$24,900,000 WASHINGTON UNIFIED SCHOOL DISTRICT (YOLO COUNTY, CALIFORNIA) GENERAL OBLIGATION BONDS, ELECTION OF 2014, SERIES 2017

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1 NEW ISSUE DTC BOOK-ENTRY ONLY S&P Insured Rating: AA S&P Underlying Rating: A+ See RATINGS herein In the opinion of Quint & Thimmig, LLP, Larkspur, California, Bond Counsel, subject to compliance by the District with certain covenants, under present law, interest on the Bonds is excludable from gross income of the owners thereof for federal income tax purposes and is not included as an item of tax preference in computing the federal alternative minimum tax for individuals and corporations, but such interest is taken into account in computing an adjustment used in determining the federal alternative minimum tax for certain corporations. In addition, in the opinion of Bond Counsel, interest on the Bonds is exempt from personal income taxation imposed by the State of California. See LEGAL MATTERS Tax Matters herein. DATED: Date of Delivery $24,900,000 WASHINGTON UNIFIED SCHOOL DISTRICT (YOLO COUNTY, CALIFORNIA) GENERAL OBLIGATION BONDS, ELECTION OF 2014, SERIES 2017 DUE: August 1, as shown on the inside cover The Washington Unified School District (Yolo County, California) General Obligation Bonds, Election of 2014, Series 2017 in the aggregate principal amount of $24,900,000 (the Bonds ) are being issued by the Washington Unified School District (the District ) to (i) finance the specific school facilities projects set forth in the ballot measure approved by the District s voters at an election held on November 4, 2014, and (ii) pay costs of issuance of the Bonds. See PLAN OF FINANCE herein. The Bonds are general obligations of the District, payable solely from ad valorem property taxes levied and collected by Yolo County. The Board of Supervisors of Yolo County is empowered and obligated to annually levy and collect ad valorem property taxes without limitation as to rate or amount on all taxable property in the District (except for certain personal property which is taxable at limited rates) for the payment of principal of and interest on the Bonds. See SECURITY AND SOURCE OF PAYMENT herein. The Bonds are being issued as current interest bonds issuable in denominations of $5,000 or any integral multiple thereof. The Bonds mature on August 1 in the years and amounts set forth on the inside page following this cover page. Interest on the Bonds accrues from the date of delivery and is payable semiannually on February 1 and August 1 of each year, commencing February 1, The Bonds are subject to redemption prior to their maturity. See THE BONDS Payment of Principal and Interest and Redemption Provisions herein. The Bonds are being issued as fully registered bonds, without coupons, in book-entry form only. When delivered, the Bonds will be initially registered in the name of Cede & Co., as nominee of The Depository Trust Company ( DTC ), acting as securities depository for the Bonds. So long as Cede & Co. is the registered owner of the Bonds, payments of principal of and interest on the Bonds will be made by The Bank of New York Mellon Trust Company, N.A. as paying agent (the Paying Agent ) to DTC for subsequent disbursement to DTC participants who will remit such payments to the Beneficial Owners. See APPENDIX E DTC BOOK-ENTRY ONLY SYSTEM attached hereto. The scheduled payment of principal of and interest on the Bonds when due will be guaranteed under an insurance policy to be issued concurrently with the delivery of the Bonds by Assured Guaranty Municipal Corp. See BOND INSURANCE herein and APPENDIX F SPECIMEN MUNICIPAL BOND INSURANCE POLICY attached hereto. THIS COVER PAGE CONTAINS CERTAIN INFORMATION FOR QUICK REFERENCE ONLY. IT IS NOT INTENDED TO BE A SUMMARY OF ALL FACTORS RELEVANT TO AN INVESTMENT IN THE BONDS. INVESTORS SHOULD READ THE ENTIRE OFFICIAL STATEMENT TO OBTAIN INFORMATION ESSENTIAL TO THE MAKING OF AN INFORMED INVESTMENT DECISION. CAPITALIZED TERMS USED ON THIS COVER PAGE NOT OTHERWISE DEFINED WILL HAVE THE MEANINGS SET FORTH HEREIN. MATURITY SCHEDULE See Inside Cover The Bonds are being purchased for reoffering by Robert W. Baird & Co. Incorporated as underwriter of the Bonds (the Underwriter ). The Bonds are offered when, as and if issued by the District and received by the Underwriter, subject to approval as to legality by Quint & Thimmig LLP, Larkspur, California, Bond Counsel to the District. It is anticipated that the Bonds, in definitive form, will be available for delivery through the facilities of DTC on or about June 27, This Official Statement is dated June 8, 2017.

2 MATURITY SCHEDULE $24,900,000 WASHINGTON UNIFIED SCHOOL DISTRICT (YOLO COUNTY, CALIFORNIA) GENERAL OBLIGATION BONDS, ELECTION OF 2014, SERIES 2017 SERIAL BONDS Maturity Date August 1 Principal Amount Interest Rate Reoffering Yield Price CUSIP $415, % 0.900% % KM , KN , KP , KQ , KR , KS , KT , KU , KV , C KW , C KX , C KY , LA , LB ,035, LC ,100, LD ,165, LE ,240, LF ,310, LG ,385, LH ,470, LJ ,465, LK ,650, LL8 C = Yield to call at par on August 1, TERM BOND Maturity Date August 1 Principal Amount Interest Rate Reoffering Yield Price CUSIP $1,665, % 3.000% % KZ8 + CUSIP is a registered trademark of the American Bankers Association. CUSIP data herein is provided by CUSIP Global Services, managed by S&P Capital IQ on behalf of The American Bankers Association. This data is not intended to create a database and does not serve in any way as a substitute for the CUSIP Services. Neither the District nor the Underwriter is responsible for the selection or correctness of the CUSIP numbers set forth herein. ii

3 Use of Official Statement. This Official Statement is submitted with respect to the sale of the Bonds referred to herein and may not be reproduced or used, in whole or in part, for any other purpose. This Official Statement is not to be construed as a contract with the purchasers of the Bonds. No Securities Laws Registration. The Bonds have not been registered under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, in reliance upon exceptions therein for the issuance and sale of municipal securities. The Bonds have not been registered or qualified under the securities law of any state. No Unlawful Offers of Solicitations. This Official Statement does not constitute an offer to sell nor the solicitation of an offer to buy nor shall there be any sale of the Bonds by a person in any jurisdiction in which it is unlawful for such person to make an offer, solicitation or sale. No Offering Except by This Official Statement. No dealer, broker, salesperson or other person has been authorized by the District to give any information or to make any representations, other than those contained herein, and if given or made, such other information or representations must not be relied upon as having been authorized by the District. Information in Official Statement. The information set forth herein has been furnished by the District and other sources that are believed to be reliable, but is not guaranteed as to accuracy or completeness. The information and expressions of opinion herein are subject to change without notice and neither delivery of this Official Statement nor any sale made hereunder shall, under any circumstances, create any implication that there has been no change in the affairs of the District since the date hereof. Website. The District maintains a website; however, the information presented there is not a part of this Official Statement and should not be relied upon in making an investment decision with respect to the Bonds. Estimates and Projections. Certain statements included or incorporated by reference in this Official Statement constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, Section 21E of the Securities Exchange Act of 1934, as amended, and Section 27A of the Securities Act of 1933, as amended. Such statements are generally identifiable by the terminology used such as plan, expect, estimate, project, budget or similar words. The achievement of certain results or other expectations contained in such forward-looking statements involves known and unknown risks, uncertainties and other factors which may cause actual results, performance or achievements described to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. The District does not plan to issue any updates or revisions to those forward-looking statements if or when its expectations or events, conditions or circumstances on which such statements are based change. Statement of Underwriter. The Underwriter has reviewed the information in this Official Statement in accordance with, and as part of, its responsibilities under 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. Stabilization of and Changes to Offering Prices. In connection with the offering, the Underwriter may over-allot or effect transactions that stabilize or maintain the market price of the Bonds offered hereby at a level above that which might otherwise prevail in the open market. Such stabilizing, if commenced, may be discontinued at any time. The Underwriter may offer and sell the Bonds to certain dealers, institutional investors, banks or others at prices lower or higher than the public offering prices stated on the inside cover page hereof, and such public offering prices may be changed from time to time by the Underwriter. Bond Insurance. Assured Guaranty Municipal Corp. ( AGM ) makes no representation regarding the Bonds or the advisability of investing in the Bonds. In addition, AGM has not independently verified, makes no representation regarding, and does not accept any responsibility for the accuracy or completeness of this Official Statement or any information or disclosure contained herein, or omitted herefrom, other than with respect to the accuracy of the information regarding AGM, supplied by AGM and presented under the heading BOND INSURANCE and APPENDIX F SPECIMEN MUNICIPAL BOND INSURANCE POLICY. iii

4 $24,900,000 WASHINGTON UNIFIED SCHOOL DISTRICT (YOLO COUNTY, CALIFORNIA) GENERAL OBLIGATION BONDS, ELECTION OF 2014, SERIES 2017 DISTRICT BOARD OF EDUCATION Sarah Kirby-Gonzalez, President Coby Pizzotti, Vice-President Alicia Cruz, Clerk Norma Alcala, Trustee Jackie Thu-Huong Wong, Trustee DISTRICT ADMINISTRATION Linda C. Luna, Ed.D., Superintendent Scott A. Lantsberger, Assistant Superintendent of Business Services Amber Lee, Assistant Superintendent of Elementary Services Andy Parsons, Ed.D, Assistant Superintendent of Secondary Services Michael Reed, Assistant Superintendent of Human Resources Washington Unified School District 930 Westacre Road West Sacramento, California (916) MUNICIPAL ADVISOR Government Financial Strategies inc N Street, Suite 13 Sacramento, California (916) BOND COUNSEL Quint & Thimmig LLP 900 Larkspur Landing Circle, Suite 270 Larkspur, California (415) PAYING AGENT The Bank of New York Mellon Trust Company, N.A Bryan Street, 11 th Floor Dallas, Texas (214) iv

5 $24,900,000 WASHINGTON UNIFIED SCHOOL DISTRICT (YOLO COUNTY, CALIFORNIA) GENERAL OBLIGATION BONDS, ELECTION OF 2014, SERIES 2017 TABLE OF CONTENTS INTRODUCTORY STATEMENT... 1 General... 1 The District... 1 Purpose of Issue... 1 Authority for Issuance... 1 Description of the Bonds... 2 Source of Payment for the Bonds... 2 Bond Insurance... 2 Tax Matters... 2 Continuing Disclosure... 2 Professionals Involved... 3 Other Information... 3 THE BONDS... 3 Authority for Issuance... 3 General Obligation Bond Election of Form and Registration... 4 Payment of Principal and Interest... 4 Redemption Provisions... 5 Transfer and Exchange... 6 Defeasance... 6 Paying Agent... 7 PLAN OF FINANCE... 7 Application and Investment of Bond Proceeds... 7 Sources and Uses of Funds... 8 Investment of Moneys... 8 Debt Service Schedules... 9 SECURITY AND SOURCE OF PAYMENT Introduction Statutory Lien on Ad Valorem Tax Revenues (Senate Bill 222) Assessed Valuation of Property Flood Zone Tax Rates Tax Collections and Delinquencies Alternative Method of Tax Apportionment BOND INSURANCE Bond Insurance Policy Assured Guaranty Municipal Corp YOLO COUNTY TREASURY POOL Page # v

6 CITY AND COUNTY ECONOMIC PROFILE General Information Population Personal Income Labor Force and Employment Employment by Industry Major Employers Commercial Activity Construction Activity THE DISTRICT General Information The District Board of Education and Key Administrative Personnel Enrollment Charter Schools Pupil-to-Teacher Ratios Employee Relations Pension Plans Other Postemployment Benefits (OPEB) DISTRICT FINANCIAL INFORMATION Accounting Practices Budget and Financial Reporting Process Financial Statements Revenues Expenditures Short-Term Borrowings Capitalized Lease Obligations Long-Term Borrowings CONSTITUTIONAL AND STATUTORY PROVISIONS AFFECTING DISTRICT REVENUES AND EXPENDITURES Background Article XIIIA of the State Constitution Constitutional Protection For Owners of Municipal Securities Article XIIIB of the State Constitution Articles XIIIC and XIIID of the State Constitution Minimum Guarantee of State Funding for Education Community Redevelopment and Revitalization Limits on State Authority Over Local Tax Revenues Deferrals of Payments Owed to K-14 School Districts Temporary State Tax Increases Enacted Budget Required for Disbursement of State Funds State and School District Budgetary Reserves School Facilities Funding Impact of Future Legislation FUNDING OF PUBLIC EDUCATION IN THE STATE Sources of Revenue for Public Education The State Budget Process The State Budget The Proposed State Budget Future Budgets LEGAL MATTERS No Litigation Legal Opinion Limitations on Remedies; Amounts Held in the County Pool Tax Matters Legality for Investment in California vi

7 RATINGS MUNICIPAL ADVISOR INDEPENDENT AUDITOR UNDERWRITING AND INITIAL OFFERING PRICE CONTINUING DISCLOSURE ADDITIONAL INFORMATION APPENDIX A THE FINANCIAL STATEMENTS OF THE DISTRICT AS OF AND FOR THE YEAR ENDING JUNE 30, 2016 APPENDIX B FORM OF CONTINUING DISCLOSURE CERTIFICATE APPENDIX C FORM OF OPINION OF BOND COUNSEL APPENDIX D COUNTY OF YOLO INVESTMENT POLICY APPENDIX E DTC BOOK-ENTRY ONLY SYSTEM APPENDIX F SPECIMEN MUNICIPAL BOND INSURANCE POLICY vii

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9 OFFICIAL STATEMENT $24,900,000 WASHINGTON UNIFIED SCHOOL DISTRICT (YOLO COUNTY, CALIFORNIA) GENERAL OBLIGATION BONDS, ELECTION OF 2014, SERIES 2017 INTRODUCTORY STATEMENT General The purpose of this Official Statement, which includes the cover page, inside cover page, table of contents and attached appendices (the Official Statement ), is to provide certain information concerning the sale and delivery of the Washington Unified School District (Yolo County, California) General Obligation Bonds, Election of 2014, Series 2017 in the aggregate principal amount of $24,900,000 (the Bonds ). This INTRODUCTORY STATEMENT is not a summary of this Official Statement. It is only a brief description of and guide to this Official Statement. This INTRODUCTORY STATEMENT is qualified by more complete and detailed information contained in this entire Official Statement. A full review of this entire Official Statement should be made by a person interested in investing in the Bonds. The offering of the Bonds to potential investors is made only by means of this entire Official Statement. The District Washington Unified School District (the District ), a political subdivision of the State of California (the State ), is a unified school district established in The District encompasses approximately 23 square miles in the eastern portion of Yolo County (the County ), serving a population of approximately 19,350 people residing primarily in the City of West Sacramento (the City ). The District provides education to approximately 7,680 students in transitional kindergarten through twelfth grade. The District operates seven elementary schools, a comprehensive high school, an alternative high school, an independent study program, a charter school, an adult education program and preschool programs. The District is governed by a five-member Board of Education (the District Board ). See THE DISTRICT and DISTRICT FINANCIAL INFORMATION herein. Purpose of Issue The Bonds are being issued by the District to (i) finance the specific school facilities projects set forth in the ballot measure approved by the District s voters at an election held on November 4, 2014, and (ii) pay costs of issuance of the Bonds. See THE BONDS General Obligation Bond Election of 2014 herein. Authority for Issuance The Bonds are being issued by the District under and pursuant to the California Constitution (the State Constitution ), certain provisions of the California Government Code (the Government Code ) and the California Education Code (the Education Code ) and a resolution adopted by the District Board on April 27, 2017 (the Resolution )

10 Description of the Bonds The Bonds are being issued as fully registered bonds, without coupons, in book-entry form only. When delivered, the Bonds will be initially registered in the name of Cede & Co. as nominee of The Depository Trust Company ( DTC ). So long as Cede & Co. is the registered owner of the Bonds, payments of principal of and interest on the Bonds will be made by The Bank of New York Mellon Trust Company, N.A. (the Paying Agent ) to DTC for subsequent disbursement to DTC participants who will remit such payments to the beneficial owners of the Bonds (the Beneficial Owners ). See APPENDIX E DTC BOOK-ENTRY ONLY SYSTEM attached hereto. The Bonds are being issued as current interest bonds in denominations of $5,000 principal amount, or any integral multiple thereof. The Bonds are dated their date of delivery and mature on August 1 in each of the years and in the amounts set forth on the inside cover page hereof. Interest on the Bonds is computed on the basis of a 360-day year comprised of twelve 30-day months. Interest on the Bonds is payable semiannually on February 1 and August 1 of each year, commencing February 1, See THE BONDS Payment of Principal and Interest herein. The Bonds are subject to redemption prior to maturity. See THE BONDS Redemption Provisions herein. Source of Payment for the Bonds The Bonds are general obligation bonds of the District payable solely from ad valorem property taxes, which the Board of Supervisors of Yolo County is empowered and obligated to annually levy and collect, without limitation as to rate or amount, on all taxable property in the District (except for certain personal property which is taxable at limited rates) for the payment of principal of and interest on the Bonds. See SECURITY AND SOURCE OF PAYMENT herein. Bond Insurance The scheduled payment of principal of and interest on the Bonds when due will be guaranteed under an insurance policy (the Policy ) to be issued concurrently with the delivery of the Bonds by Assured Guaranty Municipal Corp. ( AGM ). See BOND INSURANCE herein and APPENDIX F SPECIMEN MUNICIPAL BOND INSURANCE POLICY attached hereto. Tax Matters In the opinion of Quint & Thimmig, LLP, Larkspur, California, Bond Counsel, subject to compliance by the District with certain covenants, under present law, interest on the Bonds is excludable from gross income of the owners thereof for federal income tax purposes and is not included as an item of tax preference in computing the federal alternative minimum tax for individuals and corporations, but such interest is taken into account in computing an adjustment used in determining the federal alternative minimum tax for certain corporations. In addition, in the opinion of Bond Counsel, interest on the Bonds is exempt from personal income taxation imposed by the State of California. See LEGAL MATTERS Tax Matters herein. A complete copy of the proposed opinion of Bond Counsel is included with this Official Statement. See APPENDIX C FORM OF OPINION OF BOND COUNSEL attached hereto. Continuing Disclosure The District will covenant for the benefit of the Registered Owners (as hereinafter defined) and Beneficial Owners to make available certain financial information and operating data relating to the District and to provide notices of the occurrence of certain enumerated events in compliance with Securities and Exchange Commission (the SEC ) Rule 15c2-12(b)(5). The specific nature of the information to be made available and of the notices of certain enumerated events are set forth in APPENDIX B FORM OF CONTINUING DISCLOSURE CERTIFICATE attached hereto. See also CONTINUING DISCLOSURE herein

11 Professionals Involved Government Financial Strategies inc., Sacramento, California, has acted as municipal advisor (the Municipal Advisor ) to the District with respect to the sale and delivery of the Bonds. See MUNICIPAL ADVISOR herein. Certain proceedings in connection with the sale and delivery of the Bonds are subject to the approving legal opinion of Quint & Thimmig LLP as Bond Counsel. The Bank of New York Mellon Trust Company, N.A. will act as paying agent with respect to the Bonds. Quint & Thimmig LLP and The Bank of New York Mellon Trust Company, N.A. will receive compensation contingent upon the sale and delivery of the Bonds. Other Information This Official Statement may be considered current only as of its date that has been made a part of the cover page hereof, and the information contained herein is subject to change. A description of the Bonds and the District, together with summaries of certain provisions of the Resolution and other legal documents related to the Bonds (collectively, the Legal Documents ) are included in this Official Statement. Such summaries do not purport to be comprehensive or definitive, and all references made herein to the Legal Documents approved by the District are qualified in their entirety by reference to such document, and all references herein to the Bonds are qualified in their entirety by reference to the form thereof included in the Legal Documents. Information concerning this Official Statement, the Bonds, the District, the Legal Documents or any other information relating to the sale and delivery of the Bonds is available for public inspection and may be obtained by contacting Washington Unified School District, 930 Westacre Road, West Sacramento, California 95691, (916) , Attention: Assistant Superintendent of Business Services, or by contacting the Municipal Advisor, Government Financial Strategies inc., 1228 N Street, Suite 13, Sacramento, California , telephone (916) THE BONDS Authority for Issuance The Bonds are being issued by the District under and pursuant to the provisions of Article XIIIA, Section 1 and Article XVI, Section 18 of the State Constitution, the provisions of Government Code Section et seq. and all laws amendatory to or supplemental thereof, the provisions of Education Code Section et seq. and all laws amendatory to or supplemental thereof, and pursuant to the provisions of the Resolution. The District may incur bonded indebtedness upon the vote of 55 percent or more of the qualified electors of the District voting on the proposition pursuant to Article XIIIA, subject to the debt limitations set forth in Article XVI of the State Constitution and the Education Code. General Obligation Bond Election of 2014 Pursuant to provisions of State law, the District Board adopted a resolution calling for an election to authorize the issuance of $49.8 million in aggregate principal amount of general obligation bonds for authorized school purposes. On November 4, 2014, at an election duly held pursuant to the law (the 2014 Election ), more than 55 percent of the qualified voters within the boundaries of the District voted to approve Measure V as follows: To protect quality education locally with funding that cannot be taken by the State, shall Washington Unified School District reconstruct, renovate and repair aging elementary school classrooms and other school facilities, remove dry rot/mold and replace leaking roofs/windows, make classrooms accessible for disabled students; and provide up-to-date classrooms, science/computer labs, career technology education facilities by issuing $49.8 million dollars in bonds at legal rates, with independent oversight, with no money for administrators and with all funds staying local? - 3 -

12 The Yolo County Registrar of Voters certified the results of the election as follows: General Obligation Bond Election of 2014 Washington Unified School District Yes Votes No Votes 6,118 (67.4%) 2,954 (32.6%) Source: Yolo County Registrar of Voters. The Bonds represent the second series of bonds to be issued by the District under the authorization of the 2014 Election. Upon the issuance of the Bonds, the District will have no unissued authorization remaining under the 2014 Election. See DISTRICT FINANCIAL INFORMATION Long-Term Borrowings herein. Form and Registration The Bonds are being issued as fully registered bonds, without coupons, in book-entry form only. Pursuant to the Resolution, the Paying Agent will keep and maintain for and on behalf of the District, at the principal office of the Paying Agent, registration books (the Bond Register ) for recording the owners of the Bonds (the Registered Owners ), the transfer and exchange of the Bonds, and the payment of the principal of and interest on the Bonds to the Registered Owners. The Bonds are initially issued and registered in the name of Cede & Co., as nominee of DTC acting as securities depository for the Bonds. Purchases of the Bonds by Beneficial Owners will be made by or through a DTC participant, and ownership interests in the Bonds will be recorded as entries on the books of said participants. So long as Cede & Co. is the registered owner of the Bonds, payments of principal of and interest on the Bonds will be made by the Paying Agent to DTC for subsequent disbursement to Beneficial Owners by or through a DTC participant. Except in the event that use of this bookentry system is discontinued for the Bonds, Beneficial Owners will not receive physical certificates representing their ownership interests in the Bonds. See APPENDIX E DTC BOOK-ENTRY ONLY SYSTEM attached hereto. So long as the Bonds are registered in the name of Cede & Co., as nominee for DTC, references in this Official Statement to the Registered Owners means Cede & Co., and does not mean the purchasers or Beneficial Owners of the Bonds. Payment of Principal and Interest The Bonds are dated their date of delivery and mature on August 1 in each of the years and in the amounts set forth on the inside cover page hereof. The Bonds are issued in denominations of $5,000 principal amount, or any integral multiple thereof. Interest on the Bonds is computed from their dated date on the basis of a 360-day year comprised of twelve 30-day months. Interest on the Bonds is payable semiannually on February 1 and August 1 of each year (each, an Interest Payment Date ), commencing February 1, 2018, at the annual interest rates shown on the inside cover pages hereof. Each Bond bears interest from the Interest Payment Date next preceding the date of registration and authentication thereof, unless (i) it is registered and authenticated as of an Interest Payment Date, in which event it bears interest from such date, or (ii) it is registered and authenticated prior to an Interest Payment Date and after the close of business the fifteenth day of the month preceding such Interest Payment Date (the Record Date ), in which event it bears interest from such Interest Payment Date, or (iii) it is registered and authenticated prior to January 15, 2018, in which event it bears interest from its date of delivery, provided, however, that if at the time of authentication of a Bond, interest is in default thereon, such Bond bears interest from the Interest Payment Date to which interest has previously been paid or made available for payment. The principal of and interest on the Bonds is payable in lawful money of the United States of America by wire transfer on each payment date to Cede & Co., so long as Cede & Co. is the sole Registered Owner. In the event the book-entry system is no longer in use, principal will be payable to the Registered Owner upon surrender thereof at maturity or earlier redemption at the principal office of the Paying Agent, and interest is payable by check of the Paying Agent mailed via first-class mail to the Registered Owner thereof at such Registered Owner s address as it appears on the Bond Register on each Record Date, or at - 4 -

13 such other address as the Registered Owner may have filed with the Paying Agent for that purpose; provided however, that payment of interest may be by wire transfer in immediately available funds to an account in the United States of America to any Registered Owner of Bonds in the aggregate principal amount of $1,000,000 or more who furnishes written wire instructions to the Paying Agent at least five days before the applicable Record Date. Redemption Provisions Optional Redemption. The Bonds maturing on or before August 1, 2026 are not subject to optional redemption prior to their respective maturity dates. The Bonds maturing on or after August 1, 2027, are subject to redemption prior to their respective stated maturities, at the option of the District, from any source of available funds, as a whole or in part on any date on or after August 1, 2026, at a redemption price equal to the principal amount of the Bonds called for redemption, plus accrued interest to the date fixed for redemption, without premium. Mandatory Sinking Fund Redemption. The Bond maturing by its term on August 1, 2031 (the 2031 Term Bond ) is subject to mandatory redemption prior to its stated maturity, in part, by lot, from mandatory sinking fund payments on August 1 in the years, and in the amounts, as set forth in the following table, at a redemption price equal to 100 percent of the principal amount thereof to be redeemed (without premium), together with interest accrued thereon to the date fixed for redemption; provided, however, that if some but not all of the 2031 Term Bond has been optionally redeemed, the aggregate principal amount of the 2031 Term Bond to be redeemed will be reduced as designated pursuant to written notice filed by the District with the Paying Agent or, if not so designated, on a pro rata basis in integral multiples of $5,000. Mandatory Sinking Fund Redemption Schedule 2031 Term Bond Redemption Date (August 1) Principal Amount 2030 $805, ,000 1 Indicates maturity of the $1,665, Term Bond. Selection of Bonds for Redemption. Whenever provision is made for the optional redemption of Bonds of more than one maturity, the Bonds to be redeemed will be selected by the District evidenced by a written request of the District filed with the Paying Agent or, absent such selection by the District, on a pro rata basis among the maturities subject to redemption; and in each case, the Paying Agent will select the Bonds to be redeemed within any maturity by lot in any manner which the Paying Agent in its sole discretion deems appropriate and fair. For purposes of such selection, all Bonds will be deemed to be comprised of separate $5,000 portions and such portions will be treated as separate Bonds, which may be separately redeemed. Partial Redemption of Bonds. In the event only a portion of any Bond is called for redemption, then upon surrender of such Bond, the District will execute and the Paying Agent will authenticate and deliver to the Registered Owner thereof, at the expense of the District, a new Bond or Bonds of the same maturity date, of authorized denominations in aggregate principal amount equal to the unredeemed portion of the Bond to be redeemed. Bonds need not be presented for mandatory sinking fund redemptions. Notice of Redemption. The Paying Agent is obligated to, on behalf and at the expense of the District, mail, by first class mail at least 30 but not more than 60 days prior to the redemption date, notice of any redemption to (i) the respective Registered Owners of any Bonds designated for redemption at their respective addresses appearing on the Bond Register, and (ii) DTC or a replacement municipal registered securities depository and the Electronic Municipal Market Access system ( EMMA ) operated by the Municipal Securities Rulemaking Board (the MSRB ) or a replacement national information service. Neither failure to receive such notice nor any defect in any notice so mailed will affect the sufficiency of the proceedings for the redemption of such Bonds nor the cessation of the accrual of interest thereon. Such notice will state the date of the notice, the redemption date, the redemption place and the redemption price and will designate the CUSIP numbers, the Bond numbers and the maturity or maturities (in the event of redemption of all of the Bonds of such maturity or maturities in whole) of the Bonds to be redeemed, and will require that such Bonds be surrendered at the principal office of the Paying Agent for - 5 -

14 redemption at the redemption price, giving notice also that further interest on such Bonds will not accrue from and after the redemption date. Notwithstanding the foregoing, in the case of any optional redemption of the Bonds, the notice of redemption will state that the redemption is conditioned upon receipt by the Paying Agent of sufficient moneys to redeem the Bonds on the scheduled redemption date, and that the optional redemption shall not occur if, by no later than the scheduled redemption date, sufficient moneys to redeem the Bonds have not been deposited with the Paying Agent. In the event that the Paying Agent does not receive sufficient funds by the scheduled optional redemption date to so redeem the Bonds to be optionally redeemed, the Paying Agent will send written notice to the Registered Owners, to DTC or a replacement municipal registered securities depository and to one or more national information services that disseminate securities redemption notices to the effect that the redemption did not occur as anticipated, and the Bonds for which notice of optional redemption was given shall remain outstanding for all purposes. Effect of Redemption. From and after the date fixed for redemption, if funds available for the payment of the principal of and interest, and premium, if any, on the Bonds so called for redemption shall have been duly provided, such Bonds so called shall cease to be entitled to any benefit under the Resolution other than the right to receive payment of the redemption price, and no interest shall accrue thereon from and after the redemption date specified in such notice. Transfer and Exchange If the book-entry system as described herein is no longer used with respect to the Bonds, the provisions in the Resolution summarized below will govern the transfer and exchange of the Bonds. See APPENDIX E DTC BOOK-ENTRY ONLY SYSTEM attached hereto. Any Bond may be transferred upon the Bond Register by the person in whose name it is registered, in person or by his or her duly authorized attorney, upon surrender of such Bond for cancellation at the principal office of the Paying Agent, accompanied by delivery of a written instrument of transfer in a form approved by the Paying Agent, duly executed. Whenever any Bond or Bonds is surrendered for transfer, the District will execute and the Paying Agent will authenticate and deliver a new Bond or Bonds, for like aggregate principal amount. Bonds may be exchanged at the principal office of the Paying Agent for a like aggregate principal amount of Bonds of authorized denominations and of the same series and maturity. All fees and costs of any transfer or exchange of Bonds shall be paid by the Registered Owner requesting such transfer or exchange. The Paying Agent is not required to transfer or exchange any Bonds (i) 15 days prior to the date established by the Paying Agent for selection of Bonds for redemption or (ii) with respect to a Bond after such Bond has been selected for redemption. Defeasance Discharge of Resolution. Bonds may be paid by the District in any one or more of the following ways, provided that the District also pays or causes to be paid any other sums payable under the Resolution by the District: (i) by paying or causing to be paid the principal of and interest on such Bonds, as and when the same become due and payable; (ii) by depositing with an escrow agent, in trust, at or before maturity, money or securities in the necessary amount, including investment earnings thereon, to pay or redeem such Bonds; or (iii) by delivering to the Paying Agent, for cancellation by it, such Bonds. If the District pays all Bonds as described above, then, at the election of the District, and notwithstanding that any Bonds may not have been surrendered for payment, the Resolution and all covenants, agreements and other obligations of the District under the Resolution will cease, terminate, become void and be completely discharged and satisfied, except only as provided in the Resolution. Discharge of Liability on Bonds. Upon the deposit in trust, at or before maturity, of money or securities in the necessary amount to pay or redeem any outstanding Bond, provided that, if such Bond is to be redeemed prior to maturity, notice of such redemption will have been given, then all liability of the District in respect of such Bond will cease and be completely discharged, except that thereafter the Registered Owner thereof will be entitled to payment of the principal of and interest on or redemption price of such Bond, but only out of such money or securities deposited in trust

15 Deposit of Moneys or Securities with Paying Agent. Whenever in the Resolution it is provided or permitted that there be deposited with or held in trust with an escrow holder money or securities in the necessary amount to pay or redeem any Bonds, the money or securities so to be deposited or held may include money or securities held by the Paying Agent in the funds and accounts established pursuant to the Resolution and shall be: (i) lawful money of the United States of America in an amount equal to the principal amount of such Bonds and all unpaid interest thereon to maturity, except that, in the case of Bonds which are to be redeemed prior to maturity and in respect of which notice of such redemption shall have been given as provided in the Resolution or provision satisfactory to the Paying Agent will have been made for the giving of such notice, the amount to be deposited or held will be the principal amount or redemption price of such Bonds and all unpaid interest thereon to the redemption date; or (ii) federal securities (not callable by the issuer thereof prior to maturity), the principal of and interest on which when due, in the opinion of a certified public accountant delivered to the District, will provide money sufficient to pay the principal or redemption price of and all unpaid interest to maturity, or to the redemption date, as the case may be, on the Bonds to be paid or redeemed, as such principal or redemption price and interest become due, provided that, in the case of Bonds which are to be redeemed prior to the maturity thereof, notice of such redemption will have been given as provided in the Resolution or provision satisfactory to the Paying Agent shall have been made for the giving of such notice; provided, in each case, that the Paying Agent shall have been irrevocably instructed (by the terms of the Resolution or by request of the District) to apply such money to the payment of such principal or redemption price and interest with respect to such Bonds. Payment of Bonds After Discharge of Resolution. Notwithstanding any provisions of the Resolution, any moneys held by an escrow holder in trust for the payment of the principal or redemption price of, or interest on, any Bonds and remaining unclaimed for one year after the principal of all of the Bonds has become due and payable (whether at maturity or upon call for redemption or by acceleration as provided in the Resolution), if such moneys were so held at such date, or one year after the date of deposit of such moneys if deposited after said date when all of the Bonds became due and payable, shall, upon request of the District, be repaid to the District free from the trusts created by the Resolution, and all liability of the escrow holder with respect to such moneys shall thereupon cease; provided, however, that before the repayment of such moneys to the District as aforesaid, the Paying Agent may (at the cost of the District) first mail to the Registered Owners of all Bonds which have not been paid at the addresses shown on the Bond Register a notice in such form as may be deemed appropriate by the Paying Agent, with respect to the Bonds so payable and not presented and with respect to the provisions relating to the repayment to the District of the moneys held for the payment thereof. Paying Agent The Bank of New York Mellon Trust Company, N.A. will act as the transfer agent, bond registrar, authenticating agent and paying agent for the Bonds. As long as DTC is the registered owner of the Bonds and DTC s book-entry method is used for the Bonds, the Paying Agent will send any notice of redemption or other notices to owners only to DTC. Any failure of DTC to advise any DTC participant or of any DTC participant to notify any Beneficial Owner of any such notice and its content or effect will not effect the validity or sufficiency of the proceedings relating to the redemption of the Bonds called for redemption or of any other action premised on such notice. The Paying Agent, the District and the Underwriter have no responsibility or liability for any aspects of the records relating to, or payments made on account of, beneficial ownership, or for maintaining, supervising, or reviewing any records relating to beneficial ownership of interests in the Bonds. PLAN OF FINANCE Application and Investment of Bond Proceeds A portion of the proceeds of the sale of the Bonds, exclusive of any premium, will be transferred to the Yolo County Chief Financial Officer (the Chief Financial Officer ) for deposit in the Washington Unified School District, General Obligation Bonds, Election of 2014, Series 2017 Building Fund (the Building Fund ) to be created and established in the Yolo County Treasury (the County Treasury ) pursuant to Education Code Section 15146(g). Moneys deposited in the Building Fund will be used solely for the purpose for which the Bonds are being issued. Interest earned on moneys held in the Building Fund will be retained in the Building Fund. Any proceeds of the sale of the Bonds deposited in the Building Fund not needed for the purposes of the Bonds will be transferred to the Washington Unified School District, General Obligation Bonds Tax Collection Fund (the Tax Collection Fund ) maintained by the Chief Financial Officer in the County Treasury pursuant to Education Code Section to be applied to the payment of principal of and interest on the Bonds

16 A portion of the proceeds of the sale of the Bonds, exclusive of any premium, will be retained by the Paying Agent and deposited into the Washington Unified School District General Obligation Bonds, Election of 2014, Series 2017 Costs of Issuance Fund (the Costs of Issuance Fund ) to be created and established with the Paying Agent, to pay costs associated with the issuance of the Bonds. Any proceeds of the sale of the Bonds deposited in the Costs of Issuance Fund not needed to pay costs of issuance of the Bonds will be transferred by the Paying Agent to the Chief Financial Officer for deposit in the Tax Collection Fund. The premium, if any, received by the District from the sale of the Bonds will be transferred to the Chief Financial Officer for deposit in the Tax Collection Fund. Moneys deposited in the Tax Collection Fund will be used solely for the payment of principal of and interest on the general obligation bonds of the District. Interest earned on moneys held in the Tax Collection Fund will be retained in the Tax Collection Fund. The County is empowered and obligated to levy ad valorem taxes upon all property subject to taxation by the District, without limitation as to rate or amount (except as to certain personal property which is taxable at limited rates), in order to provide sufficient funds for repayment of principal of and interest on the Bonds when due, and the proceeds of such tax, when collected, will be placed in the Tax Collection Fund. Any moneys remaining in the Tax Collection Fund after the principal of and interest on the Bonds have been paid will be used to pay other general obligation bonds of the District or, if there are no other general obligation bonds of the District outstanding, will be transferred to the general fund of the District (the General Fund ) pursuant to Education Code Section Sources and Uses of Funds The sources and uses of funds in connection with the sale and delivery of the Bonds are set forth in the following table. Sources and Uses of Funds General Obligation Bonds, Election of 2014, Series 2017 SOURCES OF FUNDS Par Amount of Bonds $24,900, Net Original Issue Premium 727, TOTAL SOURCES OF FUNDS $25,627, USES OF FUNDS Building Fund $24,777, Tax Collection Fund 126, Costs of Issuance Fund 1 122, Underwriter s Discount 2 600, TOTAL USES OF FUNDS $25,627, The Costs of Issuance Fund will be used to pay costs of issuance of the Bonds including fees and expenses of Bond Counsel, the Municipal Advisor, the Paying Agent, the ratings fee and certain other expenses related to the issuance of the Bonds. 2 Includes the premium for the Policy. Investment of Moneys Under State law, the District is generally required to deposit all moneys received from any source into the County Treasury to be held on behalf of the District. All funds held by the Chief Financial Officer in the Building Fund and the Tax Collection Fund are expected to be invested at the sole discretion of the Chief Financial Officer, on behalf of the District, in such investments as are authorized by Government Code Sections , and and by the County of Yolo Investment Policy (the County Investment Policy ) as either may be amended or supplemented from time to time. See YOLO COUNTY TREASURY POOL herein and APPENDIX D COUNTY OF YOLO INVESTMENT POLICY attached hereto for a description of the permitted investments under the County Investment Policy

17 Debt Service Schedules Scheduled debt service on the Bonds (without regard to optional redemption) is shown in the following table. Debt Service Schedule General Obligation Bonds, Election of 2014, Series 2017 Date Principal Interest Semiannual Debt Service Annual Debt Service February 1, $535, $535, August 1, 2018 $415, , , $1,400, February 1, , , August 1, , , , ,309, February 1, , , August 1, , , , ,138, February 1, , , August 1, , , , ,174, February 1, , , August 1, , , , ,137, February 1, , , August 1, , , , ,167, February 1, , , August 1, , , , ,199, February 1, , , August 1, , , , ,234, February 1, , , August 1, , , , ,271, February 1, , , August 1, , , , ,345, February 1, , , August 1, , , ,017, ,364, February 1, , , August 1, , , ,065, ,395, February 1, , , August 1, , , ,117, ,429, February 1, , , August 1, , , ,159, ,459, February 1, , , August 1, , , ,202, ,489, February 1, , , August 1, , , ,243, ,516, February 1, , , August 1, ,035, , ,293, ,552, February 1, , , August 1, ,100, , ,343, ,586, February 1, , , August 1, ,165, , ,391, ,617, February 1, , , August 1, ,240, , ,447, ,655, February 1, , , August 1, ,310, , ,497, ,685, February 1, , , August 1, ,385, , ,551, ,717, February 1, , , August 1, ,470, , ,613, ,757, February 1, , , August 1, ,465, , ,585, ,705, February 1, , , August 1, ,650, , ,711, ,773, Total $24,900, $15,186, $40,086, $40,086, Indicates mandatory sinking fund payments of the $1,665, Term Bond

18 Upon issuance of the Bonds, scheduled debt service on the District s outstanding general obligation bond debt (without regard to optional redemption) is shown in the following table. See DISTRICT FINANCIAL INFORMATION Long-Term Borrowings for more information on the District s outstanding bonded debt. Outstanding General Obligation Bond Debt Service Washington Unified School District Year Ended June 30 Outstanding General Obligation Bonds General Obligation Bonds, Election of 2014, Series 2017 Total General Obligation Bond Debt Service 2018 $6,482,400 $535,372 $7,017, ,385,925 1,305,250 6,691, ,633,025 1,299,125 6,932, ,139,300 1,131,375 7,270, ,461,950 1,166,125 7,628, ,939,700 1,130,125 8,069, ,969,850 1,158,500 9,128, ,403,075 1,189,500 9,592, ,899,300 1,222,875 10,122, ,806,600 1,258,375 10,064, ,251,700 1,329,875 10,581, ,783,650 1,347,625 11,131, ,321,525 1,377,500 11,699, ,240,981 1,417,050 10,658, ,751,588 1,447,075 11,198, ,718,619 1,475,450 3,194, ,771,738 1,502,175 3,273, ,822,300 1,537,100 3,359, ,875,500 1,569,388 3,444, ,929,200 1,598,997 3,528, ,988,100 1,635,644 3,623, ,051,800 1,664,206 3,716, ,115,000 1,695,413 3,810, ,172,600 1,734,019 3,906, ,646,659 3,646, ,711,594 3,711,594 SECURITY AND SOURCE OF PAYMENT Introduction The Bonds are general obligation bonds of the District, payable solely from ad valorem property taxes levied and collected by Yolo County for the payment of principal of and interest on the Bonds. The Board of Supervisors of Yolo County (the County Board ) is empowered and is obligated to levy ad valorem taxes upon all property subject to taxation by the District, without limitation as to rate or amount (except as to certain personal property which is taxable at limited rates) in order to provide sufficient funds for repayment of principal of and interest on the Bonds when due. Although the County is obligated to levy and collect the ad valorem tax for the payment of the Bonds, the Bonds are not a debt of the County. The proceeds of such ad valorem tax, when collected, will be placed in the Tax Collection Fund, which ad valorem taxes, together with the amounts on deposit in the Tax Collection Fund, are irrevocably pledged for the payment of principal of and interest on the Bonds when and as the same fall due. The County will levy such ad valorem tax in accordance with Education Code Section et seq. and cause the proceeds from such levy to be deposited to the Tax Collection Fund to pay the principal of and interest on the Bonds when due

19 Various officers of the County are responsible for the performance of each function in the property taxation system. Property tax revenues result from the application of the appropriate tax rate to the total net assessed value of taxable property in the District. All property, including real, personal and intangible property, is taxable, unless granted an exemption by the State Constitution or United States law. Under the State Constitution, exempt classes of property include household and personal effects, intangible personal property (such as bank accounts, stocks and bonds), business inventories, and property used for religious, hospital, scientific and charitable purposes. The California Legislature (the State Legislature ) may create additional exemptions for personal property, but not for real property. Taxes on property located in a school district with boundaries extending into more than one county are administered separately by each county in which the property is located (the District is located solely in the County). Taxes on real property located within the District are assessed and collected by the County in the same manner, at the same time, and in the same installments as other ad valorem taxes on real property located in the County. In addition to general obligation bonds issued by the District, other entities with jurisdiction in or overlapping with the District may issue debt payable from ad valorem taxes also levied on parcels in the District. Such taxes have the same priority, become delinquent at the same times and in the same proportionate amounts, and bear the same proportionate penalties and interest after delinquency as ad valorem taxes levied for the payment of the Bonds and other general obligation bonds of the District. In no event is the District obligated to pay principal of and interest and redemption premium, if any, on the Bonds from any source of funds other than ad valorem taxes. However, nothing in the Resolution prevents the District from making advances of its moneys, howsoever derived, to any use or purpose permitted by law. Statutory Lien on Ad Valorem Tax Revenues (Senate Bill 222) All general obligation bonds issued and sold by or on behalf of a local agency in the State, including the Bonds, are secured by a statutory lien on all revenues received pursuant to the levy and collection of the tax pursuant to Education Code Section and Government Code Section 53515, which became effective as of January 1, 2016 pursuant to Senate Bill 222. The lien automatically arises without the need for any action or authorization by the local agency or its governing board and is valid and binding from the time the bonds are executed and delivered. In addition, the revenues received pursuant to the levy and collection of the tax will be immediately subject to the lien, and the lien will automatically attach to the revenues and be effective, binding, and enforceable against the local agency, such as the District, as applicable, its successor, transferees, and creditors, and all others asserting rights therein, irrespective of whether those parties have notice of the lien and without the need for physical delivery, recordation, filing, or further tax. Assessed Valuation of Property The county assessor of Yolo County (the County Assessor ) must annually assess all taxable property in the County (except for utility property, assessed by the State) to the person, business or legal entity owning, claiming, possessing or controlling the property on January 1, the lien date. Property assessed by the County Assessor is subject to the reappraisal provisions set forth in the State Constitution. See CONSTITUTIONAL AND STATUTORY PROVISIONS AFFECTING DISTRICT REVENUES AND EXPENDITURES Article XIIIA of the State Constitution herein. The duties of the County Assessor are to discover all assessable property, to inventory and list all taxable property, to value the property, and to enroll the property on the local assessment roll. Locally assessed taxable property is classified as either secured or unsecured and is listed accordingly on separate parts of the assessment roll. The secured roll contains real property sufficient, in the opinion of the County Assessor, to secure the payment of the taxes as a lien on real property. All other property is unsecured and assessed on the unsecured roll. The District can make no predictions as to the changes in assessed values that might result from pending or future appeals of assessed valuation by taxpayers or temporary reductions in assessed valuation allowed under the State Constitution. Any reduction in aggregate District assessed valuation will cause the tax rate necessary to repay the Bonds to increase accordingly. Any refund of paid taxes triggered by a successful assessment appeal will be debited against all taxing agencies receiving tax revenues, including the District. The secured roll also includes certain utility property, entered on the utility roll, located in the County but assessed by the State Board of Equalization (the SBE ) rather than the County Assessor. Such property includes property owned or used by State-regulated transportation and communications utilities such as railways, telephone and telegraph companies, companies transmitting or selling gas or electricity, and pipelines, flumes, canals and aqueducts lying within two or more counties. Property assessed by the SBE is not subject to the provisions of Proposition 13 (1978) and is annually reappraised at its market value as of January 1 and then allocated by formula among all the taxing jurisdictions in the County, including the

