expenditures. Opinion on Each State Government Program In our opinion, St. Helena Unified School District, complied, in all material respects, with the types of compliance requirements referred to above that could have a direct and material effect on each of its State government programs for the year ended June 30, Other Matters The results of our auditing procedures disclosed instances of noncompliance, which are required to be reported in accordance with the Standards and Procedures for Audits of California K-12 Local Education Agencies and which are described in the accompanying schedule of findings and questioned costs as item Our opinion on State government programs is not modified with respect to these matters. St. Helena Unified School District's Response to Findings St. Helena Unified School District's response to the finding identified in our audit are described in the accompanying schedule of findings and questioned costs. St. Helena Unified School District's responses were not subjected to the auditing procedures applied in the audit of the financial statements and, accordingly, we express no opinion on them. Purpose of this Report The purpose of this report on compliance is solely to describe the scope of our testing of compliance and the results of that testing based on the requirements of the Standards and Procedures for Audits of California K-12 Local Education Agencies published by the Education Audit Appeals Panel. Accordingly, this report is not suitable for any other purpose. December 12, 2014 ~.~.~... ~ ~ LLf GOODELL, PORTER, SANCHEZ & BRIGHT, LLP Certified Public Accountants 67

110 FINDINGS AND QUESTIONED COSTS SECTION

111 ST. HELENA UNIFIED SCHOOL DISTRICT SUMMARY OF AUDIT FINDINGS AND QUESTIONED COSTS FOR THE FISCAL YEAR ENDED JUNE 30, 2014 Section I - Summary of Auditor's Results Financial Statements Type of auditor's report issued: Internal control over financial reporting: Material weakness( es) identified? Significant deficiency(ies) identified that are not considered to be material weakness? Noncompliance material to financial statements noted? Federal Awards Internal control over financial reporting: Material weakness(es) identified? Significant deficiency(ies) identified that are not considered to be material weakness? Type of auditor's report issued on compliance for major programs Any audit findings disclosed that are required to be reported in accordance with Section 510 (a) of OMB Circular A-133? Identification of major programs CFDA Number Unqualified Yes ~Yes Yes Yes ~Yes Unqualified Yes ~No _None reported _2LNo _2LNo _None reported _2LNo Name of Federal Program or Cluster , , Child Nutrition Program Cluster NCLB: Title I, Part A, Basic Grants Low Income and Neglected Dollar threshold used to distinguish between Type A and Type B programs: $300,000 Auditee qualified as low-risk auditee? State Awards Internal control.over state programs: Material weakness(es) identified? Significant deficiency(ies) identified that are not considered to be material weakness? Type of auditor's report issued on compliance for state programs: ~Yes _Yes Unqualified _No _2LNo None reported 68

112 ST. HELENA UNIFIED SCHOOL DISTRICT SUMMARY OF AUDIT FINDINGS AND QUESTIONED COSTS FOR THE FISCAL YEAR ENDED JUNE 30, 2014 Section II- Financial Statements Findings CASH RECEIPTS Criteria Sound accounting policies require timely deposits to ensure the District earns the maximum possible rate of return on its assets and to limit the risk of a misappropriation. Additionally, good internal accounting control procedures include a requirement that two individuals verify all cash count sheets. Statement of Condition: During our testing of cash receipts, it was noted several checks were not deposited within a month of the check date. It appears this occurs both due to sites not submitting the checks in a timely manner and the District Office not depositing receipts when received. In addition, cash receipt count sheets were only endorsed by one individual. Questioned Costs: The conditions referred to above were the result of our test of an attribute of the control system. We considered defining the dollar amount by extending the error rate to the total population, but determined this type of analysis would likely result in an incorrect conclusion. Cause: District policies overseeing the cash receipts are not properly followed. Effect or Potential Effect: The possibility exists that controls may be circumvented if checks are held for undue periods of time prior to deposit. The checks may become stale-dated, the payer's account may be closed, or the District may lose potential interest earned on undeposited funds. In addition, misappropriation of assets due to an error or fraud is elevated when cash deposits are not made in a timely fashion and verified by two individuals. Recommendation: We recommend the District communicate to those involved in the receipt of funds, the importance of submitting all items received in a timely fashion for deposit. Procedures should be implemented to ensure that checks received by the District, whether at sites or at the District Office, are deposited in a timely fashion. Additionally, all receipts should be counted by two (2) individuals and count sheets should be documented by signatures of the individual performing the counts on the count sheets. The count sheets should be retained with the deposit documentation to provide a complete audit trail. District Response: The District agrees with audit recommendation. The District will communicate to those involved in the receipt of funds the importance of submitting all items received in a timely fashion for deposit. All receipts shall be counted by two individuals and documented by signatures. 69

113 ST. HELENA UNIFIED SCHOOL DISTRICT SUMMARY OF AUDIT FINDINGS AND QUESTIONED COSTS FOR THE FISCAL YEAR ENDED JUNE 30, 2014 Section III-Federal Award Findings and Questioned Costs PERSONNEL ACTNITY REPORTS Federal Agency: Pass-Through Entity: Federal Program: CFDA Number: US Department of Agriculture California Department of Education Child Nutrition Cluster , , Criteria: Office of Management and Budget (OMB) Circular A-87 states that if employees are paid with federal funds, they generally must maintain time distribution records that identify the specific federal program on which they worked for a certain percentage of time. Employees working solely on a single federal program are generally required to maintain periodic certifications, in which the employee or supervisor attest every six months that the employee worked on a single federal program. Employees working on multiple federal programs (or federal and non-federal programs) are required to maintain monthly personnel activity reports. Statement of Condition: During our testing, it was noted the District did not collect Personnel Activity Reports (time studies) on a timely basis for its employees charged to the National School Lunch Program. Questioned Costs: Based on our review of employee records and our inquiry of District employees and management, we were able to satisfy ourselves the personnel costs charged, to federal programs for are allowable. Cause: The District did not require Personnel Activity Report for employees with 100% of their time charged to the food service program. Effect or Potential Effect: By not obtaining and retaining current personnel activity reports, it is difficult for the District to document that the employee time charged is an allowable program expense. Recommendation: We recommend each employee with any portion of their salary charged to a federal program complete personnel activity reports as required by the OMB Circular A-87. The reports should be reconciled to support the employees time charged to the program. District Response: The District agrees with the audit recommendation. The District will reconcile reports with each federally funded employee, as required by the federal law, to support the time charged. 70

114 ST. HELENA UNIFIED SCHOOL DISTRICT SUMMARY OF AUDIT FINDINGS AND QUESTIONED COSTS FOR THE FISCAL YEAR ENDED JUNE 30,2014 Section IV -State Award Findings and Questioned Costs QUARTERLY REPORT OF COMPLAINT DATA Criteria: Pursuant to the provisions of Education Code Section 35186, the District shall provide a timely, approved, quarterly report summarizing complaint data identifying teacher missassignment or vacancies for comparison to the most recent School Accountability Report Card as required by the provisions of subdivision (b)(s) of Education Code Section Statement of Condition: The District Governing Board approved the third quarter report summarizing complaint data at the same time the fourth quarter report was approved, resulting in an untimely approval of the third quarter report. Questioned Costs: There is no direct cost associated with the quarterly reports summarizing complaint data. Cause: Procedures for approving quarterly complaint reports were not consistently followed. Effect or Potential Effect: There is no direct financial impact with this finding, however, the District is at risk of not addressing complaints in a timely manner. Recommendation: We recommend the District implement procedures to provide timely and approved quarterly reports summarizing complaint data. District Response: The District agrees with audit recommendation. The District will implement procedures to provide timely approved quarterly reports. 71

115 ST. HELENA UNIFIED SCHOOL DISTRICT SUMMARY SCHEDULE OF PRIOR YEAR AUDIT FINDINGS FOR THE FISCAL YEAR ENDED JUNE 30, 2014 There were no findings or recommendations considered reportable conditions determined as a result of our audit of St. Helena Unified School District for the year ended June 30,

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117 APPENDIX B GENERAL AND FINANCIAL INFORMATION ABOUT THE DISTRICT The information in this and other sections concerning the District's operations and operating budget is provided as supplementary information only, and it should not be inferred from the inclusion of this information in this Official Statement that the principal of or interest on the Refunding Bonds is payable from the General Fund of the District. The Refunding Bonds are payable from the proceeds of an ad valorem tax required to be levied by the County in an amount sufficient for the payment thereof. See "SECURITY FOR THE REFUNDING BONDS" in the front half of the Official Statement. The District GENERAL INFORMATION The District encompasses territory in the central portion of Napa County, including the City of St. Helena and adjacent unincorporated area of the County. The District currently operates one primary school, one elementary school, one middle school and one high school. The District s current enrollment is approximately 1,269 students. Basic Aid Status/Community Supported District The District s local property taxes have exceeded the State s calculated revenue limit for the District for more than the past ten fiscal years, resulting in the District being treated as a Basic Aid district for purposes of general purpose education funding by the State. As a Basic Aid District, the District has not received a general purpose revenue limit entitlement from the State, but instead has been entitled to keep its share of local property taxes in excess of the revenue limit. With implementation of the new education funding formula known as the Local Control Funding Formula (the LCFF ) commencing in fiscal year , a school district, such as the District, which has property tax revenues which exceed its entitlement under the LCFF is entitled to keep its local property tax revenues which exceed its LCFF funding entitlement, essentially maintaining its status as Basic Aid, sometimes referred to as a Community Supported District. The District expects to continue to have local property tax revenue in excess of its LCFF entitlement for the near future, including following full implementation of LCFF in fiscal year For more information on the District s Basic Aid status, see -Basic Aid District below. B-1

118 Governing Board The District is governed by a five-member Board of Trustees, each member of which is elected to a four-year term. Elections for positions to the Board of Trustees are held every two years, alternating between two and three available positions. Current members of the Board of Trustees, together with their office and the date their term expires, are listed below. Name Office Term Expires Jeannie Kerr President November 2016 Jeff Conwell Vice President November 2016 Maria Haug Clerk November 2018 Alex Shantz Trustee November 2018 Cynthia Smith Trustee November 2018 Administration. The Superintendent of the District is appointed by the Board and is responsible for management of the day-to-day operations of the District and supervises the work of other District administrators. To follow are brief biographies of the Superintendent and the Assistant Superintendent, Business Services. Superintendent: Marylou Wilson, Ed.D. Effective July 1, 2014, Dr. Marylou Wilson joined the District as the Superintendent. Dr. Wilson has worked for almost thirty years in California Public School Education, with the last twenty serving students as an Educational Administrator. Prior to joining the District team, she served as the Assistant Superintendent of Human Resources for Fairfield-Suisun Unified School District. Dr. Wilson is experienced in small, medium, and large districts as she has served diverse populations with a variety of needs throughout the state of California. She obtained her Doctorate in Organizational Leadership from the University of La Verne, and both her Masters and Bachelors of Arts in Education from San Diego State University. Andrea Stubbs, Chief Business Official. Effective April 1, 2015, Andrea Stubbs will join the District as the Chief Business Official. She has worked in California public school education for over 22 years. Prior to joining St. Helena Unified, Mrs. Stubbs served as a Chief Business Official for two other school districts. Before taking on the roll of CBO, Mrs. Stubbs worked as a school site administrator in both the elementary and secondary levels, and taught a variety of subjects in grades K-12. She received a certificate in School Business Management from the University of Southern California, earned a Master's Degree in Education Administration from Chapman University, a Bachelor's Degree in Music from San Francisco State University, and possesses two teaching credentials in addition to her administrative credential. B-2

119 Enrollment and Average Daily Attendance The following table shows recent enrollment and average daily attendance history for the District, with estimated figures for fiscal year ST. HELENA UNIFIED SCHOOL DISTRICT Annual Enrollment and Average Daily Attendance Fiscal Years through (Estimated) Fiscal Year Enrollment % Change ADA % Change , , ,376 (0.9) 1, ,351 (1.8) 1,315 (1.4) ,343 (0.6) 1,273 (3.2) , , , ,302 (0.6) ,295 (5.3) 1,238 (4.9) ,255 (3.1) 1,195 (3.5) (1) 1, , (1) 1,254 (1.2) 1,185 (1.3) (1) District projections. Source: Enrollment: California Department of Education; St. Helena Unified School District for ADA: St. Helena Unified School District. Employee Relations The District employs full-time equivalent and part-time certificated, and 55.2 classified, management and supervisory employees. Two unions represent District employees. The following table identifies the bargaining units and the term through which the current contract extends. The District has not experienced any recent work disputes with employees or any work-related disruptions. ST. HELENA UNIFIED SCHOOL DISTRICT Employee Bargaining Groups Bargaining Unit Current Contract Expiration Date St. Helena Teacher s Association June 30, 2016 California Schools Employees Association Chapter 90 June 30, 2016 Source: St. Helena Unified School District. District Insurance Coverage The District is self-insured for worker s compensation and property/liability exposures through its membership in North Bay Schools Insurance Authority ( NBSIA ). Worker s compensation benefits are provided at statutory limits. Property coverage limit is $300 million with a $5,000 deductible per occurrence. General liability protection is provided to $20 million per occurrence with no deductible excepting those activities identified as high risk events, which incur a $7,500 deductible should they result in a covered loss. B-3

120 The District is exposed to various risks of loss related to torts, theft of, damage to, and destruction of assets, errors and omissions, injuries to employees and natural disasters. During fiscal year the District contracted with North Bay Schools Authority for property, liability, and theft insurance coverage. Settled claims have not exceeded this commercial coverage in any of the past three years. DISTRICT FINANCIAL INFORMATION The following selected financial information provides a brief overview of the District s finances. This financial information has been extracted from the District s audited financial statements and, in some cases, from unaudited information provided by the District. The most recent audited financial statements of the District with an unqualified auditor s opinion is included as Appendix A hereto. See APPENDIX A Audited Financial Statements of the District for Fiscal Year Ending June 30, Education Funding Generally School districts in California receive operating income primarily from two sources: the State funded portion which is derived from the State s general fund, and a locally funded portion, being the district s share of the one percent general ad valorem tax levy authorized by the California Constitution. As a result, decreases or deferrals in education funding by the State could significantly affect a school district s revenues and operations. From to , California school districts operated under general purpose revenue limits established by the State Legislature. In general, revenue limits were calculated for each school district by multiplying (1) the average daily attendance ( ADA ) for such district by (2) a base revenue limit per unit of ADA. The revenue limit calculations were adjusted annually in accordance with a number of factors designated primarily to provide cost of living increases and to equalize revenues among all California school districts of the same type. Funding of the revenue limit was provided by a mix of local property taxes and State apportionments of basic and equalization aid. Generally, the State apportionments amounted to the difference between the District's revenue limit and its local property tax revenues. Districts which had local property tax revenues which exceeded its revenue limit entitlement were deemed Basic Aid District and received full funding from local property tax revenues, and were entitled to keep those tax revenues which exceeded its revenue limit funding entitlement. The fiscal year State budget package replaced the previous K-12 finance system with a new formula known as the Local Control Funding Formula (the LCFF ). Under the LCFF, revenue limits and most state categorical programs were eliminated. School districts instead receive funding based on the demographic profile of the students they serve and gain greater flexibility to use these funds to improve outcomes of students. The LCFF creates funding targets based on student characteristics. For school districts and charter schools, the LCFF funding targets consist of grade span-specific base grants plus supplemental and concentration grants that reflect student demographic factors. The LCFF includes the following components: A base grant for each local education agency per unit of ADA, which varies with respect to different grade spans. The base grant is $2,375 more than the average revenue limit provided prior to LCFF implementation. The base grants will be adjusted upward each year to reflect cost-of-living increases. B-4

121 In addition, grades K-3 and 9-12 are subject to adjustments of 10.4% and 2.6%, respectively, to cover the costs of class size reduction in grades K-3 and the provision of career technical education in grades A 20% supplemental grant for English learners, students from low-income families and foster youth to reflect increased costs associated with educating those students. An additional concentration grant of up to 50% of a local education agency s base grant, based on the number of English learners, students from lowincome families and foster youth served by the local agency that comprise more than 55% of enrollment. An economic recovery target to ensure that almost every local education agency receives at least their pre-recession funding level, adjusted for inflation, at full implementation of the LCFF. The LCFF was initiated in fiscal year and will be phased in gradually over eight years. Beginning in fiscal year , an annual transition adjustment was required to be calculated for each school district, equal to each district s proportionate share of the appropriations included in the State budget (based on the percentage of each district s students who are low-income, English learners, and foster youth ( Targeted Students )), to close the gap between the prior-year funding level and the target allocation at full implementation of LCFF. In each year, districts will have the same proportion of their respective funding gaps closed, with dollar amounts varying depending on the size of a district s funding gap. Based on revenue projections, districts will reach what is referred to as full funding in eight years, being fiscal year This projection assumes that the State s economy will improve each year; if the economy falters it could take longer to reach full funding. The target LCFF amounts for State school districts and charter schools based on grade levels and Targeted Students is shown below. Grade Span Funding at Full LCFF Implementation (Target Amount) K-3 Class Size Reduction and 9-12 Adjustments Average Assuming 0% Targeted Students Average Assuming 25% Targeted Students Average Assuming 50% Targeted Students Average Assuming 100% Targeted Students Grade Span Base Grant (1) K-3 $6,845 $712 $7,557 $7,935 $8,313 $10, ,947 N/A 6,947 7,294 7,642 9, ,154 N/A 7,154 7,512 7,869 10, ,289 $216 8,505 8,930 9,355 12,119 (1) Does not include adjustments for cost of living. Source: California Department of Education. The new legislation included a hold harmless provision which provided that a district or charter school would maintain total revenue limit and categorical funding at least equal to its level, unadjusted for cost of living. B-5

