2012 CERTIFICATES OF PARTICIPATION (Refunding and Capital … · 2012. 7. 6. · 2012 Certificates of Participation (Refunding and Capital Projects) MATURITY SCHEDULE Maturity Date

NEW ISSUE S&P Insured Rating: “AA-” (Stable Outlook) DTC BOOK-ENTRY ONLY S&P Underlying Rating: “A-” (Stable Outlook) See “RATINGS” herein

In the opinion of Kronick, Moskovitz, Tiedemann & Girard, a Professional Corporation, Special Counsel, based on an analysis of existing statutes, regulations, rulings, and court decisions and assuming, among other things, the accuracy of certain representations and compliance with certain covenants, the portion of the rental payments designated as and constituting interest paid by the District under the Facilities Lease and received by the owners of the Certificates is excludable from gross income for federal income tax purposes and is exempt from State of California personal income taxes. In the further opinion of Special Counsel, such interest is not an item of tax preference for purposes of the alternative minimum tax imposed on individuals and corporations; however, such interest is taken into account in determining adjusted current earnings for the purpose of computing the alternative minimum tax imposed on certain corporations. Special Counsel expresses no opinion regarding any other tax consequences relating to the ownership or disposition of, or the accrual or receipt of interest with respect to, the Certificates. See “LEGAL MATTERS—Tax Matters” herein.

$18,376,098.50 2012 CERTIFICATES OF PARTICIPATION

(Refunding and Capital Projects) Evidencing And Representing The Proportionate Interests Of The Owners Thereof In Rental Payments To Be Made By The

MARYSVILLE JOINT UNIFIED SCHOOL DISTRICT (YUBA COUNTY, CALIFORNIA)

As The Rental For Certain Property Pursuant To A Facilities Lease With The MARYSVILLE JOINT UNIFIED SCHOOL DISTRICT FINANCING CORPORATION

DATED: Date of Delivery DUE: June 1, as shown below

The 2012 Certificates of Participation (Refunding and Capital Projects) (the “Certificates”) are being executed and delivered in the aggregate principal amount of $18,376,098.50. The Certificates are being sold for the purpose of i) implementing the District’s 2012 Capital Projects and ii) refunding the District’s 2006 Certificates of Participation. See “2012 CAPITAL PROJECTS” and “PLAN OF REFUNDING” herein.

The Certificates evidence and represent the proportionate interests of the Owners thereof in Rental Payments to be made by the Marysville Joint Unified School District (the “District”) pursuant to a facilities lease dated July 1, 2012 (the “Facilities Lease”), between the Marysville Joint Unified School District Financing Corporation, a California nonprofit public benefit corporation (the “Corporation”) and the District. The Certificates are being delivered pursuant to a trust agreement dated July 1, 2012 (the “Trust Agreement”) by and among The Bank of New York Trust Company, N.A. (the “Trustee”), the Corporation and the District. The Certificates will not pay current interest. The Certificates accrete interest, compounded semiannually on June 1 and December 1 of each year, commencing December 1, 2012. The Certificates are subject to redemption prior to their maturity. See “THE CERTIFICATES—Redemption Provisions” herein.

THE DISTRICT HAS COVENANTED IN THE FACILITIES LEASE TO TAKE SUCH ACTION AS MAY BE NECESSARY TO INCLUDE AND MAINTAIN ALL RENTAL PAYMENTS AS AND WHEN DUE FOR THE FACILITIES LEASE, SUBJECT TO ABATEMENT, AS FURTHER DESCRIBED HEREIN, IN ITS ANNUAL BUDGET AND TO MAKE THE NECESSARY ANNUAL APPROPRIATIONS FOR ALL SUCH RENTAL PAYMENTS. THE OBLIGATION OF THE DISTRICT TO MAKE RENTAL PAYMENTS IS A SPECIAL OBLIGATION OF THE DISTRICT AND DOES NOT CONSTITUTE A DEBT OF THE DISTRICT OR YUBA COUNTY OR THE STATE OF CALIFORNIA OR ANY POLITICAL SUBDIVISION WITHIN THE MEANING OF ANY CONSTITUTIONAL OR STATUTORY DEBT LIMITATION OR RESTRICTION AND DOES NOT CONSTITUTE AN OBLIGATION FOR WHICH THE DISTRICT IS OBLIGATED TO LEVY OR PLEDGE ANY FORM OF TAXATION OR FOR WHICH THE DISTRICT HAS LEVIED OR PLEDGED ANY FORM OF TAXATION. THE CORPORATION HAS NO OBLIGATION OR LIABILITY WHATSOEVER TO THE OWNERS OF THE CERTIFICATES.

The scheduled payment of principal of (or, in the case of Capital Appreciation Certificates, the accreted value) and interest on the Certificates when due will be guaranteed under an insurance policy to be issued concurrently with the delivery of the Certificates by ASSURED GUARANTY MUNICIPAL CORP.

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 CERTIFICATES. 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 MEANING SET FORTH HEREIN.

MATURITY SCHEDULE

(See Inside Cover)

The Certificates will be offered when, as and if executed and delivered and received by the Underwriter, subject to the approval as to their legality by Kronick, Moskovitz, Tiedemann & Girard, a Professional Corporation, Special Counsel. It is anticipated that the Certificates, in definitive form, will be available for delivery through the facilities of DTC in New York, New York on or about July 17, 2012.

This Official Statement is dated June 26, 2012

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$18,376,098.50 MARYSVILLE JOINT UNIFIED SCHOOL DISTRICT

2012 Certificates of Participation (Refunding and Capital Projects)

MATURITY SCHEDULE

Maturity Date

Initial Principal

Accretion

Maturity

CUSIP+

June 1 Amount Rate Value Number

2023 $1,648,402.80 5.000% $2,820,000 574348 AR9 2024 1,541,947.80 5.150 2,820,000 574348 AS7 2025 1,438,171.80 5.300 2,820,000 574348 AT5 2026 1,346,578.20 5.400 2,820,000 574348 AU2 2027 1,256,109.30 5.500 2,815,000 574348 AV0 2028 1,173,627.60 5.600 2,820,000 574348 AW8 2029 1,092,496.20 5.700 2,820,000 574348 AX6 2030 1,015,002.60 5.800 2,820,000 574348 AY4 2031 941,175.00 5.900 2,820,000 574348 AZ1 2032 871,041.60 6.000 2,820,000 574348 BA5 2033 811,311.15 6.050 2,815,000 574348 BB3 2034 756,042.00 6.110 2,820,000 574348 BC1 2035 702,462.00 6.170 2,820,000 574348 BD9 2036 652,263.65 6.220 2,815,000 574348 BE7 2037 610,191.60 6.250 2,820,000 574348 BF4 2038 570,880.80 6.270 2,820,000 574348 BG2 2039 535,320.60 6.280 2,820,000 574348 BH0 2040 501,847.20 6.290 2,820,000 574348 BJ6 2041 470,404.20 6.300 2,820,000 574348 BK3 2042 440,822.40 6.310 2,820,000 574348 BL1

+ CUSIP is a registered trademark of the American Bankers Association. CUSIP data herein is provided by CUSIP Global Services, managed by Standard & Poor's Financial Services LLC on behalf of The American Bankers Association. This data is not intended to create a database and does not serve in any way as a substitute for the CUSIP Services. Neither the District nor the Underwriter is responsible for the selection or correctness of the CUSIP numbers set forth herein.

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NO DEALER, BROKER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED BY THE DISTRICT OR THE UNDERWRITER TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS, OTHER THAN THOSE CONTAINED HEREIN, AND IF GIVEN OR MADE, SUCH OTHER INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE DISTRICT OR THE UNDERWRITER. 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 CERTIFICATES BY A PERSON IN ANY JURISDICTION IN WHICH IT IS UNLAWFUL FOR SUCH PERSON TO MAKE AN OFFER, SOLICITATION OR SALE. THIS OFFICIAL STATEMENT IS NOT TO BE CONSTRUED AS A CONTRACT WITH THE PURCHASERS OF THE CERTIFICATES. STATEMENTS CONTAINED IN THIS OFFICIAL STATEMENT WHICH INVOLVE ESTIMATES, PROJECTIONS, FORECASTS OR MATTERS OF OPINION, WHETHER OR NOT EXPRESSLY SO DESCRIBED HEREIN, ARE INTENDED SOLELY AS SUCH AND ARE NOT TO BE CONSTRUED AS REPRESENTATIONS OF FACT.

THE INFORMATION SET FORTH HEREIN HAS BEEN OBTAINED FROM SOURCES BELIEVED TO BE RELIABLE. THE UNDERWRITER HAS REVIEWED THE INFORMATION IN THIS OFFICIAL STATEMENT IN ACCORDANCE WITH, AND PART OF, ITS RESPONSIBILITIES TO INVESTORS UNDER THE FEDERAL SECURITIES LAWS AS APPLIED TO THE FACTS AND CIRCUMSTANCES OF THIS TRANSACTION, BUT THE UNDERWRITER DOES NOT GUARANTEE THE ACCURACY OR COMPLETENESS OF SUCH INFORMATION. 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.

THIS OFFICIAL STATEMENT IS SUBMITTED WITH RESPECT TO THE SALE OF THE CERTIFICATES REFERRED TO HEREIN AND MAY NOT BE REPRODUCED OR USED, IN WHOLE OR IN PART, FOR ANY OTHER PURPOSE, UNLESS AUTHORIZED IN WRITING BY THE DISTRICT. ALL SUMMARIES OF THE DOCUMENTS AND LAWS ARE MADE SUBJECT TO THE PROVISIONS THEREOF AND DO NOT PURPORT TO BE COMPLETE STATEMENTS OF ANY OR ALL SUCH PROVISIONS.

IN MAKING AN INVESTMENT DECISION INVESTORS MUST RELY ON THEIR OWN EXAMINATION OF THE DISTRICT AND THE TERMS OF THE OFFERING, INCLUDING THE MERITS AND RISKS INVOLVED. THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS OFFICIAL STATEMENT.

IN CONNECTION WITH THIS OFFERING, THE UNDERWRITER MAY OVER-ALLOT OR EFFECT TRANSACTIONS THAT STABILIZE OR MAINTAIN MARKET PRICES OF THE CERTIFICATES OFFERED HEREBY AT LEVELS ABOVE THOSE 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 CERTIFICATES TO CERTAIN DEALERS, INSTITUTIONAL INVESTORS, BANKS OR OTHERS AT PRICES LOWER OR YIELDS HIGHER THAN THE PUBLIC OFFERING PRICES OR YIELDS STATED ON THE INSIDE COVER PAGE HEREOF AND SAID PUBLIC OFFERING PRICES OR YIELDS MAY BE CHANGED FROM TIME TO TIME BY THE UNDERWRITER. ASSURED GUARANTY MUNICIPAL CORP. (“AGM”) MAKES NO REPRESENTATION REGARDING THE CERTIFICATES OR THE ADVISABILITY OF INVESTING IN THE CERTIFICATES. 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”.

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THE BOARD OF TRUSTEES

Jeff D. Boom, President Glen E. Harris, Vice President

Jim C. Flurry, Clerk Frank J. Crawford, Trustee Representative

Margaret A. Markle, Member Philip R. Miller, Member

Bernard P. Rechs, Member

ADMINISTRATION

Gay S. Todd, Superintendent Mark Allgire, Assistant Superintendent, Business Services

Ramiro Carreon, Assistant Superintendent, Personnel Services

Marysville Joint Unified School District 1919 “B” Street

Marysville, California 95901 (530) 741-6000

FINANCIAL ADVISOR

Government Financial Strategies inc. 1228 N Street, Suite 13

Sacramento, California 95814-5609 (916) 444-5100

SPECIAL COUNSEL

Kronick, Moskovitz, Tiedemann & Girard A Professional Corporation

400 Capitol Mall, 27th Floor Sacramento, California 95814-4417

(916) 321-4500

TRUSTEE AND ESCROW AGENT

The Bank of New York Trust Company, N.A. 100 Pine Street, Suite 3100 San Francisco, CA 94111

(415) 263-2445

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TABLE OF CONTENTS

Page #

INTRODUCTORY STATEMENT ..................................................................................................................................................... 1

The District .................................................................................................................................................................................. 1 The Corporation........................................................................................................................................................................... 1 The Certificates ........................................................................................................................................................................... 2 Authority for Leasing and Source of Repayment for the Certificates......................................................................................... 2 Tax Matters.................................................................................................................................................................................. 3 Bond Insurance............................................................................................................................................................................ 3 Continuing Disclosure ................................................................................................................................................................. 3 Professionals Involved................................................................................................................................................................. 3 Other Information........................................................................................................................................................................ 3

THE CERTIFICATES ......................................................................................................................................................................... 4 General Provisions....................................................................................................................................................................... 4 Registration, Transfer, and Exchange ......................................................................................................................................... 4 Redemption Provisions................................................................................................................................................................ 5 DTC Book-Entry Only ................................................................................................................................................................ 6 Sources and Uses of Funds.......................................................................................................................................................... 7 Rental Payments .......................................................................................................................................................................... 8 Source of Payment for the Certificates...................................................................................................................................... 10 Certificate Reserve Fund ........................................................................................................................................................... 11 Payment Plan for the Certificates .............................................................................................................................................. 11

BOND INSURANCE ........................................................................................................................................................................ 12 Bond Insurance Policy............................................................................................................................................................... 12 Assured Guaranty Municipal Corp............................................................................................................................................ 12

THE FACILITIES.............................................................................................................................................................................. 13 2012 CAPITAL PROJECTS.............................................................................................................................................................. 14 PLAN OF REFUNDING ................................................................................................................................................................... 14 SPECIAL RISK FACTORS .............................................................................................................................................................. 15

Payments Not District Debt....................................................................................................................................................... 15 Abatement.................................................................................................................................................................................. 15 No Earthquake Insurance Coverage .......................................................................................................................................... 15 No Acceleration Upon Default .................................................................................................................................................. 16 Enforcement of Remedies ......................................................................................................................................................... 16 Loss of Tax Exemption ............................................................................................................................................................. 16

THE DISTRICT................................................................................................................................................................................. 17 General Information .................................................................................................................................................................. 17 The Board of Trustees and Key Administrative Personnel ....................................................................................................... 17 Average Daily Attendance ........................................................................................................................................................ 17 Charter Schools ......................................................................................................................................................................... 18 Employee Relations................................................................................................................................................................... 18 Pension Plans............................................................................................................................................................................. 19 Other Post-Employment Benefits.............................................................................................................................................. 19

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DISTRICT FINANCIAL INFORMATION ...................................................................................................................................... 20 Accounting Practices ................................................................................................................................................................. 20 Budget and Financial Reporting Process................................................................................................................................... 20 Financial Statements.................................................................................................................................................................. 22 Revenues.................................................................................................................................................................................... 23 Expenditures .............................................................................................................................................................................. 24 Short Term Borrowings............................................................................................................................................................. 24 Long Term Borrowings ............................................................................................................................................................. 24

TAXATION AND APPROPRIATIONS........................................................................................................................................... 25 Ad Valorem Property Taxation.................................................................................................................................................. 25 Taxation of State-Assessed Utility Property ............................................................................................................................. 25 Historical Assessed Valuation................................................................................................................................................... 26 Alternative Method of Distribution of Tax Levies.................................................................................................................... 27 Tax Collections and Delinquencies ........................................................................................................................................... 28 Major Taxpayers........................................................................................................................................................................ 29 Direct and Overlapping Bonded Debt ....................................................................................................................................... 29

COUNTY ECONOMIC PROFILE ................................................................................................................................................... 30 General Information .................................................................................................................................................................. 30 Population.................................................................................................................................................................................. 31 County Unemployment ............................................................................................................................................................. 31 Major Employers ....................................................................................................................................................................... 32

STATE FUNDING OF PUBLIC EDUCATION............................................................................................................................... 33 Sources of Revenues for Public Education ............................................................................................................................... 33 Distribution of Revenues for Public Education......................................................................................................................... 34 The 2011-12 State Budget ......................................................................................................................................................... 35 The 2012-13 State Budget ......................................................................................................................................................... 38 Future Budgets........................................................................................................................................................................... 41

CONSTITUTIONAL & STATUTORY PROVISIONS AFFECTING DISTRICT REVENUES & EXPENDITURES................. 42 LEGAL MATTERS........................................................................................................................................................................... 44

No Litigation ............................................................................................................................................................................. 44 Legal Opinion............................................................................................................................................................................ 44 Tax Matters................................................................................................................................................................................ 45 Legality for Investment ............................................................................................................................................................. 45

RATINGS .......................................................................................................................................................................................... 45 FINANCIAL ADVISOR ................................................................................................................................................................... 45 INDEPENDENT AUDITORS........................................................................................................................................................... 46 UNDERWRITING AND INITIAL OFFERING PRICES ................................................................................................................ 46 CONTINUING DISCLOSURE......................................................................................................................................................... 46 ADDITIONAL INFORMATION...................................................................................................................................................... 46

APPENDIX A SUMMARY OF PRINCIPAL LEGAL DOCUMENTS APPENDIX B THE FINANCIAL STATEMENTS OF THE DISTRICT AS OF AND FOR THE YEAR ENDED JUNE 30, 2011 APPENDIX C FORM OF CONTINUING DISCLOSURE CERTIFICATE APPENDIX D FORM OF OPINION OF SPECIAL COUNSEL APPENDIX E ACCRETED VALUE TABLE APPENDIX F SPECIMEN MUNICIPAL BOND INSURANCE POLICY

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OFFICIAL STATEMENT

$18,376,098.50 2012 Certificates of Participation (Refunding and Capital Projects)

Evidencing And Representing The Proportionate Interests Of The Owners Thereof In Rental Payments To Be Made By The

MARYSVILLE JOINT UNIFIED SCHOOL DISTRICT (YUBA COUNTY, CALIFORNIA)

As The Rental For Certain Property Pursuant To A Facilities Lease With The MARYSVILLE JOINT UNIFIED SCHOOL DISTRICT FINANCING CORPORATION

INTRODUCTORY STATEMENT The purpose of this Official Statement, which includes the cover page, table of contents and attached appendices (the “Official Statement”), is to provide certain information concerning the sale and delivery of the Marysville Joint Unified School District 2012 Certificates of Participation (Refunding and Capital Projects) (the “Certificates”). The Certificates are being sold for the purpose of i) implementing the District’s 2012 Capital Projects and ii) refunding a portion of the District’s 2006 Certificates of Participation. See “2012 CAPITAL PROJECTS” and “PLAN OF REFUNDING” herein. 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 the entire Official Statement, including the cover page and attached appendices hereto, and the documents summarized or described herein. A full review should be made of the entire Official Statement by prospective investors in the Certificates. The offering of the Certificates to potential investors is made only by means of the entire Official Statement. The District The District is a political subdivision of the State of California (the “State”) and is governed by a seven-member Board of Trustees (the “Board”). The District operates fourteen elementary schools, three intermediate schools, two comprehensive high schools, two alternative high schools, one alternative K-12 school, a charter school for the arts for grades 7-12, and preschool and day care centers. The boundaries of the District cover an area of approximately 1,700 square miles of central and northern Yuba County and a portion of Butte County. See “THE DISTRICT” herein. The Corporation The Marysville Joint Unified School District Financing Corporation (the “Corporation”) is a nonprofit public benefit corporation duly organized in 2003 at the request of the District and existing under the laws of the State and entitled, by virtue of its Articles of Incorporation and Bylaws, to provide financial assistance to the District by financing and refinancing the acquisition of real property and construction and the acquisition of facilities. The Corporation is not capitalized and has no assets. The Corporation has no liability to the owners of the Certificates.