20 District. The growth or decline in the assessed valuation of utility property is shared by all jurisdictions in the County. The District can make no predictions regarding the impact of the reorganization of regulated utilities and the transfer of electricitygenerating property to non-utility companies on the amount of tax revenue collected. In general, the transfer of State-assessed property located in the District to non-utility companies will increase the assessed value of property in the District, since the property s value will no longer be divided among taxing jurisdictions in the County; the transfer of property located and taxed in the District to a State-assessed utility will, in general, reduce the assessed value in the District, as the value is shared among the other jurisdictions in the County. The greater the total assessed value of all taxable property in the District, the lower the tax rate necessary to generate taxes sufficient to pay scheduled debt service on the Bonds. Shown in the following table are ten years of the District s historical assessed valuation. Total secured assessed values include net local secured, secured homeowner exemption and utility values. Total unsecured assessed values include net local unsecured and unsecured homeowner exemption values. Historical Total Secured and Unsecured Assessed Valuation Washington Unified School District Year Ended Total Secured Total Unsecured Total Percentage June 30 Assessed Value Assessed Value Assessed Value Change 2008 $5,214,868,320 $423,528,597 $5,638,396, ,365,182, ,038,889 5,793,221, % ,063,945, ,842,448 5,563,788,146 (3.96) ,934,268, ,808,486 5,421,077,416 (2.56) ,824,822, ,792,374 5,290,615,013 (2.41) ,681,915, ,814,619 5,127,730,053 (3.08) ,866,818, ,716,234 5,321,534, ,238,018, ,754,971 5,697,773, ,644,130, ,558,672 6,110,689, ,963,723, ,968,951 6,422,692, Source: Yolo County Assessor. The District may not issue bonds in excess of 2.5 percent of the assessed valuation of taxable property within its boundaries. The District s gross bonding capacity in fiscal year is approximately $160.6 million. Upon issuance of the Bonds, the District will have remaining bonding capacity of approximately $62.5 million

21 Shown in the following table is a distribution of taxable real property located in the District by principal purpose for which the land is used along with the local secured assessed valuation (excludes homeowners exemption) and number of parcels for each use for fiscal year Assessed Valuation and Parcels by Land Use Washington Unified School District Percent of Number of Percent of Assessed Valuation 1 Total Parcels Total Non-Residential: Agricultural/Rural $82,141, % % Commercial/Office 907,545, Vacant Commercial 67,691, Industrial 1,289,013, Vacant Industrial 157,057, Recreational 55,576, Government/Social/Institutional 6,726, Subtotal Non-Residential $2,565,752, % 1, % Residential: Single Family Residence $2,917,914, % 12, % Condominium/Townhouse 134,457, Mobile Home 14,674, Mobile Home Park 1,329, Residential Units 71,029, Residential Units/Apartments 208,341, Miscellaneous Residential 4,125, Vacant Residential 44,151, Subtotal Residential $3,396,023, % 14, % Total $5,961,776, % 16, % 1 Local secured assessed valuation, excluding tax-exempt property. Source: California Municipal Statistics, Inc. Flood Zone Due to new, stricter standards imposed by the State and federal government, the Federal Emergency Management Agency ( FEMA ) is in the process of re-evaluating the level of protection provided by all existing flood protection systems in the country. Most of the property within the District is currently designated as Flood Zone X, described as areas of 500-year flood, areas of 100-year flood with average depths of less than one foot with drainage areas less than one square mile, and areas protected by levees from 100-year flood. Within this flood zone designation, there is not a statutory requirement for flood insurance. Additionally, new construction and expansion of existing structures are allowed within this flood zone designation without being subject to onerous elevation and flood-proofing requirements. West Sacramento Area Flood Control Agency ( WSAFCA ) officials believe that FEMA will eventually change the Flood Zone X designation in the City (and therefore the District) to a Special Flood Hazard Area as a result of the new, stricter standards. If the City is re-mapped into a Special Flood Hazard Area as a result of new federal guidelines, as expected, flood insurance would become mandatory for all property owners with federally guaranteed mortgage loans, and new construction and expansion of existing structures could be subject to onerous elevation and flood-proofing requirements. A construction project, begun in 2007, is underway by WSAFCA to construct improvements needed to provide 200-year flood protection along the levees protecting the City by It is the stated goal of the WSAFCA to complete as much levee work as possible before FEMA begins its re-mapping of the City

22 If substantial flooding occurs before the completion of levee improvements, there could be substantial delinquencies in the payment of ad valorem taxes within the District. Tax Rates The State Constitution permits the levy of an ad valorem tax on taxable property not to exceed one percent of the property s full cash value, plus the amount necessary to make annual payments due on general obligation bonds or other indebtedness incurred prior to July 1, 1978, any bonded indebtedness for the acquisition or improvement or real property approved by a two-thirds majority of voters on or after July 1, 1978, and certain bonded indebtedness for school facilities approved by 55 percent of the voters. The Chief Financial Officer computes the additional rate of tax necessary to pay such scheduled debt service and presents the tax rates for all taxing jurisdictions in Yolo County to the County Board. The tax rate necessary to pay debt service in a given year largely depends on the net assessed value of taxable property in that year. The net assessed value of taxable property may be affected by several factors, such as a general market decline in land values, reclassification of property to a class exempt from taxation, such as property owned by State and local agencies, or property used for certain educational, hospital, charitable or religious purposes, or the destruction of taxable property caused by natural or manmade disaster, such as earthquake, flood, fire, drought, toxic dumping, etc. Any of these instances could cause a reduction in the net assessed value of taxable property within the District, necessitating a corresponding increase in the annual tax rate to be levied to pay the principal of and interest on the Bonds. Issuance of additional authorized bonds in the future might also cause the tax rate to increase. One factor in the ability of taxpayers to pay additional taxes for general obligation bonds is the cumulative rate of tax. The following table shows ad valorem property tax rates per $100 of assessed value for the last five years in a typical tax rate area of the District (TRA 4-005). The fiscal year assessed valuation of TRA is $2,293,314,390, approximately percent of the total assessed value of taxable property in the District. Typical Total Tax Rates per $100 of Assessed Valuation TRA Washington Unified School District Fiscal Year Fiscal Year Fiscal Year Fiscal Year Fiscal Year General $ $ $ $ $ Washington Unified School District Los Rios Community College District Total $ $ $ $ $ Source: California Municipal Statistics, Inc. The more property (by assessed value) that is owned by a single taxpayer, the more tax collections are exposed to weakness in the taxpayer s financial situation and their ability or willingness to pay property taxes. In fiscal year , no single taxpayer owned more than 2.01 percent of the total secured taxable property in the District. However, each taxpayer listed is a unique name on the tax rolls. The District cannot determine from assessment records whether individual persons, corporations or other organizations are liable for tax payments with respect to multiple properties held in various names that in aggregate may be larger than is suggested by the list of largest taxpayers identified in the following table

23 The 20 taxpayers in the District with the greatest combined secured assessed valuation of taxable property on the fiscal year tax roll own property that comprises percent of the local assessed valuation of secured property in the District. These taxpayers, ranked by aggregate assessed value of taxable property as shown on the fiscal year secured tax roll and the amount of each owner s assessed valuation for all taxing jurisdictions within the District are shown in the following table. Largest Taxpayers Washington Unified School District Percent of Property Owner Primary Land Use Assessed Valuation Total 1 1. MSHQ LLC Office Building $119,674, % 2. Harsch Investment Corp. Office Building 114,210, Bayer CropScience LP Industrial 81,844, Westcore West Sac LP Industrial 73,215, West Capital Commons LLC Apartments 63,201, Farmer Rice Co-Op Industrial 57,426, Tony s Fine Foods Industrial 53,889, River City Land Holding Co. LLC Stadium 52,222, Excel Riverpoint LLC Commercial 44,116, Ikea Property Inc. Commercial 43,904, RMC Pacific Materials Inc. Industrial 43,346, ARC FESACCA001 LLC Industrial 34,998, Wal-Mart Real Estate Business Trust Commercial 31,561, Ramco Properties LP Industrial 30,424, McKesson Corporation Industrial 30,221, Sacramento Foodco Inv LLC Industrial 29,730, Monticello at Southport Associates LLC Apartments 29,172, Buzz Oates LLC Undeveloped 28,837, Pancal 300 Southport 20 LLC Industrial 25,283, Home Depot USA Inc. Commercial 24,912, Fiscal year local secured assessed valuation: $5,961,776,764. Source: California Municipal Statistics, Inc. $1,012,193, % Another factor in the ability of taxpayers to pay additional taxes for general obligation bonds is the number of other taxes already imposed by other taxing jurisdictions in which a property is included. Contained within the District s boundaries are numerous overlapping local entities providing public services which may have outstanding long-term obligations in the form of general obligation, lease revenue and special assessment bonds. Such obligations generally are not payable from revenues of the District (except as indicated) nor are they necessarily obligations secured by land within the District. In many cases, long-term obligations issued by a public agency are payable only from the general fund or other revenues of such public agency. The following table shows long-term obligations sold in the public credit markets by the public agencies listed. The first column in the table names each public agency which has outstanding debt as of May 1, 2017 and whose territory overlaps the District in whole or in part. The second column shows the percentage of each overlapping agency s assessed value located within the boundaries of the District. This percentage, multiplied by the total outstanding debt of each overlapping agency (not shown) produces the amount shown in the third column, which is the apportionment of each overlapping agency s outstanding debt to taxable property in the District. Property owners within the District may be subject to other special taxes and assessments levied by other taxing authorities providing services within the District. Such non-ad valorem special taxes and assessments (which are not levied to fund debt service) are not represented in the statement of direct and overlapping bonded debt

24 The statement of direct and overlapping bonded debt relating to the District set forth below was prepared by California Municipal Statistics, Inc. It has been included for general information purposes only. The District has not reviewed the statement for completeness or accuracy and makes no representations in connection with the statement. Statement of Direct and Overlapping Bonded Debt (As of May 1, 2017) Washington Unified School District Assessed Valuation: $6,422,692,563 Percent Debt as of Applicable May 1, 2017 DIRECT AND OVERLAPPING TAX AND ASSESSMENT DEBT: Los Rios Community College District 3.717% $12,641,517 Washington Unified School District ,183,895 1 City of West Sacramento Community Facilities District No ,140,000 City of West Sacramento Community Facilities District No ,000 City of West Sacramento Community Facilities District No ,854,522 City of West Sacramento Community Facilities District No ,038,319 City of West Sacramento Community Facilities District No ,553,500 City of West Sacramento Community Facilities District No ,700,000 City of West Sacramento Community Facilities District No ,444,290 City of West Sacramento Community Facilities District No ,733,628 City of West Sacramento Community Facilities District No ,470,000 City of West Sacramento Community Facilities District No ,242 City of West Sacramento Community Facilities District No ,131,933 City of West Sacramento Community Facilities District No ,070,000 City of West Sacramento Community Facilities District No ,735,000 City of West Sacramento Community Facilities District No ,035,000 City of West Sacramento Community Facilities District No ,135,000 City of West Sacramento Community Facilities District No ,483,600 City of West Sacramento Community Facilities District No ,680,000 West Sacramento Area Flood Control Assessment District ,569,441 California Statewide Communities Development Authority 1915 Act Bonds ,455 TOTAL DIRECT AND OVERLAPPING TAX AND ASSESSMENT DEBT $247,824,342 DIRECT AND OVERLAPPING GENERAL FUND DEBT: Yolo County Certificates of Participation % $5,976,255 Yolo County Board of Education Certificates of Participation ,506,761 Los Rios Community College District Certificates of Participation ,312 Washington Unified School District ,553,557 City of West Sacramento General Fund Obligations ,824,604 City of West Sacramento Pension Obligation Bonds ,693,747 TOTAL DIRECT AND OVERLAPPING GENERAL FUND DEBT $119,590,236 OVERLAPPING TAX INCREMENT DEBT (Successor Agency): $87,300,634 COMBINED TOTAL DEBT $454,715,212 2 Ratios to Assessed Valuation: Direct Debt ($73,183,895) % Total Direct and Overlapping Tax and Assessment Debt % Combined Direct Debt ($154,737,452) % Combined Total Debt % Ratios to Redevelopment Incremental Valuation ($2,800,714,430): Total Overlapping Tax Increment Debt % 1 Excludes the Bonds and certificates of participation in the amount of $63,805,000 the District expects to issue in June Excludes tax and revenue anticipation notes, enterprise revenue, mortgage revenue and non-bonded capital lease obligations. Source: California Municipal Statistics, Inc

25 Tax Collections and Delinquencies Property taxes are levied for each fiscal year on taxable real and personal property situated in the taxing jurisdiction assessed as of January 1, at which time the tax lien attaches. The Yolo County Tax Collector (the County Tax Collector ) is presented with a tax roll created from the combined rolls of the County Assessor and the SBE. The County Tax Collector prepares and mails tax bills to taxpayers and collects the taxes. Property taxes on the regular secured roll are due in two equal installments. The first installment is due on November 1 and becomes delinquent at 5:00 p.m. on December 10, after which time a delinquent penalty of ten percent attaches. The second installment is due on February 1 and becomes delinquent at 5:00 p.m. on April 10, after which time a delinquent penalty of ten percent plus a $10 cost attaches. Taxes remaining unpaid by 5:00 p.m. on June 30 are deemed to be in default and subject to a $15 redemption fee and penalties of 1.5 percent per month. After five years, the County generally has the power to sell taxdefaulted property that is not redeemed; proceeds from such sale are applied to the payment of the delinquent taxes. Annual bills for property taxes on the unsecured roll are mailed during July; taxes on the unsecured roll are due on August 31, after which time delinquent penalty of ten percent attaches. After November 1, delinquent accounts are assessed a cost of $15 and penalties of 1.5 percent per month. Upon delinquency, the County may use the following collection methods: filing of liens, filing of summary judgments, seizure and sale of personal property, and seizure of State tax refunds or State lottery winnings. As long as the Teeter Plan remains in effect in the County, the District will be credited with the full amount of the tax levy no matter the delinquency rate within the District. See Alternative Method of Tax Apportionment herein. Alternative Method of Tax Apportionment The County Board has approved implementation of the Alternative Method of Distribution of Tax Levies and Collections and of Tax Sale Proceeds (the Teeter Plan ) pursuant to the California Revenue and Taxation Code (the Revenue and Taxation Code ) Section 4701 et seq. The Teeter Plan guarantees distribution to each local agency an amount equal to 100 percent of the taxes levied on their behalf on the secured roll within the County, with the County retaining all penalties and interest affixed upon delinquent properties and redemptions of subsequent collections. The cash position of the Chief Financial Officer is protected by a special fund, known as the Tax Loss Reserve Fund, which accumulates moneys from interest and penalty collections. In any given fiscal year, when the amount in the Tax Loss Reserve Fund exceeds a specified amount as prescribed by law, such excess amounts may be credited for the remainder of that fiscal year to the County s general fund. Amounts required to be maintained in the Tax Loss Reserve Fund may be drawn on to the extent of the amount of uncollected taxes credited to each agency in advance of receipt. The Teeter Plan is to remain in effect unless the County Board orders its discontinuance or unless, prior to the commencement of any fiscal year of the County (which commences on July 1), the County Board receives a petition for its discontinuance from two-thirds of the participating revenue districts in the County. The County Board may also, after holding a public hearing on the matter, discontinue the procedures with respect to any tax levying agency or assessment levying agency in the County if the rate of secured tax delinquency in that agency in any year exceeds three percent of the total of all taxes and assessments levied on the secured rolls in that agency. If the Teeter Plan were discontinued in the County, only those secured property taxes actually collected would be allocated to political subdivisions, including the District. The District s tax revenues would be subject to taxpayer delinquencies, and the District would realize the benefit of interest and penalties collected from delinquent taxpayers, pursuant to law. BOND INSURANCE Bond Insurance Policy Concurrently with the issuance of the Bonds, Assured Guaranty Municipal Corp. ( AGM ) will issue its municipal bond insurance policy for the Bonds (the Policy ). The Policy guarantees the scheduled payment of principal of and interest on the Bonds when due as set forth in the form of the Policy included as APPENDIX F to this Official Statement

26 The Policy is not covered by any insurance security or guaranty fund established under New York, California, Connecticut or Florida insurance law. Assured Guaranty Municipal Corp. AGM is a New York domiciled financial guaranty insurance company and an indirect subsidiary of Assured Guaranty Ltd. ( AGL ), a Bermuda-based holding company whose shares are publicly traded and are listed on the New York Stock Exchange under the symbol AGO. AGL, through its operating subsidiaries, provides credit enhancement products to the U.S. and global public finance, infrastructure and structured finance markets. Neither AGL nor any of its shareholders or affiliates, other than AGM, is obligated to pay any debts of AGM or any claims under any insurance policy issued by AGM. AGM s financial strength is rated AA (stable outlook) by S&P Global Ratings, a business unit of Standard & Poor s Financial Services LLC ( S&P ), AA+ (stable outlook) by Kroll Bond Rating Agency, Inc. ( KBRA ) and A2 (stable outlook) by Moody s Investors Service, Inc. ( Moody s ). Each rating of AGM should be evaluated independently. An explanation of the significance of the above ratings may be obtained from the applicable rating agency. The above ratings are not recommendations to buy, sell or hold any security, and such ratings are subject to revision or withdrawal at any time by the rating agencies, including withdrawal initiated at the request of AGM in its sole discretion. In addition, the rating agencies may at any time change AGM s long-term rating outlooks or place such ratings on a watch list for possible downgrade in the near term. Any downward revision or withdrawal of any of the above ratings, the assignment of a negative outlook to such ratings or the placement of such ratings on a negative watch list may have an adverse effect on the market price of any security guaranteed by AGM. AGM only guarantees scheduled principal and scheduled interest payments payable by the issuer of bonds insured by AGM on the date(s) when such amounts were initially scheduled to become due and payable (subject to and in accordance with the terms of the relevant insurance policy), and does not guarantee the market price or liquidity of the securities it insures, nor does it guarantee that the ratings on such securities will not be revised or withdrawn. Current Financial Strength Ratings. On July 27, 2016, S&P issued a credit rating report in which it affirmed AGM s financial strength rating of AA (stable outlook). AGM can give no assurance as to any further ratings action that S&P may take. On August 8, 2016, Moody s published a credit opinion affirming its existing insurance financial strength rating of A2 (stable outlook) on AGM. AGM can give no assurance as to any further ratings action that Moody s may take. On December 14, 2016, KBRA issued a financial guaranty surveillance report in which it affirmed AGM s insurance financial strength rating of AA+ (stable outlook). AGM can give no assurance as to any further ratings action that KBRA may take. For more information regarding AGM s financial strength ratings and the risks relating thereto, see AGL s Annual Report on Form 10-K for the fiscal year ended December 31, Capitalization of AGM. At March 31, 2017, (i) the policyholders surplus of AGM was approximately $2,204 million; (ii) the contingency reserves of AGM and its indirect subsidiary Municipal Assurance Corp. ( MAC ) (as described below) were approximately $1,263 million; and (iii) the net unearned premium reserves of AGM and its subsidiaries (as described below) were approximately $1,349 million. The contingency reserve amount set forth above includes (i) 100 percent of AGM s contingency reserve, and (ii) 60.7 percent of MAC s contingency reserve. The net unearned premium reserve amount set forth above includes (i) 100 percent of the net unearned premium reserves of AGM and AGM s wholly owned subsidiary Assured Guaranty (Europe) Ltd. and (ii) 60.7 percent of the net unearned premium reserve of MAC. The policyholders surplus of AGM and the contingency reserves and net unearned premium reserves of AGM and MAC were determined in accordance with statutory accounting principles. The net unearned premium reserves of Assured Guaranty (Europe) Ltd were determined in accordance with accounting principles generally accepted in the United States of America. Incorporation of Certain Documents by Reference. Portions of the following documents filed by AGL with the Securities and Exchange Commission (the SEC ) that relate to AGM are incorporated by reference into this Official Statement and shall be deemed to be a part hereof: the Annual Report on Form 10-K for the fiscal year ended December 31, 2016 (filed by AGL with the SEC on February 24, 2017); and the Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2017 (filed by AGL with the SEC on May 5, 2017)

27 All consolidated financial statements of AGM and all other information relating to AGM included in, or as exhibits to, documents filed by AGL with the SEC pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, excluding Current Reports or portions thereof furnished under Item 2.02 or Item 7.01 of Form 8-K, after the filing of the last document referred to above and before the termination of the offering of the Bonds shall be deemed incorporated by reference into this Official Statement and to be a part hereof from the respective dates of filing such documents. Copies of materials incorporated by reference are available over the internet at the SEC s website at at AGL s website at or will be provided upon request to Assured Guaranty Municipal Corp.: 1633 Broadway, New York, New York 10019, Attention: Communications Department (telephone (212) ). Except for the information referred to above, no information available on or through AGL s website shall be deemed to be part of or incorporated in this Official Statement. Any information regarding AGM included herein under the caption BOND INSURANCE Assured Guaranty Municipal Corp. or included in a document incorporated by reference herein (collectively, the AGM Information ) shall be modified or superseded to the extent that any subsequently included AGM Information (either directly or through incorporation by reference) modifies or supersedes such previously included AGM Information. Any AGM Information so modified or superseded shall not constitute a part of this Official Statement, except as so modified or superseded. Miscellaneous Matters. AGM makes no representation regarding the Bonds or the advisability of investing in the Bonds. In addition, AGM has not independently verified, makes no representation regarding, and does not accept any responsibility for the accuracy or completeness of this Official Statement or any information or disclosure contained herein, or omitted herefrom, other than with respect to the accuracy of the information regarding AGM supplied by AGM and presented under the heading BOND INSURANCE. YOLO COUNTY TREASURY POOL This section provides a general description of the County Investment Policy and current portfolio holdings. The information set forth under this section relating to the Yolo County Treasury Pool has been obtained from the Yolo County Department of Financial Services and is believed to be reliable but is not guaranteed as to accuracy or completeness. The District makes no representation as to the accuracy or completeness of such information. Further information may be obtained by contacting the County of Yolo, Department of Financial Services, 625 Court Street, Woodland, California 95695, telephone (530) The Chief Financial Officer manages the Yolo County Treasury Pool (the County Pool ) in which certain funds of the County and certain funds of other participating entities are pooled and invested pending disbursement. General participants are those government agencies within the County, including the District, for which the Chief Financial Officer is statutorily designated as the custodian of such funds. The Chief Financial Officer is the ex officio treasurer of each of these participating entities, and such entities are legally required to deposit their cash receipts and revenues in the County Treasury. Under State law, withdrawals are allowed only to pay for expenses which have become due. The governing board of each school district and special district within the County may allow, by appropriate board resolution, certain withdrawals of non-operating funds for purposes of investing outside the County Pool. Some districts have from time to time authorized the Chief Financial Officer to purchase specified investments for certain district funds to mature on predetermined future dates when cash would be required for disbursements. Other local agencies, such as special districts and cities for which the Chief Financial Officer is not the statutorily designated fund custodian, may participate in the County Pool. Such participation is subject to the consent of the Chief Financial Officer and must be in accordance with State law. Funds held in the County Pool are invested by the Chief Financial Officer in accordance with State law and the County Investment Policy, which is prepared by the Chief Financial Officer and approved by the County Board. A copy of the County Investment Policy is attached hereto as APPENDIX D. The County Investment Policy sets forth the Chief Financial Officer s investment objectives as, in order of priority, safety of principal, liquidity and return on investment. In addition, the County Investment Policy describes the instruments eligible for inclusion in the County Pool and the limitations applicable to each type. A County Treasury Oversight Committee (which includes, among others, a representative of the Yolo County School Superintendent and a representative of the area school districts) monitors the performance of the County Pool quarterly. The Chief Financial Officer neither monitors investments for arbitrage compliance, nor does it perform arbitrage calculations. The District will maintain or cause to be maintained detailed records with respect to the applicable proceeds

28 A summary description of the composition of the County Pool from the quarterly investment report as of March 31, 2017 is provided in the following table. Yolo County Pooled Investment Fund As of March 31, 2017 Investment Market Value Percent of Portfolio U.S. Treasuries $4,904, % Federal Agencies / GSE 74,943, Federal Agencies / Collateralized Mortgage Obligations 20,783, Supranationals 15,486, Commercial Paper 25,210, Negotiable Certificates of Deposit 50,116, Medium-Term Corporate Notes 66,688, Asset-Backed Securities 18,265, Local Agency Investment Fund (LAIF) 66,702, California Asset Management Program (CAMP) 73,318, Total $416,318, % Totals may not foot due to rounding. Source: Yolo County Department of Financial Services. Neither the District nor the Underwriter has made an independent investigation of the investments in the County Pool and has made no assessment of the current County Investment Policy. The value of the various investments in the Pool will fluctuate on a daily basis as a result of a multitude of factors, including generally prevailing interest rates and other economic conditions. Additionally, the Chief Financial Officer, upon the approval by the County Board, may change the County Investment Policy at any time. Therefore, there can be no assurance that the values of the various investments in the County Pool will not vary significantly from the values described therein. CITY AND COUNTY ECONOMIC PROFILE The information in this section concerning the economy of the City of West Sacramento and Yolo County is provided as supplementary information only, and is not intended to be an indication of security for the Bonds. The Bonds are payable from the proceeds of an ad valorem tax, approved by the voters of the District pursuant to applicable laws and State Constitutional requirements, and required to be levied by the County on all taxable property in the District in an amount sufficient for the timely payment of principal of and interest on the Bonds. See SECURITY AND SOURCE OF PAYMENT herein. General Information The County, one of 58 counties in the State, was incorporated in 1850 and is located in the northern central region of the State approximately 20 miles west of the City of Sacramento, the State s capital, and approximately 60 miles northeast of the City of San Francisco. Encompassing approximately 1,021 square miles in the Central Valley and the Sacramento River Delta, the County has four incorporated cities. Based on data compiled by CoreLogic, Inc., the median sale price of a single-family home in the County was $397,000 in March 2017, an increase of approximately 10.3 percent from $360,000 in March The City, founded in 1987, encompasses approximately 23 square miles. Based on data compiled by CoreLogic, Inc., the median sale price of a single-family home in the City was $326,500 in March 2017, a decrease of approximately 1.1 percent from $330,000 in March

29 Population The following table displays estimated population data as of January 1 for the past five years for the City, the County and the State. Historical Population City of West Sacramento, County of Yolo and the State of California City of West Sacramento 49,722 50,464 51,152 51,963 53,082 County of Yolo 204, , , , ,555 State of California 37,881,357 38,239,207 38,567,459 38,907,642 39,255,883 Source: State Department of Finance. Personal Income Total personal income includes income from all sources including net earnings, dividends, interest and rent, and personal current transfer receipts received by residents in the region. Per capita personal income ( PCPI ) was $49,063 in the County in 2015, an increase of 3.7 percent from 2014 levels, compared to an increase of 5.4 percent Statewide and 3.7 percent nationally. The following table shows PCPI for the County as well as for the State for the past five years data is available. Per Capita Personal Income County of Yolo and the State of California County of Yolo $42,738 $43,538 $44,556 $46,641 $49,063 State of California 45,820 48,312 48,471 50,988 53,741 Source: U.S. Department of Commerce, Bureau of Economic Analysis. Labor Force and Employment The following table contains a summary of the City s historical unemployment data for the past four years and for the current year as of the most recent month available, not seasonally adjusted. Historical Unemployment City of West Sacramento Annual Annual Annual Annual April Total Labor Force 16,400 24,100 25,500 26,000 25,600 Number of Employed 14,000 22,000 23,600 24,300 24,100 Number of Unemployed 2,400 2,200 1,900 1,800 1,500 Unemployment Rate 14.5% 9.0% 7.4% 6.7% 5.9% 1 Preliminary. Source: State Employment Development Department

30 The following table contains a summary of the County s historical unemployment data for the past four years and for the current year as of the most recent month available, not seasonally adjusted. Historical Unemployment County of Yolo Annual Annual Annual Annual April Total Labor Force 98, , , , ,400 Number of Employed 88,900 93,200 97, , ,100 Number of Unemployed 9,200 7,800 6,700 6,100 5,300 Unemployment Rate 9.4% 7.7% 6.4% 5.8% 5.0% 1 Preliminary. Source: State Employment Development Department. Employment by Industry The following table shows the County s labor patterns by type of industry from 2011 through 2015 by annual average, not seasonally adjusted. Data for calendar year 2016 is not yet available. Historical Employment by Industry County of Yolo Title Total, All Industries 95,400 96,900 98, , ,600 Total Farm 5,100 5,300 5,400 5,700 5,900 Total Nonfarm 90,300 91,600 93,500 96,000 99,600 Goods Producing 8,200 8,200 8,700 9,300 10,100 Mining, Logging Construction 3,300 3,100 3,000 3,000 3,500 Manufacturing 4,700 5,000 5,500 6,200 6,400 Service Providing 82,200 83,400 84,900 86,700 89,600 Trade, Transportation & Utilities 18,400 18,200 18,800 19,200 19,600 Information 1,000 1,000 1,100 1,000 1,000 Financial Activities 2,900 2,900 2,800 2,500 2,500 Professional & Business Services 7,200 7,700 7,800 8,000 8,300 Educational & Health Services 8,400 8,600 9,000 9,300 9,700 Leisure & Hospitality 6,300 6,700 6,800 7,100 7,600 Other Services 2,000 2,100 2,200 2,300 2,300 Government 36,000 36,100 36,500 37,300 38,600 Federal Government 2,300 2,300 2,300 2,300 2,300 State Government 24,300 24,600 25,000 25,500 26,500 Local Government 9,400 9,300 9,200 9,500 9,800 Figures may not foot due to rounding. Source: State Employment Development Department, Labor Market Division

31 Major Employers The following table provides a list of ten major employers and corresponding number of employees in the City for fiscal year Data for is not yet available. Major Employers City of West Sacramento Employer Number of Employees State of California, General Services 1,960 United States Postal Service 1,605 California State Teachers Retirement System 1,215 United Parcel Service (UPS) 1,182 Affiliated Computer Services 900 Washington Unified School District 750 Raley s / Bel Air 634 Tony s Fine Food 500 Nor-Cal Beverage 500 Clark Pacific 439 9,685 Source: City of West Sacramento, Comprehensive Annual Financial Report for the Year Ended June 30, The following table provides a list of ten major employers, corresponding number of employees and percent of total employment in the County for fiscal year Major Employers County of Yolo Employer Number of Employees Percent of Total County Employment University of California, Davis 9, % State of California (various) 2, U.S. Government 2, Cache Creek Casino Resort 2, County of Yolo 1, Woodland Joint Unified School District 1, Raley s Inc. 1, Walgreens Woodland Healthcare Sutter Health Total 22, % Source: County of Yolo, Comprehensive Annual Financial Report for the Fiscal Year Ended June 30, Commercial Activity Total taxable sales during calendar year 2015 in the City were reported to be $1,399,372,000, a 0.9 percent increase from the total taxable sales of $1,386,851,000 reported during calendar year

32 The number of establishments selling merchandise subject to sales tax and the valuation of taxable transactions in the City for the past five years is presented in the following table. Data for calendar year 2016 is not yet available. Taxable Retail Sales City of West Sacramento Sales Tax Permits 1,174 1,160 1,156 1,161 n/a 1 Taxable Sales (000 s) $1,246,288 $1,335,537 $1,388,205 $1,386,851 $1,399,372 1 Beginning in 2015, the reporting criteria for the number of permits/outlets changed, making the data not comparable to prior years. Source: State Board of Equalization. Total taxable sales during calendar year 2015 in the County were reported to be $3,984,801,000, a 5.4 percent increase from the total taxable sales of $3,781,449,000 reported during calendar year The number of establishments selling merchandise subject to sales tax and the valuation of taxable transactions in the County for the past five years is presented in the following table. Data for calendar year 2016 is not yet available. Taxable Retail Sales County of Yolo Sales Tax Permits 3,978 4,012 4,075 4,119 n/a 1 Taxable Sales (000 s) $3,247,541 $3,475,345 $3,700,252 $3,781,449 $3,984,801 1 Beginning in 2015, the reporting criteria for the number of permits/outlets changed, making the data not comparable to prior years. Source: State Board of Equalization. Construction Activity Estimated new privately-owned residential housing units authorized by building permits and total construction costs in the County for the past five years are shown in the following table. New Residential Building Permits County of Yolo Single Family Residential Units Multi-Family Residential Units Total New Building Permits Total Construction Costs $67,405,984 $141,312,233 $69,863,155 $103,677,679 $178,271,882 Source: U.S. Bureau of the Census, Building Permit Estimates

33 THE DISTRICT The information in this section concerning the operations of the District and its finances is provided as supplementary information only, and it should not be inferred from the inclusion of this information in this Official Statement that the principal of or interest on the Bonds is payable from the General Fund. The Bonds are payable from the proceeds of an ad valorem tax, approved by the voters of the District pursuant to applicable laws and State Constitutional requirements, and required to be levied by the County on all taxable property in the District in an amount sufficient for the timely payment of principal of and interest on the Bonds. See SECURITY AND SOURCE OF PAYMENT herein. General Information The District, a political subdivision of the State established in 1957, is a unified school district encompassing approximately 23 square miles in the eastern portion of the County. The District serves a population of approximately 19,350 people residing primarily in the City. The District provides education to approximately 7,680 students in transitional kindergarten through twelfth grade. The District operates seven elementary schools, a comprehensive high school, an alternative high school, an independent study program, a charter school, an adult education program and preschool programs. The District Board of Education and Key Administrative Personnel The District Board governs all activities related to public education within the jurisdiction of the District. The District Board has decision-making authority, the power to designate management, the responsibility to significantly influence operations and is accountable for all fiscal matters relating to the District. The District Board consists of five members. Each District Board member is elected by the public for a four-year term of office. Elections for the District Board are held every two years, alternating between two and three positions available. A president of the District Board is elected by members each year. The current members of the District Board, together with their office and the date their term expires, are set forth in the following table. District Board of Education Washington Unified School District Name Title Term Expires Sarah Kirby-Gonzalez President December 2018 Coby Pizzotti Vice President December 2020 Alicia Cruz Clerk December 2020 Norma Alcala Trustee December 2018 Jackie Thu-Huong Wong Trustee December 2020 The Superintendent of the District is appointed by and reports to the District Board. The Superintendent is responsible for managing the District s day-to-day operations and supervising the work of other key District administrators. The current members of the District s administration and positions held are set forth on page iv of this Official Statement. Enrollment Student enrollment determines to a large extent the amount of funding a State public school district receives for program, facilities and staff needs. Average daily attendance ( ADA ) is a measurement of the number of pupils attending classes of the District. The purpose of attendance accounting from a fiscal standpoint is to provide the basis on which apportionments of State funds are made to school districts. Enrollment can fluctuate due to factors such as population growth, competition from private, parochial, and public charter schools, inter-district transfers in or out, and other causes. Losses in enrollment will

34 cause a school district to lose operating revenues, without necessarily permitting the school district to make adjustments in fixed operating costs. The ADA as of the last day of the last full attendance month concluding prior to April 15 ( P-2 ADA ) is used by the State as the basis for State apportionments. Set forth in the following table is the historical and projected P-2 ADA for the District, excluding District funded County program ADA. Average Daily Attendance Washington Unified School District Total P-2 ADA 6,939 7,118 7,262 7,245 7,381 1 Projected as of the fiscal year second interim report. Charter Schools There are three charter schools operating within the District. Two of the schools are fiscally independent of the District: Sacramento Valley Charter School serves kindergarten through eighth grade with enrollment of 196 students in fiscal year and River Charter Schools Lighthouse Charter serves kindergarten through third grade with enrollment of 154 students in fiscal year River Charter Schools Lighthouse Charter is expected to eventually expand to eighth grade. The financial activities of fiscally independent charter schools are not presented in the financial statements of the District. West Sacramento Early College Preparatory Charter School, serving students in ninth through twelfth grade with enrollment of 34 students in fiscal year , is fiscally dependent on the District. Fiscally dependent schools operate, to a certain extent, under the financial control of the District, with their financial activities presented in the District s financial statements. See APPENDIX A THE FINANCIAL STATEMENTS OF THE DISTRICT AS OF AND FOR THE YEAR ENDED JUNE 30, 2016 attached hereto. West Sacramento Early College Preparatory Charter School will be renamed Washington Middle College High School Charter School as part of its charter renewal on July 1, To the extent charter schools draw students from school district schools and reduce school district enrollment, charter schools can adversely affect school district revenues. However, certain per-pupil expenditures of a school district also decrease based upon the number of students enrolled in charter schools. Pursuant to Proposition 39, school districts are required to provide facilities reasonably equivalent to those provided to regular district students for charter schools having a projected average daily attendance of at least 80 or more students from with that district. Pupil-to-Teacher Ratios Set forth in the following table are the pupil-to-teacher ratios of the District in fiscal year Pupil-to-Teacher Ratios Washington Unified School District Level Pupil-to-Teacher Ratio Transitional Kindergarten Third Grade 24 : 1 Fourth Fifth Grade 28 : 1 Sixth Eighth Grade 30 : 1 Ninth Twelfth Grade 33 :

35 Employee Relations State law provides that employees of public school districts of the State are to be divided into appropriate bargaining units which then may be represented by an exclusive bargaining agent. The District has two recognized bargaining units representing its non-management employees. The Washington Teachers Association ( WTA ) is the exclusive bargaining unit for the non-management certificated personnel of the District. The California School Employees Association, Chapter #168 ( CSEA #168 ) is the exclusive bargaining unit for the District s classified, non-management employees. Set forth in the following table are the District s bargaining units, number of full-time equivalents ( FTEs ) projected for fiscal year as of the second interim report, and contract status. Bargaining Units, Number of Employees and Contract Status Washington Unified School District Bargaining Unit Full-Time Equivalents Contract Status WTA 403 Settled through fiscal year CSEA # Settled through fiscal year The District has an additional 47 FTEs not represented by a bargaining unit projected for fiscal year as of the second interim report. Pension Plans All full-time employees of the District, as well as certain part-time employees, are eligible to participate under defined benefit retirement plans maintained by agencies of the State. Qualified certificated employees are eligible to participate in the costsharing multiple-employer State Teachers Retirement System ( STRS ). Qualified classified employees are eligible to participate in the cost-sharing multiple-employer Public Employees Retirement Fund of the Public Employees Retirement System ( PERS ), which acts as a common investment and administrative agent for participating public entities within the State. The District accounts for its pension costs and obligations pursuant to Governmental Accounting Standards Board ( GASB ) Statement No. 67, Financial Reporting for Pension Plans ( GASB 67 ) and Statement No. 68, Accounting and Financial Reporting for Pensions ( GASB 68 ) which replaced GASB Statements Nos. 25 and 27, respectively. GASB 68 requires an employer that provides a defined benefit pension, such as the District, to recognize and report its long-term obligation for pension benefits as a liability as it is earned by employees. The District implemented the new reporting standards as reflected in the District s financial statements for fiscal year See APPENDIX A THE FINANCIAL STATEMENTS OF THE DISTRICT AS OF AND FOR THE YEAR ENDED JUNE 30, 2016 attached hereto. STRS Description and Contributions. STRS operates under the California Education Code (the Education Code ) sections commonly known as the State Teachers Retirement Law. Membership is mandatory for all certificated employees of State public schools meeting the eligibility requirements. STRS provides retirement, disability and death benefits based on an employee s years of service, age and final compensation. Employees vest after five years of service and may receive early retirement benefits as early as age 50 or normal retirement either at age 60 or 62 depending on their hire date. Except as required for employees hired after January 1, 2013, STRS employee contribution rates are established by the State Legislature. The fiscal year contribution requirement for active plan members with an enrollment date prior to January 1, 2013 is percent of salary. For active plan members with an enrollment date on or after January 1, 2013, the employee contribution rate is at least 50 percent of the total annual normal cost of their pension benefit each year as determined by an actuary (9.205 percent in fiscal year ). Because STRS contribution rates are established by statute, unlike typical defined benefit programs, the District s contribution rate does not vary annually to make up funding shortfalls or assess credits based on actuarial determinations. State Assembly Bill 1469, signed into law as part of the fiscal year State budget (the State Budget ), established a plan to eliminate the unfunded STRS liability over a period of approximately 30 years through a combination of

36 State funding and increased school district and employee payments. Employee contributions increase to percent of pay by fiscal year , employer contributions increase to 19.1 percent of eligible pay by fiscal year , and State contributions increase by percent by fiscal year The District s STRS contributions for the past five years and projected contribution for fiscal year as of the second interim report are set forth in the following table. STRS Employer Contributions Washington Unified School District Fiscal Year District Contribution Rate District Contribution 1 Total District Governmental Funds Expenditures District Contributions as Percentage of Total Governmental Funds Expenditures % $2,171,861 $74,854, % ,006,566 80,139, ,255,229 79,163, ,674,147 88,069, ,435, ,314, ,556, ,515, In each instance equal to 100 percent of the required contribution. 2 Projected as of the fiscal year second interim report. PERS Description and Contributions. All full-time classified employees of the District as well as certain part-time classified employees participate in PERS, which provides retirement and disability benefits, annual cost-of-living adjustments and death benefits to plan members and beneficiaries based on an employee s years of service, age and final compensation. Employees hired before January 1, 2013 fully vest after five years of service and may receive retirement benefits at age 50; employees hired after that date fully vest at age 52. These benefit provisions and all other requirements are established by State statute and District resolution. Active plan members with an enrollment date prior to January 1, 2013 are required to contribute seven percent of their salary, while active plan members with an enrollment date on or after January 1, 2013 are required to contribute the greater of 50 percent of normal costs or six percent of their salary. The District is required to pay an actuarially determined rate

37 The District s PERS contributions for the past five years and projected contribution for fiscal year as of the second interim report are set forth in the following table. PERS Employer Contributions Washington Unified School District Fiscal Year District Contribution Rate District Contribution 1 Total District Governmental Funds Expenditures District Contributions as Percentage of Total Governmental Funds Expenditures $1,342,555 $74,854, % ,093,219 80,139, ,141,799 79,163, ,253,374 88,069, ,457, ,314, ,991, ,515, In each instance equal to 100 percent of the required contribution. 2 Projected as of the fiscal year second interim report. Unfunded Liabilities and Pension Expense Reporting. Both STRS and PERS have substantial statewide, unfunded liabilities. The amount of these liabilities will vary depending on actuarial assumptions, returns on investment, salary scales and participant contributions. The actuarial funding method used in the STRS Actuarial Valuation as of June 30, 2015 is the entry age normal cost method, and assumes, among other things, a 7.5 percent investment rate of return, 4.5 percent interest on member accounts, projected 3.0 percent inflation, and projected payroll growth of 3.75 percent. The following table shows the statewide funding progress of the STRS plan for the past six years. Actuarial valuation data as of June 30, 2016 is not yet available. Funding Progress California State Teachers Retirement System (STRS) 1 Actuarial Valuation Date as of June 30 Actuarial Value of Plan Assets Actuarial Accrued Liability Total Unfunded Actuarial Liability Funded Ratio Covered Payroll Unfunded Liability as a Percentage of Payroll 2010 $140,291 $196,315 $56,024 71% $26, % , ,405 64, , , ,189 70, , , ,281 73, , , ,213 72, , , ,753 76, , Dollars in millions. Source: California State Teachers Retirement System, Comprehensive Annual Financial Report for the Fiscal Year Ended June 30, 2016; California State Teachers Retirement System, Defined Benefit Program Actuarial Evaluation for Fiscal Year Ended June 30, Pursuant to Government Code Section et seq., PERS is authorized to create risk pools for public agencies, combining assets and liabilities across employers in large risk-sharing pools to help reduce the large fluctuations in the employer s contribution rate caused by unexpected demographic events. The Schools Pool provides identical retirement benefits to nearly all classified school employees in the State. The actuarial funding method used in the PERS Schools Pool Actuarial

