M&I MARSHALL & ILSLEY BANK AS UNDERWRITER

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1 NEW ISSUE - BOOK-ENTRY ONLY - BANK QUALIFIED RATING+: S&P AA+ Subject to compliance by the District and the Corporation (as defined herein) with certain covenants, in the opinion of Chapman and Cutler LLP, Chicago, Illinois, Bond Counsel, under present law, interest on the Bonds (i) is excludable from gross income of the owners thereof for federal income tax purposes, (ii) is not included as an item of tax preference in computing the federal alternative minimum tax for individuals and corporations, and (iii) is not taken into account in computing adjusted current earnings, which is used as an adjustment in determining the federal alternative minimum tax for certain corporations. See TAX EXEMPTION herein for a more complete discussion. Interest on the Bonds is not exempt from present State of Illinois income taxes. The Bonds are qualified tax-exempt obligations under Section 265(b)(3) of the Internal Revenue Code of 1986, amended. See QUALIFIED TAX-EXEMPT OBLIGATIONS herein. $1,525,000 COMMUNITY UNIT SCHOOL DISTRICT NUMBER 303 KANE AND DUPAGE COUNTIES, ILLINOIS (ST. CHARLES) GENERAL OBLIGATION LIMITED TAX SCHOOL BONDS, SERIES 2010 Dated: As of Date of Issuance Due: January 1, As Shown on the Inside Cover The General Obligation Limited Tax School Bonds, Series 2010 (the Bonds ), of Community Unit School District Number 303, Kane and DuPage Counties, Illinois (the District ), are issuable as fully registered Bonds under the global book-entry system operated by The Depository Trust Company, New York, New York ( DTC ). Individual purchases will be made in book-entry system form only. Beneficial owners of the Bonds will not receive physical delivery of Bond certificates. The Bonds are issued in fully registered form in denominations which are multiples of $5,000, and will bear interest payable on January 1 and July 1 of each year by The Bank of New York Mellon Trust Company, National Association, Chicago, Illinois, the District s bond registrar and paying agent, with July 1, 2011 as the first interest payment date. Details of payment of the Bonds and the global book-entry system are described herein. Interest is calculated based on a 360-day year consisting of twelve 30-day months. The Bonds, in the opinion of Bond Counsel, are valid and legally binding obligations of the District, payable both as to principal and interest from any funds of the District legally available for such purpose and from ad valorem taxes levied against all taxable property in the District without limitation as to rate, except that the rights of the owners of the Bonds and the enforceability of the Bonds may be limited by bankruptcy, insolvency, moratorium, reorganization and other similar laws affecting creditors rights and by equitable principles, whether considered at law or in equity, including the exercise of judicial discretion. The amount of said taxes that may be extended to pay the Bonds is limited as provided by law. See THE BONDS Limited Bonds herein. Proceeds of the Bonds will be used to (i) fund school fire prevention and safety improvement projects at a school building of the District and (ii) pay certain costs associated with the issuance of the Bonds. The Bonds are not subject to redemption prior to maturity. The Bonds are being purchased by the Underwriter, subject to prior sale, withdrawal or modification of the offer without any notice, and to the approval of legality by Chapman and Cutler LLP, Chicago, Illinois, Bond Counsel. Delivery of the Bonds through the facilities of DTC will be on or about August 26, M&I MARSHALL & ILSLEY BANK AS UNDERWRITER AS FINANCIAL ADVISOR +See BOND RATING herein. The date of this Official Statement is August 9, 2010.

2 For purposes of compliance with Rule 15c2-12 of the Securities and Exchange Commission, this document, as the same may be supplemented or amended by Community Unit School District Number 303, Kane and DuPage Counties, Illinois (the District ), from time to time (collectively, the Official Statement ), may be treated as an Official Statement with respect to the Bonds described herein that is deemed final by the District as of the date hereof (or of any such supplement or amendment). No dealer, broker, salesman or other person has been authorized to give any information or to make any representations other than those contained in this Official Statement, and, if given or made, such other information or representations must not be relied upon as statements of the District or the Underwriter. This Official Statement does not constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of the Bonds by any person, in any jurisdiction in which it is unlawful to make such offer, solicitation or sale. Unless otherwise indicated, the District is the source of all tables and statistical and financial information contained in this Official Statement. The information set forth herein relating to governmental bodies other than the District has been obtained from such governmental bodies or from other sources believed to be reliable. The information and opinions expressed herein are subject to change without notice, and neither the delivery of this Official Statement nor any sale made hereunder shall, under any circumstances, create any implication that there has been no change in the affairs of the District since the date of this Official Statement. The Underwriter has provided the following sentence for inclusion in this Official Statement. The Underwriter has reviewed the information in this Official Statement in accordance with, and as part of its responsibilities to investors under the federal securities laws as applied to the facts and circumstances of this transaction, but the Underwriter does not guarantee the accuracy or completeness of such information. This Official Statement should be considered in its entirety and no one factor considered less important than any other by reason of its position in this Official Statement. Where statutes, resolutions, reports or other documents are referred to herein, reference should be made to such statutes, resolutions, reports or other documents for more complete information regarding the rights and obligations of parties thereto, facts and opinions contained therein and the subject matter thereof. Upon issuance, the Bonds will not be registered under the Securities Act of 1933, as amended, and will not be listed on any stock or other securities exchange and neither the Securities and Exchange Commission nor any other Federal, State, Municipal or other governmental entity, other than the District, shall have passed upon the accuracy or adequacy of this Official Statement. Certain persons participating in this offering may engage in transactions that maintain or otherwise affect the price of the Bonds. Specifically, the Underwriter may overallot in connection with the offering, may bid for, and purchase, the Bonds in the open market. The prices and other terms respecting the offering and sale of the Bonds may be changed from time to time by the Underwriter after the Bonds are released for sale, and the Bonds may be offered and sold at prices other than the initial offering prices, including sales to dealers who may sell the Bonds into investment accounts.

3 MATURITY SCHEDULE, AMOUNTS, INTEREST RATES, YIELDS AND CUSIPS $1,525,000 General Obligation Limited Tax School Bonds, Series 2010 Maturity January 1 Amount ($) Rate (%) Price or Yield (%) CUSIP* (483800) , TE , TF , TG , TH , TJ , TK , TL2 * CUSIP data herein is provided by Standard & Poor s CUSIP Service Bureau, a Division of The McGraw-Hill Companies, Inc.

4 Community Unit School District Number 303 (St. Charles) 201 South 7th Street St. Charles, Illinois (630) * * * * * * * * * * * * * * * * * * Board of Education President Vice President Secretary Scott Nowling James Chimienti Kathleen T. Hewell Members James Gaffney Jr. Corinne Pierog Steven Spurling Michael Vyzral Treasurer Brad Cauffman Superintendent Dr. Donald Schlomann Assistant Superintendent for Business Services Brad Cauffman * * * * * * * * * * * * * * * * * Paying Agent/Bond Registrar The Bank of New York Mellon Trust Company, N.A. 2 North LaSalle Street, Suite 1020 Chicago, Illinois Independent Auditor Klein, Hall & Associates, LLC th Street, Suite 102 Aurora, Illinois Bond Counsel Chapman and Cutler LLP 111 West Monroe Street Chicago, Illinois Financial Advisor PMA Securities, Inc CityGate Lane, 7 th Floor Naperville, Illinois 60563

5 TABLE OF CONTENTS PAGE INTRODUCTION... 1 THE BONDS... 1 General Description... 1 Registration and Exchange... 1 Authority and Purpose... 2 Security and Payment... 2 Limited Bonds... 2 SOURCES AND USES... 4 THE PROJECT... 4 BOOK-ENTRY SYSTEM... 4 REAL PROPERTY ASSESMENT, TAX LEVY AND COLLECTION PROCEDURES... 6 Summary of Property Assessment, Tax Levy and Collection Procedures... 6 Tax Levy and Collection Procedure... 6 Exemptions... 7 Property Tax Extension Limitation Law... 8 Truth in Taxation Law... 9 THE DISTRICT... 9 General Description... 9 Enrollments Building Facilities The Board of Education Administration Employees SOCIO-ECONOMIC CHARACTERISTICS Population Trend Education Income Housing Residential Building Permits Retail Sales Employment Largest Employers Unemployment Historical Unemployment Statistics CERTAIN FINANCIAL INFORMATION Trend of Equalized Assessed Valuation Composition of Equalized Assessed Valuation by County Tax Rates Representative Tax Rates Tax Extensions and Collections Largest Taxpayers Summary of Outstanding Debt Debt Repayment Schedule Overlapping Debt Debt Statement Debt Ratios SUMMARY OF OPERATING RESULTS General Fund Revenue Sources General Fund Summary, Working Cash Fund Summary BUDGET SUMMARY SCHOOL DISTRICT FINANCIAL PROFILE SHORT-TERM FINANCING RECORD FUTURE FINANCING DEFAULT RECORD RETIREMENT PLANS Teacher s Retirement System of the State of Illinois Illinois Municipal Retirement Fund... 23

6 TAX EXEMPTION QUALIFIED TAX-EXEMPT OBLIGATIONS LITIGATION BOND RATING CONTINUING DISCLOSURE THE UNDERTAKING Annual Financial Information Disclosure Material Events Disclosure Consequences of Failure of the District to Provide Information Amendment; Waiver Termination of Undertaking Additional Information Dissemination of Information; Dissemination Agent CERTAIN LEGAL MATTERS UNDERWRITING FINANCIAL ADVISOR THE OFFICIAL STATEMENT Accuracy and Completeness of the Official Statement Appendices: A. Form of Legal Opinion of Bond Counsel B. Audited Financial Statement for the Fiscal Year Ended June 30, 2009

7 $1,525,000 Community Unit School District Number 303 Kane and DuPage Counties, Illinois (St. Charles) General Obligation Limited Tax School Bonds, Series 2010 INTRODUCTION The purpose of this Official Statement is to set forth certain information concerning Community Unit School District Number 303, Kane and DuPage Counties, Illinois (the District ), in connection with the offering and sale of its General Obligation Limited Tax School Bonds, Series 2010 (the Bonds ). This Official Statement includes the cover page, the reverse thereof and the Appendices. Certain factors that may affect an investment decision concerning the Bonds are described throughout this Official Statement. Persons considering a purchase of the Bonds should read this Official Statement in its entirety. General Description THE BONDS The Bonds will be issued in fully registered form, without coupons, in denominations of $5,000 each or authorized integral multiples thereof under a book-entry only system operated by The Depository Trust Company, New York, New York ( DTC ). Principal of and interest on the Bonds will be payable as described under the caption BOOK-ENTRY SYSTEM by The Bank of New York Mellon Trust Company, National Association, Chicago, Illinois, as paying agent and bond registrar (the Registrar ). The Bonds will be dated as of the date of delivery and will mature as shown on the inside cover page of this Official Statement. Interest on the Bonds will be payable on each January 1 and July 1, beginning July 1, The Bonds will bear interest from their dated date, or from the most recent interest payment date to which interest has been paid or provided for, computed on the basis of a 360- day year consisting of twelve 30-day months. The principal of the Bonds will be payable in lawful money of the United States of America upon presentation and surrender thereof at the principal corporate trust office of the Registrar in Chicago, Illinois. Interest on each Bond will be paid by check or draft of the Registrar payable upon presentation in lawful money of the United States of America to the person in whose name such Bond is registered at the close of business on the 15th day of the month next preceding the interest payment date. The Bonds are not subject to redemption prior to maturity. Registration and Exchange The Bonds may be transferred, registered and assigned only on the registration books of the Registrar, and such registration shall be at the expense of the District; provided, however, that the District may require payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with any transfer or exchange of Bonds. 1

8 Upon surrender for transfer of any Bond at the principal corporate trust office of the Registrar, duly endorsed by, or accompanied by a written instrument or instruments of transfer in form satisfactory to the Registrar and duly executed by, the registered owner or his attorney duly authorized in writing, the District shall execute and the Registrar shall authenticate, date and deliver in the name of the transferee or transferees a new fully registered Bond or Bonds of the same maturity of authorized denominations for a like aggregate principal amount. Any fully registered Bond or Bonds may be exchanged at said office of the Registrar for a like aggregate principal amount of Bond or Bonds of the same maturity of other authorized denominations. The execution by the District of any fully registered Bond shall constitute full and due authorization of such Bond and the Registrar shall thereby be authorized to authenticate, date and deliver such Bond, provided, however, the principal amount of outstanding Bonds of each maturity authenticated by the Registrar shall not exceed the authorized principal amount of Bonds for such maturity less previous retirements. The Registrar shall not be required to transfer or exchange any Bond during the period beginning at the close of business on the 15th day of the month next preceding any interest payment date on such Bond and ending at the opening of business on such interest payment date. Authority and Purpose The Bonds are issued under the authority of the School Code of the State of Illinois, the Local Government Debt Reform Act of the State of Illinois, and all laws amendatory thereof and supplementary thereto and pursuant to a resolution adopted by the Board of Education (the Board ) of the District on August 9, 2010 (the Bond Resolution ). Proceeds of the Bonds will be used to (i) fund school fire prevention and life safety improvement projects at a school building of the District (see THE PROJECT herein) and (ii) pay certain costs associated with the issuance of the Bonds. Security and Payment The Bonds, in the opinion of Bond Counsel, are payable from any funds of the District legally available for such purpose and from ad valorem taxes levied against all of the taxable property in the District without limitation as to rate, except that the rights of the owners of the Bonds and the enforceability of the Bonds may be limited by bankruptcy, insolvency, moratorium, reorganization and other similar laws affecting creditors' rights and by equitable principles, whether considered at law or in equity, including the exercise of judicial discretion. The amount of said taxes that may be extended to pay the Bonds is limited as provided by law. See Limited Bonds herein. The Bond Resolution will be filed with the County Clerks of Kane and DuPage Counties, Illinois (the County Clerks ) and will serve as authorization to the County Clerks to extend and collect the property taxes as set forth in the Bond Resolution. The form of the opinion of Bond Counsel regarding the Bonds is set forth in Appendix A. Limited Bonds The Bonds are limited bonds and are issued pursuant to the Act, as supplemented and amended, and particularly as supplemented by the Debt Reform Act. Although the obligation of the District to pay the Bonds is a general obligation under the Act and all taxable property in the District is subject to the levy of taxes to pay the Bonds without limitation as to rate, the amount of said taxes that will be extended to pay the Bonds is limited by the Property Tax Extension Limitation Law of the State of Illinois, as amended (the Limitation Law ). 2

9 The Debt Reform Act provides that the Bonds are payable from the debt service extension base of the District (the Base ), which is an amount equal to that portion of the extension for the District for the 1994 levy year constituting an extension for payment of principal and interest on bonds issued by the District without referendum, but not including alternate bonds issued under Section 15 of the Debt Reform Act or refunding obligations issued to refund or to continue to refund obligations of the District initially issued pursuant to referendum, increased each year commencing with the 2009 levy year, by the lesser of 5% or the percentage increase in the Consumer Price Index (as defined in the Limitation Law) during the 12-month calendar year preceding the levy year. The Limitation Law further provides that the annual amount of taxes to be extended to pay the Bonds and all other limited bonds heretofore and hereafter issued by the District shall not exceed the Base. At closing, the Bonds will constitute one of three series of limited bonds of the District that are payable from the Base. Payments on the Bonds from the Base will be made on a parity with the payments on the District s outstanding General Obligation Limited Tax School Bonds, Series 2002, and Taxable General Obligation Limited Tax School Bonds, Series 2005C. The District is authorized to issue from time to time additional limited bonds payable from the Base, as permitted by law, and to determine the lien priority of payments to be made from the Base to pay the District s limited bonds. The amount of the Base has been determined to be $2,474,995.56, which is calculated as follows: Original Debt Service Extension Base... $2,407, Levy Year % CPI Increase... 2, Debt Service Extension Base Levy Year $2,409, Levy year % CPI Increase... 65, Debt Service Extension Base Levy Year $2,474, The following chart shows the Base of the District and the debt service on the Bonds. Levy Year Outstanding Limited Tax Debt Service Debt Service on the Bonds Total Limited Tax Debt Service Base Available Base 2010 $ 2,227,350 $ 246,343 $ 2,473,693 $ 2,474,995 $ 1, ,252, ,876 2,472,444 2,474,995 2, ,218, ,683 2,470,845 2,474,995 4, ,212, ,808 2,471,970 2,474,995 3, ,201, ,608 2,471,708 2,474,995 3, ,159, ,125 2,465,100 2,474,995 9, ,189, ,750 2,292,725 2,474, , ,214,975-2,214,975 2,474, , ,233,375-2,233,375 2,474, , ,146,250-2,146,250 2,474, , ,057,850-2,057,850 2,474, , ,969,450-1,969,450 2,474, , ,880,200-1,880,200 2,474, , ,790,100-1,790,100 2,474, ,895 Totals $ 29,753,493 $ 1,657,192 $ 31,410,684 3

10 SOURCES AND USES The sources and uses of funds with respect to the Bonds are estimated as follows: Estimated Sources of Funds Par Amount of the Bonds... $1,525, Original Issue Premium/(Discount)... 8, Total Sources... $1,533, Estimated Uses of Funds Deposit to the Project Fund... $1,503, Costs of Issuance (1)... 29, Total Uses... $1,533, (1) Includes Underwriter s discount, financial advisor fee, rating agency fee, Registrar fees, Bond Counsel fees, and other costs of issuance. THE PROJECT Proceeds of the Bonds will be used for various health, life and safety projects at the John Baker Norris Recreation Center (the Building ) which primarily consists of the replacement of the dehumidification system. The District expects to complete the improvements by December 1, The District owns the Building and leases it to the John Baker Norris Recreation Center, an Illinois not-for-profit corporation (the Corporation ). BOOK-ENTRY SYSTEM DTC will act as securities depository for the Bonds. The Bonds will be issued as fully registered bonds 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 series and maturity of the Bonds, in the aggregate principal amount of such series and maturity, and will be deposited with DTC. DTC, the world s largest securities depository, is a limited-purpose trust company organized under the New York Banking Law, a banking organization within the meaning of the New York Banking Law, a member of the Federal Reserve System, a clearing corporation within the meaning of the New York Uniform Commercial Code, and a clearing agency registered pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934, as amended (the 1934 Act ). DTC holds and provides asset servicing for over 3.5 million 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 bond transactions in deposited bonds, through electronic computerized book-entry transfers and pledges between Direct Participants accounts. This eliminates the need for physical movement of bond certificates. Direct Participants include both U.S. and non- U.S. securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations. DTC is a wholly-owned subsidiary of The Depository Trust & Clearing Corporation ( DTCC ). DTCC, is the holding company for DTC, National Securities Clearing Corporation, Fixed Income Clearing Corporation, all of which are registered cleaning agencies DTCC is owned by the users of its regulated subsidiaries. Access to the DTC system is also available to others such as both 4