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The Certificates The Certificates are being executed and delivered in the aggregate initial principal amount of $18,376,098.50. The Certificates evidence and represent the proportionate interests of the registered owners thereof (the “Owners”) in rental payments (the “Rental Payments”) to be made by the District as the rental for the use and possession of certain facilities at Yuba Gardens Intermediate School, 1964 11th Avenue, Olivehurst, CA 95961, Edgewater Elementary School, 5715 Oakwood Drive, Marysville, CA 95901, and Linda Elementary School, 6180 Dunning Avenue, Marysville, CA 95901 (together, the “Facilities”), leased from the Corporation pursuant to a facilities lease dated July 1, 2012 (the “Facilities Lease”). See “APPENDIX A—SUMMARY OF PRINCIPAL LEGAL DOCUMENTS—FACILITIES LEASE” herein. The Certificates will be dated their date of delivery and will be issued as fully registered Certificates, without coupons, in denominations of $5,000 Maturity Value (as defined herein) or any integral multiple thereof. The Certificates will be issued in book-entry form only, and will be initially issued and registered in the name of Cede & Co. as nominee of The Depository Trust Company, New York, New York (“DTC”). The Certificates will be issued as capital appreciation bonds. The Certificates accrete interest from their date of delivery, compounded semiannually on December 1 and June 1 of each year, commencing December 1, 2012. See “THE CERTIFICATES” herein. Proceeds from the sale and delivery of the Certificates will be deposited into the funds and accounts as established under a trust agreement dated July 1, 2012 (the “Trust Agreement”) by and among the District, the Corporation and The Bank of New York Trust Company, N.A. (the “Trustee”). See “APPENDIX A—SUMMARY OF PRINCIPAL LEGAL DOCUMENTS—TRUST AGREEMENT” herein. Proceeds from the sale and delivery of the Certificates will be utilized by the District for the purpose of i) implementing the District’s 2012 Capital Projects and ii) refunding a portion of the District’s 2006 Certificates of Participation (the “2006 Certificates”). See “2012 CAPITAL PROJECTS” and “PLAN OF REFUNDING” herein. Authority for Leasing and Source of Repayment for the Certificates The District is authorized under provisions of the Constitution and laws of the State to enter into lease or lease purchase agreements relating to real property and buildings, facilities and equipment. The District approved the Facilities Lease, Trust Agreement and related legal documents by adopting a resolution on May 8, 2012 (the “Resolution”), which authorizes and directs the execution of the documents relating to the sale and delivery of the Certificates. Under the terms of a ground lease dated July 1, 2012 (the “Ground Lease”) between the District and the Corporation, the District will lease the Facilities to the Corporation. See “APPENDIX A—SUMMARY OF PRINCIPAL LEGAL DOCUMENTS—GROUND LEASE” herein. Under the terms of the Facilities Lease, the District will lease back the Facilities from the Corporation and is required to pay Rental Payments from any source of legally available funds for the use and possession of the Facilities, which amounts are sufficient in both time and aggregate amount to pay the principal and interest payable with respect to the Certificates. The District is also required to make additional payments as necessary to pay all Certificate Reserve Fund (as defined herein) deficiencies, fees, costs and expenses of the Corporation (the “Additional Payments”) in performance of the Facilities Lease and Trust Agreement. Pursuant to the Trust Agreement, the Corporation has assigned to the Trustee, for the benefit of the Owners of the Certificates, its rights under the Facilities Lease, including (i) all its rights to receive Rental Payments from the District under the Facilities Lease, and (ii) all its other rights under the Ground Lease and the Facilities Lease as may be necessary to enforce payment of Rental Payments when due or otherwise to protect the interests of the Owners of the Certificates. The District, pursuant to the Facilities Lease, will take such action as may be necessary to include all Rental Payments with respect to the Facilities in its annual budget and to make the necessary annual appropriation therefor. The amount of Rental Payments will be abated during any period in which, by reason of damage, destruction, condemnation or material title defect, there is substantial interference with the District's use and possession of any portion of the Facilities, except to the extent of the moneys on deposit in the reserve fund (the “Certificate Reserve Fund”) established under the Trust Agreement are used, or to the extent moneys are received from rental interruption insurance, if any, with respect to the Facilities. The Certificate Reserve Fund will be funded with a debt service reserve insurance policy upon delivery of the Certificates issued by

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Assured Guaranty Municipal Corp. See “APPENDIX A—SUMMARY OF PRINCIPAL LEGAL DOCUMENTS—FACILITIES LEASE—Rental Payments; Additional Payments” and “SPECIAL RISK FACTORS” herein, for a further discussion of the abatement provisions. Tax Matters In the opinion of Kronick, Moskovitz, Tiedemann & Girard, a Professional Corporation, Special Counsel, based on an analysis of existing statutes, regulations, rulings, and court decisions and assuming, among other things, the accuracy of certain representations and compliance with certain covenants, the portion of the Rental Payments designated as and constituting interest paid by the District under the Facilities Lease and received by the owners of the Certificates is excludable from gross income for federal income tax purposes and is exempt from State of California personal income taxes. Special Counsel is also of the opinion that such interest is not an item of tax preference for purposes of the federal individual and corporate alternative minimum taxes, although Special Counsel observes that such interest is included in adjusted current earnings in calculating corporate alternative minimum taxable income. See “LEGAL MATTERS- Tax Matters” herein. A complete copy of the proposed opinion of Special Counsel is attached hereto as “APPENDIX D – FORM OF OPINION OF SPECIAL COUNSEL.” Bond Insurance The scheduled payment of principal of and interest on the Certificates when due will be guaranteed under an insurance policy to be issued concurrently with the delivery of the Certificates by Assured Guaranty Municipal Corp. Continuing Disclosure The District will covenant for the benefit of Owners to make available certain financial information and operating data relating to the District and to provide significant events notices as required under federal securities laws, in compliance with S.E.C. Rule 15c2-12(b)(5). The specific nature of the information to be made available and significant events notices are set forth in “APPENDIX C – FORM OF CONTINUING DISCLOSURE CERTIFICATE.” See also "CONTINUING DISCLOSURE" herein. Professionals Involved Government Financial Strategies inc., Sacramento, California, has acted as a financial advisor (the “Financial Advisor”) to the District with respect to the sale and delivery of the Certificates. See “FINANCIAL ADVISOR” herein. All proceedings in connection with the sale and delivery of the Certificates are subject to the approving legal opinion of Kronick, Moskovitz, Tiedemann & Girard, a Professional Corporation, Sacramento, California, Special Counsel to the District with respect to the Certificates. Kronick, Moskovitz, Tiedemann & Girard, a Professional Corporation, will receive compensation contingent upon the execution and delivery of the Certificates. Other Information This Official Statement may be considered current only as of its dated date affixed to the cover page hereof, and the information contained herein is subject to change. Brief descriptions of the Certificates, the security for the Certificates and the District are included in this Official Statement, together with summaries of certain provisions relating to the Trust Agreement, the Facilities Lease, and the Ground Lease (collectively, the “Legal Documents”). Such descriptions 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 Certificates are qualified in their entirety by reference to the form thereof included in the Legal Documents. Information concerning this Official Statement, the Certificates, the District, the Legal Documents or any other information relating to the sale and delivery of the Certificates is available for public inspection and may be obtained by contacting the District or by contacting the Financial Advisor, Government Financial Strategies inc., 1228 N Street, Suite 13, Sacramento, California 95814-5609, telephone (916) 444-5100, facsimile telephone (916) 444-5109.

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THE CERTIFICATES General Provisions The Certificates will be executed and delivered in fully registered form, without coupons, in denominations of $5,000 Maturity Value (as defined herein) or any integral multiple thereof. The Certificates are dated their date of delivery. The Certificates mature on June 1 in each of the years and in the amounts set forth on the inside cover page hereof. The Certificates accrete in value from their delivery date at the rates per annum (the "Accretion Rate") set forth on the inside cover page hereof, compounded semiannually on December 1 and June 1 of each year commencing December 1, 2012. Interest with respect to each Certificate is represented by the amount each Certificate accretes in value from its initial principal amount on the date of delivery to the date for which its accreted value is calculated. The accreted value (“Accreted Value”) of a Certificate is the initial principal amount on the date of delivery plus the interest accrued thereon, compounded semiannually at the Accretion Rate. The Accreted Value of a Certificate on its maturity date is its “Maturity Value.” See “APPENDIX E—ACCRETED VALUES TABLE” herein. Registration, Transfer, and Exchange The Trustee will keep or cause to be kept a register (the “Certificate Register”) in which, subject to such reasonable regulations as it may prescribe, the Trustee will provide for the registration and transfer of Certificates. The Certificate Register will at all times be open to inspection during normal business hours by the District. Upon surrender of a Certificate for transfer at the corporate trust office of the Trustee, the Trustee will execute and deliver, in the name of the designated transferee or transferees, one or more new Certificates of the same tenor, and maturity and for an equivalent aggregate principal amount. Certificates may be exchanged for an equivalent aggregate principal amount of Certificates of other authorized denominations of the same tenor, and maturity, upon surrender of the Certificates for exchange. Upon surrender of Certificates for exchange, the Trustee will execute and deliver the Certificates that the Owner making the exchange is entitled to receive. All Certificates surrendered upon any exchange or transfer will be cancelled by the Trustee and thereafter disposed of as provided for in the Trust Agreement. All Certificates delivered upon any transfer or exchange of Certificates will be the valid obligations of the District, evidencing the same debt, and entitled to the same security and benefits under this Trust Agreement, as the Certificates surrendered upon such transfer or exchange. Every Certificate presented or surrendered for transfer or exchange must be accompanied by a written instrument of transfer in a form approved by the Trustee and duly executed by the Owner or by his attorney duly authorized in writing. No service charge will be made for any transfer or exchange of Certificates, but the Trustee will require the Owner requesting such transfer or exchange to pay any tax or other governmental charge required to be paid with respect to such transfer or exchange. The Trustee will not be required to transfer or exchange (i) Certificates during the period established by the Trustee for the selection of Certificates for redemption or (ii) any Certificate that has been selected for redemption in whole or in part, except the unredeemed portion of such Certificate selected for redemption in part, from and after the day that such Certificate has been selected for redemption in whole or in part. The Certificates will be registered initially in the name of Cede & Co., as nominee of DTC. DTC will act as securities depository for the Certificates. Individual purchases of the Certificates will be made in book-entry only form, and no physical certificates will be made available to the Owners to represent their ownership interests in the Certificates. So long as Cede & Co. is the registered owner of the Certificates, principal of and compounded interest on the Certificates will be paid in lawful money of the United States of America by the Trustee to DTC, who will, in turn, disburse such payment to direct and indirect participants of DTC for subsequent disbursement to Beneficial Owners. The principal of and compounded interest on the Certificates is payable upon maturity or prior redemption of a Certificate upon its surrender at the principal office of the Trustee. So long as Cede & Co. or its registered assignee is the Registered Owner of the Certificates, payment shall be made by wire transfer. See “THE CERTIFICATES—DTC Book-Entry Only” herein.

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Redemption Provisions Optional Redemption. The Certificates 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 June 1, 2022, at a redemption price equal to the Accreted Value of the Certificates called for redemption as of the date fixed for redemption. Special Optional Redemption. The Certificates are subject to redemption prior to their respective stated maturities, at the option of the District as a whole or in part, on any date on or after June 1, 2014, at a redemption price equal to the Accreted Value of the Certificates called for redemption as of the date fixed for redemption, from general obligation bond proceeds authorized at an election to be held subsequent to the delivery date of the Certificates. Extraordinary Redemption From Net Proceeds of Insurance and Condemnation. The Certificates are subject to mandatory redemption in whole on any date or in part on any Interest Payment Date (pro rata among maturities and at random within a maturity) at a redemption price equal to the principal amount thereof, without premium, plus accrued interest to the date fixed for redemption with respect thereto, from (i) net insurance proceeds or condemnation awards not used to repair or replace the Facilities or portions thereof which have been materially damaged, destroyed or taken in eminent domain proceedings, or (ii) proceeds of title insurance if the title defect giving rise to the payment of such proceeds would result in an abatement of Rental Payments under the Facilities Lease. Selection of Certificates for Redemption. In the case of any redemption at the election of the District of less than all the Certificates then outstanding, the District will, at least 45 days prior to the date fixed for redemption notify the Trustee and Corporation (unless a shorter notice is satisfactory to the Trustee and Corporation) of such redemption date and of the principal amount of Certificates to be redeemed. If less than all the Outstanding Certificates of any maturity are to be redeemed, prior to the redemption date the Trustee will select the particular Certificates to be redeemed (in whole or in part) from the outstanding Certificates that have not previously been called for redemption, in minimum denominations of $5,000 Maturity Value, at random in any manner that the Trustee in its sole discretion shall deem appropriate and fair. For purposes of selection, each $5,000 of Certificate obligation at maturity shall be deemed to be a separate Certificate. The Trustee will notify the District in writing of the Certificates so selected for redemption and, in the case of a Certificate selected for partial redemption, the principal amount represented thereby to be redeemed. Notice of Redemption. Notice of redemption will be mailed (first class postage prepaid) by the Trustee, not fewer than 30 nor more than 60 days prior to the redemption date, to (i) the respective Owners of any Certificates designated for redemption at their addresses appearing on the Certificate Register, and (ii) the Municipal Securities Rulemaking Board (the “MSRB”) through its Electronic Municipal Market Access (“EMMA”) website. Each notice of redemption will state the date of such notice, the date of issue of the Certificates, the redemption date, the redemption price, the place or places of redemption (including the name and appropriate address or addresses of the Trustee), the CUSIP number (if any) of the maturity or maturities, and, if less than all of any such maturity, the distinctive certificate numbers of the Certificates of such maturity to be redeemed and, in the case of Certificates to be redeemed in part only, the respective portions of the Maturity Value represented thereby to be redeemed. Each such notice will also state that on said date there will become due and payable on each of said Certificates the redemption price thereof or of said specified portion of the Maturity Value represented thereby in the case of a Certificate to be redeemed in part only, and that from and after such redemption date interest represented thereby will cease to accrue, and will require that such Certificates be then surrendered at the address or addresses of the Trustee specified in the redemption notice. Neither the District nor the Trustee will have any responsibility for any defect in the CUSIP number that appears on any Certificate or in any redemption notice with respect thereto, and any such redemption notice may contain a statement to the effect that CUSIP numbers have been assigned by an independent service for convenience of reference and that neither the District nor the Trustee shall be liable for any inaccuracy in such numbers. Each notice of redemption will either (i) explicitly state that the proposed redemption is conditioned on there being on deposit in a fund established for the purpose of redeeming Certificates (the “Redemption Fund”) on the redemption date sufficient money to pay in full the redemption price of the Certificates or portions thereof to be redeemed or (ii) be sent only if sufficient money to pay in full the redemption price of the Certificates or portions thereof to be redeemed is on deposit in the Redemption Fund. Failure by the Trustee to file notice with the MSRB or failure of any Owner to receive notice or any defect in any such notice shall not affect the sufficiency of the proceedings for redemption. Failure by the Trustee to mail or otherwise deliver notice to any one or more of the respective Owners of any Certificates designated for redemption shall not affect the sufficiency of the proceedings for redemption with respect to the Owner or Owners to whom such notice was mailed or delivered.