38 Valuation as of June 30, 2015 is the individual entry age normal cost method, and assumes, among other things, a 7.5 percent investment rate of return and projected 2.75 percent inflation; projected payroll growth varies by entry age and service. The following table shows the statewide funding progress of the PERS plan for the past six years. Actuarial valuation as of June 30, 2016 is not yet available. Funding Progress Public Employees Retirement System (PERS) Schools Pool 1 Actuarial Valuation Date as of June 30 Market Value of Plan Assets Actuarial Accrued Liability Total Unfunded Actuarial Liability Funded Ratio Covered Payroll Unfunded Liability as a Percentage of Payroll 2010 $38,435 $55,307 $16,872 70% $11, % ,901 58,358 12, , ,854 59,439 14, , ,482 61,487 12, , ,838 65,600 8, , ,814 73,325 16, , Dollars in millions. Source: California Public Employees Retirement System, Schools Pool Actuarial Valuation as of June 30, For the year ended June 30, 2016, the District s combined recognized pension expense was $7,529,068. The District s total net pension liability as of June 30, 2016 was $57,857,000. The District s recognized pension expenses and net pension liability as reported financial statements for fiscal years , the first year for which the data was provided, and are set forth in the following tables. Proportionate Share of the Net Pension Liability STRS Washington Unified School District Fiscal Year Proportion of Statewide Liability 1 Proportionate Share of Statewide Liability 1 Covered Employee Payroll Proportionate Share of Statewide Liability as Percentage of Covered Employee Payroll Fiduciary Net Position as Percentage of Total Pension Liability % $35,796,000 $27,283, % 76.52% ,680,000 30,114, Excludes State s proportionate share of the net pension liability associated with the District. Proportionate Share of the Net Pension Liability PERS Washington Unified School District Fiscal Year Proportion of Statewide Liability Proportionate Share of Statewide Liability Covered Employee Payroll Proportionate Share of Statewide Liability as Percentage of Covered Employee Payroll Fiduciary Net Position as Percentage of Total Pension Liability % $10,792,000 $9,979, % 83.38% ,177,000 10,648,

39 The District is unable to predict future amount of State pension liabilities and amount of required District contributions. Pension plan, annual contribution requirements and liabilities are more fully described in APPENDIX A THE FINANCIAL STATEMENTS OF THE DISTRICT AS OF AND FOR THE YEAR ENDED JUNE 30, 2016 attached hereto. Other Postemployment Benefits (OPEB) In addition to the pension benefits described above, the District provides postemployment health care benefits (known as other postemployment benefits, or OPEB ), in accordance with District employment contracts, to retirees meeting certain eligibility requirements. The District provides the cost of medical and dental benefits up to the District cap to its eligible retirees. In order to be eligible, classified employees must retire from the District on or after attaining the age of 55 while in service with at least ten years of service to the District. Certificated employees must retire from the District on or after attaining the age of 52 and have attained step 11 in the certificated employees salary schedule. The coverage ends once the retiree reaches age 65. Governmental Accounting Standards Board Statement No. 45, Accounting and Financial Reporting by Employers for Post Employment Benefits Other Than Pensions ( GASB 45 ) requires public agency employers providing healthcare benefits to retirees to recognize and account for the costs for providing these benefits on an accrual basis and provide footnote disclosure on the progress toward funding the benefits, in order to quantify a government agency s current liability for future benefit payments. GASB 45 is directed at quantifying and disclosing OPEB obligations, and does not impose any requirement on public agencies to fund such obligations. The District completed an actuarial study assessing the District s OPEB liability as of April 1, Based on the study, the District s actuarial accrued liability (the AAL ), which can also be considered to be the present value of all benefits earned to date assuming that an employee accrues retiree healthcare benefits ratably over his career, was $9,079,237. The AAL is an actuarial estimate that depends on a variety of assumptions about future events, such as health care costs and beneficiary mortality. The remaining unamortized balance of the initial unfunded actuarial accrued liability ( UAAL ) was $5,040,294, leaving a residual actuarial accrued liability of $4,038,943. The District has not established an irrevocable trust to pay OPEB. Every year, active employees earn additional future benefits, an amount known as the normal cost, which is added to the AAL. The annual required contribution ( ARC ) is the amount required if the District were to fund each year s normal cost plus an annual amortization of both the initial and residual UAAL, assuming the UAAL is fully funded over a 25-year period. If the amount budgeted and funded in any year is less than the ARC, the difference reflects the amount by which the UAAL is growing. The actuarial study calculated the ARC to be $1,353,252 as of April 1, The District funds its OPEB liability on a pay-as-you go basis. The District s OPEB expenditures were $335,920 in OPEB in fiscal year , were $353,244 in fiscal year , and are projected to be $250,000 in fiscal year as of the second interim report. See APPENDIX A THE FINANCIAL STATEMENTS OF THE DISTRICT AS OF AND FOR THE YEAR ENDED JUNE 30, 2016 for additional information regarding the District s OPEB. DISTRICT FINANCIAL INFORMATION The information in this section concerning the operations of the District and its finances is provided as supplementary information only, and it should not be inferred from the inclusion of this information in this Official Statement that the principal of or interest on the Bonds is payable from the General Fund. The Bonds are payable from the proceeds of an ad valorem tax, approved by the voters of the District pursuant to applicable laws and State Constitutional requirements, and required to be levied by the County on all taxable property in the District in an amount sufficient for the timely payment of principal of and interest on the Bonds. See SECURITY AND SOURCE OF PAYMENT herein. Accounting Practices The District accounts for its financial transactions in accordance with the policies and procedures of the State Department of Education s California School Accounting Manual, which, pursuant to Education Code Section 41010, is to be followed by all school districts in the State. The accounting policies of the District conform to accounting principles generally accepted in the

40 United States of America as prescribed by the Governmental Accounting Standards Board and the American Institute of Certified Public Accountants. The District s financial statements consist of government-wide statements and fund-based financial statements. Governmentwide statements, consisting of a statement of net assets and a statement of activities, report all the assets, liabilities, revenue and expenses of the District and are accounted for using the economic resources measurement focus and accrual basis of accounting. The fund-based financial statements consist of a series of statements that provide information about the District s major and non-major funds. Governmental funds, including the General Fund, special revenues funds, capital project funds and debt service funds, are accounted for using the modified accrual basis of accounting. Under the modified accrual basis of accounting, revenues are recognized in the accounting period in which they become measurable and available, while expenditures are recognized in the period in which the liability is incurred, if measurable. Proprietary funds and fiduciary funds are accounted for using the economic resources measurement focus and accrual basis of accounting. See NOTE 1 in APPENDIX A attached hereto for a further discussion of applicable accounting policies. The independent auditor for the District in fiscal year was Crowe Horwath LLP, Sacramento, California (the Auditor ). The financial statements of the District as of and for the year ended June 30, 2016, are set forth in APPENDIX A attached hereto. The District has not requested nor did the District obtain permission from the Auditor to include the audited financial statements as an appendix to this Official Statement. The Auditor has not been engaged to perform and has not performed, since the date of its report attached hereto, any procedures on the financial statements addressed in that report. The Auditor also has not performed any procedures relating to this Official Statement. Budget and Financial Reporting Process The General Fund finances the legally authorized activities of the District for which restricted funds are not provided. General Fund revenues are derived from such sources as federal and State school apportionments, taxes, use of money and property, and aid from other governmental agencies. The District is required by provisions of the Education Code to maintain a balanced budget each year, where the sum of expenditures plus the ending fund balance cannot exceed revenues plus the carry-over fund balance from the previous year. The State Department of Education imposes a uniform budgeting format for all school districts. The fiscal year for all State school districts is July 1 to June 30. The same calendar applies to county offices of education, although their budgets and reports are reviewed by the State Superintendent of Public Instruction (the State Superintendent ). Because most school districts depend on State funds for a substantial portion of revenue, the State budget is an extremely important input in the school district budget preparation process. However, there is very close timing between final approval of the State budget (legally required by June 15), the adoption of the associated school finance legislation, and the adoption of local school district budgets. In some years, the State budget is not approved by the legal deadline which forces school districts to begin the new fiscal year with only estimates of the amount of funding they will actually receive. The school district budgeting process involves continuous planning and evaluation. Within the deadlines, school districts work out their own schedules for considering whether or not to hire or replace staff, negotiating contracts with all employees, reviewing programs, and assessing the need to repair existing or acquire new facilities. Decisions depend on the critical estimates of enrollment, fixed costs, commitments in contracts with employees as well as best guesses about how much money will be available for elementary and secondary education. The timing of some decisions is forced by legal deadlines. For example, preliminary layoff notices to teachers must be delivered in March, with final notices in May. This necessitates projecting enrollments and determining staffing needs long before a school district will know either its final financial position for the current year or its revenue for the next year. School districts must adopt an annual budget on or before July 1 of each year. The budget must be submitted to the county superintendent within five days of adoption or by July 1, whichever occurs first. The governing board of the school district must not adopt a budget before the governing board adopts a local control and accountability plan (the LCAP ) for that budget year. See FUNDING OF PUBLIC EDUCATION IN THE STATE herein. The county superintendent will examine the adopted budget for compliance with the standards and criteria adopted by the State Board of Education and identify technical corrections necessary to bring the budget into compliance, will determine if the budget allows the school district to meet its current obligations, will determine if the budget is consistent with a financial plan that will enable the school district to meet its multi-year financial commitments, and will determine if the budget ensures

41 the fiscal solvency and accountability for the goals outlined in the LCAP. On or before September 15, the county superintendent will approve or disapprove the adopted budget for each school district within its jurisdiction based on these standards. The school district board must be notified by September 15 of the county superintendent s recommendations for revision and reasons for the recommendations. The county superintendent may assign a fiscal advisor or appoint a committee to examine and comment on the superintendent s recommendations. The committee must report its findings no later than September 20. Any recommendations made by the county superintendent must be made available by the school district for public inspection. The law does not provide for conditional approvals; budgets must be either approved or disapproved. No later than October 22, the county superintendent must notify the State Superintendent of all school districts whose budget may be disapproved, and no later than November 8, the county superintendent must notify the State Superintendent of all school district budgets that have been disapproved or budget committees waived. For school districts whose budgets have been disapproved, the school district must revise and readopt its budget by October 8, reflecting changes in projected income and expense since July 1, and responding to the county superintendent's recommendations. The county superintendent must determine if the budget conforms with the standards and criteria applicable to final school district budgets and not later than November 8, will approve or disapprove the revised budgets. If the budget is disapproved, the county superintendent will call for the formation of a budget review committee pursuant to Education Code Section Until a school district s budget is approved, the school district will operate on the lesser of its proposed budget for the current fiscal year or the last budget adopted and reviewed for the prior fiscal year. Under the provisions of State Assembly Bill 1200, each school district is required to file interim certifications with the county office of education as to its ability to meet its financial obligations for the remainder of the then-current fiscal year and, based on current forecasts, for the subsequent two fiscal years. Each school district is required by the Education Code to file two interim reports each year the first report for the period ending October 31 by not later than December 15, and the second report for the period ending January 31 by not later than March 15. Each interim report shows fiscal year-to-date financial operations and the current budget, with any budget amendments made in light of operations and conditions to that point. The county office of education reviews the certification and issues either a positive, negative or qualified certification. A positive certification is assigned to any school district that will meet its financial obligations for the current fiscal year and subsequent two fiscal years. A negative certification is assigned to any school district that will be unable to meet its financial obligations for the remainder of the fiscal year or subsequent fiscal year. A qualified certification is assigned to any school district that may not meet its financial obligations for the current fiscal year or subsequent two fiscal years. If either the first or second interim report is not positive, the county superintendent may require the school district to provide a third interim report by June 1 covering the period ending April 30. If not required, a third interim report is generally not prepared (though may be at the election of the school district). The county superintendent must annually present a report to the governing board of the school district and the State Superintendent of Public Instruction regarding the fiscal solvency of any school district with a disapproved budget, qualified interim certification, or negative interim certification, or that is determined at any time to be in a position of fiscal uncertainty pursuant to Education Code Section Any school district with a qualified or negative certification must allow the county office of education at least ten working days to review and comment on any proposed agreement made between its bargaining units and the school district before it is ratified by the school district board (or the state administrator). The county superintendent will notify the school district, the county board of education, the school district governing board and the school district superintendent (or the state administrator), and each parent and teacher organization of the school district within those ten days if, in his or her opinion, the agreement would endanger the fiscal well-being of the school district. Also, pursuant to Education Code Section 42133, a school district that has a qualified or negative certification in any fiscal year may not issue, in that fiscal year or the next succeeding fiscal year, non-voter approved debt unless the county superintendent of schools determines that the repayment of that debt by the school district is probable

42 The filing status of the District s interim reports for the past five years appears in the following table. Certifications of Interim Financial Reports Washington Unified School District Fiscal Year First Interim Second Interim Positive Positive Positive Positive Positive Positive Positive Positive Positive Positive Financial Statements Figures presented in summarized form herein have been gathered from the District s financial statements. The audited financial statements of the District for the fiscal year ending June 30, 2016, have been included in the appendix to this Official Statement. See APPENDIX A attached hereto. Audited financial statements and other financial reports for prior fiscal years are on file with the District and available for public inspection during normal business hours. Copies of financial statements relating to any year are available to prospective investors and or their representatives upon request by contacting Washington Unified School District, 930 Westacre Road, West Sacramento, California 95691, telephone (916) Attention: Assistant Superintendent of Business Services, or by contacting the Municipal Advisor, Government Financial Strategies inc., 1228 N Street, Suite 13, Sacramento, California , telephone (916)

43 The following table sets forth the District s audited General Fund balance sheet data for fiscal years through General Fund Balance Sheet Washington Unified School District Audited Audited Audited Audited ASSETS Cash and Investments $7,612,340 $9,839,235 $15,892,918 $16,891,015 Receivables 12,168,481 13,838,948 2,817,316 3,353,312 Prepaid Expenditures ,154,198 Due From Other Funds 253,887 92, ,510 1,967,023 Stores Inventory 28,640 23,366 21,295 18,361 TOTAL ASSETS $20,064,298 $23,795,461 $18,858,989 $23,383,909 LIABILITIES AND FUND BALANCES LIABILITIES Accounts Payable $6,984,977 $10,690,628 $4,853,698 $2,569,747 Unearned Revenue 206, , , ,258 Due to Other Funds 40,965 42, ,667 58,111 TOTAL LIABILITIES $7,232,625 $11,141,298 $5,721,239 $3,288,116 FUND BALANCES Nonspendable $54,590 $73,011 $47,245 $1,197,559 Restricted 2,207,986 2,907,503 2,175,786 2,580,614 Assigned 1,450,000 1,500,000 6,743,718 12,087,425 Unassigned 9,119,097 8,173,649 4,171,001 4,230,195 TOTAL FUND BALANCES $12,831,673 $12,654,163 $13,137,750 $20,095,793 TOTAL LIABILITIES AND FUND BALANCES $20,064,298 $23,795,461 $18,858,989 $23,383,

44 The following table sets forth the District s audited General Fund activity for fiscal years through and projected activity for fiscal year as of the second interim report. General Fund Activity Washington Unified School District Audited Audited Audited Audited 2 nd Interim BEGINNING BALANCE $15,199,308 $12,831,673 $12,654,163 $13,137,750 $20,095,793 REVENUES Revenue Limit/LCFF $37,230,144 $47,757,180 $54,652,961 $62,564,464 $67,602,636 Federal Revenue 4,246,628 3,835,261 4,024,853 4,447,042 4,742,106 Other State Revenues 9,883,273 4,289,631 6,501,300 9,407,653 5,087,731 Other Local Revenues 3,222,755 2,786,749 3,415,488 3,303,005 3,064,207 TOTAL REVENUES $54,582,800 $58,668,821 $68,594,602 $79,722,164 $80,496,680 EXPENDITURES Certificated Salaries $26,715,246 $27,388,605 $30,289,956 $32,183,335 $36,741,231 Classified Salaries 8,647,161 8,961,700 9,940,549 11,275,340 12,107,559 Employee Benefits 10,064,234 10,236,153 12,413,898 14,964,054 14,670,623 Books and Supplies 2,230,759 2,547,761 3,272,060 3,351,793 6,043,556 Services and Operating Expenses 7,385,214 7,565,305 8,406,482 9,888,232 11,515,450 Capital Outlay 511, ,113 1,353,481 1,035,268 2,283,601 Other Outgo (232,691) (42,530) 179, ,277 (165,921) TOTAL EXPENDITURES $55,321,687 $56,984,107 $65,855,797 $72,842,299 $83,196,099 OTHER FINANCING SOURCES ($1,628,748) ($1862,224) ($2,255,218) $78,178 ($1,266,678) NET INCREASE (DECREASE) ($2,367,635) ($177,510) 483,587 $6,958,043 ($3,966,097) ENDING BALANCE $12,831,673 $12,654,163 $13,137,750 $20,095,793 $16,129,696 Totals may not foot due to rounding. Revenues The District categorizes its General Fund revenues into four primary sources: revenue limit / LCFF sources, federal revenues, other State revenues and other local revenues. Revenue Limit / Local Control Funding Formula (LCFF). For nearly half a century, State school districts operated under general purpose revenue limit funding based on a district s average daily student attendance, much of which was restricted by category as to how each dollar could be spent. Revenue limit funding was calculated by multiplying a school district s ADA (using the greater of the current or prior year P-2 ADA) by the school district s revenue limit funding per ADA, with certain adjustments. In landmark legislation effective fiscal year , the State introduced a new formula, the local control funding formula ( LCFF ), to be phased in through fiscal year LCFF consolidates most categorical programs in order to give school districts more control over how to spend their revenues. At full implementation of LCFF, school districts will receive a uniform base grant per student based on grade span, a supplemental grant based on an unduplicated count of the targeted disadvantaged students ( unduplicated students ) in the school district, and an additional concentration grant based on the number of unduplicated students in the school district above 55 percent, with qualifying schools receiving an additional

45 necessary small school allowance. Approximately percent of the District s students were unduplicated students for fiscal year based on P-2 ADA. The base, supplemental, and concentration grant amounts per student were set in fiscal year and are subject to cost-of-living adjustments thereafter. School districts that would otherwise receive less funding at full implementation of LCFF than they did under the revenue-limit system are also guaranteed an additional Economic Recovery Target ( ERT ) grant to restore funding to at or above their pre-recession funding, adjusted for inflation. The ERT add-on is paid incrementally over the LCFF implementation period. In fiscal year , the District s LCFF funding at full implementation is calculated to be $70,694,983 as of the second interim report, comprised of $58,367,992 in base grant funding, $7,990,579 in supplemental grant funding, $3,925,248 in concentration grant funding, and $411,164 in add-on funding. To calculate LCFF funding during the phase-in period, school districts calculate their funding gap, the difference between LCFF funding calculated at full implementation and their funding floor, an amount based on fiscal year funding levels under the revenue limit system adjusted for prior LCFF phase-in adjustments. School districts receive their funding floor plus a percentage of their funding gap as specified in the State budget. In fiscal year , the District estimates the funding gap percentage to be 55.3% as of the second interim report, leading to an LCFF entitlement of $67,602,636 (comprised of a funding floor of $63,780,075 plus gap funding of $3,822,561). See FUNDING OF PUBLIC EDUCATION IN THE STATE herein for more information about LCFF. Set forth in the following table is the District s P-2 ADA by grade span, total enrollment, and the percentage of unduplicated student enrollment for fiscal years through ADA, Enrollment and Unduplicated Student Enrollment Percentage Washington Unified School District Fiscal Year P-2 ADA Grades TK-3 1 P-2 ADA Grades P-2 ADA Grades P-2 ADA Grades Total Total P-2 ADA 1 Enrollment 2 Unduplicated Student Enrollment Percentage ,356 1,652 1,072 2,056 7,136 7, % ,414 1,716 1,030 2,123 7,283 7, ,404 1,713 1,024 2,130 7,271 7, ,353 1,771 1,159 2,120 7,403 7, Includes District funded County program ADA. 2 As of the October report submitted to the California Basic Educational Data System ( CBEDS ). 3 For purposes of calculating supplemental and concentration grants, a school district s fiscal year percentage of unduplicated students is determined solely as the percentage of its fiscal year total enrollment. For fiscal year , the percentage of unduplicated students is based on the two-year average of unduplicated student enrollment in fiscal years and Beginning in fiscal year , a school district s percentage of unduplicated student enrollment is based on a rolling average of such district s unduplicated student enrollment for the then-current fiscal year and the two immediately preceding fiscal years. 4 Projected

46 Set forth in the following table is the District s actual LCFF funding per ADA for fiscal years through and budgeted LCFF funding per ADA for fiscal year LCFF Funding per ADA Washington Unified School District Fiscal Year Funded ADA 1 Funding per ADA 2 Average LCFF Average LCFF Funding per ADA at Full Implementation ,136 $6, $9, ,283 7, , ,271 8, , ,403 9, , Funded ADA is the greater of current year P-2 ADA and prior year P-2 ADA. 2 Represents average LCFF funding per ADA across grade spans. 3 Projected as of the second interim report. Funding of the District s revenue limit and LCFF is accomplished by a mix of a) local taxes (composed predominantly of property taxes, and including miscellaneous taxes and community redevelopment funds, if any) and b) State apportionments. The majority of the District s revenue limit / LCFF funding comes from State apportionments. LCFF revenues were 79.7 percent of General Fund revenues in fiscal year , were 78.5 percent of General Fund revenues in fiscal year , and are projected to be 84.0 percent of General Fund revenues in fiscal year as of the second interim report. Federal Revenues. The federal government provides funding for several District programs. These federal revenues, most of which historically have been restricted, were 5.9 percent of General Fund revenues in fiscal year , were 5.6 percent of General Fund revenues in fiscal year , and are projected to be 5.9 percent of General Fund revenues in fiscal year as of the second interim report. Other State Revenues. In addition to apportionment revenues, the State provides funding to the District for categorical programs. Many categorical programs previously classified as other State revenues were incorporated under LCFF in fiscal year , causing a reduction in other State revenues. These other State revenues were 9.5 percent of General Fund revenues in fiscal year , were 11.8 percent of General Fund revenues in fiscal year , and are projected to be 6.3 percent of General Fund revenues in as of the second interim report. Included in other State revenues are proceeds received from the State lottery. Other Local Revenues. Revenues from other local sources were 5.0 percent of General Fund revenues in fiscal year , were 4.1 percent of General Fund revenues in fiscal year , and are projected to be 3.8 percent of General Fund revenues in fiscal year as of the second interim report. The District is projected to receive $1,250,000 in passthrough payments in fiscal year as of the second interim report from the dissolution of redevelopment agencies. See CONSTITUTIONAL AND STATUTORY PROVISIONS AFFECTING DISTRICT REVENUES AND EXPENDITURES Community Redevelopment and Revitalization herein. Expenditures The largest components of a school district s general fund expenditures are certificated and classified salaries and employee benefits. Changes in salary and benefit expenditures from year to year are generally based on changes in staffing levels, negotiated salary increases, and the overall cost of employee benefits. Even with no negotiated salary increases or changes in staffing levels, normal step and column advancements on the salary scale result in increased salary expenditures. The District has completed negotiations with its classified and certificated bargaining units to finalize salary and benefit increases for fiscal year However, while salary and benefit increases for certificated staff are included in the fiscal year second interim report, increases for classified staff were not finalized until after the fiscal year second

47 interim report was prepared and are not included. Salary and benefit increases for classified staff are projected to increase expenditures by $681,585 from the levels in the fiscal year second interim report. Employee salaries and benefits were 79.9 percent of General Fund expenditures in fiscal year , were 80.2 percent of General Fund expenditures in fiscal year , and are projected to be 76.3 percent of General Fund expenditures in fiscal year as of the second interim report. Short-Term Borrowings The District has no short-term debt outstanding. The District has in the past issued short-term tax and revenue anticipation notes. Proceeds from the issuance of notes by the District have been used to reduce inter-fund dependency and to provide the District with greater overall efficiency in the management of its funds. The District has never defaulted on any of its short-term borrowings. Capitalized Lease Obligations The District has made use of various capital lease arrangements in the past under agreements that provide for title of items and equipment being leased to pass to the District upon expiration of the lease period. As of June 30, 2016, the District has capital lease arrangements in the amount of $35,336 outstanding, scheduled to be repaid in fiscal year In June 2007, the District issued the Washington Unified School District 2007 Certificates of Participation (the 2007 COP ) in the aggregate principal amount of $70,465,000. In April 2010, the District issued a real-property lease-purchase qualified school construction bond (the 2010 QSCB ) in the amount of $8,885,432. In October 2012, the District issued a realproperty lease-purchase clean renewable energy bond (the 2012 CREB ) in the amount of $7,306,260. The District receives a subsidy from the U.S. Treasury for a portion on the interest due on the 2012 CREB. In November 2014, the District issued the Washington Unified School District Certificates of Participation (2014 Solar Energy and Conservation Projects) (the 2014 COP ) in the aggregate principal amount of $6,055,000. The District s outstanding capitalized lease obligations are set forth in the following table. Outstanding Capitalized Lease Obligations Washington Unified School District Issue Date Issued Amount Issued Final Maturity Outstanding Principal as of April 30, 2017 Debt Service in Fiscal Year COP June 28, 2007 $70,645,000 August 1, 2037 $60,585,000 $4,723, QSCB April 9, ,885,432 March 15, ,885, , CREB October 23, ,306,260 October 23, ,113, , COP November ,055,000 December 1, ,970, ,056 $81,553,557 $5,880,994 The District expects to issue the Washington Unified School District Certificates of Participation (2017 Refunding and Capital Projects) in June 2017 in the amount of $63,805,000 to finance certain capital facilities projects and prepay the 2007 COP in full. Long-Term Borrowings 1999 Election. In an election held on November 2, 1999 (the 1999 Election ), voters within the District authorized the issuance of not-to-exceed $17.54 million of general obligation bonds. In May 2001, the District issued the first series of bonds under the 1999 Election, the Washington Unified School District Election of 1999 General Obligation Bonds, Series A

48 (the 1999A Bonds ) in the aggregate principal amount of $10,070,000. In March 2007, the District issued the second series of bonds under the 1999 Election, the Washington Unified School District Election of 1999 General Obligation Bonds, Series B (the 1999B Bonds ) in the aggregate principal amount of $7,469,422. No material authorization remains under the 1999 Election Election. In an election held on March 2, 2004 (the 2004 Election ), voters within the District authorized the issuance of not-to-exceed $52.0 million of general obligation bonds. In August 2004, the District issued the first series under the 2004 Election, the Washington Unified School District Election of 2004 General Obligation Bonds, Series A (the 2004A Bonds) in the aggregate principal amount of $39,999,040. In November 2006, the District issued the second series of bonds under the 2004 Election, the Washington Unified School District Election of 2004 General Obligation Bonds, Series B (the 2004B Bonds ) in the aggregate principal amount of $12,000,433. No material authorization remains under the 2004 Election. In November 2010, the District issued the Washington Unified School District 2010 General Obligation Refunding Bonds (the 2010 Refunding Bonds ) in the aggregate principal amount of $9,510,000 to refund a portion of the 1999A Bonds. In October 2012, the District issued the Washington Unified School District 2012 General Obligation Refunding Bonds (the 2012 Refunding Bonds ) in the aggregate principal amount of $21,150,000 to refund a portion of the 2004A Bonds Election. In the 2014 election, voters within the District authorized the issuance of not-to-exceed $49.8 million in general obligation bonds. In June 2015, the District issued both the Washington Unified School District General Obligation Bonds, Election of 2014, Series 2015 (the 2015 Bonds ) in the aggregate principal amount of $24,900,000, and the Washington Unified School District 2015 General Obligation Refunding Bonds (the 2015 Refunding Bonds ) in the aggregate principal amount of $6,225,000 to refund portions of the 1999B Bonds and the 2004B Bonds. Upon the issuance of the Bonds, the second series authorized by the 2014 Election, the District will have no remaining authorization under the 2014 Election. The following table summarizes the District s outstanding long-term indebtedness as of April 30, Outstanding General Obligation Bonds Washington Unified School District Authorization Issue Final Maturity Principal Amount Issued Outstanding Principal as of April 30, Debt Service in Fiscal Year Election 1999B Bonds August 1, 2031 $7,469,422 $3,279,422 $204, Election 2004A Bonds August 1, ,999,040 10,554, Election 2004B Bonds August 1, ,000,433 6,905, , Election 2010 Refunding March 15, ,510,000 6,915, , Election 2012 Refunding October 23, ,150,000 15,735,000 2,419, Election Series 2015 August 1, ,900,000 23,920,000 1,929, & 2004 Election 2015 Refunding August 1, ,225,000 5,875, ,950 Total $73,183,895 $6,116,725 1 Excludes accreted value of capital appreciation bonds. The District has not defaulted on the payment of principal of or interest on any of its long-term indebtedness in the past ten years. CONSTITUTIONAL AND STATUTORY PROVISIONS AFFECTING DISTRICT REVENUES AND EXPENDITURES Background From the Separation of Sources Act (1910) until Proposition 13 (1978), local governments had control over property tax rates and revenues within their jurisdiction. Voter approval was not required for most taxes, charges or fees imposed by local governments. Each school district in the State raised revenue by taxing local property owners according to a tax rate

49 established by its governing board, subject to voter approval, and received some supplemental funds from the State. The State s role in providing for public education and education facilities was limited during this time. Local school districts relied largely on general obligation bonds as the primary source of funding for school facilities. The passage of Proposition 13 brought this local property tax system to an end, fundamentally changing local government finance. Local government entities are no longer authorized to levy a general tax rate. Instead, they share in the revenues generated by Proposition 13 s countywide tax rate. In the year following the passage of Proposition 13, local property tax revenue across the State fell approximately 60 percent. In order for school districts to continue operating, the State had to assume primary responsibility for public school funding, replacing the lost property tax revenue with moneys from the State general fund. As a result of Proposition 13, control over revenues shifted away from local school districts to the State government. Proposition 13 also eliminated the ability of school districts to issue bonds; for a decade, the State provided some of the cost of school facilities projects until the passage of Proposition 46 (1986) restored the ability of school districts to issue such bonds. Article XIIIA of the State Constitution Article XIIIA, added to the State Constitution by Proposition 13 and amended over time, limits the ad valorem tax rate that can be levied on real property to one percent of its full cash value except to pay debt service, discussed below. Full cash value is defined as the property s assessed value as of the fiscal year tax bill, annually increased by the lesser of either two percent or the rate of inflation. Subsequently, the property is reappraised for tax purposes upon a change in ownership or new construction. Several types of changes in ownership and construction have been exempted from the reassessment requirement by amendment, including improvements for seismic retrofit, solar energy, fire prevention, disability access, certain purchases of replacement dwellings for persons over age 55 and by property owners whose original property is destroyed in a declared disaster, and certain transfers of property between family members. In most years, the market value of a property increases at a rate greater than the maximum two percent increase a county is allowed to calculate. As amended by Proposition 8 (1978), Article XIIIA allows for a county to temporarily reduce the assessed value to current market value when the market value of the property falls below the property s adjusted acquisition value due to an economic recession, natural disaster or other cause of damage. In years in which reduced reassessments are widespread, property tax revenue available to local governments such as school districts is reduced. Pursuant to interpretation of the Revenue and Taxation Code and upheld by State courts, once the market has rebounded or the property has been repaired to substantially its original condition, a county may increase the assessed value of the property at a rate greater than two percent annually until it has reached the property s pre-decline assessed value. As a result of these laws, real property that has been owned by the same taxpayer for many years can have an assessed value that is much lower than the market value of the property and of similar properties more recently sold. Likewise, changes in ownership of property and reassessment of such property to market value commonly lead to increases in aggregate assessed value even when the rate of inflation or consumer price index would not permit the full two percent increase on any property that has not changed ownership. Any increase or decrease in assessed valuation is allocated among the various jurisdictions. The one percent tax is levied and collected by each county, and the revenue is apportioned by the county to each local government agency in the taxing area roughly in proportion to the relative shares of taxes as levied prior to Local government agencies, including school districts, may not directly levy any ad valorem tax, unless the tax is levied to pay debt service (interest and redemption charges) on a local government s indebtedness approved by voters prior to July 1, 1978 or thereafter, as amended by Proposition 46 (1986), bonded indebtedness for the acquisition or improvement of real property approved by a two-thirds majority. In addition, Proposition 39 (2000) added a provision allowing for a lowered voter approval rate specifically for bonds to fund school facilities projects. A school district or community college district may levy ad valorem taxes in excess of one percent with 55 percent voter approval if the bonds will be used for the construction, reconstruction, rehabilitation or replacement of school facilities or the acquisition or lease of real property for school facilities. The measure must include the specific list of projects to be funded and certification that the school district s governing board has evaluated safety, class size reduction, and information technology needs in developing the list, and must conduct annual, independent financial and performance audits until all bond funds have been spent to ensure that the bond funds have been used only for the projects listed in the measure. Pursuant to legislation, the projected tax rate per $100,000 of taxable property value levied as the result of any single election may be no more than $60 in a unified school district, $30 in a high school or elementary school district, or $25 in a community college district

50 Constitutional Protection For Owners of Municipal Securities State law imposes a duty on the county tax collector to levy a property tax sufficient to pay debt service on voter-approved indebtedness as discussed above. The initiative power cannot be used to reduce or repeal the authority and obligation of a local government, such as a school district, to levy taxes pledged as security for payment of general obligation bonds or to otherwise interfere with performance of the duty of a local government, such as a school district, and the county with respect to such taxes. Although the initiative power may be used to reduce or repeal other types of charges or taxes imposed by local governments under Article XIIIC, discussed below, the law may not be construed to mean that any owner or beneficial owner of a municipal security assumes the risk of or consents to any initiative measure that would constitute an impairment of contractual rights under the contracts clause of the U.S. Constitution. Article XIIIB of the State Constitution Article XIIIB, added to the State Constitution by Proposition 4 (1979) (the Gann Limit ), amended by Proposition 111 (1990), limits the amount of certain funds, including tax revenues, that may be annually appropriated by the State and local governments, including school districts, to the amount appropriated the prior year, adjusted to reflect the rate of economic growth by measuring the change in per capita personal income and population. Certain payments are exempt from the appropriations limit calculation, including debt service payments; certain benefit payments, mandated expenses, State payments to school districts and community college districts, increases in revenues gained from fuel, vehicle and tobacco taxes, emergency appropriations; and qualified capital outlay projects (projects involving fixed assets such as land or construction that have an expected life of more than ten years and a value greater than $100,000). Tax revenues in excess of the appropriation limit are shared between increased education funding and taxpayer rebates. Calculated over two years, half of any excess is transferred to K-14 school districts and half is returned to taxpayers through a revision of tax rates within two fiscal years. Any such excess revenues transferred to K-14 school districts are not counted as part of the school districts base expenditures for calculating their entitlement for State aid in the next year, nor is the State s appropriations limit increased by this amount. If a K-14 school district s revenues exceed its appropriations limit, the school district may increase its appropriations limit to equal its spending by borrowing from the State s appropriations limit. Articles XIIIC and XIIID of the State Constitution Articles XIIIC and XIIID, added to the State Constitution by Proposition 218 (1996) and amended over time, limit the ability of local governments, including school districts, to levy and collect non-ad valorem taxes, assessments, fees and charges. The law establishes that a tax must be either a general tax, requiring the approval of a simple majority of voters, the proceeds of which can only be used for general government purposes, or a special tax, requiring the approval of two-thirds of voters, the proceeds of which are used for a specific purpose, or if the tax is levied by a special-purpose government agency, including a school district. Any tax levied on property, other than the ad valorem tax governed by Article XIIIA, is a special tax, requiring the approval of two-thirds of voters. Special-purpose government agencies, such as a school district, cannot levy general taxes. The initiative power can be used to reduce or repeal most local taxes, assessments, fees and charges. Article XIIID deals with assessments and property-related fees and charges and expressly cautions that its provisions shall not be construed to affect existing laws relating to the imposition of fees or charges as a condition of property development; however it is not clear whether the initiative power is available to repeal or reduce developer and mitigation fees imposed by the District. The District has no power to impose taxes except those property taxes associated with a general obligation bond election, following approval by 55 percent or two-thirds of the District s voters, depending upon the legal authority for the issuance of such bonds. As amended by Proposition 26 (2010), the law defines any levy, charge, or exaction of any kind imposed by a local government as a tax requiring voter approval. The following exceptions do not require voter approval: a reasonable charge for a specific benefit, privilege, product or service that is received only by the payor of the charge; a reasonable charge for regulatory costs of issuing a license or permit, performing an inspection or audit, or enforcing an order; a charge for use, rental, or purchase of government property; a charge, fine or penalty for violation of law; and assessments and propertyrelated fees imposed as a condition of property development. Although such fees and charges levied by one taxing jurisdiction do not directly impact the amount of revenue available to another taxing jurisdiction from ad valorem property taxes, if the ability to impose the fee or charge is restricted, it could indirectly impact such revenues

51 Minimum Guarantee of State Funding for Education Proposition 98 (1988), added Article XVI to the State Constitution, requiring that from all State revenues there shall first be set apart the moneys to be applied by the State for support of the public school system and higher education. Known as the minimum guarantee, funding for K-14 school districts, made up of a combination of State general fund income tax revenues and local property tax revenues, must be the greater of either the same percentage of State general fund revenues as was appropriated in fiscal year , or the amount actually appropriated to such districts from the State general fund in the previous fiscal year, adjusted for increases in enrollment and changes in the cost of living. The minimum guarantee allocated each year, determined by a set of tests, is approximately 40 percent or more of State general fund revenues. Test 1 (share of the State general fund) allocates approximately 41 percent of the State general fund revenue to K-14 school districts. Test 1 only applies if Test 2 or Test 3 (described below) does not result in additional funding for K-14 school districts. Test 1 has been used 4 times in the last 29 years, including fiscal year Test 2 (personal income) provides that K-14 school districts shall receive at least the same amount of combined State aid and local tax dollars as was received in the prior year, adjusted for the statewide growth in K-12 ADA and an inflation factor equal to the annual percentage change in per capita personal income. Test 2 is used if it results in more funding for K-14 school districts than Test 1 (unless Test 3 applies instead). Test 2 has been used in 14 of the past 29 years, including fiscal year Test 3 (available revenues) only applies in years in which the annual percentage change in per capita State general fund tax revenues plus one-half percent is lower than the Test 2 inflation factor (i.e., the change in per capita personal income), in which case the inflation factor is reduced to the annual percentage change in per capita State general fund tax revenues plus one-half percent. Test 3 has been used 9 of the past 29 years, including fiscal year In any year in which Test 3 is used, the difference between the amount appropriated and the amount that would have been appropriated under Test 2 is considered a maintenance factor credit to K-14 school districts, to be restored in future years when State revenue growth rebounds to exceed personal income. In years of economic hardship, the State Legislature can suspend the minimum guarantee for a year by a two-thirds vote, which also triggers the maintenance factor obligation, to be restored in later years. Such suspension has only occurred twice, in fiscal years and The State Legislature has the authority to spend more than the minimum guarantee, although any increase creates a higher minimum floor for the following year; this has occurred from time to time. At times, the State also has had outstanding one-time Proposition 98 obligations known as settle-up obligations. A settle-up obligation is created when the minimum guarantee increases midyear and the State does not make an additional payment within that fiscal year to meet the higher guarantee. The increased amount is used as the base for the following year s minimum guarantee. Settle-up funds can be used for any educational purpose, including paying off other state one-time obligations, such as deferrals and mandates. In fiscal year , the State is projected to reduce the outstanding maintenance factor obligation to approximately $548 million. Community Redevelopment and Revitalization Beginning with the Community Redevelopment Act (1945) under Article XVI of the State Constitution, amended over time, until the termination and dissolution of the program in 2011, a local government could improve an economically depressed area by creating a redevelopment agency (an RDA ) to pay for development projects with the future increase in property tax revenue, or tax increment, attributable to the growth in assessed value of taxable property within the project area when the project was complete. However, the allocation of the tax increment to the local RDA caused a reduction in the one percent countywide property tax levy for other local taxing agencies, including school districts, although ad valorem property taxes in excess of the one percent property tax levy collected for payment of debt service on school district bonds were not affected. Although a school district could negotiate with the RDA for pass-through payments of local tax revenues, because the State was replacing the school district s lost tax revenue, there was little incentive for most school districts to negotiate for greater amounts of pass-through from the RDAs. The State s share of reimbursements to such school districts soared into the hundreds of millions of dollars per year. Facing economic crisis, Assembly Bill, First Extended Session 26 ( AB1X 26 ) (2011), upheld by the State Supreme Court in California Redevelopment Association v. Matosantos (2011), was enacted to dissolve the more than 400 RDAs in the State to preserve funding for core public services at the local level. Successor agencies were established to facilitate the management of projects underway, making payments on enforceable obligations, and disposing of assets and properties. Senate Bill 107 (2015) streamlined the dissolution process and expanded the types of loans for which cities and counties can seek

52 reimbursement. Some school districts receive pass-through payments during the dissolution process. See DISTRICT FINANCIAL INFORMATION Revenues herein. Assembly Bill 2 ( AB2 ) (2015), the result of several legislative efforts to replace the redevelopment law in order to provide local government options for sustainable community economic development, is a limited version of the former law, targeting only the State s most impoverished areas. AB2 allows a local government to create a community revitalization investment area ( CRIA ) if several conditions are met, including measures of unemployment, crime, and dilapidated infrastructure and residential structures, which are required to insure that the CRIA process is actually used for the intended purpose of alleviating blight. Significantly, school districts are prohibited from participating in the CRIA; because schools may not contribute their share of the tax increment to the project area, the funding impact to schools and the State is avoided. Assembly Bill 2492 (2016) was enacted that clarified implementation issues of AB2. Limits on State Authority Over Local Tax Revenues State and local governments funding and responsibilities are interrelated. Both levels of government share revenues raised by certain taxes such as sales and fuel taxes, and both also share in the costs for some programs such as health and social services. Although the State does not receive local property tax revenue, it has had authority over the distribution of these revenues among local agencies and school districts. Under Article XIIIA, the State had the authority to permanently shift property taxes among local governments. At times, the State fulfilled some portion of the Proposition 98 minimum guarantee by shifting some of the property tax revenues share belonging to cities, counties, other special districts and redevelopment agencies to K-14 school districts through an Educational Revenue Augmentation Fund ( ERAF ) established in each county. Proposition 1A (2004) amended Articles XI and XIII of the State Constitution to require two-thirds approval of the State Legislature to shift property tax revenues allocation between local governments, preventing the State from reducing the property tax share allocated to cities, counties, and special districts. However, the State could still transfer property tax revenues to schools in the case of severe fiscal hardship and two-thirds approval of the State Legislature. Proposition 22 (2010) amended Articles XIII and XIX of the State Constitution to further restrict the State s control over local property taxes in order to stabilize local government revenue sources. Even during times of severe fiscal hardship, the State could not take revenue derived from locally imposed taxes, such as parcel taxes, hotel taxes, utility taxes, and sales taxes, for State purposes, nor could the State delay distribution of tax revenues to local governments, redirect redevelopment agency property tax revenue to other local governments such as school districts, or shift money to the school districts under an ERAF. As a result, the State would have to take other actions to balance its budget in some years, such as reducing State spending or increasing State taxes. Proposition 22 s restriction of the State s ability to shift local funds made K-14 school districts more directly dependent on the State general fund for Proposition 98 funding. Deferrals of Payments Owed to K-14 School Districts Beginning fiscal year , as a temporary budget solution, the State postponed, or deferred, payments owed to K-14 school districts for a few weeks, allowing the State to save money while school districts continued to operate by borrowing money or dipping into reserves. Because the deferral lasted only a matter of weeks, there was little impact on school district finances or operations. However, especially during the last recession, the State came to rely excessively on deferrals of payments to K-14 school districts to balance the State budget. As both the length and the amount of deferrals increased, the State withheld several billions of dollars from school districts, resulting in a financial crisis for K-14 school districts which could no longer borrow enough or find reserves to cover the funding shortfall, and program reduction and teacher layoffs ensued. State reliance on payment deferrals peaked in fiscal year when the State deferred approximately 20 percent of all K-14 school district funding. Increasing deferrals authorize school districts to spend at a level of programming the State cannot afford, making the State budget less transparent, and create large future obligations of the State to repay the deferrals. However, as the economy has rebounded, the State has made the repayment of deferrals a priority, and repayment of the deferrals was completed in fiscal year Temporary State Tax Increases From 2008 to 2012, the State eliminated more than $56 billion from State and local funding for local services including education, police, fire, and health care. Proposition 30 (2012) allows the State to levy a temporary sales tax (lasting four years)