11 U.S. and non U.S. securities brokers and dealers, banks trust companies, and clearing corporation that clear through or maintain a custodial relationships with a Direct Participant, either directly or indirectly ( Indirect Participations ). Standard & Poor s Rating Services, a Division of the McGraw- Hill Companies, Inc. ( S&P ), has assigned DTC its highest rating: AAA. The DTC Rules applicable to its participants are on file with the Securities and Exchange Commission (the Commission ). More information about DTC can be found at and Purchases of Bonds under the DTC system must be made by or through Direct Participants, which will receive a credit for the Bonds on DTC s records. The ownership interest of each actual purchaser of each Bond ( Beneficial Owner ) is in turn to be recorded on the Direct and Indirect Participants records. Beneficial Owners will not receive written confirmation from DTC of their purchase. Beneficial Owners are, however, expected to receive written confirmations providing details of the transaction, as well as periodic statements of their holdings, from the Direct or Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers of ownership interests in the Bonds are to be accomplished by entries made on the books of Direct and Indirect Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interests in Bonds, except in the event that use of the book-entry system for the Bonds is discontinued. To facilitate subsequent transfers, all Bonds deposited by Direct Participants with DTC are registered in the name of DTC s partnership nominee, Cede & Co., or such other name as may be requested by an authorized representative of DTC. The deposit of Bonds with DTC and their registration in the name of Cede & Co. or such other DTC nominee do not effect any change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the Bonds; DTC s records reflect only the identity of the Direct Participants to whose accounts such Bonds are credited, which may or may not be the Beneficial Owners. The Direct and Indirect Participants will remain responsible for keeping account of their holdings on behalf of their customers. Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. 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 notices be provided directly to them. Redemption notices shall be sent to DTC. If less than all of the Bonds within an issue are being redeemed, DTC s practice is to determine by lot the amount of the interest of each Direct Participant in such issue to be redeemed. Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to Bonds unless authorized by a Direct Participant in accordance with DTC s MMI Procedures. Under its usual procedures, DTC mails an Omnibus Proxy to the District as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co. s consenting or voting rights to those Direct Participants to whose accounts the Bonds are credited on the record date (identified in a listing attached to the Omnibus Proxy). 5

12 Redemption proceeds, distributions, and dividend payments on the Bonds will be made to Cede & Co., or such other nominee as may be requested by an authorized representative of DTC. DTC s practice is to credit Direct Participants accounts upon DTC s receipt of funds and corresponding detailed information from the District or Registrar, 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 bonds 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, the Registrar, or the District, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of redemption proceeds, distributions, and dividend payments to Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) is the responsibility of the District or the Registrar, disbursement of such payments to Direct Participants will be the responsibility of DTC, and disbursement of such payments to Beneficial Owners will be the responsibility of Direct and Indirect Participants. DTC may discontinue providing its services as securities depository with respect to the Bonds at any time by giving reasonable notice to the District or the Registrar. Under such circumstances, in the event that a successor securities depository is not obtained, Bond certificates are required to be printed and delivered. The District may decide to discontinue use of the system of book-entry transfers through DTC (or a successor securities depository). In that event, Bond certificates will be printed and delivered. The information in this section concerning DTC and DTC s book-entry system has been obtained from sources that the District believes to be reliable, but the District takes no responsibility for the accuracy thereof. The District will have no responsibility or obligation to any Securities Depository, any Participants in the Book-Entry System or the Beneficial Owners with respect to (i) the accuracy of any records maintained by the Securities Depository or any Participant; (ii) the payment by the Securities Depository or by any Participant of any amount due to any Beneficial Owner in respect of the principal amount or redemption price of, or interest on, any Bonds; (iii) the delivery of any notice by the Securities Depository or any Participant; (iv) the selection of the Beneficial Owners to receive payment in the event of any partial redemption of the Bonds; or (v) any other action taken by the Securities Depository or any Participant. REAL PROPERTY ASSESMENT, TAX LEVY AND COLLECTION PROCEDURES Summary of Property Assessment, Tax Levy and Collection Procedures A separate tax to pay the principal of and interest on the Bonds will be levied on all taxable property in the District. The information under this caption describes the current procedures for real property assessments, tax levies and collections in Kane and DuPage Counties (the Counties ). There can be no assurance that the procedures described herein will not change. Tax Levy and Collection Procedure Local Assessment Officers determine the assessed valuation of taxable real property and railroad property not held or used for railroad operations. The Illinois Department of Revenue (the Department ) assesses certain other types of taxable property, including railroad property held or used for railroad operations. Local Assessment Officers valuation determinations are subject to review at the county level and then, in general, to equalization by the Department. Such equalization 6

13 is achieved by applying to each county s assessments a multiplier determined by the Department. The purpose of equalization is to provide a common basis of assessments among counties by adjusting assessments toward the statutory standard of 33-1/3% of fair cash value. Farmland is assessed according to a statutory formula, which takes into account factors such as productivity and crop mix. Taxes are extended against the assessed values after equalization. Property tax levies of each taxing body are filed in the office of the county clerk in which territory of that taxing body is located. The county clerk computes the rates and amount of taxes applicable to taxable property subject to the tax levies of each taxing body and determines the dollar amount of taxes attributable to each respective parcel of taxable property. The county clerk then supplies to the appropriate collecting officials within the county the information needed to bill the taxes attributable to the various parcels therein. After the taxes have been collected, the collecting officials distribute to the various taxing bodies their respective shares of the taxes collected. Taxes levied in one calendar year are due and payable in two installments during the next calendar year. Taxes that are not paid when due, or that are not paid by mail and postmarked on or before the due date, are subject to a penalty of 1-1/2% per month until paid. Unpaid property taxes, together with penalties, interest and costs, constitute a lien against the property subject to the tax. Exemptions An annual General Homestead Exemption provides that the Equalized Assessed Valuation ( EAV ) of certain property owned and used for residential purposes ( Residential Property ) may be reduced by up to $5,000 for assessment years 2004 through 2007 in all counties. Additionally, the maximum reduction is $5,500 for assessment year 2008 and the maximum reduction is $6,000 for assessment year 2009 and thereafter in all counties. The Homestead Improvement Exemption applies to Residential Properties that have been improved or rebuilt in the two years following a catastrophic event. The exemption is limited to $45,000 through December 31, 2003, and $75,000 per year beginning January 1, 2004 and thereafter, to the extent the assessed value is attributable solely to such improvements or rebuilding. Additional exemptions exist for senior citizens. The Senior Citizens Homestead Exemption ( Senior Citizens Homestead Exemption ) operates annually to reduce the EAV on a senior citizen s home for assessment years prior to 2004 by $2,000 in counties with less than 3,000,000 inhabitants. For assessment years 2004 and 2005, the maximum reduction is $3,000 in all counties. For assessment years 2006 and 2007, the maximum reduction is $3,500 in all counties. In addition, for assessment year 2008 and thereafter, the maximum reduction is $4,000 for all counties. Furthermore, beginning with assessment year 2003, for taxes payable in 2004, property that is first occupied as a residence after January 1 of any assessment year by a person who is eligible for the Senior Citizens Homestead Exemption must be granted a pro rata exemption for the assessment year based on the number of days during the assessment year that the property is occupied as a residence by a person eligible for the exemption. A Senior Citizens Assessment Freeze Homestead Exemption ( Senior Citizens Assessment Freeze Homestead Exemption ) freezes property tax assessments for homeowners, who are 65 and older and receive a household income not in excess of the maximum income limitation. The maximum income limitation is $35,000 for years prior to 1999, $40,000 for assessment years 1999 through 2003, $45,000 for assessment years 2004 and 2005, $50,000 for assessment years 2006 and 2007 and for assessment year 2008 and after, the maximum income limitation is $55,000. In general, the exemption limits the annual real property tax bill of such property by granting to qualifying senior citizens an exemption as to a portion of the valuation of their property. For those counties with less than 7

14 3,000,000, the exemption is as follows: through assessment year 2005 and for assessment year 2007 and later, the exempt amount is the difference between (i) the current EAV of the residence and (ii) the base amount, which is the EAV of a senior citizen s residence for the year prior to the year in which he or she first qualifies and applies for the exemption. For assessment year 2006, the amount of the exemption phases out as the amount of household income increases. The amount of the exemption is calculated by using the same formula as above, and then multiplying the resulting value by a ratio that varies according to household income. Another exemption available to disabled veterans operates annually to exempt up to $70,000 of the EAV of property owned and used exclusively by such veterans or their spouses for residential purposes. However, individuals claiming exemption under the Disabled Persons Homestead Exemption ( Disabled Persons Homestead Exemption ) or the Disabled Veterans Standard Homestead Exemption ( Disabled Veterans Standard Homestead Exemption ) cannot claim the aforementioned exemption. Also, certain property is exempt from taxation on the basis of ownership and/or use, such as public parks, not-for-profit schools and public schools, churches, and not-for-profit hospitals and public hospitals. Furthermore, beginning with assessment year 2007, the Disabled Persons Homestead Exemption provides an annual homestead exemption in the amount of $2,000 for property that is owned and occupied by certain persons with a disability. However, individuals claiming exemption as a disabled veteran or claiming exemption under the Disabled Veterans Standard Homestead Exemption cannot claim the aforementioned exemption. In addition, the Disabled Veterans Standard Homestead Exemption provides disabled veterans an annual homestead exemption starting with assessment year 2007 and thereafter. Specifically, (i) those veterans with a service-connected disability of 75% are granted an exemption of $5,000 and (ii) those veterans with a service-connected disability of less than 75%, but at least 50% are granted an exemption of $2,500. Furthermore, the veteran s surviving spouse is entitled to the benefit of the exemption, provided that the spouse has legal or beneficial title of the homestead, resides permanently on the homestead and does not remarry. However, individuals claiming exemption as a disabled veteran or claiming exemption under the Disabled Persons Homestead Exemption cannot claim the aforementioned exemption. Beginning with assessment year 2007, the Returning Veterans Homestead Exemption ( Returning Veterans Homestead Exemption ) is available for property owned and occupied as the principal residence of a veteran in the assessment year the veteran returns from an armed conflict while on active duty in the United States armed forces. This provision grants a homestead exemption of $5,000, which is applicable in all counties. In order to apply for this exemption, the individual must pay real estate taxes on the property, own the property or have either a legal or an equitable interest in the property, subject to some limitations. Those individuals eligible for this exemption may claim the exemption in addition to other homestead exemptions, unless otherwise noted. Property Tax Extension Limitation Law The Limitation Law limits the annual growth in the amount of property taxes to be extended for certain Illinois non-home-rule units, including the District. In general, the annual growth permitted under the Limitation Law is the lesser of 5% or the percentage increase in the Consumer Price Index during the calendar year preceding the levy year. Taxes can also be increased due to new construction, referendum approval of tax rate increases, mergers and consolidations. 8

15 The effect of the Limitation Law is to limit the amount of property taxes that can be extended for a taxing body. In addition, general obligation bonds, notes and installment contracts payable from ad valorem taxes unlimited as to rate and amount cannot be issued by the affected taxing bodies unless they are approved by referendum, are alternate bonds or are for certain refunding purposes. The District has the authority to levy taxes for many different purposes. See FINANCIAL INFORMATION Tax Rates. The ceiling at any particular time on the rate at which these taxes may be extended for the District is either (i) unlimited (as provided by statute), (ii) initially set by statute but permitted to be increased by referendum, (iii) capped by statute, or (iv) limited to the rate approved by referendum. Public Act , effective June 30, 2006, provides that the only ceiling on a particular tax rate is the ceiling set by statute above, at which the rate is not permitted to be further increased by referendum or otherwise. Therefore, taxing districts (such as the District) have increased flexibility to levy taxes for the purposes for which they most need the money. The total aggregate tax rate for the various purposes subject to the Limitation Law, however, will not be allowed to exceed the District s limiting rate computed in accordance with the provisions of the Limitation Law. Local governments, including the District, can issue limited tax bonds (such as the Bonds) in lieu of general obligation bonds that have otherwise been authorized by applicable law. See THE BONDS Limited Bonds herein. Truth in Taxation Law Legislation known as the Truth in Taxation Law (the Law ) limits the aggregate amount of certain taxes which can be levied by, and extended for, a taxing district to 105% of the amount of taxes extended in the preceding year unless specified notice, hearing and certification requirements are met by the taxing body. The express purpose of the Law is to require published disclosure of, and hearing upon, an intention to adopt a levy in excess of the specified levels. The provisions of the Law do not apply to levies made to pay principal of and interest on the Bonds. The District covenanted in the Bond Resolution that it will not take any action which would adversely affect the levy, extension, collection, and application of the taxes levied by the District for payment of principal of and interest on the Bonds. The District also covenanted that it will comply with all present and future laws concerning the levy, extension, and collection of such taxes levied by the District. General Description THE DISTRICT The District was formed as a consolidated unit in 1949 by combining three existing school districts into one. The District now educates over 13,922 students from pre-kindergarten through high school. It is currently made up of 12 elementary schools, three middle school campuses, and two high schools. The District is located approximately 40 miles west of Chicago in Kane and DuPage Counties (the Counties ) and encompasses an area of approximately 57 square miles in the Fox River Valley. The District serves the City of St. Charles (the City ) as well as portions of the communities of West Chicago, South Elgin, Wayne, Campton Hills, Wasco, Elburn and unincorporated Kane County. There are 62 park sites and four golf courses located in the City with settings for various recreational activities. Residents also enjoy a variety of shops to fill their needs: The Randall Road 9

16 Corridor, distinctive downtown shops and the 1,200,000 square-foot regional mall, Charlestowne Centre. The Norris Cultural Arts Center, which seats approximately 900, is also available for community residents. The District lies within the boundaries of Community College District Nos. 509 and 516, twoyear colleges offering associate degrees in liberal arts and technical programs leading to employment or further study at four-year colleges or universities. Other nearby institutions of higher learning include Northern Illinois University located in DeKalb, Aurora University in Aurora, North Central College in Naperville and the College of DuPage in Glen Ellyn, all located within 30 minutes travel time. District residents are served by Illinois Routes 25 and 31 (north/south) and Illinois Route 64 (east/west), both of which traverse the City, and Interstates 90 (located 12 miles to the north) and 88 (located eight miles to the south) connecting with other interstate highways leading to Chicago and other parts of Illinois and the nation. Commuters are served by Metra s Chicago and Northwestern Railway that can be accessed in Geneva, which borders the City on the south. A freight line is accessed in the City. The suburban PACE bus system offers various routes between the City and neighboring communities. The DuPage Airport is located at the City s eastern border and Chicago s O Hare International Airport is located approximately 29 miles to the east. Enrollments * Projected Source: District Records and Estimates 2005/06 13, /11* 13, /07 13, /12* 13, /08 13, /13* 13, /09 13, /14* 13, /10 13, /15* 13,835 10

17 Building Facilities The District currently operates 17 school buildings: Building Enrollment* Capacity East High School... 2,213 2,160 North High School... 2,119 1,820 Haines Middle School... 1,101 1,025 Thompson Middle School ,000 Wredling Middle School... 1,284 1,250 Anderson Elementary School Bell Graham Elementary School Corron Elementary School Davis Elementary School Ferson Creek Elementary School Fox Ridge Elementary School Lincoln Elementary School Munhall Elementary School Norton Creek Elementary School Richmond Elementary School Wasco Elementary School Wild Rose Elementary School Homebound or out-of District N/A * As of September 30, 2009 Source: The District The Board of Education The District is governed by a Board whose members are elected for staggered terms of office. The Board is a policy making body whose primary function is to establish policies for the District, provide for the general operation and personnel of the District, and to oversee the property and facilities of the District. The Board elects a President, Vice President and Secretary from its membership. The present members are as follows: Title Name Year First Elected Current Term Expires President Scott Nowling Vice President James Chimienti Secretary Kathleen T. Hewell Member James Gaffney Jr Member Corinne Pierog Member Steven Spurling Member Michael Vyzral Treasurer Brad Cauffman Appointed 11

18 Administration Dr. Donald Schlomann began as Superintendent of the District on July 1, He previously served as Superintendent for Community Unit School District Number 100 in Belvidere, Illinois. Brad Cauffman is the Assistant Superintendent for Business Services and has been with the District since Employees The District currently has 1,731 employees, of whom 1,043 are certified and 688 are noncertified. Of the total number of employees, 966 are represented by the St. Charles Education Association, 421 are represented by the St. Charles Educational Support Professionals Association and 165 by the St. Charles Transportation and Maintenance Association. The former three contracts expire on August 25, 2011, June 30, 2011 and June 30, 2012, respectively. The District considers its relationship with the unions to be stable. Population Trend SOCIO-ECONOMIC CHARACTERISTICS 2008/ % Change * The City... 22,501 27,896 32, % DuPage County , , , % Kane County , , , % State of Illinois... 11,430,602 12,419,293 12,910, % *2009 figures reflect an estimated 2009 population for the Counties and the State of Illinois as well as a 2008 estimated population figure for the City (most current figures available). Source: U.S. Census Bureau (1990 and 2000 Censuses) Education The educational background of District area residents living in the City as compared to the Counties and the State of Illinois (the State ) is illustrated in the following table. Educational Levels for Persons 25 years of Age and Older Education Level The City Kane County DuPage County The State Less than 9 th Grade % 9.7% 3.9% 7.5% 9 th to 12 th grade, no diploma High school graduate Some college, no degree Associate degree Bachelor s degree Graduate or professional degree Totals % 100% 100% 100% Source: 2000 Census, U.S. Department of Commerce, Census Bureau 12