122 The LCFF includes an accountability component. Districts are required to increase or improve services for English language learners, low income, and foster youth students in proportion to supplemental and concentration grant funding received. All school districts, county offices of education, and charter schools are required to develop and adopt local control and accountability plans, which identify local goals in areas that are priorities for the State, including pupil achievement, parent engagement, and school climate. County superintendents review and provide support to the districts under their jurisdiction, and the Superintendent of Public Instruction performs a corresponding role for county offices of education. In addition, the Budget created the California Collaborative for Education Excellence to advise and assist school districts, county offices of education, and charter schools in achieving the goals identified in their plans. Under the LCFF and related legislation, the State will continue to measure student achievement through statewide assessments, produce an Academic Performance Index for schools and subgroups of students, determine the contents of the school accountability report card, and establish policies to implement the federal accountability system. Community Supported Districts (formerly known as Basic Aid ) are those whose local property tax revenues exceed the funding entitlement under the LCFF. Community supported districts do not receive any funds from the State appropriation, however, it does receive funds from the State for categorical and grant programs restricted to a special population or for certain purposes such as disabled students or instructional equipment. The current law in California allows these districts to keep the excess property tax revenues without penalty. The implication for community supported districts is that the legislatively determined annual cost of living adjustment and other politically determined factors are less significant in determining such districts primary funding sources. Rather, property tax growth and the local economy become the determinant factors. The District has been a community supported district for over ten years. The District anticipates that it will continue for the near future to remain a community supported district, including through full funding of LCFF in fiscal year Financial Statements and Accounting Practices Accounting Practices. The District s fiscal year begins on July 1 and ends on June 30. The accounting practices of the District conform to generally accepted accounting principles in accordance with policies and procedures of the California School Accounting Manual. This manual, according to Section of the State of California Education Code, is to be followed by all California school districts. Measurement Focus and Basis of Accounting. The government-wide financial statements are reported using the economic resources measurement focus and the accrual basis of accounting, as are the fiduciary fund financial statements. Revenues are recorded when earned and expenses are recorded when a liability is incurred, regardless of the timing of related cash flows. Grants and similar items are recognized as revenues when all eligibility requirements imposed by the provider have been met. Governmental and fund financial statements are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Revenues are recognized as soon as they are both measurable and available. Revenues are considered to be available when they are collectible within the current period or soon enough thereafter to pay liabilities of the current period. For this purpose, the District considers revenues to be available if they are collected within one year of the end of the current fiscal period. Expenses generally B-6

123 are recorded when a liability is incurred, as under accrual accounting. However, debt service expenses, as well as expenses related to the compensated absences and claims and judgments, are recorded only when payment is due. Basic Aid/Community Supported District. The District became a Basic Aid District over ten years ago for purposes of State general purpose education funding. As a Basic Aid District, the District has not received a general purpose revenue limit entitlement from the State, but instead has been entitled to keep its share of local property taxes in excess of the revenue limit. With implementation of the LCFF commencing in fiscal year , a school district, such as the District, which has property tax revenues which exceed its entitlement under the LCFF is entitled to keep its local property tax revenues which exceed its LCFF funding entitlement, essentially maintaining its status as Basic Aid, sometimes referred to as a Community Supported District. In fiscal year , the District budgeted LCFF Funding of over $24.4 million, of which approximately 96% it sourced from local property tax revenues, not from the State. If the District was not a Community Supported District, it estimates that LCFF Funding in fiscal year would have been $8.8 million (36% of the $24.4 million budgeted funding under LCFF as a Community Supported District). The District expects to continue to have local property tax revenue in excess of its LCFF entitlement for the near future, including following full implementation of LCFF in fiscal year Financial Statements. The District's independent auditor for fiscal year was Goodell, Porter, Sanchez & Bright, LLP, Sacramento, California. The District s audited financial statements for the year ended June 30, 2014 are included as Appendix A hereto. The District has not requested nor did the District obtain permission from the Auditor to include the audited financial statements as an appendix to this Official Statement. Accordingly, the Auditor has not performed any post-audit review of the financial condition or operations of the District. [Remainder of page intentionally left blank] B-7

124 General Fund Revenues, Expenditures and Changes in Fund Balance. The following table shows the audited fund balance, revenues and expenses statements for the District for the fiscal years through ST. HELENA UNIFIED SCHOOL DISTRICT General Fund - Revenues, Expenses and Changes in Fund Balance Fiscal Years through Audited Audited Audited Audited Audited Revenues Revenue Limit/LCFF (1) $19,793,189 $20,406,475 $20,722,570 $22,252,887 $23,968,686 Federal Revenue 894, , , , ,383 Other State Revenue 914,151 1,146, , , ,925 Other Local Revenue 1,434, ,664 1,074, , ,771 Total Revenue 23,036,391 23,171,602 23,223,700 24,588,178 25,974,765 Expenditures Certificated Salaries 11,021,404 10,999,607 10,372,810 10,510,186 11,094,119 Classified Salaries 3,434,178 3,364,139 3,035,866 3,067,356 3,254,671 Employee Benefits 4,173,134 5,362,322 4,847,755 4,671,170 4,629,394 Books & Supplies 854, ,287 1,088,050 1,566,371 1,770,542 Services & Other Operating Expenses 3,465,833 2,887,673 2,769,022 2,976,703 3,492,721 Capital Outlay 113,168 31, , , ,537 Other Outgo 75, ,126 55,689 59, ,156 Debt Service 330, , , ,867 Total Expenditures 23,468,087 23,679,194 22,602,453 23,111,586 24,787,007 Excess of Revenues Over (Under) Expenditures (431,696) (507,592) 621,247 1,476,592 1,187,758 Other Financing Sources (Uses): Operating Transfer In 619, , Operating Transfer Out - (148,387) - (648,242) (375,951) Other Sources (Uses) (805,882) (47,896) (347,097) 211, Total Other Sources & Uses (186,689) 484,599 (347,097) (436,869) (375,951) Net Change in Fund Balance (618,385) (22,993) 274,150 1,039, ,807 Fund Balance, Beginning of Year (2) 1,510,327 2,197,587 2,174,594 2,448,744 3,488,467 Fund Balance, End of Year $891,942 $2,174,594 $2,448,744 $3,488,467 $4,300,274 (1) LCFF was implemented in fiscal year (2) On July 1, 2011 fund balance restated from the balance reported June 30, 2010 to include other governmental funds pursuant to GASB No. 54, including reserve funds. District budgets and interim reports, as shown on the following table, continue to account for the General Fund separately from other governmental funds, including special reserves. Source: St. Helena Unified School District. District Budget and Interim Financial Reporting Budgeting and Interim Reporting Procedures. State law requires school districts to maintain a balanced budget in each fiscal year. The State Department of Education imposes a uniform budgeting and accounting format for school districts. Under current law, a school district governing board must adopt and file with the county superintendent of schools a tentative budget by July 1 in each fiscal year. The District is under the jurisdiction of the Napa County Superintendent of Schools (the "County Superintendent"). The County Superintendent must review and approve or disapprove the budget no later than August 15. The County Superintendent is required to examine the adopted budget for compliance with the standards and criteria adopted by the State Board of Education and identify B-8

125 technical corrections necessary to bring the budget into compliance with the established standards. If the budget is disapproved, it is returned to the District with recommendations for revision. The District is then required to revise the budget, hold a public hearing thereon, adopt the revised budget and file it with the County Superintendent no later than September 8. Pursuant to State law, the County Superintendent has available various remedies by which to impose and enforce a budget that complies with State criteria, depending on the circumstances, if a budget is disapproved. After approval of an adopted budget, the school district's administration may submit budget revisions for governing board approval. Subsequent to approval, the County Superintendent will monitor each district under its jurisdiction throughout the fiscal year pursuant to its adopted budget to determine on an ongoing basis if the district can meet its current or subsequent year financial obligations. If the County Superintendent determines that a district cannot meet its current or subsequent year obligations, the County Superintendent will notify the district's governing board of the determination and may then do either or both of the following: (a) assign a fiscal advisor to enable the district to meet those obligations or (b) if a study and recommendations are made and a district fails to take appropriate action to meet its financial obligations, the County Superintendent will so notify the State Superintendent of Public Instruction, and then may do any or all of the following for the remainder of the fiscal year: (i) request additional information regarding the district's budget and operations; (ii) after also consulting with the district's board, develop and impose revisions to the budget that will enable the district to meet its financial obligations; and (iii) stay or rescind any action inconsistent with such revisions. However, the County Superintendent may not abrogate any provision of a collective bargaining agreement that was entered into prior to the date upon which the County Superintendent assumed authority. A State law adopted in 1991 ("A.B. 1200") imposed additional financial reporting requirements on school districts, and established guidelines for emergency State aid apportionments. Under the provisions of A.B. 1200, each school district is required to file interim certifications with the County Superintendent (on December 15, for the period ended October 31, and by mid-march for the period ended January 31) 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 Superintendent 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 is deemed unable to meet its financial obligations for the remainder of the current fiscal year or the 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. Under California law, any school district and office of education that has a qualified or negative certification in any fiscal year may not issue, in that fiscal year or in the next succeeding fiscal year, certificates of participation, tax anticipation notes, revenue bonds or any other debt instruments that do not require the approval of the voters of the district, unless the applicable county superintendent of schools determines that the district s repayment of indebtedness is probable. District s Budget Approval/Disapproval and Certification History. The District has not received any qualified or negative certifications of its financial reports in the past five years, nor have any of its budgets been disapproved. The District s most recent interim report, the Second Interim for fiscal year , received a positive certification. B-9

126 Copies of the District s budget, interim reports and certifications may be obtained upon request from the District Office at St. Helena Unified School District, 465 Main Street, St. Helena, California 94574, Phone: (707) The District may impose charges for copying, mailing and handling. District s Budget and Second Interim Report. The following table shows the District s Budgeted figures (Adopted Budget and Second Interim Report). ST. HELENA UNIFIED SCHOOL DISTRICT Budgeted (Adopted and Second Interim) (1) Budgeted (2) nd Interim Revenues Revenue Limit Sources $24,420,535 $24,770,021 Federal revenues 375, ,353 Other state revenues 446, ,876 Other local revenues 94, ,364 Total Revenues 25,337,823 26,742,614 Expenses Certificated Salaries 12,164,119 12,183,271 Classified Salaries 3,146,433 3,176,598 Employee Benefits 4,771,693 4,777,074 Books and Supplies 1,307,075 1,658,298 Services and Other Operating Expenses 3,039,493 3,884,224 Capital Outlay 233, ,377 Other Outgo 94,659 94,659 Total Expenses 24,756,849 26,007,501 Excess of Revenues Over/(Under) Expenses 580, ,113 Other Financing Sources (Uses) Operating Transfers In Operating Transfers Out (538,723) (539,723) Total Other Financing Sources (Uses) (539,723) (539,723) Net Change in Fund Balance 42, ,390 Fund Balance, July 1 1,915,041 1,915,041 Fund Balance, June 30 $1,957,292 $2,110,431 (1) Budgeted figures and Second Interim Projections do not include reserves held outside of the general fund, because for budgeting and interim reporting purposes the General Fund is accounted for separately from other governmental funds. Pursuant to GASB 54, the District s audited financial statements account for governmental funds, including special reserves, on a combined basis, as shown on the previous table. (2) Budget assumptions include a 2% increase in property taxes, an ADA increase of 50, and a Basic Aid fair share reduction of $400,000. Source: St. Helena Unified School District. District Reserves The District s ending fund balance is the accumulation of surpluses from prior years. This fund balance is used to meet the State s minimum required reserve of 3% of expenditures, plus any other allocation or reserve which might be approved as an expenditure by the District in the future. The District maintains an unrestricted reserve which meets the State s minimum requirements. The Board of Trustees of the District has adopted a B-10

127 policy which requires the District to maintain an operating reserve which is equal to at least 10% of general fund expenditures, with a targeted second layer of reserves of a minimum of 33% of District excess property taxes received each year. Such policy permits the District to use its reserves to bridge short-term negative financial impacts to the District when no reasonable alternative exists. In connection with legislation adopted in connection with the State s fiscal year Budget ( SB 858 ), the Education Code was amended to provide that, beginning in fiscal year , if a district s proposed budget includes a local reserve above the minimum recommended level, the governing board must provide the information for review at the annual public hearing on its proposed budget. In addition, SB 858 included a provision which limits the amount of reserves which may be maintained at the District level. This proposed reserve fund cap was conditioned on the success of Proposition 2 on the November 4, 2014 statewide ballot, which was approved by voters. This provision may, under certain circumstances, limit the District s ability to maintain reserves above a certain level. The District cannot predict how this legislation will impact its reserves and future spending in the near future. See STATE FUNDING OF EDUCATION; RECENT STATE BUDGETS State Budget. For fiscal year , the ending general fund balance of $4,300,274 (audited) included reserves as follows: District Retirement Systems ST. HELENA UNIFIED SCHOOL DISTRICT Fiscal Year Reserve Fund Balance Non-spendable: $20,000 Restricted: 311,698 Assigned 722,027 Unassigned: 3,246,549 Total $4,300,274 Qualified employees are covered under multiple-employer defined benefit pension plans maintained by agencies of the State of California. Certificated employees are members of the State Teachers' Retirement System ( STRS ) and classified employees are members of the Public Employees' Retirement System ( PERS ). STRS. All full-time certificated employees participate in STRS, a cost-sharing, multipleemployer contributory public employee retirement system. The plan provides retirement and disability benefits and survivor benefits to beneficiaries. Benefit provisions are established by State statutes, as legislatively amended, within the State Teacher s Retirement Law. The current contribution requirement for active plan members with an enrollment date prior to January 1, 2013 is 8.0% of salary. For active plan members with an enrollment date on or after January 1, 2013 the contribution rate is at least 50% of the total annual normal cost of their pension benefit each year as determined by an actuary. The fiscal year contribution requirement for the District is 8.25% of salary. The following table summarizes District contributions in recent fiscal years. B-11

128 ST. HELENA UNIFIED SCHOOL DISTRICT STRS Contributions Fiscal Years through (Projected) Fiscal Year Amount $827, , , * 1,081,539 *Second Interim projection. Source: St. Helena Unified School District. New Legislation Regarding STRS Contributions Implemented in FY In connection with the State s adoption of its fiscal year Budget, the Governor signed into law Assembly Bill 1469 ( AB 1469 ), which represents a legislative effort to address the unfunded liabilities of the STRS pension plan (see below section entitled State Pension Trusts ). AB 1469 addresses the funding gap by increasing contributions of plan members, employers (including the District) and the State commencing in fiscal year Pursuant to AB 1469, employer contribution rates to the STRS plan will increase over the next seven years, from the contribution rate of 8.25% in Fiscal Year to 19.1% in Fiscal Year Thereafter, employer contribution rates will be determined by the STRS board to reflect the contribution required to eliminate unfunded liabilities by June 30, STRS employer contribution rates under AB 1469 for Fiscal Years through are summarized in the following table. AB 1469 STRS Employer Contribution Rates % Increase From FY Rate* Under AB 1469 Total Contribution Rate Fiscal Year % 8.88% *Fiscal year rate of 8.25%. PERS. All full-time and some part-time classified employees participate in PERS, an agent multiple-employer contributory public employee retirement system that acts as a common investment and administrative agent for participating public entities within the State of California. The District is part of a "cost-sharing" pool within PERS. As a result of the implementation of PEPRA, new members must pay at least 50% of the normal costs of the plan, which can fluctuate from year to year. For , the normal cost is 11.85%, which rounds to a 6.0% contribution rate. "Classic" plan members continue to contribute 7.0%. The District is required to contribute an actuarially determined rate. The actuarial methods and assumptions used for determining the rate are those adopted by the PERS Board of Administration. The required employer contribution rate for fiscal year was % of covered payroll. The contribution requirements of the plan members are established by State statute. The following table summarizes District contributions in recent fiscal years. B-12

129 ST. HELENA UNIFIED SCHOOL DISTRICT PERS Contributions Fiscal Years through (Projected) Fiscal Year Amount $349, , , * 383,809 *Second Interim projection. ** Budgeted. Source: St. Helena Unified School District. PERS Board Adopts New Employer Contribution Rates. On April 16, 2014, the Board of Administration of PERS approved new contribution rates beginning on July 1, School district employer contribution rates will reflect new demographic assumptions and other changes in actuarial assumptions which were adopted by the Board in February The new assumptions, which are aimed eliminating the unfunded liability of PERS in approximately 30 years, will be implemented for school districts beginning in fiscal year , with the costs spread over twenty years and the increases phased in over the first five years. These new employer contribution rates continue to recognize asset losses from prior years. Projected employer contribution rates for school districts are as follows: Projected PERS Contribution Rates for School Districts % 12.6% 15.0% 16.6% 18.2% 19.9% 20.4% Source: California Public Employees Retirement System State Pensions Trusts. Both the PERS and STRS systems are operated on a statewide basis. District contribution rates to PERS can vary annually depending on changes in actuarial assumptions and other factors, such as liability. Contributions to STRS can only be changed legislatively. Both PERS and STRS have substantial State unfunded actuarial liabilities, being $49.5 billion for PERS as of June 30, 2013 (the date of the last actuarial valuation for PERS) and $73.7 billion for STRS as of June 30, 2013 (the date of the last actuarial valuation for STRS). As described above, AB 1469 was enacted in connection with the State s Budget in an attempt to reduce and eliminate the unfunded liability of the STRS pension plan, and the PERS Board has recently taken actions to increase contribution rates in order to address unfunded liabilities. Both STRS and PERS issue separate comprehensive financial reports that include financial statements and required supplemental information. Copies of such reports may be obtained from STRS and PERS, respectively, as follows: (i) STRS, P.O. Box 15275, Sacramento, California ; (ii) PERS, P.O. Box , Sacramento, California More information regarding STRS and PERS can also be obtained at their websites, and respectively. However, information in the financial reports and on the websites is not incorporated in this Official Statement by reference. See also the following paragraph on recent pension reform legislation. B-13