53 and income tax on high-income earners (lasting seven years), the revenues of which are dedicated to increased education funding and to balance the State budget. Existing law requires that in years in which the State s general fund revenues grow by a large amount funding for education must also be increased by a large amount. The tax revenues allocated to education as part of the minimum guarantee are deposited into the Education Protection Account ( EPA ), recalculated and distributed quarterly to K-14 school districts (89 percent to K-12 school districts and 11 percent to community college districts) as a continuing appropriation not subject to budget adoption. The funds are distributed in the same manner as existing unrestricted per-student funding. The Proposition 30 tax revenue is included in the Proposition 98 calculation, raising the guarantee by billions each year. The remaining Proposition 30 tax revenues will be used to balance the budget. Proposition 55 (2016) extends the income tax increase on high-income taxpayers through the year Approximately half of the revenue raised by this measure is allocated to K-14 school districts. The measure also directs half of any excess revenues, up to a maximum of $2 billion, for additional funding for Medi-Cal, if revenues exceed the constitutionally required education spending and the costs of government programs in place as of January 1, A portion would also be saved in reserves and spent on debt payments. Any remaining revenues would be available for any State purpose. Enacted Budget Required for Disbursement of State Funds In years in which the State Legislature has not been able to enact a budget by the required deadline, the fiscal year begins without an enacted budget, and the State has, in some cases, issued registered warrants, or IOUs, to pay certain State employees wages and State debts. In 1988, during such a budgetary impasse, a taxpayers association argued that such warrants were not authorized without an enacted budget. In the case, known as Jarvis v. Connell, the State Court of Appeal held that, without an enacted budget, State funds may not be disbursed unless the payment is authorized by the State Constitution, as a continuing appropriation, or by federal mandate. This could affect school district budgets to the extent that, if there is neither an enacted budget nor emergency appropriation, State payments owed to school districts could be delayed unless they are required as a continuing appropriation or federal mandate. As upheld by the State Supreme Court in 2003, the State is not authorized to disburse funds without an enacted budget or other appropriation, but under federal law is required to pay State employees who are protected by federal wage laws under the Fair Labor Standards Act. State and School District Budgetary Reserves Proposition 58 (2004) amended Article IV of the State Constitution to require the State to enact a balanced budget, in which estimated revenues would meet or exceed estimated expenditures in each year, and that mid-year adjustments be made if the budget fell out of balance. The law established the Budget Stabilization Account ( BSA ) in the State s general fund, which required a deposit of three percent of the State general fund each year. Proposition 2 (2014) addressed the need for long-term financial stability in the State in the face of economic volatility by dedicating funds to pay down the State s debt, changing the State s reserve policies, and creating a separate budget reserve for K-14 school districts called the Public School System Stabilization Account ( PSSSA ). The law reduced legislative discretion over the timetable for the repayment of State debts and required that 1.5 percent of the State general fund be deposited into the BSA annually, plus an additional amount when the State experiences spikes in capital gains tax revenue in excess of eight percent of State general fund revenues. The PSSSA, also funded with capital gains spikes, is drawn upon when the Proposition 98 minimum guarantee exceeds available State general fund and property tax revenues. Through 2030, half of the funds deposited each year into the BSA must be used to pay fiscal obligations such as budget loans and unfunded State level pension plans. Funds may be withdrawn from BSA only for a disaster or if, over three years, spending does not rise above the highest level of spending. In the case of a recession, only half of the funds can be withdrawn. As a result, a large amount of incremental gains in the State s general fund revenues are allocated to building reserves and repaying debt. The State has a constitutional obligation to ensure that school districts continue to operate even in times of financial difficulty so that the education of students in the State is not disrupted. The State requires school districts to maintain a minimum reserve in their general fund s Reserve for Economic Uncertainties to help school districts manage cash flow, address unexpected costs, save for large purchases, reduce costs of borrowing money, and mitigate the volatility in funding produced by the reliance on tax revenue funding sources. The minimum reserve amount required depends on the size of the school district s enrollment. Smaller school districts are required to keep a higher percentage of reserves because they are more easily overwhelmed by unexpected costs, such as a single major facility repair, which could deplete most of its reserves in a

54 single year. School districts with enrollment of 300 or fewer students, which represent 25 percent of school districts in the State, must keep a minimum reserve of five percent of expenditures. School districts with enrollment of 301 to 1,000 students, which represent 17 percent of school districts in the State, must keep a minimum reserve of four percent. School districts with enrollment of 1,001 to 30,000 students, which represent 55 percent of school districts in the State, must keep a minimum reserve of three percent. School districts with enrollment of 30,001 to 400,000 students, which represent three percent of school districts in the State, must keep a minimum reserve of two percent. The one school district in the State with an enrollment of 400,001 or more students must keep a minimum reserve of one percent. Many school districts attempt to keep their reserve levels higher than State minimum requirements, from five percent to as much as 25 percent of expenditures. A 17 percent reserve is equal to approximately two months of expenditures and is a standard reserve level for local public agencies. Senate Bill 858 (2014), enacted as trailing legislation to the State budget, requires school districts, in the event of a deposit by the State to the PSSSA, to reduce total assigned and unassigned reserves to no more than twice its minimum reserve for economic uncertainty, ranging from one to five percent of expenditures depending on the size of the school district. County education officials could exempt a school district from the cap if the school district demonstrates extraordinary fiscal circumstances, including undertaking multi-year infrastructure or technology projects. A smaller reserve could affect the school district s financial condition in the event of an economic downturn. The District cannot predict or when a deposit to the PSSSA might occur or whether future legislation will be enacted that changes this requirement. School Facilities Funding The Leroy F. Greene School Facilities Act (1998) established the State Facilities Program ( SFP ) to allocate funding grants based on proposals submitted by school districts for the new construction of or the modernization of existing school facilities, although the program has evolved to allow funding for other types of school facility needs including facility hardship, seismic mitigation, charter school facilities, relief of overcrowding, career technical education facilities, incentives for energy efficiency and high-performance architectural attributes, and joint-use programs with other government entities. Funding for SFP grants comes from statewide general obligation bonds approved by the voters in the State. The State retires these bonds by making annual debt service payments. In fiscal year , the State will pay $2.4 billion in debt service on previously issued K-12 facilities bonds and $300 million in debt service on community college facilities bonds. Proposition 1A (1998) provided $9.2 billion ($6.7 billion for K-12 facilities), Proposition 47 (2002) provided $13.2 billion ($11.4 billion for K-12 facilities), Proposition 55 (2004) provided $12.3 billion ($10 billion for K-12 facilities), Proposition 1D (2006) provided $10.4 billion ($7.3 billion for K-12 facilities), and Proposition 51 (2016), the first initiative facilities bond measure, provides $9 billion ($6 billion for K-12 facilities). The payment the State must make on Proposition 51 will average approximately $500 million per year. Proposition 51 amends the Education Code, prescribing the fiscal allocation and purpose of the $9 billion bond and establishing the 2016 State School Facilities Fund and the 2016 California Community College Capital Outlay Bond Fund in the State Treasury. Of the total amount, $6 billion is allocated to K-12 facilities (half for new construction and half for modernization), $500 million for charter schools, $500 million for career technical education programs, and $2 billion to community colleges. In most cases, K-12 school and community college districts that receive funding for approved projects must match the funding with local funding according to the type of project. Projects for the purchase of land and new construction are matched evenly. Modernization projects require a match of 40 percent local funding to 60 percent State funding. If no local funding is available, the school district can apply for additional grant funding. Community college projects do not have a specified contribution model and are determined individually. K-12 school and community college districts may sell local general obligation bonds to cover the school district s share of the cost of facility projects. K-12 school districts may also raise funds for facilities by charging fees on new development (community college districts may not). Both K-12 school and community college districts may also raise funds by parcel taxes and other methods used less frequently. Impact of Future Legislation Laws affecting school district funding and the power of State and local governments to raise and spend revenue have been subject to many changes as voters and lawmakers react to economic and political cycles. The complex patchwork of the many different provisions at times results in uncertainty regarding their operation or interpretation. Many of the laws discussed

55 above were enacted through the State s initiative process. Initiative constitutional amendments may be changed only by another statewide initiative. Legislative constitutional provisions may be changed by a majority vote of both houses of the State Legislature and approval by the Governor of California (the Governor ), if the change furthers the purposes of the provision. The District cannot predict whether or when the voters in the State or the State Legislature will approve further legislation that could restrict the District s sources of revenue or its ability to spend that revenue, or require the District to appropriate additional revenue. FUNDING OF PUBLIC EDUCATION IN THE STATE Sources of Revenue for Public Education There are four general sources of funding for K-12 public education in the State: the federal government, local property taxes, other local funding sources and State funding, the principal source of funding for most school districts. Proposition 13 eliminated the possibility of raising additional ad valorem property taxes above one percent for general-purpose school support, and the courts have declared that school districts may not charge fees for school-related activities, unless the charge is specifically authorized by law for a particular program or activity. See CONSTITUTIONAL AND STATUTORY PROVISIONS AFFECTING DISTRICT REVENUES AND EXPENDITURES herein. State Funding. Many school districts in the State receive the majority of their funds from the State. In fiscal year , State funds are expected to account for approximately 60 percent of State K-12 public education funding. There are three sources of State funds for K-12 public education: the Proposition 98 minimum guarantee, comprised of a combination of State general fund revenues and local property tax revenues, representing the majority (88 percent in fiscal year ) of State funding; additional State funds for targeted programs such as facilities and remaining categorical programs such as special education, nutrition, afterschool programs, and home-to-school transportation; and State lottery funds, a portion of which may only be used for instructional purposes. The Proposition 98 guaranteed minimum amount is set forth each year in the State budget. See The State Budget and The Proposed State Budget herein. More than 60 percent of the State s general fund revenue comes from personal income taxes, with capital gains taxes representing more than ten percent of the State s general fund revenue, so a downturn in the stock market may significantly impact the State s general fund. Because funding for education in the State depends on the amount of money available in the State general fund, the linkage can result in significant volatility in education funding. For instance, during the recent recession in fiscal year , State general fund revenues available for education funding were approximately eight percent less than the amount available four years prior. Provisions added to the State Constitution and statutes in 2013 and 2014 attempt to provide funding stability to public education by capturing spikes in capital gains revenue to use for paying down debts and obligations and to create reserves. See CONSTITUTIONAL AND STATUTORY PROVISIONS AFFECTING DISTRICT REVENUES AND EXPENDITURES herein. Revenue Limit Funding. The State Revenue Limit was instituted in fiscal year to provide a mechanism to calculate the total amount of general-purpose revenue a school district, community college district or county office of education is entitled to receive from combined State and local sources per average daily attendance, known as its revenue limit, and the funding from this calculation formed the bulk of school districts income, and was annually increased to adjust for changes in the cost of living. The revenue limit for each school district or county office of education was funded first by the property tax revenue available to that entity, with the remaining balance filled by State funds. Basic aid districts, whose local property tax revenues exceeded their calculated revenue limit, did not receive State revenue limit funding, although such districts did receive the constitutionally required minimum funding, or basic aid per pupil, and categorical State and federal aid that was restricted to specific programs and purposes. Local Control Funding Formula (LCFF). In landmark legislation, the fiscal year State budget replaced revenue limit funding with the LCFF. The LCFF transfers control over spending decisions to local authorities, requiring community input about those spending decisions along with increased transparency and accountability for the outcomes of those decisions. The general-purpose funds for school districts are now funneled through LCFF, and funds received through categorical programs are greatly reduced. As under the revenue limit system, the amount a school district is entitled to receive for general-purpose LCFF funds is financed through the local property tax revenue available to the school district, with the remaining balance funded by the State

56 Most public education funding from the State is provided through the LCFF, including approximately 80 percent of Proposition 98 funding for K-12 public education. As under the revenue limit, school districts continue to receive funds based on the greater of prior year or current year ADA figures. Under LCFF, school districts across the State receive the same base grants for each grade span, based on ADA. In fiscal year , the base grants are $7,820 for kindergarten through third grade, $7,189 for fourth through sixth grade, $7,403 for seventh through eighth grade, and $8,801 for ninth through twelfth grade. These figures include increases for class size reduction for kindergarten through third grade and career technical education for ninth through twelfth grade. School districts receive a supplemental grant of 20 percent of the base grant for each student in the school district who is lowincome, English-learner, or foster youth. Enrollment counts are unduplicated, such that students may not be counted as both English-learner and low-income (foster youth automatically meet the eligibility requirements for free or reduced-price meals, and are therefore not discussed separately). School districts with more than 55 percent enrollment of unduplicated students receive a concentration grant, an additional 50 percent of the base grant for each unduplicated student above the threshold, intended to address the additional academic challenges faced by such students when their peers are similarly disadvantaged. The supplemental and concentration grants are allocated so that as a school district s proportion of unduplicated students increases, so does its total funding allocation. A school district in which 100 percent of enrollment is unduplicated students will receive 42.5 percent more total funding than a school district with no unduplicated students. The supplemental and concentration grant amounts are based on the unduplicated count of pupils divided by the total enrollment in the school district, based on the fall P-1 certified enrollment report. School districts have broad discretion to decide how to spend the base grant. The supplemental and concentration grants must be used to increase or improve services to the population they are intended to serve, although some services may be provided district- or site-wide. The implementation of LCFF began in fiscal year , with full implementation planned by fiscal year Until full implementation has occurred, the difference between the actual amount districts receive in a year and the target amount they will receive as of full implementation is referred to as the funding gap. The funding gap is determined by the difference between the funding floor, or amount of funding a school district received the prior year, and the target amount of funding the school district will receive at full implementation. The funding floor consists of fiscal year s deficited revenue limit divided by ADA multiplied by current year ADA, plus the sum of any categorical funding. Sufficient funding was available to fund 12 percent of the funding gap in fiscal year , 33 percent of the gap in fiscal year ; and 52 percent of the gap in fiscal year ; projected funding of 54 percent of the gap in fiscal year , the fourth year of implementation of LCFF, will bring LCFF to 96 percent of full implementation. Under the hold harmless provision, no school district will receive less State aid than it received in fiscal year Most districts will receive more funding at full implementation of LCFF than they did previously under the revenue-limit system. For some school districts, their per-pupil undeficited fiscal year funding was higher than their LCFF entitlement at full implementation. Such districts will have their undeficited funding level restored through a supplemental ERT add-on payment. School districts that are eligible for ERT funding will receive the difference between their LCFF target and their LEA s fiscal year undeficited funding, adjusted for cost-of-living increases. Basic aid districts continue to receive at least the amount of State funding they received in fiscal year Although basic aid districts do not receive LCFF funding grants, they must comply with the regulations and accountability requirements of LCFF. Basic aid districts also continue to receive the constitutionally guaranteed $120 per-pupil minimum from under the revenue limit, as well the $200 per-pupil minimum from the EPA pursuant to Proposition 30 as additional revenue. The District is not a basic aid district. The State funds school districts in monthly installments based on calculations made in a series of three apportionments throughout the fiscal year. Each apportionment includes funding for the LCFF and for other State programs. The amount of each apportionment is based on calculations made by each school district and reviewed by its county office of education. The Advance Principal Apportionment ( Advance Apportionment ), certified by July 20, sets forth the amount the school district will receive for the year, paid in a series of installments from August through January. The First Principal Apportionment ( P-1 Apportionment ), certified by February 20, set forth a new calculation based on the school district s first period ADA determined as of December, for installments that will be paid to the school district from February through June. The Second Principal Apportionment ( P-2 Apportionment ), certified July 2, based on second period ADA determined as of April, recalculates the amount of the final installment for the fiscal year paid to the school district in July. At the close of the fourth quarter, a final annual recalculation ( Annual Apportionment ) provides an updated estimate of the prior year s adjustment. In addition, under the EPA established for the deposit of revenues from the tax increase under Proposition 30 and extended under Proposition 55, school districts receive a quarterly allocation of the tax revenue received from the temporary tax increase under Proposition 30. The funds in the EPA are allocated between K-14 school districts by 89 percent and

57 percent, respectively, in quarterly allocations made in September, December, March and June each year. The amount received by a school district under EPA is a reduction to the aid the school district receives from the State applied at each principal apportionment certification. See CONSTITUTIONAL AND STATUTORY PROVISIONS AFFECTING DISTRICT REVENUES AND EXPENDITURES herein. The LCFF requires each school district to demonstrate that its spending decisions are producing the desired results of increased student performance as stated in each school district s own LCAP. Each school district must create its own annually updated LCAP with input from teachers, parents and the community, including the parents or guardians of unduplicated students. School districts must review and share the results to determine whether spending achieved the goals stated in the LCAP, for each school site and for the school district as a whole. All school districts must use the State s LCAP template beginning fiscal year The LCAP must include a description of the annual goals to be achieved for each student group for each State priority, including the content standards adopted by the State Board of Education. The LCAP of each school district is overseen and approved by the county superintendent. Charter schools must comply with LCFF and receive mostly the same funds as public schools, although calculation of targeted disadvantaged students differs somewhat to prevent abuse of the system. There are also differences in the process of LCAP adoption and assessment. In the case of a charter school that fails to perform according to its LCAP, the State is not required to provide the same support that a public school district or county office of education receives, and its charter can be revoked. Federal Funding. In fiscal year , federal revenues account for less than ten percent of funding for school districts in the State. Most of these funds are designated for particular purposes. There are no unfunded federal education mandates; each is conditioned on a state s voluntary decision to accept federal program funds. The primary source of federal supplemental education funding is the Elementary and Secondary Education Act ( ESEA ) (1965), enacted to address inequality in education. The previous authorization of ESEA, the No Child Left Behind Act ( NCLB ) (2001), expanded the federal government s role and increased testing requirements to measure improvement. Most recently reauthorized under the Every Student Succeeds Act ( ESSA ) (2015), responsibility for school improvement has been shifted to the states. ESSA provides funding through six programs: Title I grants, tied to student assessment, to assist economically disadvantaged children; Title II grants for professional development; Title III grants for ancillary student services; Title IV grants for research and training; Title V grants for state departments; and Title VI grants for special education. Another significant source of federal funding for school districts is the Education for All Handicapped Children Act ( EHA ) (1975), enacted to support special education and related services, reauthorized by the Individuals with Disabilities Education Act ( IDEA ) (1990). The largest of the law s three sections, Part B, authorizes grants to states and local school districts to offset special education costs. As of fiscal year 2014, IDEA federal funding covered 16 percent of the estimated excess cost of educating students with disabilities; the shortfall is assumed by states and local school districts. Local Property Tax Revenue. In fiscal year , local property taxes are expected to account for approximately 25 percent of K-12 public education funding within the State. Property taxes are constitutionally limited to one percent of the property s value, except to repay voter-approved debt. Other Local Funds. In fiscal year , miscellaneous local sources are expected to account for approximately five percent of K-12 public education funding within the State. There are several types of revenue a school district may receive from other local sources, including developer fees, parcel taxes, property lease revenues, and private donations. A school district may levy developer fees on new residential or commercial development within the school district s boundaries to finance the construction or renovation of school facilities. A school district may, with two-thirds approval from local voters, levy special taxes on parcels to fund specific programs within the school district. A school district may lease or sell its unused sites or facilities as another source of revenue. A school district may also seek contributions, sometimes channeled through private foundations established to solicit donations from local families and businesses. The State Budget Process Under the State Constitution, money may be drawn from the California Centralized Treasury System (the State Treasury ) only by an appropriation authorized by law. The primary source of annual appropriations authorizations is the budget act approved by the State Legislature and signed by the Governor (the Budget Act ), which can provide for projected expenditures only to the amount of projected revenues and balances available from prior fiscal years. The annual budget cycle begins when the Governor releases a proposed budget in January for the next fiscal year, which starts each July 1 and ends June 30. The Governor releases a revised budget in May based on new projections regarding State

58 revenues and feedback from the State Legislature and other constituents. The State Constitution requires that the State Legislature pass the Budget Act by June 15 by majority approval from both Houses. The Governor may reduce or eliminate specific line items in the Budget Act or any other appropriations bill without vetoing the entire bill. Such individual line-item vetoes are subject to override by a two-thirds majority vote of each House of the State Legislature. Appropriations may also be included in legislation other than the Budget Act. Bills containing appropriations (including for K-14 education) must be approved by a majority vote in each House of the State Legislature, unless such appropriations require tax increases, in which case they must be approved by a two-thirds vote of each House of the State Legislature, and be signed by the Governor. The State Constitution or a State statute may also provide for continuing appropriations that are available without regard to fiscal year. Funds necessary to meet an appropriation need not be in the State Treasury at the time such appropriation is enacted; revenues may be appropriated in anticipation of their receipt. The State Budget On June 27, 2016, the Governor signed the 2016 Budget Act and associated trailer bills to enact the fiscal year State budget (the State Budget ), a $170.9 billion spending plan that continues the effort to prepare the State for an expected recession by increasing investment in reserves and limiting spending increases. The State Budget features an additional $2 billion investment in the reserve fund as well as limited one-time spending initiatives that implement the State minimum wage increase, build affordable housing, repair infrastructure and address effects of the drought. The State Budget includes State general fund revenues of $123.6 billion, representing a four percent increase from fiscal year , and State general fund expenditures of $122.5 billion, representing a six percent increase from fiscal year The State s general fund balance is budgeted to be $2.7 billion at the end of fiscal year The State Budget funds the BSA to a total balance of $6.7 billion by the end of fiscal year , representing 54 percent of the funding goal. The following table identifies historical and budgeted State general fund revenues, expenditures and fund balances. State General Fund State Budget Revised Revised Budget (Millions) (Millions) (Millions) Prior-year Fund Balance $5,103 $3,444 $4,875 Revenues and Transfers 111, , ,310 Expenditures 113, , ,468 Ending Fund Balance $3,444 $4,875 $2,717 Encumbrances Special Fund for Economic Uncertainties 2,478 3,909 1,751 Reserves Special Fund for Economic Uncertainties $2,478 $3,909 $1,751 Budget Stabilization Account 1,606 3,420 6,714 Total Reserves $4,084 $7,329 $8,465 Source: The State Legislative Analyst s Office. Education Funding. The Proposition 98 minimum guarantee for K-14 education funding continues to increase after reaching a low of $47.3 billion in fiscal year The State Budget provides a minimum guarantee of $71.9 billion to K- 14 education, an increase of $3.5 billion from fiscal year levels. Combined with increases of $1.5 billion and other one-time savings and adjustments in fiscal years and , the State Budget provides a total increase of $5.9 billion for K-14 education. K-12 education is budgeted to receive $63.5 billion of the $71.9 billion Proposition 98 minimum guarantee to K-14 education. Proposition 98 K-12 expenditures are budgeted to be $10,657 per-pupil in fiscal year , an increase of $440 per-pupil, or 4.3 percent, from revised fiscal year levels. Since fiscal year ,

59 Proposition 98 funding for K-12 education has grown by more than $21.7 billion, representing an increase of more than $3,600 per student. The Proposition 98 maintenance factor, created in years in which revenue growth is slow or decreases, is the difference between the funding level that would have been budgeted had revenue growth been stronger and the lesser amount that is actually budgeted. The maintenance factor is carried over from year to year until the State s economy is strong enough to restore the difference by accelerating Proposition 98 funding and adjusted annually for changes in K-12 attendance and per capita personal income. The maintenance factor, which was approximately $11 billion in fiscal year , is projected to be reduced to an estimated $908 million as of the end of fiscal year LCFF Implementation: The State Budget provides an additional $2.9 billion for LCFF spending, bringing total LCFF funding to $55.8 billion, reaching approximately 96 percent of full implementation. K-12 Mandates Backlog: The State Budget provides for $1.3 billion to reimburse school districts for the costs of implementing State-mandated programs to substantially reduce outstanding mandate debt, for discretionary uses such as deferred maintenance, professional development or instructional materials. According to the State Legislative Analyst s Office, this reduces the fiscal year K-12 mandates backlog to approximately $987 million. The State Budget also provides for certain one-time increases in Proposition 98 general funds for preschool and K-12 educational programs, including: Proposition 39 Energy Efficiency: $398.8 million in grants for improved energy efficiency in schools. College Readiness: $200 million in block grants over three years to improve eligibility for college admission, allocated based on unduplicated student count in grades 9-12, with a minimum grant per district or charter school of $75,000. Child Care and State Preschool: $137.5 million for increased childcare provider rates; $7.8 million for almost 3,000 additional full-day State preschool slots for children of low-income families. Teacher Workforce: $25 million (plus $10 million in non-proposition 98 funds) to fund teacher recruitment and training. California Collaborative for Educational Excellence: $24 million for the agency to assist local educational agencies in implementing individual LCAP priorities. Charter School Start-Up: $20 million in grants to offset loss of federal funds. Multi-tiered Systems of Support: $20 million in grants to improve student outcomes by providing layers of support that address students academic, behavioral, social and emotional needs. Proposition 47 Safe Neighborhoods and Schools Act: $18 million in grants for restorative justice programs to prevent truancy and reduce dropout rates. Safe Drinking Water In Schools: $9.5 million in grants to improve access to safe drinking water for students at isolated and economically disadvantaged schools

60 The following table identifies historical and proposed Proposition 98 funding. Proposition 98 Funding State Budget Actual Revised Budget Act (Millions) (Millions) (Millions) By Segment K-12 Schools General Fund $44,251 $43,340 $44,465 Local Property Tax Revenue 14,810 16,759 18,057 Subtotal $59,061 $60,099 $62,522 Community Colleges General Fund $5,025 $5,415 $5,528 Local Property Tax Revenue 2,306 2,569 2,767 Subtotal $7,331 $7,983 $8,295 Preschool 1 $664 $885 $975 Other Agencies Total $67,146 $69,050 $71,874 By Fund Source General Fund $50,029 $49,722 $51,050 Local Property Tax Revenue 17,117 19,328 20,824 Total $67,146 $69,050 $71,874 1 Beginning in fiscal year , includes $145 million for wraparound care formerly funded with non-proposition 98 State general fund. 2 Includes State agencies providing direct instruction to K-12 students. Consists entirely of State general fund. Source: The State Legislative Analyst s Office. The Proposed State Budget On January 10, 2017, the Governor released the proposed State budget for fiscal year (the January Proposal ), and on May 11, 2017, the Governor released the May revision to the January Proposal (the May Revision ). The January Proposal reflected slowing revenue and uncertainty regarding future federal funding to the State as well as the possibility of an economic downturn. Projecting a $1.6 billion deficit without corrective measures, the Governor proposed to eliminate certain planned spending increases to balance the budget, while preserving spending on education, the earned income tax credit, rising minimum wage, and extension of healthcare coverage and setting aside $1.2 billion in the State s Budget Stabilization Account / Rainy Day Fund (BSA). Assuming implementation of the proposed corrective measures, total State general fund revenues and transfers were projected to be $118.8 billion in fiscal year and $124.0 billion in fiscal year , with total State general fund expenditures of $122.8 billion in fiscal year and $122.5 billion in fiscal year Under the January Proposal, the State general fund was budgeted to have a fiscal year ending reserve of $6.8 billion, increasing to $9.4 billion at the end of fiscal year , of which $7.9 billion was allocated to the BSA, reaching 63 percent of the constitutionally established target for the reserve during fiscal year Due largely to a strong stock market performance, the Governor projects a $2.4 billion increase in total State general fund revenues and transfers, excluding the BSA deposit, in the May Revision compared to the January Proposal. Total State general fund revenues and transfers are projected to be $118.5 billion in fiscal year and $125.9 billion in fiscal year in the May Revision, with total State general fund expenditures of $122.3 billion in fiscal year

61 and $124.0 billion in fiscal year Under the May Revision, the State general fund is budgeted to have a fiscal year ending reserve of $6.5 billion, increasing to $10.1 billion at the end of fiscal year , of which $8.5 billion is allocated to the BSA. In total, the May Revision contains $183.4 billion in fiscal year expenditures, comprised of $124.0 billion in general funds, $55.9 billion in special funds and $3.4 billion in bond funds, a total increase of $3.9 billion from the January Proposal. The following table sets forth a summary of the State s general fund budget for fiscal years , and under the May Revision. State General Fund May Revision Revised Revised Revised (Millions) (Millions) (Millions) Prior-year Fund Balance $3,308 $4,515 $723 Revenues and Transfers 115, , ,912 Expenditures 114, , ,018 Ending Fund Balances $4,515 $723 $2,617 Encumbrances Special Fund for Economic Uncertainties 3,535 (257) 1,637 Reserves Special Fund for Economic Uncertainties $3,535 ($257) $1,637 Budget Stabilization Account 3,700 6,713 8,488 Total Reserves $7,235 $6,456 $10,125 Source: The State Legislative Analyst s Office. Education Funding. The May Revision departs from past State budgets by proposing to fund K-14 education by $1.5 billion more than required by the Proposition 98 minimum guarantee over the three-year period (fiscal years through ). The May Revision proposes a total of $74.6 billion for K-14 expenditures under the Proposition 98 minimum guarantee in fiscal year , an increase of approximately $1.1 billion from the January Proposal and $27.3 billion (58 percent) since fiscal year Together with a $664 million increase in Proposition 98 general fund expenditures to offset reduced property tax estimates, K-14 education receives most of the benefit of the State general fund revenue increase in the May Revision, triggering an accelerated maintenance factor repayment of $614 million in fiscal year , reducing the outstanding maintenance factor to $823 million. The January Proposal called for K-12 education State general fund expenditures of $52.2 billion (42.6 percent of the State general fund) and special funds expenditures of $104 million (together, 29.2 percent of the State s total funds). The May Revision proposes K-12 education State general fund expenditures of $53.6 billion (a 2.7 percent increase from the January Proposal) and special funds expenditures of $109 million (a 5.5 percent increase from the January Proposal). The May Revision proposes Proposition 98 general fund K-12 expenditures of $11,080 per pupil, an increase of $490 per pupil from fiscal year levels and an increase $4,058 per pupil from fiscal year levels. The May Revision includes an increase of more than $1.4 billion for the fifth year of implementation of LCFF, including funding for a statutory 1.56 percent cost-of-living adjustment, bringing LCFF funding to 97 percent of full implementation. K-12 student attendance, which grew in fiscal year to 5,971,343, is projected to decline in fiscal years and to 5,958,933 and 5,958,288, respectively. The January Proposal proposed corrective measures to reduce the Proposition 98 minimum funding guarantee set in the State Budget, which over-appropriated the Proposition 98 minimum guarantee by $432 million, creating a higher Proposition 98 funding base in future years. The corrective measures would have reduced Proposition 98 expenditures for fiscal year by $432 million and shifted $859 million in education funding from fiscal year to The May Revision eliminates these proposals, instead proposing no funding reduction for fiscal year as a result of revised State general fund revenue projections. The May Revision also proposes to suspend the statutory

62 Proposition 98 supplemental appropriation, a mechanism to allow education funding to grow at the same rate as the rest of the budget in years of slower economic growth, in fiscal years and through The January Proposal set forth a plan to pay $400 million in settle-up payments on the $1 billion owed under the minimum guarantee for fiscal years , and The May Revision increases this settle-up payment to $603 million, most of which would be designated to LCFF costs for fiscal year The May Revision also includes the following proposals with respect to K-12 education, with significant adjustments to the January Proposal noted: Discretionary Funding: The January Proposal included $287 million in one-time funding to local educational agencies to be used for any purpose in order to pay down K-12 mandates backlog of unpaid reimbursement claims for Statemandated programs. The May Revision proposes an additional funding increase of $750 million, providing a total of more than $1 billion in one-time discretionary funding to K-12 education in fiscal year Child Care and State Preschool: The January Proposal suspended implementation of the expenditure increases, planned over four years, for child care provider rates and additional full-day State preschool slots for children of low-income families initiated in the State Budget, extending implementation of the program through fiscal year The May Revision fully restores the increases to childcare provider rates and additional full-day State preschools, including funding provider rate increases by $67.6 million. ADA Adjustments: The January Proposal included a $93 million increase in expenditures for projected growth in charter school ADA, a $4.9 million decrease in expenditures associated with a projected decline in special education ADA, and decreases in expenditures of $168.9 million in fiscal year and $63.1 million in fiscal year as a result of projected declines in school district ADA. The May Revision proposes increases in expenditures from the January Proposal of $26.2 million in fiscal year and $74.1 million in fiscal year for charter school, special education and school district ADA as a result of a smaller drop in overall ADA. Local Property Tax Adjustments: The January Proposal included decreases in expenditures of $149.2 million in fiscal year and a $922.7 million in fiscal year for school districts and county offices of education to offset higher property tax revenues. The May Revision proposes increases in expenditures of $188.7 million in fiscal year and $327.9 million in fiscal year from the 2017 January Proposal as a result of lower offsetting property tax revenues. Categorical Program Growth: The May Revision includes an increase of $2.4 million as a result of revised ADA estimates. Cost-of-Living Adjustments: The January Proposal included a $58.1 million increase to support a 1.48 percent costof-living adjustment for categorical programs not covered by the LCFF. The May Revision proposes an additional increase of $3.2 million in Proposition 98 general funds for cost-of-living adjustments to certain categorical programs in fiscal year as a result of a cost-of-living factor increase from 1.48 percent to 1.56 percent in the May Revision. Mandated Reporter: An $8.5 million block grant for mandated reporter training of school employees. Proposition 39 Energy Efficiency: The January Proposal included $422.9 million in grants for improved energy efficiency in K-12 public schools. The May Revision proposes a decrease of $46.7 million in funding for energy efficiency projects from the January Proposal as a result of lower revised estimates of corporate tax revenue

63 The following table identifies historical and proposed Proposition 98 funding under the May Revision. Proposition 98 Funding May Revision (Millions) (Millions) (Millions) January Proposal General Fund $48,989 $50,330 $51,351 Local Property Tax Revenue 19,681 21,038 22,160 Total $68,671 $71,368 $73, May Revision General Fund $49,424 $50,602 $52,852 Local Property Tax Revenue 19,679 20,787 21,749 Total $69,103 $71,390 $74,601 Change General Fund $435 $273 $1,500 Local Property Tax (2) (251) (411) Total $433 $22 $1,090 Totals may not foot due to rounding. Source: The State Legislative Analyst s Office. Future Budgets The District cannot predict what actions will be taken in the future by the State Legislature and the Governor to address changing State revenues and expenditures or the impact such actions will have on State revenues available in the current or future years for education. The State budget will be affected by national and State economic conditions and other factors over which the District will have no control. Certain actions could result in a significant shortfall of revenue and cash, and could impair the State s ability to fund schools as budgeted. State budget shortfalls in future fiscal years could have an adverse financial impact on the District. For more information on the State budget, please refer to the State Department of Finance s website at and to the State Legislative Analyst s Office s website at The District takes no responsibility for the continued accuracy of these Internet addresses or for the accuracy, completeness or timeliness of the information presented therein, and such information is not incorporated herein by such reference. LEGAL MATTERS No Litigation There is no action, suit or proceeding known by the District to be pending or threatened restraining or enjoining the sale or delivery of the Bonds, or in any way contesting or affecting the validity thereof or any proceeding of the District taken with respect to the issuance or sale of the Bonds, or the pledge or application of moneys or security provided for the payment of the Bonds, or the authority of the County to levy property taxes to pay principal of and interest on the Bonds when due

64 Legal Opinion The proceedings in connection with the authorization, sale, execution and delivery of the Bonds are subject to the approval as to their legality of Quint & Thimmig LLP, Bond Counsel. A copy of the legal opinion will be attached to each Bond, and a form of such opinion is attached hereto as APPENDIX C FORM OF OPINION OF BOND COUNSEL. Bond Counsel s employment is limited to a review of the legal proceedings required for authorization of the Bonds and to rendering the aforementioned opinion. Bond Counsel has not undertaken any responsibility for the accuracy, completeness, or fairness of this Official Statement, and the opinion of Bond Counsel will not extend to any documents, agreements, representations, offering circulars, official statements or other material of any kind concerning the Bonds that are not referred to in the aforementioned opinion. The fees of Bond Counsel are contingent upon the issuance and delivery of the Bonds. Limitations on Remedies; Amounts Held in the County Pool The opinion of Bond Counsel with respect to the enforceability of the rights of the owners of the Bonds is qualified by reference to bankruptcy, insolvency and other laws relating to or affecting creditor s rights. Bankruptcy proceedings, if initiated, could subject the owners of the Bonds to judicial discretion and interpretation of their rights in bankruptcy or otherwise, and consequently may entail risks of delay, limitation, or modification of their rights. The County on behalf of the District is expected to be in possession of the annual ad valorem property taxes and certain funds to repay the Bonds and may invest these funds in the County Pool, as described under the caption YOLO COUNTY TREASURY POOL herein and in APPENDIX D COUNTY OF YOLO INVESTMENT POLICY attached hereto. In the event the District or the County were to go into bankruptcy, a federal bankruptcy court might hold that the owners of the Bonds are unsecured creditors with respect to any funds received by the District or the County prior to the bankruptcy, which may include taxes that have been collected and deposited into the Tax Collection Fund, where such amounts are deposited into the County Pool, and such amounts may not be available for payment of the principal of and interest on the Bonds unless the owners of the Bonds can trace those funds. There can be no assurance that the Owners could successfully so trace such taxes on deposit in the Tax Collection Fund where such amounts are invested in the County Pool. The Government Code requires the County to annually levy ad valorem property taxes upon all property subject to taxation by the District, without limitation as to rate or amount (except as to certain personal property which is taxable at limited rates) for the payment of the principal of and interest on the Bonds. Tax Matters The following discussion of federal income tax matters written to support the promotion and marketing of the Bonds was not intended or written to be used, and cannot be used, by a taxpayer for the purpose of avoiding federal tax penalties that may be imposed. Each taxpayer should seek advice based on the taxpayer s particular circumstances from an independent tax advisor. 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 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 includible in gross income for federal income tax purposes retroactively to the date of issuance of the Bonds. Subject to the District s compliance with the above referenced covenants, under present law, in the opinion of Quint & Thimmig LLP, Larkspur, California, Bond Counsel, interest on the Bonds is excludable from the gross income of the owners thereof for federal income tax purposes and is not included as an item of tax preference in computing the federal alternative minimum tax for individuals and corporations, but interest on the Bonds is taken into account, however, in computing an adjustment used in determining the federal alternative minimum tax for certain corporations. In rendering its opinions, Bond Counsel will rely upon certifications of the District with respect to certain material facts within the District s knowledge. 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

65 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, 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 include certain tax-exempt interest, including 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 the Bonds is the price at which a substantial amount of the Bonds is first sold to the public. The Issue Price 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. 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, 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. 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 tax-exempt interest received. As bond premium is amortized, it reduces the investor s basis in the Bonds. 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 Bonds. 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 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. 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 includible 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 Bond owners 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

66 In the further opinion of Bond Counsel, interest on the Bonds is exempt from California personal 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. The complete text of the final opinion that Bond Counsel expects to deliver upon the issuance of the Bonds is set forth in APPENDIX C FORM OF OPINION OF BOND COUNSEL attached hereto. Legality for Investment in California Under provisions of the California Financial Code, the Bonds are legal investments for commercial banks in the State to the extent that the Bonds, in the informed opinion of the investing bank, are prudent for the investment of funds of depositors. Under provisions of the Government Code, the Bonds are eligible security deposits of public moneys in the State. RATINGS S&P is expected to assign a municipal bond rating of AA to the Bonds with the understanding that upon the delivery of the Bonds, the Policy will be issued by AGM. S&P has assigned an underlying municipal bond rating of A+ to the Bonds. Such ratings reflect only the views of S&P, and an explanation of the significance of such ratings may be obtained from S&P. There is no assurance that any such rating will continue for any given period of time or that any such rating will not be revised downward or withdrawn entirely by S&P if, in the judgment of S&P, circumstances so warrant. Any such downward revision or withdrawal of any such rating may have an adverse effect on the market price of the Bonds. MUNICIPAL ADVISOR Government Financial Strategies inc. has been employed by the District to perform municipal advisory services in relation to the sale and delivery of the Bonds. Government Financial Strategies inc., in its capacity as Municipal Advisor, has read and participated in drafting this Official Statement. Government Financial Strategies inc. has not, however, independently verified nor confirmed all of the information contained within this Official Statement. Government Financial Strategies inc. will not participate in the underwriting of the Bonds. Fees charged by Government Financial Strategies inc. are not contingent upon the sale of the Bonds. INDEPENDENT AUDITOR The financial statements of the District as of and for the year ending June 30, 2016 have been audited by Crowe Horwath LLP, Sacramento, California. The audited financial statements of the District as of and for the year ended June 30, 2016, are set forth in APPENDIX A THE FINANCIAL STATEMENTS OF THE DISTRICT AS OF AND FOR THE YEAR ENDING JUNE 30, 2016 attached hereto. The District has not requested nor did the District obtain permission from the Auditor to include the audited financial statements as an appendix to this Official Statement. The Auditor has not been engaged to perform and has not performed, since the date of its report attached hereto, any procedures on the financial statements addressed in that report. The Auditor also has not performed any procedures relating to this Official Statement. UNDERWRITING AND INITIAL OFFERING PRICE The Bonds were sold to Robert W. Baird & Co. Incorporated (the Underwriter ) pursuant to a bond purchase agreement by and between the District and the Underwriter at a price of $25,026,568.75, being the principal amount of the Bonds of

67 $24,900,000.00, plus a net original issue premium of $727,045.00, less an underwriting discount of $600, (which amount includes the premium for the Policy), at a true interest cost (TIC) to the District of percent. The Underwriter has certified the initial offering prices or yields stated on the inside cover page hereof. The Underwriter may offer and sell the Bonds to certain dealers (including dealers depositing Bonds into investment trusts), dealer banks, banks acting as agents and others at prices lower than said public offering prices. The reoffering prices may be changed from time to time by the Underwriter. CONTINUING DISCLOSURE The District will covenant for the benefit of the holders and Beneficial Owners of the Bonds to annually provide certain financial information and operating data relating to the District (the Annual Report ), by not later than nine months after the end of the fiscal year, commencing with the report for the fiscal year (which is due no later than March 31, 2018), and to provide notices of the occurrence of certain enumerated events. The Annual Report and notices of certain enumerated events will be filed by the District with the MSRB through its EMMA system. The specific nature of the information to be contained in the Annual Report or the notices are specified in APPENDIX B FORM OF CONTINUING DISCLOSURE CERTIFICATE attached hereto. These covenants are being made in order to assist the Underwriter in complying with SEC Rule 15c2-12(b)(5) (the Rule ). In the past five years, the District has not complied in all respects with its previous undertakings with regard to said Rule to provide annual reports and notices of significant events. The following annual reports were filed after their due date: The annual report for fiscal year for the 1999A Bonds, 1999B Bonds, 2004A Bonds, 2004B Bonds, and 2007 COPs, due March 1, 2012, and the 2010 Refunding Bonds, due April 1, 2012, was posted to EMMA on September 1, Notice of failure to file the annual report was not filed until September 1, The following significant event notices were filed more than ten business days after the occurrence of the event: On August 19, 2013, Moody s Investors Service, Inc. ( Moody s ) reinstated the insured rating of the 2004A Bonds. Due to administrative oversight, notice of the reinstatement was not posted until January 31, On May 21, 2014, Moody s upgraded the insurer of the 1999B Bonds, the 2004A Bonds, and the 2004B Bonds, resulting in upgrades of those issues. Due to administrative oversight, notices of the upgrades were not posted until June 30, Procedures have been implemented to prevent such administrative oversight from recurring. As of the date of this Official Statement, the District has made all required filings in the past five years for currently outstanding issues in connection with prior undertakings under the Rule. ADDITIONAL INFORMATION Additional information concerning the District, the Bonds or any other matters concerning the sale and delivery of the Bonds may be obtained by contacting Washington Unified School District, 930 Westacre Road, West Sacramento, California 95691, (916) , Attention: Assistant Superintendent of Business Services, or by contacting the Municipal Advisor, Government Financial Strategies inc., 1228 N Street, Suite 13, Sacramento, California , telephone (916) All of the preceding summaries of the Bonds, the Resolution and other documents are made subject to the provisions of such documents respectively, and do not purport to be complete statements of any or all of such provisions. Reference is hereby made to such documents on file with the District for further information in connection therewith. Further, this Official Statement does not constitute a contract with the purchasers of the Bonds, and any statements made in this Official Statement involving matters of opinion or of estimates, whether or not so expressly stated, are set forth as such and not as representations of fact, and no representation is made that any of the estimates will be realized

68 The execution and delivery of this Official Statement by the District has been duly authorized by its District Board. Washington Unified School District By: /s/ Linda C. Luna Linda C. Luna Superintendent

69 APPENDIX A THE FINANCIAL STATEMENTS OF THE DISTRICT AS OF AND FOR THE YEAR ENDED JUNE 30, 2016

70 [THIS PAGE INTENTIONALLY LEFT BLANK]

71 WASHINGTON UNIFIED SCHOOL DISTRICT FINANCIAL STATEMENTS June 30, 2016

72 WASHINGTON UNIFIED SCHOOL DISTRICT FINANCIAL STATEMENTS WITH SUPPLEMENTARY INFORMATION For the Year Ended June 30, 2016 (Continued) CONTENTS INDEPENDENT AUDITOR'S REPORT.... MANAGEMENT'S DISCUSSION AND ANALYSIS BASIC FINANCIAL STATEMENTS: GOVERNMENT-WIDE FINANCIAL STATEMENTS: STATEMENT OF NET POSiTION STATEMENT OF ACTiViTIES FUND FINANCIAL STATEMENTS: BALANCE SHEET - GOVERNMENTAL FUNDS RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET - TO THE STATEMENT OF NET POSiTION STATEMENT OF REVENUES, EXPENDITURES AND CHANGE IN FUND BALANCES - GOVERNMENTAL FUNDS RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES AND CHANGE IN FUND BALANCES - GOVERNMENTAL FUNDS - TO THE STATEMENT OF ACTIVITIES STATEMENT OF FIDUCIARY NET POSITION - TRUST AND AGENCY FUND STATEMENT OF CHANGE IN FIDUCIARY NET POSITION - TRUST FUND NOTES TO FINANCIAL STATEMENTS REQUIRED SUPPLEMENTARY INFORMATION: GENERAL FUND BUDGETARY COMPARISON SCHEDULE CAFETERIA FUND BUDGETARY COMPARISON SCHEDULE SCHEDULE OF OTHER POSTEMPLOYMENT BENEFITS (OPEB) FUNDING PROGRESS SCHEDULE OF THE DISTRICT'S PROPORTIONATE SHARE OF THE NET PENSION LIABILITy SCHEDULE OF THE DISTRICT'S CONTRIBUTIONS NOTE TO REQUIRED SUPPLEMENTARY INFORMATION... 59

73 WASHINGTON UNIFIED SCHOOL DISTRICT FINANCIAL STATEMENTS WITH SUPPLEMENTARY INFORMATION For the Year Ended June 30, 2016 CONTENTS SUPPLEMENTARY INFORMATION: COMBINING BALANCE SHEET - ALL NON-MAJOR FUNDS COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGE IN FUND BALANCES - ALL NON-MAJOR FUNDS COMBINING STATEMENT OF CHANGES IN ASSETS AND LlABILITIES- ALL AGENCY FUNDS ORGANiZATION SCHEDULE OF AVERAGE DAILY ATTENDANCE SCHEDULE OF INSTRUCTIONAL TIME SCHEDULE OF EXPENDITURE OF FEDERAL AWARDS RECONCILIATION OF UNAUDITED ACTUAL FINANCIAL REPORT WITH AUDITED FINANCIAL STATEMENTS SCHEDULE OF FINANCIAL TRENDS AND ANALYSIS - UNAUDITED SCHEDULE OF CHARTER SCHOOLS NOTES TO SUPPLEMENTARY INFORMATION INDEPENDENT AUDITOR'S REPORT ON COMPLIANCE WITH STATE LAWS AND REGULATIONS INDEPENDENT AUDITOR'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS INDEPENDENT AUDITOR'S REPORT ON COMPLIANCE FOR EACH MAJOR FEDERAL PROGRAM AND REPORT ON INTERNAL CONTROL OVER COMPLIANCE FINDINGS AND RECOMMENDATIONS: SCHEDULE OF AUDIT FINDINGS AND QUESTIONED COSTS STATUS OF PRIOR YEAR FINDINGS AND RECOMMENDATIONS... 84

74 Crowe Horwath., Crowe Horwath LLP Independent Member Crowe HoIwath International INDEPENDENT AUDITOR'S REPORT Board of Education Washington Unified School District West Sacramento, California Report on the Financial Statements \Ne have audited the accompanying fjnm cial statements of the governmental activities, each major fund, and the aggregate remaining fund information of Washington Unified School District, as of and for the year ended June 30, 201 6, and the related notes to the financial statements, which collectively comprise Washington Unified School District's basic financial statements as listed in the table of contents. Management's Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor's Responsibility Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in acc.ordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. VVe believe that th e audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions. Opinions In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, each major fund, and the aggregate remaining fund information of Washington Unified School District, as of June 30, 2016, and the respective changes in financial position for the year then ended in accordance with accounting principles generally accepted in the United States of America. (Continued) 1.