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Effect of Redemption. Notice of redemption having been duly given as aforesaid and moneys for payment of the redemption price of the Certificates so to be redeemed being held by the Trustee, on the redemption date designated in such notice (i) the Certificates so to be redeemed shall become due and payable at the redemption price specified in such notice, (ii) interest represented by such Certificates shall cease to accrue, (iii) such Certificates shall cease to be entitled to any benefit or security under the Trust Agreement, and (iv) the Owners of such Certificates shall have no rights in respect thereof except to receive payment of said redemption price. Upon surrender of any such Certificate for redemption in accordance with said notice, such Certificate shall be paid by Trustee at the redemption price. DTC Book-Entry Only The following information concerning DTC and DTC’s book-entry-only system has been provided by DTC for use in securities disclosure documents. Bracketed material may apply only to certain issues. 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 Certificates payment of principal and interest, other payments with respect to the Certificates to Direct Participants or Beneficial Owners, confirmation and transfer of beneficial ownership interests in such Certificates, 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. DTC will act as securities depository for the Certificates (in this Section, the “Securities”). The Securities 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 Security certificate will be issued for the Securities, in the aggregate principal amount of such issue, and will be deposited with DTC. DTC, the world’s largest securities depository, is a limited-purpose trust company organized under the New York Banking Law, a “banking organization” within the meaning of the New York Banking Law, a member of the Federal Reserve System, a “clearing corporation” within the meaning of the New York Uniform Commercial Code, and a “clearing agency” registered pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934. 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 www.dtcc.com. Purchases of the Notes under the DTC system must be made by or through Direct Participants, which will receive a credit for the Notes on DTC’s records. The ownership interest of each actual purchaser of each Note (“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 Notes are to be accomplished by entries made on the books of Direct and Indirect Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interests in the Notes, except in the event that use of the book-entry system for the Notes is discontinued. To facilitate subsequent transfers, all Securities 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 Securities 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 Notes; DTC’s records reflect only the

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identity of the Direct Participants to whose accounts such Notes 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 Securities may wish to take certain steps to augment transmission to them of notices of significant events with respect to the Notes, such as redemptions, tenders, defaults, and proposed amendments to the security documents. For example, Beneficial Owners of Notes may wish to ascertain that the nominee holding the Notes 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 Paying Agent and request that copies of the notices be provided directly to them. Redemption notices shall be sent to DTC. If less than all of the Securities 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 Securities unless authorized by a Direct Participant in accordance with DTC’s MMI Procedures. Under its usual procedures, DTC mails an Omnibus Proxy to Issuer 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 Securities are credited on the record date (identified in a listing attached to the Omnibus Proxy). Redemption proceeds, distributions, and dividend payments on the Securities 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 Issuer or Agent, on payable date in accordance with their respective holdings shown on DTC’s records. Payments by Direct and Indirect 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 Direct or Indirect Participant and not of DTC, Agent, or Issuer, 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 Issuer or Agent, disbursement of such payments to Direct Participants will be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners will be the responsibility of Direct and Indirect Participants. DTC may discontinue providing its services as depository with respect to the Securities at any time by giving reasonable notice to the Issuer or Agent. Under such circumstances, in the event that a successor depository is not obtained, Security certificates are required to be printed and delivered. The Issuer may decide to discontinue use of the system of book-entry transfers through DTC (or a successor securities depository). In that event, certificated securities representing the Notes will be printed and delivered. Sources and Uses of Funds The proceeds from the sale of the Certificates will be paid a) to Assured Guaranty Municipal Corp. for the purchase of the municipal bond insurance policy and debt service reserve insurance policy and b) to the Trustee who will transfer or deposit such proceeds: • into a fund held by the Trustee to refund a portion of the 2006 Certificates (the “Escrow Fund”); • into a fund held by the County to pay for the 2012 Capital Projects (the “Construction Fund”); and • into a fund held by Trustee to pay the costs of issuance of the Certificates (the “Costs of Issuance Fund”)

Moneys in the funds will be invested in any one or more investments generally permitted to school districts under the laws of the State of California and will be applied solely as described above. Interest earned on the investment of the moneys in the Escrow Fund, Costs of Issuance Fund and Construction Fund will be retained within the respective fund.

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The sources and uses of funds in connection with the sale and delivery of the Certificates are set forth in the following schedule.

Sources and Uses of Funds 2012 Certificates of Participation

SOURCES OF FUNDS Par Amount of the Certificates $18,376,098.50 Original Issue Premium / (Discount) 0.00 TOTAL SOURCES OF FUNDS $18,376,098.50 USES OF FUNDS Escrow Fund $14,126,300.00 Construction Fund 2,781,758.53 Costs of Issuance1 751,949.58 Underwriting Discount 716,089.50 TOTAL USES OF FUNDS $18,376,098.50 1 Costs of issuance include the premiums for the municipal bond insurance policy and the debt service reserve insurance policy, the fees and expenses of special counsel, financial advisor, and rating agency, and other costs.

Rental Payments Rental Payments are required to be made by the District under the Facilities Lease on or before May 15 of each year the Certificates are outstanding, commencing on May 15, 2023, for the use and possession of the Facilities. The Facilities Lease requires that Rental Payments be deposited in the Certificate Fund maintained by the Trustee. On each Payment Date, the Trustee will withdraw from the Certificate Fund the aggregate amount necessary to make payments of Maturity Value with respect to the Certificates, as shown in the following table of the Rental Payments Schedule.

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Rental Payments Schedule 2012 Certificates of Participation

Initial Accreted

Date Principal Interest Total

June 1, 2023 1,648,402.80 1,171,597.20 2,820,000.00 June 1, 2024 1,541,947.80 1,278,052.20 2,820,000.00 June 1, 2025 1,438,171.80 1,381,828.20 2,820,000.00 June 1, 2026 1,346,578.20 1,473,421.80 2,820,000.00 June 1, 2027 1,256,109.30 1,558,890.70 2,815,000.00 June 1, 2028 1,173,627.60 1,646,372.40 2,820,000.00 June 1, 2029 1,092,496.20 1,727,503.80 2,820,000.00 June 1, 2030 1,015,002.60 1,804,997.40 2,820,000.00 June 1, 2031 941,175.00 1,878,825.00 2,820,000.00 June 1, 2032 871,041.60 1,948,958.40 2,820,000.00 June 1, 2033 811,311.15 2,003,688.85 2,815,000.00 June 1, 2034 756,042.00 2,063,958.00 2,820,000.00 June 1, 2035 702,462.00 2,117,538.00 2,820,000.00 June 1, 2036 652,263.65 2,162,736.35 2,815,000.00 June 1, 2037 610,191.60 2,209,808.40 2,820,000.00 June 1, 2038 570,880.80 2,249,119.20 2,820,000.00 June 1, 2039 535,320.60 2,284,679.40 2,820,000.00 June 1, 2040 501,847.20 2,318,152.80 2,820,000.00 June 1, 2041 470,404.20 2,349,595.80 2,820,000.00 June 1, 2042 440,822.40 2,379,177.60 2,820,000.00

Total 18,376,098.50 38,008,901.50 56,385,000.00

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Upon issuance of the Certificates and without regard to optional redemption, scheduled debt service on the District’s outstanding certificates of participation is shown in the following table. See “DISTRICT FINANCIAL INFORMATION – Long Term Borrowings” for more information on the District’s outstanding debt.

Outstanding Certificates of Participation Marysville Joint Unified School District

Remaining 2006 2012 Certificates of Certificates of Combined

Fiscal Year Participation Participation Debt Service

2012 - 13 $136,068.75 $ 0.00 $ 136,068.75 2013 - 14 136,068.75 0.00 136,068.75 2014 - 15 136,068.75 0.00 136,068.75 2015 - 16 552,993.75 0.00 552,993.75 2016 - 17 551,393.75 0.00 551,393.75 2017 - 18 553,668.75 0.00 553,668.75 2018 - 19 549,968.75 0.00 549,968.75 2019 - 20 550,259.38 0.00 550,259.38 2020 - 21 554,000.00 0.00 554,000.00 2021 - 22 551,475.00 0.00 551,475.00 2022 - 23 -- 2,820,000.00 2,820,000.00 2023 - 24 -- 2,820,000.00 2,820,000.00 2024 - 25 -- 2,820,000.00 2,820,000.00 2025 - 26 -- 2,820,000.00 2,820,000.00 2026 - 27 -- 2,815,000.00 2,815,000.00 2027 - 28 -- 2,820,000.00 2,820,000.00 2028 - 29 -- 2,820,000.00 2,820,000.00 2029 - 30 -- 2,820,000.00 2,820,000.00 2030 - 31 -- 2,820,000.00 2,820,000.00 2031 - 32 -- 2,820,000.00 2,820,000.00 2032 - 33 -- 2,815,000.00 2,815,000.00 2033 - 34 -- 2,820,000.00 2,820,000.00 2034 - 35 -- 2,820,000.00 2,820,000.00 2035 - 36 -- 2,815,000.00 2,815,000.00 2036 - 37 -- 2,820,000.00 2,820,000.00 2037 - 38 -- 2,820,000.00 2,820,000.00 2038 - 39 -- 2,820,000.00 2,820,000.00 2039 - 40 -- 2,820,000.00 2,820,000.00 2040 - 41 -- 2,820,000.00 2,820,000.00 2041 - 42 -- 2,820,000.00 2,820,000.00

Source of Payment for the Certificates Each Certificate represents proportionate interest in the Rental Payments to be made by the District to the Corporation. The Corporation, pursuant to the Trust Agreement, will assign its rights under the Facilities Lease to the Trustee for the benefit of the Owners, including its right to receive Rental Payments thereunder and its right to exercise such rights and remedies as may be necessary to enforce Rental Payments when due or otherwise to protect its interests if an Event of Default (as defined in the Facilities Lease) occurs. Principal and interest with respect to the Certificates when due will be made from Rental Payments payable by the District for the use and occupancy of the Facilities, rental interruption insurance proceeds, if any, insurance net proceeds pertaining to the Facilities to the extent that such net proceeds are not used for repair or replacement, and from money in the Certificate Reserve Fund.

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The District has covenanted under the Facilities Lease to take such action as may be necessary to include all Rental Payments and any Additional Payments due under the Facilities Lease in its annual budget and to make the necessary annual appropriations therefor. The Facilities Lease requires that the District furnish annually to the Trustee a certificate stating that all Rental Payments and Additional Payments for the applicable fiscal year have been included in its annual budget. Such covenants are deemed in the Facilities Lease to be duties imposed by law and the ministerial duty of each and every public official of the District. The amount of Rental Payments due under the Facilities Lease will be abated during any period in which by reason of damage, destruction, eminent domain, material title defect or otherwise there is substantial interference with the use and occupancy of the Facilities or any portion thereof by the District. If abatement occurs, the amount of abatement will be such that the resulting Rental Payments and Additional Payments represent fair consideration for use of that portion of the Facilities that is available for use. See “SPECIAL RISK FACTORS – Abatement” herein. The abated Rental Payments will be payable solely from moneys deposited in the Certificate Reserve Fund or the Certificate Fund, or from the proceeds of rental interruption insurance, if any. See “APPENDIX A—SUMMARY OF PRINCIPAL LEGAL DOCUMENTS—FACILITIES LEASE—Abatement of Rental” herein. If the Rental Payments remain abated and the rental interruption insurance is exhausted and the Certificate Reserve Fund is depleted, the diminished Rental Payments, if any, may not be sufficient to pay the principal and interest with respect to the Certificates when due. See “SPECIAL RISK FACTORS” herein. The failure to make such payments of principal and interest with respect to the Certificates due to such abatement does not constitute an Event of Default under the Trust Agreement, the Facilities Lease or the Certificates. The obligation of the District to make Rental Payments does not constitute an obligation for which the District is obligated to pledge any tax revenues. Neither the Certificates nor the obligation of the District to make Rental Payments constitutes an indebtedness of the District, the Corporation, the State or any of its political subdivisions within the meaning of the Constitution of the State or a pledge of the full faith and credit of the District. Certificate Reserve Fund The Trust Agreement provides that a Certificate Reserve Fund be funded in an amount equal to the least of (i) maximum annual Lease Payments, (ii) 125% of average annual Lease Payments or (iii) 10% of the principal amount of the Certificates (the “Reserve Requirement”) from proceeds of the sale of the Certificates or cash deposited by the District. In lieu of a cash funded reserve, the District may purchase a debt service reserve insurance policy in the amount required thereunder in favor of the Trustee. In the event of insufficient funds in the Lease Payment Fund from which to make principal and/or interest payments to the Owners of the Certificates as due on an Interest Payment Date, the Trustee will draw first on the debt service reserve insurance policy or Certificate Reserve Fund, to the extent available therefrom, to obtain sufficient funds to pay principal and/or interest as due to the Owners of the Certificates. The Certificate Reserve Fund will be funded with a debt service reserve insurance policy issued by Assured Guaranty Municipal Corp. upon the closing of the Certificates. Payment Plan for the Certificates The Rental Payments are payable from any source of legally available funds, including but not limited to unrestricted moneys of the District (see “SPECIAL RISK FACTORS—Payments Not District Debt” herein), the majority of which are deposited in the General Fund of the District. Although not pledged for repayment, the District intends to use developer fees deposited into the District’s Capital Facilities Fund to make Rental Payments. To the extent that developer fees are insufficient to make principal and interest payments on the Certificates, the District intends to cover any shortfall from its General Fund.

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BOND INSURANCE

Bond Insurance Policy Concurrently with the issuance of the Certificates, Assured Guaranty Municipal Corp. ("AGM") will issue its Municipal Bond Insurance Policy for the Certificates (the "Policy"). The Policy guarantees the scheduled payment of principal of (or, in the case of Capital Appreciation Certificates, the accreted value) and interest on the Certificates when due as set forth in the form of the Policy included as an exhibit to this Official Statement. 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 a wholly owned subsidiary of Assured Guaranty Municipal Holdings Inc. ("Holdings"). Holdings is 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. No shareholder of AGL, Holdings or AGM is liable for the obligations of AGM. AGM’s financial strength is rated “AA-” (stable outlook) by Standard and Poor’s Ratings Services, a Standard & Poor’s Financial Services LLC business (“S&P”) and “Aa3” (on review for possible downgrade) by Moody’s Investors Service, Inc. (“Moody’s”). 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 March 20, 2012, Moody’s issued a press release stating that it had placed AGM’s “Aa3” insurance financial strength rating on review for possible downgrade. AGM can give no assurance as to any further ratings action that Moody’s may take. Reference is made to the press release, a copy of which is available at www.moodys.com, for the complete text of Moody’s comments. On November 30, 2011, S&P published a Research Update in which it downgraded AGM’s financial strength rating from “AA+” to “AA-“. At the same time, S&P removed the financial strength rating from CreditWatch negative and changed the outlook to stable. AGM can give no assurance as to any further ratings action that S&P may take. Reference is made to the Research Update, a copy of which is available at www.standardandpoors.com, for the complete text of S&P’s comments. 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, 2011 and its Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2012. Capitalization of AGM. At March 31, 2012, AGM’s consolidated policyholders’ surplus and contingency reserves were approximately $3,123,869,658 and its total net unearned premium reserve was approximately $2,275,867,231, in each case, in accordance with statutory accounting principles. AGM’s statutory financial statements for the fiscal year ended December 31, 2011, and for the quarterly period ended March 31, 2012, which have been filed with the New York State Department of Financial Services and posted on AGL’s website at

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http://www.assuredguaranty.com, are incorporated by reference into this Official Statement and shall be deemed to be a part hereof. 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: (i) the Annual Report on Form 10-K for the fiscal year ended December 31, 2011 (filed by AGL with the SEC on February 29,

2012); and (ii) the Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2012 (filed by AGL with the SEC on May 10,

2012). All information relating to AGM included in, or as exhibits to, documents filed by AGL pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, after the filing of the last document referred to above and before the termination of the offering of the Refunding 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 http://www.sec.gov, at AGL’s website at http://www.assuredguaranty.com, or will be provided upon request to Assured Guaranty Municipal Corp.: 31 West 52nd Street, New York, New York 10019, Attention: Communications Department (telephone (212) 826-0100). 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 or one of its affiliates may purchase a portion of the Refunding Bonds or any uninsured bonds offered under this Official Statement and may hold such Bonds or uninsured bonds for investment or may sell or otherwise dispose of such Bonds or uninsured bonds at any time or from time to time. AGM makes no representation regarding the Refunding Bonds or the advisability of investing in the Refunding 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”.

THE FACILITIES The Facilities to be leased to the Corporation from the District by way of the Ground Lease and leased back to the District from the Corporation by way of the Facilities Lease consist of the real property (the legal description of which is included in the Facilities Lease) and the improvements located thereon at Yuba Gardens Intermediate School, 1964 11th Avenue, Olivehurst, CA 95961, Edgewater Elementary School, 5715 Oakwood Drive, Marysville, CA 95901, and Linda Elementary School, 6180 Dunning Avenue, Marysville, CA 95901. The District is the owner in fee of the real property on which the Facilities are located. During the period the Certificates are outstanding, the District will retain title to the Facilities and all structural additions thereto and the Corporation will have a leasehold estate in the Facilities. Yuba Gardens Intermediate School opened at its current location in 1956 and provides public education to students in grades seven and eight. Enrollment in fiscal year 2011-12 totaled 738 students. The campus is comprised of an administration building, a multi-purpose building, a gymnasium, six permanent classroom buildings, one permanent toilet building, twenty-two portable classroom buildings, two portable toilet buildings, two shade structures and six storage facilities, and has an insured value, exclusive of the value of the land, of $13,031,485. Edgewater Elementary School opened in 2009 and provides public education to students in grades kindergarten through five, expanding to kindergarten through six in fiscal year 2012-13. Enrollment in fiscal year 2011-12 totaled 426 students. The campus is comprised of an administration building, a multi-purpose building, twenty-one portable classroom buildings and one portable toilet building, and has an insured value, exclusive of the value of the land, of $8,156,437. Linda Elementary School opened at its current location in 1931 and provides public education to students in grades pre-kindergarten through six. Enrollment in fiscal year 2011-12 totaled 703 students. The campus is

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comprised of an administration building, a multi-purpose building, seven permanent classroom buildings, two permanent toilet buildings, fourteen portable classroom buildings, one portable toilet building, four shade structures and storage facilities, and has an insured value, exclusive of the value of the land, of $8,043,475. In total, the Facilities have an insured value, exclusive of the value of the land, of $29,231,397.