130 Pension Reform Act of 2013 (Assembly Bill 340). On September 12, 2012, Governor Brown signed AB 340, enacting the California Public Employees Pension Reform Act of 2013 ( PEPRA ) and amending various sections of the California Education and Government Codes. AB 340 (i) increased the retirement age for new State, school, and city and local agency employees depending on job function, (ii) capped the annual PERS and STRS pension benefit payouts, (iii) addressed numerous abuses of the system, and (iv) required State, school, and certain city and local agency employees to pay at least half of the costs of their PERS pension benefits. PEPRA applies to all public employers except the University of California, charter cities and charter counties (except to the extent they contract with PERS.) The provisions of AB 340 went into effect on January 1, 2013 with respect to new State, school, and city and local agency employees hired on that date and after; existing employees who are members of employee associations, including employee associations of the District, have a five-year window to negotiate compliance with AB 340 through collective bargaining. If no deal is reached by January 1, 2018, a city, public agency or school district could force employees to pay their half of the costs of PERS pension benefits, up to 8 percent of pay for civil workers and 11 percent or 12 percent for public safety workers. PERS has predicted that the impact of AB 340 on employees and employers, including the District and other employers in the STRS system, will vary, based on each employer s current level of benefits. To the extent that the new formulas lower retirement benefits, employer contribution rates could decrease over time as current employees retire and employees subject to the new formulas make up a larger percentage of the workforce. This change would, in some circumstances, result in a lower retirement benefit for employees than they currently earn. Additionally, PERS has noted that changes arising from AB 340 could ultimately have an adverse impact on public sector recruitment in areas that have historically experienced recruitment challenges due to higher pay for similar jobs in the private sector. With respect to STRS, the provisions of AB 1469 effective as of July 1, 2014 effectively addressed the contribution requirements of STRS members, employers and the State. More information about AB 340 can be accessed through the PERS s web site at pca=st and through the STRS web site at AB340_detailed_impact_analysis.pdf. The references to these internet websites are shown for reference and convenience only; the information contained within the websites may not be current and has not been reviewed by the District and is not incorporated herein by reference. Early Retirement Incentive Programs STRS Golden Handshake. In addition to the benefits described above, the District has offered incentives for employees to retire. The District adopted an early retirement incentive program pursuant to Education Code Sections 22714, , 44929, , and , whereby the service credit to eligible employees is increased by two years. Two employees retired in exchange for the additional two years of service credit during fiscal year As a result of this early retirement incentive program, the District incurred $127,310 in additional costs. The District elected to pay this cost as a single payment in fiscal year B-14

131 Other Post-Employment Benefits The District provides post-retirement medical benefits to employees who retire from the District based on age and years of service in the District (the Plan ). For qualifying employees, such benefits terminate at the age of 65. A cap of the least costly available plan offered by the District applies to certificated and management employees hired after January, The Governmental Accounting Standards Board ( GASB ) has published Statement No. 45 which requires the District to account for post-employment benefits other than pension benefits ( OPEB ). The most recently prepared actuarial report is dated July 1, 2013 and sets forth the amount of unfunded actuarial accrued liability ( UAAL ) for such benefits, which was $3,488,826 as of July 1, This represents the present value of all benefits expected to be paid by the District for its current and future retirees, if all assumptions used are correct. Employees are not required to contribute to the Plan. In order to fully fund the Plan, the District would be required to contribute the annual required contribution of the employer (the ARC ), an amount actuarially determined in accordance with GASB 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 accrued liabilities ( UAAL ) over a period not to exceed 30 years. The District s policy is to pay the benefits as a cash outlay after retirement (the payas-you-go method). However, at June 30, 2014, the District contributed $202,259 for the payment of future postemployment benefits. Annual OPEB Cost. For the period ended June 30, 2014, the District s OPEB cost (expense) was $393,482. The District s annual OPEB cost, the percentage of annual OPEB cost contributed to the plan and the net OPEB obligation for the first two years of implementing the standard was as follows: ST. HELENA UNIFIED SCHOOL DISTRICT Annual OPEB Cost, % Contributed and Net OPEB Obligation Years Ending June 30, 2012 through 2014 Fiscal Year Annual OPEB Cost Percentage of Annual OPEB Cost Contributed Net OPEB Obligation 2012 $478,398 62% $181, , , , ,155 Source: St. Helena Unified School District Audited Financial Statements. B-15

132 The following table shows the components of the District s annual OPEB cost for the fiscal year, the amount actually contributed to the Plan and changes in the District s net OPEB obligation to the Plan: ST. HELENA UNIFIED SCHOOL DISTRICT Net OPEB Obligation Year Ending June 30, 2014 Annual required contribution $396,611 Interest on net OPEB obligation 7,019 Adjustment to annual required contribution (10,148) Annual OPEB cost (expense) 393,482 Contributions made (282,800) Increase in net OBEP Obligation 110,682 Net OPEB Obligation beginning of year 175,473 Net OPEB Obligation end of year $286,155 Source: St. Helena Unified School District Audited Financial Statements. See APPENDIX A AUDITED FINANCIAL STATEMENTS OF THE DISTRICT FOR FISCAL YEAR Note 11 - Other Postemployment Benefits. The District s most recent actuarial report was prepared in October, 2014, with respect to the UAAL as of July 1, The Report identified an unfunded actuarial liability of $3.488 million, and an annual required contribution of $396,611. The District plans to have its next actuarial report prepared in Long-Term Borrowing The District has never defaulted on the payment of principal or interest on any of its indebtedness. General Obligation Bonds. The District has received voter authorization to issue general obligation bonds at three separate bond elections, one held on June 3, 1997, one held on November 6, 2010, and one held in November 2012, as described below Authorization/2005 Refunding Bonds. On November 2, 1997, the District s voters approved an authorization of $18,800,000 principal amount of general obligation bonds (the 1997 Authorization ). Two series of bonds were issued, and thereafter refunded with the proceeds of $15,520,000 General Obligation Refunding Bonds, 2005 Series A (the 2005 Series A Bonds ), which are currently outstanding in the aggregate amount of $8,530,000. The 2005 Series A Bonds are expected to be refinanced with the proceeds of the Refunding Bonds described herein Authorization. On November 2, 2010, the District s voters approved an authorization of $30,000,000 principal amount of general obligation bonds (the 2010 Authorization ). Under the 2010 Authorization, the District has previously issued the following general obligation bonds (leaving $5,218, of authorized but unissued bonds under the 2010 Authorization): B-16

133 2010 Series A Bonds. On June 9, 2011, the District issued a first series of bonds under the 2010 Authorization designated General Obligation Bonds, Election of 2010, Series A (Federally Taxable Direct Pay Qualified School Construction Bonds in the aggregate principal amount of $13,860,000. The remaining Series A Bonds are currently outstanding in the aggregate principal amount of $13,860, Series B Bonds. On June 9, 2011, the District issued a first series of bonds under the 2010 Authorization designated General Obligation Bonds Election of 2010, Series B (Federally Tax-Exempt Capital Appreciation Bonds) in the aggregate principal amount of $9,450, The remaining Series B Bonds are currently outstanding in the aggregate principal amount of $9,450, Series C Bonds. On April 11, 2013, the District issued a third series of bonds under the 2010 Authorization designated General Obligation Bonds, Election of 20106, Series C in the aggregate principal amount of $1,471, The remaining Series C Bonds are currently outstanding in the aggregate principal amount of $1,471, Authorization. On November 6, 2012, the District s voters approved an authorization of $30,000,000 principal amount of general obligation bonds (the 2012 Authorization ). Under the 2012 Authorization (all of which has been issued), the District has previously issued the following general obligation bonds: 2012 Series A-1 Bonds. On April 11, 2013, the District issued a first series of bonds under the 2012 Authorization designated General Obligation Bonds, Election 2012, Series A-1 (Federally Tax-Exempt) in the aggregate principal amount of $19,999, The remaining Series A-1 Bonds are currently outstanding in the aggregate principal amount of $19,524, (excluding accrued interest) Series A-2 Bonds. On April 11, 2013, the District issued a first series of bonds under the 2012 Authorization designated General Obligation Bonds, Election of 2012, Series A-2 (Federally Taxable) in the aggregate principal amount of $10,000,000. The remaining Series A-2 Bonds are currently outstanding in the aggregate principal amount of $9,235,000. See DEBT SERVICE SCHEDULES in the body of this Official Statement for the future debt service (assuming no optional redemption) due on the District s outstanding general obligation bonds. Long-Term Lease Obligation. During fiscal year , the District entered into a lease financing with Energy Retrofit. The present value of minimum future lease payments is $381,812. The final lease payment is due in B-17

134 Investment of District Funds In accordance with Government Code Section et seq., the Napa County Treasurer manages funds deposited with it by the District. The County is required to invest such funds in accordance with California Government Code Sections et seq. In addition, counties are required to establish their own investment policies which may impose limitations beyond those required by the Government Code. See APPENDIX G - NAPA COUNTY INVESTMENT POLICY AND MONTHLY REPORT. Revenue Sources The District categorizes its general fund revenues into four sources, being LCFF, Federal Revenues, Other State Revenues and Local Revenues. Each of these revenue sources is described below. LCFF Sources. Beginning in , Proposition 13 and its implementing legislation provided for each county to levy and collect all property taxes, and prescribed how levies on county-wide property values are to be shared with local taxing entities within each county. The principal component of local revenues is the school district s property tax revenues, i.e., the district s share of the local 1% property tax, received pursuant to Sections 75 and following and Sections 95 and following of the California Revenue and Taxation Code. Education Code Section 42238(h) itemizes the local revenues that are counted towards the base revenue limit before calculating how much the State must provide in equalization aid. Historically, the more local property taxes a district received, the less State equalization aid it is entitled to. Furthermore, if a school district s share of local property tax revenues exceeded the revenue limit, the school district was deemed a Basic Aid district, and entitled to keep the full share of local property taxes, even if they exceeded the revenue limit which would have been provided through State funding. As described in this Official Statement, with the implementation of the LCFF in fiscal year , the amount of State funding provided to school districts is determined with a funding model which attempts to better meet the needs of students, particularly those students which come from low-income families or are English language learners which may require more support for success in school, and which provides local school officials with the ability to decide how best to meet the needs of their students. The LCFF affects how much funding a district will receive, but generally not the source of such funding, being its share of local property taxes together with the State funding provided pursuant to the LCFF. For school districts which were Basic Aid prior to implementation of the LCFF, provided that the per pupil funding targets under LCFF, including economic recovery targets, are met or exceeded by local property tax revenues, such districts are entitled to retain their status as Basic Aid and keep their full local property tax revenue entitlement. The threshold for Basic Aid status under the LCFF, however, is higher than under the prior funding formula, resulting in some district falling out of Basic Aid status as the result of the implementation of the LCFF. Accountability measures contained in the LCFF must be implemented by all districts, including Basic Aid districts. Federal Revenues. The federal government provides funding for several District programs, including special education programs, programs under No Child Left Behind, the B-18

135 Individuals With Disabilities Education Act, and specialized programs such as Drug Free Schools. Other State Revenues. The District receives some other State revenues, which are primarily restricted revenues funding items such as the Special Education Master Plan, Economic Impact Aid, School Improvement Program, instructional materials, and various block grants. The District receives State aid from the California State Lottery (the "Lottery"), which was established by a constitutional amendment approved in the November 1984 general election. Lottery revenues must be used for the education of students and cannot be used for non-instructional purposes such as real property acquisition, facility construction, or the financing of research. Moreover, State Proposition 20 approved in March 2000 requires that 50% of the increase in Lottery revenues over levels must be restricted to use on instructional materials. Other Local Revenues. In addition to local property tax revenues, the District receives additional local revenues from interest earnings and other local sources. In addition to its other local revenues, the District receives substantial annual contributions from the St. Helena Public Schools Foundation Endowment Trust, which was formed in 1992 and which currently maintains an endowment balance of over $1 million with a goal to increase such balance to $3 million. [Remainder of page intentionally left blank] B-19

136 STATE FUNDING OF EDUCATION AND RECENT STATE BUDGETS State Funding of Education General. The State requires that from all State revenues there first shall be set apart the moneys to be applied for support of the public school system and public institutions of higher education. Public school districts in California are dependent on revenues from the State for a large portion of their operating budgets. California school districts receive an average of about 55% of their operating revenues from various State sources. The primary source of funding for school districts is the revenue limit, which is a combination of State funds and local property taxes (see State Funding of Education Revenue Limits above). State funds typically make up the majority of a district s revenue limit. The availability of State funds for public education is a function of constitutional provisions affecting school district revenues and expenditures (see CONSTITUTIONAL AND STATUTORY PROVISIONS AFFECTING DISTRICT REVENUES AND APPROPRIATIONS below), the condition of the State economy (which affects total revenue available to the State general fund), and the annual State budget process. Decreases in State revenues may significantly affect appropriations made by the Legislature to school districts. The following information concerning the State s budgets for the current and most recent preceding years has been compiled from publicly-available information provided by the State. Neither the District, the County, nor the Underwriter is responsible for the information relating to the State s budgets provided in this section. Further information is available from the Public Finance Division of the State Treasurer s Office. The Budget Process. The State s fiscal year begins on July 1 and ends on June 30. The annual budget is proposed by the Governor by January 10 of each year for the next fiscal year (the Governor s Budget ). Under State law, the annual proposed Governor s Budget cannot provide for projected expenditures in excess of projected revenues and balances available from prior fiscal years. Following the submission of the Governor s Budget, the Legislature takes up the proposal. Under the State Constitution, money may be drawn from the State Treasury only through an appropriation made by law. The primary source of the annual expenditure authorizations is the Budget Act as approved by the Legislature and signed by the Governor. The Budget Act must be approved by a majority vote of each house of the Legislature. The Governor may reduce or eliminate specific line items in the Budget Act or any other appropriations bill without vetoing the entire bill. Such individual line-item vetoes are subject to override by a two-thirds majority vote of each House of the Legislature. Appropriations also may be included in legislation other than the Budget Act. Bills containing appropriations (including for K-14 education) must be approved by a majority vote in each house of the Legislature, unless such appropriations require tax increases, in which case they must be approved by a two-thirds vote of each house of the Legislature, and be signed by the Governor. Continuing appropriations, available without regard to fiscal year, may also be provided by statute or the State Constitution. Funds necessary to meet an appropriation need not be in the State Treasury at the time such appropriation is enacted; revenues may be appropriated in anticipation of their receipt. B-20

137 Recent State Budgets Certain information about the State budgeting process and the State Budget is available through several State of California sources. A convenient source of information is the State s website, where recent official statements for State bonds are posted. The references to Internet websites shown below are shown for reference and convenience only, the information contained within the websites may not be current and has not been reviewed by the District and is not incorporated herein by reference. 1. The California Department of Finance s Internet home page at under the heading California Budget, includes the text of proposed and adopted State Budgets. 2. The State Legislative Analyst s Office ( LAO ) prepares analyses of the proposed and adopted State budgets. The analyses are accessible on the LAO s Internet home page at under the heading Subject Area Budget (State). Prior Years Budgeting Techniques. Declining revenues and fiscal difficulties which arose in the State commencing in fiscal year led the State to undertake a number of budgeting strategies, which had subsequent impacts on local agencies within the State. These techniques included the issuance of IOUs in lieu of warrants (checks); the enactment of statutes deferring amounts owed to public schools until a later date in the fiscal year or even into the following fiscal year (known as statutory deferrals); trigger reductions, which were budget cutting measures which were implemented or could have been implemented if certain State budgeting goals were not met; among others, and the dissolution of local redevelopment agencies in part to make available additional funding for local agencies. Although the fiscal year Budget is balanced and projects a balanced budget for the foreseeable future, largely attributable to the additional revenues generated due to the passage of Proposition 30 at the November 2, 2012 statewide election, there can be no certainty that budget-cutting strategies such as those used in recent years will not be used in the future should the State Budget again be stressed and if projections included in such budget do not materialize State Budget: Change in Education Funding. As described previously herein, the State Budget and its related implementing legislation enacted significant reforms to the State s system of K-12 education finance with the enactment of the LCFF. Significant reforms such as the LCFF and other changes in law may have significant impacts on the District s finances Adopted State Budget On June 20, 2014, Governor Brown approved the Budget Act (the Budget ), projecting $108 billion in general fund revenues, which is $7.3 million more in general fund revenues than in fiscal year The Budget is balanced and projects paying down more than $10 billion in unprecedented amounts of budgetary debt from past years, including paying down deferral of payments to schools by $5 billion, paying off Economic Recovery Bonds, repaying various special fund loans, and funding $100 million in mandate claims that have been owed to local governments since The budgetary deficit is projected to be reduced to below $5 billion by the end of The fiscal year begins with a State Budget reserve of $2 billion dollars, including $1.6 billion in the State s Budget Stabilization Account, also known as the State s rainy day fund. Temporary revenues provided B-21

138 by the passage of Proposition 30 (Sales and Income Tax Revenue Increase approved by State voters at an election held on November 8, 2011) and spending cuts have allowed for continued economic growth in the State. The State Budget also contains triggers allowing for additional spending, if various revenue benchmarks are exceeded. If revenues surpass certain estimates, then the Budget calls for more funds to be applied to higher education and to pay down debt. Certain highlights of the Budget are described below. Plan for Reducing STRS Unfunded Liability. The California State Teachers Retirement System ( STRS ) has funded significant unfunded liability. Without changes to how the system is funded, STRS is expected to run out of money in about 33 years. To prevent this, the Budget sets forth a plan that shares responsibility among the school districts, the state, and teachers to better fund STRS. Contributions for the first year from all three of these sources will total $275 million. Contributions will increase in subsequent years, reaching more than $5 billion annually. This plan is projected to eliminate unfunded liability by Constitutional Amendment on November, 2014 Ballot: Rainy Day Fund. The State Budget included a proposed constitutional amendment which will be placed before State voters in November 4, The measure was approved by voters, resulting in a change to the State s previously existing requirements for the Budget Stabilization Account, the State s existing rainy day account. This amendment: Requires deposits into the Rainy Day Fund whenever capital gains revenues rise to more than 8 percent of General Fund tax revenues, and would set the maximum size of the Rainy Day Fund at 10 percent of the General Fund revenues. Requires half of each year s deposit for the next 15 years be used for supplemental payments of debt or other long-term liabilities. Allows for withdrawal of funds only for a disaster or if spending remains at or below the highest level of spending from the past three years. The maximum amount that could be withdrawn in the first year of a recession would be limited to half of the Rainy Day Fund s balance. Requires that the state provide a multiyear budget forecast to better manage the state s long-term finances. Creates a Proposition 98 reserve, known as the Public School System Stabilization Account, where spikes in funding would be saved for future years. This is intended to smooth school spending and minimize future cuts to education funding. In addition, approval of this amendment had the effect of enacting a related trailer bill (SB 858), which imposes a cap on the amount school districts may maintain in reserves. Specifically, the legislation, among other things, enacts Education Code Section , operative December 15, 2014, and provides that in any fiscal year immediately after a fiscal year in which a transfer is made to the Public School System Stabilization Account (referenced in the last bullet point above), a school district may not adopt a budget that contains a reserve for economic uncertainties in excess of twice the applicable minimum recommended reserve for economic uncertainties established by the State Board (for school districts with ADA B-22