75 Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that the Management's Discussion and Analysis on pages 4 to 11 and the Required Supplementary Information, such as the General Fund Budgetary Comparison Schedule, the Cafeteria Fund Budgetary Comparison Schedule, the Schedule of Other Postemployment Benefits (OPE B) Funding Progress, the Schedule of the District's Proportionate Share of the Net Pension Liability, and the Schedule of the District's Contributions on pages 52 to 58 be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by Governmental Accounting Standards Board who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management's responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Supplementary Information Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise Washington Unified School District's basic financial statements. The accompanying schedule of expenditure of federal awards as required by Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards and the other supplementary information listed in the table of contents are presented for purposes of additional analysis and are not a required part of the basic financial statements. The schedule of expenditure of federal awards and other supplementary information as listed in the table of contents are the responsibility of management and were derived from and relate directly to the underlying accounting and other records used to prepare the basic financial statements. Such information, except for the Schedule of Financial Trends and Analysis, have been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the schedule of expenditure of federal awards and other supplementary information as listed in the table of contents, except for the Schedule of Financial Trends and Analysis, are fairly stated, in all material respects, in relation to the basic financial statements as a whole. (Continued) 2.

76 The Schedule of Financial Trends and Analysis has not been subjected to the auditing procedures applied in the audit of the basic financial statements, and accordingly, we do not express an opinion or provide any assurance on it. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated December 2, 2016 on our consideration of Washington Unified School District's internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering Washington Unified School District's internal control over financial reporting and compliance. Sacramento, California December 2,2016 ~~J..)..,1J Crowe Horwath LLP 3.

77 MANAGEMENT'S DISCUSSION AND ANALYSIS

78 This section of the Washington Unified School District's (District) annual financial report presents District management's discussion and analysis of the District's fmancial performance during the fiscal year ended June 30, Please read it in conjunction with the District's financial statements, which immediately follow this section. INTRODUCTION The Washington Unified School District, founded in 1957, is located in the City of West Sacramento. The city covers a 23 square mile area in eastern Yolo County along the west bank of the Sacramento River, opposite the City of Sacramento. The District serves an ethnically diverse and growing population of approximately 7,538 students. The District has six (6) K-8 schools, one (1) K-5 school, one (1) comprehensive high school, a continuation high school, an independent study program and an adult education program. We believe in our motto: The Gateway to Extraordinary Possibilities. FINANCIAL HIGHLIGHTS The Adopted Budget Unrestricted General Fund projected a surplus of $3,807,] 69 and the Adopted Budget Restricted General Fund projected a deficit of $31,857. The year ended with an Unrestricted General Fund surplus of$6,553,216 and a Restricted General Fund deficit of $404,827 Contributions to restricted programs were $405,183, or 5.13%, less than projected at the second financial reporting period for fiscal The decrease was a result of meeting the 3% routine restricted maintenance contribution ahead of the State required deadline. The General Fund ended the year with a fund balance of $20,095,793. This is an increase of $6,958,043 over the prior fiscal year. Employee compensation increased by 3% for all employee groups for the fiscal year. As of June 30, 2016, salary and benefit negotiations for the fiscal year had not been completed. For additional data, please see the General Fund Budgetary Highlights section. In November of 2014, the citizens of West Sacramento voted for and authorized the issuance of a general obligation bonds in the amount of $49.8M. The bonds, to be issued in two series, had their first issuance in June, In fiscal , the first phase of the Bryte CTE campus was completed, and additional building was added to the Bridgeway Island Campus, the districtwide roofing project continued with the completion of the Elkhorn and Alyce Norman campuses. In November of 2014, the Board of Education authorized the issuance of a Certificate of Participation in the amount of$6.9m for Solar Power Phase #3. The project was completed with the end result being that all District sites have photovoltaic arrays that cover some or all of their electrical needs. Capital outlay expenditures were $20,021,265. The majority of these expenditures are attributable to the Bryte CTE campus project, Bridgeway Island classrooms, districtwide re-roofing projects, and updating offrre alarm systems. All governmental funds ended with positive ending fund balances, and the District's cash position in the General Fund was positive. The District Administration continues to be proactive with the board, bargaining units, and community stakeholders to convey the District's fiscal position in a very transparent manner. The District maintains a positive certification with its fiscal oversight agent while acknowledging that continued fiscal solvency will require prudent action(s) in the coming fiscal years; even in an improving economy. With the passage of the Local Control Funding Formula in 2013, new funding for schools has materialized. However, the "rules" that govern how LCFF dollars continue being developed with implementation being dictated by the Local Control Accountability Plan (LCAP) and the State Board of Education's LCAP template. OVERVIEW OF THE FINANCIAL STATEMENTS This annual report consists offout parts: (1) management's discussion and analysis (this section), (2) the basic financial statements, (3) required supplementary information and (4) supplementary information. The basic fmancial statements include two kinds of statements that present different views of the District: 4.

79 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 operations in more detail than the district-wide statements. The governmental funds statements tell how basic services like regular and special education are financed in the short term as well as what remains for future spending. Proprietary funds statements offer short- and long-term financial information about the activities the District operates like businesses. 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 to whom the resources belong. REPORTING THE DISTRICT AS A WHOLE The Statement of Net Position and the Statement of Activities report information about the District as a whole and about its activities. These statements include all assets, deferred outflows of resources, liabilities and deferred inflows of resources of the District using the accrual basis of accounting, which is similar to the accounting used by most privatesector companies. All of the current year's revenues and expenses are taken into account regardless of when cash is received or paid. These two statements report the District's net position and changes in them. Net position is the difference between assets and liabilities, one way to measure the District's fmancial health, or financial position. Over time, increases or decreases in the District's net position are one indicator of whether its fmancial health is improving or deteriorating. The relationship between revenues and expenses is the District's operating results. Since it is the responsibility of the Board to provide services to our students and not to generate profit as commercial entities do, one must consider other factors when evaluating the overall health of the District. The quality of the education and the safety of our schools will likely be important components in this evaluation. In the Statement of Net Position and the Statement of Activities, District activities are defined as follows: Governmental activities - Most of the District's services are reported in this category. This includes the education of transitional kindergarten through grade twelve students, adult education students, the operation of child development activities, and the on-going effort to improve and maintain buildings and sites. Property taxes, State income taxes, user fees, interest income, Federal, State and local grants, as well as general obligation bonds, fmance these activities. REPORTING THE DISTRICT'S MOST SIGNIFICANT FUNDS The Fund Financial Statements provide detailed information about the most significant funds - not the District as a whole. Some funds are required to be established by State law and some by bond covenants. However, management establishes many other funds to help it control and manage money for particular purposes or to show that it is meeting legal responsibilities for using certain taxes, grants, and other money that it receives from the California Department of Education, the U.S. Department of Education, local funds, and external borrowings. Governmental funds - Most of the District's basic services are reported in governmental funds, which focus on how money flows into and out of those funds and the balances remaining at year-end that are available for spending. These funds are reported using an accounting method called modified accrual accounting, which measures cash and all other fmancial assets that can readily be converted to cash. The governmental fund statements provide a detailed short-term view of the District's general government operations and the basic services it provides. Governmental fund information helps determine whether there are more or fewer financial resources that can be spent in the near future to fmance the District's programs. The differences of results in the governmental fund financial statements to those in the governmentwide financial statements are explained in a reconciliation following each governmental fund financial statement. 5.

80 THE DISTRICT AS TRUSTEE The District is the trustee, or fiduciary, for funds held on behalf of others, like funds for associated student body activities and foundation private-purpose trust funds. The District's fiduciary activities are reported in separate Statements of Fiduciary Net Position. We exclude these activities from the District's other financial statements because the District cannot use these assets to finance its operations. The District is responsible for ensuring that the assets reported in these funds are used for their intended purposes. THE DISTRICT AS A WHOLE Net Position The District's net position was $76.3 million for the fiscal year ended June 30, 2016, resulting in an increase from the prior fiscal period's net position by $4.7 million. In June of 2012, the Governmental Accounting Standards Board approved GASB Statement No. 68 (GASB 68), Accounting and Financial Reporting for Pensions. The primary objective of this Statement is to improve accounting and financial reporting by state and local governments for pensions. It also improves information provided by state and local governmental employers about fmancial support for pensions that is provided by other entities. Due to GASB 68, the District's beginning net position for the fiscal year ending June 30, 2014, was restated last year by $51.5 million. Table 1 below focuses on the net position of the District's governmental activities. Table 1 (Amounts in millions) 2016 Governmental Activities 2015 Governmental Activities 2014 Governmental Activities Current and other assets Capital Assets Total Assets $ $ $ Deferred Outfiows of Resources Current liabilities Long-term liabilities Total Liabilities Deferred Infiows of Resources Net position Invested in capital assets, net of related debt Restricted Unrestricted Total Net Position $ (88.8) 76.3 $ (46.3) 71.6 $

81 Changes in Net Position The results of this year's operations for the District as a whole are reported in the Statement of Activities. Table 2 focuses on the change in net position of the District's governmental activities by taking the information from the Statement, rounds off the numbers, and rearranges them slightly so that total revenues for the year can be seen. Table 2 (Amounts in millions) Governmental Governmental Governmental Activities Activities Activities Revenues Program revenues: Charges for services $ 1.1 $ 0.9 $ 0.9 Operating grants and contnbutions Capital grants and contributions General revenues: State revenue limit souces Property taxes Other general revenues Total Revenues Expenses Instruction and instruction-related activities Student support services Administration Plant services Other Total Expenses Change in Net.Positio~ $ 4.7 $ 1.7 $ (2.3.L Governmental Activities As reported in the Statement oj Activities, the cost of all our governmental activities this year was $97.7 million. However, the amount that our taxpayers ultimately financed for these activities through local taxes was only $23 million because the cost was paid by those who benefited from the programs ($1.1 million) or by other governments and organizations who subsidized certain programs with grants and contributions ($23.4 million). We paid for the remaining "public benefit" portion of our governmental activities with $55 million in State funds and with other revenues, like interest and general entitlements. In Table 3, shown on the following page, we have presented the cost of each of the District's five largest functions: Instruction and instruction related activities, Pupil services, General administration, Plant services, and other, as well as each program's net cost (total cost less revenues generated by the activities). As discussed above, net cost shows the fmancial burden that was placed on the District's taxpayers by each of these functions. Providing this information allows our citizens to consider the cost of each function in comparison to the benefits they believe are provided by that function. 7.

82 Table 3 (Amounts in millions) Instruction and instruction rejated activities Pupil services General administration PJant services Other Totals $ 2016 Total Net Cost of Svcs $ 39.2 $ $ 73.3 $ $ Total Net Total Net Cost of Svcs. Cost of Svcs $ 40.0 $ 49.0 $ $ 68.0 $ 85.0 $ 60.3 THE DISTRICT'S FUNDS The financial perfonnance of the District as a whole is reflected in its governmental funds. The Fund Balances shown on the Governmental Funds Balance Sheet are largely cash and cash equivalents, and do not show Capital Facilities Assets. The General Fund is the District's principal operating fund. The fund balance in the General Fund increased from $ million to $ million, or $6.9 million. The District expected to see an increase in the fund balance by at least $3.8 million due to the carryover of one-time funding of mandated cost reimbursement(s). There were also several expenses that the District had planned on spending in fiscal 2015 that did not occur. These expenses will be recognized in fiscal 2016 and are for the following: School Bus Purchase - 6 Units: $1,055,451 AB1200 Estimated Value Certificated : $1,036,329 ABl200 Estimated Value Classified : $378,094 The second and third items noted are the result of an agreement with the collective bargaining units for that was not tentatively agreed upon until October of2016. Payments (salary) are due to staff in November and December of2016. Expenditures in the Building Fund, the Capital Facilities Fund, and the Special Reserve Fund equaled $24.1 million as the District completed the first phase of the Bryte CTE project, the Bridgeway Island Expansion project, and the Solar Power Phase #3 project. The District's Other Non-Major Governmental Funds remained stable from the prior year. GENERAL FUND BUDGETARY HIGHLIGHTS The fiscal budget continued the practice of conservative budgeting. Although the LCFF projects increases in revenues ( saw an increase of $7.8 million), the multi-year projection only assumes half of those revenues will materialize. In addition, there are no revenue streams associated with future growth, and no predictions of the outcomes of future budget policy changes at the State level. As such, the Board of Education directed the Administration to develop and implement a budget plan that would address deficit spending, restore services that had been reduced in previous years, and provide and increase in salary and/or benefits to District staff. The Administration brought forth a balanced spending plan that added services and staff as well as provided for a compensation increase of 5% for all employee groups. In addition, the District implemented the Local Control Accountability Plan (LCAP) for fiscal that increased 8.

83 services provided to those students that were identified as being of poverty, English language learners, and/or foster youth. The LCAP increased targeted staffmg by 14 full-time equivalent staff and an additional $592,526.2M in support cost(s). As noted, the multi-year projection shows increases in funding at half of the Department of Finance estimate. The increase in future year funding will allow the District to continue to implement the LCAP by providing increases in services and or new service(s) as well as provide additional employee compensation. Federal Funds Federal funding for fiscal increased by $470 thousand. Although a welcome increase, the District's Administration continues to be conservative with the allocation of these resources and the associated expenditures. As with prior years, the objective of the use of Federal Funds is to spend current year dollars on current year students. Cash Flow The concern over potential cash flow shortages compared to prior years has been eliminated for the time being. For the year ending June 30, 2016, the District had its strongest ending cash position. This is seen in the ratio of receivable to total assets, which is 14.3%; the lowest since the fiscal year. Capital Assets At June 30, 2016, the District had $323.2 million in a broad range of capital assets net of accumulated depreciation, including land, buildings, vehicles, and furniture and equipment. Table 4 (AmOlU1ts in millions) Governmental Governmental Governmental Activities Activities Activities Land and construction in progress $ 52.4 $ 35.3 $ 29.5 Buildings and Improvements Equipment Totals $ $ $ We present more detailed information about our capital assets in the notes to the basic financial statements. 9.

84 Long-term Liabilities In November of2014, the voters in the City of West Sacramento approved Measure V, which authorized the Board of Education to issue General Obligation Bonds in the amount of $49.8 million. Of this authorization, the Board of Education issued Series 2015 Bonds at a value of$24.9 million. Measure V projects will include the Bryte CTE campus, Bridgeway Island classrooms, districtwide re-roofmg projects, updating of fire alarm systems, and ADA access issue. Table 5 shows the long-term liabilities of the District. Table 5 (Amounts in millions) Governmental Governmental Governmental Activities Activities Activities General Obligation bonds $ 95.9 $ 70.4 $ 70.0 Certificates of participation Compensated absences and retirement incentives Capital leases Net Pension Liability Totals $ $ $ We present more detailed information regarding our long-term liabilities in the Notes to the basic fmancial statements. ECONOMIC FACTORS AND NEXT YEAR'S BUDGET Revenue limit funding was replaced beginning in fiscal year with the new Local Control Funding Formula (LCFF). The LCCF model brought up much needed revenues and, beginning with fiscal , had additional "rules" implemented. The LCCF has a target for each school district that the State hopes to achieve within an eight year funding cycle. For the District, year two of the funding cycle saw an increase in funding of$7.8 million. Recognizing that the new revenues for fiscal would continue to be a focal point of stakeholders within the District, the Board of Education moved cautiously and continues to directed the Administration to implement a multiyear budget plan that kept a structural surplus, allowed restoration of some programs that had been reduced in prior years, allowed for an increase in new programs that during years of enrollment growth and State cuts were not added, and provided for increase(s) to employee salaries and benefits. In the May Revision of the Governor's budget, funding for education continues to priority with a total funding of $87.6 billion ($51.5 billion General Fund and $36.1 billion other funds). The Prop 98 minimum guarantee for is projected to be $71.9 billion. The maintenance factor, anticipated to be repaid in full by the end of in January, is now projected to be $155 million for and $908 million for will be a Test 3 year. The May Revision includes a Cost of Living Adjustment (COLA) decrease from 0.47% to 0.00% for both LCFF and categorical program funds. While there is no COLA for , the Local Control Funding Formula (LCFF) gap funding was increased by an additional $154 million to a total of$2.98 billion with the May Revision. The gap percentage for is now estimated at 54.84% and LCFF implementation through is now projected to be 95.7% complete. In addition, the May Revision proposes an additional $134.8 million of one-time discretionary funding, for a total of $1.4 billion. Although this funding is discretionary, the Governor suggests it be targeted for the implementation of the stateadopted standards, professional development, teacher induction for beginning teachers, infrastructure and deferred maintenance, instructional materials and technology. All of the funds will offset any applicable mandate reimbursement claims. The May Revise, as noted above, is the basis for overall budget development for fiscal year Revenue under the LCFF increased in fiscal by 6.13%. The Unrestricted General Fund, Fund 01 is balanced with a surplus of$i,100,447; a result of one-time revenues of$i,717,124. This financial position allows the Board of Education the 10.

85 opportunity to continue to improve programs and services through the LCAP while balancing with other expenses such as the unfunded retirement liability of the CalSTRS and CalPERS retirement systems, employee salary and benefit enhancements, and restoration of prior unfunded positions. As noted earlier, there are also several expenses that the District had planned on spending in fiscal 2015 that did not occur. These expenses will be recognized in fiscal 2016 and are for the following: School Bus Purchase - 6 Units: $1,055,451 AB1200 Estimated Value Certificated : $1,036,329 AB1200 Estimated Value Classified : $378,094 The second and third items noted are the result of an agreement with the collective bargaining units for that was not tentatively agreed upon until October of Payments (salary) are due to staff in November and December of2016. Overall, the District's fiscal position remains stable. The most recent Legislative Analyst's Office forecast shows the potential for positive years for the State over the next several years. The Administration remains cautiously optimistic that the economic indicators will hold true; however fiduciary responsibility dictates that the District continue to stay ahead of any potential funding or expense cliff(s) with the expiration of short term sales taxes and the increased cost of funding the CalSTRS and CalPERS retirement systems. CONTACTING THE DISTRICT'S FINANCIAL MANAGEMENT TEAM This fmancial report is designed to provide our citizens, taxpayers, students, and investors and creditors with a general overview of the District's finances and to demonstrate the District's accountability for the money it received. If you have questions about this report or need any additional financial information, contact the Business Office, Washington Unified School District, 930 Westacre Road, West Sacramento, California or call

86 BASIC FINANCIAL STATEMENTS

87 WASHINGTON UNIFIED SCHOOL DISTRICT STATEMENT OF NET POSITION June 30, 2016 Governmental Activities ASSETS Cash and investments (Note 2) Receivables Prepaid expenses Stores inventory Non-depreciable capital assets (Note 4) Depreciable capital assets, net of accumulated depreciation (Note 4) Total assets $ 52,293,063 5,847,726 1,178,273 85,629 52,467, A DEFERRED OUTFLOWS OF RESOURCES Deferred outflow of resources - pensions (Notes 7 and 8) Deferred loss on refunding of debt Total deferred outflows 7,745, LIABILITIES Accounts payable Unearned revenue Long-term liabilities (Note 5): Due within one year Due in more than one year Total liabilities 6,196, ,258 8,614, A39 DEFERRED INFLOW OF RESOURCES Deferred inflow of resources - pensions (Notes 7 and 8) 5,754,000 NET POSITION Net investment in capital assets Restricted: Legally restricted programs Capital projects Debt service Unrestricted Total net position 109,728,610 3,639,359 35,975,945 15,818,227 ( A23) $ See accompanying notes to financial statements. 12.

88 WASHINGTON UNIFIED SCHOOL DISTRICT STATEMENT OF ACTIVITIES For the Year Ended June 30, 2016 Program Revenues Operating Charges Grants and For Contri- Expenses Services butions Capital Grants and Contributions Net (Expense) Revenue and Change in Net Position Governmental Activities Governmental activities: Instruction Instruction-related services: Supervision of instruction Instructional library, media and technology School site administration Pupil services: Home-to-school transportation Food services All other pupil services General administration: Data processing All other general administration Plant services Ancillary services Community services Interest on long-term debt Other outgo Total governmental activities $ 47,622,926 $ 29,159 $ 14,847,794 $ 2,250, , , ,883,773 4, ,003 2,613, ,363,370 1,028,179 4,036,881 3,263,689 1, ,049 2,279,852 13,920 5,228,781 55, ,233 14,312,206 1,463 48, ,555 9, ,143, ~ ~ ~ ~ General revenues: Taxes and subventions: Taxes levied for general purposes Taxes levied for debt service Taxes levied for other specific purposes Federal and state aid not restricted to specific purposes Interest and investment earnings Miscellaneous Total general revenues Change in net position Net position, July 1, 2015 Net position, June 30, 2016 $ (32,745,973) (1,611,881) (305,021) (4,499,926) (2,613,332) 701,690 (2,657,576) (2,265,932) (4,329,122) (14,262,550) (346,007) (446) (10,143,788) ( ) 14,542,212 6,810,472 1,616,622 53,305, , a189 4,716, $ See accompanying notes to financial statements. 13.

89 WASHINGTON UNIFIED SCHOOL DISTRICT BALANCE SHEET GOVERNMENTAL FUNDS June 30, 2016 General Fund Cafeteria Fund Building Fund Capital Facilities Fund Bond Interest and Redemption Fund All Non-Major Funds Total Governmental Funds ASSETS Cash and investments: Cash in County Treasury $ Cash on hand and in banks Cash in revolving fund Cash with Fiscal Agent Receivables Prepaid expenditures Due from other funds Stores inventory 16,866,015 25,000 3,353,312 1,154,198 1,967, $ 334,124 2,120, $ 10,603,187 $ 3,473,889 5,576,076 20,100 24,075 $ 7,163,135 75,777 $ 3,982,497 4,269, ,352 58,911 $ 42,088, ,124 25,000 9,845,216 5,847,726 1,178,273 2,101, Total assets $ ~ ~ ~ ~ ~ ~ LIABILITIES AND FUND BALANCES Liabilities: Accounts payable $ Unearned revenue Due to other funds 2,569, , $ 23, $ 13, ]77 $ 959, $ $ 29,537 6, $ 3,595, , ]11 Total liabilities Fund balances: Nonspendable Restricted Assigned Unassigned 1,197,559 2,580,614 12,087, , ,713 10,513,660 24,075 8,109,963 7,238,912 8,301,709 1,288,902 37,536,571 12,087, Total fund balances Total liabilities and fund balances $ $ $ $ $ $ $ See accompanying notes to financial statements. 14.

90 WASHINGTON UNIFIED SCHOOL DISTRICT RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET TO THE STATEMENT OF NET POSITION June 30, 2016 Total fund balances - Governmental Funds $ 55,143,093 Amounts reported for governmental activities in the statement of net position are different because: Capital assets used for governmental activities are not financial resources and, therefore, are not reported as assets in governmental funds. The cost of the assets is $323,291,844 and the accumulated depreciation is $62,128,365 (Note 4). Long-term liabilities are not due and payable in the current period and, therefore, are not reported as liabilities in the governmental funds. Long-term liabilities at June 30, 2016 consisted of (Note 5): General Obligation Bonds Accreted interest Unamortized premiums on debt Certificates of Participation Qualified School Construction Bonds Clean Renewable Energy Bonds Capitalized leases obligations Net pension liability (Notes 7 and 8) Other post-employment benefits (Note 9) Compensated absences Unmatured interest on long-term liabilities is recognized in the period incurred. Losses on the refunding of debt and debt issuance costs are recognized as expenditures in the period they are incurred. In the government-wide statements, they are categorized as deferred outflows and are amortized over the shortened life of the debt. In government funds, deferred outflows and inflows of resources relating to pensions are not reported because they are applicable to future periods. In the statement of net position, deferred outflows and inflows of resources relating to pensions are reported (Notes 7 and 8). Deferred outflows of resources relating to pensions Deferred inflows of resources relating to pensions Total net position - governmental activities $ (77,133,895) (15,702,950) (3,026,651 ) (68,265,000) (8,885,432) (6,519,051 ) (35,336) (57,857,000) (3,061,048) (257,788) 7,745,871 (5,754,000) 261,163,479 (240,744,151 ) (2,600,690) 1,393,116 1,991,871 $ 76,346,718 See accompanying notes to financial statements, 15.

91 WASHINGTON UNIFIED SCHOOL DISTRICT STATEMENT OF REVENUES, EXPENDITURES AND CHANGE IN FUND BALANCES GOVERNMENTAL FUNDS For the Year Ended June 30, 2016 Funds Bond Capital Interest and All Total General Cafeteria Building Facilities Redemption Non-Major Governmental Fund Fund Fund Fund Fund Fund Funds Revenues: Local Control Funding Formula (LCFF): State apportionment $ 49,042,260 $ $ $ $ $ $ 49,042,260 Local sources Total LCFF ,564,464 Federal sources 4,447,042 3,997, ,613 8,566,410 Other state sources 9,407, ,597 53,019 5,677,640 15,414,909 Other local sources 3,303,005 1, , , , Total revenues ,360, , , Expenditures: Current: Certificated salaries 32,183, ,902 32,756,237 Classified salaries 11,275,340 1,402, , ,040 13,507,900 Employee benefits 14,964, ,367 79, ,602 15,430,665 Books and supplies 3,351,793 1,820, ,230 8,133 71,983 5,366,412 Contract services and operating expenditures 9,888, , ,111 1,083, ,329 12,284,334 Other outgo 144, ,277 Capital outlay 1,035,268 10,500,920 6,292,313 2,192,764 20,021,265 Debt service: Principal retirement 1,595,333 2,740, ,656 4,732,989 Interest Total expenditures 72, Excess (deficiency) of revenues over (under) expenditures 6, ,095 ( ) (8, ) 819,620 1, (9,693710) Other financing sources (uses): Transfers in 1,238,700 3,851,529 1,160,522 6,250,751 Transfers out (1,160,522) (923,455) (3,851,529) (315,245) (6,250,751 ) Proceeds from issuance of debt 30,845,000 30,845,000 Premium on issuance of debt 1,241,721 75,777 1,317,498 Payment to refunding escrow ( ) (6.305,000) Total other financing sources (uses) (923455) Change in fund balances 6,958,043 64,640 10,513,660 (4,983,223) 895,397 2,715,271 16,163,788 Fund balances, July 1, Fund balances, June 30,2016 $ 20,095,793 $ $ $ 8.134,038 $ $ $ See accompanying notes to financial statements. 16.

92 WASHINGTON UNIFIED SCHOOL DISTRICT RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES AND CHANGE IN FUND BALANCES - GOVERNMENTAL FUNDS - TO THE STATEMENT OF ACTIVITIES For the Year Ended June 30,2016 Net change in fund balances - Total Governmental Funds $ 16,163,788 Amounts reported for governmental activities in the statement of activities are different because: Acquisition of capital assets is an expenditure in the governmental funds, but increases capital assets in the statement of net position (Note 4). Depreciation of capital assets is an expense that is not recorded in the governmental funds (Note 4). In the statement of activities the gain or loss on disposal of capital assets is recorded. Issuance of long-term liabilities is an other financing source in the governmental funds, but increases the long-term liabilities in the statement of net position. Amounts recognized in government funds as proceeds from debt, net of issue premium or discount, were (Note 5): Repayment of principal on long-term liabilities is an expenditure in the governmental funds, but decreases the long-term liabilities in the statement of net position (Note 5). Payments made to refunding escrow is an other financing use in the governmental funds, but decreases the long-term liabilities in the statement of net position (Note 5). Losses on refundings of debt are categorized as deferred outflows and are amortized over the shortened life of the refunded or refunding of the debt. In governmental funds, debt issued at a premium is recognized as an other financing source. In the government-wide statements debt issued at a premium is amortized as interest over the life of the debt (Note 5) Accreted interest is an expense that is not recorded in the governmental funds (Note 5) In governmental funds, interest on long-term liabilities is recognized in the period that it becomes due. In the government-wide statement of activities, it is recognized in the period that it is incurred. 19,955,031 (6,166,573) (156,323) (30,845,000) 4,732,989 6,305, ,849 (1,039,982) (2,593,862) (414,873) (Continued) 17.

93 WASHINGTON UNIFIED SCHOOL DISTRICT RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES AND CHANGE IN FUND BALANCES - GOVERNMENTAL FUNDS- TO THE STATEMENT OF ACTIVITIES For the Year Ended June 30, 2016 In government funds, OPEB costs are recognized when employer contributions are made. In the statement of activities, OPEB costs are recognized on the accrual basis (Notes 5 and 9). (1,011,020) In government funds, pension costs are recognized when employer contributions are made. In the statement of activities, pension costs are recognized on the accrual basis. This year, the difference between accrual-basis pension costs and actual employer contributions was (Notes 7 and 8). In the statement of activities, expenditures related to compensated absences are measured by the amounts earned during the year. In the governmental funds, expenditures are measured by the amount of financial resources used (Note 5). Change in net position of governmental activities (356,900) (70,608) $ 4,716,516 See accompanying notes to financial statements. 18.

94 WASHINGTON UNIFIED SCHOOL DISTRICT STATEMENT OF FIDUCIARY NET POSITION TRUST AND AGENCY FUNDS June 30, Foundation Trust Fund Student Body Funds ASSETS Cash and investments (Note 2): Cash in County Treasury Cash on hand and in banks Local Agency Investment Fund $ 3, $ 234,452 Total assets $ LIABILITIES Due to student groups $ NET POSITION Restricted for trust expenditures $ See accompanying notes to financial statements. 19.

95 WASHINGTON UNIFIED SCHOOL DISTRICT STATEMENT OF CHANGE IN FIDUCIARY NET POSITION For the Year Ended June 30, 2016 Foundation Trust Fund Additions: Interest Deductions: Contract services and operating expenditures Change in net position Net position. July Net position. June 30, 2016 $ (467) $ See accompanying notes to financial statements. 20.

96 WASHINGTON UNIFIED SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS June 30, 2016 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Washington Unified School District (the "District") accounts for its financial transactions in accordance with the policies and procedures of the California Department of Education's California School Accounting Manual. The accounting policies of the District conform to accounting principles generally accepted in the United States of America as prescribed by the Governmental Accounting Standards Board. The following is a summary of the more significant policies: Reporting Entity: The Board of Education is the level of government which has governance responsibilities over all activities related to public school education in the District. The Board is not included in any other governmental "reporting entity" as defined by the Governmental Accounting Standards Board since Board members have decision-making authority, the power to designate management, the responsibility to significantly influence operations and primary accountability for fiscal matters. The District receives funding from local, state and federal government sources and must comply with all the requirements of these funding source entities. Basis of Presentation - Financial Statements: The basic financial statements include a Management's Discussion and Analysis (MD & A) section providing an analysis of the District's overall financial position and results of operations, financial statements prepared using full accrual accounting for all of the District's activities, including infrastructure and a focus on the major funds. Basis of Presentation - Government-Wide Financial Statements: The Statement of Net Position and the Statement of Activities displays information about the reporting government as a whole. Fiduciary funds are not included in the government-wide financial statements. Fiduciary funds are reported only in the Statement of Fiduciary Net Position and the Statement of Change in Fiduciary Net Position at the fund financial statement level. The Statement of Net Position and the Statement of Activities are prepared using the economic resources measurement focus and the accrual basis of accounting. Revenues, expenses, gains, losses, assets and liabilities resulting from exchange and exchange-like transactions are recognized when the exchange takes place. Revenues, expenses, gains, losses, assets and liabilities resulting from nonexchange transactions are recognized in accordance with the requirements of Governmental Accounting Standards Board Codification Section (GASB Cod. Sec.) NSO Program revenues: Program revenues included in the Statement of Activities derive directly from the program itself or from parties outside the District's taxpayers or citizenry, as a whole; program revenues reduce the cost of the function to be financed from the District's general revenues. Allocation of indirect expenses: The District reports all direct expenses by function in the Statement of Activities. Direct expenses are those that are clearly identifiable with a function. Depreciation expense is specifically identified by function and is included in the direct expense of each function. Interest on general long-term liabilities is considered an indirect expense and is reported separately on the Statement of Activities. (Continued) 21.

97 WASHINGTON UNIFIED SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS June 30, 2016 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Basis of Presentation - Fund Accounting: The accounts of the District are organized on the basis of funds, each of which is considered to be a separate accounting entity. The operations of each fund are accounted for with a separate set of self-balancing accounts that comprise its assets, liabilities, fund equity, revenues, and expenditures or expenses, as appropriate. District resources are allocated to and accounted for in individual funds based upon the purpose for which they are to be spent and the means by which spending activities are controlled. A - Major Funds The General Fund is the general operating fund of the District and accounts for all revenues and expenditures of the District not encompassed within other funds. All general tax revenues and other receipts that are not allocated by law or contractual agreement to some other fund are accounted for in this fund. General operating expenditures and the capital improvement costs that are not paid through other funds are paid from the General Fund. Cafeteria Fund is a special revenue fund used to account for the proceeds of specific revenue sources that are legally restricted to expenditures for specified purposes The Building Fund is a capital projects fund used to account for resources used for the acquisition or construction of major capital facilities by the District. The Capital Facilities Fund is a capital projects fund used to account for resources used for the acquisition or construction of capital facilities by the District. The Bond Interest and Redemption Fund is a debt service fund used to account for the accumulation of resources for, and the payment of, general long-term debt principal, interest and related costs. B - Other Funds Special Revenue Funds are used to account for the proceeds of specific revenue sources that are legally restricted to expenditures for specified purposes. This classification includes the Adult Education and Child Development. The Special Reserve for Capital Outlay Projects is an capital project fund used to provide for the accumulation of general fund moneys for capital outlay purposes. The Debt Service Fund is used to account for the accumulation of resources for, and the payment of, general long-term debt principal, interest, and related costs. The Foundation Trust Fund is used to account for assets held by the District as Trustee. The Student Body Fund is a fiduciary fund for which the District act as an Agent. All cash activity and assets of the various student bodies of the District are accounted for in the Student Body Fund. Basis of Accounting: Basis of accounting refers to when revenues and expenditures or expenses are recognized in the accounts and reported in the basic financial statements. Basis of accounting relates to the timing of the measurement made, regardless ofthe measurement focus applied. (Continued) 22.

98 WASHINGTON UNIFIED SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS June 30, 2016 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Accrual: Governmental activities in the government-wide financial statements and the proprietary and fiduciary fund financial statements are presented on the accrual basis of accounting. Revenues are recognized when earned and expenses are recognized when incurred. Modified Accrual: The governmental funds financial statements are presented on the modified accrual basis of accounting. Under the modified accrual basis of accounting, revenues are recorded when susceptible to accrual; i.e., both measurable and available. "Available" means collectible within the current period or within 60 days after year end. Expenditures are generally recognized under the modified accrual basis of accounting when the related liability is incurred. The exception to this general rule is that principal and interest on general obligation long-term liabilities, if any, is recognized when due. Budgets and Budgetarv Accounting: By state law, the Board of Education must adopt a final budget by July 1. A public hearing is conducted to receive comments prior to adoption. The Board of Education complied with these requirements. Receivables: Receivables are made up principally of amounts due from the State of California for the Local Control Funding Formula and Categorical programs. The District has determined that no allowance for doubtful accounts was needed as of June 30,2016. Stores Inventory: Inventories in the General and Cafeteria Funds are valued at average cost. Inventory recorded in the General and Cafeteria Funds consists mainly of school supplies and consumable supplies. i Inventories are recorded as an expenditure at the time the individual inventory items are transferred from the warehouse to schools and offices. Capital Assets: Capital assets purchased or acquired, with an original cost of $5,000 or more, are recorded at historical cost or estimated historical cost. Contributed assets are reported at acquisition value for the contributed asset. Additions, improvements and other capital outlay that significantly extend the useful life of an asset are capitalized. Other costs incurred for repairs and maintenance are expensed as incurred. Capital assets are depreciated using the straight-line method over 5-50 years depending on asset types. Deferred Outflowsllnflows of Resources: In addition to assets, the Statement of Net Position includes a separate section for deferred outflows of resources. This separate financial statement element, deferred outflows of resources, represents a consumption of net position that applies to a future period(s), and as such will not be recognized as an outflow of resources (expense/expenditures) until then. The' District has recognized a deferred loss on refunding reported, which is in the Statement of Net Position. A deferred loss on refunding results from the difference in the carrying value of refunded debt and its reacquisition price. This amount is deferred and amortized over the shortened life of the refunded or refunding debt. Additionally, the District has recognized a deferred outflow of resources related to the recognition of the pension liability reported in the statement of net position. Amortization for the year ended June 30, 2016 totaled $563,750. In addition to liabilities, the Statement of Net Position will sometimes report a separate section for deferred inflows of resources. This separate financial statement element, deferred inflows of resources, represents an acquisition of net position that applies to a future period(s) and as such, will not be recognized as an inflow of resources (revenue) until that time. The District has recognized a deferred inflow of resources related to the recognition of the pension liability which is in the Statement of Net Position. Amortization for the year ended June 30,2016 totaled $1,676,000 (Continued) 23.

99 WASHINGTON UNIFIED SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS June 30, 2016 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Pensions: For purposes of measuring the net pension liability, deferred outflows of resources and deferred inflows of resources related to pensions, and pension expense, information about the fiduciary net position of the State Teachers' Retirement Plan (STRP) and the Public Employers Retirement Fund 8 (PERF B) and additions to/deductions from STRP's and PERF B's fiduciary net position have been determined on the same basis as they are reported by STRP and PERF B. For this purpose, benefit payments (including refunds of employee contributions) are recognized when due and payable in accordance with the benefit terms. Investments are reported at fair value. The following is a summary of pension amounts in aggregate: STRP PERF B Total Deferred outflows of resources Deferred inflows of resources Net pension liability Pension expense $ $ $ $ $ $ $ $ $ $ $ $ Compensated Absences: Compensated absences totaling $257,788 are recorded as a liability of the District. The liability is for the earned but unused benefits. The amount to be provided by future operations represents the total amount that would be required to be provided from the general operating revenues of the District if all the benefits were to be paid. Accumulated Sick Leave: Sick leave benefits are not recognized as liabilities of the District. The District's policy is to record sick leave as a operating expenditure or expense in the period taken since such benefits do not vest nor is payment probable; however, unused sick leave is added to the creditable service period for calculation of retirement benefits for certain STRS and CalPERS employees, when the employee retires. Encumbrances: Encumbrance accounting is used in all budgeted funds to reserve portions of applicable appropriations for which commitments have been made. Encumbrances are recorded for purchase orders, contracts, and other commitments when they are written. Encumbrances are liquidated when the commitments are paid. All encumbrances are liquidated at June 30. Unearned Revenue: Revenue from federal, state, and local special projects and programs is recognized when qualified expenditures have been incurred. Funds received but not earned are recorded as unearned revenue until earned. Net Position: Net position is displayed in three components: 1 - Net Investment in Capital Assets - Consists of capital assets including restricted capital assets, net of accumulated depreciation and reduced by the outstanding balances (excluding unspent bond proceeds) of any bonds, mortgages, notes or other borrowings that are attributable to the acquisition, construction, or improvement of those assets. 2- Restricted Net Position - Restrictions of the ending net position indicate the portions of net position not appropriate for expenditure or amounts legally segregated for a specific future use. The restriction for legally restricted programs represents the portion of net position restricted to specific program expenditures. The restriction for capital projects represents the portion of net position restricted for capital projects. The restriction for debt service represents the portion of net position available for the retirement of debt. It is the District's policy to use restricted net position first when allowable expenditures are incurred. 3 - Unrestricted Net Position - All other net position that do not meet the definitions of "restricted" or "net investment in capital assets". (Continued) 24.

100 WASHINGTON UNIFIED SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS June 30, 2016 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Fund Balance Classifications: Governmental Accounting Standards Board Codification Sections 1300 and 1800, Fund Balance Reporting and Governmental Fund Type Definitions (GASB Cod. Sec and 1800) implements a five-tier fund balance classification hierarchy that depicts the extent to which a government is bound by spending constraints imposed on the use of its resources. The five classifications, discussed in more detail below, are nonspendable, restricted, committed, assigned and unassigned. A - Nonspendable Fund Balance: The nonspendable fund balance classification reflects amounts that are not in spendable form, such as revolving fund cash, prepaid expenditures and stores inventory. B - Restricted Fund Balance: The restricted fund balance classification reflects amounts subject to externally imposed and legally enforceable constraints. Such constraints may be imposed by creditors, grantors, contributors, or laws or regulations of other governments, or may be imposed by law through constitutional provisions or enabling legislation. These are the same restrictions used to determine restricted net position as reported in the government-wide and fiduciary trust fund statements. C - Committed Fund Balance: The committed fund balance classification reflects amounts subject to internal constraints self-imposed by formal action of the Board of Education. The constraints giving rise to committed fund balance must be imposed no later than the end of the reporting period. The actual amounts may be determined subsequent to that date but prior to the issuance of the financial statements. Formal action by the Board of Education is required to remove any commitment from any fund balance. At June 30, 2016, the District had no committed fund balances. D - Assigned Fund Balance: The assigned fund balance classification reflects amounts that the District's Board of Education has approved to be used for specific purposes, based on the District's intent related to those specific purposes. The Board of Education can designate personnel with the authority to assign fund balances, however, as of June 30, 2016, no such designation has occurred. E - Unassigned Fund Balance: In the General Fund only, the unassigned fund balance classification reflects the residual balance that has not been assigned to other funds and that is not restricted, committed, or assigned to specific purposes. In any fund other than the General Fund, a positive unassigned fund balance is never reported because amounts in any other fund are assumed to have been assigned, at least, to the purpose of that fund. However, deficits in any fund, including the General Fund that cannot be eliminated by reducing or eliminating amounts assigned to other purposes are reported as negative unassigned fund balance. (Continued) 25.

101 WASHINGTON UNIFIED SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS June 30, 2016 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Fund Balance Policy: The District has an expenditure policy relating to fund balances. For purposes of fund balance classifications, expenditures are to be spent from restricted fund balances first, followed in order by committed fund balances (if any), assigned fund balances and lastly unassigned fund balances. While GASB Cod. Sec and 1800 do not require districts to establish a minimum fund balance policy or a stabilization arrangement, GASB Cod. Sec and 1800 do require the disclosure of a minimum fund balance policy and stabilization arrangements, if they have been adopted by the Board of Education. At June 30, 2016, the District has not established a minimum fund balance policy nor has it established a stabilization arrangement. Property Taxes: Secured property taxes are attached as an enforceable lien on property as of January 1. Taxes are due in two installments on or before November 15 and March 15. Unsecured property taxes are due in one installment on or before August 31. The County of Yolo bills and collects taxes for the District. Tax revenues are recognized by the District when received. Eliminations and Reclassifications: In the process of aggregating data for the Statement of Net Position and the Statement of Activities, some amounts reported as interfund activity and balances in the funds were eliminated or reclassified. Interfund receivables and payables were eliminated to minimize the IIgrossing up" effect on assets and liabilities within the governmental activities column. Estimates: The preparation of basic financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions. These estimates and assumptions 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 expenditures during the reporting period. Accordingly, actual results may differ from those estimates. NOTE 2 - CASH AND INVESTMENTS Cash and investments at June 30, 2016 are reported at fair value and consisted of the following: Governmental Activities Fiduciary Activities Pooled Funds: Cash in County Treasury Local Agency Investment Fund $ 42,088,723 $ 3, Total pooled funds Deposits: Cash on hand and in banks Cash in revolving fund 334, ,450 Total deposits Investments: Cash with Fiscal Agent Total cash and investments m m (Continued) 26.