2012 CAPITAL PROJECTS A portion of the proceeds from the sale of the Certificates will be deposited in the Construction Fund in order to implement the 2012 Capital Projects, which consist of costs associated with the purchase of relocatable classrooms currently being leased along with reimbursement to the District for prior expenditures related to the acquisition of real property known as the “Hammonton/Smartsville Property.” The District may add, change, or remove projects at their discretion.

PLAN OF REFUNDING A portion of the proceeds from the sale of the Certificates will be irrevocably deposited in the Escrow Fund to be created and maintained by The Bank of New York Trust Company, N.A. (the “Escrow Agent,” also referred to as the Trustee) under that certain escrow agreement by and between the District and the Escrow Agent dated as of July 1, 2012 (the “Escrow Agreement”). The moneys in the Escrow Fund shall be used to pay a portion of the 2006 Certificates maturing August 1, 2012 through August 1, 2015 and prepay on August 1, 2015 a portion of the 2006 Certificates maturing on or after August 1, 2016, as identified in the following table (the “Prior Certificates”).

Schedule of Prior Certificates 2012 Certificates of Participation

2006 Certificates 2006 Certificates Principal to Principal Prior Remain

Date Amount Certificates Outstanding

August 1, 2012 $1,345,000 $1,345,000 $ 0 August 1, 2013 1,395,000 1,395,000 0 August 1, 2014 1,450,000 1,450,000 0 August 1, 2015 1,510,000 1,085,000 425,000 August 1, 2016 1,575,000 1,135,000 440,000 August 1, 2017 1,640,000 1,180,000 460,000 August 1, 2018 1,680,000 1,205,000 475,000 August 1, 2019 1,750,000 1,255,000 495,000 August 1, 2020 1,825,000 1,305,000 520,000 August 1, 2021 1,910,000 1,370,000 540,000

The majority of the moneys in the Escrow Fund will be invested in non-callable direct obligations of the United States Treasury or other non-callable obligations, the payment of the principal of and interest on which is guaranteed by a pledge of the full faith and credit of the United States of America, with a small portion held as cash, uninvested. AMTEC, acting as verification agent with respect to the Escrow Fund, will certify in writing that moneys irrevocably deposited and invested in the Escrow Fund will be sufficient to i) pay through August 1, 2015 the interest and principal due on the Prior Certificates, and ii) prepay on August 1, 2015, the principal amount of the Prior Certificates maturing on or after August 1, 2016. Upon such irrevocable deposit, the Prior Certificates will be deemed paid and no longer outstanding. Any moneys remaining in the Escrow Fund after redemption of the Prior Certificates shall be deposited by the Trustee in the Certificate Fund.

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SPECIAL RISK FACTORS The following factors, which represent major risk factors that have been identified at this time, should be considered along with all other information in this Official Statement by potential investors in evaluating the credit quality of the Certificates. There can be no assurance that other major risk factors do not exist or will not become evident at any future time regarding the credit quality of the Certificates. Furthermore, no representations are made as to the future financial condition of the District. Payment of the Rental Payments is a General Fund obligation of the District and the ability of the District to make Rental Payments may be adversely affected by its financial condition as of any particular time. Payments Not District Debt The full faith and credit of the District, the State and other political subdivisions thereof have not been pledged to the payment of the Rental Payments or any other payments due under the Facilities Lease. The District is not obligated to levy any form of taxation to pay Rental Payments. Neither Rental Payments nor the Certificates constitute a debt of the District, the State of California, or any other political subdivision thereof. The District is obligated under the Facilities Lease to pay Rental Payments from any source of legally available funds (subject to the exceptions under which the Rental Payments may be abated; see “SPECIAL RISK FACTORS—Abatement” below) from within the unrestricted moneys of the General Fund of the District. The General Fund finances the legally authorized activities of the District not provided for by other funds of the District that are restricted to the specific purposes for which those moneys were received. The District has covenanted in the Facilities Lease that, for as long as the Facilities are available for its use, it will make the necessary annual appropriations within its budget for all Rental Payments. A significant source of unrestricted revenue for the District consists of revenues it receives from the State. This State revenue is utilized by the District in its normal course of operation, including the discharging of obligations, such as will be the case for the payment of Rental Payments. As a result of the District’s dependence upon the State for the majority of its funding, District revenues in any and all future years during which the Certificates will be outstanding may be adversely affected by the financial condition of the State. For a discussion of the State’s financial condition and the funding of education in California see “STATE FUNDING OF PUBLIC EDUCATION” herein. Abatement If damage or destruction or eminent domain proceedings or material title defect with respect to the Facilities results in abatement or adjustment of Rental Payments and the resulting Rental Payments, together with moneys in the Certificate Reserve Fund (and in the event of damage or destruction to the Facilities, together with rental interruption or title insurance proceeds, see “APPENDIX A—SUMMARY OF PRINCIPAL LEGAL DOCUMENTS—FACILITIES LEASE—Insurance” herein), are insufficient to make all payments of Accreted Value with respect to the Certificates during the period that the Facilities are being replaced, repaired or reconstructed, then such payments of Accreted Value due with respect to the Certificates may not be made and no remedy is available to the Trustee or the Owners under the Facilities Lease or Trust Agreement for nonpayment under such circumstances. The District will have in place at the time of closing of the sale of the Certificates a policy of rental abatement insurance that will cover at least two years of Rental Payments. If reconstruction or replacement of the Facilities takes longer than two years and the Certificate Reserve Fund is depleted, then the Certificate Owners would not receive payments on their Certificates as scheduled. However, if rental is abated, the term of the Facilities Lease will be extended for a period equal to the period of the abatement, up to ten years, or until all payments on the Certificates are made. No Earthquake Insurance Coverage The District is not obligated under the Facilities Lease to procure and maintain, or cause to be procured and maintained, earthquake insurance on the Facilities for the duration of the Facilities Lease term. Should an earthquake cause damage to the Facilities such that there results substantial interference with the use and occupancy of the Facilities, Rental Payments would be abated but the policy of rental interruption insurance would not cover the abatement. See “APPENDIX A—SUMMARY OF

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PRINCIPAL LEGAL DOCUMENTS—FACILITIES LEASE” herein and “SPECIAL RISK FACTORS” above for a discussion of the abatement provisions. The District would, however, promptly apply for Federal disaster aid or State of California disaster aid in the event that the Facilities are damaged or destroyed as a result of an earthquake. Any money received as a result of such disaster aid will be used to repair, reconstruct, restore or replace the damaged or destroyed portions of the Facilities or, at the option of the District, to prepay all outstanding Certificates if such use of such disaster aid is permitted. See “THE CERTIFICATES—Redemption Provisions” herein. No Acceleration Upon Default In the event of a Default, as defined in the Facilities Lease (see “APPENDIX A—SUMMARY OF PRINCIPAL LEGAL DOCUMENTS—FACILITIES LEASE” herein), there is no available remedy of acceleration of the total Rental Payments due over the term of the Facilities Lease. The District will only be liable for Rental Payments on an annual basis, and the Trustee would be required to seek a separate judgment each year for that year’s Rental Payments. Any such suit for money damages would be subject to limitations on legal remedies against school districts in California, including a limitation on enforcement of judgments against funds needed to serve the public welfare and interest. Enforcement of Remedies The enforcement of any remedies provided in the Facilities Lease (see “APPENDIX A—SUMMARY OF PRINCIPAL LEGAL DOCUMENTS—FACILITIES LEASE” herein) and the Trust Agreement (see “APPENDIX A—SUMMARY OF PRINCIPAL LEGAL DOCUMENTS—TRUST AGREEMENT” herein) could prove both expensive and time consuming. In addition to the limitation on remedies contained in the Facilities Lease and the Trust Agreement, the rights and remedies provided in the Facilities Lease and the Trust Agreement may be limited by and are subject to provisions of federal bankruptcy laws, as now or hereafter enacted, and to other laws or equitable principles that may affect the enforcement of creditors’ rights. The legal opinion to be delivered concurrently with the delivery of the Certificates will be qualified, as to the enforceability of the Trust Agreement, the Facilities Lease and other related documents, by bankruptcy, reorganization, moratorium, insolvency or other similar laws affecting the enforcement of creditors’ rights, to the application of equitable principles, to the exercise of judicial discretion in appropriate cases and to the limitation on legal remedies against public agencies in the State of California. The District is a unit of State government and therefore is not subject to the involuntary procedures of the United States Bankruptcy Code (the “Bankruptcy Code”). However, pursuant to Chapter 9 of the Bankruptcy Code, the District may seek voluntary protection from its creditors for purposes of adjusting its debts. In the event the District were to become a debtor under the Bankruptcy Code, the District would be entitled to all of the protective provisions of the Bankruptcy Code as applicable in a Chapter 9 proceeding and an Owner would be treated as a creditor in a municipal bankruptcy. Among the adverse effects of such a bankruptcy would be: (i) the application of the automatic stay provisions of the Bankruptcy Code, which, until relief is granted, would prevent collection of payments from the District or the commencement of any judicial or other action for the purpose of recovering or collecting a claim against the District; (ii) the avoidance of preferential transfers occurring during the relevant period prior to the filing of a bankruptcy petition; (iii) the incurrence of unsecured or court-approved secured debt which may have a priority of payment superior to that of secured debt which may have a priority of payment superior to that of Owners; and (iv) the possibility of the adoption of a plan for the adjustment of the District's debt (a “Plan”) without the consent of all of the Owners, which Plan may restructure, delay, compromise or reduce the amount of the claim of the Owners if the Bankruptcy Court finds that the Plan is fair and equitable. In addition, the Bankruptcy Code would invalidate any provision of the Certificates which makes the bankruptcy or insolvency of the District an Event of Default. With the exception of the provisions contained in the Plan, a Bankruptcy Court could not impose restrictions on the District's power or its property without the consent of the District. Loss of Tax Exemption The District has covenanted to comply with restrictions under the Internal Revenue Code of 1986, as amended (the "Code") (relating to use of Certificate proceeds, Certificate Reserve Fund funding requirements, investment yield limitations, rebate requirements, federal guarantee prohibitions and registration requirements), so that interest paid with respect to the Certificates is excludable from gross income for federal income tax purposes. However, in the event the District fails to comply with any of these covenants, interest paid with respect to the Certificates would be includable in gross income for federal income tax purposes, possibly retroactive to the date of Certificate delivery.

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THE DISTRICT General Information The District, a political subdivision of the State, was organized in 1965 under the authority of a majority vote of the qualified electors residing within thirteen area school districts who elected to unify said school districts into a unified school district. The District provides elementary and secondary adult education to the general public residing in and around the City of Marysville and within certain portions of the unincorporated area of the County of Yuba. The District operates fourteen elementary schools, three intermediate schools, two comprehensive high schools, two alternative high schools, one alternative K-12 school, a charter school for the arts for grades 7-12, and preschool and day care centers. The boundaries of the District cover an area of approximately 1,700 square miles of central and northern Yuba County and a small portion of Butte County. The Board of Trustees and Key Administrative Personnel The Board governs all activities related to public education within the jurisdiction of the District. The Board consists of seven members who are publicly elected from within the boundaries of the District according to specific area. Each Board member is elected by the public for a four-year term of office and elections for the Board are staggered every two years. The Board has the decision-making authority and is accountable for all fiscal matters relating to the District. The current members of the Board are set forth in the following table.

Board of Trustees Marysville Joint Unified School District

Name Title Term Expires

Jeff D. Boom President November 2014 Glen E. Harris Vice President November 2012 Jim C. Flurry Clerk November 2012

Frank J. Crawford Trustee Representative November 2014 Margaret A. Markle Member November 2012

Philip R. Miller Member November 2014 Bernard P. Rechs Member November 2012

The Superintendent of the District is appointed by the Board and reports to the Board. The Superintendent is responsible for managing the District's day-to-day operations and supervising the work of other key District administrators. Key members of the District’s staff are set forth on page ‘iv’ of this Official Statement. Average Daily Attendance Student enrollment of a public school district in California determines to a large extent what the school district will receive in terms of funding for program, facilities and staff needs. Average daily attendance (“ADA”) is a measurement of the number of students attending class within 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. See “STATE FUNDING OF PUBLIC EDUCATION” herein.

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Set forth in the exhibit below is Period 2 ADA for the District for previous fiscal years; these figures exclude adult education.

Average Daily Attendance Marysville Joint Unified School District

2007-08 2008-09 2009-10 2010-11 2011-12*

Period 2 ADA 9,250 9,141 9,040 8,850 8,809

*Estimated. Charter Schools There are three charter schools operating within the District—the Marysville Charter Academy for the Arts, Paragon Collegiate Academy Charter School and the Yuba Environmental Science Charter Academy. Marysville Charter Academy for the Arts serves grades seven through twelve. Its charter was originally granted and approved in 2000, with the most recent term expiring in 2014. The Marysville Charter Academy for the Arts is fiscally dependent on the District. Current enrollment at the Marysville Charter Academy for the Arts is approximately 325 students, of which approximately 165 reside within the District. Paragon Collegiate Academy Charter School serves grades kindergarten to eight. Its charter was originally granted and approved in 2010, with the most recent term expiring in 2013. Paragon Collegiate Academy Charter School is fiscally dependent on the District. Current enrollment at the Paragon Collegiate Academy Charter School is approximately 110 students, of which approximately 83 reside within the District. Yuba Environmental Science Charter Academy serves grades kindergarten through eight. Its charter was originally granted and approved in 2008, with the most recent term expiring in 2013. Marysville Joint Unified School District is not fiscally liable for Yuba Environmental Science Charter Academy. Current enrollment at the Yuba Environmental Science Charter Academy is approximately 80 students, of which approximately 75 reside within 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 under the Charter School Fund (see “APPENDIX B” herein). To the extent charter schools draw students from District schools and reduce District enrollment, charter schools can adversely affect District revenues. However, certain per-pupil expenditures of the District also decrease based upon the number of students enrolled in charter schools. School districts are required to provide charter schools having a projected average daily attendance of at least 80 or more students from within the district facilities comparable to those provided to regular District students. Employee Relations California law provides that employees of public school districts of the State are to be divided into appropriate bargaining units which then are to be represented by an exclusive bargaining agent. The District has three recognized bargaining units which represent its non-management employees: the Marysville Unified Teachers’ Association, representing certificated teachers of the District; the California School Employees’ Association, representing instructional assistants, pre-school and day care teachers; and the Operating Engineers Local #3, representing clerical, transportation, maintenance/operations and nutrition services personnel.

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Set forth below are the District’s employee groups including bargaining units (if applicable), number of employees by full-time equivalents (“FTEs”) funded from the General Fund and contract status.

Bargaining Units, Number of Employees and Contract Status Marysville Joint Unified School District

CERTIFICATED # OF FTEs STATUS Marysville Unified Teachers’ Association 443 Unsettled for fiscal year 2011-12

CLASSIFIED # OF FTEs STATUS

The California School Employees Association and Operating Engineers Local #3

306

Unsettled for fiscal year 2011-12

UNREPRESENTED # OF FTEs STATUS

Management, Confidential and Administrative 60 n/a

Pension Plans All full-time employees of the District are eligible to participate under defined benefit retirement plans maintained by agencies of the State. Certificated employees are eligible to participate in the cost-sharing multiple-employer State Teachers’ Retirement System (“STRS”). Classified employees are eligible to participate in the agent 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. STRS operates under the State of California Education Code sections commonly known as the State Teachers’ Retirement Law. Membership is mandatory for all certificated employees of California 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 retirement benefits at age fifty-five. Active plan members are required to contribute 8.0% of their salary and the District is required to contribute a rate determined by the State (8.25% in 2010-11). The District's contribution to STRS was $2,949,262 for fiscal year 2009-10, was $2,870,593 for fiscal year 2010-11, and is budgeted to be $2,886,111 for fiscal year 2011-12. All full-time classified employees of the District participate in PERS, which 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 retirement benefits at age fifty. These benefit provisions and all other requirements are established by State statute and District resolution. Active plan members are required to contribute 7.0% of their salary and the District is required to contribute an actuarially determined rate (10.707% in fiscal year 2010-11). The District's contribution to PERS was $1,452,112 for fiscal year 2009-10, was $1,525,843 for fiscal year 2010-11, and is budgeted to be $1,518,756 for fiscal year 2011-12. For a more complete description of the District’s pension plan and annual contribution requirements, see “APPENDIX B” attached hereto. Other Post-Employment Benefits In June 2004, the Governmental Accounting Standards Board (“GASB”) pronounced Statement No. 45, Accounting and Financial Reporting by Employers for Post Employment Benefits Other Than Pensions. The pronouncement will require public agency employers providing other post-employment benefits (“OPEB”) 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. Employees who are eligible to receive OPEB while in retirement must meet specific criteria, i.e., age and years with the District.

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The District provides OPEB through its Retired Employees Healthcare plan, which provides medical and dental insurance benefits to eligible retirees, their spouses and if applicable, dependents. The District funds only the portion of post-retirement costs related to the current year’s cost for active retirees’ benefits (“pay-as-you-go” funding). The District completed an actuarial study identifying its OPEB liability dated March 25, 2010. The actuarial accrued liability as of June 30, 2011 was $11.4 million, with an annual required contribution (“ARC”) of $1,280,799. For the year ended June 30, 2011, the District’s pay-as-you-go expenditures were $1,032,524. The District has budgeted $1,126,207 for OPEB during fiscal year 2011-12.