19 Income The following table sets forth the distribution of household income derived from the 2000 Census for the City compared with the Counties and the State. Household Income The City Kane County DuPage County The State Under $10, % 4.1% 3.0% 8.3% $10,000 to $14, $15,000 to $24, $25,000 to $34, $35,000 to $49, $50,000 to $74, $75,000 to $99, $100,000 to $149, $150,000 to $199, $200,000 or more Median household income... $69,424 $59,351 $67,887 $46,590 Source: 2000 Census, U.S. Department of Commerce, Census Bureau Housing The following table sets forth the distribution of home values for owner-occupied units derived from the 2000 U.S. Census as well as the median home value and percent of residences that were owner-occupied for the City as well as the Counties and the State. Number of Units in the City Number of Units in Kane County Value of Specified City Owner-Occupied Units Percent Percent Under $50, % % $50,000 to $99, , $100,000 to $149, , , $150,000 to $199, , , $200,000 to $299, , , $300,000 or more... 1, , $500,000 to $999, , $1,000,000 or More Total... 7, % 92, % Median value... $196,200 $160,400 Owner-occupied % 76.0% 13

20 Housing Continued Number of Units in DuPage County Number of Units in the State Value of Specified City Owner-Occupied Units Percent Percent Under $50, % 230, % $50,000 to $99, , , $100,000 to $149, , , $150,000 to $199, , , $200,000 to $299, , , $300,000 or more... 29, , $500,000 to $999, , , $1,000,000 or More... 1, , Total , % 2,470, % Median value... $195,000 $130,800 Owner-occupied % 67.3 Source: 2000 Census, U.S. Department of Commerce, Census Bureau Residential Building Permits The following table sets forth the reported number of residential building permits issued and relative construction costs in the City for each of the years listed. *As of May 2010 Source: U.S. Census Bureau Retail Sales Year Reported Number of Building Permits Construction Cost $27,235, ,870, ,408, ,629, ,163, * ,613,790 The following table demonstrates the estimated sales reported by retailers in the City for the last four calendar years and the first quarter of *Through 1 st quarter 2010 Source: Illinois Department of Revenue Year The City 2006 $991,671, ,163, ,733, ,402, * 197,031,877 14

21 Employment The District has a significant employment base provided by a range of manufacturing, commercial and public enterprises. The following table categorizes occupations for District residents 16 years of age and older living in the City compared with the Counties and the State. Occupational Category The City Kane County DuPage County The State Management, professional, and related occupations % 32.3% 43.7% 34.2% Service occupations Sales and office occupations Farming, fishing and forestry occupations Construction, extraction, and maintenance Production, transportation, and material moving occupations Totals % 100.0% 100.0% 100.0% Source: 2000 Census, U.S. Department of Commerce, Census Bureau Largest Employers The following table reflects the diversity of the major employers in the area served by the District by the products manufactured or services performed and approximate number of employees. Name Product or Service Approximate No. of Employees The District... K-12 Education... 1,731 System Sensor (Honeywell)... Manufacturer of commercial smoke detectors & fire equipment Wallace... Office equipment and supplies Omron Automotive Electronics Inc.... Automotive relays and controls Armor Eckrich St. Charles... Manufacturer of salami and delicatessen meats Mason Corporation... Manufacturer of retail store fixtures and display racks Illinois Youth Center... State of Illinois youth correctional facility Pheasant Run Resort & Spa... Resort (with golf course), hotel and conference center Coca-Cola Bottling Co. of Chicago... Regional Coca-Cola distributor Dopaco, Inc.... Manufacturer of paper cartons for fast food industry The City... Municipal government Source: The City and the District s Audited Financial Statement Unemployment Preliminary unemployment statistics for the month of May 2010, as reported by the Illinois Department of Employment Security reveal unemployment rates of 8.5%, 10.5%, 8.6% and 10.0%, for the City, the Counties and the State, respectively. Source: Illinois Department of Employment Security 15

22 Historical Unemployment Statistics The City % 3.4% 3.8% 4.9% 8.6% DuPage County Kane County The State Source: Illinois Department of Employment Security Trend of Equalized Assessed Valuation (Estimated 33 1/3% of Fair Market Value) CERTAIN FINANCIAL INFORMATION By Type Residential... $2,270,733,416 $2,458,126,986 $2,660,618,892 $2,749,665,400 $2,706,978,308 Commercial ,891, ,460, ,803, ,019, ,254,101 Industrial ,135, ,877, ,511, ,986, ,610,228 Farm... 13,927,153 13,647,489 14,785,164 16,219,922 16,976,881 Railroad , , , , ,710 TOTAL... $2,792,253,645 $3,044,714,397 $3,295,419,501 $3,433,696,094 $3,400,789,228 Source: Kane and DuPage County Clerks Offices Composition of Equalized Assessed Valuation by County Kane County... $2,626,860,696 $2,868,715,985 $3,110,104,248 $3,242,902,594 $3,210,873,964 DuPage County ,392, ,998, ,315, ,793, ,915,264 TOTAL... $2,792,253,645 $3,044,714,397 $3,295,419,501 $3,433,696,094 $3,400,789,228 Source: Kane and DuPage County Clerks Offices Tax Rates (Per $100 Equalized Assessed Valuation) Educational... $ $ $ $ $ Tort Immunity Special Education Operations and Maintenance Transportation IMRF Bond & Interest Social Security TOTAL... $ $ $ $ $ Source: Kane County Clerk s Office 16

23 Representative Tax Rates (Per $100 Equalized Assessed Valuation) Taxing Body (1) The District... $ $ $ $ $ Kane County Kane County Forest Preserve The City St. Charles Township (2) St. Charles Park District St. Charles Library District Community College District No TOTAL... $ $ $ $ $ (1) For property within the City. (2) Includes St. Charles Township Road and St. Charles Cemetery. Source: Kane County Clerk s Office Tax Extensions and Collections The following table sets forth the District s tax levy and collections for the last five levy years Extensions... $118,806,204 $128,247,573 $133,577,233 $140,434,167 $141,625,254 Collections ,566, ,004, ,287, ,907,259 In Process % Collected % 99.81% 99.78% 99.62% Source: The District s Records Largest Taxpayers Taxpayer 2009 Assessed Valuation Arthur Andersen & Co... $15,306,735 Pheasant Run Inc ,541,160 AMLI At St. Charles LLC... 12,498,750 Dividend Capital OP PT SHP... 11,681,230 Oreo Corp... 11,165,331 Covington Main St. Commons Acquisitions LLC... 8,665,800 Lake Street Plaza, LLC... 6,437,175 Meijer Stores Limited Partnership... 6,154,385 St. Charles Country Club... 6,065,055 Target Corp... 5,904,974 Total... $96,420,595 The above taxpayers represent 2.84% of the District s $3,400,789, EAV. Every reasonable effort has been made to determine and report the largest taxpayers and to include all taxable property of those taxpayers listed. Many of the taxpayers listed, however, may own multiple parcels, and it is possible that some parcels and their valuations may not be included. The 2009 EAV is the most current available. Source: DuPage and Kane County Clerks Offices 17

24 Summary of Outstanding Debt Below is a summary of the District s outstanding debt after the issuance of the Bonds. Type Dated Date Original Amount of Issue Current Amount Outstanding Final Maturity Date G.O. Limited Tax School Bonds, Series /1/2001 $4,500,000 $ 105,000 1/1/2011 G.O. Limited Tax School Bonds, Series /1/2002 5,025,000 1,805,000 1/1/2013 G.O. School Bonds, Series 2002A... 6/15/ ,880,000 7,980,000 1/1/2013 Debt Certificates, Series 2004A... 12/1/2004 2,300,000 1,140,000 1/1/2015 Debt Certificates, Series 2004B... 12/1/2004 4,325,000 3,440,000 7/1/2024 G.O. School Bonds, Series 2005A... 3/1/ ,695,000 81,445,000 1/1/2022 Taxable G.O. Limited Tax School Bonds, Series 2005C... 10/15/ ,000,000 20,000,000 1/1/2025 G.O. Refunding School Bonds, Series /6/ ,120,000 34,960,000 1/1/2018 The Bonds... 1,525,000 1,525,000 1/1/2018 Total... $152,400,000 Debt Repayment Schedule Shown below is the maturity schedule for the outstanding general obligation debt of the District as of the closing of the Bonds. Fiscal Year Principal Outstanding The Bonds Total Principal Cumulative Amount Retirement Percent 2011 $ 9,810,000 $ - $ 9,810,000 $ 9,810, % ,180, ,000 11,390,000 21,200, ,695, ,000 12,890,000 34,090, ,605, ,000 15,835,000 49,925, ,240, ,000 17,480,000 67,405, ,575, ,000 18,830,000 86,235, ,285, ,000 20,580, ,815, ,170, ,000 20,270, ,085, ,210,000-5,210, ,295, ,595,000-4,595, ,890, ,735,000-4,735, ,625, ,890,000-4,890, ,515, ,005,000-2,005, ,520, ,015,000-2,015, ,535, ,865,000-1,865, ,400, $ 150,875,000 $ 1,525,000 $ 152,400,000 18

25 Overlapping Debt (as of July 12, 2010) Taxing Body (1) Outstanding Debt Percent Amount Kane County... $4,760, % $987,386 Kane County Forest Preserve District ,070, % 46,687,375 DuPage County... 50,425, % 223,084 DuPage County Forest Preserve District ,257, % 1,009,832 DuPage County Water Commission... 12,465, % 61,100 Campton Township... 41,655, % 32,137,966 City of Elgin ,406, % 7,095 The City... 90,111, % 89,979,249 Village of South Elgin... 4,585, % 2,170,863 City of West Chicago... 15,295, % 2,676,010 St. Charles Park District... 29,631, % 28,821,833 West Chicago Park District... 5,575, % 731,602 Gail Border Library District... 24,250, % 482,615 West Chicago Library District , % 9,889 St. Charles Special Service Area Number ,705, % 3,705,000 Wayne Special Service Area Number ,150, % 801,926 Community College District No ,799, % 20,975,893 Total Overlapping General Obligation Bonded Debt... $231,468,718 Source: Kane and DuPage County Clerks Offices (1) Does not include Alternate Revenue Bonds. Debt Statement Direct Outstanding Debt... $150,875,000 This Issue... $1,525,000 Leases... $2,237,137 Total... $154,637,137 Net Direct Debt... $154,637,137 Overlapping Debt... $231,468,718 Net Direct and Overlapping Debt... $386,105,855 Equalized Assessed Valuation, $3,400,789,228 Statutory Debt Limit (13.8% of Equalized Assessed Valuation)... $469,308,913 Statutory Debt Margin... $314,671,776 19

26 Debt Ratios Estimated Market Valuation, $10,202,367,684 Equalized Assessed Valuation, $3,400,789,228 Estimated Population... 55,000 Net Direct Debt to Equalized Assessed Valuation % Net Direct Debt to Estimated Market Valuation % Net Direct and Overlapping Debt to Equalized Assessed Valuation % Net Direct and Overlapping Debt to Estimated Market Valuation % Net Direct Debt Per Capita... $2, Net Direct and Overlapping Debt Per Capita... $7, General Fund Revenue Sources (Years Ended June 30) SUMMARY OF OPERATING RESULTS * Local Source % 85.73% 80.89% 81.12% 79.70% State Source Federal Source Total % % % % % Please note that totals may not amount to exactly % due to rounding. Source: Compiled from the District s Audited Financial Statements for Fiscal Years Ending June 30, The preliminary June 30, 2010 results are from the District. General Fund Summary (Years Ended June 30) * Receipts... $118,245,948 $127,697,393 $141,042,927 $147,877,620 $148,253,000 (1) Disbursements ,187, ,930, ,064, ,805, ,352,000 Net Surplus (Deficit)... 6,058,539 3,766,865 5,978,734 3,071,805 (1,099,000) Other Financing Sources... 2,876, ,946 1,167,890 (864,612) - Reallocation Beginning Fund Balance... $ 7,901,489 $ 16,836,476 $ 20,901,287 $ 28,047,911 $ 30,255,104 Ending Fund Balance... $ 16,836,476 $ 20,901,287 $ 28,047,911 $ 30,255,104 $ 29,156,104 *Preliminary, subject to change. (1) The State owes the District $3,673,700 as of June 30, No allowance has been made for accounts receivable for this item. Source: Compiled from the District s Audited Financial Statements for Fiscal Years Ending June 30, The preliminary June 30, 2010 results are from the District. 20

27 Working Cash Fund Summary (Years Ended June 30) The District is authorized to issue (subject to the provisions of the Limitation Law) general obligation bonds to create or increase a Working Cash Fund. Such fund can also be created or increased by the levy of an annual tax not to exceed $0.05 per hundred dollars of EAV. The purpose of the fund is to enable the District to have sufficient cash to meet demands for ordinary and necessary expenditures for school operating purposes. In order to achieve this purpose, the balance in the Working Cash Fund may be loaned, in whole or in part, as authorized and directed by the Board, to any fund of the District in anticipation of ad valorem property taxes levied by the District. The Working Cash Fund is reimbursed when the anticipated taxes or other moneys are received by the District. When a balance is available in the Working Cash Fund, such amounts must be used to the extent possible to avoid the issuance of tax anticipation warrants. The balance in the Working Cash Fund may not be appropriated by the Board in the annual budget. Receipts... $ 418,878 $ 825,539 $ 1,187,850 $ 558,705 $ 22,795 Disbursements Transfers Other... 20,080, Beginning Fund Balance... $ - $ 20,499,793 $ 21,325,332 $ 22,513,182 $ 23,071,887 Ending Fund Balance... $ 20,499,793 $ 21,325,332 $ 22,513,182 $ 23,071,887 $ 23,094,682 Source: Compiled from the District s Audited Financial Statements for Fiscal Years Ending June 30, The preliminary June 30, 2010 results are from the District. BUDGET SUMMARY Below is the District s budget summary as filed with the Illinois State Board of Education ( ISBE ). Projected Fund Balances (1) FY10 FY10 FY10 Fund Balances Fund July 1, 2009 Revenue Expenditures Transfers/Other June 30, 2010 Education... $ 37,301,288 $ 136,420,337 $ 136,735,061 $ - $ 36,986,564 Operations & Maintenance... (7,046,184) 14,993,600 14,963, ,000 (6,915,584) Transportation... (588,228) 8,102,800 7,783,300 - (268,728) IMRF/Social Security... 1,634,578 4,096,500 4,301,200-1,429,878 Working Cash... 23,071, , ,335,887 Total Operating Funds... $ 54,373,341 $ 163,877,237 $ 163,782,561 $ 100,000 $ 54,568,017 Debt Service... 8,929,446 16,998,300 16,898,300 (100,000) 8,929,446 Capital Projects... (165,656) (165,656) Fire Prevention & Safety Tort ,510 1,173,000 1,340, ,510 Total All Funds... $ 63,696,641 $ 182,048,537 $ 182,020,861 $ - $ 63,724,317 (1) The beginning fund balances were revised from the adopted budget to reflect the actual ending fund balances for the prior fiscal year. The budget is adopted before the audit for the prior fiscal year is available. Source: Compiled from the District s Budget for the Fiscal Year Ending June 30,

28 SCHOOL DISTRICT FINANCIAL PROFILE Since the spring of 2003, ISBE has utilized a new system for assessing a school district s financial health. The new financial assessment system is referred to as the School District Financial Profile which replaces the Financial Watch List and Financial Assurance and Accountability System (FAAS). The new system identifies those school districts, which are moving into financial distress. The new system uses five indicators which are individually scored and weighted in order to arrive at a composite district financial profile. The indicators are as follows: fund balance to revenue ratio; expenditures to revenue ratio; days cash on hand; percent of short-term borrowing ability remaining; and percent of long-term debt margin remaining. Each indicator is calculated and the result is placed into a category of a four, three, two or one, with four being the highest and best category possible. Each indicator is weighted as follows: Fund balance to revenue ratio 35% Expenditures to revenue ratio 35% Days cash on hand 10% Percent of short term borrowing ability remaining 10% Percent of long-term debt margin remaining 10% The scores of the weighted indicators are totaled to obtain a district s overall score. The highest score is 4.0 and the lowest score is 1.0. A district is then placed in one of four categories as follows: Financial Recognition. A school district with a score of is assigned to this category, which is the best category of financial strength. These districts require minimal or no active monitoring by ISBE unless requested by the district. Financial Review. A school district with a score of is assigned to this category, the next highest financial strength category. These districts receive a limited review by ISBE, but are monitored for potential downward trends. ISBE staff also review the next year s school budget for further negative trends. Financial Early Warning. A school district with a score of is placed in this category. ISBE monitors these districts closely and offers proactive technical assistance, such as financial projections and cash flow analysis. These districts also are reviewed to determine whether they meet the criteria set forth in Article 1A-8 of the School Code to be certified in financial difficulty and possibly qualify for a Financial Oversight Panel. Financial Watch. A school district with a score of is in this category, the highest risk category. ISBE monitors these districts very closely and offers technical assistance with, but not limited to, financial projections, cash flow analysis, budgeting, personnel inventories and enrollment projections. These districts are also assessed to determine if they qualify for a Financial Oversight Panel. The District s overall score for Fiscal Year 2009, as reported by ISBE in March 2010, is 3.80, thus placing the District in the Financial Recognition Category. The District s overall score for Fiscal Year 2008 was