102 WASHINGTON UNIFIED SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS June 30, 2016 NOTE 2 - CASH AND INVESTMENTS (Continued) Pooled Funds: In accordance with Education Code Section 41001, the District maintains substantially all of its cash in the interest bearing Yolo County Treasurer's Pooled Investment Fund. The District is considered to be an involuntary participant in an external investment pool. The fair value of the District's investment in the pool is reported in the financial statements at amounts based upon the District's prorata share of the fair value provided by the County Treasurer for the entire portfolio (in relation to the amortized cost of that portfolio). The balance available for withdrawal is based on the accounting records maintained by the County Treasurer, which is recorded on the amortized cost basis. Local Agency Investment Fund: The District places certain funds with the State of California's Local Agency Investment Fund (LAIF). The District is a voluntary participant in LAIF, which is regulated by California Government Code Section under the oversight of the Treasurer of the State of California and the Pooled Money Investment Board. The State Treasurer's Office pools these funds with those of other governmental agencies in the state and invests the cash. The fair value of the District's investment in the pool is reported in the accompanying financial statements based upon the District's pro-rata share of the fair value provided by LAIF for the entire LAIF portfolio (in relation to the amortized cost of that portfolio). The monies held in the pooled investments funds are not subject to categorization by risk category. The balance available for withdrawal is based on the accounting records maintained by LAIF, which are recorded on an amortized cost basis. Funds are accessible and transferable to the master account within twenty-four hours notice. Included in LAIF's investment portfolio are collateralized mortgage obligations, mortgage-backed securities, other asset-backed securities, and floating rate securities issued by federal agencies, government-sponsored enterprises and corporations. LAIF is administered by the State Treasurer. LAIF investments are audited annually by the Pooled Money Investment Board and the State Controller'S Office. Copies of this audit may be obtained from the State Treasurer's Office: 915 Capitol Mall; Sacramento, California The Pooled Money Investment Board has established policies, goals, and objectives to make certain that their goal of safety, liquidity and yield are not jeopardized. Deposits - Custodial Credit Risk: The District limits custodial credit risk by ensuring uninsured balances are collateralized by the respective financial institution. Cash balances held in banks are insured up to $250,000 by the Federal Deposit Insurance Corporation (FDIC) and are collateralized by the respective financial institution. At June 30, 2016, the carrying amount of the District's accounts was $593,574 and the bank balance was $592,480. The total uninsured bank balance at June 30, 2016 was $92,480. Cash with Fiscal Agent: Cash with Fiscal Agent represents funds held by Fiscal Agents restricted for capital projects and repayment of General Obligation Bonds. The District holds their funds with the Sacramento County Treasurer. The balance available for withdrawal is based on the accounting records maintained by the County Treasurer, which is recorded on the amortized cost basis Interest Rate Risk: The District does not have a formal investment policy that limits cash and investment maturities as a means of managing its exposure to fair value losses arising from increasing interest rates. At June 30, 2016, the District had no significant interest rate risk related to cash and investments held. Credit Risk: The District does not have a formal investment policy that limits its investment choices other than the limitations of state law. Concentration of Credit Risk: The District does not place limits on the amount it may invest in anyone issuer. At June 30, 2016, the District had no concentration of credit risk. (Continued) 27.

103 WASHINGTON UNIFIED SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS June 30, 2016 NOTE 3 - INTERFUND TRANSACTIONS Interfund Activity: Transactions between funds of the District are recorded as interfund transfers. The unpaid balances at year end, as a result of such transactions, are shown as due to and due from other funds. Interfund Receivables/Payables: Individual interfund receivable and payable balances at June 30, 2016 were as follows: Interfund Interfund Fund Receivables Payables Major Funds: General $ 1,967,023 $ 58,111 Cafeteria 1,640,369 Building 75,777 Capital Facilities 800 Bond Interest and Redemption 75,777 Non-Major Funds: Adult Education 8,610 Child Development 49, ,511 Special Reserve for Capital Outlay 7,143 Debt Service 800 Totals $ }11 $ }11 Interfund Transfers: Interfund transfers consist of operating transfers from funds receiving revenue to funds through which the resources are to be expended. Interfund transfers for the fiscal year were as follows: Transfer from the General Fund to the Child Development Fund to cover operating costs. Transfer from the General Fund to the Debt Service Fund to make qualified school construction bond payment. Transfer from the Cafeteria Fund to the General Fund for indirect costs. Transfer from the Cafeteria Fund to the General Fund for repayment of cash borrowed in Transfer from the Building Fund to the Capital Facilities Fund to repay loan. Transfer from the Adult Education Fund to the General Fund for indirect costs Transfer from the Child Development Fund to the General Fund for repayment of cash borrowed in $ 49,501 1,111, , ,000 3,851,529 10, ,000 Transfer from the Child Development Fund to the General Fund for indirect costs $ 6250}51 (Continued) 28.

104 WASHINGTON UNIFIED SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS June 30, 2016 NOTE 4 - CAPITAL ASSETS A schedule of changes in capital assets for the year ended June 30, 2016 is shown below: Governmental Activities Balance Transfers Transfers Balance July 1, and and June 30, 2015 Additions Deductions 2016 Non-depreciable: Land $ 29,155,759 $ $ $ 29,155,759 Work-in-process 6,180,347 18,177,855 (1,046,920) 23,311,282 Depreciable: Buildings 219,717, , ,512,474 Site improvements 37,827, ,644 38,032,566 Equipment Totals, at cost 303A ( ) Less accumulated depreciation: Buildings (40,965,418) (4,764,390) (45,729,808) Site improvements (6,745,801) (808,109) (7,553,910) Equipment ( ) (594 I 074) ( ) Total accumulated depreciation { ) ( ) ( ) Capital assets, net ~ ~ ~ (1 I ) ~ A79 Depreciation expense was charged to governmental activities as follows: Instruction $ 13,764 Home to school 69,120 Food services 10,397 All other pupil services 2,057 All other general administration 1,275 Centralized Data Processing 320,906 Plant services 5} Total depreciation expense ~ (Continued) 29.

105 WASHINGTON UNIFIED SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS June 30, 2016 NOTE 5 - LONG-TERM LIABILITIES General Obligation Bonds: In August 2004, the District issued 2004 General Obligation Bonds, Series A totaling $39,999,040. Repayment of the Bonds is made from ad valorem taxes to be levied annually upon all property subject to taxation by the District. The Current Interest and Capital Appreciation Bonds bear interest rates from 5.0% to 5.25% and are scheduled to mature through August With the issuance of the 2012 Refunding General Obligation Bonds in October 2012, all of the current interest Series A bonds were refunded. The annual requirements to amortize the remaining current appreciation bonds as of June 30, 2016 are as follows: Year Ended June 30. PrinciQal Interest Total $ 4,605,594 $ 10,817,992 $ 15,423, A A14 $ i i In November 2006, the District issued 2004 General Obligation Bonds, Series B totaling $12,000,433. Repayment of the Bonds is made from ad valorem taxes to be levied annually upon all property subject to taxation by the District. The current interest and capital appreciation bonds bear interest rates from 4.0% to 5.4% and are scheduled to mature through August With the issuance of the 2016 Refunding General Obligation Bonds in June 2015, $2,895,000 of the current interest Series B bonds were refunded. The annual requirements to amortize the remaining bonds as of June 30, 2016 are as follows: Year Ended June 30 1 PrinciQal Interest Total 2017 $ 410,000 $ 125,675 $ 535, ,562,185 2,122,861 3,685, ,630,408 8,723,126 12,353, } A20 i A33 i i (Continued) 30.

106 WASHINGTON UNIFIED SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS June 30, 2016 NOTE 5 - LONG-TERM LIABILITIES (Continued) In February 2007, the District issued 1999 General Obligation Bonds, Series B totaling $7,469,422. Repayment of the Bonds is made from ad valorem taxes to be levied annually upon all property subject to taxation by the District. The Current Interest and Capital Appreciation Bonds bear interest rates from 4.0% to 7.51% and are scheduled to mature through August With the issuance of the 2016 Refunding General Obligation Bonds in June 2015, $3,410,000 of the current interest Series B bonds were refunded. The annual requirements to amortize the remaining bonds as of June 30, 2016 are as follows: Year Ended June 30. PrinciQal Interest Total 2017 $ 200,000 $ 141,919 $ 341, , ,072 1,094, ,682,171 4,795,385 7,477, } $ ~ ~ In November 2010, the District issued 2010 General Obligation Refunding Bonds in the aggregate principal amount of $9,510,000 for the purpose of refunding $8,740,000 of its 1999 General Obligation Bonds, Series A. Repayment of the Bonds is made from ad valorem taxes to be levied annually upon all property subject to taxation by the District. The bonds consist of serial bonds bearing various fixed interest rates from 2% to 4% and mature through August The annual requirements to amortize the refunding bonds as of June 30, 2016 are as follows: Year Ended June 301 PrinciQal Interest Total 2017 $ 535,000 $ 259,175 $ 794, , , , , , , , , , , , , $ ~ ~ (Continued) 31.

107 WASHINGTON UNIFIED SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS June 30, 2016 NOTE 5 - LONG-TERM LIABILITIES (Continued) In October 2012, the District issued 2012 General Obligation Refunding Bonds, consisting of $21,150,000 Serial Bonds. The proceeds were to be used solely to refund that portion of the District's Election of 2004 General Obligation Bonds, Series A. Repayment of the Bonds is made from ad valorem taxes to be levied annually upon all property subject to taxation by the District. The current interest bonds bear interest rates from 2.0% to 4.0% and are scheduled to mature through August The annual requirements to amortize the bonds as of June 30, 2016 are as follows: Year Ended June 30, PrinciQal Interest Total 2017 $ 1,755,000 $ 664,500 $ 2,419, ,970, ,000 2,560, ,205, ,500 2,711, ,455, ,300 2,868, ,735, ,500 3,044, $ $ ~ In July 2015, the District issued 2016 General Obligation Bonds, consisting of $24,900,000 Serial Bonds. Repayment of the Bonds is made from ad valorem taxes to be levied annually upon all property subject to taxation by the District. The current interest bonds bear interest rates from 3.15% to 5.0% and are scheduled to mature through August The annual requirements to amortize the bonds as of June 30, 2016 are as follows: Year Ended June 30. PrinciQal Interest Total 2017 $ 980,000 $ 949,900 $ 1,929, ,300, ,900 2,192, , , , , , ,500 1,100, ,485,000 4,038,700 6,523, ,260,000 3,394,456 7,654, ,355,000 2,499,744 8,854, ] $ ~ ~ (Continued) 32.

108 WASHINGTON UNIFIED SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS June 30, 2016 NOTE 5 - LONG-TERM LIABILITIES (Continued) In July 2015, the District issued 2016 General Obligation Refunding Bonds, consisting of $5,945,000 Serial Bonds. The proceeds are to be used solely to refund that portion of the District's Election of 2004 General Obligation Bonds, Series Band 1999 General Obligation Bonds, Series B. Repayment of the Bonds is made from ad valorem taxes to be levied annually upon all property subject to taxation by the District. The current interest bonds bear interest rates from 3.00% to 5.0% and are scheduled to mature through August The annual requirements to amortize the bonds as of June 30, 2016 are as follows: Year Ended June 30. Princigal Interest 2017 $ , , , , , $ 280,950 $ 266, , , , , , ,200 1,038,625 1,109, $ $ $ 7, Certificates of Particigation: In June 2007, the District issued Certificates of Participation (COPs) in the amount of $70,645,000 with an interest rate of 4.75%, maturing through August The annual requirements to amortize the COPs as of June 30, 2016 are as follows: Year Ended June 30 1 Princigal Interest Total 2017 $ 1,625,000 $ 3,098,019 $ 4,723, ,690,000 3,021,237 4,711, ,785,000 2,934,363 4,719, ,860,000 2,843,236 4,703, ,960,000 2,747,738 4,707, ,380,000 12,126,688 23,506, ,520,000 8,905,188 23,425, ,560,000 4,735,500 23,295, $ ~ ~ (Continued) 33.

109 WASHINGTON UNIFIED SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS June 30, 2016 NOTE 5 - LONG-TERM LIABILITIES (Continued) In December 2014, the District issued Certificates of Participation (COPs) in the amount of $6,055,000 with an interest rate from 2.0% to 3.75% maturing through December The annual requirements to amortize the COPs as of June 30, 2016 are as follows: Year Ended June 30. PrinciQal Interest 2017 $ 85, , , , , , ,345, ,665, $ $ 209, , , , , , , , ~ A11 $ 294, , , , ,081 1,740,806 2,107,219 2,148, A09 $ 9A08A11 Qualified School Construction Bonds: On April 9, 2010, the District received $8,885,432 financing in the form of Qualified School Construction Bonds (QSCB) to provide resources for the implementation of a district-wide energy efficiency projects including the solar project at the River City High School. Under the lease, the principal components of the QSCB payments to be paid by the District are to be accumulated in a sinking fund and are to be paid in a lump sum on March 15, 2026, the maturity date. As of June 30, 2016, $3,332,037 was held by Yolo County Treasury as fiscal agent in the sinking fund. The bonds bear interest at 1 A2% payable quarterly. The annual requirements to amortize the QSCB as of June 30, 2016 are as follows: Year Ended June 30. PrinciQal Interest Total 2017 $ $ 126,172 $ 126, , , , , , , , , A A $ A32 ~ ~ (Continued) 34.

110 WASHINGTON UNIFIED SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS June 30, 2016 NOTE 5 - LONG-TERM LIABILITIES (Continued) Clean Renewable Energy Bonds: On October 23, 2012, the District issued $7,306,260 of Clean Renewable Energy Bonds (CREB) at an interest rate of 5.09%, maturing through October 2029 to fund solar projects. The District receives a Federal interest subsidy. The full value of the subsidy rate is 3.01 %. The amount of the Federal subsidy has in the past, and may in the future, be decreased. The annual requirements to amortize the CREB as of June 30, 2016 are as follows: Year Ended June 30. PrinciQal Interest 2017 $ 405,927 $ 311,820 $ 717, , , , , , , , , , , , , ,345, ,785 3,232, $ $ 2.579A95 =$ ==91::09=8=15::::4=6 CaQitalized Lease Obligations: The District also leases modular computer lab buildings under Interestfree agreements with the State of California which provide for title to pass upon expiration of the lease period. The modular lab buildings have a capitalized cost of $318,000 and accumulated depreciation at June 30, 2016 of $44,520. The District has one payment in the amount of $35,336 remaining due in year ending June 30, Schedule of Changes in Long-Term Liabilities: A schedule of changes in long-term liabilities for the year ended June 30, 2016 is shown below: Balance Amounts Balance June 30, Due Within Jul:i Additions Deductions 2016 One Year Governmental activities: General Obligation Bonds $ 55,333,895 $ 30,845,000 $ 9,045,000 $ 77,133,895 $ 3,950,000 Accreted Interest 13,109,088 2,593,862 15,702,950 1,907,431 Premium on issuance of long-term debt 1,986,669 1,317, ,516 3,026, ,687 Certificates of Participation 69,825,000 1,560,000 68,265,000 1,710,000 Qualified School Construction Bonds 8,885,432 8,885,432 Clean Renewable Energy Bonds 6,916, ,656 6,519, ,927 Capitalized lease obligations 70,669 35,333 35,336 Net pension liability (Notes 7 and 8) 46,588,000 11,269,000 57,857,000 Other post-employment benefits (Note 9) 2,050,028 1,364, ,244 3,061,048 Compensated absences $ $ J Payments on the General Obligation Bonds are made from the Bond Interest and Redemption Fund. Payments on the Certificates of Participation and Capitalized Lease Obligations are made from the Capital Facilities Fund. Payments on the Qualified School Construction Bonds and the Clean Renewable Energy Bonds are made from the Debt Service Fund. Payments on compensated absences and postemployment benefits are made from the fund for which the related employee worked. (Continued) 35.

111 WASHINGTON UNIFIED SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS June 30, 2016 NOTE 6 - FUND BALANCES Fund balances, by category, at June 30, 2016 consisted of the following: Nonspendable: Revolving cash fund Prepaid expenditures Stores inventory General Fund $ 25,000 $ 1,154, Cafeteria Fund Building Fund $ $ Bond Capital Interest and All Facilities Redemption Non-Major Fund Fund Funds 24,075 $ $ Total $ 25,000 1,178, Subtotal nonspendable ,902 Restricted: Other legally restricted programs Capital projects Debt service 2,580, ,713 10,513, ,765 8,109,963 3,791, ,572,092 22,415, Subtotal restricted } } Assigned: Deferred maintenance reserve Textbook Adoption 1:1 Devices Capital investments Subtotal assigned Unassigned: Designated for economic uncertainty Subtotal unassigned 2,000,000 2,699,328 2,511, , ,000,000 2,699,328 2,511, J95 Total fund balances $ }93 $ 85Ba981 $ $ Ba $ $ }09 $ (Continued) 36.

112 WASHINGTON UNIFIED SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS June 30, 2016 NOTE 7 - NET PENSION LIABILITY - STATE TEACHERS' RETIREMENT PLAN General Information about the State Teachers' Retirement Plan Plan Description: Teaching-certified employees of the District are provided with pensions through the State Teachers' Retirement Plan (STRP) - a cost-sharing multiple-employer defined benefit pension plan administered by the California State Teachers' Retirement System (CaISTRS). The Teachers' Retirement Law (California Education Code Section et seq.), as enacted and amended by the California Legislature, established this plan and CalSTRS as the administrator. The benefit terms of the plans may be amended through legislation. CalSTRS issues a publicly available financial report that can be obtained at Benefits Provided: The STRP Defined Benefit Program has two benefit formulas: CalSTRS 2% at 60: Members first hired on or before December 31, 2012, to perform service that could be creditable to CaISTRS. CalSTRS 2% at 62: Members first hired on or after January 1, 2013, to perform service that could be creditable to CaISTRS. The Defined Benefit Program provides retirement benefits based on members' final compensation, age and years of service credit. In addition, the retirement program provides benefits to members upon disability and to survivors/beneficiaries upon the death of eligible members. There are several differences between the two benefit formulas which are noted below. CalSTRS 2% at 60 CalSTRS 2% at 60 members are eligible for normal retirement at age 60, with a minimum of five years of credited service. The normal retirement benefit is equal to 2.0 percent of final compensation for each year of credited service. Early retirement options are available at age 55 with five years of credited service or as early as age 50 with 30 years of credited service. The age factor for retirements after age 60 increases with each quarter year of age to 2.4 percent at age 63 or older. Members who have 30 years or more of credited service receive an additional increase of up to 0.2 percent to the age factor, known as the career factor. The maximum benefit with the career factor is 2.4 percent of final compensation. CalSTRS calculates retirement benefits based on a one-year final compensation for members who retired on or after January 1,2001, with 25 or more years of credited service, or for classroom teachers with less than 25 years of credited service if the employer elected to pay the additional benefit cost prior to January 1, One-year final compensation means a member's highest average annual compensation earnable for 12 consecutive months calculated by taking the creditable compensation that a member could earn in a school year while employed on a fulltime basis, for a position in which the person worked. For members with less than 25 years of credited service, final compensation is the highest average annual compensation earnable for any three consecutive years of credited service. (Continued) 37.

113 WASHINGTON UNIFIED SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS June 30, 2016 NOTE 7 - NET PENSION LIABILITY - STATE TEACHERS' RETIREMENT PLAN (Continued) CalSTRS 2% at 62 CalSTRS 2% at 62 members are eligible for normal retirement at age 62, with a minimum of five years of credited service. The normal retirement benefit is equal to 2.0 percent of final compensation for each year of credited service. An early retirement option is available at age 55. The age factor for retirement after age 62 increases with each quarter year of age to 2.4 percent at age 65 or older. All CalSTRS 2% at 62 members have their final compensation based on their highest average annual compensation earnable for three consecutive years of credited service. Contributions: Required member, employer and state contribution rates are set by the California Legislature and Governor and detailed in Teachers' Retirement Law. Contribution rates are expressed as a level percentage of payroll using the entry age normal actuarial cost method. A summary of statutory contribution rates and other sources of contributions to the Defined Benefit Program are as follows: Members - Under CalSTRS 2% at 60, the member contribution rate was 9.20 percent of applicable member earnings for fiscal year Under CalSTRS 2% at 62, members contribute 50 percent of the normal cost of their retirement plan, which resulted in a contribution rate of 8.56 percent of applicable member earnings for fiscal year In general, member contributions cannot increase unless members are provided with some type of "comparable advantage" in exchange for such increases. Under previous law, the Legislature could reduce or eliminate the 2 percent annual increase to retirement benefits. As a result of AB 1469, effective July 1, 2014, the Legislature cannot reduce the 2 percent annual benefit adjustment for members who retire on or after January 1, 2014, and in exchange for this "comparable advantage," the member contribution rates have been increased by an amount that covers a portion of the cost of the 2 percent annual benefit adjustment. Effective July 1, 2014, with the passage of AB 1469, member contributions for those under the 2% at 60 benefit structure increase from 8.0 percent to a total of percent of applicable member earnings, phased in over the next three years. For members under the 2% at 62 benefit structure, contributions will increase from 8.0 percent to percent of applicable member earnings, again phased in over three years, if there is no change to normal cost. Employers percent of applicable member earnings. In accordance with AB 1469, employer contributions will increase from 8.25 percent to a total of 19.1 percent of applicable member earnings phased in over seven years starting in The new legislation also gives the board limited authority to adjust employer contribution rates from July 1, 2021 through June 2046 in order to eliminate the remaining unfunded actuarial obligation related to service credited to members prior to July 1, The board cannot adjust the rate by more than 1 percent in a fiscal year, and the total contribution rate in addition to the 8.25 percent cannot exceed 12 percent. (Continued) 38.

114 WASHINGTON UNIFIED SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS June 30, 2016 NOTE 7 - NET PENSION LIABILITY - STATE TEACHERS' RETIREMENT PLAN (Continued) The CalSTRS employer contribution rate increases effective for fiscal year through fiscal year are summarized in the table below: Effective Date Prior Rate Increase Total July 01, % 2.48% 10.73% July 01, % 4.33% 12.58% July 01, % 6.18% 14.43% July 01, % 8.03% 16.28% July 01, % 9.88% 18.13% July 01, % 10.85% 19.10% July 01, % Increase from prior rate ceases in The District contributed $3,435,263 to the plan for the fiscal year ended June 30, State percent of the members' creditable earnings from the fiscal year ending in the prior calendar year. Additionally, beginning October 1, 1998, a statutory contribution rate of percent, adjustable annually in 0.25 percent increments up to a maximum of percent, of the creditable earnings from the fiscal year ending in the prior calendar year per Education Code Section 22955(b). This contribution is reduced to zero if there is no unfunded actuarial obligation and no normal cost deficit for benefits in place as of July 1, Based on the actuarial valuation, as of June 30,2012 there was no normal cost deficit, but there was an unfunded obligation for benefits in place as of July 1, As a result, the state was required to make quarterly payments starting October 1, 2013, at an additional contribution rate of percent. As of June 30, 2014, the state contributed $200.7 million of the $267.6 million total amount for fiscal year As a result of AB 1469, the fourth quarterly payment of $66.9 million was included in an increased first quarter payment of $94 million for the fiscal year, which was transferred on July 1, In accordance with AB 1469, the portion of the state appropriation under Education Code Section 22955(b) that is in addition to the percent has been replaced by section (b) in order to fully fund the benefits in effect as of 1990 by The additional state contribution will increase from percent in to percent in The increased contributions end as of fiscal year (Continued) 39.

115 WASHINGTON UNIFIED SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS June 30,2016 NOTE 7 - NET PENSION LIABILITY - STATE TEACHERS' RETIREMENT PLAN (Continued) The CalSTRS state contribution rates effective for fiscal year and beyond are summarized in the table below: AB 1469 Increase For Total State Base 1990 Benefit SBMA Appropriation Effective Date Rate Structure Funding to DB Program July 01, % 2.874% 2.50% 7.391% July 01, % 4.311% 2.50% 8.828% July 01, 2017 to June 30, % 4.311%* 2.50% 8.828%* July 01, 2046 and thereafter 2.017% * 2.50% 4.571%* * The new legislation also gives the board limited authority to adjust state contribution rates from July 1, 2017, through June 2046 in order to eliminate the remaining unfunded actuarial obligation associated with the 1990 benefit structure. The board cannot increase the rate by more than 0.50 percent in a fiscal year, and if there is no unfunded actuarial obligation, the contribution rate imposed to pay for the 1990 benefit structure shall be reduced to zero percent. Rates in effect prior to July 1, 2014, are reinstated if necessary to address any remaining 1990 unfunded actuarial obligation from July 1, 2046, and thereafter. Pension Liabilities, Pension Expense, and Deferred Outflows of Resources and Deferred Inflows of Resources Related to Pensions At June 30, 2016, the District reported a liability for its proportionate share of the net pension liability that reflected a reduction for State pension support provided to the District. The amount recognized by the District as its proportionate share of the net pension liability, the related State support, and the total portion of the net pension liability that was associated with the District were as follows: District's proportionate share of the net pension liability State's proportionate share of the net pension liability associated with the District Total $ 43,680,000 23,102,000 $ 66,782,000 The net pension liability was measured as of June 30, 2015, and the total pension liability used to calculate the net pension liability was determined by an actuarial valuation as of June 30, 2014, The District's proportion of the net pension liability was based on the District's share of contributions to the pension plan relative to the contributions of all participating school districts and the State. At June 30, 2015, the District's proportion was percent, which was an increase of percent from its proportion measured as of June 30, (Continued) 40,

116 WASHINGTON UNIFIED SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS June 30, 2016 NOTE 7 - NET PENSION LIABILITY - STATE TEACHERS' RETIREMENT PLAN (Continued) For the year ended June 30, 2016, the District recognized pension expense of $6,270,445 and revenue of $2,279,297 for support provided by the State. At June 30, 2016, the District reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources: Difference between expected and actual experience Changes of assumptions Net differences between projected and actual earnings on investments Changes in proportion and differences between District contributions and proportionate share of contributions Contributions made subsequent to measurement date Total Deferred Outflows of Resources $ 2,043, $ Deferred Inflows of Resources $ 730,000 3,561,000 t $ 4.291,000 $3,435,263 reported as deferred outflows of resources related to pensions resulting from contributions subsequent to the measurement date will be recognized as a reduction of the net pension liability in the year ended June 30, Other amounts reported as deferred outflows of resources and deferred inflows of resources related to pensions will be recognized in pension expense as follows: Years Ended June 30, $ (1,255,300) $ (1,255,300) $ (1,255,300) $ 1,078,900 $ 219,500 $ 219,500 Differences between expected and actual experience and changes in assumptions are amortized over a closed period equal to the average remaining service life of plan members, which is 7 years as of the June 30, 2015 measurement date. Deferred outflows and inflows related to differences between projected and actual earnings on plan investments are netted and amortized over a closed 5-year period. (Continued) 41.

117 WASHINGTON UNIFIED SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS June 30, 2016 NOTE 7 - NET PENSION LIABILITY - STATE TEACHERS' RETIREMENT PLAN (Continued) Actuarial Methods and Assumptions: The total pension liability for the STRP was determined by applying update procedures to a financial reporting actuarial valuation as of June 30, 2014, and rolling forward the total pension liability to June 30, The financial reporting actuarial valuation as of June 30, 2014, used the following actuarial methods and assumptions, applied to all prior periods included in the measurement: Valuation Date Experience Study Actuarial Cost Method Investment Rate of Return Consumer Price Inflation Wage Growth Post-retirement Benefit Increases June 30, 2014 July 1, 2006, through June 30, 2010 Entry age normal 7.60% 3.00% 3.75% 2.00% simple for DB Not applicable for DBS/CBB CalSTRS uses custom mortality tables to best fit the patterns of mortality among its members. These custom tables are based on RP2000 series tables adjusted to fit CalSTRS experience. RP2000 series tables are an industry standard set of mortality rates published by the Society of Actuaries. See CalSTRS July 1, June 30, 2010 experience analysis for more information. The long-term expected rate of return on pension plan investments was determined using a buildingblock method in which best-estimate ranges of expected future real rates of return (expected returns, net of pension plan investment expense and inflation) are developed for each major asset class. The best estimate ranges were developed using capital market assumptions from CalSTRS general investment consultant as an input to the process. Based on the model from CalSTRS consulting actuary's investment practice, a best estimate range was determined by assuming the portfolio is re-balanced annually and that annual returns are log normally distributed and independent from year to year to develop expected percentiles for the long-term distribution of annualized returns. The assumed asset allocation by PCA is based on board policy for target asset allocation in effect on February 2, 2012, the date the current experience study was approved by the board. Best estimates of 10-year geometric real rates of return and the assumed asset allocation for each major asset class used as input to develop the actuarial investment rate of return are summarized in the following table: Asset Class Global Equity Private Equity Real Estate Inflation Sensitive Fixed Income Cash I Liquidity * 1 O-year geometric average Assumed Asset Allocation 47% Long-Term* Expected Real Rate of Return 4.50% (Continued) 42.

118 WASHINGTON UNIFIED SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS June 30, 2016 NOTE 7 - NET PENSION LIABILITY - STATE TEACHERS' RETIREMENT PLAN (Continued) Discount Rate: The discount rate used to measure the total pension liability was 7.60 percent. The projection of cash flows used to determine the discount rate assumed that contributions from plan members and employers will be made at statutory contribution rates in accordance with the rate increase per Assembly Bill Projected inflows from investment earnings were calculated using the long-term assumed investment rate of return (7.60 percent) and assuming that contributions, benefit payments, and administrative expense occur midyear. Based on those assumptions, the STRP's fiduciary net position was projected to be available to make all projected future benefit payments to current plan members. Therefore, the long-term assumed investment rate of return was applied to all periods of projected benefit payments to determine the total pension liability. Sensitivity of the District's Proportionate Share of the Net Pension Liability to Changes in the Discount Rate: The following presents the District's proportionate share of the net pension liability calculated using the discount rate of 7.60 percent, as well as what the District's proportionate share of the net pension liability would be if it were calculated using a discount rate that is 1-percentage-point lower (6.60 percent) or 1-percentage-point higher (8.60 percent) than the current rate: 1% Decrease (6.60%) Current Discount Rate (7.60%) 1% Increase (8.60%) District's proportionate share of the net pension liability $ $ 43,680,000 $ 25,169,000 Pension Plan Fiduciarv Net Position: Detailed information about the pension plan's fiduciary net position is available in the separately issued CalSTRS financial report. NOTE 8 - NET PENSION LIABILITY - PUBLIC EMPLOYER'S RETIREMENT FUND B General Information about the Public Employer's Retirement Fund B Plan Description: The schools cost-sharing multiple-employer defined benefit pension plan Public Employer's Retirement Fund B (PERF B) is administered by the California Public Employees' Retirement System (CaIPERS). Plan membership consists of non-teaching and non-certified employees of public schools (K-12), community college districts, offices of education, charter and private schools (elective) in the State of California. The Plan was established to provide retirement, death and disability benefits to non-teaching and noncertified employees in schools. The benefit provisions for Plan employees are established by statute. CalPERS issues a publicly available financial report that can be obtained at Benefits Provided: The benefits for the defined benefit plans are based on members' years of service, age, final compensation, and benefit formula. Benefits are provided for disability, death, and survivors of eligible members or beneficiaries. Members become fully vested in their retirement benefits earned to date after five years (10 years for State Second Tier members) of credited service. (Continued) 43.

119 WASHINGTON UNIFIED SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS June 30,2016 NOTE 8 - NET PENSION LIABILITY - PUBLIC EMPLOYER'S RETIREMENT FUND B (Continued) Contributions: The benefits for the defined benefit pension plans are funded by contributions from members and employers, and earnings from investments. Member and employer contributions are a percentage of applicable member compensation. Member contribution rates are defined by law and depend on the respective employer's benefit formulas. Employer contribution rates are determined by periodic actuarial valuations or by state statute. Actuarial valuations are based on the benefit formulas and employee groups of each employer. Employer contributions, including lump sum contributions made when agencies first join the PERF, are credited with a market value adjustment in determining contribution rates. The required contribution rates of most active plan members are based on a percentage of salary in excess of a base compensation amount ranging from zero dollars to $863 monthly. Required contribution rates for active plan members and employers as a percentage of payroll for the year ended June 30, 2016 were as follows: Members - The member contribution rate was 6.0 or 7.0 percent of applicable member earnings for fiscal year Employers - The employer contribution rate was percent of applicable member earnings. The District contributed $1,457,608 to the plan for the fiscal year ended June 30, Pension Liabilities, Pension Expense, and Deferred Outflows of Resources and Deferred Inflows of Resources Related to Pensions At June 30, 2016, the District reported a liability of $14,177,000 for its proportionate share of the net pension liability. The net pension liability was measured as of June 30, 2015, and the total pension liability used to calculate the net pension liability was determined by an actuarial valuation as of June 30, The District's proportion of the net pension liability was based on the District's share of contributions to the pension plan relative to the contributions of all participating school districts. At June 30, 2015, the District's proportion was percent, which was an increase of percent from its proportion measured as of June 30,2014. For the year ended June 30, 2016, the District recognized pension expense of $1,258,623. At June 30, 2016, the District reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources: Difference between expected and actual experience Changes of assumptions Net differences between projected and actual earnings on investments Changes in proportion and differences between District contributions and proportionate share of contributions Contributions made subsequent to measurement date Total Deferred Outflows of Resources $ 810, ~ Deferred Inflows of Resources $ 871, , ,000 $ (Continued) 44.

120 WASHINGTON UNIFIED SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS June 30,2016 NOTE 8 - NET PENSION LIABILITY - PUBLIC EMPLOYER'S RETIREMENT FUND B (Continued) $1,457,608 reported as deferred outflows of resources related to pensions resulting from contributions subsequent to the measurement date will be recognized as a reduction of the net pension liability in the year ended June 30, Other amounts reported as deferred outflows of resources and deferred inflows of resources related to pensions will be recognized in pension expense as follows: Years Ended June 30, $ (188,333) $ (188,333) $ (188,334) $ (88,000) Differences between expected and actual experience and changes in assumptions are amortized over a closed period equal to the average remaining service life of plan members, which is 4 years as of the June 30, 2015 measurement date. Deferred outflows and inflows related to differences between projected and actual earnings on plan investments are netted and amortized over a closed 5-year period. Actuarial Methods and Assumptions: The total pension liability for the Plan was determined by applying update procedures to a financial reporting actuarial valuation as of June 30, 2014, and rolling forward the total pension liability to June 30, The financial reporting actuarial valuation as of June 30, 2014, used the following actuarial methods and assumptions, applied to all prior periods included in the measurement: Valuation Date Experience Study Actuarial Cost Method Investment Rate of Return Consumer Price Inflation Wage Growth Post-retirement Benefit Increases June 30,2014 July 1, 2006, through June 30, 2010 Entry age normal 7.65% 2.75% Varies by entry age and service Contract COLA up to 2.00% until Purchasing Power Protection Allowance Floor on Purchasing Power applies 2.75% thereafter The mortality table used was developed based on CalPERS specific data. The table includes 20 years of mortality improvements using Society of Actuaries Scale BB. For more details on this table, please refer to the 2014 experience study report. All other actuarial assumptions used in the June 30, 2013 valuation were based on the results of an actuarial experience study for the period from 1997 to 2011, including updates to salary incrl?ase, mortality and retirement rates. Further details of the Experience Study can be found at CalPERS' website. (Continued) 45.

121 WASHINGTON UNIFIED SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS June 30, 2016 NOTE 8 - NET PENSION LIABILITY - PUBLIC EMPLOYER'S RETIREMENT FUND B (Continued) The table below reflects long-term expected real rate of return by asset class. The rate of return was calculated using the capital market assumptions applied to determine the discount rate and asset allocation. Asset Class Global Equity Global Fixed Income Inflation Sensitive Private Equity Real Estate Infrastructure & Forestland Liquidity * 1 O-year geometric average Long-Term* Assumed Asset Allocation 51% Expected Real Rate of Return 5.25% (0.55) Discount Rate: The discount rate used to measure the total pension liability was 7.65 percent. A projection of the expected benefit payments and contributions was performed to determine if assets would run out. The test revealed the assets would not run out. Therefore the long-term expected rate of return on pension plan investments was applied to all periods of projected benefit payments to determine the total pension liability for the Plan. The results of the crossover testing for the Plan are presented in a detailed report that can be found at CaIPERS' website. The discount rate was 7.50 and 7.65 percent in the June 30, 2013 and June 30, 2014 actuarial reports, respectively. The long-term expected rate of return on pension plan investments was determined using a buildingblock method in which best-estimate ranges of expected future real rates of return (expected returns, net of pension plan investment expense and inflation) are developed for each major asset class. In determining the long-term expected rate of return, CalPERS took into account both short-term and long-term market return expectations as well as the expected cash flows of the Plan. Such cash flows were developed assuming that both members and employers will make their required contributions on time and as scheduled in all future years. Using historical returns of all the Plan's asset classes, expected compound (geometric) returns were calculated over the short-term (first 10 years) and the long-term (11-60 years) using a building-block approach. Using the expected nominal returns for both short-term and long-term, the present value of benefits was calculated. The expected rate of return was set by calculating the single equivalent expected return that arrived at the same present value of benefits for cash flows as the one calculated using both short-term and long-term returns. The expected rate of return was then set equivalent to the single equivalent rate calculated above and rounded down to the nearest one quarter of one percent. (Continued) 46.

122 WASHINGTON UNIFIED SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS June 30, 2016 NOTE 8 - NET PENSION LIABILITY - PUBLIC EMPLOYER'S RETIREMENT FUND B (Continued) Sensitivity of the District's Proportionate Share of the Net Pension Liability to Changes in the Discount Rate: The following presents the District's proportionate share of the net pension liability calculated using the discount rate of 7.65 percent, as well as what the District's proportionate share of the net pension liability would be if it were calculated using a discount rate that is 1-percentage-point lower (6.65 percent) or 1-percentage-point higher (8.65 percent) than the current rate: 1% Current 1% Decrease Discount Increase (6.65%) Rate {7.65%} {8.65%} District's proportionate share of the net pension liability $ $ ~ Pension Plan Fiduciary Net Position: Detailed information about the pension plan's fiduciary net position is available in the separately issued CalPERS financial report. NOTE 9 - OTHER POST-EMPLOYMENT BENEFITS Plan Description In addition to the pension benefits described in Notes 7 and 8, the District provides post-employment health care benefits to all employees who retire from the District on or after attaining age 55 with at least 10 years of service, in accordance with contracts between the District and employee groups under a single employer defined benefit plan. The plan does not issue separate financial statements. Certificated employees must retire from the District on or after attaining the age of 52 and have attained step 11 in the Certificated Employees' Salary Schedule. The coverage ends once the retirees reaches age 65. Funding Policy The required contribution is based on projected pay-as-you-go financing requirements, with an amount to fund the actuarial accrued liability as determined annually by the Board. For the fiscal year ended June 30, 2016, the District contributed only for pay-as-you-go in the amount of $353,244. (Continued) 47.

123 WASHINGTON UNIFIED SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS June 30, 2016 NOTE 9 - OTHER POST-EMPLOYMENT BENEFITS (Continued) Annual OPEB Cost and Net OPEB Obligation The District's annual other postemployment benefit (OPES) cost (expense) is calculated based on the annual required contribution of the employer (ARC), an amount actuarially determined in accordance with the parameters of Cod. Sec. P The ARC represents a level of funding that, if paid on an ongoing basis, is projected to cover normal cost each year and amortize any unfunded actuarial liabilities (or funding excess) over a period not to exceed thirty years. The following table shows the components of the District's annual OPES cost for the year, the amount actually contributed to the plan, and changes in the District's net OPES obligation: Annual required contribution Interest on net OPES obligation Adjustment to annual required contribution Annual OPES cost (expense) Contributions made Increase in net OPES obligation Net OPES obligation - beginning of year Net OPEB obligation - end of year $ 1,353,252 92,251 (81.239) 1,364,264 ( ) 1,011, $ 3, The District's annual OPES cost, the percentage of annual OPES cost contributed to the plan, and the net OPES obligation for the year ended June 30, 2016 and preceding two years were as follows: Percentage of Annual Fiscal Year Annual OPES Cost Net OPES Ended OPES Cost Contributed Obligation June 30,2014 $ 979, % $ 1,413,113 June30,2015 $ 972, % $ 2,050,028 June 30,2016 $ 1,364, % $ 3,061,048 As of April 1, 2016, the most recent actuarial valuation date, the plan was zero percent funded. The actuarial accrued liability for benefits was $9.1 million, and the actuarial value of assets was zero, resulting in an unfunded actuarial accrued liability (UAAL) of $9.1 million. The covered payroll (annual payroll of active employees covered by the Plan) was $41.2 million, and the ratio of the UAAL to the covered payroll was 22,01 percent. The OPES plan is currently operated as a pay-as-you-go plan and does not prepare stand-alone financial statements. (Continued) 48,

124 WASHINGTON UNIFIED SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS June 30,2016 NOTE 9 - OTHER POST-EMPLOYMENT BENEFITS (Continued) Actuarial valuations of an ongoing plan involve estimates of the value of reported amounts and assumptions about the probability of occurrence of events far into the future. Examples include assumptions about future employment, mortality, and the healthcare cost trend. Amounts determined regarding the funded status of the plan and the annual required contributions of the employer are subject to continual revision as actual results are compared with past expectations and new estimates are made about the future. The schedule of funding progress, presented as required supplementary information following the notes to the financial statements, presents multiyear trend information about whether the actuarial value of plan assets is increasing or decreasing over time relative to the actuarial accrued liabilities for benefits. Projections of benefits for financial reporting purposes are based on the substantive plan (the plan as understood by the employer and the plan members) and include the types of benefits provided at the time of each valuation and the historical pattern of sharing of benefit costs between the employer and plan members to that point. The actuarial methods and assumptions used include techniques that are designed to reduce the effects of short-term volatility in actuarial accrued liabilities and the actuarial value of assets, consistent with the long-term perspective of the calculations. In the April 1, 2016 actuarial valuation, the entry age actuarial cost method was used. The actuarial assumptions included a 4.5 percent investment rate (net of administrative expenses), which is a blended rate of the expected long-term investment returns on plan assets and on the employer's own investments calculated based on the funded level of the plan on the valuation date, and an annual healthcare cost trend rate of 4 percent. Both rates included a 2.75 percent inflation assumption. The actuarial value of assets was determined using techniques that spread the effects of short-term volatility in the market value of investments over a five-year period. The UAAL is being amortized as a level percentage of projected payroll on an open basis. The remaining amortization period at June 30, 2016, was 25 years. NOTE 10 - JOINT POWERS AGREEMENTS The District participates in five joint ventures under joint powers agreements. Northern California Regional Liability Excess Fund: The District is a member with other school districts in Northern California Regional Liability Excess Fund (NCReLiEF) for the operation of a common risk management and insurance program. NCReLiEF is governed by a board consisting of representatives of member districts. The board controls the operations of NCReLiEF, including the selection of management and approval of operating budgets, independent of any influence by the member districts beyond their representation on the board. Settled claims resulting from these risks have not exceeded commercial insurance coverage in any of the past three fiscal years. There have been no significant reductions in insurance coverage from coverage in the prior year. Condensed audited financial information for NCReLiEF for the year ended June 30, 2015 (most recent information available) is as follows: Total assets Total liabilities Net position Total revenues Total expenditures Change in net position $ 66,435,645 $ 59,236,261 $ 7,199,384 $ 46,568,938 $ 45,562,131 $ 1,006,807 (Continued) 49.

125 WASHINGTON UNIFIED SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS June 30,2016 NOTE 10 - JOINT POWERS AGREEMENTS (Continued) School Project for Utility Rate Reduction: The District is a member in School Project for Utility Rate Reduction (SPURR), which is a California joint powers authority, whose members are California public K-12 school districts, community college districts and county offices of education. SPURR provides members access to the wholesale natural gas market that would otherwise be unavailable to them. Condensed audit information for SPURR for the year ended June 30, 2014 (the latest information available) is as follows: Total assets Total liabilities Net position Total revenue Total expenditures Change in net position $ 12,618,781 $ 7,684,404 $ 4,934,377 $ 33,778,951 $ 34,880,230 $ (1,101,279) North Valley Schools Insurance Group: The District is a member with other districts in North Valley Schools Insurance Group (NVSIG) for the operation of a common risk management and insurance program for workers' compensation. There have been no significant reductions in insurance coverage from coverage in the prior year. Condensed audited financial information for NVSIG for the year ended June 30, 2015 (most recent information available) is as follows: Total assets Total liabilities Net position Total revenues Total expenditures Change in net position $ 3,022,400 $ 1,448,227 $ 1,574,173 $ 10,329,745 $ 9,996,043 $ 333,702 Schools Excess Liability Fund: The District is a member with other districts in Schools Excess Liability Fund (SELF) for the purpose of providing excess insurance coverage. There have been no significant reductions in insurance coverage from coverage in the prior year. Condensed audited financial information for SELF for the year ended June 30, 2015 (most recent information available) is as follows: Total assets Deferred outflows of resou rces Total liabilities Deferred inflows of resources Net position Total revenues Total expenditures Change in net position $ 154,727,271 $ 99,437 $ 122,470,926 $ 166,153 $ 32,189,629 $ 11,968,752 $ 23,063,637 $ (11,094,885) (Continued) 50.