DISTRICT FINANCIAL INFORMATION 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. The accounting policies of the District conform to accounting principles generally accepted in the United States of America as prescribed by GASB and the American Institute of Certified Public Accountants. The District’s basic financial statements consist of government-wide statements and fund-based financial statements. Government-wide 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 District’s general fund (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 B” herein for a further discussion of applicable accounting policies. The District’s independent auditor for the fiscal year ending June 30, 2011 is Crowe Horwath LLP, Sacramento, California. Selected information concerning the financial statements of the District as of and for the year ended June 30, 2011, are set forth in “APPENDIX B” attached hereto. The auditor has not performed any subsequent events review or other procedures relative to these audited financial statements since the date of its letter. Budget and Financial Reporting Process The District’s General Fund finances the legally authorized activities of the District for which restricted funds are not provided. General Fund revenues are derived from such sources as 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 State 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 school districts. The fiscal year for all school districts is July 1 to June 30. The same calendar applies to the budgets of county offices of education, except that their budgets and reports go to the Superintendent of Public Instruction for review. The State budget is an extremely important input in the school district budget preparation process, as school districts depend on the State budget for a substantial portion of their revenue. There is very close timing in the summer between final approval of the State budget, school finance legislation, and the adoption of local district budgets. In some years, the State budget is not approved by the deadline, which forces school districts to begin the new fiscal year with only estimates of the amount of money 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 positions for the current year or its income for the next year.

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The governing board must submit a budget to the County Superintendent of Schools by July 1, and a publicized opportunity for public participation in the budget process is required by law. There are two options for budget adoption. School districts may adopt their budgets by July 1 and then revise and readopt them by September 8 after a public hearing. Alternatively, school districts may decide, by the previous October 31, to hold public hearings before adopting their budgets by July 1. School districts choosing this option revise their revenues and expenditures after the State budget act is adopted, without a second public hearing. All school districts must perform a criteria and standards review before budget adoption. In addition, those school districts on the alternative schedule for adoption must repeat the review before their revision only if the July 1 budget was disapproved. Legislation requires criteria and standards for stringent review of school districts' finances, focusing primarily on predictions of actual daily attendance, operating deficit, and reserves. The legislation also dictates when and how outside committees, or an appointed trustee in emergency situations, must work with school districts. This oversight is part of an effort to reduce the number of districts in financial trouble and to increase the responsible use of tax dollars. The county superintendents monitor all school districts' budgets, ongoing financial obligations and multi-year contracts. They have specific powers for recommending actions to revise budgets. They are not, however, authorized to abrogate existing collective bargaining agreements. School districts must review their financial position for the periods ending October 31 and January 31 in order to certify their ability to meet commitments through the remainder of the fiscal year and the following two years. Each school district is required by the State Education Code to file these two interim reports each year by not later than December 15 and 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 offices of education must then, within 30 days, evaluate the interim reports and forward their comments to the State Department of Education and the State Controller's Office. Included in the report is a certification by the president of the governing board of each school district that classifies the school district according to its ability to meet its financial obligations. The certifications are grouped into three categories: positive certification, which designates that the school district will be able to meet its financial obligations for the remainder of the fiscal year and the following two years; qualified certification, which means that the school district may not be able to meet its financial obligations for the remainder of the fiscal year and following two years if certain events occur; and negative certification, which signifies that the school district will not be able to meet its financial obligations for the remainder of the fiscal year or of the following year. A certification by the governing board may be overridden by the county superintendent. If either the first or second interim report is not positive, the county superintendent may require the 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 district). The same calendar applies to the budgets of county offices of education, except that their budgets and reports go to the State Superintendent of Public Instruction for review. 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 State Education Code Section 42127.6. 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 board (or the State administrator). The county superintendent will notify the school district, the county board of education, the governing board and the 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. In addition, pursuant to State 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.

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The filing status of the District’s interim reports for the past five years appears in the following table.

Certifications of Interim Financial Reports Marysville Joint Unified School District

Fiscal Year First Interim Second Interim

2007-08 Positive Positive 2008-09 Positive Positive 2009-10 Positive Qualified 2010-11 Positive Positive 2011-12 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, 2011, have been included in this Official Statement. See “APPENDIX B” herein. Audited financial statements for all 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 the District at the address and telephone number set forth on page “iv” of this Official Statement, or by contacting the District’s Financial Advisor, Government Financial Strategies inc., 1228 “N” Street, Suite Thirteen, Sacramento, California, 95814-5609, Tel. (916) 444-5100.


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The following illustration sets forth certain General Fund information for the District.

General Fund Activity for the Fiscal Years Indicated Marysville Joint Unified School District

2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 Audited Audited Audited Audited Estimated Budget BEGINNING BALANCE $9,737,296 $9,060,434 $9,901,200 $9,404,820 $11,006,438 $9,420,850 REVENUES Revenue Limit Sources $55,654,453 $54,244,455 $47,460,022 $49,554,531 $48,424,211 $46,822,363 Federal Revenue 7,562,950 10,778,631 8,990,405 12,733,287 13,775,571 8,720,674 Other State Revenues 17,258,534 14,879,098 15,584,559 14,369,020 15,115,141 13,850,267 Other Local Revenues 6,085,573 5,287,986 5,855,979 5,466,685 5,279,018 4,480,639 TOTAL REVENUES $86,561,510 $85,190,170 $77,890,965 $82,123,523 $82,593,941 $73,873,943 EXPENDITURES Certificated Salaries $38,233,384 $38,544,875 $36,447,273 $35,490,052 $36,621,068 $33,477,506 Classified Salaries 13,611,638 13,455,385 12,918,774 12,695,111 12,741,347 11,877,552 Employee Benefits 17,645,476 16,971,266 16,513,820 15,942,971 16,236,142 15,334,891 Books & Supplies 6,528,465 4,861,869 3,909,244 5,467,536 5,960,126 3,787,816 Services & Other Op. Expenses 7,221,924 7,320,724 7,082,500 7,527,316 9,807,728 8,446,354 Capital Outlay 1,755,666 780,895 1,428,222 538,237 247,619 135,300 Other Outgo / Transfers 2,292,180 2,642,902 3,678,450 2,463,237 1,932,212 663,284 Debt Service 355,407 426,301 439,987 633,425 633,287 358,631 TOTAL EXPENDITURES $87,644,140 $85,004,217 $82,418,270 $80,757,885 $84,179,530 $74,081,334 FINANCING SOURCES (USES) 405,768 654,813 4,030,925 235,980 0 0 NET INCREASE (DECREASE) ($676,862) $840,766 ($496,380) $1,601,618 ($1,585,588) ($207,391) ENDING BALANCE $9,060,434 $9,901,200 $9,404,820 $11,006,438 $9,420,850 $9,213,459

Revenues The District categorizes its General Fund revenues into four primary sources: revenue limit sources, federal revenues, other state revenues and other local revenues. Revenue Limit Sources. Since fiscal year 1973-74, California school districts have operated under general purpose revenue limits established by the State Legislature. In general, the state revenue limit for a school district is calculated by multiplying a “base revenue limit” per student by the school district’s student enrollment measured in units of average daily attendance. The revenue limit calculations are adjusted annually in accordance with a number of factors designated primarily to provide cost of living increases and to equalize revenues among all California school districts of the same type. The District’s base revenue limit per unit of ADA was $6,357.87 in fiscal year 2010-11 (before a deficit factor of 0.82037), is estimated to be $6,500.87 in fiscal year 2011-12 (before a deficit factor of 0.79398), and is budgeted to be $6,712.87 in fiscal year 2012-13 (before a deficit factor of 0.77728). Revenue limit sources account for 60.3% of total District revenues in fiscal year 2010-11, are estimated to be 58.6% of revenues in fiscal year 2011-12, and are budgeted to be 63.4% of revenues in fiscal year 2012-13. School district revenue limit funding is typically accomplished by a mix of a) local property taxes, and b) State apportionments of basic and equalization aid. Generally, the State’s apportionments amount to the difference between the District’s revenue limit and its local property tax revenues. The District received approximately $13.3 million in local tax revenues in fiscal year 2010-11 representing 26.9% of the District’s revenue limit funding, is estimated to receive approximately $12.1 million in local tax

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revenues in fiscal year 2011-12, representing 24.9% of the District’s revenue limit funding, and is budgeted to receive approximately $12.1 million in local tax revenues in fiscal year 2012-13, representing 25.8% of the District’s revenue limit funding. Federal Revenues. The federal government provides funding for several District programs. These federal revenues, most of which are restricted, were 15.5% of General Fund revenues in fiscal year 2010-11, are estimated to be 16.7% of revenues in fiscal year 2011-12, and are budgeted to be 11.8% of revenues in fiscal year 2012-13. Other State Revenues. In addition to revenue limit funding, the State provides funding for several District programs. While the majority of these other State revenues have historically been restricted, the State budget for fiscal year 2011-12 extended spending flexibility through 2014-15 for a variety of categorical programs. Other State revenues were 17.5% of General Fund revenues in fiscal year 2010-11, are estimated to be 18.3% of revenues in fiscal year 2011-12, and are budgeted to be 18.7% of revenues in fiscal year 2012-13. Included in other State revenues are proceeds received from the State from the California State Lottery. Other Local Revenues. Revenues from other local sources were 6.7% in fiscal year 2010-11, are estimated to be 6.4% of revenues in fiscal year 2011-12, and are budgeted to be 6.1% of revenues in fiscal year 2012-13. 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 cost of living increases or changes in staffing levels, normal “step and column” advancements on the salary scale result in increased salary expenditures. Employee salaries and benefits accounted for 79.4% of the District’s General Fund expenditures in fiscal year 2010-11, are estimated to be 77.9% of the District’s General Fund expenditures in fiscal year 2011-12, and are budgeted to be 81.9% of the District’s General Fund expenditures in fiscal year 2012-13. Short Term Borrowings The District has in the past issued short-term tax and revenue anticipation notes. Proceeds from the issuance of notes by the District during previous fiscal years have been used to reduce interfund dependency and to provide the District with greater overall efficiency in the management of its funds. Currently, the District has no notes outstanding. The District has never defaulted on any of its short term borrowings. Long Term Borrowings The District has made use of various capital and bonded lease arrangements in the past under agreements which provide for title of items and equipment being leased to pass to the District upon expiration of the lease period. The District has promised to annually appropriate the amounts necessary to make all future lease payments from available revenues. Please refer to “APPENDIX B” attached hereto for more details. In June 2004, the District entered into a Qualified Zone Academy Bond lease-purchase in the amount of $4,451,939. The District is required to deposit $404,722 each year commencing August 15, 2005 through August 15, 2014 into a sinking fund to accumulate funds to repay the Qualified Zone Academy Bond in August 2014.


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The District’s current outstanding certificates of participation are set forth below.

Outstanding Certificates of Participation Marysville Joint Unified School District

Date Issued

Final Maturity

Amount Issued Outstanding as of

May 31, 2012 Debt Service in

Fiscal Year 2011-12

August 31, 2006 August 1, 2021 $22,145,000 $16,080,000 $1,950,102

Proceeds from the issuance of the Certificates will be used to refund a portion of the Certificates of Participation issued in 2006 (see “PLAN OF REFUNDING” herein). The District’s current outstanding general obligation bonds are set forth below.

Outstanding General Obligation Bonds Marysville Joint Unified School District

Authorization

Issue

Final Maturity

Amount Issued Outstanding as of

May 31, 20121 Debt Service in

Fiscal Year 2011-12

Election of 2006 Series 2006 August 1, 2032 $18,000,000 $16,330,000 $712,674 Election of 2006 Series 2008 August 1, 2033 $19,000,000 $18,465,000 $1,046,696 Election of 2008 Series 2009 August 1, 2036 $34,433,777 $33,968,777 $1,771,656

1 Excludes accreted interest on the capital appreciation bonds. The District has never defaulted on any of its long term bonded indebtedness.

TAXATION AND APPROPRIATIONS Ad Valorem Property Taxation The District utilizes the services of the County for the assessment and collection of taxes for District purposes, except for public utility property which is assessed by the State Board of Equalization. The State Constitution and sections of various State statutes provide exemptions from ad valorem property taxation for certain classes of property such as churches, colleges, nonprofit hospitals, and charitable institutions. The State Constitution exempts from ad valorem property taxation $5,000 of full value of owner-occupied dwellings, and requires the Legislature to reimburse each local government for revenue lost as a result of the exemption. Taxation of State-Assessed Utility Property A portion of property tax revenue of the District is derived from utility property subject to assessment by the State Board of Equalization (“SBE”). State-assessed property, or “unitary property,” is property of a utility system with components located in many taxing jurisdictions assessed as part of a “going concern” rather than as individual parcels of real or personal property. Unitary and certain other state-assessed property is allocated to the counties by the SBE, taxed at special county-wide rates, and the tax revenues distributed to taxing jurisdictions (including the District) according to statutory formulae generally based on the distribution of taxes in the prior year.

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Changes in the California electric utility industry and in the way in which components of the industry are regulated and owned, including the sale of electric generation assets to largely unregulated, nonutility companies, may affect how utility assets are assessed in the future, and which local agencies are to receive the property taxes. The District is unable to predict the impact of these changes on its utility property tax revenues, or whether future legislation or litigation may affect ownership of utility assets or the State’s methods of assessing utility property and allocating tax revenues to local taxing agencies, including the District. Because the District is not a basic aid district, any taxes lost due to a reduction in, or transfer to another jurisdiction of, utility property assessed valuation will be compensated by the State under the State’s school financing formula. See “STATE FUNDING OF PUBLIC EDUCATION—Revenue for Public Education” herein. Historical Assessed Valuation Set forth in the table below is the total secured and unsecured historical assessed valuation for the District in the past ten years. Total Secured Assessed Value for the District includes net local secured, secured homeowner exemption and utility values. Total Unsecured Assessed Values for the District includes net local unsecured and unsecured homeowner exemption values.

Historical Assessed Valuation Marysville Joint Unified School District

Total Secured Total Unsecured Total Percentage

Fiscal Year Assessed Value Assessed Value Assessed Value Change

2002 - 03 $1,929,323,251 $167,290,697 $2,096,613,948 4.8% 2003 - 04 2,047,667,186 173,935,294 2,221,602,480 6.0% 2004 - 05 2,237,536,859 194,994,874 2,432,531,733 9.5% 2005 - 06 2,703,043,393 205,441,833 2,908,485,226 19.6% 2006 - 07 3,340,638,957 217,968,958 3,558,607,915 22.4% 2007 - 08 3,770,941,726 214,445,040 3,985,386,766 12.0% 2008 - 09 3,746,856,819 218,943,149 3,965,799,968 -0.5% 2009 - 10 3,508,439,806 211,980,122 3,720,419,928 -6.2% 2010 - 11 3,333,552,330 192,259,488 3,525,811,818 -5.2% 2011 - 12 3,277,436,828 187,833,796 3,465,270,624 -1.7%

Sources: Yuba County Auditor-Controller’s Office and Butte County Auditor-Controller’s Office.


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Shown in the following table is the historical assessed valuation by county for the District.

Historical Total Assessed Valuation by County Marysville Joint Unified School District

Source: Yuba County Auditor-Controller’s Office and Butte County Auditor-Controller’s Office. Alternative Method of Distribution of Tax Levies As an alternative method of property tax allocation, both the County and Butte County approved the implementation of the Alternative Method of Distribution of Tax Levies and Collections and of Tax Sale Proceeds (the “Teeter Plan”), pursuant to sections 4701 through 4717 of the State’s Revenue & Taxation Code, for the 1% countywide secured tax. Under the Teeter Plan, the County distributes to each participating local tax-levying agency, including school districts, the amount levied on the 1% countywide secured tax rolls instead of the amount actually collected. In return, the County receives and retains delinquent payments, penalties and interest as collected that would have been due the local agency in the absence of the Teeter Plan. The Treasurer’s cash position is protected by a special fund, known as the “Tax Loss Reserve Fund,” which accumulates moneys from tax and penalty collections. Amounts exceeding the amount required to be maintained in the tax loss reserve fund may be credited 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. A county electing to utilize the Teeter Plan may elect to discontinue its use for any tax levying agency if the rate of secured tax delinquencies in any fiscal year exceeds 3% of the total of all taxes levied on the secured roll of that agency. Otherwise, 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, the County Board receives a petition for its discontinuance joined in by resolutions adopted by at least two-thirds of the participating revenue districts in the County, in which event the County Board is to order discontinuance of the Teeter Plan effective at the commencement of the subsequent fiscal year. If the Teeter Plan is discontinued subsequent to its implementation, only those 1% secured property taxes actually collected would be allocated to each taxing entity within the jurisdiction of the County. Further, each taxing entity’s tax revenues would be subject to taxpayer delinquencies, and each entity would realize the benefit of interest and penalties collected from delinquent taxpayers, pursuant to law. The County does not apply the Teeter Plan to taxes levied for repayment of school district general obligation bonds. Consequently, the District’s general obligation bond property tax revenues reflect both delinquencies and the receipt of penalties and interest. To determine a tax rate sufficient pay debt service on the Bonds each year, the County assumes a certain level of delinquencies. The County has historically used a 10% delinquency rate assumption on the unsecured roll to calculate tax rates. With respect to the District’s general obligation bonds in particular, the District has provided the County with information regarding the debt service and the calculated amount of a 10% reserve on each year's bond debt service, so that the County will calculate its taxes on an amount equal to 110% of debt service. The County may adjust the delinquency rate assumption depending upon economic conditions.