29 SHORT-TERM FINANCING RECORD The District has not issued any tax anticipation warrants or tax anticipation notes that are currently outstanding and has no plans to issue tax anticipation warrants or tax anticipation notes in the foreseeable future. FUTURE FINANCING The District does not anticipate issuing any additional long-term debt in the next six months. DEFAULT RECORD The District has no record of default and has met its debt repayment obligations promptly. RETIREMENT PLANS Teacher s Retirement System of the State of Illinois The District participates in the Teacher s Retirement System of the State of Illinois ( TRS ). TRS is a cost-sharing multiple-employer defined benefit pension plan that was created by the Illinois legislature for the benefit of Illinois public school teachers outside the City of Chicago. The Illinois Pension Code sets the benefit provisions of TRS, which can only be amended by the Illinois General Assembly. The State of Illinois maintains primary responsibility for the funding of the plan, but contributions from participating employers and members are also required. The TRS Board of Trustees is responsible for the System s administration. TRS issues a publicly available comprehensive annual financial report that includes financial statements and required supplementary information. The report may be viewed at TRS s website as follows: See Note 6 to the District s Audited Financial Statement for the fiscal year ended June 30, 2009, attached hereto as Appendix B, for a more complete discussion. Illinois Municipal Retirement Fund The District also participates in another defined benefit pension plan, the Illinois Municipal Retirement Fund ( IMRF ). IMRF is an agent multiple employer pension plan that acts as a common investment and administrative agent for local governments and school districts in Illinois. The Illinois Pension Code sets the benefit provisions of IMRF, which can only be amended by the Illinois General Assembly. IMRF issues a publicly available financial report that includes financial statements and required supplementary information. That report may be viewed at IMRF s website as follows: See Note 6 to the District s Audited Financial Statement for the fiscal year ended June 30, 2009, attached hereto as Appendix B, for a more complete discussion. 23

30 TAX EXEMPTION Federal tax law contains a number of requirements and restrictions which apply to the Bonds, including investment restrictions, periodic payments of arbitrage profits to the United States, requirements regarding the proper use of bond proceeds and the facilities financed therewith, and certain other matters. The District and the Corporation have has covenanted to comply with all requirements that must be satisfied in order for the interest on the Bonds to be excludable from gross income for federal income tax purposes. Failure to comply with certain of such covenants could cause interest on the Bonds to become includable in gross income for federal income tax purposes retroactively to the date of issuance of the Bonds. Subject to compliance by the District and the Corporation with the above-referenced covenants, under present law, in the opinion of Bond Counsel, interest on the Bonds (i) is excludable from the gross income of the owners thereof for federal income tax purposes, (ii) is not included as an item of tax preference in computing the federal alternative minimum tax for individuals and corporations, and (iii) is not taken into account in computing adjusted current earnings as described below. In rendering its opinion, Bond Counsel will rely upon certifications of the District and the Corporation with respect to certain material facts within the District s and the Corporation s knowledge and will rely on an opinion of Hodges, Loizzi, Eisenhammer, Rodick & Kohn LLP, special counsel to the Corporation, that the Corporation is a 501(c)(3) organization and certain other matters. Bond Counsel s opinion represents its legal judgment based upon its review of the law and the facts that it deems relevant to render such opinion and is not a guarantee of a result. The Internal Revenue Code of 1986, as amended (the Code ), includes provisions for an alternative minimum tax ( AMT ) for corporations in addition to the corporate regular tax in certain cases. The AMT for a corporation, if any, depends upon the corporation s alternative minimum taxable income ( AMTI ), which is the corporation s taxable income with certain adjustments. One of the adjustment items used in computing the AMTI of a corporation (with certain exceptions) is an amount equal to 75% of the excess of such corporation s adjusted current earnings over an amount equal to its AMTI (before such adjustment item and the alternative tax net operating loss deduction). Adjusted current earnings would generally include certain tax-exempt interest, but not interest on the Bonds. Ownership of the Bonds may result in collateral federal income tax consequences to certain taxpayers, including, without limitation, corporations subject to the branch profits tax, financial institutions, certain insurance companies, certain S corporations, individual recipients of Social Security or Railroad Retirement benefits and taxpayers who may be deemed to have incurred (or continued) indebtedness to purchase or carry tax-exempt obligations. Prospective purchasers of the Bonds should consult their tax advisors as to applicability of any such collateral consequences. The issue price (the Issue Price ) for each maturity of the Bonds is the price at which a substantial amount of such maturity of the Bonds is first sold to the public. The Issue Price of a maturity of the Bonds may be different from the price set forth, or the price corresponding to the yield set forth, on the inside cover page hereof. If the Issue Price of a maturity of the Bonds is less than the principal amount payable at maturity, the difference between the Issue Price of each such maturity, if any, of the Bonds (the OID Bonds ) and the principal amount payable at maturity is original issue discount. 24

31 For an investor who purchases an OID Bond in the initial public offering at the Issue Price for such maturity and who holds such OID Bond to its stated maturity, subject to the condition that the District and the Corporation comply with the covenants discussed above, (a) the full amount of original issue discount with respect to such OID Bond constitutes interest which is excludable from the gross income of the owner thereof for federal income tax purposes; (b) such owner will not realize taxable capital gain or market discount upon payment of such OID Bond at its stated maturity; (c) such original issue discount is not included as an item of tax preference in computing the alternative minimum tax for individuals and corporations under the Code; (d) such original issue discount is not taken into account in computing an adjustment used in determining the alternative minimum tax for certain corporations under the Code, as described above; and (e) the accretion of original issue discount in each year may result in certain other collateral federal income tax consequences in each year even though a corresponding cash payment may not be received until a later year. Based upon the stated position of the Illinois Department of Revenue under Illinois income tax law, accreted original issue discount on such OID Bonds is subject to taxation as it accretes, even though there may not be a corresponding cash payment until a later year. Owners of OID Bonds should consult their own tax advisors with respect to the state and local tax consequences of original issue discount on such OID Bonds. Owners of Bonds who dispose of Bonds prior to the stated maturity (whether by sale, redemption or otherwise), purchase Bonds in the initial public offering, but at a price different from the Issue Price or purchase Bonds subsequent to the initial public offering should consult their own tax advisors. If a Bond is purchased at any time for a price that is less than the Bond s stated redemption price at maturity or, in the case of an OID Bond, its Issue Price plus accreted original issue discount (the Revised Issue Price ), the purchaser will be treated as having purchased a Bond with market discount subject to the market discount rules of the Code (unless a statutory de minimis rule applies). Accrued market discount is treated as taxable ordinary income and is recognized when a Bond is disposed of (to the extent such accrued discount does not exceed gain realized) or, at the purchaser s election, as it accrues. Such treatment would apply to any purchaser who purchases an OID Bond for a price that is less than its Revised Issue Price. The applicability of the market discount rules may adversely affect the liquidity or secondary market price of such Bond. Purchasers should consult their own tax advisors regarding the potential implications of market discount with respect to the Bonds. An investor may purchase a Bond at a price in excess of its stated principal amount. Such excess is characterized for federal income tax purposes as bond premium and must be amortized by an investor on a constant yield basis over the remaining term of the Bond in a manner that takes into account potential call dates and call prices. An investor cannot deduct amortized bond premium relating to a tax-exempt bond. The amortized bond premium is treated as a reduction in the taxexempt interest received. As bond premium is amortized, it reduces the investor s basis in the Bond. Investors who purchase a Bond at a premium should consult their own tax advisors regarding the amortization of bond premium and its effect on the Bond s basis for purposes of computing gain or loss in connection with the sale, exchange, redemption or early retirement of the Bond. There are or may be pending in the Congress of the United States legislative proposals, including some that carry retroactive effective dates, that, if enacted, could alter or amend the federal tax matters referred to above or adversely affect the market value of the Bonds. It cannot be predicted whether or in what form any such proposal might be enacted or whether, if enacted, it would apply to bonds issued prior to enactment. Prospective purchasers of the Bonds should consult their own tax advisors regarding any pending or proposed federal tax legislation. Bond Counsel expresses no opinion regarding any pending or proposed federal tax legislation. 25

32 The Internal Revenue Service (the Service ) has an ongoing program of auditing tax-exempt obligations to determine whether, in the view of the Service, interest on such tax-exempt obligations is includable in the gross income of the owners thereof for federal income tax purposes. It cannot be predicted whether or not the Service will commence an audit of the Bonds. If an audit is commenced, under current procedures the Service may treat the District as a taxpayer and the Bondholders may have no right to participate in such procedure. The commencement of an audit could adversely affect the market value and liquidity of the Bonds until the audit is concluded, regardless of the ultimate outcome. Payments of interest on, and proceeds of the sale, redemption or maturity of, tax-exempt obligations, including the Bonds, are in certain cases required to be reported to the Service. Additionally, backup withholding may apply to any such payments to any Bond owner who fails to provide an accurate Form W-9 Request for Taxpayer Identification Number and Certification, or a substantially identical form, or to any Bond owner who is notified by the Service of a failure to report any interest or dividends required to be shown on federal income tax returns. The reporting and backup withholding requirements do not affect the excludability of such interest from gross income for federal tax purposes. Interest on the Bonds is not exempt from present State of Illinois income taxes. Ownership of the Bonds may result in other state and local tax consequences to certain taxpayers. Bond Counsel expresses no opinion regarding any such collateral consequences arising with respect to the Bonds. Prospective purchasers of the Bonds should consult their tax advisors regarding the applicability of any such state and local taxes. QUALIFIED TAX-EXEMPT OBLIGATIONS Subject to the District s and the Corporation s compliance with certain covenants, in the opinion of Bond Counsel, the Bonds are qualified tax-exempt obligations under the small issuer exception provided under Section 265(b)(3) of the Code, which affords banks and certain other financial institutions more favorable treatment of their deduction for interest expense than would otherwise be allowed under Section 265(b)(2) of the Code. LITIGATION There is no controversy or litigation of any nature now pending or threatened restraining or enjoining the issuance, sale, execution or delivery of the Bonds or in any way contesting or affecting the validity of the Bonds or any proceedings of the District taken with respect to the issuance or sale thereof. BOND RATING S&P has assigned its municipal bond rating of AA+ to the Bonds. This rating reflects only the view of S&P and any explanation of the significance of such rating may only be obtained from S&P. Certain information concerning the Bonds and the District not included in this Official Statement was furnished to S&P by the District. There is no assurance that the rating will be maintained for any given period of time or that it may not be changed by S&P, if, in its judgment, circumstances so warrant. Any downward change in or withdrawal of the rating may have an adverse effect on the market price of the Bonds. Except as may be required by the Undertaking described below under the heading CONTINUING DISCLOSURE, neither the District nor the Underwriter undertakes responsibility 26

33 to bring to the attention of the owners of the Bonds any proposed change in or withdrawal of such rating or to oppose any such revision or withdrawal. CONTINUING DISCLOSURE The District will enter into a Continuing Disclosure Undertaking (the Undertaking ) for the benefit of the beneficial owners of the Bonds to send certain information annually and to provide notice of certain events to certain information repositories pursuant to the requirements of Section (b)(5) of Rule 15c2-12 (the Rule ) adopted by the Securities and Exchange Commission (the Commission ) under the Securities Exchange Act of The information to be provided on an annual basis, the events that will be noticed on an occurrence basis and a summary of other terms of the Undertaking, including termination, amendment and remedies, are set forth below under THE UNDERTAKING. The District is in compliance with each and every undertaking previously entered into by it pursuant to the Rule. A failure by the District to comply with the Undertaking will not constitute a default under the Bond Resolution and beneficial owners of the Bonds are limited to the remedies described in the Undertaking. See THE UNDERTAKING Consequences of Failure of the District to Provide Information. A failure by the District to comply with the Undertaking must be reported in accordance with the Rule and must be considered by any broker, dealer or municipal securities dealer before recommending the purchase or sale of the Bonds in the secondary market. Consequently, such a failure may adversely affect the transferability and liquidity of the Bonds and their market price. Bond Counsel expresses no opinion as to whether the Undertaking complies with the requirements of Section (b)(5) of the Rule. THE UNDERTAKING The following is a brief summary of certain provisions of the Undertaking of the District, and does not purport to be complete. The statements made under this caption are subject to the detailed provisions of the Undertaking, a copy of which is available upon request from the District. Annual Financial Information Disclosure The District covenants that it will disseminate its Annual Financial Information and its Audited Financial Statements, if any (as described below), to the MSRB in such manner and format and accompanied by identifying information as is prescribed by the MSRB or the Commission at the time of delivery of such information. The District is required to deliver such information so that such entities receive the information by the dates specified in the Undertaking. Annual Financial Information means information of the type contained in the following tables, headings and exhibits of the Final Official Statement: Trend of Equalized Assessed Valuation Tax Rates Tax Extensions and Collections Debt Statement (with respect to the District s debt only) Debt Ratios (with respect to the District s debt only) General Fund Summary Working Cash Fund Summary 27

34 Budget Summary School District Financial Profile (last paragraph only) Short-Term Financing Record Audited Financial Statements means the combined financial statements of the District prepared in accordance with auditing standards generally accepted in the United States of America. Material Events Disclosure The District covenants that it will disseminate in a timely manner to the MSRB the disclosure of the occurrence of an Event (as described below) with respect to the Bonds that is material, as materiality is interpreted under the 1934 Act in such manner and format and accompanied by identifying information as is prescribed by the MSRB or the Commission at the time of delivery of such information. The Events are: Principal and interest payment delinquencies Non-payment related defaults Unscheduled draws on debt service reserves reflecting financial difficulties Unscheduled draws on credit enhancements reflecting financial difficulties Substitution of credit or liquidity providers, or their failure to perform Adverse tax opinions or events affecting the tax-exempt status of the security Modifications to the rights of security holders Bond calls Defeasances Release, substitution or sale of property securing repayment of the securities Rating changes Consequences of Failure of the District to Provide Information The District shall give notice in a timely manner to the MSRB of any failure to provide disclosure of Annual Financial Information and Audited Financial Statements when the same are due under the Undertaking. In the event of a failure of the District to comply with any provision of the Undertaking, the beneficial owner of any Bond may seek mandamus or specific performance by court order to cause the District to comply with its obligations under the Undertaking. A default under the Undertaking shall not be deemed a default under the Bond Resolution, and the sole remedy under the Undertaking in the event of any failure of the District to comply with the Undertaking shall be an action to compel performance. Amendment; Waiver Notwithstanding any other provision of the Undertaking, the District by resolution authorizing such amendment or waiver, may amend the Undertaking, and any provision of the Undertaking may be waived, if: (a) (i) The amendment or the waiver is made in connection with a change in circumstances that arises from a change in legal requirements, including, without limitation, pursuant to a no-action letter issued by the Commission, a change in law, or a change in the identity, nature, or status of the District, or type of business conducted; or 28

35 (ii) The Undertaking, as amended, or the provision, as waived, would have complied with the requirements of the Rule at the time of the primary offering, after taking into account any amendments or interpretations of the Rule, as well as any change in circumstances; and (b) The amendment or waiver does not materially impair the interests of the beneficial owners of the Bonds, as determined by parties unaffiliated with the District (such as Bond Counsel). In the event that the Commission or the MSRB or other regulatory authority approves or requires Annual Financial Information or notices of a material Event to be filed with a central post office, governmental agency or similar entity other than the MSRB or in lieu of the MSRB, the District shall, if required, make such dissemination to such central post office, governmental agency or similar entity without the necessity of amending the Undertaking. Termination of Undertaking The Undertaking shall be terminated if the District shall no longer have any legal liability for any obligation on or relating to repayment of the Bonds under the Bond Resolution. The District shall give notice to the MSRB in a timely manner if this paragraph is applicable. Additional Information Nothing in the Undertaking shall be deemed to prevent the District from disseminating any other information, using the means of dissemination set forth in the Undertaking or any other means of communication, or including any other information in any Annual Financial Information or Audited Financial Statements or notice of occurrence of a material Event, in addition to that which is required by the Undertaking. If the District chooses to include any information from any document or notice of occurrence of a material Event in addition to that which is specifically required by the Undertaking, the District shall have no obligation under the Undertaking to update such information or include it in any future disclosure or notice of occurrence of a material Event. Dissemination of Information; Dissemination Agent When filings are required to be made with the MSRB in accordance with the Undertaking, such filings are required to be made through its Electronic Municipal Market Access (EMMA) system for municipal securities disclosure or through any other electronic format or system prescribed by the MSRB for purposes of the Rule. The District may, from time to time, appoint or engage a Dissemination Agent to assist it in carrying out its obligations under the Undertaking, and may discharge any such Agent, with or without appointing a successor Dissemination Agent. CERTAIN LEGAL MATTERS Certain legal matters incident to the authorization, issuance and sale of the Bond are subject to the approving legal opinion of Chapman and Cutler LLP, Chicago, Illinois, as Bond Counsel (the Bond Counsel ), who has been retained by, and acts as, Bond Counsel to the District. Bond Counsel has not been retained or consulted on disclosure matters and has not undertaken to review or verify the accuracy, completeness or sufficiency of this Official Statement or other offering material relating to the Bonds and assumes no responsibility for the statements or information contained in or incorporated by reference in this Official Statement, except that in its capacity as Bond Counsel, Chapman and 29