126 WASHINGTON UNIFIED SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS June 30, 2016 NOTE 10 - JOINT POWERS AGREEMENTS (Continued) The Protected Insurance Program for Schools: The District is a member with other districts in the Protected Insurance Program for Schools (PIPS) for the purpose of providing an alternative for workers' compensation coverage. There have been no significant reductions in insurance coverage from coverage in the prior year. Condensed audited financial information for PIPS for the year ended June 30, 2015 (most recent information available) is as follows: Total assets Deferred outflows of resources Total liabilities Deferred inflows of resources Net position Total revenues Total expenditures Change in net position The relationship between the District and the Joint Powers component units of the District for financial reporting purposes. NOTE 11 - CONTINGENCIES Authorities is $ 154,727,271 $ 99,437 $ 122,470,926 $ 166,153 $ 32,189,629 $ 11,968,752 $ 23,063,637 $ (11,094,885) such that they are not The District is subject to legal proceedings and claims which arise in the ordinary course of business. In the opinion of management, the amount of ultimate liability with respect to these actions will not materially affect the financial position or results of operations of the District. The District has received federal and state funds for specific purposes that are subject to review and audit by the grantor agencies. Although such audits could result in expenditure disallowances under terms of the grants, it is management's opinion that any required reimbursements of future revenue offsets subsequently determined will not have a material effect on the District's financial position or results of operations. Construction Commitments: As of June 30, 2016, the District has $2.9 million in outstanding commitments on construction contracts. 51.

127 REQUIRED SUPPLEMENTARY INFORMATION

128 WASHINGTON UNIFIED SCHOOL DISTRICT GENERAL FUND BUDGETARY COMPARISON SCHEDULE For the Year Ended June 30, 2016 Budget Variance Favorable Original Final Actual (Unfavorable) Revenues: Local Control Funding Formula (LCFF): State apportionment $ 51,813,210 $ 49,633,847 $ 49,042,260 $ (591,587) Local sources Total LCFF ( ) Federal sources 4,163,467 4,714,024 4,447,042 (266,982) Other state sources 6,970,438 7,639,126 9,407,653 1,768,527 Other local sources Total revenues Expenditures: Current: Certificated salaries 33,727,659 33,900,225 32,183,335 1,716,890 Classified salaries 11,478,307 11,391,514 11,275, ,174 Employee benefits 12,200,058 13,491,952 14,964,054 (1,472,102) Books and supplies 3,899,334 4,656,994 3,351,793 1,305,201 Contract services and operating expenditures 8,650,240 10,233,570 9,888, ,338 Other outgo 205, , ,277 Capital outlay A Total expenditures Excess (deficiency) of revenues over (under) expenditures Other financing sources (uses): Transfers in 320, ,000 1,238, ,700 Transfers out ( ) ( ) ( ) ( ) Total other financing sources (uses) ( ) ( ) Change in fund balance 3,775,312 2,666,060 6,958,043 4,291,983 Fund balance, July 1, } }50 Fund balance, June 30, 2016 $ m ~ ~ See accompanying notes to required supplementary information. 52.

129 WASHINGTON UNIFIED SCHOOL DISTRICT CAFETERIA FUND BUDGETARY COMPARISON SCHEDULE For the Year Ended June 30, 2016 Original Budget Final Actual Variance Favorable {Unfavorable} Revenues: Federal sources $ 3,065,000 $ 3,204,732 $ Other state sources 242, ,000 Other local sources Total revenues Expenditures: Current: Classified salaries 1,318,926 1,318,926 Employee benefits 445, ,074 Books and supplies 2,062,239 2,099,339 Contract services and operating expenditures 341, ,721 Other outgo Total expenditures Excess (deficiency) of revenues over (under) expenditures }33 Other financing uses: Transfers out ( ) Change in fund balance 26,733 (673,267) Fund balance, July 1, Fund balance, June 30,2016 ~ ~ ~ 3,997, , ,402, ,367 1,820, , ( ) 64, $ 793,023 34,597 (13.366) (83,542) (19,293) 279,066 (247,062) ( ) 737,907 ~ See accompanying notes to required supplementary information. 53.

130 WASHINGTON UNIFIED SCHOOL DISTRICT SCHEDULE OF OTHER POSTEMPLOYMENT BENEFITS (OPE B) FUNDING PROGRESS For the Year Ended June 30, 2016 Actuarial Valuation Date April 1,2012 April 1,2014 April 1,2016 Schedule of Funding Progress Unfunded Actuarial Actuarial Actuarial Accrued Accrued Value of Liability Liability Funded Covered Assets (MU (UMU Ratio Payroll $ $ 5.9 million $ 5.9 million 0% $ 37.6 million $ $ 6.6 million $ 6.6 million 0% $ 38.6 million $ $ 9.1 million $ 9.1 million 0% $ 41.2 million UMLasa Percentage of Covered Payroll 15.79% 17.07% 22.01% 54.

131 WASHINGTON UNIFIED SCHOOL DISTRICn SCHEDULE OF THE DISTRICT'S PROPORTIONATE SHARE OF THE NET PENSION LIABILITY For the Year Ended June 30,2016 State Teachers' Retirement Plan Last 10 Fiscal Years District's proportion of the net pension liability District's proportionate share of the net pension liability $ State's proportionate share of the net pension liability associated with the District Total net pension liability $ District's covered-employee payroll $ District's proportionate share of the net pension liability as a percentage of its covered-employee payroll Plan fiduciary net position as a percentage of the total pension liability % 35,796,000 21,615,000 57,411,000 27,283, % 76.52% % $ 43,680,000 23,102,000 $ 66?82,OOO $ 30,114, % 74.02% The amounts presented for each fiscal year were determined as of the year end that occurred one year prior. All years prior to 2015 are not available. (Continued) 55.

132 WASHINGTON UNIFIED SCHOOL DISTRICTT SCHEDULE OF THE DISTRICT'S PROPORTIONATE SHARE OF THE NET PENSION LIABILITY For the Year Ended June 30, 2016 Public Employer's Retirement Fund B Last 10 Fiscal Years 2015 District's proportion of the net pension liability 0.095% District's proportionate share of the net pension liability $ 10,792,000 District's covered-employee payroll $ 9,979,000 District's proportionate share of the net pension liability as a percentage of its covered-employee payroll % Plan fiduciary net position as a percentage of the total pension liability 83.38% % $ 14,177,000 $ 10,648, % 79.43% The amounts presented for each fiscal year were determined as of the year end that occurred one year prior. All years prior to 2015 are not available. 56.

133 WASHINGTON UNIFIED SCHOOL DISTRICTT SCHEDULE OF THE DISTRICT'S CONTRIBUTIONS For the Year Ended June 30, 2016 State Teachers' Retirement Plan Last 10 Fiscal Years Contractually required contribution Contributions in relation to the contractually required contribution 2015 $ 2,674,147 $ 2,674, $ 3,435,263 $ 3,435,263 District's covered-employee payroll Contributions as a percentage of covered-employee payroll $ 30,114, % $ 32,015, % All years prior to 2015 are not available. (Continued) 57.

134 WASHINGTON UNIFIED SCHOOL DISTRICTT SCHEDULE OF THE DISTRICT'S CONTRIBUTIONS For the Year Ended June 30,2016 Public Employer's Retirement Fund B Last 10 Fiscal Years Contractually required contribution Contributions in relation to the contractually required contribution 2015 $ 1,253,374 $ 1,253, $ 1,457,608 $ 1,457,608 District's covered-employee payroll Contributions as a percentage of covered-employee payroll $ 10,648, % $ 12,304, % All years prior to 2015 are not available. 58.

135 WASHINGTON UNIFIED SCHOOL DISTRICT NOTE TO REQUIRED SUPPLEMENTARY INFORMATION June 30, 2016 NOTE 1 - PURPOSE OF SCHEDULES A - Budgetary Comparison Schedule The District employs budget control by object codes and by individual appropriation accounts. Budgets are prepared on the modified accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America as prescribed by the Governmental Accounting Standards Board. The budgets are revised during the year by the Board of Education to provide for revised priorities. Expenditures cannot legally exceed appropriations by major object code. The originally adopted and final revised budgets for the General Fund and Cafeteria Fund are presented as Required Supplementary Information. The basis of budgeting is the same as GAAP. Excess of expenditures over appropriations for the year ended June 30,2016 were as follows: Excess Expenditures General Fund: Employee Benefits Cafeteria Fund: Classified salaries Employee Benefits Contract services and operating expenditures These excesses are not in accordance with Education Code B - Schedule of Other Postemployment Benefits Funding Progress $ 1,472,102 83,542 19, ,062 The Schedule of Funding Progress presents multi-year trend information which compares, over time, the actuarially accrued liability for benefits with the actuarial value of accumulated plan assets. C - Schedule of the District's Proportionate Share of the Net Pension Liability The Schedule of the District's Proportionate Share of the Net Pension Liability is presented to illustrate the elements of the District's Net Pension Liability. There is a requirement to show information for 10 years. However, until a full 10-year trend is compiled, governments should present information for those years for which information is available. D - Schedule of the District Contributions The Schedule of the District Contributions is presented to illustrate the District's required contributions relating to the pensions. There is a requirement to show information for 1 years. However, until a full 10- year trend is compiled, governments should present information for those years for which information is available. E - Changes of Benefit Terms There are no changes in benefit terms reported in the Required Supplementary Information. F - Changes of Assumptions The discount rate for Public Employer's Retirement Fund B was 7.50 and 7.65 percent in the June 30, 2013 and June 30, 2014 actuarial reports, respectively. There are no changes in assumptions reported for the State Teachers' Retirement Plan. 59.

136 SUPPLEMENTARY INFORMATION

137 WASHINGTON UNIFIED SCHOOL DISTRICT COMBINING BALANCE SHEET ALL NON-MAJOR FUNDS June 30, 2016 Special Reserve Adult Child for Capital Education Development Outlay Projects Fund Fund Fund Debt Service Fund Total ASSETS Cash in County Treasury $ Cash with Fiscal Agent Receivables Due from other funds Total assets $ 135,591 $ 24,714 $ 3,822,192 45, , A67 $ $ $ $ 3,982,497 4,269,140 4,269,140 40, , $ 4, $ R LIABILITIES AND FUND BALANCES Liabilities: Accounts payable $ 726 $ 5,531 $ 23,280 Due to other funds 319,511 7,143 Unearned revenue Total liabilities Fund balances: Restricted 188} Total fund balances 188} ]69 Total liabilities and fund balances $ m m $ $ 29, , ]09 i 4! m ,

138 WASHINGTON UNIFIED SCHOOL DISTRICT COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGE IN FUND BALANCES ALL NON-MAJOR FUNDS For the Year Ended June 30,2016 Special Reserve Adult Child for Capital Debt Education Development Outlay Projects Service Fund Fund Fund Fund Total Revenues: Federal sources $ 45,266 $ 76,347 $ $ $ 121,613 Other state sources 160,219 1,299,422 4,217,999 5,677,640 Other local sources Total revenues Expenditures: Current: Certificated salaries 123, , ,902 Classified salaries 7, , ,040 Employee benefits 26, , ,602 Books and supplies 50,269 21,714 71,983 Contract services and operating expenditures 9,681 19, , ,329 Capital outlay 2,192,764 2,192,764 Debt service: Principal retirement 397, ,656 Interest Total expenditures Excess (deficiency) of revenues over (under) expenditures { ) Other financing sources (uses): Transfers in 49,501 1,111,021 1,160,522 Transfers out (101556) ( ) ( ) Total other financing sources (uses) (101556) ( ) Net change in fund balances 164,352 (188,976) 1,910, ,573 2,715,271 Fund balances, July 1, Fund balances, June 30,2016 ~ ~ ~ ~ ~ 81301}09 61.

139 WASHINGTON UNIFIED SCHOOL DISTRICT COMBINING STATEMENT OF CHANGES IN ASSETS AND LIABILITIES ALL AGENCY FUNDS For the Year Ended June 3D, 2016 Balance July 1, 2015 Additions Deductions Assets: Cash on hand and in banks: Bridgeway Island Elementary $ 9,984 $ 43,551 $ 41,618 $ Westmore Oaks Elementary 9,822 6,149 8,437 Stonegate Elementary 15,968 72,837 59,868 River City High 192, , ,552 Yolo High Total assets $ $ 527A55 $ $ Liabilities: Due to student groups ~ ~ 527A55 ~ ~ Balance June 30, ,917 7,534 28, , A

140 WASHINGTON UNIFIED SCHOOL DISTRICT ORGANIZATION June 30, 2016 Washington Unified School District was established on July 1, 1957 and comprises an area of approximately 23 square miles located in Yolo County. Washington Unified School District serves an ethnically diverse and growing population of 7,421 students, with a staff of 400 certificated employees and 350 classified employees. The district currently operates seven elementary schools (six K-8 schools and one Transitional Kindergarten-5 school), a comprehensive high school, an alternative high school, a dependent charter, an independent study program, and an adult education program. At least one additional elementary school is planned for the future to accommodate growth. There were no changes in District boundaries during the year. BOARD OF EDUCATION Term Expires Alicia Cruz Sarah Kirby-Gonzalez Katie Villegas Norma Alcala Cody Pizzotti President Vice President Clerk Trustee Trustee ADMINISTRATION Linda C, Luna Superintendent Scott Lantsberger Assistant Superintendent, Business Services Michael Reed Assistant Superintendent, Human Resources Amber Lee Assistant Superintendent, Educational Services, Elementary Andy Parsons, Ed. D Assistant Superintendent, Educational Services, Secondary 63.

141 WASHINGTON UNIFIED SCHOOL DISTRICT SCHEDULE OF AVERAGE DAILY ATTENDANCE For the Year Ended June 30, 2016 Second Period Report Annual Report DISTRICT Elementary: Transitional Kindergarten through Third 2,323 Fourth through Sixth 1,734 Seventh and Eighth Subtotal Elementary Secondary: Ninth through Twelfth Subtotal Secondary District Totals ,353 1, See accompanying notes to supplementary information. 64.

142 WASHINGTON UNIFIED SCHOOL DISTRICT SCHEDULE OF INSTRUCTIONAL TIME For the Year Ended June 30,2016 Grade Level District: Kindergarten Grade 1 Grade 2 Grade 3 Grade 4 Grade 5 Grade 6 Grade 7 Grade 8 Grade 9 Grade 10 Grade 11 Grade 12 Statutory Number Minutes of Days Require- Actual Traditional ment Minutes Calendar 36,000 42, ,400 51, ,400 51, ,400 51, ,000 54, ,000 54, ,000 54, ,000 54, ,000 54, ,800 66, ,800 66, ,800 66, ,800 66, Status In Compliance In Compliance In Compliance In Compliance In Compliance In Compliance In Compliance In Compliance In Compliance In Compliance In Compliance In Compliance In Compliance See accompanying notes to supplementary information. 65.

143 WASHINGTON UNIFIED SCHOOL DISTRICT SCHEDULE OF EXPENDITURE OF FEDERAL AWARDS For the Year Ended June 30, 2016 Federal Catalog Number Federal Grantor/Pass-Through Grantor/Program or Cluster Title Pass Through Entity Identifying Number Federal Expenditures U.S. Department of Education - Passed through California Department of Education A A Special Education Cluster: Special Education: IDEA Basic local Assistance Entitlement, Part B I Sec 611 Special Education, Part B Private School ISPs, Special Education: IDEA Preschool local Entitlement, Part B, Sec 611 (Age 3-5) Special Education: IDEA Preschool Grants, Part B Special Education: IDEA Mental Health Services $ 1,266,087 9,805 96,071 35, Subtotal Special Education Cluster A A Adult Education Programs: Adult Education: State leadership Projects Adult Education: Adult Basic Education & ESl Adult Education: English Literacy & Civics Education ,723 9,832 1}11 Subtotal Adult Education Programs B Special Education: State Improvement Grant, NClB: Title I, Part A, Basic Grants low-income and Neglected NClB: Title I, Part G, AP Test Fee Carl D. Perkins Career and Technical Education: Secondary, Section 131 Indian Education NClB: Title II, Part A, Improving Teacher Quality NClB: Title III, Limited English Proficient (lep) Student Program ,716 2,061,883 13,653 72,648 8, , Total U.S. Department of Education U.S. Department of Agriculture - Passed through California Department of Education Child Nutrition: School Programs Child Nutrition: Centers and Family Day Care Homes Child Nutrition: Fresh Fruit and Vegetable Program ,361, , Total U.S. Department of Agriculture A92 (Continued) 66.

144 WASHINGTON UNIFIED SCHOOL DISTRICT SCHEDULE OF EXPENDITURE OF FEDERAL AWARDS For the Year Ended June 30, 2016 Federal Catalog Number Federal Grantor/Pass-Through Grantor/Program or Cluster Title Pass Through Entity Identifying Number Federal Expenditures U.S. Department of Health and Human Services - Passed through California Department of Education Medi-Cal Programs: Medi-Cal Billing Option Medi-Cal Administrative Activities $ 383, Subtotal Medi-Cal programs Child Development: Federal General and State Preschool Total U.S. Department of Health and Human Services Total Federal Programs ~ See accompanying notes to supplementary information. 67.

145 WASHINGTON UNIFIED SCHOOL DISTRICT RECONCILIATION OF UNAUDITED ACTUAL FINANCIAL REPORT WITH AUDITED FINANCIAL STATEMENTS For the Year Ended June 30, 2016 There were no adjustments proposed to any funds of the District See accompanying notes to supplementary information. 68.

146 WASHINGTON UNIFIED SCHOOL DISTRICT SCHEDULE OF FINANCIAL TRENDS AND ANALYSIS For the Year Ended June 30,2016 (UNAUDITED) General Fund Revenues and other financing sources (Budget) 2017 $ 77,849,155 $ 80,960,864 $ 69,822,264 $ 58,668,821 Expenditures Other uses and transfers out 75,901, ,523 72,842,299 1,160,522 65,855, ,880 56,985,057 1,862,224 Total outgo 76,708,278 74,002,821 69,338,677 58,847,281 Change in fund balance Ending fund balance Available reserves Designated for economic uncertainties Undesignated fund balance Available reserves as percentages of total outgo $ 1,140,877 $ 6,958,043 $ 483,587 $ ( ) $ ,670 $ 20,095,793 $ 13,137,750 $ 12,654,163 $ 4,554,105 $ 4.230,195 $ 4,171,001 $ 8,539,810 $ 4,554,105 $ 4.230,195 $ 4171,001 $ 3,665,774 $ $ $ $ 4,875,036 5,94% 5,72% 6,02% 14,5% All Funds Total long-term liabilities Average daily attendance at P-2, excluding Adult and Charter School $ 232,129,318 $ 240, $ 204,952,669 $ ,696 7,326 7,245 7,262 7,118 The General Fund fund balance has increased by $7,263,170 over the past three years, The fiscal year budget projects an increase of $1,140,877, For a district this size, the State of California recommends available reserves of at least 2% of total General Fund expenditures, transfers out, and other uses, For the year ended June 30, 2016, the District has met this requirement. The District has incurred an operating surplus in two of the past three years and anticipates an operating surplus during the fiscal year ending June 30,2017, Total long-term liabilities have increased by $87,544,455 over the past two years Average daily attendance has increased by 127 over the past two years. The District anticipates an increase of 81 ADA for the fiscal year. See accompanying notes to supplementary information. 69.

147 WASHINGTON UNIFIED SCHOOL DISTRICT SCHEDULE OF CHARTER SCHOOLS For the Year Ended June 30, 2016 Charter Schools Chartered by District West Sacramento Early College Prep Charter School Sacramento Valley Charter School Included in District Financial Statements, or Separate Report Separate Report Separate Report See accompanying notes to supplementary information. 70.

148 WASHINGTON UNIFIED SCHOOL DISTRICT NOTES TO SUPPLEMENTARY INFORMATION June 30, 2016 NOTE 1 - PURPOSE OF SCHEDULES A - Schedule of Average Daily Attendance Average daily attendance is a measurement of the number of pupils attending classes of the District. The purpose of attendance accounting from a fiscal standpoint is to provide the basis on which apportionments of state funds are made to school districts. This schedule provides information regarding the attendance of students at various grade levels and in different programs. B - Schedule of Instructional Time The District has received incentive funding for increasing instructional time as provided by the Incentives for Longer Instructional Day. The District neither met nor exceeded its target funding. This schedule presents information on the amount of instructional time offered by the District, and whether the District complied with the provisions of Education Code Sections through C - Schedule of Expenditure of Federal Awards The Schedule of Expenditure of Federal Awards includes the federal award activity of Washington Unified School District, and is presented on the accrual basis of accounting. The information in this schedule is presented in accordance with the requirements of Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance). Expenditures are recognized following, as applicable, either the cost principles in OMB Circular A-21, Cost Principles for Educational Institutions or the cost principles contained in the Uniform Guidance, wherein certain types of expenditures are not allowable or are limited as to reimbursement. The District has elected not to use the 10-percent de minimis indirect cost rate allowed under the Uniform Guidance. The following schedule provides a reconciliation between revenues reported on the Statement of Revenues, Expenditures and Change in Fund Balances and the related expenditures reported on the Schedule of Expenditure of Federal Awards. The reconciling amounts represent Federal funds that have been recorded as revenues that have not been expended by June 30, Description CFDA Number Amount Total Federal revenues, Statement of Revenues, Expenditures and Change in Fund Balances $ 8,566,410 Less: Child Nutrition: Fresh Fruit & Vegetable funds not spent Child Nutrition: NSLP Equipment funds not spent Add: Medi-Cal Billing Option funds spent in excess of revenues (14,163) (37,100) Total Schedule of Expenditure of Federal Awards $ D - Reconciliation of Unaudited Actual Financial Report with Audited Financial Statements This schedule provides the information necessary to reconcile the Unaudited Actual Financial Report to the audited financial statements. (Continued) 71.

149 WASHINGTON UNIFIED SCHOOL DISTRICT NOTES TO SUPPLEMENTARY INFORMATION June 30, 2016 NOTE 1 - PURPOSE OF SCHEDULES (Continued) E - Schedule of Financial Trends and Analysis Unaudited This schedule provides information on the District's financial condition over the past three years and its anticipated condition for the fiscal year, as required by the State Controller's Office. The information-in this schedule has been derived from audited information. F - Schedule of Charter Schools This schedule provides information for the California Department of Education to monitor financial reporting by Charter Schools. NOTE 2 - EARLY RETIREMENT INCENTIVE PROGRAM Education Code Section requires certain disclosure in the financial statements of districts which adopt Early Retirement Incentive Programs pursuant to Education Code Sections and For the fiscal year ended June 30, 2016, the District did not adopt this program. 72.

150 Crowe Horwath ~ Crowe Horwath LLP Independent Member CI'O'Ne Horwath Internaticl1al INDEPENDENT AUDITOR'S REPORT ON COMPLIANCE WITH STATE LAWS AND REGULATIONS Board of Education Washington Unified School District West Sacramento, California Report on Compliance with State Laws and Regulations \Ne have audited \Nashington Uni11ed School District's compliance with the types of compliance requirements described in the State of California's Guide for Annual Audits of K-12 Local Education Agencies and State Compliance Reporting (the "Audit Guide") applicable to the state laws and regulations listed below for the year ended June 30, Description Attendance Teacher Certification and Misassignments ~Cind ergarten Continuance Independent Study Continuation Education Instructional Time Instructional Materials Ratio of Administrative Employees to Teachers Classroom Teacher Salaries Early Retirement Incentive Gann Limit Calculation School Accountability Report Card Juvenile Court Schools Middle or Early College High Schools K-3 Grade Span Adjustment Transportation Maintenance of Effort Educator Effectiveness California Clean Energy Jobs Act After School Education and Safety Pmgrarn: General requirements After school Before school Proper Expenditure of Education Protection j:\ccount Funds Undupficated l ocal Control Funding Formula Pupil Counts Local Control and Accountability Plan Independent Study - Course Based Immunizations Attendance, for charter schools Mode of Instruction, for charter schools Nonclassroom-Based Instructionllndependent Study, for charter schools Determination of Funding for Nonclassroom-Based Instruction, for charter schools Annual Instructional Minutes - Classroom Based, for charter schools Charter School Facility Grant Program Procedures Performed Yes Yes Yes No, see below Yes Yes Yes Yes No, see below Yes Yes No, see below No, see below Yes Yes No, see below Yes. Yes Yes No, see below Yes Yes Yes No, see below No, see below No, see below No, see below No, see below No, see below No, see below No, see below (Continued) 73.

151 The District's reported ADA for Independent Study was below the materiality level that requires testing; therefore, we did not perform any testing of Independent Study ADA. The District did not offer an Early Retirement Incentive Program; therefore, we did not perform any procedures related to the Early Retirement Incentive Program. The District does not have any Juvenile Court Schools, therefore, we did not perform any procedures related to Juvenile Court Schools. The District does not have any Middle or Early College High Schools, therefore, we did not perform any procedures related to Middle or Early College High Schools. The District did not expend any Educator Effectiveness funds in the current year, therefore, we did not perform any procedures related to Educator Effectiveness. The District did not offer a Before School Education and Safety Program; therefore, we did not perform any procedures relating to the Before School Education and Safety Program. The District did not report any ADA for Independent Study - Course Based; therefore, we did not perform any procedures related to the Independent Study - Course Based program. The District submitted all required immunization assessment reports to the California Department of Public Health; therefore, we did not perform any procedures related to this requirement. The District does not have any Charter Schools; therefore, we did not perform any of the testing required by Article 4 of the Audit Guide. The District did not receive Charter School Facility Grant Program funding in the current year, therefore, we did not perform any procedures related to Charter School Facility Grant Program. Management's Responsibility Management is responsible for compliance with the requirements of state laws and regulations, as listed above. Auditor's Responsibility Our responsibility is to express an opinion on compliance with state laws and regulations as listed above. We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States of America; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; and the Guide for Annual Audits of K12 Local Education Agencies and State Compliance Reporting. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the state laws and regulations listed above occurred. An audit includes examining, on a test basis, evidence about Washington Unified School District's compliance with those requirements and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion on compliance with state laws and regulations. However, our audit does not provide a legal determination of Washington Unified School District's compliance. Basis for Qualified Opinion on Compliance with State Laws and Regulations As described in Finding in the accompanying Schedule of Audit Findings and Questioned Costs, Washington Unified School District did not comply with the requirements regarding the School Accountability Report Card. Compliance with such requirements is necessary, in our opinion, for Washington Unified School District to comply with the requirements applicable to state laws and regulations applicable to School Accountability Report Card. (Continued) 74.

152 Qualified Opinion on Compliance with State Laws and Regulations In our opinion, except for the noncompliance described in the Basis for Qualified Opinion paragraph, Washington Unified School District complied, in all material respects, with the compliance requirements referred to above that are applicable to the state laws and regulations referred to above for the year ended June 30, Other Matter Washington Unified School District's response to the finding identified in our audit is included in the accompanying Schedule of Audit Findings and Questioned Costs. Washington Unified School District's response was not subjected to auditing procedures applied in the audit of compliance and, accordingly, we express no opinion on it. Purpose of this Report The purpose of this report on compliance is solely to describe the scope of our testing of compliance and the results of that testing based on the requirements of the Guide for Annual Audits of K-12 Local Education Agencies and State Compliance Reporting. Accordingly, this report is not suitable for any other purpose. Sacramento, California December 2,2016 ~~~ Crowe Horwath LLP 75.

153 Crowe Horwath. Crowe Horwath LLP Independent Member Crowe Horwath International INDEPENDENT AUDITOR'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS Board of Education Washington Unified School District West Sacramento, California We have audited, in accordance with the auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States, the financial statements of the governmental activities, each major fund, and the aggregate remaining fund information of Washington Unified School District as of and for the year ended June 30, 2016, and the related notes to the financial statements, which collectively comprise Washington Unified School District's basic financial statements, and have issued our report thereon dated December 2,2016. Internal Control Over Financial Reporting In planning and performing our audit of the financial statements, we considered Washington Unified School District's internal control over financial reporting (internal control) to determine the audit procedures that are appropriate in the circumstances for the purpose of expressing our opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of Washington Unified School District's internal control. Accordingly, we do not express an opinion on the effectiveness of Washington Unified School District's internal control. A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of the entity's financial statements will not be prevented, or detected and corrected on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance. Our consideration of internal control was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies. Given these limitations, during our audit we did not identify any deficiencies in internal control that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified. We identified a deficiency involving internal control that we communicated to management as identified in the accompanying Schedule of Audit Findings and Questioned Costs as finding Compliance and Other Matters As part of obtaining reasonable assurance about whether Washington Unified School District's financial statements are free of material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards. (Continued)

154 Washington Unified School District's Response to Finding Washington Unified School District's response to the finding identified in our audit are included in the accompanying Schedule of Audit Findings and Questioned Costs. Washington Unified School District's response was not subjected to the auditing procedures applied in the audit of the financial statements and, accordingly, we express no opinion on it. Purpose of this Report The purpose of this report is solely to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the entity's internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the entity's internal control and compliance. Accordingly, this communication is not suitable for any other purpose. Sacramento, California December 2,2016 ~~~ Crowe Horwath LLP 77.

155 Crowe HorwathQ Crowe Horwath LLP Independent Member Crowe HoIwath International INDEPENDENT AUDITOR'S REPORT ON COMPLIANCE FOR EACH MAJOR FEDERAL PROGRAM AND REPORT ON INTERNAL CONTROL OVER COMPLIANCE Board of Education Washington Unified School District West Sacramento, California Report on Compliance for Each Major Federal Program We have audited Washington Unified School District's compliance with the types of compliance requirements described in the OMB Compliance Supplement that could have a direct and material effect on each of Washington Unified School District's major federal programs for the year ended June 30, Washington Unified School District's major federal programs are identified in the summary of auditor's results section of the accompanying schedule of findings and questioned costs. Management's Responsibility Management is responsible for compliance with federal statues, regulations, and the terms and conditions of its federal awards applicable to its federal programs. Auditor's Responsibility Our responsibility is to express an opinion on compliance for each of Washington Unified School District's major federal programs based on our audit of the types of compliance requirements referred to above. We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States of America; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; and the audit requirements of Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance). Those standards and the Uniform Guidance require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the types of compliance requirements referred to above that could have a direct and material effect on a major federal program occurred. An audit includes examining, on a test basis, evidence about Washington Unified School District's compliance with those requirements and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion on compliance for each major federal program. However, our audit does not provide a legal determination of Washington Unified School District's compliance. Opinion on Each Major Federal Program In our opinion, Washington Unified School District complied, in all material respects, with the types of compliance requirements referred to above that could have a direct and material effect on each of its major federal programs for the year ended June 30, (Continued) 78.

156 Report on Internal Control Over Compliance Management of Washington Unified School District is responsible for establishing and maintaining effective internal control over compliance with the types of compliance requirements referred to above. In planning and performing our audit of compliance, we considered Washington Unified School District's internal control over compliance with the types of requirements that could have a direct and material effect on each major federal program to determine the auditing procedures that are appropriate in the circumstances for the purpose of expressing an opinion on compliance for each major federal program and to test and report on internal control over compliance in accordance with the Uniform Guidance, but not for the purpose of expressing an opinion on the effectiveness of internal control over compliance. Accordingly, we do not express an opinion on the effectiveness of Washington Unified School District's internal control over compliance. A deficiency in internal control over compliance exists when the design or operation of a control over compliance does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, noncompliance with a type of compliance requirement of a federal program on a timely basis. A material weakness in internal control over compliance is a deficiency, or combination of deficiencies, in internal control over compliance, such that there is a reasonable possibility that material noncompliance with a type of compliance requirement of a federal program will not be prevented, or detected and corrected, on a timely basis. A significant deficiency in internal control over compliance is a deficiency, or a combination of deficiencies, in internal control over compliance with a type of compliance requirement of a federal program that is less severe than a material weakness in internal control over compliance, yet important enough to merit attention by those charged with governance. Our consideration of internal control over compliance was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control over compliance that might be material weaknesses or significant deficiencies. We did not identify any deficiencies in internal control over compliance that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified. The purpose of this report on internal control over compliance is solely to describe the scope of our testing of internal control over compliance and the results of that testing based on the requirements of the Uniform Guidance. Accordingly, this report is not suitable for any other purpose. Sacramento, California December 2,2016 ~~~ Crowe Horwath LLP 79.

157 FINDINGS AND RECOMMENDATIONS

158 WASHINGTON UNIFIED SCHOOL DISTRICT SCHEDULE OF AUDIT FINDINGS AND QUESTIONED COSTS Year Ended June 30,2016 SECTION I - SUMMARY OF AUDITOR'S RESULTS FINANCIAL STATEMENTS Type of auditor's report issued: Unmodified Internal control over financial reporting: Material weakness( es) identified? Yes _X_ No Significant deficiency(ies) identified not considered to be material weakness( es)? Yes _X_ None reported Noncompliance material to financial statements noted? FEDERAL AWARDS Yes _X_ No Internal control over major programs: Material weakness( es) identified? Yes _X_ No Significant deficiency(ies) identified not considered to be material weakness(es)? Yes _X_ None reported Type of auditors' report issued on compliance for major programs: Unmodified Any audit findings disclosed that are required to be reported in accordance with 2 CFR (a)? Yes _X_ No Identification of major programs: CFDA Number(s) , A, Name of Federal Program or Cluster Special Education Cluster Child Nutrition: School Programs Dollar threshold used to distinguish between Type A and Type B programs: Auditee qualified as low-risk auditee? STATE AWARDS Type of auditors' report issued on compliance for state programs: $ 750,000 _X_Yes Qualified No (Continued) 80.

159 WASHINGTON UNIFIED SCHOOL DISTRICT SCHEDULE OF AUDIT FINDINGS AND QUESTIONED COSTS Year Ended June 30,2016 SECTION \I - FINANCIAL STATEMENT FINDINGS DEFICIENCY-INTERNAL CONTROL - ASSOCIATED STUDENT BODY (30000) Education Code Section (and California Department of Education's "Accounting Procedures for Student Organizations Handbook") requires student body organizations to follow the regulations set by the Governing Board of th~ school district. Condition At Westmore Oaks Elementary, a fundraiser was held and there were no detailed schedules defining the number of items receipted and the price per item. In addition, the deposit into the bank was not made in a timely manner. At River City High School, detailed schedules defining the number of items receipted and the price per item was not required when turning in deposits. There exists a risk that Associated Student Body funds could potentially be misappropriated. Adequate internal control procedures have not been consistently followed. Fiscal Impact Not determinable. Recommendation School sites should implement and consistently apply proper control procedures in order to protect Associated Student Body funds from misappropriation. Corrective Action Plan Training was provided by Fiscal Services on October 24,2016 to the Principal of Westmore Oaks on the proper procedures for the Associated Student Body. Fiscal Services will continue to monitor and advise River City High School of the proper procedures. (Continued) 81.

160 WASHINGTON UNIFIED SCHOOL DISTRICT SCHEDULE OF AUDIT FINDINGS AND QUESTIONED COSTS Year Ended June 30,2016 No matters were reported. SECTION III - FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (Continued) 82.

161 WASHINGTON UNIFIED SCHOOL DISTRICT SCHEDULE OF AUDIT FINDINGS AND QUESTIONED COSTS Year Ended June 30, 2016 SECTION IV - STATE AWARD FINDINGS AND QUESTIONED COSTS DEFICIENCY - STATE COMPLIANCE - SCHOOL ACCOUNTABILITY REPORT CARD (72000) School Accountability Report Card in California Public Schools, Education Code Section 33126(b)(8) - Each District must complete a Facility Inspection Tool (FIT). School Facility Conditions Evaluation for each site. Condition At Westmore Oaks Elementary, the information on the FIT and School Accountability Report Cart were not consistent. The School Accountability Report Card and the FIT reports could be misleading as they might not reflect current conditions at the school. Adequate procedures are not in place to ensure the FIT and the School Accountability Report card are consistent. Fiscal Impact Not determinable. Recommendation The District should develop and implement procedures to ensure compliance with School Accountability Report Card and the required FIT. Corrective Action Plan The District has implemented a control, to have a second review, to catch errors before submittal. 83.

162 STATUS OF PRIOR YEAR FINDINGS AND RECOMMENDATIONS

163 WASHINGTON UNIFIED SCHOOL DISTRICT STATUS OF PRIOR YEAR FINDINGS AND RECOMMENDATIONS Year Ended June 30, Finding/Recommendation Condition: At two locations selected, River City High School and Bridgeway Island Elementary, the District did not complete the Facility Inspection Tool (FIT). Recommendation: The District should develop and implement procedures to ensure compliance with School Accountability Report Card and the required FIT. Current Status Partially implemented District Explanation If Not Implemented See current year finding

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165 APPENDIX B FORM OF CONTINUING DISCLOSURE CERTIFICATE

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167 APPENDIX B FORM OF CONTINUING DISCLOSURE CERTIFICATE This Continuing Disclosure Certificate (the Disclosure Certificate ) is executed and delivered by the WASHINGTON UNIFIED SCHOOL DISTRICT (the District ) in connection with the issuance by the District of its $24,900,000 Washington Unified School District (Yolo County, California) General Obligation Bonds, Election of 2014, Series 2017 (the Bonds ). The Bonds are being issued pursuant to a resolution adopted by the Board of Trustees of the District on April 27, 2017 (the Bond Resolution ). The District covenants and agrees as follows: Section 1. Definitions. In addition to the definitions set forth in the Bond Resolution, which apply to any capitalized term used in this Disclosure Certificate, unless otherwise defined in this Section 1, the following capitalized terms shall have the following meanings when used in this Disclosure Certificate: Annual Report shall mean any Annual Report provided by the District pursuant to, and as described in, Sections 3 and 4 of this Disclosure Certificate. Beneficial Owner shall mean any person who (a) has the power, directly or indirectly, to vote or consent with respect to, or to dispose of ownership of, any Bonds (including persons holding Bonds through nominees, depositories or other intermediaries), or (b) is treated as the owner of any Bonds for federal income tax purposes. Dissemination Agent shall mean Government Financial Strategies inc. or any successor Dissemination Agent designated in writing by the District and which has filed with the District a written acceptance of such designation. In the absence of such a designation, the District shall act as the Dissemination Agent. EMMA or Electroni c Muni ci pal Market Access means the centralized on-line repository for documents to be filed with the MSRB, such as official statements and disclosure information relating to municipal bonds, notes and other securities as issued by state and local governments. Listed Events shall mean any of the events listed in Section 5(a) or 5(b) of this Disclosure Certificate. MSRB means the Municipal Securities Rulemaking Board, which has been designated by the Securities and Exchange Commission as the sole repository of disclosure information for purposes of the Rule, or any other repository of disclosure information which may be designated by the Securities and Exchange Commission as such for purposes of the Rule in the future. Participating Underwriter shall mean the original underwriter of the Bonds, required to comply with the Rule in connection with offering of the Bonds. Rule shall mean Rule 15c2-12 adopted by the Securities and Exchange Commission under the Securities Exchange Act of 1934, as the same may be amended from time to time. Section 2. Purpose of the Disclosure Certificate. This Disclosure Certificate is being executed and delivered by the District for the benefit of the owners and Beneficial Owners of the Bonds and in order to assist the Participating Underwriter in complying with Securities and Exchange Commission Rule 15c2-12(b)(5). Section 3. Provision of Annual Reports. (a) Delivery of Annual Report. The District shall, or shall cause the Dissemination Agent to, not later than nine months after the end of the District s fiscal year (which currently ends on June 30), commencing with the report for the Fiscal Year, which is due not later than March 31, 2018, file with EMMA, in a readable PDF or other electronic format as prescribed by the MSRB, an Annual Report that is Appendix B Page 1

168 consistent with the requirements of Section 4 of this Disclosure Certificate. The Annual Report may be submitted as a single document or as separate documents comprising a package and may cross-reference other information as provided in Section 4 of this Disclosure Certificate; provided that the audited financial statements of the District may be submitted separately from the balance of the Annual Report and later than the date required above for the filing of the Annual Report if they are not available by that date. (b) Change of Fiscal Year. If the District s fiscal year changes, it shall give notice of such change in the same manner as for a Listed Event under Section 5(c), and subsequent Annual Report filings shall be made no later than nine months after the end of such new fiscal year end. (c) Delivery of Annual Report to Dissemination Agent. Not later than fifteen (15) Business Days prior to the date specified in subsection (a) (or, if applicable, subsection (b)) of this Section 3 for providing the Annual Report to EMMA, the District shall provide the Annual Report to the Dissemination Agent (if other than the District). If by such date, the Dissemination Agent has not received a copy of the Annual Report, the Dissemination Agent shall notify the District. (d) Report of Non-Compliance. If the District is the Dissemination Agent and is unable to file an Annual Report by the date required in subsection (a) (or, if applicable, subsection (b)) of this Section 3, the District shall send a notice to EMMA, in a timely manner, substantially in the form attached hereto as Exhibit A. If the District is not the Dissemination Agent and is unable to provide an Annual Report to the Dissemination Agent by the date required in subsection (c) of this Section 3, the Dissemination Agent shall send a notice to EMMA, in a timely manner, in substantially the form attached hereto as Exhibit A. (e) Annual Compli ance Certi fi cati on. The Dissemination Agent shall, if the Dissemination Agent is other than the District, file a report with the District certifying that the Annual Report has been filed with EMMA pursuant to Section 3 of this Disclosure Certificate, stating the date it was so provided and filed. Section 4. Content of Annual Reports. The Annual Report shall contain or incorporate by reference the following: (a) Financial Stateme nts. Audited financial statements of the District for the preceding fiscal year, prepared in accordance generally accepted accounting principles. If the District s audited financial statements are not available by the time the Annual Report is required to be filed pursuant to Section 3(a), the Annual Report shall contain unaudited financial statements in a format similar to the financial statements contained in the final Official Statement, and the audited financial statements shall be filed in the same manner as the Annual Report when they become available. (b) Other Annual Information. To the extent not included in the audited final statements of the District, the Annual Report shall also include financial and operating data with respect to the District for preceding fiscal year, substantially similar to that provided in the corresponding tables and charts in the official statement for the Bonds, as follows: (i) (ii) (iii) (iv) (v) State funding received by the District for the last completed fiscal year; average daily attendance of the District for the last completed fiscal year; summary financial information on revenues, expenditures and fund balances for the District s adopted budget for the current fiscal year; current fiscal year assessed valuation of taxable properties in the District; and assessed valuation of the top ten taxpayers in the District. (c) Cross References. Any or all of the items listed above may be included by specific reference to other documents, including official statements of debt issues of the District or related public entities, which are available to the public on EMMA. The District shall clearly identify each such other document so included by reference. Appendix B Page 2

169 If the document included by reference is a final official statement, it must be available from EMMA. (d) Further Information. In addition to any of the information expressly required to be provided under paragraph (b) of this Section 4, the District shall provide such further information, if any, as may be necessary to make the specifically required statements, in the light of the circumstances under which they are made, not misleading. Section 5. Reporting of Listed Events. (a) Reportable Events. The District shall, or shall cause the Dissemination (if not the District) to, give notice of the occurrence of any of the following events with respect to the Bonds: (1) Principal and interest payment delinquencies. (2) Unscheduled draws on debt service reserves reflecting financial difficulties. (3) Unscheduled draws on credit enhancements reflecting financial difficulties. (4) Substitution of credit or liquidity providers, or their failure to perform. (5) Defeasances. (6) Rating changes. (7) Tender offers. (8) Bankruptcy, insolvency, receivership or similar event of the obligated person. (9) Adverse tax opinions, the issuance by the Internal Revenue Service of proposed or final determinations of taxability, Notices of Proposed Issue (IRS Form 5701-TEB) or other material notices or determinations with respect to the tax status of the security, or other material events affecting the tax status of the security. Note: For the purposes of the event identified in subparagraph (8), the event is considered to occur when any of the following occur: the appointment of a receiver, fiscal agent or similar officer for an obligated person in a proceeding under the U.S. Bankruptcy Code or in any other proceeding under state or federal law in which a court or governmental authority has assumed jurisdiction over substantially all of the assets or business of the obligated person, or if such jurisdiction has been assumed by leaving the existing governmental body and officials or officers in possession but subject to the supervision and orders of a court or governmental authority, or the entry of an order confirming a plan of reorganization, arrangement or liquidation by a court or governmental authority having supervision or jurisdiction over substantially all of the assets or business of the obligated person. (b) Mate ri al Reportable Events. The District shall give, or cause to be given, notice of the occurrence of any of the following events with respect to the Bonds, if material: (1) Non-payment related defaults. (2) Modifications to rights of security holders. (3) Bond calls. (4) The release, substitution, or sale of property securing repayment of the securities. (5) The consummation of a merger, consolidation, or acquisition involving an obligated person or the sale of all or substantially all of the assets of the obligated person, other than in the ordinary course of business, the entry into a definitive agreement to undertake such an action or the termination of a definitive agreement relating to any such actions, other than pursuant to its terms. (6) Appointment of a successor or additional trustee, or the change of name of a trustee. (c) Ti me to D i s clos e. The District shall, or shall cause the Dissemination Agent (if not the District) to, file a notice of such occurrence with EMMA, in an electronic format as prescribed by the MSRB, in a timely manner not in excess of 10 business days after the occurrence of the Listed Event. Notwithstanding the foregoing, notice of Listed Events described in subsections (a)(5) and (b)(3) above need not be given under this subsection any earlier than the notice (if any) of the underlying event is given to owners of affected Bonds under the Bond Resolution. Appendix B Page 3