Fiscal Yuba County Percent Butte County Percent Total Year Assessed Value of Total Assessed Value of Total Assessed Value

2002 - 03 $2,067,814,607 98.6% $28,799,341 1.4% $2,096,613,948 2003 - 04 2,191,598,214 98.6% 30,004,266 1.4% 2,221,602,480 2004 - 05 2,399,974,778 98.7% 32,556,955 1.3% 2,432,531,733 2005 - 06 2,873,035,926 98.8% 35,449,300 1.2% 2,908,485,226 2006 - 07 3,519,009,264 98.9% 39,598,651 1.1% 3,558,607,915 2007 - 08 3,943,040,653 98.9% 42,346,113 1.1% 3,985,386,766 2008 - 09 3,919,845,628 98.8% 45,954,340 1.2% 3,965,799,968 2009 - 10 3,673,680,575 98.7% 46,739,353 1.3% 3,720,419,928 2010 - 11 3,479,061,021 98.7% 46,750,797 1.3% 3,525,811,818 2011 - 12 3,419,891,208 98.7% 45,379,416 1.3% 3,465,270,624

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Tax Collections and Delinquencies A school district’s share of the 1% countywide tax is based on the actual allocation of property tax revenues to each taxing jurisdiction in the county in fiscal year 1978-79, as adjusted according to a complex web of statutory modifications enacted since that time. Revenues derived from special ad valorem taxes for voter-approved indebtedness, including the Bonds, are reserved to the taxing jurisdiction that approved and issued the debt, and may only be used to repay that debt.

The Treasurer prepares the property tax bills. Property taxes on the regular secured assessment roll are due in two equal installments: the first installment is due on November 1, and becomes delinquent at 5:00 p.m. December 10, after which time a 10% penalty attaches. The second installment is due on February 1 and becomes delinquent at 5:00 p.m. April 10, after which time a 10% penalty and $10 cost attach. If taxes remain unpaid by 5:00 p.m. June 30, the tax is deemed to be in default and it will be necessary to pay (i) delinquent penalties, (ii) costs, (iii) redemption penalties, and (iv) a redemption fee. After five years, the Treasurer has the power to sell tax-defaulted property that is not redeemed.

Annual bills for property taxes on the unsecured roll are mailed no later than August 1. Taxes on the unsecured roll as of July 31, if unpaid are delinquent at 5:00 p.m. on August 31, and thereafter subject to a delinquent penalty of 10%. Taxes added to the unsecured roll after July 31, if unpaid are delinquent and subject to a penalty of 10 percent at 5:00 p.m., or the close of business, whichever is later, on the last day of the month succeeding the month of enrollment.


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Major Taxpayers The 20 largest taxpayers in the District own property that comprises 6.7% of the total assessed valuation of secured property in the District. These taxpayers, ranked by aggregate assessed value of taxable property, as shown on the 2011-12 secured tax roll, and the amount of each owner’s assessed valuation for all taxing jurisdictions within the District, are shown below.

Major Taxpayers Marysville Joint Unified School District

2011-12 % of Assessed Property Owner Primary Land Use Valuation Total 1

1 Western Aggregates Inc. Industrial – Mining $24,991,200 0.76% 2 Hampac LLC Office Building 23,887,818 0.73 3 Wal-Mart Real Estate Business Trust Shopping Center 16,323,880 0.50 4 Recology Yuba Sutter Waste Management 14,419,728 0.44 5 Naumes Inc. Agricultural 14,178,634 0.43 6 Fellowship of Friends Inc. Agricultural 12,664,354 0.39 7 Nordic Industries Inc. Light Industrial 12,085,112 0.37 8 La Paloma Apartments LLC Apartments 10,030,220 0.31 9 Coastline RE Holdings Corporation Agricultural 9,667,202 0.29

10 James J. Hill III Agricultural 8,717,687 0.27 11 Federal National Mortgage Association Residential Properties 8,657,316 0.26 12 Thomas L. and Diana L. Bloxham Apartments 8,523,846 0.26 13 Triangle Properties Inc. Industrial – Mining 8,252,129 0.25 14 Feather River Center LLC Commercial 8,001,280 0.24 15 Baldwin Contracting Company Agricultural 7,701,672 0.23 16 Farmland Reserve Inc. Agricultural 7,688,675 0.23 17 Wheeler Land LLC Agricultural 6,897,552 0.21 18 Yuba Street Ventures Office Building 6,558,937 0.20 19 Mathews Rice Dryer Food Processing 5,965,112 0.18 20 RBC Real Estate Finance Inc. Residential Properties 5,809,908 0.18

$221,022,262 6.74%

Source: California Municipal Statistics, Inc. 12011-12 Local Secured Assessed Valuation: $3,277,394,828 Direct and Overlapping Bonded Debt The District’s statement of direct and overlapping bonded debt, which is 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. Contained within the District's boundaries are numerous overlapping local entities providing public services. These local entities may have outstanding bonds issued in the form of general obligation, lease revenue and special assessment bonds. The first column in the table below names the public agencies, which have outstanding debt as of the date of the report and whose boundaries overlap the District. The second column in the table shows the assessed value of the area of overlap as a percentage of the total assessed value of the overlapping entity identified in the first column. The third column shows the corresponding portion of each overlapping entity’s existing debt allocable to property within the District. The total amount of debt for each overlapping entity is not shown in the table. In addition, property owners within the District may be subject to other special taxes and assessments levied by other taxing authorities which provide services within the District. Such special taxes and assessments are not represented in the statement of direct and overlapping bonded debt.

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Statement of Direct and Overlapping Bonded Debt (As of May 1, 2012) Marysville Joint Unified School District

2011-12 Assessed Valuation: $3,468,046,624 Redevelopment Incremental Valuation: 39,804,799 Adjusted Assessed Valuation: $3,428,241,825 DIRECT AND OVERLAPPING TAX AND ASSESSEMENT DEBT: % Applicable Debt 5/1/12 Yuba Joint Community College District 14.300% $18,175,603 Marysville Joint Unified School District 100.000 68,763,777 Yuba County Community Facilities District No. 2004-1 100.000 12,330,000 TOTAL DIRECT AND OVERLAPPING TAX AND ASSESSMENT DEBT $99,269,380 DIRECT AND OVERLAPPING GENERAL FUND DEBT: Butte County Certificates of Participation 0.307% $37,033 Butte County Pension Obligations 0.307 153,178 Yuba County General Fund Obligations 75.727 29,673,625 Yuba County Board of Education Certificates of Participation 75.727 2,673,163 Yuba Joint Community College District General Fund Obligations 14.300 3,031,013 Marysville Joint Unified School District 100.000 20,531,9391 City of Marysville General Fund Obligations 100.000 8,150,000 Linda Fire Protection District Certificates of Participation 69.068 1,257,038 TOTAL DIRECT AND OVERLAPPING GENERAL FUND DEBT $65,506,989 COMBINED TOTAL DEBT $164,776,369 2 Ratios to 2011-12 Assessed Valuation: Direct Debt ($68,763,777) ................................................... 1.98% Total Direct and Overlapping Tax and Assessment Debt...... 2.86% Ratios to Adjusted Assessed Valuation: Combined Direct Debt ($89,295,716) ................................ 2.60% Combined Total Debt............................................................. 4.81% STATE SCHOOL BUILDING AID REPAYABLE AS OF 6/30/11: $0

Source: California Municipal Statistics, Inc. 1Excludes certificates of participation to be sold. 2Excludes tax and revenue anticipation notes, enterprise revenue, mortgage revenue and tax allocation bonds and non-bonded capital lease obligations.

COUNTY ECONOMIC PROFILE The information in this section concerning the County’s economy is provided as supplementary information only. The District encompasses only a portion of the County. General Information The boundaries of the District cover an area of approximately 1,700 square miles of central and northern portion of the County and a portion of Butte County. The County is located approximately thirty miles north of the state capital of Sacramento. The city of Marysville in the northern part of gold rush country is the county seat. Based on data from the MDA DataQuick Information Systems, the median resale value of single-family residences and condos as well as new homes in the County was approximately $135,000 in April 2012, a decrease of approximately 4.3% from $141,000 in

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April 2011. The median resale value of single-family residences and condos as well as new homes in the City of Marysville was approximately $82,000 in April 2012, an increase of approximately 28.7% from $115,000 in April 2011. Population The following displays estimated population data as of January 1st for the previous three years for the County and the City of Marysville.

Historical Population Yuba County and the City of Marysville

2010 2011 2012 Yuba County 72,155 72,479 72,615 City of Marysville 12,072 12,233 12,104

Source: California Department of Finance County Unemployment The following table contains a summary of the County’s unemployment data, seasonally unadjusted, rounded to the nearest hundred.

Historical Unemployment Data Yuba County

Annual Annual Annual Annual April 2008 2009 2010 2011 2012 Labor Force 27,700 28,400 27,900 28,000 27,700 Number of Employed 24,400 23,500 22,600 22,900 22,900 Number of Unemployed 3,300 4,900 5,400 5,100 4,700 Unemployment Rate 11.8% 17.2% 19.2% 18.2% 17.1%

Source: California Employment Development Department.


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The following table contains a summary of the City of Marysville’s unemployment data, seasonally unadjusted, rounded to the nearest hundred.

Historical Unemployment Data City of Marysville

Annual Annual Annual Annual April 2008 2009 2010 2011 2012 Labor Force 6,500 6,500 6,400 6,400 6,400 Number of Employed 5,800 5,600 5,400 5,400 5,500 Number of Unemployed 600 1,000 1,000 1,000 900 Unemployment Rate 9.9% 14.6% 16.3% 15.4% 14.5%

Source: California Employment Development Department. Major Employers The following table provides a listing of 10 major employers in the County, listed by number of employees.

Major Employers Yuba County

# of Employer Employees Type of Business

Beale Air Force Base 5,700 Military, government services The Fremont - Rideout Health Group 1,800 Nonprofit, community-based health system Yuba County 800 County government State of California 746 State government Yuba Community College District 343 Higher education Bishop’s Pumpkin Farm 290 Agricultural tourism destination Sierra Kiwi Inc. 200-300 Agriculture, farming SaveMart / FoodMaxx 114 Supermarket Appeal Democrat 82 Newspaper publishing California Security Services Inc. 68 Security guard training

Source: 2011 Sacramento Business Journal.

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Taxable Sales Total taxable sales reported during the calendar year 2010 in Yuba County were reported to be $433,699,000, a 1.3% increase from the total taxable sales of $428,141,000 reported during calendar year 2009. The number of establishments selling merchandise subject to sales tax and the valuation of taxable transactions (roundest to the nearest thousand) in Yuba County is presented in the following table.

Taxable Retail Sales Yuba County

2006 2007 2008 2009 2010 Sales Tax Permits 1,308 1,325 1,352 1,238 1,255 Taxable Sales (000’s) 557,805 537,364 514,706 428,141 433,699

Source: California State Board of Equalization. Total taxable sales reported during the calendar year 2010 in the City of Marysville were reported to be $146,451,000, a 10.2% increase from the total taxable sales of $132,838,000 reported during calendar year 2009. The number of establishments selling merchandise subject to sales tax and the valuation of taxable transactions (roundest to the nearest thousand) in the City of Marysville is presented in the following table.

Taxable Retail Sales City of Marysville

2006 2007 2008 2009 2010 Sales Tax Permits 461 474 370 340 348 Taxable Sales (000’s) 176,758 180,004 178,195 132,838 146,451

Source: California State Board of Equalization.

STATE FUNDING OF PUBLIC EDUCATION Sources of Revenues for Public Education Sources of Revenues. The State’s K-12 education system is supported primarily from State revenues, mostly sales and income taxes. The availability of State funds for public education is a function of constitutional provisions affecting school district revenues and expenditures (see “CONSTITUTIONAL & STATUTORY PROVISIONS AFFECTING SCHOOL DISTRICT REVENUES & EXPENDITURES”). As a result, changes in State revenues may affect appropriations made by the State to school districts. State revenue sources for school districts are supplemented with local property taxes, federal aid, local miscellaneous funds, and the California lottery. In recent years, approximately 58% of all funds for California K-12 public education came from the State budget, which is required to be proposed by the Governor by January 10 and adopted by June 15 of each year (although the State often is late adopting the budget). Approximately 21% of funding for K-12 education comes from local property taxes. The California Constitution limits property taxes to one percent of the value of property; property taxes may only exceed this limit to repay voter-approved debt. Statewide, approximately 13% of school districts’ revenues come from the federal government, and about 6% come from local miscellaneous sources. The latter category includes items such as food sales, money for debt repayment, interest on reserves and, in some cases, more significant sources such as developer fees and parcel taxes. Developer fees are fees that school districts can levy on new residential or commercial development within their boundaries to finance the construction or renovation of school facilities. Many school districts also seek grants or contributions, sometimes channeled through private foundations established to

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solicit donations from local families and businesses. School districts that still have unused school buildings or sites can lease or sell them for miscellaneous income as well. A significant number of school districts have secured the required two-thirds approval from local voters to levy special taxes on parcels or residences and/or have won voter approval, with either a two-thirds vote or a 55% majority, to sell general obligation bonds or to establish special taxing districts for the construction of schools. Use of such taxes is restricted by law. The final revenue source for school districts is the California State Lottery. Approved by voters in late 1984, the lottery generates about 1% of total school revenues. Every three months the Lottery Commission calculates 34% of lottery proceeds for all public education institutions, the minimum according to the lottery law. Every K-14 school district receives the same amount of lottery funds per pupil from the State, which may be spent for any instructional purpose, excluding capital projects. No other source of general purpose revenues is currently permitted for schools. Proposition 13 eliminated the possibility of raising additional ad valorem property taxes for general school support, and the courts have declared that fees may not be charged for school-related activities such as busing services. The State Revenue Limit. The State Revenue Limit establishes a mechanism to calculate the amount of revenue a school district, community college district or county board of education is entitled to receive from State and local sources. Each school district has its own target amount of funding from State funds and local property taxes per ADA. The ADA is the average number of pupils attending school over the year. This target is known as revenue limit, and the funding from this calculation forms the bulk of all school districts' income. The State Legislature usually grants annual cost-of-living adjustments (COLAs) to revenue limits. The exact amount depends on whether the school district is an elementary, high school or a unified school district. Apportionments for revenue limits are calculated three times a year for each school district, community college district and county board of education. The first calculation is performed for the February 20th First Principal Apportionment, the second calculation for the June 25th Second Principal Apportionment, and the final calculation for the end of the year Annual Apportionment. Calculations are reviewed by the county and submitted to the State Department of Education with respect to school districts and to the Chancellor of the California Community Colleges with respect to community college districts, which, respectively, reviews the calculations for accuracy, calculates the amount of state aid owed to such school district or community college district, as the case may be, and notifies the State Controller of the amount, who then distributes the state aid. School districts that receive their revenue limit income entirely from property taxes are called “basic aid” school districts. They are permitted to keep all their property tax money (even if it exceeds their revenue limit). As guaranteed in the California Constitution, the State must apportion $120 per pupil. However, the categorical aid (see below) that school districts receive counts toward this requirement. Distribution of Revenues for Public Education General Purpose. The largest part of each school district's revenue funds general operating expenses associated with providing education, including salaries, benefits, supplies, textbooks and regular maintenance. As previously mentioned, the Revenue Limit governs the amount each school district receives. Each school district also receives some State and federal money for special programs, special costs, or categories of children with particular educational needs, called “categorical aid.” Categorical Aid. This special support goes into a school district's General Fund, but its expenditure is restricted to the purpose for which it is granted. About seventy-five percent (75%) of the total money generated for education is for general purposes, and about twenty-five percent (25%) is for categorical aid. The complex allocation system is adjusted somewhat by the State Legislature almost every year, with unpredictable effects on individual school districts. There are a number of major federal and State categorical aid programs. Some allocations come automatically to school districts, while others require an application. Some programs are based on the characteristics of the children or families in a particular school district, such as gifted and talented, non-English speaking, migrant, low income or handicapped students. Other programs are for specific activities or expenses, such as transportation, textbooks or childcare. Each year a large amount of aid is allocated directly to the State Teachers' Retirement System (STRS) fund. For the past several years, supplemental grants have been directed to equalizing school districts' income from revenue limits plus specific categoricals. Most of the federal funds flow through the California Department of Education, which retains a certain percentage for administration. In terms of dollars and the number of children served, the largest categorical aid program is Special Education for the Handicapped. According to court decisions and federal and California law, school districts are responsible for the appropriate education of each handicapped child from age 3 to 21 who lives within their boundaries. The allocations do not cover the cost of

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educating them. School districts are required to contribute a certain amount of general purpose funds for Special Education, and many spend much more. This is known as “encroachment.” School Facilities. Growing enrollments and/or aging facilities require school districts to build or make major renovations to school buildings. The income from developer fees on residential or commercial property is insufficient to fund all facilities costs. General obligation bond moneys issued by a two-thirds voter approval may only be used for purchase or improvement of real property; general obligation bond moneys issued by 55% voter approval (pursuant to Proposition 39) can be used only for construction, rehabilitation, equipping of school facilities, or the acquisition or lease of real property for school facilities. See “CONSTITUTIONAL & STATUTORY PROVISIONS AFFECTING REVENUES & EXPENDITURES” herein. Mello-Roos taxes can be used for this as well as for ongoing maintenance or purchase of needed equipment. A majority of voters has regularly approved state bond measures for the construction or reconstruction of schools. The 2011-12 State Budget The information in this section has been compiled from publicly available information through the State Department of Finance and the State Legislative Analyst’s Office. Neither the District nor the Underwriter assume any responsibility for the accuracy of such information as set forth or incorporated by reference herein, although they believe that the information provided by the above-listed sources is reliable. Proposed Budget. On January 10, 2011, the Governor released his proposed 2011-12 State budget (the “Proposed 2011-12 State Budget). The Proposed 2011-12 State Budget estimated that, without corrective action by the State Legislature and the Governor, the State would end fiscal year 2011-12 with a $25.4 billion deficit. Specifically, the administration estimated that the general fund would end fiscal year 2010-11 with a deficit of $8.2 billion, with the gap between expenditures and revenues in fiscal year 2011-12 at $17.2 billion. The Proposed 2011-12 State Budget proposed significant reforms to State and local programs, substantial reductions to state operations, and spending cuts across all service areas in order to address the deficit. Specifically, the Proposed 2011-12 State Budget identified $12.5 billion in expenditure cuts over the next two fiscal years, particularly ongoing program reductions, and $14 billion in increased revenues over the next two fiscal years, predominantly from extending the four temporary tax increases adopted in February 2009 which voters would be asked to approve in a June 2011 special election (which ultimately did not occur). Other key features of the Proposed 2011-12 State Budget included: • Restructuring the State-local relationship in the delivery of services by shifting funding and responsibility to local

governments for those services, subject to voter approval at the June 2011 special election • Overhauling redevelopment through elimination of redevelopment agencies and transfer of agencies’ revenues to local

successor agencies SB 70. On March 24, 2011, the Governor signed into law Senate Bill 70 (“SB 70”) implementing several provisions included in the Proposed 2011-12 State Budget. Key features of SB 70 relating to the funding of education included the following: • For fiscal year 2011-12, SB 70 increases the revenue limit deficit factor for county offices of education and school districts to

19.892% and 19.608%, respectively. • SB 70 extends, for an additional two fiscal years, existing flexibility options available to school districts relating to deferred

maintenance contributions, use of surplus proceeds from the sale of real property, general fund reserve requirements, categorical program funding expenditures, reduction of instructional minutes, class size reduction program penalties, and the implementation of new State instructional materials.