36 Cutler LLP has, at the request of the District, reviewed only those portions of this Official Statement involving the description of the Bonds, the security for the Bonds (excluding forecasts, projections, estimates or any other financial or economic information in connection therewith), the description of the federal tax exemption of interest on the Bonds and the bank-qualified status of the Bonds. This review was undertaken solely at the request and for the benefit of the District and did not include any obligation to establish or confirm factual matters set forth herein. UNDERWRITING The underwriter, M&I Marshall & Ilsley Bank, Milwaukee, Wisconsin, (the Underwriter ), has agreed, subject to the terms of a purchase contract (the Purchase Contract ) to purchase the Bonds from the District. The Purchase Contract provides, in part, that the Underwriter, subject to certain conditions, will purchase from the District the aggregate principal amount of Bonds for a purchase price as set forth therein. The Underwriter has further agreed to offer the Bonds to the public at the approximate initial offering prices as set forth on the inside cover hereto. The Underwriter may offer and sell the Bonds to certain dealers and others at prices lower than the offering prices stated on the inside cover hereto. The offering prices may be changed from time to time by the Underwriter. The aggregate underwriting fee for the Bonds equals 0.4 percent of the par amount of the Bonds. The Purchase Contract provides that the obligations of the Underwriter is subject to certain conditions, including, among other things, that there has not been any event, court decision, proposed law or rule that may have the effect of changing the federal income tax incidents of the Bonds. The Purchase Contract further provides that the District will provide to the Underwriter within seven business days of the date of the Purchase Contract sufficient copies of the Official Statement to enable the Underwriter to comply with the requirements of Rule 15c2-12(b)(4) under the 1934 Act, as amended. FINANCIAL ADVISOR PMA Securities, Inc. of Naperville, Illinois has been retained as financial advisor (the Financial Advisor ) in connection with the issuance of the Bonds. In preparing this Official Statement, the Financial Advisor has relied upon the District, and other sources, having access to relevant data to provide accurate information for this Official Statement. To the best of the Financial Advisor s knowledge, the information contained in this Official Statement is true and accurate. However, the Financial Advisor has not been engaged, nor has it undertaken, to independently verify the accuracy of such information. The Financial Advisor s duties, responsibilities, and fees arise solely from that as financial advisor to the District. THE OFFICIAL STATEMENT This Official Statement includes the cover page, reverse thereof and the Appendices hereto. All references to material not purporting to be quoted in full are only summaries of certain provisions thereof and do not purport to summarize or describe all the provisions thereof. Reference is hereby made to such instruments, documents and other materials for the complete provision thereof, copies of which will be furnished upon request to the District. 30

37 Accuracy and Completeness of the Official Statement This Official Statement has been approved by the District for distribution to the Underwriter of the Bonds. The District s officials will provide to the original purchaser of the Bonds at the time of delivery of the Bonds, a certificate confirming to the purchaser that, to the best of their knowledge and belief, the Official Statement, with respect to the Bonds, at the time of the sale and delivery of the Bonds, was true and correct in all material respects and did not at any time contain an untrue statement of a material fact or omit to state a material fact required to be stated, where necessary to make the statements, in light of the circumstances under which they were made, not misleading. /s/ Scott Nowling President, Board of Education Community Unit School District Number 303 Kane and DuPage Counties, Illinois 31

38 Form of Legal Opinion of Bond Counsel Appendix A

39 PROPOSED FORM OF OPINION OF BOND COUNSEL [LETTERHEAD OF CHAPMAN AND CUTLER LLP] [TO BE DATED CLOSING DATE] We hereby certify that we have examined certified copy of the proceedings of the Board of Education of Community Unit School District Number 303, Kane and DuPage Counties, Illinois (the District ), passed preliminary to the issue by the District of its fully registered General Obligation Limited Tax School Bonds, Series 2010 (the Bonds ), to the amount of $1,525,000, dated August 26, 2010, due serially on January 1 of the years and in the amounts and bearing interest as follows: 2012 $210, % , % , % , % , % , % , % and we are of the opinion that such proceedings show lawful authority for said issue under the laws of the State of Illinois now in force. We further certify that we have examined the form of bond prescribed for said issue and find the same in due form of law, and in our opinion said issue, to the amount named, is valid and legally binding upon the District and is payable from any funds of the District legally available for such purpose, and all taxable property in the District is subject to the levy of taxes to pay the same without limitation as to rate, except that the rights of the owners of the Bonds and the enforceability of the Bonds may be limited by bankruptcy, insolvency, reorganization, moratorium and other similar laws affecting creditors rights and by equitable principles, whether considered at law or in equity, including the exercise of judicial discretion. The amount of said taxes that may be extended to pay the Bonds is, however, limited as provided by the Property Tax Extension Limitation Law of the State of Illinois, as amended (the Law ). The Law provides that the annual amount of said taxes to be extended to pay the Bonds and all other limited bonds (as defined in the Local Government Debt Reform Act of the State of Illinois, as amended) heretofore and hereafter issued by the District shall not exceed the debt service extension base (as defined in the Law) of the District, as more fully described in said proceedings. It is our opinion that, subject to compliance by the District and the John Baker Norris Recreation Center (the Corporation ) with certain covenants, under present law, interest on the Bonds (i) is excludable from gross income of the owners thereof for federal income tax purposes, (ii) is not included as an item of tax preference in computing the alternative minimum tax for individuals and corporations under the Internal Revenue Code of 1986, as amended (the Final Legal Opinion LKG/EA

40 Code ), and (iii) is not taken into account in computing adjusted current earnings, which is used as an adjustment in determining the federal alternative minimum tax for certain corporations. Failure to comply with certain of such District and Corporation covenants could cause interest on the Bonds to be includable in gross income for federal income tax purposes retroactively to the date of issuance of the Bonds. Ownership of the Bonds may result in other federal tax consequences to certain taxpayers, and we express no opinion regarding any such collateral consequences arising with respect to the Bonds. In rendering our opinion on tax exemption, we have relied on the opinion of Hodges, Loizzi, Eisenhammer, Rodick & Kohn LLP, special counsel to the Corporation, that the Corporation is a 501(c)(3) organization and certain other matters. It is also our opinion that the Bonds are qualified tax-exempt obligations pursuant to Section 265(b)(3) of the Code. We express no opinion herein as to the accuracy, adequacy or completeness of any information furnished to any person in connection with any offer or sale of the Bonds. In rendering this opinion, we have relied upon certifications of the District and the Corporation with respect to certain material facts within the District s and the Corporation s knowledge. Our opinion represents our legal judgment based upon our review of the law and the facts that we deem relevant to render such opinion and is not a guarantee of a result. This opinion is given as of the date hereof and we assume no obligation to revise or supplement this opinion to reflect any facts or circumstances that may hereafter come to our attention or any changes in law that may hereafter occur. -2-

41 Appendix B Audited Financial Statement for the Fiscal Year Ended June 30, 2009 The audited financial statement contained in this Appendix B (the Audit ), including the independent auditor s report accompanying the Audit, has been prepared by Klein, Hall & Associates, LLC, Aurora, Illinois (the Auditor ), and approved by formal action of the Board of Education of the District. The District has not requested the Auditor to update information contained in the Audit; nor has the District requested that the Auditor consent to the use of the Audit in this Official Statement. Other than as expressly set forth in this Official Statement, the financial information contained in the Audit has not been updated since the date of the Audit. The inclusion of the Audit in this Official Statement in and of itself is not intended to demonstrate the fiscal condition of the District since the date of the Audit. If you have a specific question or inquiry relating to the financial information of the District since the date of the Audit, you should contact Brad Cauffman, Assistant Superintendent for Business Services of the District.

42 COMMUNITY UNIT SCHOOL DISTRICT 303 Sf. Charles, Illinois Audited Financial Statements Fiscal year ended June 30, 2009 Prepared by: Brad Cauffman Assistant Superintendent for Business Services

43

44 Table of Contents June 30, 2009 Introductory Section: Table of Contents I-V Financial Section: Independent Auditors' Report Report on Compliance and on Internal Control Over Financial Reporting Based on an Audit of Financial Statements Performed In Accordance with Government Auditing Standards Management's Discussion and Analysis l3 Basic Financial Statements Government-wide Financial Statements: Statement of Net Assets Statement of Activities Fund Financial Statements: Balance Sheet - Governmental Funds Reconciliation of the Balance Sheet of Governmental Funds to the Statement of Net Assets Statement of Revenues, Expenditures, and Changes in Fund Balances - Governmental Funds Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances of Governmental Funds to the Statement of Activities Statement of Fiduciary Net Assets Statement of Changes in Fiduciary Net Assts Notes to Financial Statements

45 Table of Contents June 30, 2009 Page(s) Required Supplementary Information Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual- General and Major Special Revenue Fund Combining and Individual Fund Financial Statements and Schedules General Fund: Balance Sheet by Account Schedule of Revenues, Expenditures, and Changes in Fund Balances by Account Educational Account: Schedule of Revenues, Expenditures, and Changes in Fund Balance - Budget and Actual Operations and Maintenance Account: Schedule of Revenues, Expenditures, and Changes in Fund Balance - Budget and Actual Major Debt Service Fund: Debt Service Fund: Schedule of Revenues, Expenditures, and Changes in Fund Balance - Budget and Actual Major Special Revenue Fund: Working Cash Fund: Schedule of Revenues, Expenditures, and Changes in Fund Balance - Budget and Actual Combining Balance Sheet - Nonmajor Governmental Funds Combining Schedule of Revenues, Expenditures, and Changes in Fund Balance - Nonmajor Governmental Funds Schedule of Revenues, Expenditures, and Changes in Fund Balance - Nonmajor Governmental Funds Transportation Special Revenue Fund: Schedule of Revenues, Expenditures, and Changes in Fund Balance - Budget and Actual Municipal Retirement/Social Security Special Revenue Fund: Schedule of Revenues, Expenditures, and Changes in Fund Balance - Budget and Actual

46 Table of Contents June 30, 2009 Tort Immunity Special Revenue Fund Schedule of Revenues, Expenditures, and Changes in Fund Balance - Budget and Actual Capital Projects Fund: Schedule of Revenues, Expenditures, and Changes in Fund Balance - Budget and Actual Supplementary Schedules Private Purpose Trust Funds - Combining Schedule of Net Assets Private Purpose Trust Funds - Combining Schedule of Revenues, Expenses, and Changes in Net Assets Agency Funds - Student Activity and Workshop Funds Changes in Assets and Liabilities Schedule of 82 Schedule of General Long-term Debt used in Governmental Activities Bonds Payable Schedule Bonds Payable Schedule - School Construction and Refunding - Issue Dated July 1, 1998 Bonds Payable Schedule - School Construction - Issue Dated July 15, 1998 Bonds Payable Schedule - Fire Prevention and Life Safety - Issue Dated March 1, 2001 Bonds Payable Schedule - Fire Prevention and Life Safety - Issue Dated February 1,2002 Bonds Payable Schedule - School Construction - Issue Dated June 15,2002 Bonds Payable Schedule - School Refunding - Issue Dated March 1,

47 Table of Contents June 30, 2009 Page(s) Bonds Payable Schedule - Working Cash - Issue Dated October 18, 2005 Bonds Payable Schedule - School Refunding - Issue Dated August 6, 2008 Employee Health Benefit Plan Reserve - Schedule of Assets and Changes in Fund Balance Food Service Program - Schedule of Revenues, Expenditures, and Program Balance Food Service Program - Schedule of Meals Served Other Information All Governmental Fund Types - Revenues by Source - Last Ten Fiscal Years General School System Expenditures by Function - Last Ten Fiscal Years General School System Expenditures by Object Property Tax Rates, Levies and Collections - Last Ten Fiscal Tax Years Equalized Assessed Valuation and Estimated Actual Value of Taxable Property - Last Ten Tax Levy Years Major Categories of Equalized Assessed Valuation - Last Ten Tax Levy Years Ratio of Annual Debt Service Expenditures for General Bonded Debt to Total General Expenditures - Last Ten Fiscal Years Operating Cost and Tuition Charge Enrollment Data - Last Ten Fiscal Years District Attendance Centers Computation of Legal Debt Margin IV

48 Table of Contents June 30, 2009 Page(s) Principal Taxpayers in the District Principal Employers in the District Demographic and Miscellaneous Statistics v

49

50 dperville-ared CHAMBER OF COMMERCE ~ASSOCIATES,LLC CERTIFIED PUBLIC ACCOUNTANTS &CON5UITANTS Independent Auditors' Report Board of Education Community Unit School District 303 St. Charles, Illinois We have audited the accompanying financial statements of governmental activities, each major fund, and the aggregate remaining fund information of Community Unit School District 303 as of and for the year ended June 30, 2009, which collectively comprise the District's basic financial statements as listed in the table of contents. These financial statements are the responsibility of the District's management. Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Governmental 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 of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinions. In our opinion, the financial statements referred to 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 Community Unit School District 303 as of June 30, 2009, and the respective changes in financial position for the year then ended, in conformity with accounting principles generally accepted in the United States of America. In accordance with Government Auditing Standards, we have also issued our report dated October 30, 2009, on our consideration ofthe Community Unit School District 303 's internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be considered in assessing results of our audit th Suite IL Phone: Fa.x: Members of American Institute of Certified Public Accountants & Illinois CPA

51 Board of Education October 30, 2009 The management's discussion and analysis and budgetary comparison information are not a required part of the basic financial statements but are supplementary information required by accounting principles generally accepted in the United States of America. We have applied certain limited procedures, which consisted principally of inquires of management regarding the methods of measurement and presentation of the supplementary information. However, we did not audit the information and express no opinion on it. Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the Community Unit School District 303's basic financial statements. The introductory section, combining and individual nonmajor fund financial statements, and statistical tables are presented for purposes of additional analysis and are not a required part of the basic financial statements. The combining and individual nonmajor fund financial statements have been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, are fairly stated in all material respects in relation to the basic financial statements takes as a whole. The introductory section and statistical tables have not been subjected to the auditing procedures applied in the audit of the basic financial statements and, accordingly, we express no opinion on them. Klein, Hall & Associates, LLC Aurora, Illinois October 30,

52 ~ ASSOCIATES, LLC CERTIFIED PUBLIC ACCOUNTANTS & CONSULTANTS dper\'ilieared CHAMBE;;S'F COMME~_E 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 Education Community Unit School District 303 St. Charles, Illinois We have audited the financial statements of the governmental activities, each major fund, and the aggregate remaining fund information of Community Unit School District 303 as of and for the year ended June 30, 2009, which collectively comprise the Community Unit School District 303's basic financial statements and have issued our report thereon dated October 30, 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. Internal Control Over Financial Reporting In planning and performing our audit, we considered Community Unit School District 30 internal control over financial reporting as a basis for designing our auditing procedures for the purpose of expressing our opinion on the financial statements, but not for the purpose of expressing and opinion on the effectiveness of the Community Unit School District 30's internal control over financial reporting. Accordingly, we do not express an opinion on the effectiveness of the Entity's internal control over financial reporting. A control deficiency exists when the design or operations of a control does not allow management or employees, in the normal course of peliorming their assigned functions, to prevent or detect misstatements on a timely basis. A significant deficiency is a control deficiency, or combination of control deficiencies, that adversely affects the entity's ability to initiate, authorize, record, process, or report financial data reliably in accordance with generally accepted accounting principles such that there is more than a remote likelihood that a misstatement of the entity's financial statements that is more than inconsequential will not be prevented or detected by the entity's internal controls. A material wealmess is a significant deficiency, or combination of significant deficiencies, that results in more than a remote likelihood that material misstatement of the financial statements will not be prevented or detected by the entity's internal controls. Our consideration of internal control over financial reporting was for the limited purpose described in the first paragraph of this section and would not necessarily identify all deficiencies in internal control that might be significant deficiencies or material weaknesses. We did not identify any deficiencies in internal control over financial reporting that we consider to be material weaknesses, as defined above th nun",,-. IL Phone: Fax: Members of American Institute of Certified Public Accountants & Illinois CPA

53 Board of Education October 30, 2009 Compliance and Other Matters As a part of obtaining reasonable assurance about whether Community Unit School District 303' s fmancial 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. We noted certain matters that we reported to management of Community Unit School District 303 in a separate letter dated October 30, This report is intended solely for the information and use of the audit committee, management and the Illinois State Board of Education, federal awarding agencies and pass-through entities and is not intended to be and should not be used by anyone other than those specified parties. However, this report is a matter of public record and its distribution is not limited. Klein, Hall & Associates, LLC Aurora, Illinois October 30,

54 ST. CHARLES COMMUNITY UNIT SCHOOL DISTRICT 303 MANAGEMENT'S DISCUSSION AND ANALYSIS This section of the St. Charles Community Unit School District 303's annual financial report presents its discussion and analysis of the District's financial performance during the fiscal year ending June 30, Please read it in conjunction with the District's financial statements. The Management's Discussion and Analysis (MD&A) is an element of the new 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 Financial Highlights Overall, the District's fund balance grew by $2,346,267 or a 3.82% increase; bringing the fund balance to $63,696,641 for all funds. Over the past several years the District has worked to rebuild its fund balances. As of June 30, 2009 the District had achieved the highest financial profile designation from the State of Illinois, that of "Financial Recognition". For fiscal year ending June 30,2009 the District has maintained this status. Overview of the Financial Statements This annual report consists of three parts: the management's discussion and analysis (this section), the basic financial statements, and required supplementary information. The basic financial statements include two kinds of statements that present different views of the District: The first two statements are district-wide financial statements that provide both short-term and long-term information about the District's overall financial status... The remaining statements are fund financial statements that focus on individual parts of the District, reporting the District's operation in more detail than the district-wide statements. The governmental funds statements tell how basic services such as regular and special education were financed in the short-term as well as what remains for future spending... Fiduciary funds statements provide information about the financial relationships in which the District acts solely as a trustee or agent for the benefit of others. The financial statements also include notes that explain some of the information in the statements and provide more detailed data. The statements are followed by a section of required supplementary information that further explains and supports the financial statements. 5

55 ST. CHARLES COMMUNITY UNIT SCHOOL DISTRICT 303 MANAGEMENT'S DISCUSSION AND ANALYSIS Figure A-I shows how the various parts of this annual report are arranged and related to one another. Figure A-I Organization of St. Charles Community Unit School District 303's Financial Report Management~s. Discussion and Analysis Statements R.equiredSupplementary Information F'inancial.S1atements Statements Fund Financial Statements Summary Detail 6