139 over 400,000, the limit is three times the amount). Exemptions can be granted by the County Superintendent under certain circumstances. AB 146 is currently pending in the California legislature, which would repeal Education Code Section K - 12 Budget Adjustments. The State Budget includes total funding of $76.6 billion ($45.3 billion General Fund and $31.3 billion other funds) for all K-12 education programs. Prop. 98 funding has contributed $10 billion to the total funding amount and the State Budget provides $1,954 more per K-12 student in than was provided in The State Budget also provides $4.7 billion for the second year of implementing the LCFF and continues to commit most new funding to districts serving English language learners, students from low-income families, and youth in foster care. The Education Budget Trailer Bill ( SB 858 ) is included in the State Budget and contains two separate provisions that have the potential to affect district reserve funds. In addition, the State Budget includes the following: Local Control Funding Formula. The State Budget contains an increase of $4.75 billion in the Proposition 98 General Fund to continue the State s transition to the LCFF. This increase will close the remaining funding implementation gap by more than 29 percent. Additionally, the State Budget addresses an administrative problem related to the collection of income eligibility forms that are used to determine student eligibility for free or reducedprice meals. K-12 Deferrals. The State Budget repays nearly $4.7 billion Proposition 98 General Fund for K-12 expenses that had been deferred from one year to the next during the past few years. This repayment will leave an outstanding balance of less than $900 million in K-12 deferrals. The State Budget also contains a trigger mechanism that will appropriate any additional funding resources attributable to the and fiscal years subsequent to the enactment of the State Budget for the purpose of retiring the remaining $900 million in K-12 deferrals. Independent Study. The State Budget reduces administrative burdens and frees up time for teachers to spend on student instruction and support, making it easier for schools to offer and expand instructional opportunities available to students through non-classroom based instruction. K-12 Mandates. The State Budget provides $400.5 million in one-time Proposition 98 General Fund to reimburse K-12 local educational agencies for the costs of state-mandated programs. These funds will make a significant down payment on outstanding mandate debt, while providing school districts, county offices of education, and charter schools with discretionary resources to support critical investments such as Common Core implementation. K-12 High-Speed Internet Access. The State Budget increases the onetime Proposition 98 General Fund for the K-12 High Speed Network by $26.7 million. This Fund provides technical assistance and grants to local educational agencies to address the technology requirements necessary for Common Core implementation. B-23

140 Career Technical Education Pathways Program. The State Budget increases by $250 million the one-time Proposition 98 General Fund to support a second cohort of competitive grants for participating K-12 local educational agencies. Established in the 2013 Budget Act, the Career Pathways Trust Program provides grant awards to improve career technical programs and linkages between employers, schools and community colleges. Higher Education and Healthcare. The State Budget includes total funding of $26.2 billion ($14.7 billion General Fund and local property tax and $11.5 billion other funds). It also provides for up to a 20 percent increase in General Fund appropriations over a four-year period. The Budget includes a 5 percent increase in for each university system, which equals $284 million total. Regarding healthcare, the state s adoption of the optional expansion of Medi-Cal under federal law known as the Affordable Care Act created major new spending commitments. The Budget assumes an additional Medi-Cal caseload of 2.5 million individuals and a rise in costs of $2.4 billion over fiscal year Emergency Drought Response. On January 17, 2014, Governor Brown proclaimed a state of emergency due to the severe drought conditions faced by the state. Legislation was enacted in February which provided $687.4 million to support drought relief. The Budget includes additional one-time resources to continue immediate drought-related efforts started in 2014, such as an increase of $53.8 million General Fund and $12.2 million other funds for firefighting efforts, and an increase of $18.1 million General Fund to aid in assessing water conditions and provide public outreach regarding water conservation. Numerous Factors Affecting Budget and Projections. The execution of the State Budget may be affected by numerous factors, including but not limited to: (i) shifts of costs from the federal government to the State, (ii) national, State and international economic conditions, (iii) litigation risk associated with spending reductions, including the elimination of redevelopment agencies, (iv) rising health care costs (v) large unfunded liabilities for retired State employee s pensions and healthcare, (vi) deferred maintenance of State s critical infrastructure and (vii) other factors, all or any of which could cause the revenue and spending projections made in State Budget to be unattainable. The District cannot predict the impact that the State Budget, or subsequent budgets, will have on its own finances and operations. Additionally, the District cannot predict the accuracy of any projections made in the State s State Budget. The complete State Budget is available from the California Department of Finance website at The District can take no responsibility for the continued accuracy of this internet address or for the accuracy, completeness or timeliness of information posted there, and such information is not incorporated in this Official Statement by such reference. The information referred to above should not be relied upon in making an investment decision with respect to the Refunding Bonds California Spending Plan. In October 2014 the Legislative Analyst s Office released its California Spending Plan (a publication summarizing the State s current spending plan, including legislative and gubernatorial action through October 2014). The Spending Plan reports, among other things: The State General Fund and Education Protection Fund are $107 billion in (an increase of nearly 5% over the prior year s levels). B-24

141 The State s fiscal year is projected to end with $2.1 billion in total reserves. The Proposition 98 minimum guarantee is up $2.6 billion over the revised levels. In , $5.2 billion in outstanding K-14 deferrals and $450 million in outstanding education mandates are expected to be paid down. An expected $4.7 billion in additional funding for LCFF implementation (12% higher than the level, and sufficient to close 29% of the funding gap). These gains are largely due to modest revenue growth assumed in from personal income taxes, sales and use taxes, and corporation taxes. The complete California Spending Plan may be accessed at the following link: although the information available through such site is not incorporated herein by reference Proposed State Budget On January 9, 2015, Governor Brown presented his proposed budget for the Fiscal Year (the Proposed State Budget ). The Proposed State Budget proposes a multiyear plan that is balanced, maintains a $3.4 billion reserve, and pays down budgetary debt from past years. Under the Proposed State Budget, funding levels for the K-12 LCFF will increase by $4 billion to $13,462 per pupil, and funding levels for workforce education and training will increased by $876 million. Funding is also increased for the University of California and California State University higher education systems. The Proposed State Budget includes a $115 million allocation from the State s General Fund to address the drought, and addresses deferred maintenance issues with $500 million from the State s General Fund. The complete Proposed State Budget is available from the California Department of Finance website at The District can take no responsibility for the continued accuracy of this internet address or for the accuracy, completeness or timeliness of information posted there, and such information is not incorporated in this Official Statement by such reference. The information referred to above should not be relied upon in making an investment decision with respect to the Refunding Bonds. The execution of Proposed State Budget may be affected by numerous factors, including but not limited to: (i) shifts of costs from the federal government to the State, (ii) national, State and international economic conditions, (ii) litigation risk associated with proposed spending reductions, (iii) rising health care costs and (iv) other factors, all or any of which could cause the revenue and spending projections made in the Proposed State Budget to be unattainable. The District cannot predict the impact that the Proposed State Budget, or subsequent budgets, will have on its own finances and operations. Additionally, the District cannot predict the accuracy of any projections made in the Proposed State Budget. Uncertainty Regarding Future State Budgets. The District cannot predict what actions will be taken in future years by the State Legislature and the Governor to address the State s current or future budget deficits. Future State budgets will be affected by national and B-25

142 state economic conditions and other factors over which the District has no control. The District cannot predict what impact any future budget proposals will have on the financial condition of the District. To the extent that the State budget process results in reduced revenues to the District, the District will be required to make adjustments to its budgets. The State has not entered into any contractual commitment with the District, the County, or the Owners of the Refunding Bonds to provide State budget information to the District or the owners of the Refunding Bonds. Although they believe the State sources of information listed above are reliable, neither the District nor the Purchaser assumes any responsibility for the accuracy of the State Budget information set forth or referred to in this Official Statement or incorporated herein. However, the Refunding Bonds are secured by ad valorem taxes levied and collected on taxable property in the District, without limit as to rate or amount, and are not secured by a pledge of revenues of the District or its general fund. Legal Challenges to State Funding of Education The application of Proposition 98 and other statutory regulations has been the subject of various legal challenges in recent years, and is likely to be further challenged in the future. For a discussion of how the provisions of Proposition 98 have been applied to school funding see - State Funding of Education" and "-Recent State Budgets above. CONSTITUTIONAL AND STATUTORY PROVISIONS AFFECTING DISTRICT REVENUES AND APPROPRIATIONS Principal of and interest on the Refunding Bonds are payable from the proceeds of an ad valorem tax levied by the County for the payment thereof. Articles XIIIA, XIIIB, XIIIC, and XIIID of the State Constitution, Propositions 62, 98, 111 and 218, and certain other provisions of law discussed below, are included in this section to describe the potential effect of these Constitutional and statutory measures on the ability of the District to levy taxes and spend tax proceeds for operating and other purposes, and it should not be inferred from the inclusion of such materials that these laws impose any limitation on the ability of the District to levy taxes for payment of the Refunding Bonds. The tax levied by the County for payment of the Refunding Bonds was approved by the District's voters in compliance with Article XIIIA and all applicable laws. Constitutionally Required Funding of Education The State Constitution requires that from all State revenues, there shall be first set apart the moneys to be applied by the State for the support of the public school system and public institutions of higher education. School districts receive a significant portion of their funding from State appropriations. As a result, decreases and increases in State revenues can significantly affect appropriations made by the State Legislature to school districts. Article XIIIA of the California Constitution Basic Property Tax Levy. On June 6, 1978, California voters approved Proposition 13 ("Proposition 13"), which added Article XIIIA to the State Constitution ("Article XIIIA"). Article XIIIA limits the amount of any ad valorem tax on real property to 1% of the full cash value thereof, except that additional ad valorem taxes may be levied to pay debt service on (i) indebtedness approved by the voters prior to July 1, 1978, (ii) (as a result of an amendment to B-26

143 Article XIIIA approved by State voters on June 3, 1986) 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 (which provided the authority for the issuance of the Refunded Bonds), and (iii) (as a result of an amendment to Article XIIIA approved by State voters on November 7, 2000) bonded indebtedness incurred by a school district or community college district for the construction, reconstruction, rehabilitation or replacement of school facilities or the acquisition or lease of real property for school facilities, approved by 55% of the voters of the district, but only if certain accountability measures are included in the proposition. Article XIIIA defines full cash value to mean "the county assessor s valuation of real property as shown on the tax bill under full cash value, or thereafter, the appraised value of real property when purchased, newly constructed, or a change in ownership have occurred after the 1975 assessment". This full cash value may be increased at a rate not to exceed 2% per year to account for inflation. Article XIIIA has subsequently been amended to permit reduction of the "full cash value" base in the event of declining property values caused by damage, destruction or other factors, to provide that there would be no increase in the "full cash value" base in the event of reconstruction of property damaged or destroyed in a disaster and in other minor or technical ways. Legislation Implementing Article XIIIA. Legislation has been enacted and amended a number of times since 1978 to implement Article XIIIA. Under current law, local agencies are no longer permitted to levy directly any property tax (except to pay voter-approved indebtedness). The 1% property tax is automatically levied by the county and distributed according to a formula among taxing agencies. The formula apportions the tax roughly in proportion to the relative shares of taxes levied prior to Increases of assessed valuation resulting from reappraisals of property due to new construction, change in ownership or from the annual adjustment not to exceed 2% are allocated among the various jurisdictions in the taxing area based upon their respective situs. Any such allocation made to a local agency continues as part of its allocation in future years. Inflationary Adjustment of Assessed Valuation. As described above, the assessed value of a property may be increased at a rate not to exceed 2% per year to account for inflation. On December 27, 2001, the Orange County Superior Court, in County of Orange v. Orange County Assessment Appeals Board No. 3, held that where a home s taxable value did not increase for two years, due to a flat real estate market, the Orange County assessor violated the 2% inflation adjustment provision of Article XIIIA, when the assessor tried to "recapture" the tax value of the property by increasing its assessed value by 4% in a single year. The assessors in most California counties, including the County, use a similar methodology in raising the taxable values of property beyond 2% in a single year. The State Board of Equalization has approved this methodology for increasing assessed values. On appeal, the Appellate Court held that the trial court erred in ruling that assessments are always limited to no more than 2% of the previous year s assessment. On May 10, 2004 a petition for review was filed with the California Supreme Court. The petition has been denied by the California Supreme Court. As a result of this litigation, the recapture provision described above may continue to be employed in determining the full cash value of property for property tax purposes. B-27

144 Article XIIIB of the California Constitution Article XIIIB ( Article XIIIB ) of the State Constitution, as subsequently amended by Propositions 98 and 111, respectively, limits the annual appropriations of the State and of any city, county, school district, authority or other political subdivision of the State to the level of appropriations of the particular governmental entity for the prior fiscal year, as adjusted for changes in the cost of living and in population and for transfers in the financial responsibility for providing services and for certain declared emergencies. For fiscal years beginning on or after July 1, 1990, the appropriations limit of each entity of government shall be the appropriations limit for the fiscal year adjusted for the changes made from that fiscal year under the provisions of Article XIIIB, as amended. The appropriations of an entity of local government subject to Article XIIIB limitations include the proceeds of taxes levied by or for that entity and the proceeds of certain state subventions to that entity. Proceeds of taxes include, but are not limited to, all tax revenues and the proceeds to the entity from (a) regulatory licenses, user charges and user fees (but only to the extent that these proceeds exceed the reasonable costs in providing the regulation, product or service), and (b) the investment of tax revenues. Appropriations subject to limitation do not include (a) refunds of taxes, (b) appropriations for debt service, (c) appropriations required to comply with certain mandates of the courts or the federal government, (d) appropriations of certain special districts, (e) appropriations for all qualified capital outlay projects as defined by the legislature, (f) appropriations derived from certain fuel and vehicle taxes and (g) appropriations derived from certain taxes on tobacco products. Article XIIIB includes a requirement that all revenues received by an entity of government other than the State in a fiscal year and in the fiscal year immediately following it in excess of the amount permitted to be appropriated during that fiscal year and the fiscal year immediately following it shall be returned by a revision of tax rates or fee schedules within the next two subsequent fiscal years. However, in the event that a school district s revenues exceed its spending limit, the district may in any fiscal year increase its appropriations limit to equal its spending by borrowing appropriations limit from the State. Article XIIIB also includes a requirement that 50% of all revenues received by the State in a fiscal year and in the fiscal year immediately following it in excess of the amount permitted to be appropriated during that fiscal year and the fiscal year immediately following it shall be transferred and allocated to the State School Fund under Section 8.5 of Article XVI of the State Constitution. Unitary Property Some amount of property tax revenue of the District is derived from utility property which is considered part of a utility system with components located in many taxing jurisdictions ( unitary property ). Under the State Constitution, such property is assessed by the State Board of Equalization ( SBE ) as part of a going concern rather than as individual pieces of real or personal property. State-assessed unitary and certain other property is allocated to the counties by SBE, taxed at special county-wide rates, and the tax revenues distributed to taxing jurisdictions (including the District) according to statutory formulae generally based on the distribution of taxes in the prior year. B-28

145 Articles XIIIC and XIIID On November 5, 1996, the voters of the State of California approved Proposition 218, popularly known as the Right to Vote on Taxes Act. Proposition 218 added to the California Constitution Articles XIIIC and XIIID (respectively, Article XIIIC and Article XIIID ), which contain a number of provisions affecting the ability of local agencies, including school districts, to levy and collect both existing and future taxes, assessments, fees and charges. According to the Title and Summary of Proposition 218 prepared by the California Attorney General, Proposition 218 limits the authority of local governments to impose taxes and property-related assessments, fees and charges. Among other things, Article XIIIC establishes that every tax is either a general tax (imposed for general governmental purposes) or a special tax (imposed for specific purposes), prohibits special purpose government agencies such as school districts from levying general taxes, and prohibits any local agency from imposing, extending or increasing any special tax beyond its maximum authorized rate without a two-thirds vote; and also provides that the initiative power will not be limited in matters of reducing or repealing local taxes, assessments, fees and charges. Article XIIIC further provides that no tax may be assessed on property other than ad valorem property taxes imposed in accordance with Articles XIII and XIIIA of the California Constitution and special taxes approved by a two-thirds vote under Article XIIIA, Section 4. On November 2, 2010, Proposition 26 was approved by State voters, which amended Article XIIIC to expand the definition of tax to include any levy, charge, or exaction of any kind imposed by a local government except the following: (1) a charge imposed for a specific benefit conferred or privilege granted directly to the payor that is not provided to those not charged, and which does not exceed the reasonable costs to the local government of conferring the benefit or granting the privilege; (2) a charge imposed for a specific government service or product provided directly to the payor that is not provided to those not charged, and which does not exceed the reasonable costs to the local government of providing the service or product; (3) a charge imposed for the reasonable regulatory costs to a local government for issuing licenses and permits, performing investigations, inspections, and audits, enforcing agricultural marketing orders, and the administrative enforcement and adjudication thereof; (4) a charge imposed for entrance to or use of local government property, or the purchase, rental, or lease of local government property; (5) a fine, penalty, or other monetary charge imposed by the judicial branch of government or a local government, as a result of a violation of law; (6) a charge imposed as a condition of property development; and (7) assessments and property-related fees imposed in accordance with the provisions of Article XIIID. Proposition 26 provides that the local government bears the burden of proving by a preponderance of the evidence that a levy, charge, or other exaction is not a tax, that the amount is no more than necessary to cover the reasonable costs of the governmental activity, and that the manner in which those costs are allocated to a payor bear a fair or reasonable relationship to the payor s burdens on, or benefits received from, the governmental activity. Article XIIID deals with assessments and property-related fees and charges, and explicitly provides that nothing in Article XIIIC or XIIID will be construed to affect existing laws relating to the imposition of fees or charges as a condition of property development. While the provisions of Proposition 218 may have an indirect effect on the District, such as by limiting or reducing the revenues otherwise available to other local governments whose boundaries encompass property located within the District (thereby causing such local governments to reduce service levels and possibly adversely affecting the value of property B-29