• SB 70 establishes a zero percent cost of living adjustment for K-12 programmatic funding for fiscal year 2011-12. • SB 70 authorizes three new cross-fiscal year deferrals of State apportionments, as follows: (1) $1.3 billion from March to

August, (2) $763,794,000 from April to August, and (3) $500 million from June to July. SB 70 also extended the existing April-to-July deferral to September and the existing May-to-July deferral to September. These deferrals are in addition to existing inter-fiscal year deferrals applicable to fiscal year 2011-12.

• SB 70 authorizes the State Director of Finance to adjust the State’s Proposition 98 calculation to ensure that any shift in property taxes previously received by redevelopment agencies does not affect the State’s minimum funding obligations under Proposition 98.

• SB 70 implements a reduction to categorical funding for basic aid school districts in proportion to the revenue limit funding reductions experienced by non-basic aid school districts in fiscal years 2008-09 and 2009-10. SB 70 declares the State Legislature’s intent to restore this categorical funding at the same time as such revenue limit funding reductions are restored.

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May Revision to the Proposed Budget. On May 16, 2011, the Governor released his May revision to the Proposed 2011-12 State Budget for fiscal year 2011-12 (the “2011-12 May Revision”) which included a revised projected budget deficit of $9.6 billion without additional corrective action. Included in this revised projection were higher-than anticipated State general fund revenues totaling $6.6 billion for both fiscal years 2010-11 and 2011-12. The increase in revenues was largely attributed to strong personal income tax collections experienced since the beginning of the 2011 calendar year. Offsetting these increased revenues, the 2011-12 May Revision identified additional general fund costs, as well as the impact of the cancelation of the State buildings sale authorized by the 2010-11 Budget. To address the $9.6 billion budget gap, the 2011-12 May Revision proposed measures totaling $10.8 billion for both fiscal years 2010-11 and 2011-12. These measures were in addition to, or modified, those set out by the Proposed 2011-12 State Budget and subsequent budget legislation. Assuming the implementation of these measures, the 2011-12 May Revision projected ending fiscal year 2011-12 with a surplus of $1.2 billion. Adopted Budget. On June 30, 2011, the Governor signed into law the 2011-12 State budget (the “2011-12 State Budget”). The 2011-12 State Budget, including previously enacted legislation, closes the $26.6 billion budget gap identified in the 2011-12 May Revision through $15.0 billion in expenditure reductions, $0.9 billion in revenue increases and $2.9 billion in other solutions, which, combined with increased State revenue forecast of $8.3 billion, results in a State general fund reserve of $543 million at the end of fiscal year 2011-12. State general fund expenditures are budgeted to be $85.9 billion in fiscal year 2011-12, a decrease of 6.1% from a revised $91.5 billion figure for fiscal year 2010-11. State general fund revenues (including transfers) are budgeted to be approximately $88.5 billion in fiscal year 2011-12, a decrease of 6.7% from a revised fiscal year 2010-11 State general fund revenues and transfers of $94.8 billion. The following table identifies historical and budgeted State general fund revenues and expenditures.

State General Fund under the 2011-12 State Budget

2010-11 2010-11 2011-12 Original Budget Revised Revised (Millions) (Millions) (Millions)

Prior-year Fund Balance ($4,804) ($4,507) ($1,206) Revenues and Transfers 94,230 94,781 88,456

Total Resources Available $89,426 $90,274 $87,250

Expenditures 86,552 91,480 85,937 Ending Fund Balances $2,874 ($1,206) $1,313

Encumbrances 1,537 770 770

Reserve $1,337 ($1,976) $543

Source: The California Department of Finance In general, the 2011-12 State Budget realigns the administration of various public safety and mental health and welfare programs from the State level to local government level. Funding for the $5.6 billion realignment comes from 1) the dedication of 1.0625 cents of the existing sales tax rate ($5.1 billion) and 2) the redirection of vehicle license fee revenues ($453.4 million). The 2011-12 State Budget reduces State government through expenditure cuts to various health and human services programs, education, and others, including:

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• Maintenance of K-12 education funding at a similar level as fiscal year 2010-11 (as discussed in more detail in the following section)

• Reduction of State Supplementary Payment grants • Reduction of CalWORKS grants • Reduction of California Department of Corrections and Rehabilitation’s inmate population by 25% once realignment is fully

implemented • Requiring recipients of Medi-Cal health benefits to pay a share of the cost for doctor visits and other services • Reduction of the State’s support for the University of California and California State University by 22 and 25%, respectively,

and requiring community college students to pay $10 more per class unit • Delay of the court system’s construction program for one year • Elimination of the Adult Day Health Care program, Williamson Act subventions, and the refundable child care and

dependent tax credit • Reduction of the State’s workforce by 5,500 positions • Elimination of 20 boards, commissions, task forces, offices and departments, including the California Medical Assistance

Commission and the Office of Insurance Advisor. The 2011-12 State Budget also includes “trigger reductions” contingent on future revenues: • Tier 1 – if revenues fall short of projections in the 2011-12 State Budget by more than $1 billion, an additional $600 million

in cuts to higher education, health and human services and public safety would be implemented • Tier 2 – if revenues fall short of projections by more than $2 billion, up to an additional $1.9 billion in education reductions

would be implemented Funding for K-12 Education. The 2011-12 State Budget includes total funding of $64.1 billion for all K-12 education programs ($34.7 billion from the State’s General Fund and $29.4 billion from other funds). The 2011-12 State Budget funds the Proposition 98 minimum funding requirement at $48.7 billion, of which $32.9 billion is budgeted from the State general fund. The Proposition 98 minimum funding requirement reflects four new “rebenching” (or adjustments to base calculation) impacts: • An increase of $578 million to ensure that the Proposition 98 guarantee does not decrease with the shift in motor vehicle fuel

revenues • An increase of $222 million to reflect the inclusion of mental health and out-of-home care services within the Proposition 98

guarantee • A decrease of $1.134 billion to reflect the exclusion of child care programs, with the exception of partial-day preschool

programs, from Proposition 98 • A decrease of $1.7 billion to ensure that the total Proposition 98 is not changed due to new local revenue related to

redevelopment agencies In addition to the rebenching, the Proposition 98 minimum funding requirement is decreased $2.1 billion as a result of the reduction in State general fund sales tax revenues related to the realignment of public safety programs to local government. An overview of the State’s Proposition 98 funding under the 2011-12 State Budget appears in the following table.

Proposition 98 Funding under the 2011-12 State Budget

2009-10 2010-11 2011-12 Final Revised Budget (Millions) (Millions) (Millions)

K-12 Education $44,060 $43,868 $43,151

Community Colleges 5,721 5,834 5,415 Other Agencies 93 85 85

Total $49,874 $49,787 $48,651

State General Fund $35,546 $35,691 $32,879 Local Property Taxes $14,327 $14,096 $15,772

Source: The State Legislative Analyst’s Office

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As discussed previously, the 2011-12 State Budget also includes a series of trigger reductions in the event the State’s revenues are less than forecasted. In December 2011, the State’s revised revenue forecast for fiscal year 2011-12 fell short of the original budget amount by $2.2 billion, resulting in “trigger reductions” of $980 million, with Proposition 98 funding reduced by $80 million and other K-12 education funding reduced by $248 million. Other solutions for K-12 education implemented in the 2011-12 State Budget include: • Decrease of $62.3 million of Proposition 98 funding to part-day State preschool program • Provision of $11 million to provide charter schools that commenced operation between fiscal years 2008-09 and 2011-12

with supplemental categorical funding • Increase of $3.2 million to support the Clean Technology and Renewable Energy Job Training, Career Technical Education,

and Dropout Prevention Program, • Decrease of $180.4 million to child care and development programs • Elimination of the Office of Secretary of Education • Elimination of funding for California Longitudinal Teacher Integrated Data System (CALTIDES) • Provision requiring districts to project the same level of revenue per student in fiscal year 2011-12 as in fiscal year 2010-11

and “maintain staffing and program levels” commensurately along with a related provision specifying that school districts are not required to demonstrate they can meet their financial obligations for the two subsequent fiscal years.

The full text of the 2011-12 State Budget may be found at the State Department of Finance website, www.dof.ca.gov, and the Legislative Analyst’s Office overview of the 2011-12 State Budget may be found at www.lao.ca.gov. The 2012-13 State Budget The information in this section has been compiled from publicly available information through the State Department of Finance and the State Legislative Analyst’s Office. Neither the District nor the Underwriter assume any responsibility for the accuracy of such information as set forth or incorporated by reference herein, although they believe that the information provided by the above-listed sources is reliable. Proposed 2012-13 State Budget. On January 5, 2012, Governor Brown announced his proposed budget for fiscal year 2012-13 (the “Proposed 2012-13 Budget”). The Proposed 2012-13 Budget projects a budget deficit of approximately $9.2 billion without corrective action, and provides for $10.3 billion in cuts and additional revenues to balance the budget and create a $1.1 billion reserve. The Proposed 2012-13 Budget assumes that voters will pass the Governor’s ballot measure planned for the November 2012 election to raise taxes by approximately $7 billion. The ballot measure proposes an income tax increase of up to 2% on high-income earners for five years and a temporary one-half cent sales tax increase. If passed, this measure will provide new revenues to schools and constitutionally protect the 2011 realignment funds for local public safety, as well as generate an estimated $6.9 billion through fiscal year 2012-13. After accounting for the increased Proposition 98 minimum guarantee, the measure would provide $4.4 billion in net benefit to the State general fund and prevent deeper cuts to schools, protect local public safety funding, and assist in balancing the budget. The ballot measure also would provide some constitutional protection for the funds dedicated in 2011 to counties and local law enforcement to fund the realignment of various State responsibilities to the local level. Should the voters reject the tax measure in November, the Proposed 2012-13 Budget provides for an additional $5.4 billion in trigger cuts that would affect mainly K-12 schools (in the amount of approximately $4.8 billion), higher education, courts, fire protection and a variety of parks services. K-12 Education. The Proposed 2012-13 Budget provides Proposition 98 funding of $52.5 billion for 2012-13, an increase of $4.9 billion compared to fiscal year 2011-12. Accounting for all state, federal, and local property tax resources, total funding for K-12 education is projected to be $67.1 billion in fiscal year 2012-13. The Proposed 2012-13 Budget projects per-pupil expenditures from all sources to be $10,610 in fiscal year 2011-12 and $11,246 in fiscal year 2012-13, including funds provided for prior year settle-up obligations, and K-12 Proposition 98 per-pupil expenditures of $7,096 in fiscal year 2011-12 and $7,815 in fiscal year 2012-13. The Proposed 2012-13 Budget includes a series of adjustments or “rebenchings” of the Proposition 98 guarantee, including the elimination of the sales tax on gasoline in fiscal year 2010-11, which would result in $373.2 million of State general fund savings. The Proposed 2012-13 Budget also includes a Proposition 98 reduction of $171.2 million to special education and community college apportionments in the 2011-12 fiscal year to offset increased property taxes resulting from the elimination of redevelopment agencies and their entitlement to tax increment. The Proposed 2012-13 Budget consolidates many categorical programs (excluding federally required programs such as special education) with revenue limit apportionments into a single stream of funding for schools on a permanent basis in an effort to

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eliminate inefficiencies and costs. This “weighted pupil formula” funding mechanism would be implemented over a period of five years, with school districts held harmless from any decreases in revenue in fiscal year 2012-13. May Revision to Proposed 2012-13 Budget. On May 14, 2012, the Governor released his May revision to the Proposed 2012-13 Budget (the “2012-13 May Revision”), which includes a revised projected two-year budget deficit of $15.7 billion without additional corrective action. State general fund expenditures are budgeted to be $91.4 billion in fiscal year 2012-13, an increase of 10.9% from a revised $86.5 billion figure for fiscal year 2011-12. State general fund revenues (including transfers) are budgeted to be approximately $95.7 billion in fiscal year 2012-13, an increase of 5.6% from a revised fiscal year 2011-12 State general fund revenues and transfers of $84.0 billion. The following table identifies historical and budgeted State general fund revenues and expenditures.

State General Fund under the Proposed 2012-13 Budget

2011-12 2012-13 Revised May Revision (Millions) (Millions)

Prior-year Fund Balance ($2,844) ($2,535) Revenues and Transfers 86,809 95,689

Total Resources Available 83,965 93,154

Expenditures 86,500 91,387 Ending Fund Balances ($2,535) $1,767

Encumbrances 719 719

Reserve (3,254) 1,048

Source: The California Department of Finance The Governor attributes the $6.5 billion increase in the projected budget deficit without corrective action to: • A $4.3 billion overestimation of State general fund revenue, • Adverse decisions by the federal government and courts that blocked $1.7 billion in cost reduction measures from previous

budget solutions, and • A $2.4 billion increase in Proposition 98 funding, due to higher revenues being accrued from the Governor’s revised tax

measure and revenue growth in fiscal year 2012-13.

With the larger budget deficit, the 2012-13 May Revision proposes $8.3 billion in spending cuts, $1.5 billion of which will come from Proposition 98 reductions. In addition, the Governor proposes $5.9 billion of increased revenues from temporary taxes, $1.8 billion in new borrowing, and $747 million in miscellaneous solutions, totaling $16.7 billion in budget-balancing measures to address the State’s budget problems and build a $1.0 billion reserve. K-12 Education. The 2012-13 May Revision proposes Proposition 98 guarantee funding of $53.7 billion. Although State revenues are, in the aggregate, down from previous years, Proposition 98 funding is determined by Test I in fiscal year 2012-13, and as a result the guarantee is increased by $1.2 billion from the $52.5 billion spending level in the Proposed 2012-13 Budget. This $1.2 billion increase is primarily the result of higher revenues being accrued from the Governor’s modified tax measure and higher year-to-year revenue growth than initially projected. These increased revenues to schools are funded primarily by an estimated $1.2 billion increase in local property taxes in fiscal year 2012-13 made available to schools through higher "Redevelopment Agency (RDA) asset liquidation.” The 2012-13 May Revision proposes to reduce inter-year deferral payments, allocating $2.6 billion to a cross-year deferral buy-down. Overall, K-12 inter-year deferrals would be reduced from $9.5 billion to $6.9 billion in fiscal year 2012-13, and eliminated by fiscal year 2015-16.

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The 2012-13 May Revision also: • Alters the weighted pupil funding formula proposed in the Proposed 2012-13 Budget. Implementation of the modified

formula, which would be phased in during a period of seven years as opposed to the five years originally proposed, would “be contingent on school funding being at the levels proposed in the May Revision.” Compared to the Proposed 2012-13 Budget, the May Revision increases the weighted pupil formula base grant from $4,920 to $5,421, reduces supplemental grants for English-language learners and students from low-income families from 37 percent of the base funding grant to 20 percent, and reduces grants for concentrations of low-income students accordingly.

• Restores $496 million in 2012-13 funding for the home-to-school transportation program. The Governor proposed to eliminate State funding for home-to-school transportation in the Proposed 2012-13 Budget.

• Contains a decrease of $132.2 million in projected savings associated with the proposed elimination of transitional kindergarten requirements.

• Contains an increase of $3.4 million Proposition 98 State general fund spending for charter school categorical programs due to growth.

• Contains an increase of $459 million in fiscal year 2011-12 and $398 million in fiscal year 2012-13 for school districts and county offices of education revenue limits as a result of lower offsetting property tax revenues.

• Designates $450 million of 2011-12 over-appropriation towards 2012-13 Quality Education Investment Act payments (due to the California Teachers Association v. Schwarzenegger settlement agreement) and $335 million as “settle-up” payments, which would produce $450 million of 2012-13 State general fund savings.

• Eliminates nearly half of the existing K-12 and community college mandates and provides $200 million to fund a mandates block grant incentive program to reimburse K-12 schools and community colleges for all remaining mandated electives.

Child Care and State Preschool. The 2012-13 May Revision proposes significant changes to three of the child care and preschool budget reduction and policy reform proposals included in the Proposed 2012-13 Budget: • Reduce Child Care Costs: The 2012-13 May Revision proposes to maintain $452.5 million in child care cost savings but

modifies eligibility requirements. • Part-Day Preschool Programs: The 2012-13 May Revision provides $91.5 million in additional Proposition 98 funding to

restore the 10% reduction to the standard reimbursement rates for part-day preschool programs included in the Proposed 2012-13 Budget ($34.1 million impact), and to expand part-day preschool for 15,500 children from low-income families ($57.5 million impact).

• Restructure Administration of Child Care: The 2012-13 May Revision addresses various concerns raised by the education community.