56 ST. CHARLES COMMUNITY UNIT SCHOOL DISTRICT 303 MANAGEMENT'S DISCUSSION AND ANALYSIS Figure A-2 summarizes the major features of the District's financial statements, including the portion of the District's activities they cover and types of information they contain. The remainder of this overview section of management's discussion and analysis highlights the structure and contents of each of the statements. FigureA-2 Major Features of the District-Wide and Fund Financial Statements District-wide Statements Fund Financial Statements Governmental Funds Fiduciary Funds Scope Entire District (except The activities of the Instances in which the fiduciary Funds District that are not District administers proprietary or fiduciary, resources on behalf of such as Educational and someone else, such as Operations & Maintenance. student activities momes. Required financial Statements of Balance sheet Statement of statements net assets.. Statement of fiduciary net CD Statement of revenues, assets activities expenditures, and.. Statement of changes in fund change in balance fiduciary net assets Accounting basis and Accrual accounting and Modified accrual Accrual accounting and measurement focus economic resources accounting and current economic resources focus. financial focus. focus. Type of asset/liability All assets and Generally assets expected All assets and information liabilities, both to be used up and liabilities liabilities, both shortfinancial and capital, that corne due during the term and long-term; short-term and long- year or soon thereafter; no funds do not currently term. capital assets or long-term contain capital assets, liabilities included. although they can. Type of inflow/outflow All revenues and Revenues for which cash is All additions and information expenses during year, received during or soon deductions during the regardless of when cash after the end of the year; year, regardless of is received or paid expenditures when goods when cash is received or services have been or paid. received and the related liability is due and payable. 7

57 ST. CHARLES COMMUNITY UNIT SCHOOL DISTRICT 303 MANAGEMENT'S DISCUSSION AND ANALYSIS District-wide Statements The District-wide statements report information about the District as a whole using accounting methods similar to those used by private-sector companies. The statement of net assets includes all of the District's assets and liabilities. All ofthe current year's revenues and expenses are accounted for in the statement of activities regardless of when cash is received or paid. The two District-wide statements report the District's net assets and how they have changed. Net assetsthe difference between the District's assets and liabilities - is one way to measure the District's financial health or position. Over time, increases or decreases in the District's net assets are an indicator of whether its financial position is improving or deteriorating, respectively. To assess the District's overall health, you need to consider additional non-financial factors such as changes in the District's property tax base and the condition of school buildings and other facilities... The value of property is recorded at original acquisition cost and does not reflect current market values. In the District-wide financial statements, the District's activities are all categorized as Governmental Activities. All of the District's basic services are included here, such as regular and special education, transportation, and administration. Property taxes finance most of these activities. 8

58 ST. CHARLES COMMUNITY UNIT SCHOOL DISTRICT 303 MANAGEMENT'S DISCUSSION AND ANALYSIS Financial Analysis of the District as a Whole The District's combined net assets decreased from $53,686,404 to $31,936,728. (See Figure A-3) FigureA-3 Statement of Net Assets (in thousands of dollars) Governmental Activities Current and other assets Deferred Charges Capital assets (net of depreciation) Total assets Current Liabilities Long-term debt outstanding Total liabilities Invested in capital assets, net of related debt Restricted Unrestricted Net assets , , ,460 77, , ,523 16,723 15,214 31, , , ,641 78, , ,955 15,594 17,971 20,l21 53,686 With passage of GASB 34, the District has been working to improve its tracking and deprecation of capital assets, which historically was not required. During the year, the District completed a District-wide capital assets appraisal, which included historical costs of its assets. This re-evaluation process resulted in an extraordinary loss adjustment of $31,331,381. 9

59 ST. CHARLES COMMUNITY UNIT SCHOOL DISTRICT 303 MANAGEMENT'S DISCUSSION AND ANALYSIS Fund Financial Statements School District 303's fund financial statements provide more detailed information about the District's funds, focusing on its most significant or "major" fund - not the District as a whole. Funds are accounting devices the District uses to keep track of specific sources of funding and spending on particular programs: Some funds are required by state law and by bond covenants. The District establishes other funds to control and manage money for particular purposes (such as repaying its long-term debts) or to show that it is properly using certain revenues. The District has two categories of funds: Governmental funds: Most of the District's basic services are included in governmental funds, which generally focus on (1) how cash and other financial assets that can readily be converted to cash flow in and out, and (2) the balances left at year-end that are available for spending. Consequently, the governmental funds statements provide a detailed sholi-term view that helps determine whether there are more or fewer financial resources that can be spent in the near future to finance the Districts' programs. Because this information does not encompass the additional longterm focus of the District-wide statements, additional information at the bottom of the governmental funds statements explain the relationships (or differences) between them. Fiduciary funds: The District is the trustee, orfiduciary, for assets that belong to others, such as the student activities funds. The District is responsible for ensuring that the assets reported in these funds are used only for their intended purposes and by those to whom the assets belong. The District excludes these activities from the district-wide financial statements because it cannot use these assets to finance its operation. 10

60 ST. CHARLES COMMUNITY UNIT SCHOOL DISTRICT 303 MANAGEMENT'S DISCUSSION AND ANALYSIS Financial Analysis of the Governmental Funds: The total cost of all programs and services was $176.3 million. The District's expenses can be broken into general operations, debt retirement, and other governmental operations. Other governmental operations were $9.9 million, or 5.6%. Debt service was $17.4 million, or 9.9%. The remaining 84.5% ($149.0 million) provided ongoing programs and services to District students. The ongoing operations of the District are funded primarily through property taxes (76.9%). FigureA-4 Excess (Deficiency) o/revenues Over Expenditures/or Fiscal Year 2009 Governmental Funds (in thousands 0/ dollars): On-going Operations Percent 0/ Total Revenue: Property Taxes State Aid and Grants Federal Grants Other $136,682 26,697 4,812 9, % 15.0% 2.7% 5.4% Total 177, % Expense: Instruction Pupil and Instructional Services Building Administration Business Administration Maintenance and Operations Transportation Bond and Interest Other 88,953 20,624 9,449 5,836 15,525 8,623 17,446 9, % 11.7% 5.4% 3.3% 8.8% 4.9% 9.9% 5.6% Total $176, % Excess $1,358 11

61 ST. CHARLES COMMUNITY UNIT SCHOOL DISTRICT 303 MANAGEMENT'S DISCUSSION AND ANALYSIS Financial Analysis of the District's Funds: The District's finances are largely determined by revenue from real estate taxes and budgets are put in place by the Board of Education. The District's tax revenue is controlled by the Property Tax Extension Limit Law, which limits property tax growth to the Consumer Price Index for Urban consumers plus taxes on new property growth. New property growth within the District has been declining. The District has increased the operating fund balance of the last five years to the point that tax anticipation warrants are longer needed on an annual basis. Operating grants and contributions for governmental activities continue to remain consistent with no new significant funding initiatives realized. The outlook for funding from the State of Illinois would indicate flat to slightly decreasing revenue. Figure A-4 indicates the District expended less for regular operations than revenue taken in. This is due to increased revenue from local sources, directly attributed to the EA V tax increase. Education Fund: Total revenue in this fund increased by 5.4% over the prior year. The largest source of revenue is property taxes at 77.0% of revenue. Total expenditures increased from the previous year by 7.5%. The passing of the operating rate referendum brought increases in programs for students. The fund balance at year-end was $37,301,288, an increase of$3,481,173 over the prior year. The available cash at year-end was sufficient to maintain cash flow, so the District did not need to borrow short-term debt (Tax Anticipation Warrants). Operations and Maintenance Fund: Total revenue decreased (0.5%) over the prior year. Expenditures increased 5.2% over the prior year. This decreased the fund balance to ($7,046,184). Transportation Fund: The District discontinued the use of an outside contractor to provide their Special Education transportation services and begin providing these services themselves, which required a one-time capital investment over $1,000,000. Eighty percent of this investment will be reimbursed by the State of Illinois over a five year period, which will result in this Fund's balance being restored. Total revenue increased 5.0% over the prior year. Expenditures increased 16.3% over the prior year. Total expenditures exceeded total revenues by $793,709 bringing the fund balance to $(588,228). IMRF/Social Security Fund: Total expenditures exceeded total revenues by $605,663 decreasing the fund balance to $1,634,578. Bond and Interest Fund: Total revenue increased to $16,759,587. Expenditures were $17,445,521. Fund balance increased to $8,929,

62 ST. CHARLES COMMUNITY UNIT SCHOOL DISTRICT 303 MANAGEMENT'S DISCUSSION AND ANALYSIS Capital Assets and Debt Administration At the close of2008, the following were the values for Capital Assets (in thousands): Land Other assets net of depreciation Total $ 9,409 $ 124,382 $ 133,791 At year-end, the District had $165,859,725 in general obligation bonds and other long-term debt outstanding. The District retired debt of $8.6 million this fiscal year. Further information about capital assets and debt administration can be found in the notes to the financial statements. Factors Bearing on the District's Future The District's financial outlook is positive, despite the general negative outlook for state-wide funding. The passage of a local operating rate increase referendum assures adequate property tax funding for the future - it is essential as the District becomes more and more dependent on this source of revenue and as state funding remains stagnant or slightly increasing. Enrollment is currently at 13,922, and will likely increase to 13,966 next year before beginning to slightly decline over the next several years. Labor contracts extend to the close of fiscal year 2011 for all labor associations. Request for Information The financial report is designed to provide the District's citizens, taxpayers, and creditors with a general overview of the District's finances and to demonstrate the District's accountability for the money it receives. If you have questions about this report, or need additional financial information, please contact the District at

63 STATEMENT OF NET ASSETS JUNE 30, 2009 Assets: Cash and investments Receivables: Property taxes Replacement taxes Due from other governments Other DefelTed charges Capital assets: Land and construction in progress Other capital assets, net of depreciation Total Assets Liabilities: Accounts payable Self insurance claims payable Accrued salaries and related expenditures Unearned revenue Noncurrent liabilities: Due within one year Due in more than one year Other post employment benefits Governmental Activities $ 66,085,313 69,514, ,812 5,085,714 35, ,410 9,409, ,382, ,459, ,159 2,107,525 8,832,624 65,278,558 l3,404, ,455, , ,522,909 Net Assets: Restricted for: Employee health costs Debt service Working capital requirements Umestricted Total net assets 4,721,941 8,929,446 3,071,887 15,213,454 $ 31,936,728 See accompanying notes to basic financial statements 14

64 STATEMENT OF ACTIVITIES YEAR ENDED JUNE 30, 2009 Functions Expenses Program Revenues Operating Capital Charges for Grants and Grants and Services Contributions Contributions Net (Expense) Revenue and Changes in Net Assets Total Govermnental Activities Governmental Activities: Instructional services: Regular programs Special programs Tuition, learning disabilities Support services: Pupils Instructional staff General administration School administration Business Operation and maintenance of facilities Transportation Central Other Community services Interest on long-term liabilities $ 82,400,780 $ 2,736,278 11,253,409 5,977,793 9,227,674 11,873, ,548 2,204,861 8,842,426 5,126,275 2,888,767 14,579,397 1,058,565 7,735, ,756 1,080, ,708 36,835 7,643,299 $ 15,288,200 $ 6,704, , ,750 3,591,608 $ (64,376,302) (4,548,959) (5,977,793) (9,227,674) (11,266,716) (2,204,861 ) (8,842,426) (1,767,758) (13,520,832) (3,890,835) (1,080,224) (141,708) (36,835) (7,643,299) Total school district $168,123,525 $ 7,090,914 $ 26,506,389 $ (134,526,222) General revenues: Property taxes levied for: General purposes Transportation Retirement Debt service Tort immunity Federal and state aid not restricted to specific purposes Earnings on investments Miscellaneous Extraordinary item-loss on adjustement of capital assets Total general revenues and extraordinary items Net assets - beginning Net assets - ending Change in net assets 111,604,349 3,973,385 3,265,868 16,694,063 1,144,254 5,003,048 1,208,723 1,214,237 (31,331,381) 112,776,546 (21,749,676) 53,686,404 $ 31,936,728 See accompanying notes to basic financial statements 15

65 BALANCE SHEET GOVERNMENTAL FUNDS JUNE 30, 2009 General ASSETS Assets: Cash and investments $ 41,989,697 $ Receivables: Property taxes 56,633,572 Replacement taxes 174,812 Due from other governments 3,320,472 Other 33,428 Due from other funds TOTAL ASSETS $ 102,151,981 $ LIABILITIES AND FUND BALANCES Liabilities: Accounts payable $ 884,497 $ Self insurance claims payable 2,107,525 Accrued salaries and related expenditures 8,535,560 Deferred revenue 53,263,873 Due to other funds 7,105,422 Total Liabilities 71,896,877 Fund Balances: Reserved: Reserved for employee health costs 4,721,941 Reserved for debt service Reserved for working capital requirements Unreserved 25,533,163 Total Fund Balances 30,255,104 TOTAL LIABILITIES AND FUND BALANCES $ 102,151,981 $ Debt Service 8,360,217 8,454,212 16,814,429 7,884,983 7,884,983 8,929,446 8,929,446 16,814,429 Working Cash $ 13,667,410 9,404,477 $ 23,071,887 $ 23,071,887 23,071,887 $ 23,071,887 See accompanying notes to basic financial statements 16

66 Other Governmental Funds Total Governmental Funds $ 2,067,989 $ 66,085,3l3 4,427,127 69,514, ,812 1,765,242 5,085,714 2,329 35,757 9,404,477 $ 8,262,687 $ 150,300,984 $ 96,662 $ 981,159 2,107, ,064 8,832,624 4,129,702 65,278,558 2,299,055 9,404,477 6,822,483 86,604,343 4,721,941 8,929,446 23,071,887 1,440,204 26,973,367 1,440,204 63,696,641 $ 8,262,687 $ 150,300,984 17

67

68 RECONCILIATION OF THE BALANCE SHEET OF GOVERNMENTAL FUNDS TO THE STATEMENT OF NET ASSETS JUNE 30, 2009 Total fund balances - governmental funds $ 63,696,641 Amounts reported for governmental activities in the statement of net assets are different because: Capital assets used in governmental activities are not financial resources, and therefore, are not reported in the funds. The cost of the assets is $221,318,461 and the accumulated depreciation is $87,526,741. Deferred charges included in the statement of net assets are not available to pay for current period expenditures and accordingly, are not included in the governmental funds balance sheet. 133,791, ,410 Long-term liabilities, including bonds payable, are not due and payable in the current period and therefore are not repolied in the funds. Long-term liabilities at year-end consist of: Long term debt $ (165,859,725) Other post employment benefits (463,318) (166,323,043) Net assets of governmental activities $ 31,936,728 See accompanying notes to basic fmancial statements 18

69 STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES GOVERNMENTAL FUNDS YEAR ENDED JUNE 30, 2009 General Debt Service Working Cash REVENUES Local sources $ 119,959,791 $ State sources 23,105,319 Federal sources 4,812,510 Total Revenues 147,877,620 EXPENDITURES CUlTent operating: Instruction 87,503,047 Supporting services 48,024,050 Community services 36,178 Non-programmed charges 5,977,793 Debt service: Principal Interest and other Capital Outlay 3,264,747 Total Expenditures 144,805,815 Excess (deficiency) of revenues over expenditures 3,071,805 OTHER FINANCING SOURCES (USES) Principal on bonds sold Premium on bonds sold Transfers in 62,000 Transfers out (1,910,742) Capital lease proceeds 984,130 Other uses Total other financing sources (uses) (864,612) Net change in fund balances 2,207,193 Fund Balances at beginning of year 28,047,911 FUND BALANCES AT END OF YEAR $ 30,255,104 $ 16,759,587 $ 558,705 16,759, ,705 9,485,345 7,960,176 17,445,521 (685,934) 558,705 41,120,000 1,467,404 1,164,398 (62,000) (42,583,652) 1,106, , ,705 8,509,230 22,513,182 8,929,446 $ 23,071,887 See accompanying notes to basic financial statements 19

70 Other Governmental Funds Total Governmental Funds $ 8,917,710 $ 146,195,793 3,591,608 26,696,927 4,812,510 12,509, ,705,230 1,449,901 88,952,948 10,817,566 58,841, ,835 5,977, ,500 9,612, ,784 8,074,960 1,585,101 4,849,848 14,095, ,346,845 (1,586,191) 1,358,385 41,120,000 1,467, ,344 1,972,742 (1,972,742) 984,130 (42,583,652) 746, ,882 (839,847) 2,346,267 2,280,051 61,350,374 $ 1,440,204 $ 63,696,641 20

71 RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS TO THE STATEMENT OF ACTIVITIES YEAR ENDED rune 30, 2009 Net change in fund balances - total governmental funds $ 2,346,267 Amounts reported for governmental activities in the statement of activities are different because: Governmental funds report capital outlays as expenditures. However, in the statement of activities, assets with an initial, individual cost of more than $5,000 are capitalized and the cost is allocated over their estimated lives and reported as depreciation expense. This is the amount by which capital outlays exceeded depreciation in the current period. Capital outlays Depreciation expense $ 4,849,848 (5,969,069) (1,119,221) The costs fi'om the acquisition of capital assets are reported as expenses in the governmental funds. However, the cost of the capital assets are removed from the capital asset account in the statement of net assets and offset against the proceeds from the sale of capital assets resulting in a gain/loss on the sale of capital assets in the statement of activities. Also any adjustment of the capital assets are not reflected in the governmental funds. Loss on adjustment of capital assets Some items reported in the statement of activities do not require the use of current financial resources and therefore are not reported as expenditures in the governmental funds. These activities consist of: Increase in self insurance claims payable Increase in compensated absences Increase in retirement benefit payable $ (339,906) (261,265) (100,794) (31,331,381) (701,965) The governmental funds record bond and loan proceeds as other financing sources, while repayment of bond and loan principal is reported as an expenditure. Also, governmental funds report the effect of issuance costs and premiums when debt is first issued, whereas these amounts are deferred and amortized in the statement of activities. The net effect of these differences in the treatment of bonds and loans and related items is as follows: Bond proceeds Premium on bonds issued Deposit to refunding escrow Repayment of bond and loan principal Capital lease proceeds Amortization of deferred loss on refunding Issuance cost amortization Bond premium amortization Bond discount amortization Change in net assets of governmental activities $(41,120,000) (1,467,404) 42,583,652 9,612,845 (984,130) (350,398) (115,318) 900,132 (2,755) 9,056,624 $(21,749,676) See accompanying notes to basic financial statements 21