146 within the District), the District does not believe that Proposition 218 will directly impact the revenues available to pay debt service on the Refunding Bonds. Proposition 98 On November 8, 1988, California voters approved Proposition 98, a combined initiative constitutional amendment and statute called the Classroom Instructional Improvement and Accountability Act (the Accountability Act ). Certain provisions of the Accountability Act have, however, been modified by Proposition 111, discussed below, the provisions of which became effective on July 1, The Accountability Act changes State funding of public education below the university level and the operation of the State s appropriations limit. The Accountability Act guarantees State funding for K-12 school districts and community college districts (hereinafter referred to collectively as K-14 school districts ) at a level equal to the greater of (a) the same percentage of general fund revenues as the percentage appropriated to such districts in , and (b) the amount actually appropriated to such districts from the general fund in the previous fiscal year, adjusted for increases in enrollment and changes in the cost of living. The Accountability Act permits the Legislature to suspend this formula for a oneyear period. The Accountability Act also changes how tax revenues in excess of the State appropriations limit are distributed. Any excess State tax revenues up to a specified amount would, instead of being returned to taxpayers, be transferred to K-14 school districts. Any such transfer to K-14 school districts would be excluded from the appropriations limit for K-14 school districts and the K-14 school district appropriations limit for the next year would automatically be increased by the amount of such transfer. These additional moneys would enter the base funding calculation for K 14 school districts for subsequent years, creating further pressure on other portions of the State budget, particularly if revenues decline in a year following an Article XIIIB surplus. The maximum amount of excess tax revenues which could be transferred to K 14 school districts is 4% of the minimum State spending for education mandated by the Accountability Act. Proposition 111 On June 5, 1990, the voters approved Proposition 111 (Senate Constitutional Amendment No. 1) called the Traffic Congestion Relief and Spending Limit Act of 1990 ( Proposition 111 ) which further modified Article XIIIB and Sections 8 and 8.5 of Article XVI of the State Constitution with respect to appropriations limitations and school funding priority and allocation. The most significant provisions of Proposition 111 are summarized as follows: Annual Adjustments to Spending Limit. The annual adjustments to the Article XIIIB spending limit were liberalized to be more closely linked to the rate of economic growth. Instead of being tied to the Consumer Price Index, the change in the cost of living is now measured by the change in California per capita personal income. The definition of change in population specifies that a portion of the State s spending limit is to be adjusted to reflect changes in school attendance. Treatment of Excess Tax Revenues. Excess tax revenues with respect to Article XIIIB are now determined based on a two-year cycle, so that the State can avoid having to return to taxpayers excess tax revenues in one year if its appropriations in the next fiscal year B-30

147 are under its limit. In addition, the Proposition 98 provision regarding excess tax revenues was modified. After any two-year period, if there are excess State tax revenues, 50% of the excess are to be transferred to K-14 school districts with the balance returned to taxpayers; under prior law, 100% of excess State tax revenues went to K-14 school districts, but only up to a maximum of 4% of the schools minimum funding level. Also, reversing prior law, any excess State tax revenues transferred to K-14 school districts are not built into the school districts base expenditures for calculating their entitlement for State aid in the next year, and the State s appropriations limit is not to be increased by this amount. Exclusions from Spending Limit. Two exceptions were added to the calculation of appropriations which are subject to the Article XIIIB spending limit. First, there are excluded all appropriations for qualified capital outlay projects as defined by the Legislature. Second, there are excluded any increases in gasoline taxes above the 1990 level (then nine cents per gallon), sales and use taxes on such increment in gasoline taxes, and increases in receipts from vehicle weight fees above the levels in effect on January 1, These latter provisions were necessary to make effective the transportation funding package approved by the Legislature and the Governor, which expected to raise over $15 billion in additional taxes from 1990 through 2000 to fund transportation programs. Recalculation of Appropriations Limit. The Article XIIIB appropriations limit for each unit of government, including the State, is to be recalculated beginning in fiscal year It is based on the actual limit for fiscal year , adjusted forward to as if Proposition 111 had been in effect. School Funding Guarantee. There is a complex adjustment in the formula enacted in Proposition 98 which guarantees K-14 school districts a certain amount of State general fund revenues. Under prior law, K-14 school districts were guaranteed the greater of (1) 40.9% of State general fund revenues (the first test ) or (2) the amount appropriated in the prior year adjusted for changes in the cost of living (measured as in Article XIIIB by reference to per capita personal income) and enrollment (the second test ). Under Proposition 111, schools will receive the greater of (1) the first test, (2) the second test, or (3) a third test, which will replace the second test in any year when growth in per capita State general fund revenues from the prior year is less than the annual growth in California per capita personal income (the third test ). Under the third test, schools will receive the amount appropriated in the prior year adjusted for change in enrollment and per capita State general fund revenues, plus an additional small adjustment factor. If the third test is used in any year, the difference between the third test and the second test will become a credit to schools which will be paid in future years when State general fund revenue growth exceeds personal income growth. Proposition 39 On November 7, 2000, California voters approved an amendment (commonly known as Proposition 39 ) to the California Constitution. This amendment (1) allows school facilities bond measures to be approved by 55 percent (rather than two-thirds) of the voters in local elections and permits property taxes to exceed the current 1 percent limit in order to repay the bonds and (2) changes existing statutory law regarding charter school facilities. As adopted, the constitutional amendments may be changed only with another Statewide vote of the people. The statutory provisions could be changed by a majority vote of both houses of the Legislature and approval by the Governor, but only to further the purposes of the proposition. The local school jurisdictions affected by this proposition are K-12 school districts, community college districts, including the District, and county offices of education. As noted above, the California B-31

148 Constitution previously limited property taxes to 1 percent of the value of property. Prior to the approval of Proposition 39, property taxes could only exceed this limit to pay for (1) any local government debts approved by the voters prior to July 1, 1978 or (2) bonds to acquire or improve real property that receive two-thirds voter approval after July 1, The 55% vote requirement authorized by Proposition 39 applies only if the local bond measure presented to the voters includes: (1) a requirement that the bond funds can be used only for construction, rehabilitation, equipping of school facilities, or the acquisition or lease of real property for school facilities; (2) a specific list of school projects to be funded and certification that the school board has evaluated safety, class size reduction, and information technology needs in developing the list; and (3) a requirement that the school board conduct annual, independent financial and performance audits until all bond funds have been spent to ensure that the bond funds have been used only for the projects listed in the measure. Legislation approved in June 2000 places certain limitations on local school bonds to be approved by 55 percent of the voters. These provisions require that the tax rate levied as the result of any single election be no more than $60 (for a unified school district), $30 (for an elementary school district or high school district), or $25 (for a community college district), per $100,000 of taxable property value. These requirements are not part of this proposition and can be changed with a majority vote of both houses of the Legislature and approval by the Governor. Proposition 30 Guaranteed Local Public Safety Funding, Initiative Constitutional Amendment (also known as Proposition 30 ), which temporarily increases the State Sales and Use Tax and personal income tax rates on higher incomes. Proposition 30 temporarily imposes an additional tax on all retailers, at the rate of 0.25% of gross receipts from the sale of all tangible personal property sold in the State from January 1, 2013 to December 31, Proposition 30 also imposes an additional excise tax on the storage, use, or other consumption in the State of tangible personal property purchased from a retailer on and after January 1, 2013 and before January 1, This excise tax will be levied at a rate of 0.25% of the sales price of the property so purchased. For personal income taxes imposed beginning in the taxable year commencing January 1, 2012 and ending December 31, 2018, Proposition 30 increases the marginal personal income tax rate by: (i) 1% for taxable income over $250,000 but less than $300,000 for single filers (over $340,000 but less than $408,000 for joint filers), (ii) 2% for taxable income over $300,000 but less than $500,000 for single filers (over $408,000 but less than $680,000 for joint filers), and (iii) 3% for taxable income over $500,000 for single filers (over $680,000 for joint filers). The revenues generated from the temporary tax increases will be included in the calculation of the Proposition 98 minimum funding guarantee for school districts and community college districts. See Proposition 98 and Proposition 111 above. From an accounting perspective, the revenues generated from the temporary tax increases will be deposited into the State account created pursuant to Proposition 30 called the Education Protection Account (the EPA ). Pursuant to Proposition 30, funds in the EPA will be allocated quarterly, with 89% of such funds provided to schools districts and 11% provided to community college districts. The funds will be distributed to school districts and community college districts in the same manner as existing unrestricted per-student funding, except that no school district will receive less than $200 per unit of ADA and no community college district will receive less than $100 per full time equivalent student. The governing board of each school district and community college district is granted sole authority to determine how the moneys received from the EPA are spent, B-32

149 provided that, the appropriate governing board is required to make these spending determinations in open session at a public meeting and such local governing boards are prohibited from using any funds from the EPA for salaries or benefits of administrators or any other administrative costs. Proposition 1A and Proposition 22 On November 2, 2004, California voters approved Proposition 1A, which amended the State constitution to significantly reduce the State's authority over major local government revenue sources. Under Proposition 1A, the State cannot (i) reduce local sales tax rates or alter the method of allocating the revenue generated by such taxes, (ii) shift property taxes from local governments to schools or community colleges, (iii) change how property tax revenues are shared among local governments without two-thirds approval of both houses of the State Legislature or (iv) decrease Vehicle License Fee revenues without providing local governments with equal replacement funding. Under Proposition 1A, beginning, in , the State may shift to schools and community colleges a limited amount of local government property tax revenue if certain conditions are met, including: (i) a proclamation by the Governor that the shift is needed due to a severe financial hardship of the State, and (ii) approval of the shift by the State Legislature with a two-thirds vote of both houses. Under such a shift, the State must repay local governments for their property tax losses, with interest, within three years. Proposition 1A does allow the State to approve voluntary exchanges of local sales tax and property tax revenues among local governments within a county. Proposition 1A also amended the State Constitution to require the State to suspend certain State laws creating mandates in any year that the State does not fully reimburse local governments for their costs to comply with the mandates. This provision does not apply to mandates relating to schools or community colleges or to those mandates relating to employee rights. Proposition 22, a constitutional initiative entitled the Local Taxpayer, Public Safety, and Transportation Protection Act of 2010, approved on November 2, 2010, superseded many of the provision of Proposition 1A. This initiative amends the State constitution to prohibit the legislature from diverting or shifting revenues that are dedicated to funding services provided by local government or funds dedicated to transportation improvement projects and services. Under this proposition, the State is not allowed to take revenue derived from locally imposed taxes, such as hotel taxes, parcel taxes, utility taxes and sales taxes, and local public transit and transportation funds. Further, in the event that a local governmental agency sues the State alleging a violation of these provisions and wins, then the State must automatically appropriate the funds needed to pay that local government. This Proposition was intended to, among other things, stabilize local government revenue sources by restricting the State s control over local property taxes. Proposition 22 did not prevent the California State Legislature from dissolving State redevelopment agencies pursuant to AB 1X26, as confirmed by the decision of the California Supreme Court decision in California Redevelopment Association v. Matosantos (2011). 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. B-33

150 Future Initiatives Article XIIIA, Article XIIIB, Article XIIIC and Article XIIID of the California Constitution and Propositions 98, 22, 26, 30 and 39 were each adopted as measures that qualified for the ballot under the State s initiative process. From time to time other initiative measures could be adopted further affecting District revenues or the District s ability to expend revenues. The nature and impact of these measures cannot be anticipated by the District. [Remainder of page intentionally left blank] B-34

151 APPENDIX C GENERAL INFORMATION ABOUT THE CITY OF ST. HELENA AND NAPA COUNTY The following information concerning Napa County (the County ) and the City of St. Helena (the City ) is included only for the purpose of supplying general information regarding the area of the District. The Refunding Bonds are not a debt of the County, the City, the State of California (the State ) or any of its political subdivisions, and neither the County, the City, the State nor any of its political subdivisions is liable therefor. General and Location The City. The City of St. Helena is located in the center of the world famous wine growing Napa Valley, 65 miles north of San Francisco. The area was settled in 1834 as part of General Vallejo's land grant. The City of St. Helena was incorporated as a City on March 24, 1876 and reincorporated on May 14, The City from its inception has served as a rural agricultural center. Over the years, with the growth and development of the wine industry, the City has become an important business and banking center for the wine industry. The City also receives many visitors as a result of the wine industry and the area's scenic qualities. The main goal of the City is to maintain a small-town atmosphere and to provide quality services to its citizens. St. Helena is a full service City and encompasses an area of 4 square miles. The City of St. Helena is a General Law City and operates under the Council-City Manager form of government. The City Council is the governing body and has the power to make and enforce all laws and set policy related to municipal affairs. The City Manager is responsible for carrying out the policies of the City Council and for the proper and efficient management of municipal activities. The City Manager directs and manages the various departments and municipal services through appointed Department Heads who directly supervise and administer the various City programs, services, and activities. The County. The County is located in Northern California about fifty miles northeast of San Francisco, was incorporated in 1850 as one of the original 27 California counties. The County encompasses an area of approximately 794 square miles and includes five incorporated cities. The County is bordered on the west by Sonoma County, on the northeast by Yolo County, on the north by Lake County, and on the southeast by Solano County. The County is characterized by northwest to southeast mountain ranges and valleys, the major valley being that of the Napa River. The topography is also marked by Lake Berryessa, an approximately 25 mile long, man-made lake in the northeastern part of the County, and Mt. Saint Helena, approximately 4,444 feet high, to the northwest. The County is governed by a five-member Board of Supervisors. The County is one of three counties in California to establish a separate department to deal with corrections pursuant to California Government Code 23013, along with Santa Clara County and Madera County. C-1

152 Population As of January 1, 2014 the County's population was approximately 139,255. The historic population estimates for the County and cities within the County as of January 1 of the years 2010 through 2014 are listed below. CITY OF ST. HELENA AND NAPA COUNTY Population Estimates As of January American Canyon 19,401 19,693 19,734 19,916 20,001 Calistoga 5,151 5,188 5,181 5,209 5,224 Napa 76,838 77,464 77,514 78,093 78,358 St. Helena 5,809 5,849 5,837 5,870 5,943 Yountville 2,930 2,997 2,991 2,989 3,017 Unincorporated 26,187 26,448 26,476 26,677 26,712 Total County 136, , , , ,255 Source: California State Department of Finance. C-2

153 Employment and Industry The unemployment rate in the County was 5.0% in February 2015, down from a revised 5.7% in January 2015, and below the year-ago estimate of 6.6%. This compares with an unadjusted unemployment rate of 6.8% for California and 5.8% for the nation during the same period. The table below provides information about employment rates and employment by industry type for the County for calendar years 2010 through Annual Figures are not yet available for the calendar year NAPA COUNTY Annual Average Civilian Labor Force, Employment and Unemployment, Employment by Industry Civilian Labor Force (1) 75,300 76,000 77,300 78,300 73,900 Employment 68,000 69,100 71,300 73,400 69,800 Unemployment 7,300 6,900 6,000 4,900 4,100 Unemployment Rate 9.7% 9.1% 7.8% 6.3% 5.6% Wage and Salary Employment (2) Agriculture 4,900 4,700 4,800 4,800 5,000 Logging, Mining, Construction 3,000 2,600 2,500 2,700 3,200 Manufacturing 10,900 10,700 10,900 11,200 11,600 Wholesale Trade 1,500 1,500 1,400 1,500 1,600 Retail Trade 5,800 5,800 5,700 5,900 6,100 Transportation, Warehousing and 1,600 1,500 1,600 1,800 1,900 Utilities Information Financial Activities 2,400 2,300 2,300 2,300 2,200 Professional and Business 5,700 5,300 5,500 6,100 6,500 Services Educational and Health Services 8,500 8,700 8,800 9,100 9,600 Leisure and Hospitality 8,800 9,300 10,000 10,700 11,300 Other Services 1,900 1,900 1,900 1,900 2,000 Federal Government State Government 3,700 3,600 3,500 3,400 3,500 Local Government 6,600 6,400 6,300 6,200 6,400 Total, All Industries (3) 66,300 65,200 66,000 68,300 71,400 (1) Labor force data is by place of residence; includes self-employed individuals, unpaid family workers, household domestic workers, and workers on strike. (2) Industry employment is by place of work; excludes self-employed individuals, unpaid family workers, household domestic workers, and workers on strike. (3) Totals may not add due to rounding. Source: State of California Employment Development Department. C-3

154 Major Employers The major employers in the County as of February 2015 are shown below, in alphabetical order. NAPA COUNTY Major Employers As of February 2015 Employer Name Location Industry Auberge Du Soleil Rutherford Hotels & Motels Domaine Chandon Yountville Wineries (Mfrs) Health & Human Svc Napa Health & Welfare Agencies Health & Human Svc Agency Napa County Government-Public Health Programs Health & Human Svc Agency Napa County Government-Social/Human Resources Marriott-Napa Valley Napa Hotels & Motels Meritage Resort & Spa Napa Resorts Napa County Health & Human Svc Napa County Government-Public Health Programs Napa Valley College Napa Schools-Universities & Colleges Academic Owens Corning Napa Building Materials-Manufacturers Pacific Union College Ltd Angwin Schools-Universities & Colleges Academic Pavilion-Vintage Estate Yountville Wedding Chapels Queen of the Valley Med Ctr Napa Hospitals Silverado Resort Napa Hotels & Motels Stone Bridge Cellars Inc Saint Helena Wineries (Mfrs) Sutter Home Winery Saint Helena Exporters (Whls) Syar Industries Inc Napa Marketing Programs & Services Treasury Wine Estates Saint Helena Wineries (Mfrs) Trinchero Family Estates Saint Helena Wineries (Mfrs) Universal Protection Svc Napa Security Guard & Patrol Service Veterans Home Yountville Veterans' & Military Organizations Veterans Home of Ca Yountville Government-Specialty Hosp Ex Psychiatric Walmart Supercenter American Canyon Department Stores Walmart Supercenter Napa Department Stores Yolano Engineers Inc Napa Surveyors-Land Source: California Employment Development Department, extracted from The America's Labor Market Information System (ALMIS) Employer Database, st Edition. C-4