170 Section 6. Identifying Information for Filings with EMMA. All documents provided to EMMA under this Disclosure Certificate shall be accompanied by identifying information as prescribed by the MSRB. Section 7. Termination of Reporting Obligation. The District s obligations under this Disclosure Certificate shall terminate upon the defeasance, prior redemption or payment in full of all of the Bonds. If such termination occurs prior to the final maturity of the Bonds, the District shall give notice of such termination in the same manner as for a Listed Event under Section 5(c). Section 8. Dissemination Agent. (a) Appoi ntment of D i ssemi nati on Agent. The District may, from time to time, appoint or engage a Dissemination Agent to assist it in carrying out its obligations under this Disclosure Certificate and may discharge any such agent, with or without appointing a successor Dissemination Agent. If the Dissemination Agent is not the District, the Dissemination Agent shall not be responsible in any manner for the content of any notice or report prepared by the District pursuant to this Disclosure Certificate. It is understood and agreed that any information that the Dissemination Agent may be instructed to file with EMMA shall be prepared and provided to it by the District. The Dissemination Agent has undertaken no responsibility with respect to the content of any reports, notices or disclosures provided to it under this Disclosure Certificate and has no liability to any person, including any Bondholder, with respect to any such reports, notices or disclosures. The fact that the Dissemination Agent or any affiliate thereof may have any fiduciary or banking relationship with the District shall not be construed to mean that the Dissemination Agent has actual knowledge of any event or condition, except as may be provided by written notice from the District. (b) Compensation of Dissemination Agent. The Dissemination Agent shall be paid compensation by the District for its services provided hereunder in accordance with its schedule of fees as agreed to between the Dissemination Agent and the District from time to time and all expenses, legal fees and expenses and advances made or incurred by the Dissemination Agent in the performance of its duties hereunder. The Dissemination Agent shall not be deemed to be acting in any fiduciary capacity for the District, owners or Beneficial Owners, or any other party. The Dissemination Agent may rely, and shall be protected in acting or refraining from acting, upon any direction from the District or an opinion of nationally recognized bond counsel. The Dissemination Agent may at any time resign by giving written notice of such resignation to the District. The Dissemination Agent shall not be liable hereunder except for its negligence or willful misconduct. (c) Responsibilities of Dissemination Agent. In addition of the filing obligations of the Dissemination Agent set forth in Sections 3(e) and 5, the Dissemination Agent shall be obligated, and hereby agrees, to provide a request to the District to compile the information required for its Annual Report at least 30 days prior to the date such information is to be provided to the Dissemination Agent pursuant to subsection (c) of Section 3. The failure to provide or receive any such request shall not affect the obligations of the District under Section 3. Section 9. Amendment; Waiver. Notwithstanding any other provision of this Disclosure Certificate, the District may amend this Disclosure Certificate (and the Dissemination Agent shall agree to any amendment so requested by the District that does not impose any greater duties or risk of liability on the Dissemination Agent), and any provision of this Disclosure Certificate may be waived, provided that all of the following conditions are satisfied: (a) Change in Circumstances. If the amendment or waiver relates to the provisions of Sections 3(a), 4 or 5(a) or (b), it may only be made in connection with a change in circumstances that arises from a change in legal requirements, change in law, or change in the identity, nature, or status of an obligated person with respect to the Bonds, or the type of business conducted. (b) Compliance as of Issue Date. The undertaking, as amended or taking into account such waiver, would, in the opinion of a nationally recognized bond counsel, have complied with the requirements of the Rule at the time of the original issuance of the Bonds, after taking into account any amendments or interpretations of the Rule, as well as any change in circumstances. Appendix B Page 4

171 (c) Consent of Holders; Non-impairment Opinion. The amendment or waiver either (i) is approved by the Bondholders in the same manner as provided in the Bond Resolution for amendments to the Bond Resolution with the consent of Bondholders, or (ii) does not, in the opinion of nationally recognized bond counsel, materially impair the interests of the Bondholders or Beneficial Owners. If this Disclosure Certificate is amended or any provision of this Disclosure Certificate is waived, the District shall describe such amendment or waiver in the next following Annual Report and shall include, as applicable, a narrative explanation of the reason for the amendment or waiver and its impact on the type (or in the case of a change of accounting principles, on the presentation) of financial information or operating data being presented by the District. In addition, if the amendment relates to the accounting principles to be followed in preparing financial statements, (i) notice of such change shall be given in the same manner as for a Listed Event under Section 5(c), and (ii) the Annual Report for the year in which the change is made should present a comparison (in narrative form and also, if feasible, in quantitative form) between the financial statements as prepared on the basis of the new accounting principles and those prepared on the basis of the former accounting principles. Section 10. Additional Information. Nothing in this Disclosure Certificate shall be deemed to prevent the District from disseminating any other information, using the means of dissemination set forth in this Disclosure Certificate or any other means of communication, or including any other information in any Annual Report or notice of occurrence of a Listed Event, in addition to that which is required by this Disclosure Certificate. If the District chooses to include any information in any Annual Report or notice of occurrence of a Listed Event in addition to that which is specifically required by this Disclosure Certificate, the District shall have no obligation under this Disclosure Certificate to update such information or include it in any future Annual Report or notice of occurrence of a Listed Event. Section 11. Default. In the event of a failure of the District to comply with any provision of this Disclosure Certificate, any Bondholder or Beneficial Owner may take such actions as may be necessary and appropriate, including seeking mandate or specific performance by court order, to cause the District to comply with its obligations under this Disclosure Certificate. The sole remedy under this Disclosure Certificate in the event of any failure of the District to comply with this Disclosure Certificate shall be an action to compel performance. Section 12. Duties, Immunities and Liabilities of Dissemination Agent. The Dissemination Agent shall have only such duties as are specifically set forth in this Disclosure Certificate, and no implied covenants or obligations shall be read into this Disclosure Certificate against the Dissemination Agent, and the District agrees to indemnify and save the Dissemination Agent, its officers, directors, employees and agents, harmless against any loss, expense and liabilities which it may incur arising out of or in the exercise or performance of its powers and duties hereunder, including the costs and expenses (including attorneys fees and expenses) of defending against any claim of liability, but excluding liabilities due to the Dissemination Agent s negligence or willful misconduct. The Dissemination Agent shall have the same rights, privileges and immunities hereunder as are afforded to the Paying Agent under the Bond Resolution. The obligations of the District under this Section 12 shall survive resignation or removal of the Dissemination Agent and payment of the Bonds. Appendix B Page 5

172 Section 13. Beneficiaries. This Disclosure Certificate shall inure solely to the benefit of the District, the Dissemination Agent, the Participating Underwriter and the owners and Beneficial Owners from time to time of the Bonds, and shall create no rights in any other person or entity. Date: [Closing Date] WASHINGTON UNIFIED SCHOOL DISTRICT ACKNOWLEDGED: GOVERNMENT FINANCIAL STRATEGIES INC., as Dissemination Agent By Authorized Officer By Authorized Officer Appendix B Page 6

173 EXHIBIT A NOTICE TO EMMA OF FAILURE TO FILE ANNUAL REPORT Name of Issuer: Washington Unified School District Name of Issue: Date of Issuance: Washington Unified School District (Yolo County, California) General Obligation Bonds, Election of 2014, Series 2017 [Closing Date] NOTICE IS HEREBY GIVEN that the Obligor has not provided an Annual Report with respect to the above-named Issue as required by the Continuing Disclosure Certificate, dated [Closing Date], furnished by the Issuer in connection with the Issue. The Issuer anticipates that the Annual Report will be filed by. Dated: GOVERNMENT FINANCIAL STRATEGIES INC., as Dissemination Agent cc: Paying Agent By Title Appendix B Page 7

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175 APPENDIX C FORM OF OPINION OF BOND COUNSEL

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177 APPENDIX C FORM OF OPINION OF BOND COUNSEL [Letterhead of Quint & Thimmig LLP] [Closing Date] Board of Trustees of the Washington Unified School District 930 Westacre Road West Sacramento, California OPINION: $24,900,000 Washington Unified School District (Yolo County, California) General Obligation Bonds, Election of 2014, Series 2017 Members of the Board of Trustees: We have acted as bond counsel to the Washington Unified School District (the District ) in connection with the issuance by the District of $24,900,000 principal amount of Washington Unified School District (Yolo County, California) General Obligation Bonds, Election of 2014, Series 2017 (the Bonds ), pursuant to the provisions of Article 4.5 of Chapter 3 of Part 1 of Division 2 of Title 5 (commencing with section 53506) of the California Government Code (the Act ), and a resolution adopted by the Board of Trustees of the District on April 27, 2017 (the Resolution ). We have examined the law and such certified proceedings and other papers as we deemed necessary to render this opinion. As to questions of fact material to our opinion, we have relied upon representations of the District contained in the Resolution and in the certified proceedings and certifications of public officials and others furnished to us, without undertaking to verify such facts by independent investigation. Based upon our examination, we are of the opinion, as of the date hereof, that: 1. The District is duly created and validly existing as a school district with the power to cause the Board to issue the Bonds in its name and to perform its obligations under the Resolution and the Bonds. 2. The Resolution has been duly adopted by the District and creates a valid first lien on the funds pledged under the Resolution for the security of the Bonds. 3. The Bonds have been duly authorized, executed and delivered by the Board and are valid and binding general obligations of the District. The Board of Supervisors of Yolo County is required under the Act to levy a tax upon all taxable property in the District for the interest and redemption of all outstanding bonds of the District, including the Bonds. The Bonds are payable from an ad v alore m tax levied without limitation as to rate or amount. 4. Subject to the District s compliance with certain covenants, interest on the Bonds is excludable from gross income of the owners thereof for federal income tax purposes and 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, but is taken into account in computing an adjustment used in determining the federal alternative minimum tax for certain corporations. Failure to comply with certain of such District covenants could cause interest on the Bonds to be includible in gross income for federal income tax purposes retroactively to the date of issuance of the Bonds. Appendix C Page 1

178 5. The interest on the Bonds is exempt from personal income taxation imposed by the State of California. Ownership of the Bonds may result in other tax consequences to certain taxpayers, and we express no opinion regarding any such collateral consequences arising with respect to the Bonds. The rights of the owners of the Bonds and the enforceability of the Bonds and the Resolution may be subject to the bankruptcy, insolvency, reorganization, moratorium and other similar laws affecting creditors rights heretofore or hereafter enacted and also may be subject to the exercise of judicial discretion in accordance with general principles of equity. Our opinion represents our legal judgment based upon such review of the law and the facts that we deem relevant to render our 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. Respectfully submitted, Appendix C Page 2

179 APPENDIX D COUNTY OF YOLO INVESTMENT POLICY

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181 Att. A COUNTY OF YOLO INVESTMENT POLICY 2017 Proposed by: Department of Financial Services Reviewed by: County Financial Oversight Committee November 17, 2016 Approved by: Board of Supervisors December 13, 2016

182 County of Yolo Investment Policy 2017 I. Introduction This document is known as the annual investment policy and represents the policies of the board of supervisors of the County of Yolo related to the investment of funds under the control of the county treasury. This policy is prepared annually by the county treasurer (presently Chief Financial Officer) in accordance with the California Government Code and prudent asset management principles. Pursuant to Government Code sections and this policy has been reviewed by the Financial Oversight Committee and approved by the Board of Supervisors at a public meeting. II. Scope This policy applies to the cash management and investment activities performed by County personnel and officials for any local agency, public agency, public entity or public official that has funds on deposit in the county treasury. The terms "County" and "county treasury pool" are used interchangeably and include all such funds so invested. The investment of bond proceeds will be governed by the provisions of relevant bond documents. The investment of endowment funds will be governed by the underlying laws, regulations and specific governmental approvals under those laws pursuant to which the endowments were created. Endowment fund investments will primarily focus on the preservation of principal and use of investment income for operational purpose. III. Standard of Care Investments shall be made with judgment and care, under circumstances then prevailing, which persons of prudence, discretion, and intelligence exercise in the management of their own affairs, not for speculation, but for investment, considering the probable safety of their capital as well as the probable income to be derived. The standard of prudence to be used by investment officials shall be the "prudent investor" standard which states that when investing, reinvesting, purchasing, acquiring, exchanging, selling, or managing public funds, a trustee shall act with care, skill, prudence, and diligence under the circumstances then prevailing, including, but not limited to, the general economic conditions and the anticipated needs of the agency, that a prudent person acting in a like capacity and familiarity with those matters would use in the conduct of funds of a like character and with like aims, to safeguard the principal and maintain the liquidity needs of the agency. Page 2 of 16

183 County of Yolo Investment Policy 2017 This standard shall be applied in the context of managing an overall portfolio. Investment officers acting in accordance with written procedures and the investment policy and exercising due diligence shall be relieved of personal responsibility for an individual security's credit risk or market price changes, provided deviations from expectations are reported in a timely fashion and appropriate action is taken to control adverse developments. IV. Public Trust All participants in the investment process shall seek to act responsibly as custodians of the public trust. Investment officials shall avoid any transaction that might impair public confidence in the County's ability to govern effectively. V. Objectives The primary objectives, in descending priority order, of the investment activities of the County shall be: Safety. Safety of principal is the foremost objective of the investment program. Investments of the County shall be undertaken in a manner that seeks to ensure preservation of capital in the portfolio. Liquidity. The investment portfolio shall be maintained in such a manner as to provide sufficient liquidity to meet the operating requirements of any of the participants. Return on Investment. The investment portfolio of the County shall be designed with the objective of attaining a market rate of return on its investments consistent with the constraints imposed by its safety objective and cash flow considerations. VI. Delegation of Authority Subject to Section the authority of the Board of Supervisors to invest or to reinvest funds of the pooled investments, or to sell or exchange securities so purchased, may be delegated for a one-year period by ordinance in accordance with Government Code Sections and Since 1999 the Board of Supervisors has designated the Auditor-Controller (presently Chief Financial Officer) as its agent authorized to make investment decisions in consultation with the Finance and Investment Committee of the Board after considering the strategy proposed by the investment advisor. Page 3 of 16

184 County of Yolo Investment Policy 2017 VII. Ethics and Conflict of Interest Individuals performing the investment function and members of the Financial Oversight Committee or FOC shall maintain the highest standards of conduct. Officers and employees involved in the investment process shall refrain from personal business activities that could conflict with proper execution of the investment program, or which could impair their ability to make impartial decisions. These individuals should follow the Code of Ethics for Procurement approved by the Board of Supervisors and comply with all relevant provisions of the Political Reform Act, especially the requirements of Chapter 7 Conflict of Interest and Chapter 9.5 Ethics. The key requirements are listed below: a. Officers and employees involved in the investment process shall refrain from personal business activity that could conflict with the proper execution and management of the investment program, or that could affect their ability to make impartial decisions. b. Officers and employees shall refrain from undertaking personal investment transactions with the same individual with whom business is conducted on behalf of the County. c. Officers and employees shall not accept gifts or gratuities with a value exceeding $460 in any one year from any bank, broker, dealer, or any other person, firm, or organization who conducts business with the County Treasurer. d. No person with investment decision-making authority in the County Administrator s office or the Auditor-Controller and Treasurer-Tax Collector s office (presently Department of Financial Services) may serve on the board of directors or any committee appointed by the board or the credit committee or supervisory committee of a state or federal credit union which is a depository for County funds. The Financial Oversight Committee Charter includes the following requirements for members of the committee: a. A member shall disclose to the committee at a regular meeting any activities that directly or indirectly raised money for: 1. a candidate for local treasurer; or 2. a member of the governing board of any local agency that has deposited funds in the county treasury while a member of the committee. Page 4 of 16

185 County of Yolo Investment Policy 2017 For purposes of this subsection, raising money includes soliciting, receiving, or controlling campaign funds of a candidate, but not the member's individual campaign contributions or non-financial support. This section does not apply to a member raising money for his or her own campaign. b. A member shall disclose to the Committee at a regular meeting any contributions, in the previous three years or during the period that the employee is a member of the committee, by an employer to: 1. the campaign of a candidate for the office of local treasurer; or 2. to the campaign of a candidate to be a member of a legislative body of any local agency that has deposited funds in the county treasury. c. A member cannot secure employment with, or be employed by, bond underwriters, bond counsel, security brokerages or dealers, financial services firms, financial institutions, and municipal advisors with whom the County is doing business during the member s Financial Oversight Committee membership period or for one year after leaving the Financial Oversight Committee. This subsection only applies to employment or soliciting employment, and not other relationships with such companies with whom the County is doing business. d. A member shall disclose to the Committee any honoraria, gifts, and gratuities from advisors, brokers, dealers, bankers, or other persons who conduct business with the County Treasurer while a member of the Committee. All members shall also comply with the requirements of the Political Reform Act or any other law or regulation regarding to receipt and disclosure of financial benefits and conflicts. VIII. Internal Controls Internal control procedures shall be established and maintained by the Treasurer that provide reasonable assurance that the investment objectives are met and to ensure that the assets are protected from loss, theft, misuse, or mismanagement. The internal controls shall be reviewed as part of the regular annual independent audit. The controls and procedures shall be designed to prevent employee error, misrepresentations by third parties, and imprudent or illegal actions by employees or officers of the County. Page 5 of 16

186 County of Yolo Investment Policy 2017 IX. Cash Management In determining the amount that can be invested County personnel shall take into account the liquidity needs of the County and the agencies in the Treasury pool, and shall take reasonable steps to ensure that cash flow requirements of the County and pool participants are met for the next six months, barring unforeseen actions from the State Controller or other funding sources, such as deferrals of cash payments. County personnel shall maintain separate accounting for cash funds and monitor aggregate cash balances of the County and each agency in the Treasury pool, and shall notify the County Administrator or agency management of unhealthy trends in aggregate cash balances. Unhealthy trends may include but are not limited to deferral of cash payments from State, Federal grantors, or other funding sources, significant declines in available aggregate cash balances, or near-deficit aggregate balances. Agencies that are so notified are expected to take immediate action to cure any deficit and improve cash balances. Continuing deficits shall be reported to the Board of Supervisors for further action. The Auditor-Controller and Treasurer-Tax Collector (presently Chief Financial Officer) shall provide quarterly reports on total cash flows and balances of the Treasury Pool to the Treasury Oversight Committee (presently Financial Oversight Committee). X. Authorized Financial Dealers and Qualified Institutions The County may secure the services of an Investment Advisor. Precautionary contractual language with such an adviser shall include: delivery versus payment methods, third-party custody arrangements, prohibitions against self-dealings, independent audits, and other appropriate internal control measures as deemed necessary by the Auditor Controller and Treasurer-Tax Collector (presently Chief Financial Officer). The County or the County s Investment Advisor shall maintain a list of authorized broker/dealers and financial institutions which are approved for investment transaction purposes, and it shall be the policy of the County to purchase securities only from those authorized institutions or firms. Authorized brokers/dealers must either (i) be classified as Reporting Dealers affiliated with the New York Federal Reserve Bank as Primary Dealers or (ii) be registered to conduct business in the State of California and be licensed by the state as a broker-dealer, as defined in Section of the Corporations Code. No broker/dealer shall be selected which has within any consecutive 48-month period made a political contribution to the local auditor-controller, treasurer-tax collector or to any Page 6 of 16

187 County of Yolo Investment Policy 2017 member of the Board of Supervisors or to any candidate for these offices in an amount exceeding the limitations contained in Rule G-37 of the Municipal Securities Rulemaking Board. XI. Permitted Investment Instruments 1. United States Treasury Obligations. Government obligations for which the full faith and credit of the United States are pledged for the payment of principal and interest. 2. Federal Agency Obligations. Federal agency or United States government-sponsored enterprise obligations, participations, or other instruments, including those issued by or fully guaranteed as to principal and interest by federal agencies or United States government-sponsored enterprises. 3. California Municipal Obligations. Obligations of the State of California, this local agency or any local agency within the state, including bonds payable solely out of revenues from a revenue-producing property owned, controlled or operated by the state, this local agency or any local agency or by a department, board, agency or authority of the state or any local agency that is rated in a rating category of A long term or A-1 short term, the equivalent or higher by a nationally recognized statistical rating organization (NRSRO). Any investment in obligations of this local agency shall be in a ratio proportionate to the County s share of the pooled investments. 4. Other 49 State Municipal Securities. Registered treasury notes or bonds issued by any of the other 49 states, including bonds payable solely out of the revenues from a revenue-producing property owned, controlled, or operated by a state or by a department, board, agency, or authority of any state that is rated in a rating category of A long term or A-1 short term, the equivalent or higher by a NRSRO. 5. Repurchase Agreements. Agreements to be used solely as short-term investments not to exceed 90 days. The County may enter into Repurchase Agreements with primary dealers in U.S. Government securities who are eligible to transact business with, and who report to, the Federal Reserve Bank of New York. The following collateral restrictions will be observed: Only U.S. Treasury securities or Federal Agency securities, as described in X.1 and X.2, will be acceptable collateral. All securities underlying Repurchase Agreements must be delivered to the County's custodian bank versus payment or be handled under a properly executed tri-party repurchase agreement. The total market value of all collateral for each Repurchase Agreement must equal or exceed, 102 percent of the total dollar value of the money invested by the County for the term of the investment. For any Repurchase Agreement Page 7 of 16

188 County of Yolo Investment Policy 2017 with a term of more than one day, the value of the underlying securities must be reviewed at least weekly. Market value must be calculated each time there is a substitution of collateral. The County or its trustee shall have a perfected first security interest under the Uniform Commercial Code in all securities subject to Repurchase Agreement. The County will have properly executed a PSA agreement with each counter party with which it enters into Repurchase Agreements. 6. Banker's Acceptances. Issued by domestic or foreign banks, the short-term paper of which is rated in the highest category by a nationally recognized statistical rating organization (NRSRO). Purchases of Banker's Acceptances may not exceed 180 days maturity or 40 percent of the County's investment portfolio. 7. Commercial Paper. Of prime quality of the highest ranking or of the highest letter and number rating as provided for by a nationally recognized statistical-rating organization (NRSRO). The entity that issues the commercial paper shall meet all of the following conditions shown in either paragraph (1) or paragraph (2): 1. The entity meets the following criteria: A. Is organized and operating in the United States as a general corporation. B. Has total assets in excess of five hundred million dollars ($500,000,000). C. Has debt other than commercial paper, if any, that is rated in a rating category of A, the equivalent or higher by a nationally recognized statistical-rating organization (NRSRO). 2. The entity meets the following criteria: A. Is organized within the United States as a special purpose corporation, trust, or limited liability company. B. Has program wide credit enhancements including, but not limited to, over collateralization, letters of credit, or surety bond. C. Has commercial paper that is rated in a rating category A-1", the equivalent or higher by a nationally recognized statistical-rating organization (NRSRO). Purchases of eligible commercial paper may not exceed 270 days maturity. Page 8 of 16

189 County of Yolo Investment Policy 2017 No more than 40 percent of the County s investment portfolio may be invested in eligible commercial paper. 8. Medium-Term Corporate Notes. Notes issued by corporations organized and operating within the United States or by depository institutions licensed by the U.S. or any state and operating within the U.S. Medium-term corporate notes shall be rated in a rating category "A",the equivalent or higher by a nationally recognized statistical rating organization (NRSRO). Purchase of medium-term corporate notes may not exceed 30 percent of the County's investment portfolio. 9. Non-Negotiable Certificates of Deposit. FDIC insured or fully collateralized time certificates of deposit in financial institutions located in California, including U.S. branches of foreign banks licensed to do business in California. All time deposits must be collateralized in accordance with California Government Code Section 53651, either at 150% by promissory notes secured by first mortgages and first trust deeds upon improved residential property in California eligible under section (m) or at 110% by eligible marketable securities listed in subsections (a) through (l) and (n) and (o). The County, at its discretion and by majority vote of the Board of Supervisors, on a quarterly basis, may waive the collateralization requirements for any portion of the deposit that is covered by federal insurance. Alternatively, the County may invest in deposits, including certificates of deposit, at a commercial bank, savings bank, savings and loan association, or credit union that uses a private sector entity that assists in the placement of certificates of deposit as provided for in Government Code section Negotiable Certificates of Deposit. Negotiable certificates of deposit issued by a nationally or state-chartered bank or a state or federal savings and loan association or by a federally-licensed or a state-licensed branch of a foreign bank that is rated in a rating category of A long-term or A-1 short-term, the equivalent or higher by a nationally recognized statistical rating organization (NRSRO). Purchases of all negotiable certificates of deposit may not exceed 30 percent of the County's investment portfolio. 11. Local Government Investment Pools. (Either state-administered or through joint powers statutes and other intergovernmental agreement legislation.) Investments may be maximized to the level allowed by the State and should be reviewed periodically. Investment objectives, limitations, and controls of each pool must be consistent with this policy. 12. Money Market Funds. Shares of beneficial interest issued by diversified management Page 9 of 16

190 County of Yolo Investment Policy 2017 companies that are money market mutual funds registered with Securities and Exchange Commission under the Investment Company Act of To be eligible for investment pursuant to this subdivision these companies shall either: (1) attain the highest ranking letter or numerical rating provided by not less than two of the largest nationally recognized statistical rating organizations or (2) have retained an investment advisor registered or exempt from registration with the Securities and Exchange Commission with not less than five years experience investing in securities and obligations authorized by Government Code Section and with assets under management in excess of $500,000,000. Money Market Funds shall not exceed 20 percent of the investment portfolio of the County as recorded at purchase price on date of purchase. 13. Asset-Backed Securities. Any mortgage pass-through security, collateralized mortgage obligation, mortgage-backed or other pay-through bond, equipment leaseback certificate, consumer receivable pass-through certificate, or consumer receivablebacked bond of a maximum of five years maturity. Eligible securities must be rated, by a nationally recognized rating service, as "AAA", and the issuer of the security must be in a rating category of "A", the equivalent or higher for its debt as provided by a nationally recognized rating service. No more than 20 percent of the County s investment portfolio may be invested in this type of security. 14. Reverse Repurchase Agreements. Reverse repurchase agreements shall be used primarily as a cash flow management tool and subject to all the following conditions: 1. The security to be sold using a reverse repurchase agreement has been owned and fully paid for by the County for a minimum of 30 days prior to sale. 2. The total of all reverse repurchase agreements on investments owned by the County does not exceed 20 percent of the base value of the portfolio. The base value of the County's portfolio for this section is defined as that dollar amount obtained by totaling all cash balances placed in the portfolio by all participants, excluding any amounts obtained through selling securities by way of reverse repurchase agreements, securities lending agreements, or other similar borrowing methods. 3. The agreement does not exceed a term of 92 days, unless the agreement includes a written codicil guaranteeing a minimum earning or spread for the entire period between the sale of a security using a reverse repurchase agreement and the final maturity date of the same security. 4. Funds obtained or funds within the pool of an equivalent amount to that obtained from selling a security to a counterparty using a reverse repurchase agreement shall not be used to purchase another security with a maturity longer than 92 days from Page 10 of 16

191 County of Yolo Investment Policy 2017 the initial settlement date of the reverse repurchase agreement, unless the reverse repurchase agreement includes a written codicil guaranteeing a minimum earning or spread for the entire period between the sale of a security using a reverse repurchase agreement and the final maturity date of the same security. 5. Investments in reverse repurchase agreements or similar investments in which the County sells securities prior to purchase with a simultaneous agreement to repurchase the security shall be made only with primary dealers of the Federal Reserve Bank of New York or with a nationally or state-chartered bank that has or has had a significant banking relationship with a local agency. A significant banking relationship is defined by any of the following activities of a bank: a. Involvement in the creation, sale, purchase, or retirement of the County's bonds, warrants, notes, or other evidence of indebtedness. b. Financing of the County's activities. c. Acceptance of the County's securities or funds as deposits. 15. Supranationals. United States dollar denominated senior unsecured unsubordinated obligations issued or unconditionally guaranteed by the International Bank for Reconstruction and Development (IBRD), International Finance Corporation (IFC), or Inter-American Development Bank (IADB), with a maximum remaining maturity of five years or less, and eligible for purchase and sale within the United States. Investments under this subdivision shall be rated in a rating category of AA, the equivalent or higher by a NRSRO. Purchases of these securities shall not exceed 30 percent of the County s portfolio. The Treasurer-Tax Collector (presently Chief Financial Officer) may make permitted investments (as described above) pursuant to the California Government Code (including Section et. seq.) or deposit funds for safekeeping in state or national banks, savings association, credit unions, or federal insured industrial loan companies (as described in Section ). Credit criteria listed in this section refers to the credit of the issuing organization at the time the security is purchased. Should a security owned by the County be downgraded below A the Investment Advisor shall immediately notify the County Auditor-Controller (presently Chief Financial Officer) who will report to the Board of Supervisors, at their next regularly scheduled meeting, the circumstances of the downgrade and any action taken or recommended. XII. Ineligible Investments The County shall not invest any funds in inverse floaters, range notes, or interest-only strips Page 11 of 16

192 County of Yolo Investment Policy 2017 that are derived from a pool of mortgages, or in any security that could result in zero interest accrual if held to maturity. Any other security not specifically permitted by Section XI is prohibited. XIII. Maximum Maturity Investment maturities shall be based on a review of cash flow forecasts. Maturities will be scheduled so as to permit the County to meet all projected obligations. Unless otherwise specified in this policy or authorized by the Board of Supervisors, no investment shall be made in any security, other than a security underlying a repurchase agreement as authorized by this policy that at the time of the investment has a term remaining to maturity in excess of five years. The Board of Supervisors has specifically approved investment maturities beyond five years for three long-term portfolios: Yolo County Landfill Closure Trust Fund, the Yolo County Cache Creek Maintenance and Remediation Fund, and the Demeter Endowment (funds deallocated from the Ceres Tobacco Endowment Fund). XIV. Diversification & Percentage Limitations The County shall limit the County s investments in any one issuer to no more than 5 percent of the County s total investments at the time of purchase, except for U.S. Treasuries, Federal Agencies, supranationals, repurchase and reverse repurchase agreements, and pooled investments such as local government investment pools, LAIF, and money market funds All percentage limitations apply at the time of the investment (purchase date). XV. Reporting Requirements The County Auditor-Controller and Treasurer-Tax Collector (presently Chief Financial Officer) shall render a quarterly investment report to the Board of Supervisors that includes, at a minimum, the following information for each investment: Type of investment instrument (e.g., U.S. Treasury note, Federal Agency note) Issuer name (e.g., General Electric Capital Corp.) Credit quality Purchase date Maturity date Par value Page 12 of 16

193 County of Yolo Investment Policy 2017 Purchase price Current market value and the source of the valuation Current amortized or book value Accrued interest Original yield to maturity Overall portfolio yield based on cost New investment transactions The quarterly report shall (i) state compliance of the portfolio to the statement of investment policy, or manner in which the portfolio is not in compliance, (ii) include a description of any of the County s funds, investments or programs that are under the management of contracted parties, including lending programs, and (iii) include a statement explaining the ability of the County to meet its cash flows requirements for the next six months, or provide an explanation as to why sufficient money shall, or may, not be available. This quarterly report shall be available within 30 days following the end of the quarter, and submitted to the Board of Supervisors at the earliest reasonable opportunity, with copies to all pool participants. XVI. Annual Review of Investment Policy The County Auditor-Controller and Treasurer-Tax Collector (presently Chief Financial Officer) shall annually prepare an investment policy that will be reviewed by the County Financial Oversight Committee and submitted to the Board of Supervisors for approval in a public meeting. Any change to the investment policy shall be reviewed and approved by the Board in a public meeting. XVII. Safekeeping and Custody All securities, whether negotiable, bearer, registered or non-registered shall be delivered either by book entry or physical delivery to the County s third party custodian. Monthly safekeeping statements are received from custodians where securities are held. Authorized personnel, other than the person handling daily investments, shall review the statements to confirm that investment transactions have settled and been delivered to the County s third party custodian. Page 13 of 16

194 County of Yolo Investment Policy 2017 XVIII. Apportionment of Earnings and Costs The manner of calculating and apportioning the cost of investing, depositing, banking, auditing, reporting, or otherwise handling or managing funds is as follows: Investment earnings shall be apportioned to all pool participants quarterly based upon the ratio of the average daily balance of each individual fund to the average daily balance of all funds in the investment pool. Earnings are computed on an accrual basis and the effective date that earnings are deposited into each fund is the first day of the following quarter (January 1, April 1, July 1, and October 1). Direct and Administrative (including indirect) costs associated with investing, depositing, banking, auditing, reporting, safekeeping, or otherwise handling or managing funds shall be netted against any moneys received pursuant to state mandated reimbursements and deducted from the gross investment earnings in the quarter received. XIX. Criteria for Considering Requests to Withdraw Funds Withdrawal of funds from county treasurer pool may occur pursuant to Government Code Section and approval of the Board of Supervisors. Assessment of the effect of a proposed withdrawal on the stability and predictability of the investment in the County Pool will be based on the following criteria: o o o o o o o Size of withdrawal Size of remaining balances of: Pool Agency Current market conditions Duration of withdrawal Effect on predicted cash flows A determination if there will be sufficient balances remaining to cover costs Proof that adequate information has been supplied in order to make a proper finding that other pool participants will not be adversely affected. The Auditor-Controller and Treasurer-Tax Collector (presently Chief Financial Officer) reserves the right to mark a fund balance to market value prior to allowing a withdrawal if it is deemed necessary to be equitable to the remaining funds. Page 14 of 16

195 County of Yolo Investment Policy 2017 XX. Terms and Conditions for Non-Statutory Combined Pool Participants All entities qualifying under California Government Code Section (g) may deposit funds for investment purposes providing all of the following has been accomplished: (1) the agency s administrative body has requested the privilege, (2) has agreed to terms and conditions of an investment agreement as prescribed by the County s Board of Supervisors, (3) has by resolution identified the authorized officer acting on behalf of the agency; and (4) the County Auditor-Controller (presently Chief Financial Officer) has prescribed the appropriate accounting procedures. XXI. Audits Annual Compliance Audit - The Financial Oversight Committee is not designated a Treasury Oversight Committee however the FOC may cause an annual audit pursuant to Government Code section at its discretion which may include issues relating to the structure of the investment portfolio and risk. The costs of complying with this article shall be County charges and may be included with those charges enumerated under Section Quarterly Review and Annual Financial Audit The Auditor-Controller (presently Chief Financial Officer) shall cause quarterly reviews to be made of the Treasurer s records relative to the type and amount of assets in the treasury, pursuant to Government Code sections The Auditor-Controller (Chief Financial Officer) shall also cause an annual financial audit to be made of the Treasurer s records as of June 30. In addition to an opinion on the statement of assets held in the treasury this audit shall include a review of the adequacy of internal controls. The annual compliance audit and the annual financial audit may be combined. The Auditor-Controller and Treasurer-Tax Collector (Chief Financial Officer) shall report audits that contain significant audit findings to the Audit Committee of the Board of Supervisors immediately and to the full Board at the earliest reasonable opportunity. Copies of the audit reports shall be provided to the Financial Oversight Committee. All audit recommendations shall be addressed timely and in a manner acceptable to the Board of Supervisors Audit Committee (Financial Oversight Committee). ~ ~ ~ Page 15 of 16

196 County of Yolo Investment Policy 2017 Page 16 of 16

197 APPENDIX E DTC BOOK-ENTRY ONLY SYSTEM

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199 The following information concerning The Depository Trust Company, New York, New York ( DTC ) and DTC s book-entryonly system has been provided by DTC for use in securities disclosure documents. The District takes no responsibility for the accuracy or completeness thereof. There can be no assurance that DTC will abide by its procedures or that such procedures will not be changed from time to time. The following description includes the procedures and record-keeping with respect to beneficial ownership interests in the Bonds payment of principal and interest, other payments with respect to the Bonds to Direct Participants or Beneficial Owners, confirmation and transfer of beneficial ownership interests in such Bonds, notices to beneficial owners and other related transactions by and between DTC, the Participants, and the Beneficial Owners. However, DTC, the Participants, and the Beneficial Owners should not rely on the following information with respect to such matters, but should instead confirm the same with DTC or the Direct Participants, as the case may be. The Depository Trust Company, New York, New York ( DTC ) will act as securities depository for the securities (in this Appendix, the Bonds ). The Bonds will be issued as fully-registered securities registered in the name of Cede & Co. (DTC s partnership nominee) or such other name as may be requested by an authorized representative of DTC. One fully-registered Bond will be issued for each maturity of the Bonds, in the aggregate principal amount of such maturity, and will be deposited with DTC. DTC, the world s largest securities depository, is a limited-purpose trust company organized under the New York Banking Law, a banking organization within the meaning of the New York Banking Law, a member of the Federal Reserve System, a clearing corporation within the meaning of the New York Uniform Commercial Code, and a clearing agency registered pursuant to the provisions of Section 17A of the Securities Exchange Act of DTC holds and provides asset servicing for over 3.5 million issues of U.S. and non-u.s. equity issues, corporate and municipal debt issues, and money market instruments (from over 100 countries) that DTC s participants ( Direct Participants ) deposit with DTC. DTC also facilitates the post-trade settlement among Direct Participants of sales and other securities transactions in deposited securities, through electronic computerized book-entry transfers and pledges between Direct Participants accounts. This eliminates the need for physical movement of securities certificates. Direct Participants include both U.S. and non-u.s. securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations. DTC is a wholly-owned subsidiary of The Depository Trust & Clearing Corporation ( DTCC ). DTCC is the holding company for DTC, National Securities Clearing Corporation and Fixed Income Clearing Corporation, all of which are registered clearing agencies. DTCC is owned by the users of its regulated subsidiaries. Access to the DTC system is also available to others such as both U.S. and non-u.s. securities brokers and dealers, banks, trust companies, and clearing corporations that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly ( Indirect Participants ). DTC has a Standard & Poor s rating of AA+. The DTC Rules applicable to its Participants are on file with the Securities and Exchange Commission. More information about DTC can be found at Purchases of the Bonds under the DTC system must be made by or through Direct Participants, which will receive a credit for the Bonds on DTC s records. The ownership interest of each actual purchaser of each Bond ( Beneficial Owner ) is in turn to be recorded on the Direct and Indirect Participants records. Beneficial Owners will not receive written confirmation from DTC of their purchase. Beneficial Owners are, however, expected to receive written confirmations providing details of the transaction, as well as periodic statements of their holdings, from the Direct or Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers of ownership interests in the Bonds are to be accomplished by entries made on the books of Direct and Indirect Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive Bonds representing their ownership interests in the 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 the 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

200 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 the Bonds unless authorized by a Direct Participant in accordance with DTC s MMI Procedures. Under its usual procedures, DTC mails an Omnibus Proxy to the District as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co. s consenting or voting rights to those Direct Participants to whose accounts Bonds are credited on the record date (identified in a listing attached to the Omnibus Proxy). Redemption proceeds, distributions, and dividend payments on the Bonds will be made to Cede & Co., or such other nominee as may be requested by an authorized representative of DTC. DTC s practice is to credit Direct Participants accounts upon DTC s receipt of funds and corresponding detail information from the District or the Paying Agent, on payable date in accordance with their respective holdings shown on DTC s records. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered in street name, and will be the responsibility of such Participant and not of DTC, the Paying Agent, or the District, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of redemption proceeds, distributions, and dividend payments to Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) is the responsibility of the District or Paying Agent, disbursement of such payments to Direct Participants will be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners will be the responsibility of Direct and Indirect Participants. DTC may discontinue providing its services as depository with respect to the Bonds at any time by giving reasonable notice to the District or the Paying Agent. Under such circumstances, in the event that a successor depository is not obtained, Bonds are required to be printed and delivered. The District may decide to discontinue use of the system of book-entry-only transfers through DTC (or a successor securities depository). In that event, Bond certificates will be printed and delivered to DTC. The information in this section concerning DTC and DTC s book-entry system has been obtained from sources that the District believes to be reliable, but the District takes no responsibility for the accuracy thereof

201 APPENDIX F SPECIMEN MUNICIPAL BOND INSURANCE POLICY

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203 MUNICIPAL BOND INSURANCE POLICY ISSUER: BONDS: $ in aggregate principal amount of Policy No: -N Effective Date: Premium: $ ASSURED GUARANTY MUNICIPAL CORP. ("AGM"), for consideration received, hereby UNCONDITIONALLY AND IRREVOCABLY agrees to pay to the trustee (the "Trustee") or paying agent (the "Paying Agent") (as set forth in the documentation providing for the issuance of and securing the Bonds) for the Bonds, for the benefit of the Owners or, at the election of AGM, directly to each Owner, subject only to the terms of this Policy (which includes each endorsement hereto), that portion of the principal of and interest on the Bonds that shall become Due for Payment but shall be unpaid by reason of Nonpayment by the Issuer. On the later of the day on which such principal and interest becomes Due for Payment or the Business Day next following the Business Day on which AGM shall have received Notice of Nonpayment, AGM will disburse to or for the benefit of each Owner of a Bond the face amount of principal of and interest on the Bond that is then Due for Payment but is then unpaid by reason of Nonpayment by the Issuer, but only upon receipt by AGM, in a form reasonably satisfactory to it, of (a) evidence of the Owner's right to receive payment of the principal or interest then Due for Payment and (b) evidence, including any appropriate instruments of assignment, that all of the Owner's rights with respect to payment of such principal or interest that is Due for Payment shall thereupon vest in AGM. A Notice of Nonpayment will be deemed received on a given Business Day if it is received prior to 1:00 p.m. (New York time) on such Business Day; otherwise, it will be deemed received on the next Business Day. If any Notice of Nonpayment received by AGM is incomplete, it shall be deemed not to have been received by AGM for purposes of the preceding sentence and AGM shall promptly so advise the Trustee, Paying Agent or Owner, as appropriate, who may submit an amended Notice of Nonpayment. Upon disbursement in respect of a Bond, AGM shall become the owner of the Bond, any appurtenant coupon to the Bond or right to receipt of payment of principal of or interest on the Bond and shall be fully subrogated to the rights of the Owner, including the Owner's right to receive payments under the Bond, to the extent of any payment by AGM hereunder. Payment by AGM to the Trustee or Paying Agent for the benefit of the Owners shall, to the extent thereof, discharge the obligation of AGM under this Policy. Except to the extent expressly modified by an endorsement hereto, the following terms shall have the meanings specified for all purposes of this Policy. "Business Day" means any day other than (a) a Saturday or Sunday or (b) a day on which banking institutions in the State of New York or the Insurer's Fiscal Agent are authorized or required by law or executive order to remain closed. "Due for Payment" means (a) when referring to the principal of a Bond, payable on the stated maturity date thereof or the date on which the same shall have been duly called for mandatory sinking fund redemption and does not refer to any earlier date on which payment is due by reason of call for redemption (other than by mandatory sinking fund redemption), acceleration or other advancement of maturity unless AGM shall elect, in its sole discretion, to pay such principal due upon such acceleration together with any accrued interest to the date of acceleration and (b) when referring to interest on a Bond, payable on the stated date for payment of interest. "Nonpayment" means, in respect of a Bond, the failure of the Issuer to have provided sufficient funds to the Trustee or, if there is no Trustee, to the Paying Agent for payment in full of all principal and interest that is Due for Payment on such Bond. "Nonpayment" shall also include, in respect of a Bond, any payment of principal or interest that is Due for Payment made to an Owner by or on behalf of the Issuer which has been recovered from such Owner pursuant to the

204 Page 2 of 2 Policy No. -N United States Bankruptcy Code by a trustee in bankruptcy in accordance with a final, nonappealable order of a court having competent jurisdiction. "Notice" means telephonic or telecopied notice, subsequently confirmed in a signed writing, or written notice by registered or certified mail, from an Owner, the Trustee or the Paying Agent to AGM which notice shall specify (a) the person or entity making the claim, (b) the Policy Number, (c) the claimed amount and (d) the date such claimed amount became Due for Payment. "Owner" means, in respect of a Bond, the person or entity who, at the time of Nonpayment, is entitled under the terms of such Bond to payment thereof, except that "Owner" shall not include the Issuer or any person or entity whose direct or indirect obligation constitutes the underlying security for the Bonds. AGM may appoint a fiscal agent (the "Insurer's Fiscal Agent") for purposes of this Policy by giving written notice to the Trustee and the Paying Agent specifying the name and notice address of the Insurer's Fiscal Agent. From and after the date of receipt of such notice by the Trustee and the Paying Agent, (a) copies of all notices required to be delivered to AGM pursuant to this Policy shall be simultaneously delivered to the Insurer's Fiscal Agent and to AGM and shall not be deemed received until received by both and (b) all payments required to be made by AGM under this Policy may be made directly by AGM or by the Insurer's Fiscal Agent on behalf of AGM. The Insurer's Fiscal Agent is the agent of AGM only and the Insurer's Fiscal Agent shall in no event be liable to any Owner for any act of the Insurer's Fiscal Agent or any failure of AGM to deposit or cause to be deposited sufficient funds to make payments due under this Policy. To the fullest extent permitted by applicable law, AGM agrees not to assert, and hereby waives, only for the benefit of each Owner, all rights (whether by counterclaim, setoff or otherwise) and defenses (including, without limitation, the defense of fraud), whether acquired by subrogation, assignment or otherwise, to the extent that such rights and defenses may be available to AGM to avoid payment of its obligations under this Policy in accordance with the express provisions of this Policy. This Policy sets forth in full the undertaking of AGM, and shall not be modified, altered or affected by any other agreement or instrument, including any modification or amendment thereto. Except to the extent expressly modified by an endorsement hereto, (a) any premium paid in respect of this Policy is nonrefundable for any reason whatsoever, including payment, or provision being made for payment, of the Bonds prior to maturity and (b) this Policy may not be canceled or revoked. THIS POLICY IS NOT COVERED BY THE PROPERTY/CASUALTY INSURANCE SECURITY FUND SPECIFIED IN ARTICLE 76 OF THE NEW YORK INSURANCE LAW. In witness whereof, ASSURED GUARANTY MUNICIPAL CORP. has caused this Policy to be executed on its behalf by its Authorized Officer. ASSURED GUARANTY MUNICIPAL CORP. By Authorized Officer A subsidiary of Assured Guaranty Municipal Holdings Inc Broadway, New York, N.Y (212) Form 500NY (5/90)

205 1228 N Street, Suite 13 Sacramento, CA (916)

206