72 STATEMENT OF FIDUCIARY NET ASSETS JUNE 30,2009 Private Purpose Trusts Mid-Valley Joint Agreement Student Activity Total Assets Cash and investments Liabilities Due to fiduciary organizations Net assets Amounts held in trust $ 1,801,195 $ 1,096,036 $ $ 1,096,036 $ 1,801,195 $ $ 914,742 $ 3,811,973 $ 914,742 $ 2,010,778 $ $ 1,801,195 See accompanying notes to basic financial statements 22

73 STATEMENT OF CHANGES IN FIDUCIARY NET ASSETS YEAR ENDED JUNE 30, 2009 Private Purpose Trusts Additions Net earnings (loss) on investments Other local sources Total additions - local sources $ (176,701) 2,300 (174,401) Deductions Payments to Cultural Arts Center Other Total deductions Changes in net assets Net assets, at beginning of year Net assets, at end of year 104,175 30, ,758 (309,159) 2,110,354 $ 1,801,195 See accompanying notes to basic fmancial statements 23

74 Notes to Financial Statements June 30, 2009 NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Community Unit School District 303 (the District) is governed by an elected Board of Education. The accounting policies of the District conform to accounting principles generally accepted in the United States of America (GAAP) as applicable to governmental units. The Governmental Accounting Standards Board (GASB) is the accepted standard-setting body for establishing governmental accounting and financial reporting principles. A summary of the significant accounting policies, consistently applied in the preparation of the accompanying financial statements is described below. In June 1999 the GASB unanimously approved Statement No. 34, Basic Financial Statements - and Management's Discussion and Analysis - for State and Local Governments. Certain of the significant changes in the Statement include the following: The financial statements include: Ell A Management's Discussion and Analysis (MD&A) providing an analysis of the District's overall financial position and results of operations. Financial statements prepared using the full-accrual basis of accounting for all the District's activities. A change in the fund financial statements to focus on major funds. 3. The Reporting Entity The District includes all funds of its governmental operations that are controlled by or dependent upon the District as determined on a basis of financial accountability. Financial accountability includes appointment of the organization's governing body, imposition of will, and fiscal dependency. The accompanying financial statements include only those funds and account groups of the District as there are no other organizations for which it has financial accountability. Joint Venture - the District is also a member of the following organizations: - Mid-Valley Special Education Joint Agreement (see Note 15) - Northwestern Illinois Association (see Note 16) - Northern Kane County Regional Vocational Systems (see Note 17) 24

75 Notes to Financial Statements (Continued) June 30, 2009 b. Basis of Presentation Government-wide and fund financial statements The government-wide financial statements (i.e., the statement of net assets and the statement of activities) report information on all of the nonfiduciary activities of the District. For the most part, the effect of inter fund activity has been removed from these statements. All of the District's operating activities are considered "governmental activities", that is, activities that are normally supported by taxes and intergovernmental revenues. The District has no operating activities that would be considered "business activities". The statement of activities demonstrates the degree to which the direct expense of a given function or segment are offset by program revenues. Direct expenses are those that are clearly identifiable with a specific function. Program revenues include 1) charges to students or applicants who purchase, use, or directly benefit from goods, services, or privileges provided by a given function and 2) grants and contributions that are restricted to meeting the operational or capital requirements of a particular function. Taxes and other items not properly included among program revenues are reported instead as general revenues. Separate financial statements are provided for governmental funds and fiduciary funds, even though the latter are excluded from the government-wide financial statements. Major individual governmental funds are reported as separate columns in the fund financial statements. Measurement focus, basis of accounting, and financial statement presentation 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. Property taxes are recognized as revenues in the year for which they are levied. Grants and similar items are recognized as revenue as soon as all eligibility requirements imposed by the provider have been met. Government 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 in the current period. For this purpose, the District considers revenues to be available if they are collected within 60 days of the current fiscal period. Expenditures generally are recorded when a liability is incurred, as under accrual accounting. However, debt service expenditures, as well as expenditures related to compensated absences, are recorded only when payment is due. Interest associated with the current fiscal period is considered to be susceptible to accrual and so has been recognized as a revenue of the current period. Property taxes are recognized as revenues 25

76 Notes to Financial Statements (Continued) June 30, 2009 in the year for which they are levied. Grants and similar items are recognized as revenue as soon as all eligibility requirements imposed by the provider have been met. All other revenue items are considered to be measurable and available only when the District receives the cash. The District reports the following major governmental funds: The General Fund is the District's primary operating fund. It accounts for all financial resources of the District, except those required to be accounted for in another fund. The General Fund consists of the Educational Account and Operations and Maintenance Account that are legally mandated by the State of Illinois. The Working Cash Fund (a special revenue fund) accounts for financial resources held by the District to be used as loans for working capital requirements to any other fund for which taxes are levied. The Debt Service Fund accounts for the accumulation of, resources for, and the payment of general long-term debt, principal, interest and related costs. Additionally, the District reports the following fund types: Fiduciary Funds - account for assets held by the District in a trustee capacity or as an agent for individuals, private organizations, other governments or other funds. Agency Funds-include Student Activity Funds, Convenience Accounts and amounts held in the District's name for Mid-Valley Joint Agreement. These funds are custodial in nature and do not present results of operations or have a measurement focus. Although the Board of Education has the ultimate responsibility for Activity Funds, they are not local education agency funds. Student Activity Funds account for assets held by the District which are owned, operated and managed generally by the student body, under the guidance and direction of adults or a staff member, for educational, recreational or cultural purposes. Convenience Accounts account for assets that are normally maintained by a local education agency as a convenience for its faculty, staff, etc. In accordance with GASB No. 24, on-behalf payments (payments made by a third party for the benefit of the district, such as payments made by the state to the Teachers' Retirement System) have been recognized in the financial statements. Property taxes, replacement taxes, certain state and federal aid, and interest on investments are susceptible to accrual. Other receipts become measurable and available when cash is received by the District and recognized as revenue at that time. Grant funds are considered to be earned to the extent of expenditures made under the provisions of the grant. 26

77 Notes to Financial Statements (Continued) June 30, 2009 Accordingly, when such funds are received, they are recorded as deferred revenues until earned. Private-sector standards of accounting, and financial reporting issued prior to December 1, 1989, generally are followed in the government-wide financial statements to the extent that those standards do not conflict with or contradict guidance of the GASB. 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. Private Purpose Trust Funds - the funds are used to report trust arrangements which benefit individuals, private organizations, and other governments. Lester J. Norris Charitable Trust (Bank Trust #441) The Board of Education created this trust in August 1978 to accept a gift of common stocks from Lester J. Norris. Income earned by the trust assets is to be used for the purpose of promoting activities of the Dellora A. Norris Cultural Art Center. In the event that Center or any replacement thereof ceases to exist, any remaining trust assets must be distributed for the promotion of cultural activities in St. Charles, Illinois in such a manner as directed by the St. Charles City Council. For the year ended June 30, 2009, $7,800 of the fund's assets were transferred to the Dellora A. Norris Cultural Art Center for the purpose described above. Dellora A. Norris Charitable Trust (Bank Trust #505) The Board of Education created this trust in December 1980 to accept a gift of common stocks from Dellora A. Norris. Income earned by the trust assets is to be used for the purpose of promoting activities of the Dellora A. Norris Cultural Art Center. In the event that the Center or any replacement thereof ceases to exist, any remaining assets must be distributed for the promotion of the cultural activities in St. Charles, Illinois in such manner as described by the Board of Education. For the year ended June 30, 2009, $6,720 of the fund's assets were transferred to the Dellora A. Norris Cultural Art Center for the purpose described above. Dellora A. Norris Cultural Arts Center Endowment Trust (Bank Trust #602) The Board of Education created this trust in March 1983 to accept a bequest of$1,000,000 from the estate of Dellora A. Norris. Trust assets are to be used for the repair, maintenance, improvement and operating expenses of the Center. All income, including capital gains, of this trust is expendable, as well as an amount of principal equal to $20,000 multiplied by the number of calendar years from the date of her death. However, the Board of Education has resolved that expendable principal will be spent only with specific Board approval. For the year ended June 30, 2009, $49,368 of the fund's assets were transferred to the Dellora A. Norris Cultural Art Center for the purpose described above. In the event that the Center or any replacement thereof ceases to exist, any remaining trust assets must be distributed for the promotion of cultural activities in St. Charles, Illinois in such manner as 27

78 Notes to Financial Statements (Continued) June 30, 2009 directed by the Board of Education. Edward J. Baker Building and Equipment Trust Edward J. Baker, as past president of the Board of Education, established this fund in 1958 upon the gift of$75,000. Income from the fund's assets may be used for the benefit of public schools as directed by the board of Education. As of June 30, 2009, $84,089 of the fund's assets was expendable. Charles H. Haines Trust This fund was established in 1915 by Charles H. Haines, a former president of the Board of Education, with a cash contribution and one-third title to a 99-year ground lease of the property located at 1143 West Monroe Street, Chicago, Illinois. The Monroe Street property was sold in June 2004 and the proceeds used as a donation to the District. The remaining value of the trust after the sale is in excess of the nonexpendable principal noted. The original nonexpendable principal in the fund has been set at $99,672. Income earned on the principal may be used for the benefit of the public schools as directed by the Board of Education. As of June 30, 2009, $32,751 of the fund's assets was expendable. Dellora A. Norris Cultural Arts Center Trust (Trust No. 444) The Board of Education established this fund in August, 1978 to accept a gift of common stocks from Dellora A. Norris. The gifted funds are to be used for the purpose of purchasing art or ornamental works for the interior and exterior beautification and decoration of the Center in such a manner as directed by an advisory committee established by the donor. All assets of this trust are expendable. Gift Accounts The Board of Education established these accounts to account for various memorials and scholarships given by the District. c. Budgetary Data Annual budgets for all Governmental Funds are adopted on the modified accrual basis, consistent with generally accepted accounting principles (GAAP) for local governments. The Board of Education follows these procedures in establishing the budgetary data reflected in the financial statements: 1. The Administration submits to the Board of Education a proposed operating budget for the fiscal year commencing July 1. The operating budget includes proposed expenditures and the means of financing them. 28

79 Notes to Financial Statements (Continued) June 30, Public hearings are conducted and the proposed budget is available for inspection to obtain taxpayer comments. 3. Prior to September 30 the budget is legally adopted through passage of a resolution. On or before the last Tuesday in December, a tax levy ordinance is filed with the County Clerk to obtain tax revenues. 4. The Superintendent is authorized to transfer up to 10% of the total budget between departments within any fund without Board of Education approval; however, any revisions that alter the total expenditures of any fund must be approved by the Board of Education following the public hearing process mandated by law. The budget was originally adopted on August 11,2008 and amended, on April 13, Formal budgetary integration is employed as a management control device during the year for the General Fund, Special Revenue Funds, the Debt Service Fund, and the Capital Projects Fund. 6. The District has adopted a legal budget for all its Governmental Funds. Total actual expenditures for the governmental funds may not legally exceed the total budgeted for such funds. However, under the State Budget Act expenditures may exceed the budget if additional resources are available to finance such expenditures. 7. The budget (all appropriations) lapses at the end of each fiscal year. 8. The District's actual expenditures in various funds exceeded budgeted expenditures. Additional sources are available to finance these excess expenditures as allowed under the State Budget Act. See Note 7 for these excess expenditure amounts. d. Deposits and Investments Investments held by the District which are short-term highly liquid investments having a remaining maturity of one year or less at the time of purchase are reported by the District at amortized cost. All other investments are reported at fair value. Gains or losses on the sale of investments are recognized upon realization. The District has adopted a formal written investment and cash management policy. The institutions in which investments are made must be approved by the Board of Education. Under Illinois law, the District is restricted to investing funds in specific types of investment instruments. The following generally represents the types of instruments allowable by State laws. Securities issued or guaranteed by the United States... Interest-bearing accounts of banks and Savings and Loan Associations insured up to $250,000 29

80 Notes to Financial Statements (Continued) June 30, 2009 by the Federal Deposit Insurance Corporation. 4& Short-term obligations (less than 180 days) of U.S. corporations with assets over $500,000,000 rated in the three highest classifications by at least two rating agencies. Insured accounts of an Illinois credit union chartered under United States or Illinois law. Money market mutual funds with portfolios of securities issued or guaranteed by the United States or agreements to repurchase these same types of obligations. The Illinois Funds or Illinois School District Liquid Asset Fund Plus. Repurchase agreements that meet instrument transaction requirements of Illinois law. The District maintains a cash and investment pool that is available for use by all funds. In addition, investments may be separately held by some of the District's funds. Each fund type's portion of the deposits, unrestricted investments, and cash on hand is displayed on the combined balance sheet as "Cash and Investments", as applicable. The following amounts which are included in these captions have been excluded from the amounts shown below: Carrying Value Deposits held by Agency Funds $ 2,010,778 e. Property Taxes The District must file its tax levy ordinance by the last Tuesday in December of each year. The District's 2008 tax levy ordinance was approved during the December 8, 2008 Board meeting. The District's property tax is levied each year on all taxable real property located in the District. The owner ofreal property on January 1 (the lien date) in any year is liable for taxes of that year. The District's annual property tax levy is subject to two statutory limitations: Individual fund rate ceilings and the Property Tax Extension Limitation Act (PTELA). The tax rate ceilings are applied at the fund level. These ceilings are established by state law subject to change only by the approval of the voters of the District. The PTELA limitation is applied in the aggregate to the total levy (excluding certain levies from the repayment of debt). PTELA limits the increase in total taxes billed to the lessor of 5% or the percentage increase in the Consumer Price Index (CPI) for the preceding year. The amount can be exceeded to the extent there is "new growth" in the District's tax base. The new growth consists of new construction, annexations and tax increment finance district property becoming eligible for taxation. 30

81 Notes to Financial Statements (Continued) June 30, 2009 The County Assessor is responsible for the assessment of all taxable real property within the County except for certain railroad property which is assessed directly by the State. The County Clerk computes the annual tax rate by dividing the levy into the assessed valuation of the taxing district. The County Clerk then computes the rate for each parcel of real property by aggregating the tax rates of all units having jurisdiction over that parcel. Property taxes are collected by the County Collector who remits to the units their respective shares of the collections. Taxes levied in one year become due and payable in two installments on June 1 and September 1 during the following year. Substantial collections are received by the District in June and September. The District considers that the first installment of the 2008 levy is to be used to finance operations in fiscal This District has determined that the second installment of the 2008 levy is to be used to finance operations in fiscal 2010 and has deferred the corresponding receivable. f. Personal Property Replacement Taxes Personal property replacement tax revenues are first allocated to the extent required by Illinois law in the Municipal Retirement/Social Security Fund with the balance allocated to funds at the discretion of the District. g. Encumbrances Encumbrance accounting, under which purchase orders, contracts, and other commitments for the expenditure of monies are recorded in order to reserve that portion of the applicable appropriation, is employed as an extension of formal budgetary integration in the Governmental Funds. All encumbrances are canceled at year end, and, if necessary, are reinstated at the beginning of the subsequent fiscal year. h. Compensated Absences All employees except teachers earn vacations days throughout the year. Contractual administrators and support staff can carry all and 10 unused vacation days into the next fiscal year respectively. Contractual administrators may carry five unused vacations past December 31, while support staff will lose any unused vacation days as of September 30. At June 30, 2009, all of the liability is held on the government wide level. i. Capital Assets Capital assets, which include land, buildings, improvements, and furniture and equipment, are reported in the government-wide financial statements. The District defines capital assets as assets with an initial, individual cost of more than $5,000 and an estimated useful life in excess of two years. Such assets are recorded at historical cost or estimated historical cost if purchased or constructed. Donated capital assets are recorded at estimated fair value at the date of donation. 31

82 Notes to Financial Statements (Continued) June 30, 2009 The cost of normal maintenance and repairs that do not add to the value of the asset or materially extend the life of an asset are not capitalized. Major outlays for capital assets and improvements are capitalized as projects are constructed. Interest incurred during construction is not capitalized. Buildings, improvements, and furniture and equipment of the District are depreciated using the straight-line method over the following estimated lives: Assets Buildings and building improvements Land improvements Furniture, equipment and vehicles Years 50 years 20 years 5-10 years j. 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 assets. Bond premiums and discounts, as well as issuance costs, are deferred and amortized over the life ofthe bonds using the straight-line method which approximates the effective interest method. Bonds payable are reported net of the applicable bond premium or discount. Bond issuance costs are reported as deferred charges and amortized over the term of the related debt. In the fund financial statements, governmental fund types recognize bond premiums and discounts, as well as bond issuance costs, during the current period. The face amount of debt issued is reported as other financing sources. Premiums received on debt issuances are reported as other financing sources while discounts on debt issuances are reported as other financing uses. Issuance costs, whether or not withheld from the actual debt proceeds received, are reported as debt service expenditures. k. Vacation and Sick Leave Employee vacation and sick leave, including salary related payments, is recorded when it is paid. Accumulated unpaid employee vacation and sick leave which was earned prior to the current fiscal year but unused at the end of the current fiscal year is not significant. Vacation and sick leave will be paid with future tax collections and therefore has not been reported as a current liability of the governmental funds. 1. Fund Equity In the fund financial statements, governmental fund report reservations of fund balance for amounts that are not available for appropriation or are legally restricted by outside parties for use for 32