155 Effective Buying Income Effective Buying Income is defined as personal income less personal tax and nontax payments, a number often referred to as disposable or after-tax income. Personal income is the aggregate of wages and salaries, other labor-related income (such as employer contributions to private pension funds), proprietor s income, rental income (which includes imputed rental income of owner-occupants of non-farm dwellings), dividends paid by corporations, interest income from all sources, and transfer payments (such as pensions and welfare assistance). Deducted from this total are personal taxes (federal, state and local), nontax payments (fines, fees, penalties, etc.) and personal contributions to social insurance. According to U.S. government definitions, the resultant figure is commonly known as disposable personal income. The following table summarizes the total effective buying income for the County, the State and the United States for the period 2009 through Effective buying income data is not yet available for the calendar year CITY OF ST. HELENA AND NAPA COUNTY Effective Buying Income 2009 through 2013 Total Effective Buying Income (000 s Omitted) Median Household Effective Buying Income Year Area 2009 City of St. Helena $195,890 $64,010 Napa County $3,549,050 54,426 California 844,823,319 49,736 United States 6,571,536,768 43, City of St. Helena $174,978 $57,506 Napa County 3,370,165 51,737 California 801,393,028 47,177 United States 6,365,020,076 41, City of St. Helena $186,748 $57,809 Napa County 3,453,650 51,788 California 814,578,458 47,062 United States 6,438,704,664 41, City of St. Helena $244,745 $55,392 Napa County 3,652,663 52,115 California 864,088,828 47,307 United States 6,737,867,730 41, City of St. Helena $203,223 $57,220 Napa County 3,631,706 53,714 California 858,676,636 48,340 United States 6,982,757,379 43,715 Source: The Nielsen Company (US), Inc. C-5

156 Commercial Activity Total taxable sales during calendar year 2013 in the City were reported to be $219.2 million, a 10.6% increase over the total taxable sales of $198.2 million reported during calendar year CITY OF ST. HELENA Taxable Retail Sales Number of Permits and Valuation of Taxable Transactions (Dollars in Thousands) Retail Stores Total All Outlets Numbers of Permits Taxable Transactions Number of Permits Taxable Transactions $121, $182, , , , , , , , ,195 (1) Retail Stores data not comparable to prior years. Source: California State Board of Equalization Total taxable sales during calendar year 2013 in the County were reported to be $2.93 billion, an 8.0% increase over the total taxable sales of $2.72 billion reported during calendar year NAPA COUNTY Taxable Retail Sales Number of Permits and Valuation of Taxable Transactions (Dollars in Thousands) Retail Stores Total All Outlets Numbers of Permits Taxable Transactions Number of Permits Taxable Transactions ,673 $1,325,300 4,992 $2,216, ,752 1,383,036 5,148 2,301, ,840 1,500,810 5,245 2,494, ,039 1,612,489 5,516 2,718, ,250 1,755,049 5,780 2,935,274 (1) Retail Stores data not comparable to prior years. Source: California State Board of Equalization C-6

157 Building and Construction Provided below are the building permits and valuations for the City and the County for calendar years 2009 through Annual figures are not yet available for calendar year CITY OF ST. HELENA Total Building Permit Valuations (Valuations In Thousands) Permit Valuation: New Single-family 1, $3,739.5 $3,562.4 New Multi-family , Res. Alterations/Additions 4, , , , ,123.0 Total Residential 6, , , , ,685.4 New Commercial 0.0 1, , New Industrial New Other 1, , Com. Alterations/Additions 7, , , , ,612.5 Total Nonresidential 9, , , , ,068.9 New Dwelling Units: Single Family Multiple Family TOTAL Source: Construction Industry Research Board, Building Permit Summary NAPA COUNTY Total Building Permit Valuations (Valuations In Thousands) Permit Valuation: New Single-family $82,970.9 $60, ,267.2 $54,758.7 $50,896.3 New Multi-family 1, , , ,249.1 Res. Alterations/Additions 36, , , , ,742.1 Total Residential 120, , , , ,887.5 New Commercial 45, , , , ,937.9 New Industrial 8, , ,703.9 New Other 20, , , , ,472.0 Com. Alterations/Additions 57, , , , ,548.3 Total Nonresidential 132, , , , ,662.2 New Dwelling Units: Single Family Multiple Family TOTAL Source: Construction Industry Research Board, Building Permit Summary C-7

158 Education Public instruction in the County is provided by one elementary school district and four unified (combined elementary and high school) districts. The largest district, Napa Valley Unified School District, has approximately 16,000 students enrolled. The Napa Valley College and the Pacific Union College are also located within the County. Transportation The transportation network includes publicly operated systems as well as private enterprise systems within the cities. A privately owned airporter service operates seven days a week from St. Helena, Napa and Vallejo to San Francisco International Airport. There is also a County owned and operated airport [Remainder of page intentionally left blank] C-8

159 APPENDIX D FORM OF OPINION OF BOND COUNSEL May 27, 2015 Board of Trustees St. Helena Unified School District 465 Main Street St. Helena, California OPINION: $6,820,000 St. Helena Unified School District (Napa County, California) 2015 General Obligation Refunding Bonds Ladies and Gentlemen: We have acted as bond counsel to the St. Helena Unified School District (the District ) in connection with the issuance by the District of its St. Helena Unified School District (Napa County, California) 2015 General Obligation Refunding Bonds in the aggregate principal amount of $6,820,000_ (the Bonds ). The Bonds have been authorized to be issued under the provisions of Articles 9 and 11 of Chapter 3 of Part 1 of Division 2 of Title 5 of the California Government Code, commencing with Section of said Code (the Bond Law ), and a resolution of the Board of Trustees of the District (the Board ) adopted on April 16, 2015 (the Bond Resolution ). We have examined the law and such certified proceedings and other papers as we have deemed necessary to render this opinion. As to questions of fact material to our opinion, we have relied upon representations of the Board contained in the Bond Resolution and in the certified proceedings and certifications of public officials and others furnished to us, without undertaking to verify the same by independent investigation. Based upon the foregoing, we are of the opinion, under existing law, as follows: 1. The District is duly established and validly existing as a unified school district with the power to issue the Bonds, and to perform its obligations under the Bond Resolution and the Bonds. 2. The Bond Resolution has been duly adopted by the Board, and constitutes a valid and binding obligation of the District enforceable against the District in accordance with its terms. 3. The Bonds have been duly authorized, executed and delivered by the District and are valid and binding general obligations of the District, and the Board of Supervisors of Napa D-1

160 County is obligated under the laws of the State of California to cause to be levied a tax without limit as to rate or amount upon the taxable property in the District for the payment when due of the principal of and interest on the Bonds. 4. Interest on the Bonds is excluded from gross income for federal income tax purposes and is not an item of tax preference for purposes of the federal alternative minimum tax imposed on individuals and corporations; it should be noted, however, that, for the purpose of computing the alternative minimum tax imposed on corporations (as defined for federal income tax purposes), such interest is taken into account in determining certain income and earnings. The Bonds are qualified tax-exempt obligations within the meaning of Section 265(b)(3) of the Internal Revenue Code of 1986 (the Tax Code ), and, in the case of certain financial institutions (within the meaning of Section 265(b)(5) of the Tax Code), a deduction is allowed for 80 percent of that portion of such financial institutions interest expense allocable to the portion of the Bonds designated as and comprising interest. The opinions set forth in the preceding paragraph are subject to the condition that the District comply with all requirements of the Internal Revenue Code of 1986 Code which must be satisfied subsequent to the issuance of the Bonds in order that interest thereon be, or continue to be, excluded from gross income for federal income tax purposes, and in order for the Bonds to be qualified tax-exempt obligations within the meaning of Section 265(b)(3) of the Tax Code. The District has covenanted to comply with each such requirement. Failure to comply with certain of such requirements may cause the inclusion of interest on the Bonds in gross income for federal income tax purposes to be retroactive to the date of issuance of the Bonds, or may cause the Bonds to lose their status as "qualified tax-exempt obligations" within the meaning of Section 265(b)(3) of the Tax Code. We express no opinion regarding other federal tax consequences arising with respect to the Bonds. 5. The interest on the Bonds is exempt from personal income taxation imposed by the State of California. The rights of the owners of the Bonds and the enforceability of the Bonds and the Resolution may be subject to bankruptcy, insolvency, reorganization, moratorium and other similar laws affecting creditors rights heretofore or hereafter enacted and may also be subject to the exercise of judicial discretion in appropriate cases. Respectfully submitted, Jones Hall, A Professional Law Corporation D-2

161 APPENDIX E FORM OF CONTINUING DISCLOSURE CERTIFICATE $6,820,000 ST. HELENA UNIFIED SCHOOL DISTRICT (Napa County, California) 2015 General Obligation Refunding Bonds CONTINUING DISCLOSURE CERTIFICATE This Continuing Disclosure Certificate (the Disclosure Certificate ) is executed and delivered by the St. Helena Unified School District (the District ) in connection with the issuance of $6,820,000 aggregate principal amount of St. Helena Unified School District School District (Napa County, California) 2015 General Obligation Refunding Bonds (the Bonds ). The Bonds are being issued under a Resolution adopted by the Board of Trustees of the District on April 16, 2015 (the Bond Resolution ). The District covenants and agrees as follows: Section 1. Purpose of the Disclosure Certificate. This Disclosure Certificate is being executed and delivered by the District for the benefit of the holders and beneficial owners of the Bonds and in order to assist the Participating Underwriters in complying with S.E.C. Rule 15c2-12(b)(5). Section 2. Definitions. In addition to the definitions set forth in the Bond Resolution, which apply to any capitalized term used in this Disclosure Certificate unless otherwise defined in this Section, the following capitalized terms have the following meanings: Annual Report means any Annual Report provided by the District under and as described in Sections 3 and 4. Annual Report Date means the date that is nine months after the end of the District s fiscal year (currently March 31 based on the District s fiscal year end of June 30). Dissemination Agent means, the District, or any successor Dissemination Agent designated in writing by the District and which has filed with the District a written acceptance of such designation. Listed Events means any of the events listed in Section 5(a). MSRB means the Municipal Securities Rulemaking Board, which has been designated by the Securities and Exchange Commission as the sole repository of disclosure information for purposes of the Rule. Participating Underwriter means the original underwriter of the Bonds required to comply with the Rule in connection with offering of the Bonds. Rule means Rule 15c2-12(b)(5) adopted by the Securities and Exchange Commission under the Securities Exchange Act of 1934, as the same may be amended from time to time. E-1

162 Section 3. Provision of Annual Reports. (a) The District shall, or shall cause the Dissemination Agent to provide, not later than nine months after the end of the District s fiscal year (which currently would be March 31), commencing no later than March 31, 2016 with the report for the Fiscal Year, provide to the MSRB, in an electronic format as prescribed by the MSRB, an Annual Report that is consistent with the requirements of Section 4 of this Disclosure Certificate. Not later than 15 Business Days prior to the Annual Report Date, the District shall provide the Annual Report to the Dissemination Agent (if other than the District). If by 15 Business Days prior to the Annual Report Date the Dissemination Agent (if other than the District) has not received a copy of the Annual Report, the Dissemination Agent shall contact the District to determine if the District is in compliance with the previous sentence. The Annual Report may be submitted as a single document or as separate documents comprising a package, and may include by reference other information as provided in Section 4; provided that the audited financial statements of the District may be submitted separately from the balance of the Annual Report, and later than the Annual Report Date, if not available by that date. If the District s fiscal year changes, it shall give notice of such change in the same manner as for a Listed Event under Section 5(c). The District shall provide a written certification with each Annual Report furnished to the Dissemination Agent to the effect that such Annual Report constitutes the Annual Report required to be furnished by the District hereunder. (b) If the District does not provide (or cause the Dissemination Agent to provide) an Annual Report by the Annual Report Date, the District shall provide (or cause the Dissemination Agent to provide) to the MSRB, in an electronic format as prescribed by the MSRB, a notice in substantially the form attached as Exhibit A. (c) (i) (ii) With respect to the Annual Report, the Dissemination Agent shall: determine each year prior to the Annual Report Date the then-applicable rules and electronic format prescribed by the MSRB for the filing of annual continuing disclosure reports; and if the Dissemination Agent is other than the District, file a report with the District certifying that the Annual Report has been provided pursuant to this Disclosure Certificate, and stating the date it was provided. Section 4. Content of Annual Reports. The Annual Report shall contain or incorporate by reference the following: (a) Audited financial statements prepared in accordance with generally accepted accounting principles as promulgated to apply to governmental entities from time to time by the Governmental Accounting Standards Board. If the District s audited financial statements are not available by the Annual Report Date, the Annual Report shall contain unaudited financial statements in a format similar to the financial statements contained in the final Official Statement, and the audited financial statements shall be filed in the same manner as the Annual Report when they become available. (b) Unless otherwise provided in the audited financial statements identified in (a) above, the following information: (i) Assessed value of taxable property in the jurisdiction of the District E-2

163 for the most recently completed fiscal year; (ii) Assessed valuation of the properties of the top 10 secured property taxpayers in the District for the most recently completed fiscal year; (iii) Property tax collection delinquencies for the District for the most recently completed fiscal year, if available from the County at the time of filing the Annual Report, and only if the District is no longer a participant in Napa County s Teeter Plan with respect to ad valorem tax levies securing general obligation bonds; (iv) The District s most recently adopted Budget or approved interim report with budgeted figures, which is available at the time of filing the Annual Report; and (v) Such further information, if any, as may be necessary to make the statements made pursuant to (a) and (b) of Section 4, in the light of the circumstances under which they are made, not misleading (c) Any or all of the items listed above may be included by specific reference to other documents, including official statements of debt issues of the District or related public entities, which are available to the public on the MSRB s Internet web site or filed with the Securities and Exchange Commission. Section 5. Reporting of Significant Events. (a) The District shall give, or cause to be given, notice of the occurrence of any of the following Listed Events with respect to the Bonds: (1) Principal and interest payment delinquencies. (2) Non-payment related defaults, if material. (3) Unscheduled draws on debt service reserves reflecting financial difficulties. (4) Unscheduled draws on credit enhancements reflecting financial difficulties. (5) Substitution of credit or liquidity providers, or their failure to perform. (6) Adverse tax opinions, the issuance by the Internal Revenue Service of proposed or final determinations of taxability, Notices of Proposed Issue (IRS Form 5701-TEB) or other material notices or determinations with respect to the tax status of the security, or other material events affecting the tax status of the security. (7) Modifications to rights of security holders, if material. (8) Bond calls, if material, and tender offers. (9) Defeasances. E-3

164 (10) Release, substitution, or sale of property securing repayment of the securities, if material. (11) Rating changes. (12) Bankruptcy, insolvency, receivership or similar event of the District. (13) The consummation of a merger, consolidation, or acquisition involving the District or the sale of all or substantially all of the assets of the District, other than in the ordinary course of business, the entry into a definitive agreement to undertake such an action or the termination of a definitive agreement relating to any such actions, other than pursuant to its terms, if material. (14) Appointment of a successor or additional trustee or the change of name of a trustee, if material. (b) Whenever the District obtains knowledge of the occurrence of a Listed Event, the District shall, or shall cause the Dissemination Agent (if not the District) to, file a notice of such occurrence with the MSRB, in an electronic format as prescribed by the MSRB, in a timely manner not in excess of 10 business days after the occurrence of the Listed Event. Notwithstanding the foregoing, notice of Listed Events described in subsections (a)(8) and (9) above need not be given under this subsection any earlier than the notice (if any) of the underlying event is given to holders of affected Bonds under the Resolution. (c) The District acknowledges that the events described in subparagraphs (a)(2), (a)(7), (a)(8) (if the event is a bond call), (a)(10), (a)(13), and (a)(14) of this Section 5 contain the qualifier if material and that subparagraph (a)(6) also contains the qualifier "material" with respect to certain notices, determinations or other events affecting the tax status of the Bonds. The District shall cause a notice to be filed as set forth in paragraph (b) above with respect to any such event only to the extent that it determines the event s occurrence is material for purposes of U.S. federal securities law. Whenever the District obtains knowledge of the occurrence of any of these Listed Events, the District will as soon as possible determine if such event would be material under applicable federal securities law. If such event is determined to be material, the District will cause a notice to be filed as set forth in paragraph (b) above. (d) For purposes of this Disclosure Certificate, any event described in paragraph (a)(12) above is considered to occur when any of the following occur: the appointment of a receiver, fiscal agent, or similar officer for the District in a proceeding under the United States Bankruptcy Code or in any other proceeding under state or federal law in which a court or governmental authority has assumed jurisdiction over substantially all of the assets or business of the District, or if such jurisdiction has been assumed by leaving the existing governing body and officials or officers in possession but subject to the supervision and orders of a court or governmental authority, or the entry of an order confirming a plan of reorganization, arrangement, or liquidation by a court or governmental authority having supervision or jurisdiction over substantially all of the assets or business of the District. Section 6. Identifying Information for Filings with the MSRB. All documents provided to the MSRB under the Disclosure Certificate shall be accompanied by identifying information as prescribed by the MSRB. Section 7. Termination of Reporting Obligation. The District s obligations under this Disclosure Certificate shall terminate upon the legal defeasance, prior redemption or payment in E-4

165 full of all of the Bonds. If such termination occurs prior to the final maturity of the Bonds, the District shall give notice of such termination in the same manner as for a Listed Event under Section 5(c). Section 8. Dissemination Agent. The District may, from time to time, appoint or engage a Dissemination Agent to assist it in carrying out its obligations under this Disclosure Certificate, and may discharge any such Agent, with or without appointing a successor Dissemination Agent. Section 9. Amendment; Waiver. Notwithstanding any other provision hereof, the District may amend this Disclosure Certificate, and any provision of this Disclosure Certificate may be waived, provided that the following conditions are satisfied: (a) (b) (c) if the amendment or waiver relates to the provisions of Sections 3(a), 4 or 5(a), it may only be made in connection with a change in circumstances that arises from a change in legal requirements, change in law, or change in the identity, nature, or status of an obligated person with respect to the Bonds, or type of business conducted; the undertakings herein, as proposed to be amended or waived, would, in the opinion of nationally recognized bond counsel, have complied with the requirements of the Rule at the time of the primary offering of the Bonds, after taking into account any amendments or interpretations of the Rule, as well as any change in circumstances; and the proposed amendment or waiver either (i) is approved by holders of the Bonds in the manner provided in the Bond Resolution for amendments to the Bond Resolution with the consent of holders, or (ii) does not, in the opinion of nationally recognized bond counsel, materially impair the interests of the holders or beneficial owners of the Bonds. If the annual financial information or operating data to be provided in the Annual Report is amended under the provisions hereof, the first annual financial information filed pursuant hereto containing the amended operating data or financial information shall explain, in narrative form, the reasons for the amendment and the impact of the change in the type of operating data or financial information being provided. If an amendment is made to the undertaking specifying the accounting principles to be followed in preparing financial statements, the annual financial information for the year in which the change is made shall present a comparison between the financial statements or information prepared on the basis of the new accounting principles and those prepared on the basis of the former accounting principles. The comparison shall include a qualitative discussion of the differences in the accounting principles and the impact of the change in the accounting principles on the presentation of the financial information, in order to provide information to investors to enable them to evaluate the ability of the District to meet its obligations. To the extent reasonably feasible, the comparison shall be quantitative. A notice of the change in the accounting principles shall be filed in the same manner as for a Listed Event under Section 5(c). Section 9. Additional Information. Nothing in this Disclosure Certificate prevents the District from disseminating any other information, using the means of dissemination set forth in this Disclosure Certificate or any other means of communication, or including any other E-5

166 information in any Annual Report or notice of occurrence of a Listed Event, in addition to that which is required by this Disclosure Certificate. If the District chooses to include any information in any Annual Report or notice of occurrence of a Listed Event in addition to that which is specifically required by this Disclosure Certificate, the District shall have no obligation under this Disclosure Certificate to update such information or include it in any future Annual Report or notice of occurrence of a Listed Event. Section 10. Default. If the District fails to comply with any provision of this Disclosure Certificate, any holder or beneficial owner of the Bonds may take such actions as may be necessary and appropriate, including seeking mandate or specific performance by court order, to cause the District to comply with its obligations under this Disclosure Certificate. A default under this Disclosure Certificate shall not be deemed an Event of Default under the Bond Resolution, and the sole remedy under this Disclosure Certificate in the event of any failure of the District to comply with this Disclosure Certificate shall be an action to compel performance. Section 11. Duties, Immunities and Liabilities of Dissemination Agent. The Dissemination Agent shall have only such duties as are specifically set forth in this Disclosure Certificate, and the District agrees to indemnify and save the Dissemination Agent, its officers, directors, employees and agents, harmless against any loss, expense and liabilities which it may incur arising out of or in the exercise or performance of its powers and duties hereunder, including the costs and expenses (including attorneys fees) of defending against any claim of liability, but excluding liabilities due to the Dissemination Agent s negligence or willful misconduct. The obligations of the District under this Section shall survive resignation or removal of the Dissemination Agent and payment of the Bonds. Section 12. Beneficiaries. This Disclosure Certificate shall inure solely to the benefit of the District, the Dissemination Agent, the Participating Underwriters and holders and beneficial owners from time to time of the Bonds, and shall create no rights in any other person or entity. Date: May 27, 2015 ST. HELENA UNIFIED SCHOOL DISTRICT By: Chief Business Official E-6

167 EXHIBIT A NOTICE OF FAILURE TO FILE ANNUAL REPORT Name of Obligor: St. Helena Unified School District Name of Bond Issue: Date of Issuance: May 27, 2015 $6,820,000 aggregate principal amount of St. Helena Unified School District (Napa County, California) 2015 General Obligation Refunding Bonds NOTICE IS HEREBY GIVEN that the District has not provided an Annual Report with respect to the above-named Bonds as required by the resolution adopted by the Board of Trustees of the District authorizing the issuance of the Bonds. The District anticipates that the Annual Report will be filed by. Dated:, as Dissemination Agent By: Authorized Officer E-7

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169 APPENDIX F BOOK-ENTRY ONLY SYSTEM The following description of the Depository Trust Company ( DTC ), the procedures and record keeping with respect to beneficial ownership interests in the Refunding Bonds, payment of principal, interest and other payments on the Refunding Bonds to DTC Participants or Beneficial Owners, confirmation and transfer of beneficial ownership interest in the Refunding Bonds and other related transactions by and between DTC, the DTC Participants and the Beneficial Owners is based solely on information provided by DTC. Accordingly, no representations can be made concerning these matters and neither the DTC Participants nor the Beneficial Owners should rely on the foregoing information with respect to such matters, but should instead confirm the same with DTC or the DTC Participants, as the case may be. Neither the District nor the Paying Agent take any responsibility for the information contained in this Section. No assurances can be given that DTC, DTC Participants or Indirect Participants will distribute to the Beneficial Owners (a) payments of interest, principal or premium, if any, with respect to the Refunding Bonds, (b) Bonds representing ownership interest in or other confirmation or ownership interest in the Refunding Bonds, or (c) redemption or other notices sent to DTC or Cede & Co., its nominee, as the registered owner of the Refunding Bonds, or that they will so do on a timely basis, or that DTC, DTC Participants or DTC Indirect Participants will act in the manner described in this Appendix. The current "Rules" applicable to DTC are on file with the Securities and Exchange Commission and the current "Procedures" of DTC to be followed in dealing with DTC Participants are on file with DTC. 1. The Depository Trust Company ( DTC ), New York, NY, will act as securities depository for the securities (in this Appendix, the Bonds ). The Bonds will be issued as fullyregistered securities registered in the name of Cede & Co. (DTC s partnership nominee) or such other name as may be requested by an authorized representative of DTC. One fully-registered Bond will be issued for each maturity of the Bonds, in the aggregate principal amount of such maturity, and will be deposited with DTC. If, however, the aggregate principal amount of any maturity exceeds $500 million, one certificate will be issued with respect to each $500 million of principal amount and an additional certificate will be issued with respect to any remaining principal amount of such issue. 2. DTC, the world s largest securities depository, is a limited-purpose trust company organized under the New York Banking Law, a banking organization within the meaning of the New York Banking Law, a member of the Federal Reserve System, a clearing corporation within the meaning of the New York Uniform Commercial Code, and a clearing agency registered pursuant to the provisions of Section 17A of the Securities Exchange Act of DTC holds and provides asset servicing for over 3.5 million issues of U.S. and non-u.s. equity issues, corporate and municipal debt issues, and money market instruments (from over 100 countries) that DTC s participants ( Direct Participants ) deposit with DTC. DTC also facilitates the post-trade settlement among Direct Participants of sales and other securities transactions in deposited securities, through electronic computerized book-entry transfers and pledges between Direct Participants accounts. This eliminates the need for physical movement of securities certificates. Direct Participants include both U.S. and non-u.s. securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations. DTC is F-1

170 a wholly-owned subsidiary of The Depository Trust & Clearing Corporation ( DTCC ). DTCC is the holding company for DTC, National Securities Clearing Corporation and Fixed Income Clearing Corporation, all of which are registered clearing agencies. DTCC is owned by the users of its regulated subsidiaries. Access to the DTC system is also available to others such as both U.S. and non-u.s. securities brokers and dealers, banks, trust companies, and clearing corporations that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly ( Indirect Participants ). DTC has a Standard & Poor s rating of AA+. The DTC Rules applicable to its Participants are on file with the Securities and Exchange Commission. More information about DTC can be found at The information contained on this Internet site is not incorporated herein by reference. 3. Purchases of Bonds under the DTC system must be made by or through Direct Participants, which will receive a credit for the Bonds on DTC s records. The ownership interest of each actual purchaser of each Bond ( Beneficial Owner ) is in turn to be recorded on the Direct and Indirect Participants records. Beneficial Owners will not receive written confirmation from DTC of their purchase. Beneficial Owners are, however, expected to receive written confirmations providing details of the transaction, as well as periodic statements of their holdings, from the Direct or Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers of ownership interests in the Bonds are to be accomplished by entries made on the books of Direct and Indirect Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive Bonds representing their ownership interests in Bonds, except in the event that use of the book-entry system for the Bonds is discontinued. 4. To facilitate subsequent transfers, all Bonds deposited by Direct Participants with DTC are registered in the name of DTC s partnership nominee, Cede & Co. or such other name as may be requested by an authorized representative of DTC. The deposit of Bonds with DTC and their registration in the name of Cede & Co. or such other nominee do not effect any change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the Bonds; DTC s records reflect only the identity of the Direct Participants to whose accounts such Bonds are credited, which may or may not be the Beneficial Owners. The Direct and Indirect Participants will remain responsible for keeping account of their holdings on behalf of their customers. 5. Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. Beneficial Owners of Bonds may wish to take certain steps to augment transmission to them of notices of significant events with respect to the Bonds, such as redemptions, tenders, defaults, and proposed amendments to the Bond documents. For example, Beneficial Owners of Bonds may wish to ascertain that the nominee holding the Bonds for their benefit has agreed to obtain and transmit notices to Beneficial Owners. In the alternative, Beneficial Owners may wish to provide their names and addresses to the registrar and request that copies of the notices be provided directly to them. 6. Redemption notices will be sent to DTC. If less than all of the Bonds within an issue are being redeemed, DTC s practice is to determine by lot the amount of the interest of each Direct Participant in such issue to be redeemed. 7. Neither DTC nor Cede & Co. (nor such other DTC nominee) will consent or vote with respect to the Bonds unless authorized by a Direct Participant in accordance with DTC s MMI Procedures. Under its usual procedures, DTC mails an Omnibus Proxy to District as soon as F-2

171 possible after the record date. The Omnibus Proxy assigns Cede & Co. s consenting or voting rights to those Direct Participants to whose accounts the Bonds are credited on the record date (identified in a listing attached to the Omnibus Proxy). 8. Redemption proceeds, distributions, and interest payments on the Bonds will be made to Cede & Co., or such other nominee as may be requested by an authorized representative of DTC. DTC s practice is to credit Direct Participants accounts, upon DTC s receipt of funds and corresponding detail information from District or Paying Agent on payable date in accordance with their respective holdings shown on DTC s records. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered in street name, and will be the responsibility of such Participant and not of DTC nor its nominee, Paying Agent, or District, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of redemption proceeds, distributions, and dividend payments to Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) is the responsibility of District or Paying Agent, disbursement of such payments to Direct Participants will be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners will be the responsibility of Direct and Indirect Participants. 9. DTC may discontinue providing its services as securities depository with respect to the Bonds at any time by giving reasonable notice to District or Paying Agent. Under such circumstances, in the event that a successor securities depository is not obtained, Bonds are required to be printed and delivered. 10. The District may decide to discontinue use of the system of book-entry-only transfers through DTC (or a successor securities depository). In that event, Bond certificates will be printed and delivered to DTC. 11. The information in this section concerning DTC and DTC s book-entry system has been obtained from sources that District believes to be reliable, but District takes no responsibility for the accuracy thereof. F-3

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173 APPENDIX G NAPA COUNTY INVESTMENT POLICY AND MONTHLY REPORT G-1

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175 NAPA COUNTY STATEMENT OF INVESTMENT POLICY EFFECTIVE APRIL 1, 2013

176 TABLE OF CONTENTS Page 1 1. POLICY 3 2. SCOPE 3 3. STANDARDS OF CARE 3 4. INVESTMENT OBJECTIVES 4 A. Safety 4 B. Liquidity 4 C. Yield 4 5. PARTICIPANTS 4 A. Statutory Participants 4 B. Voluntary Participants 4 6. DELEGATION OF AUTHORITY 5 7. PERMITTED INVESTMENTS AND LIMITS 5 A. U.S. Treasury Obligations 5 B. U.S. Agency Obligations 5 C. Bankers Acceptances (BA) - (Domestic and Foreign) 6 D. Negotiable Certificates of Deposit (CDs) 6 E. Commercial Paper 6 F. Repurchase Agreements (Repo) 7 G. State of California Obligations 7 H. California Local Agency Obligations 7 I. California State Local Agency Investment Pool (LAIF) 8 J. Medium Term Notes 8

177 Page 2 8. COMPETITIVE TRANSACTIONS 8 9. SAFEKEEPING AND CUSTODY BROKERS AND FINANCIAL INSTITUTIONS HONORARIA, GIFTS AND GRATUITIES WITHDRAWALS 9 A. Statutory Participants 9 B. Voluntary Participants SPECIAL INVESTMENTS APPORTIONMENT OF INTEREST AND COSTS INTERNAL CONTROLS REPORTING SOCIAL ISSUES/RESPONSIBILITY GLOSSARY OF SELECTED INVESTMENT TERMINOLOGY 12 APPENDIX A APPROVED INVESTMENT BROKERS

178 Page 3 NAPA COUNTY STATEMENT OF INVESTMENT POLICY In accordance with the California Government Code and under the authority delegated to the County Treasurer-Tax Collector (Treasurer) by the Board of Supervisors, the following sets forth the investment policy of the County of Napa. 1. POLICY It is the policy of Napa County to invest all public funds held within its pooled investment fund in a manner which will provide the highest reasonable investment return within the boundaries of maximum security and safety of principal while meeting the daily cash flow demands of all pool participants and conforming to all state and local statutes governing the investment of public funds. 2. SCOPE This investment policy applies to all financial assets held in the Pooled Investment Fund of the County Treasury. These funds include, but are not limited to the following fund types: General Fund Special Revenue Funds Capital Project Funds Enterprise Funds Trust and Agency Funds School Funds Internal Service Funds Debt Service Funds 3. STANDARDS OF CARE The County Treasurer is considered the Trustee of the Pooled Investment Fund and, therefore, a fiduciary subject to the prudent investor standard, which states that: Investments shall be made with judgment and care, under circumstances then prevailing, which persons of prudence, discretion and intelligence exercise in the management of their own affairs, not for speculation, but for investment, considering the probable safety of their capital as well as the probable income to be derived. The County Treasurer, the Assistant Treasurer, and the members of the Pooled Investment Oversight Committee shall refrain from all personal business activity that could conflict with the management of the investment program, or that could impair their ability to make

179 Page 4 impartial investment decisions. All individuals involved will be required to report all gifts and income in accordance with California State law. When investing, reinvesting, purchasing, acquiring, exchanging, selling and managing public funds, the County Treasurer shall act with the care, skill, prudence and diligence to meet the aims of the investment objectives listed in the Policy. 4. INVESTMENT OBJECTIVES All funds on deposit with the County Treasurer shall be invested in accordance with the objectives set out by California Government Code Sections and to ensure: A. Safety: The preservation of capital is the primary objective of the investment program. Each transaction shall seek to ensure that capital losses are avoided, whether they are from securities default or erosion of market value. B. Liquidity: Secondly, the Pooled Investment Fund should remain sufficiently liquid and flexible to ensure the County Treasurer meets all operating requirements which may be reasonably anticipated in any depositor s funds. C. Yield: Thirdly, the investment portfolio should be designed with the objective of attaining a reasonable rate of return throughout budgetary and economic cycles, commensurate with the investment risk constraints and the cash flow characteristics of Napa County s portfolio. 5. PARTICIPANTS Statutory Participants are those government agencies within the County of Napa for which the Napa County Treasurer is statutorily designated as the Custodian of Funds. Voluntary Participants are other local agencies that may participate in the Pooled Investment Fund, such as Special Districts and Cities, for which the Treasurer is not the statutorily designated Custodian of Funds. Such participation is subject to the consent of the County Treasurer and subject to California Government Code Section Voluntary Participants must authorize in writing the Napa County Pooled Investment Fund as an investment and must accept the County of Napa s Statement of Investment Policy.

180 6. DELEGATION OF AUTHORITY Page 5 In accordance with California Government Code Sections and 53607, and Napa County Ordinance No. 1103, and in conjunction with its annual adoption of the Investment Policy, the Napa County Board of Supervisors has delegated investment responsibility for the Napa County Pooled Investment Fund to the Treasurer. Such delegation remains in effect until the Board of Supervisors either revokes its delegation of authority by ordinance, or decides not to renew the annual delegation. The responsibility to execute investment transactions may be further delegated to the Assistant Treasurer-Tax Collector under the direction of the Treasurer. 7. PERMITTED INVESTMENTS AND LIMITS The investment of money on deposit in the Treasury is limited to those investments specified by California Government Code Sections 53601, et seq.; 53635, et seq.; and As the California Government Code is amended, this Policy shall likewise become amended. The Treasurer may place further restrictions upon the types of investments for which money on deposit in the Treasury may be invested. Permitted investments and investment parameters for the Pooled Investment Fund are: A. U.S. Treasury Obligations -United States Treasury notes, bonds, bills, or certificates of indebtedness, or those for which the faith and credit of the United States are pledged for the payment of principal and interest. 1. Maximum maturity: 5 years 2. Maximum % of portfolio: not limited 3. Maximum par value per issuer: none 4. Credit: N/A B. U.S. Agency Obligations - Federal agency or United States government-sponsored enterprise obligations, participations, or other instruments, including those issued by or fully guaranteed as to principal and interest by Federal agencies or United States government-sponsored enterprises. 1. Maximum maturity: 5 years 2. Maximum % of portfolio: not limited 3. Maximum par value per issuer: none 4. Credit: N/A

181 Page 6 C. Bankers Acceptances (BA) - (Domestic and Foreign) Bankers acceptances otherwise known as bills of exchange or time drafts that are drawn on and accepted by a commercial bank. 1. Maximum maturity: 180 days 2. Maximum % of portfolio: 40% 3. Maximum par value per issuer: 30% 4. Credit: Prime quality domestic and foreign Commercial banks D. Negotiable Certificates of Deposit (CDs) Negotiable certificates of deposit issued by a nationally or state chartered bank, a savings association or a federal association (as defined by Section 5102 of the Financial Code), a state or federal credit union, or by a state-licensed branch of a foreign bank, including CDs that use a private sector entity that assists in the placement thereof, as allowed by Government Code Sections 53601(i), , and Maximum maturity: 5 years 2. Maximum % of portfolio: 30% 3. Maximum par value per issuer: N/A 4. Credit: Must be issued by a nationally or statechartered bank or a savings association or federal association or a state or federal credit union or by a state-licensed branch of a foreign bank, subject to the conflict of interest provision described in the Government Code Section 53601(i). E. Commercial Paper Unsecured short-term debt obligations issued by corporations, limited to those issuers as defined in Government Code Sections 53601(h) and (a). 1. Maximum maturity: 270 days 2. Maximum % of portfolio: 40% 3. Maximum par value per issuer: May not exceed 10% of the outstanding paper of an issuing corporation 4. Credit: Commercial paper must be of prime quality of the highest ranking or of the highest letter and numerical rating as provided by Moody s Investor Service ( A-1 ), Standard & Poor s Financial Services, LLP ( P-1 ) or Fitch Ratings ( F-1 ). Eligible paper is further limited to issuing corporations that are organized and operating within the United States, having total assets in excess of five hundred million dollars ($500,000,000) and having an A or higher rating for the issuer s debt other than commercial paper, if any, as provided by Moody s Investors Service (Moody s), Standard & Poor s Financial Services, LLP (S&P), or Fitch Ratings (Fitch).