83 Notes to Financial Statements (Continued) June 30, 2009 a restricted purpose. Designations of fund balance represent tentative plans for future use of financial resources that are subject to change. m. Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses/expenditures during the reporting period. Actual results could differ from those estimates. NOTE 2. CASH AND INVESTMENTS Deposits and Custodial Credit Risk At June 30, 2009 the carrying amount of the District's deposits, which include both cash and certificates of deposits totaled $53,560,263 and the bank balances totaled $56,033,974. Custodial credit risk is the risk that in the event of a bank failure, the government's deposits may not be returned to it. The District does not have a deposit policy for custodial credit risk. All the District's deposits were entirely insured or collateralized as of June 30, Investments As of June 30, 2009 the District has the following investments and maturities. Maturities ~pplicable (in years) %0/ Agency \Investment Type Fair Value Less than 1 Portfolio rating Other Investments: Illinois School District Liquid Asset Fund 12,853,796 12,853,796 90% AAAm Pooled Equity Funds 1,472,449 1,472,449 10% N/A Total Investments $14,326,245 $14,326, % At June 30, 2009, the District held the following investments: The Illinois School District Liquid Asset Fund and Pooled Equity Funds are investment pools. The value of the position in these investment pools are the same as the value of the pool shares. 33

84 Notes to Financial Statements (Continued) June 30, 2009 Credit Risk. The District's investments are rated as shown above by the applicable rating agency. Concentration of Credit Risk. The District places no limit on the amount the District may invest in anyone issuer. More than 5 percent of the District's investments are concentrated in specific individual investments. The above table indicates the percentage of each investment to the total investments of the District. NOTE 3. CAPITAL ASSETS A summary of changes in general fixed assets follows: Balance Balance July 1, Additions Deletions June 30, Capital assets, not being depreciated: Land $ 9,409,432 $ - $ - $ 9,409,432 Total capital assets not being depreciated 9,409, ,409,432 Capital assets, being depreciated: Buildings 216,610,685 1,795,380 32,291, ,114,792 Improvements other than buildings 5,424,366 - (306,978) 5,731,344 Equipment 12,662,559 3,054,468 (4,345,866) 20,062,893 Total capital assets being depreciated 234,697,610 4,849,848 27,638, ,909,029 Accumulated depreciation for: Building 68,164,494 4,439,423 1,739,658 70,864,259 Improvements other than buildings 2,638, ,199 (397,224) 3,305,528 Equipment 7,062,121 1,259,447 (5,035,386) 13,356,954 Total accumulated depreciation 77,864,720 5,969,069 (3,692,952) 87,526,741 Total capital assets being depreciated, net 156,832,890 (1,119,221) 31,331, ,382,288 Total capital assets, net $166,242,322 $(1,119,221) $31,331,381 $133,791,720 34

85 Notes to Financial Statements (Continued) June 30, 2009 Depreciation expense was charged to functions of the District as follows: Instructional services: Regular programs Special programs Supporting services: Pupils Instructional staff General administration School administration Business Operations and maintenance of facilities Transportation 3,103, , , ,144 59, , , , ,835 5,969,069 NOTE 4. ST. CHARLES HIGH SCHOOL NORRIS CAMPUS The District's east high school campus, called the Norris Campus, includes a high school, the Dellora A. Norris Cultural Art Center, the John Baker Norris Recreation Center, and the Lester J. Norris Sports Complex. The Dellora A. Norris Cultural Arts Center, Ltd. (Arts Center) is a not-for-profit corporation which is administered by the Cultural Arts Center Board of Directors (Center Board). The Center Board is appointed by the Board of Education. Income from the Lester J. Norris Charitable Trust Fund, Dellora A. Norris Charitable Trust Fund, and Dellora A. Norris Cultural Alis Center Endowment Trust Fund is available to the commission for operating purposes. The Dellora A. Norris Cultural Arts Center Endowment Trust Fund (an expendable trust fund) is to be used for the purchase of art or ornamental works for the interior and exterior beautification and decoration of the Art Center, in such a manner as directed by an advisory committee established by the donor. The District provides the Art Center with use of its facility and certain business services at no charge. On May 13, 1985, the Board of Education ofthe District voted to establish a legal entity to be called the John Baker Norris Recreation Center (Recreation Center) which is a not-for-profit corporation. The John Baker Norris Recreation Center Board of Trustees administers the Recreation Center. The Board of Trustees is appointed by the members of the not-for-profit corporation comprised of the members of the Board of Education and Superintendent of the District. The Recreation Center began daily operation April 1, 1986, under the control of the Board of Trustees. The Recreation Center leases the premises on an annual basis from the District for $1 per year and responsible for all expenses of maintaining and operating it. The District is responsible for maintenance of the exterior grounds. In return, the District entered into an agreement with the 35

86 Notes to Financial Statements (Continued) June 30, 2009 Recreation Center for limited used of the Recreation Center's pool for $79,000 per year. NOTE 5. LONG TERM DEBT The following is a summary of the components oflong-term debt and related transactions of the District for the year ended June 30, 2009: Balance Balance Amount due July 1, 2008 Additions Reductions June 30, 2009 III one year General Obligation Bonds Payable: Series Dated July 1, 1998 $ 20,220,000 $ - $20,220,000 $ - $ - Series Dated July 15, ,015,000-22,015, Series Dated March 1, ,135, , , ,000 Series Dated February 1,2002 3,175, ,000 2,535, ,000 Series Dated June 15, ,205,000-1,455,000 9,750,000 1,770,000 Series Dated March 1, ,695,000-2,955,000 84,740,000 3,295,000 Series Dated October 15, ,000, ,000,000 - Series Dated August 6, ,120,000 2,915,000 38,205,000 3,245,000 Deferred Refunding (4,417,454) (348,652) (350,398) (4,415,708) (350,398) Unamortized Premium 5,771,229 1,467, ,132 6,338, ,794 Unamortized Discount (20,463) - (2,755) (17,708) (2300) Total General Obligation Bonds $166,778,312 $42,238,752 $51,256,979 $157,760,085 $10,086,096 Debt Certificates 3,870, ,000 3,700, ,000 Capital Leases 2,220, , ,845 2,237, ,027 Self Insurance Claims 1,275,584 1,615,490 1,275,584 1,615,490 1,615,490 Compensated Absences 285, , , , ,013 Total Long-Term Debt $174,430,496 $45,778,711 $54,349,482 $165,859,725 $13,404,626 Long-Term Debt at June 30, 2009 is comprised of the following: General Obligation Bonds Payable March 1,2001 life safety bonds, due in annual installments varying from $300,000 to $570,000 through 2011, interest rates varying from 4.25% to 4.50% per annum. February 1, 2002 life safety/refunding bonds, due in annual installments varying from $180,000 to $730,000 through 2013; interest rates varying from 4.40% to 4.80% per annum. 36

87 Notes to Financial Statements (Continued) June 30, 2009 June 15,2002 building bonds, due in annual installments varying from $180,000 to $6,230,000 through 2013; interest rates varying from 3.50% to 5.50% per annum. March 1, 2005 refunding bonds, due in annual installments varying from $2,630,000 to $12,985,000 through 2022, interest rates varying from 3.00% to 5.00% per annum. October 15,2005 working cash bonds, due in annual installments varying from $425,000 to $1,700,000 through 2025, interest rates varying from 2.75% to 3.00% per annum. August 6, 2008 refunding bonds, due in annual installments varying from $2,915,000 to $6,200,000 through 2018, interest rates varying from 3.00% to 5.00% per annum. In past years, the District has issued General Obligation Refunding School Bonds to partially advance refund a portion of certain outstanding General Obligation bonds. Proceeds were used to purchase U.S. Government securities. These securities were deposited in an irrevocable trust with an escrow agent to provide for all future debt service payments on the refunded debt. As a result these bonds are considered defeased and the liability has been removed from the general long-term debt. There was no economic gain recognized. As of June 30, 2009, the outstanding debt considered defeased is $125,133,666. The District is subject to the Illinois Compiled Statutes which limits the amount of bond indebtedness, including tax anticipation warrants and the installment contracts, to 13.8% of the most recent available equalized assessed valuation of the District. As of June 30, 2009, the statutory debt limit for the District was $476,932,402 providing a debt margin of $330,006,848 after taking into account amounts available in the Debt Service Fund. At June 30, 2009, the District's annual debt service requirements to maturity for general obligation bonds are as follows for governmental type activities: Fiscal Year Ending June 30, Principal Interest Total 2010 $ 9,560,000 $7,431,632 $16,991, ,605,000 7,100,793 16,705, ,750,000 6,738,937 17,488, ,250,000 6,234,092 18,484, ,145,000 5,635,512 20,780, ,055,000 15,573,688 95,628, ,790,000 2,629,625 19,419, ,700,000 90,100 1,790,100 Total $155,855,000 $51,434,379 $207,289,379 37

88 Notes to Financial Statements (Continued) June 30, 2009 Debt Certificates Payable In 2005, the District entered into an agreement for $4,325,000, to pay the costs of acquiring, constructing and equipping additions to the District's facilities as well as the costs for improvements and renovations to the District's existing school buildings. The obligations for the agreement will be repaid from the Transportation Fund and Operations and Maintenance Fund. Annual debt service requirements to maturity for certificates of participation are as follows: Fiscal Year Ending June 30, Principal Interest Total 2010 $ 170,000 $ 147,945 $ 317, , , , , , , , , , , , , ,150, ,457 1,639, ,450, ,430 1,671, ,000 3, ,713 Total $ 3,700,000 $ 1,393,935 $ 5,093,935 Capital Leases The District has entered into lease agreements as lessee for financing the acquisition of equipment. These lease agreements qualify as capital leases for accounting purposes and, therefore, the assets and obligations have been recorded at the present vale of the future minimum lease payments as of the inception date. At June 30, 2009, $6,102,026, of amounts included in capital assets were acquired by capital leases. The obligations for the capital leases will be repaid from the General Fund. 38

89 Notes to Financial Statements (Continued) June 30, 2009 The future minimum payment lease obligations and the net present value of these minimum lease payments as of June 30, 2009, are as follows: Amount 2010 $ 1,083, , , ,702 Total minimum lease payments 2,408,914 Less: amount representing interest (171,777) Present value of minimum lease payments $2,237,137 NOTE 6. RETIREMENT FUND COMMITMENTS Other Post-Employment Benefits The District provides a $900 annual stipend to certified employees retiring between the ages of 55 and 65 (previously between 50 and 65) to be used toward the TRS health insurance program. The stipend is payable through age 65. Eligible employees receive an additional stipend of$1,550 per year under certain conditions. The District finances the plan on a pay as you go basis. For the year ended June 30, 2009, the District incurred $360,150 of expenditures for 147 retirees receiving stipends under this program. Combined Retirement Reporting The Community Unit School District 303 is the administrative agent for Mid-Valley Special Education Joint Agreement. Retirement data, maintained by the state agency for the Illinois Municipal Retirement System, and listed below is on a combined entities basis. Separate data for District 303 and Mid-Valley Special Education Joint Agreement is not available. The data on the Illinois Teachers' Retirement System, however, are separately maintained; therefore the information presented applies only to District 303. Illinois Teachers' Retirement System The District participates in the Teachers' Retirement System of the State of Illinois (TRS). TRS is a cost-sharing multiple-employer defined benefit pension plan that was created by the Illinois legislature for the benefit of Illinois public school teachers employed outside the city of Chicago. The Illinois Pension Code outlines the benefit provisions of TRS, and amendments to the plan can be made only by legislative action with the Governor's approval. The State of Illinois maintains primary responsibility for the funding of the plan, but contributions from participating employers and members are also required. The TRS Board of Trustees is responsible for the System's administration. 39

90 Notes to Financial Statements (Continued) June 30, 2009 TRS members include all active nonannuitants who are employed by a TRS-covered employer to provide services for which teacher certification is required. The active member contribution rate for the year ended June 30, 2009, was 9.4 percent of creditable earnings. These contributions, which may be paid on behalf of employees by the employer, are submitted to TRS by the employer. The active member contribution rate was also 9.4 percent for the years ended June 30,2008 and The State of Illinois makes contributions directly to TRS on behalf of the District's TRScovered employees. The District's total payroll reported to TRS for the year ended June 30, 2009 was $71,151,115. On-behalf contributions. The State of Illinois makes employer pension contributions on behalf ofthe District. For the year ended June 30, 2009, State of Illinois contributions were based on percent of creditable earnings not paid from federal funds, and the District recognized revenue and expenditures of $12,083,426 in pension contributions that the State of Illinois paid directly to TRS. For the years ended June 30, 2008, and June 30, 2007, the State of Illinois contribution rates as percentages of creditable earnings not paid from federal funds were percent ($8,809,892) and 9.78 percent ($6,211,638), respectively. The state contributions to TRS for the year ended June 30, 2009 and June 30, 2008 were based on actuarial fornmla. The state contribution for the year ended June 30, 2007 was based on a dollar amount specified by the statute and were not actuarially determined. The District makes other types of employer contributions directly to TRS. 2.2 Formula Contributions. Employers contribute 0.58 percent of creditable earnings for the 2.2 formula change. This rate is specified by statute. Contributions for the year ended June 30,2009 were $412,676. Contributions for the years ending June 30, 2008, and June 30, 2007, were $391,303 and $368,378, respectively. Federal and special trust fund contributions. When TRS members are paid from federal and special trust funds administered by the district, there is a statutory requirement for the district to pay an employer pension contribution from those funds. Under a policy adopted by the TRS Board of Trustees that was first effective in the fiscal year ended June 30, 2006, employer contributions for employees paid from federal and special trust funds will be the same as the state contribution rate to TRS. For the year ended June 30, 2009, the employer pension contribution was percent of salaries paid from federal and special trust funds. For the year ended June 30, 2008 and 2007 the employer contribution was and 9.78 percent of salaries paid from federal and special trust funds, respectively. For the year ended June 30, 2009, salaries totaling $405,064 were paid from federal and special trust funds that required employer contributions of $69,185. For the years ended June 30, 2008 and June 30, 2007, required district contributions were $32,283 40

91 Notes to Financial Statements (Continued) June 30, 2009 and $28,309, respectively. Early Retirement Option (ERO). The district is also required to make one-time employer contributions to TRS for members retiring under the Early Retirement Option (ERO). The payments vary depending on the age and salary of the member. Under Public Act , a "Pipeline ERO" program was provided for members to retire under the same terms as the ERO program that expired June 30, 2005, provided they meet certain conditions and retire on or before July 1, If members do not meet these conditions, they can retire under "Modified ERO" program which requires higher member and employer contributions to TRS. Also, under Modified ERO, Public Act eliminates the waiver of member and employer ERO contributions that had been in effect for members with 34 years of service (unless the member qualifies for the Pipeline ERO). Under the Pipeline ERO, the maximum employer contribution was 100 percent of the member's highest salary used in the final average salary calculation. Under the Modified ERO, the maximum employer contribution is percent. Both the 100 percent and percent maximums apply when the member is age 55 at retirement. For the year ended June 30, 2009, the district paid $621,870 to TRS for employer contributions under the ERO program. For the years ended June 30, 2008 and June 30, 2007, the district paid $249,078 and $74,366 in employer ERO contributions, respectively. Salary increases over 6 percent and excess sick leave. Public Act added two new employer contributions to TRS. If an employer grants salary increases over 6 percent and those salaries are used to calculate a retiree's final average salary, the employer makes a contribution to TRS. The contribution will cover the difference in actuarial cost of the benefit based on actual salary increases and the benefit based on salary increases of up to 6 percent. For the year ended June 30, 2009, the District paid $59,385 to TRS for employer contributions due on salary increases in excess of 6 percent. For the year ended June 30, 2008 and 2007, the District paid $6,801 and $17,236 in employer contributions due on salary increases in excess of 6 percent, respectively. If an employer grants sick leave days in excess of the normal annual allotment and those days are used as TRS service credit, the employer makes a contribution to TRS. The contribution is based on the number of excess sick leave days used as service credit, the highest salary used to calculate final average salary, and the TRS total normal cost rate (18.67 percent of salary during the year ended June 30, 2009). For the year ended June 30, 2009, the District paid $1,790 to TRS for sick leave days granted 41

92 Notes to Financial Statements (Continued) June 30, 2009 in the excess of the normal annual allotment. For the year ended June 30, 2008 and 2007, the District paid $0 and $322 in employer contributions granted for sick leave days, respectively. TRS financial information, an explanation of TRS' benefits, and descriptions of member, employer and state funding requirements can be found in the TRS Comprehensive Annual Financial Report for the year ended June 30, The report for the year ended June 30, 2009, is expected to be available in late The reports may be obtained by writing to the Teachers' Retirement System of the State of Illinois, P.O. Box 19253,2815 West Washington Street, Springfield, IL The most current report is also available on the TRS Web site at Teacher Health Insurance Security (THIS) The District participates in the Teacher Health Insurance Security (THIS) Fund, a costsharing, multiple-employer defined benefit postemployment healthcare plan that was established by the Illinois legislature for the benefit of Illinois public school teachers employed outside the city of Chicago. The THIS Fund provides medical, prescription, and behavioral health benefits, but does not provide vision, dental or life insurance benefits to annuitants of the Teachers' Retirement System (TRS). Annuitants may participate in the state administered participating provider option plan or choose from several managed care options. The State Employees Group Insurance Act of 1971 (5ILCS 375) outlines the benefit provisions of THIS Fund and amendments to the plan can be made only by legislative action with the Governor's approval. The Illinois Department of Healthcare and Family Services (HFS) and the Illinois Department of Central Management Services (CMS) administer the plan with the cooperation of TRS. The director ofhfs determines the rates and premiums from annuitants and dependent beneficiaries and establishes the cost-sharing parameters. Section 6.6 of the State Employees Group Insurance Act of 1971 requires all active contributors to the TRS who are not employees of the state make a contribution to THIS. The percentage of employer required contributions in the future will be determined by the director of Healthcare and Family Services and will not exceed 105 percent of the percentage of salary actually required to be paid in the paid in the previous fiscal year. On Behalf Contributions to THIS Fund. The state of Illinois makes employer retiree health insurance contributions on behalf of the District. State contributions are intended to match contributions to THIS Fund from active members which were 0.84 percent of pay during the year ended June 30, State of Illinois contributions were $597,669, and the district recognized revenue and expenditures of this amount during the year. State contributions intended to match active member contributions during the year ended June 30, 2008 and 2007 were 0.84 percent and 0.80 percent of pay, respectively. State contributions on behalf of district employees were $566,715, and $508,109 respectively. 42