182 Page 7 F. Repurchase Agreements (Repo) Purchase of securities pursuant to an agreement by which the counter-party seller will repurchase the securities on or before a specified date and for a specified amount. 1. Maximum maturity: 1 year 2. Maximum % of portfolio: none 3. Maximum par value per issuer: N/A 4. Credit: Counterparties will be limited to (i) primary government securities dealers who report daily to the Federal Reserve Bank of New York, or (ii) banks, savings and loan associations or diversified securities broker-dealers subject to regulation of capital standards by any State or Federal regulatory agency. A master repurchase agreement must be in place with the bank or dealer. 5. Collateralization: Collateral for repurchase agreements shall have a market value of at least 102% of the amount invested. Term repos must be marked to market on a regular basis, no less than quarterly. Collateral for term repos must be delivered to the county s custodial agent for safekeeping. G. State of California Obligations Registered state warrants or treasury notes or bonds of this state, including bonds payable solely out of the revenues from a revenueproducing property owned, controlled, or operated by the state or by a department, board, agency, or authority of the state. 1. Maximum maturity: 5 years 2. Maximum % of portfolio: not limited 3. Maximum par value per issuer: N/A 4. Credit: A rated or better by Moody s, S&P or Fitch H. California Local Agency Obligations - Bonds, notes, warrants or other evidence of indebtedness of any local agency within the State of California, including bonds payable solely out of the revenues from a revenue-producing property owned, controlled, or operated by the local agency, or by a department, board, agency, or authority of the local agency. 1. Maximum maturity: 5 years 2. Maximum % of portfolio: not limited 3. Maximum par value per issuer: N/A 4. Credit: A rated or better by Moody s, S&P or Fitch

183 Page 8 I. California State Local Agency Investment Pool (LAIF) 1. Maximum maturity: N/A 2. Maximum % of portfolio: N/A 3. Maximum par value: Dollar limit set by the state (the limit effective 11/16/2009 is $50,000,000) 4. Credit: N/A J. Medium Term Notes all corporate and depository institution debt securities with a maximum remaining maturity of five years or less, issued by corporations organized and operating within the United States or by depository institutions licensed by the United States or any state and operating within the United States. 1. Maximum maturity 5 years 2. Maximum % of portfolio 30% 3. Maximum par value per issuer N/A 4. Credit A rated or better by Moody s, S&P or Fitch and issued by corporations organized and operating within the United States or by depository institutions licensed by the United States or any state and operating within the United States. 8. COMPETITIVE TRANSACTIONS On all instruments purchased on the secondary market, the Treasurer shall obtain competitive bid information from at least two separate brokers and/or financial institutions or through the use of a nationally recognized trading platform. 9. SAFEKEEPING AND CUSTODY All trades of marketable securities will be executed on a delivery vs. payment (DVP) basis, and held by the third-party custodian designated by the Treasurer. Non-marketable securities, such as non-negotiable C/D s and notes of local agencies, may be held in the Treasurer s safe. 10. BROKERS AND FINANCIAL INSTITUTIONS A list will be maintained of approved broker/dealers and financial institutions authorized to provide investment services to the Napa County Pooled Investment Fund. Approved security broker/dealers will be selected by conducting a process of due diligence. These may include primary dealers or regional dealers that qualify under Securities and Exchange Commission (SEC) Rule 15c3-1 (uniform net capital rule).

184 Page 9 The Treasurer shall determine which financial institutions are authorized to provide investment services to the Napa County Pooled Investment Fund. Institutions eligible to transact investment business include: Primary government dealers as designated by the Federal Reserve Bank; Nationally or state-chartered banks; The Federal Reserve Bank; Direct issuers of securities eligible for purchase. Selection of broker/dealers and financial institutions authorized to engage in transactions with the Napa County Pooled Investment Fund shall be at the sole discretion of the Treasurer. The Treasurer will monitor the financial condition, certification, and registration of approved firms and employees on an annual basis. In accordance with California Government Code Section 27133(c), any broker, brokerage, dealer, or securities firm that has exceeded the political contribution limitations contained in Rule G-37 of the Municipal Securities Rulemaking Board, within any consecutive 48-month period, to the County Treasurer or any member of the governing board of the local agency or any candidate for those offices, is disqualified for selection. 11. HONORARIA, GIFTS AND GRATUITIES With respect to honoraria, gifts and gratuities, the County Treasurer, the Assistant Treasurer, and any member of the Oversight Committee are subject to California law and the limits set forth by the California Fair Political Practices Commission. The County Treasurer, the Assistant Treasurer, and each member of the Oversight Committee, shall file an annual Statement of Economic Interests (CA Form 700) with the Elections Division of the Napa County Assessor-Clerk-Recorder s Office. 12. WITHDRAWALS A. For Statutory Participants, the County Treasurer will honor all requests to withdraw funds for normal cash flow purposes that are approved by the Napa County Auditor-Controller at a one-dollar net asset value. Pursuant to California Government Code Section 27136, any Statutory Participant that seeks to withdraw funds for the purpose of investing or depositing those funds outside the county treasury pool shall submit a written request for withdrawal to the County Treasurer for approval. When determining whether to approve the withdrawal request, the County Treasurer will consider any adverse effects such a withdrawal would have on the Pooled Investment Fund, its yield or its participants. The County Treasurer will also assess the effect of the proposed withdrawal on the stability and predictability of the investments in the

185 Page 10 County treasury. Any withdrawal for such purposes may be paid based upon the market value of the Pooled Investment Fund as of the date of withdrawal. B. For Voluntary Participants, where the County Treasurer is not the statutorily designated Custodian of Funds and their Board of Directors has adopted the Napa County Investment Policy, any withdrawal request shall be submitted in writing to the County Treasurer, who will determine the timing of the payout (normally within 48 hours), in order to mitigate any adverse effects such a withdrawal would have on the Pooled Investment Fund, its yield or its participants. Withdrawals may be paid based upon the market value of the Pooled Investment Fund as of the date of the withdrawal. Withdrawals will generally be limited to once per week and will be paid by wire transfer. The withdrawing entity will be billed for any wire transfer(s) initiated on its behalf. 13. SPECIAL INVESTMENTS Napa County operates a Pooled Investment Portfolio. All monies from all units of government, schools, agencies, and districts deposited into the treasury are combined into one pool. The purpose of the combined pool is to increase the participants liquidity and not limit them to specific investments. This pool is invested as a unit based on a calculated combined cash flow of all the participants. No exceptions to the combined pool are allowed and no special investment is permitted for any agency. 14. APPORTIONMENT OF INTEREST AND COSTS Interest shall be apportioned to all pool participants quarterly based upon the ratio of the average daily balance of each individual fund to the average daily balance of all funds in the investment pool. The amount of interest apportioned shall be determined using the cash method of accounting whereby interest will be apportioned for the quarter in which it was actually received. The Treasurer shall deduct from the gross interest received those administrative costs related to investing, depositing or handling of funds and of distribution of such interest or income, including salaries and other compensation, banking costs, equipment purchased, supplies, costs of information services, audits, Oversight Committee costs and any other costs as provided by Government Code Section Such cost reimbursement shall be paid into the County s general fund. 15. INTERNAL CONTROLS Internal control procedures shall be established and maintained by the Treasurer that provide reasonable assurance that the investment objectives are met and to ensure that the assets are protected from loss, theft, misuse, or mismanagement. The internal controls shall be reviewed as part of the regular annual independent audit. The controls and procedures shall be

186 Page 11 designed to prevent employee error, misrepresentations by third parties, and imprudent or illegal actions by employees or officers of the County. 16. REPORTING The Napa County Treasurer will provide the following: Monthly, an investment report to the Treasury Oversight Committee, the Board of Supervisors, and any participating agency making such a request in writing. The report shall include all of the elements as required by California Government Code Section 53646(b). Annually, a statement of investment policy to the Board of Supervisors for approval; and to the Treasury Oversight Committee or any participating agency (making such a request in writing) for review and monitoring. 17. SOCIAL ISSUES/RESPONSIBILITY Issues of public social concern and benefit will be evaluated on a case by case basis. While consideration will be given to various social concerns, transactions must meet the Policy objectives of safety, liquidity, and yield when compared to investments permitted by state law. Any decision to conduct financial transactions with an entity shall be made exercising the care, skill, prudence and diligence under the circumstances then prevailing, which persons of prudence, discretion and intelligence exercise in the management of their own affairs. FINAL NOTE: All participants in the investment process shall act as custodians of the public trust. Investment officials shall recognize that the investment portfolio is subject to public review. The overall program shall be designed and managed with a degree of professionalism that is worthy of the public trust.

187 Page GLOSSARY OF SELECTED INVESTMENT TERMINOLOGY ACCRUED INTEREST: Coupon interest accumulated on a bond or note since the last interest payment or, for a new issue, from the dated date to the date of delivery. AGENCIES: Federal agency securities and/or Government-sponsored enterprises. ASKED: The price at which securities are offered. BANKERS ACCEPTANCE (BA): A draft or bill or exchange accepted by a bank or trust company. The accepting institution guarantees payment of the bill, as well as the issuer. BASIS POINTS: Refers to the yield on bonds. Each percentage pointof yield in bonds equals 100 basis points (1/100% or 0.01%). If a bond yield changes from 4.20% to 4.25%, that is a change of 5 basis points. BENCHMARK: A comparative base for measuring the performance or risk tolerance of the investment portfolio. A benchmark should represent a close correlation to the level of risk and the average duration of the portfolio s investments. BID: The price offered by a buyer of securities (when you are selling securities, you ask for a bid). BROKER: A person or firm that acts as an intermediary by purchasing and selling securities for others rather than for its own account. CERTIFICATE OF DEPOSIT (CD): A time deposit with a specific maturity evidenced by a Certificate. Large-denomination CD s are typically negotiable. COLLATERAL: Securities, evidence of deposit or other property, which a borrower pledges to secure repayment of a loan. Also refers to securities pledged by a bank to secure deposits of public monies. COLLATERALIZATION: Process by which a borrower pledges securities, property, or other deposits for the purpose of securing the repayment of a loan and/or security. COMMERCIAL PAPER: An unsecured short-term promissory note issued by corporation, with maturities ranging from 2 to 270 days. COUPON: (a) The annual rate of interest that a bond s issuer promised to pay the bondholder on the bond s face value. (b) A certificate attached to a bond evidencing interest due on a payment date. DEALER: A dealer, as opposed to a broker, acts as a principal in all transactions, buying and selling for his own account. DEBENTURE: A bond secured only by the general credit of the issuer. DELIVERY VERSUS PAYMENT: There are two methods of delivery of securities: delivery versus payment and delivery versus receipt. Delivery versus payment is delivery of securities with an exchange

188 of money for the securities. Delivery versus receipt is delivery of securities with an exchange of a signed receipt for the securities. Page 13 DERIVATIVE: Securities that are based on, or derived from, some underlying asset, reference date, or index. DISCOUNT: The difference between the cost price of a security and its maturity when quoted at lower than face value. A security selling below original offering price shortly after sale also is considered to be at a discount. DISCOUNT SECURITIES: Non-interest bearing money market instruments that are issued at a discount and redeemed at maturity for full face value, e.g. U.S. Treasury Bills. DIVERSIFICATION: Dividing investment funds among a variety of securities offering independent returns. FEDERAL CREDIT AGENCIES: Agencies of the Federal government set up to supply credit to various classes of institutions and individuals, e.g. S&L s, small business firms, students, farmers, farm cooperatives, and exporters. FEDERAL DEPOSIT INSURANCE CORPORATION (FDIC): A federal agency that insures bank deposits. FEDERAL FUNDS RATE: The rate of interest at which Fed funds are traded. This rate is currently pegged by the Federal Reserve through open-market operations. FEDERAL HOME LOAN BANKS (FHLB): Government sponsored wholesale banks (currently 12 regional banks), which lend funds and provide correspondent banking services to member commercial banks, thrift institution, credit unions and insurance companies. The mission of the FHLBs is to liquefy the housing related assets of its members who must purchase stock in their district Bank. FEDERAL NATIONAL MORTGAGE ASSOCIATION (FNMA): FNMA, like GNMA, was chartered under the Federal National Mortgage Association Act in GNMA is a federal corporation working under the auspices of the Department of Housing and Urban Development (HUD). It is the largest single provider of residential mortgage funds in the United States. Fannie Mae, as the corporation is called, is a private stockholder-owned corporation. The corporation s purchases include a variety of adjustable mortgages and second loans, in addition to fixed-rate mortgages. GNMA s securities are also highly liquid and are widely accepted. GNMA assumes and guarantees that all security holders will receive timely payment of principal and interest. FEDERAL OPEN MARKET COMMITTEE (FOMC): Consists of seven members of the Federal Reserve Board and five of the twelve Federal Reserve Bank Presidents. The President of the New York Federal Reserve Bank is a permanent member, while the other Presidents serve on a rotating basis. The Committee periodically meets to set Federal Reserve guidelines regarding purchase and sales of Government Securities in the open market as a means of influencing the volume of bank credit and money.

189 FEDERAL RESERVE SYSTEM: The central bank of the United States created by Congress and consisting of a seven member Board of Governors in Washington, D.C., 12 regional banks and about 5,700 commercial banks that are members of the system. Page 14 GOVERNMENT NATIONAL MORTGAGE ASSOCIATION (GNMA OR Ginnie Mae): Securities influencing the volume of bank credit guaranteed by GNMA and issued by mortgage bankers, commercial banks, savings and loan associations, and other institutions. Security holder is protected by full faith and credit of the U.S. Government. Ginnie Mae securities are backed by the FHA, VA, or FmHA mortgages. The term pass-throughs is often used to describe Ginnie Maes. LIQUIDITY: A liquid asset is one that can be converted easily and rapidly into cash without a substantial loss of value. In the money market, a security is said to be liquid if the spread between bid and asked prices is narrow and reasonable size can be done at those quotes. LOCAL GOVERNMENT INVESTMENT POOL (LGIP): The aggregate of all funds from political subdivisions that are placed in the custody of the State Treasurer for investment and reinvestment. MARKET VALUE: The price at which a security is trading and could presumably be purchased or sold at a particular point in time. MASTER REPURCHASE AGREEMENT: A written contract covering all future transactions between the parties to repurchase/reverse repurchase agreements that establishes each party s rights in the transactions. A master agreement will often specify, among other things, the right of the buyer/lender to liquidate the underlying securities in the event of default by the seller/borrower. MATURITY: The date upon which the principal or stated value of an investment becomes due and payable. MONEY MARKET: The market in which short-term debt instruments (bills, commercial paper, bankers acceptances, etc.) are issued and traded. OFFER: The price asked by a seller of securities. (When you are buying securities you ask for an offer.) OPEN MARKET OPERATIONS: Purchases and sales of government and certain other securities in the open market by the New York Federal Reserve Bank as directed by the FOMC in order to influence the volume of money and credit in the economy. Purchases inject reserves into the bank system and stimulate growth of money and credit; sales have the opposite effect. Open market operations are the Federal Reserve s most important and most flexible monetary policy tool. PORTFOLIO: Collection of securities held by an investor. PRIMARY DEALER: A group of government securities dealers who submit daily reports of market activity and positions and monthly financial statements to the Federal Reserve Bank of New York and are subject to its informal oversight. Primary dealers include Securities and Exchange Commission (SEC)-registered securities broker-dealers, banks, and a few unregulated firms. PRUDENT PERSON RULE or PRUDENT INVESTOR STANDARD: A standard of conduct where a person acts with care, skill, prudence, and diligence when investing, re-investing, purchasing, acquiring, exchanging, selling, and managing funds. The test of whether the standard is being met is if a prudent

190 Page 15 person acting in such a situation would engage in similar conduct to ensure that investments safeguard principal and maintain liquidity. REPURCHASE AGREEMENT (REPO): An agreement of one party (for example, a financial institution) to sell securities to a second party (such as a local agency) and simultaneous agreement by the first party to repurchase the securities at a specified price from the second party on demand or at a specified date. REVERSE REPURCHASE AGREEMENT: The mirror of a repurchase agreement. An agreement of one party to purchase securities at a specified price from a second party and a simultaneous agreement by the first party to resell the securities at a specified price to the second party on demand or at a specified date. SAFEKEEPING: A service to customers rendered by banks for a fee whereby securities and valuables of all types and descriptions are held in the bank s vaults for protection. SECONDARY MARKET: A market made for the purchase and sale of outstanding issues following the initial distribution. SECURITIES & EXCHANGE COMMISSION (SEC): Agency created by Congress to protect investors in securities transaction by administering securities legislation. SEC RULE 15C3-1: See Uniform Net Capital Rule. STRUCTURED NOTES: Notes issued by Government Sponsored Enterprises (FHLB, GNMA, SLMA, etc.) and Corporations, which have imbedded options (e.g., call features, step-up coupons, floating rate coupons, derivative-based returns) into their debt structure. Their market performance is impacted by the fluctuation of interest rates, the volatility of the imbedded options, and shifts in the shape of the yield curve. TREASURY BILLS: A non-interest bearing discount security issued by the U.S. Treasury to finance the national debt. Most bills are issued to mature in three months, six months, or one year. TREASURY BONDS: Long-term coupon-bearing U.S. Treasury securities issued as direct obligations of the U.S. Government and having initial maturities of more than 10 years. TREASURY NOTES: Medium-term coupon-bearing U.S. Treasury securities issued as direct obligations of the U.S. Government and having initial maturities from two to 10 years. UNIFORM NET CAPITAL RULE: Securities and Exchange Commission requirement that member firms as well as nonmember broker-dealers in securities maintain a maximum ratio of indebtedness to liquid capital of 15 to 1; also called net capital rule and net capital ratio. Indebtedness covers all money owed to a firm, including margin loans and commitments to purchase securities, one reason new public issues are spread among members of underwriting syndicates. Liquid capital includes cash and assets easily converted into cash. YIELD: The current rate of return on an investment security generally expressed as a percentage of the securities current price.

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