Charter School Reforms. Charter schools are not eligible for reimbursement of state-mandated costs. Additionally, charter schools have limited access to affordable interest rates for borrowing and cannot issue bonds. The 2012-13 May Revision makes a number of changes to accommodate these concerns: • Allow Surplus Property Conveyance: The 2012-13 May Revision requires school districts to convey surplus property to any

charter school opting to claim property and provides an incentive for school districts to sell property to charter schools without having to declare the property surplus and without losing eligibility in the state school facilities program.

• Eliminate the State Funding Determination Process for Non-Classroom Charters: The 2012-13 May Revision allows all new and existing non-classroom based charter schools to receive full funding without needing State Board of Education review and approval and would eliminate the funding determination process and will ultimately allow all non-classroom based charter schools to receive full funding.

• Financial Assistance: County treasurers will be authorized to lend to charter schools. Also, charter schools, as a condition of directly applying to the State for a deferral exemption, will be required to provide a copy of their application for a deferral exemption to their charter authorizer.

Trigger Cuts. The 2012-13 May Revision assumes the passage of the Governor’s tax initiative. This measure temporarily increases the personal income tax on the State’s wealthiest taxpayers for seven years and increases the sales tax by 0.25% for four years. If the tax initiative is not approved by voters in November 2012, the Governor proposes automatic trigger cuts of $5.5 billion for K-14 schools, an increase of $656.7 million over the $4.8 billion trigger reduction level in the Proposed 2012-13 Budget. Should the trigger be implemented, the $2.6 billion K-14 cross-year deferral buy-down would not occur. The remaining $2.9 billion cut will be achieved through a reduction in core revenue funding for K-14 schools. K-12 schools are proposed to be given the flexibility to reduce the school year by up to 15 days in the 2012-13 and 2013-14 fiscal years. Other proposed “trigger” budget reductions proposed in the 2012-13 May Revision include: • $500 million from Higher Education ($100 million higher than January) • $50 million from Developmental Services (new) • $10.6 million from Local Water Safety (new) • $10 million from Forestry and Fire Protection ($5 million less than January) • $6.6 million from Flood Control (unchanged from January)

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• $3.5 million from Fish and Game (unchanged from January) • $1.5 million from Park Lifeguards and Rangers ($0.5 million higher than January) • $1.0 million from Department of Justice (unchanged from January) LAO Overview of the 2012-13 May Revision. On May 18, 2012, the State Legislative Analyst’s Office (the “LAO”) released an analysis of the 2012-13 May Revision entitled “The 2012-13 Budget: Overview of the May Revision” (the “LAO May Revision Overview”). The LAO Revision May Overview states that the economic and revenue forecasts included in the 2012-13 May Revision are reasonable, but notes that the Governor’s projected revenues for fiscal years after 2012-13 are higher than those projected by the LAO (ranging from $1.3 billion to $4 billion higher through fiscal year 2015-16). In addition, the LAO states that the Governor’s estimate of former redevelopment agencies’ liquid assets available for distribution is subject to considerable uncertainty due to, among other things, lawsuits that will delay distribution of funds and the amount of assets that have been spent or are contractually committed to third parties. The LAO further recommends that the State Legislature consider an alternative financing plan for the Proposition 98 minimum guarantee rather than the Governor’s proposal set forth in the 2012-13 May Revision to achieve additional budget balancing solutions. The LAO also states that given current forecasting challenges, the adoption of realistic budgetary actions, including realistic trigger cuts, is particularly important if the State is to continue making progress toward eliminating the ongoing structural deficit. The 2012-13 Budget. On June 27, 2012, the Governor signed the fiscal year 2012-13 State budget (the “2012-13 Budget”). The 2012-13 Budget closes a $15.7 billion budget gap and builds a reserve of nearly $1 billion with (i) $8.1 billion in expenditure reductions, (ii) $6 billion in increased revenues (which assumes the approval by the voters of the Governor’s tax initiative at the November 2012 election) and (iii) $2.5 billion from certain loan and transfer measures. The 2012-13 Budget includes Proposition 98 funding of $53.6 billion, of which $36.8 billion is from the State General Fund. If the tax initiative is not approved by voters in November 2012, automatic trigger cuts of approximately $5.4 billion for K-14 schools would be implemented effective January 1, 2013. Such trigger cuts equate to a reduction in funding of approximately $457 per ADA, an increase of more than $16 from that proposed in the 2012-13 May Revision. Other significant features impacting K-12 education in the 2012-13 Budget include: • Authorization for local educational agencies to choose to receive mandate funding from either a $28 ADA block grant or to

claim reimbursements under the traditional cost-based process • Suspension of Level 3 developer fees if State funds for new facility construction are exhausted • Buy down of approximately $2.1 billion in deferrals if the Governor's tax initiative passes • Authorization to reduce the school year by up to an additional 15 days each year in 2012-13 and 2013-14 if the tax initiative

fails • Authorization for charter schools to participate in tax and revenue anticipation notes (TRANs), and authorization for county

treasurers to provide charter schools with short-term cash loans • Expansion of the ability of school districts to convey surplus property to charter schools The 2012-13 Budget does not include the Governor’s proposal for a weighted student funding formula, the elimination of transitional kindergarten, or the elimination of redevelopment agency (RDA) pass-through funds. The full text of the Proposed 2012-13 Budget, the 2012-13 May Revision and the 2012-13 Budget may be found at the State Department of Finance website, www.dof.ca.gov, under the heading “California Budget” or www.ebudget.ca.gov, and the Legislative Analyst’s Office overview of the Proposed 2012-13 State Budget and 2012-13 May Revision may be found at www.lao.ca.gov. 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. Continued 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 www.dof.ca.gov and to the State Legislative Analyst’s Office’s website at www.lao.ca.gov.

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CONSTITUTIONAL & STATUTORY PROVISIONS AFFECTING DISTRICT REVENUES & EXPENDITURES

Article XIIIA. In an election held on June 6, 1978, the voters of the State approved an initiative amendment to the State Constitution. The amendment added Article XIIIA to the State Constitution, commonly known as Proposition 13, which limits the taxing powers of State public agencies. Except as described in the following paragraph, Article XIIIA provides that the maximum ad valorem tax on real property cannot exceed one percent of the “full cash value” which is defined as the “county assessor's valuation of real property as shown on the 1975-76 tax bill under ‘full cash value’ or, thereafter, the appraised value of real property when purchased, newly constructed, or a change in ownership has occurred after the 1975 assessment,” subject to exceptions for certain circumstances of transfer or reconstruction. The “full cash value” is subject to annual adjustments to reflect increases not to exceed two percent per year, or decreases in the consumer price index or comparable local data, or to reflect reduction in property value caused by damage, destruction or other factors. Article XIIIA requires a vote of two-thirds of the qualified electorate to impose special taxes, and except as described in the following sentence, prohibits the imposition of any additional ad valorem, sales or transaction tax on real property. As amended by Proposition 46, on June 3, 1986, Article XIIIA exempts from the one percent tax limitation ad valorem taxes required to pay debt service on indebtedness approved by the voters prior to July 1, 1978, or on bonded indebtedness approved by two-thirds of those voting thereon, after July 1, 1978, the proceeds of which are applied to the acquisition or improvement of real property. Proposition 39: On November 7, 2000, voters within the State approved an amendment (commonly known as Proposition 39) to the State Constitution. This amendment (1) allows school facilities bond measures to be approved by 55 percent (rather than two-thirds) of the voters in local elections and permits property taxes to exceed the current 1 percent limit in order to repay the bonds, and (2) changes existing statutory law regarding charter school facilities. The local school jurisdictions affected by this proposition are K-12 school districts, including the District, community college districts, and county offices of education. The 55 percent vote requirement would apply only if the local bond measure presented to the voters includes: (1) a requirement that the bond funds can be used only for construction, rehabilitation, equipping of school facilities, or the acquisition or lease of real property for school facilities; (2) a specific list of school projects to be funded and certification that the school board has evaluated safety, class size reduction, and information technology needs in developing the list; and (3) a requirement that the school board conduct annual, independent financial and performance audits until all bond funds have been spent to ensure that the bond funds have been used only for the projects listed in the measure. Legislation approved in June 2000 places certain limitations on local school bonds to be approved by 55 percent of the voters. These provisions require that the tax rate levied as the result of any single election be no more than $60 (for a unified school district), $30 (for a high school or elementary school district), or $25 (for a community college district), per $100,000 of taxable property value. The Governor can change these limitations with a majority vote of both houses of the Legislature and approval; unlike constitutional amendments, which may be changed only with another statewide vote of the people. The statutory provisions could be changed by a majority vote of both houses of the Legislature and approval by the Governor, but only to further the purposes of the proposition. Finally, Article XIIIA requires the approval of two-thirds of all members of the State Legislature to change any State laws for the purpose of increasing tax revenues. Article XIIIB. In a special election held on November 6, 1979, the voters of the State approved an initiative constitutional amendment. This amendment added Article XIIIB to the State Constitution. Article XIIIB limits the annual appropriations of the State and of any city, county, school district, special district, authority or other political subdivision of the State to the level of appropriations for the prior fiscal year, as adjusted for changes in the cost of living, population and services rendered by the government entity. The “base year” for establishing such appropriation limit is the 1978-79 fiscal year and the limit is to be adjusted annually to reflect changes in population, consumer prices and certain increases in the cost of services provided by these public agencies. Appropriations subject to Article XIIIB include generally the proceeds of taxes levied by the State or by any other entity of local government, exclusive of certain State subventions, refunds or taxes, benefit payments from retirement, unemployment insurance and disability insurance funds but excludes taxes to pay voter approved bonds. “Proceeds of taxes” include, but are not limited to, all tax revenues and the proceeds to an entity of government from (1) regulatory licenses, user charges, and user fees (but only to the extent such proceeds exceed the cost of providing the service or regulation), and (2) the investment of tax revenues. Article XIIIB includes a requirement that if an entity's revenues in any year exceed the amounts permitted to be spent, the excess would have to be returned by revising tax rates or fee schedules over the subsequent two years. State law provides that in the event a

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school district's appropriations will exceed its limit, the district may assume from the State a portion of the State's appropriations limit. Proposition 98/111: On November 8, 1988, voters of the State approved Proposition 98, a combined initiative constitutional amendment and statute called the “Classroom Instructional Improvement and Accountability Act.” Proposition 98 changed State funding of public education below the university level and the operation of the State’s appropriations limit, primarily by guaranteeing K-14 schools a minimum share of General Fund revenues. Under Proposition 98 (as modified by Proposition 111, which was enacted on June 5, 1990, hereinafter defined as “Proposition 98/111”), K-14 schools are guaranteed the greater of (a) the percentage of General Fund revenues appropriated for school districts in Fiscal Year 1986-87 (“Test 1”); (b) the amount of State and local proceeds of taxes appropriated to K-14 schools in the prior year, adjusted for changes in the cost of living (measured as in Article XIII B by reference to State per capita personal income) and enrollment (“Test 2”); or (c) a third test, which would replace Test 2 in any year in which the percentage growth in State per capita personal income is greater than the percentage growth on per capita General Fund revenues plus one-half of one percent (“Test 3”). Under Test 3, schools would receive the amount of State and local proceeds of taxes appropriated to K-14 schools in the prior year adjusted for changes in enrollment and per capita General Fund revenues, plus an additional small adjustment factor. If Test 3 is used in any year, the difference between Test 3 and Test 2 would become a “credit” to schools which would be the basis of payments in future years when per capita General Fund revenue growth exceeds per capita personal income growth. Legislation adopted prior to the end of the 1988-89 Fiscal Year, implementing Proposition 98, determined the K-14 schools' funding guarantee under Test 1 to be 40.3% of the General Fund tax revenues, based on 1986-87 appropriations. However, that percentage has been adjusted to 34% to account for a subsequent redirection of local property taxes, since such redirection directly affects the share of General Fund revenues to schools. Proposition 98/111 permits the Legislature by two-thirds vote of both houses, with the Governor's concurrence, to suspend the K-14 schools' minimum funding formula for a one-year period. This guarantee was suspended in 2004-05, initially with the agreement of the Education Coalition (an alliance of major education interest groups), and effectively reduced the amount schools received by $2 billion. The Legislature ratified the suspension in Senate Bill 1101. However, the Education Coalition agreed to the suspension under the terms that Proposition 98 funding would be reduced for only one year, the year of the State budget crisis, by a maximum of $2 billion; and if the situation were to improve, funding would be restored. But when the State’s finances did improve, funding was not restored to the same level it at which it would have been, had the suspension not occurred. Subsequently, the State Superintendent of Public Instruction Jack O’Connell filed a lawsuit jointly with the California Teachers Association against Governor Arnold Schwarzenegger over this loss in Proposition 98 funding. On May 10, 2006, the two sides reached an agreement whereby, in effect, the State would repay all losses incurred due to the suspension, with payments to be made annually through 2013-14. Since Proposition 98/111 is unclear in some details, there can be no assurance that the Legislature or a court might not interpret it to require a different percentage of General Fund revenues to be allocated to K-14 districts or to apply the relevant percentage to the State's budget in a different way. Proposition 98/111 may place increasing pressure on the State's budget in future years, potentially reducing resources available for other State programs, especially to the extent that the Article XIIIB spending limit would restrain the State's ability to fund these other programs by raising taxes. Proposition 98/111 also changes how tax revenues in excess of the State’s appropriations limit are distributed. Any excess State tax revenues up to a specified amount would, instead of being returned to taxpayers, be transferred to K-14 districts. Such transfer would be excluded from the appropriations limits for K-14 districts and the K-14 schools’ appropriations limits for the next year would automatically be increased by the amount of such transfer. These additional moneys would enter the base funding calculation for K-14 districts for subsequent years, creating further pressure on other portions of the State budget, particularly if revenues decline in a year following an Article XIIIB surplus. The maximum amount of excess tax revenues which could be transferred to schools is four percent of the minimum State spending for education mandated by Proposition 98/111, as described above. Proposition 1A. On November 2, 2004, California voters approved Proposition 1A amending the State Constitution to significantly reduce the State’s authority over major local government revenue sources. Under Proposition 1A, the State may not reduce any local sales tax rates or alter the method of allocation, shift property taxes from local governments to schools or community colleges, make changes in how property taxes revenues are shared among local governments without two-thirds approval of both house of the State Legislature, and decrease vehicle license fees without providing local governments with equal replacement funding. Under Proposition 1A, beginning in fiscal year 2008-09, the State may divert no more than eight percent of local property tax revenues for State purposes (including but not limited to funding K-12 education) only if: (i) the Governor declares such action to

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be necessary due to a State fiscal emergency, (ii) two-thirds approval of both houses of the State Legislature, (iii) the amount diverted is required to be repaid within three years, and (iv) certain other conditions are met. Article XIIIC and Article XIIID. On November 5, 1996, the voters of the State approved Proposition 218, the so-called “Right to Vote on Taxes Act.” Proposition 218 added Articles XIIIC and XIIID to the State Constitution, which contain a number of provisions affecting the ability of local agencies, including school districts, to levy and collect both existing and future taxes, assessments, fees and charges. Among other things, Article XIIIC establishes that every tax is either a “general tax” (imposed for general governmental purposes) or a “special tax” (imposed for specific purposes); prohibits special purpose government agencies such as school districts from levying general taxes except as allowed by Article XIIIA; and prohibits any local agency from imposing, extending or increasing any special tax beyond its maximum authorized rate without a two-thirds vote. Article XIIID also provides that no tax may be assessed on property other than ad valorem property taxes imposed in accordance with Articles XIII and XIIIA of the State Constitution and special taxes approved by a two-thirds vote under Article XIIIA, Section 4. Article XIIIC also provides that the initiative power shall not be limited in matters of reducing or repealing local taxes, assessments, fees and charges. The State Constitution and the laws of the State impose a duty on the county treasurer/tax collector (of each county) to levy a property tax sufficient to pay debt service on general obligation bonds coming due in each year. Legislation adopted in 1997 provides that Article XIIIC will 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, which would constitute an impairment of contractual rights under the contracts clause of the U.S. Constitution. Article XIIID deals with assessments and property-related fees and charges. Article XIIID explicitly provides that nothing in Article XIIIC or XIIID shall 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 therefore unavailable to repeal or reduce developer and mitigation fees imposed by school districts. The interpretation and application of Proposition 218 will ultimately be determined by the courts with respect to a number of the matters discussed above, and it is not possible at this time to predict with certainty the outcome of such determination. Possible Future Actions. Article XIIIA, Article XIIIB and Propositions 39, 46, 98, 111 and 218 and 1A were each adopted as measures that qualified for the ballot pursuant to the State's initiative process. From time to time other initiative measures could be adopted, further affecting K-14 school districts' revenues or such districts' ability to expend revenues. There is no assurance that the State electorate or Legislature will not at some future time approve additional limitations which could reduce property or other tax revenues and adversely affect the revenues of school districts or require additional expenditures.

LEGAL MATTERS No Litigation There is no action, suit or proceeding known to be pending or threatened that seeks to restrain or enjoin the execution or delivery of the Certificates, the Facilities Lease or the Trust Agreement or in any way contesting or affecting the validity of the foregoing or any proceeding of the District taken with respect to the foregoing. There are no lawsuits or claims pending against the District that would impair the ability of the District to make Rental Payments or otherwise meet its outstanding lease or debt obligations. Legal Opinion Kronick, Moskovitz, Tiedemann & Girard, a Professional Corporation, Sacramento, California, Special Counsel, will render its opinion with respect to the validity and enforceability of the Facilities Lease, Trust Agreement, and Ground Lease. Copies of such approving opinion will be available at the time of delivery of the Certificates. The form of the legal opinion to be delivered by Special Counsel is included as “APPENDIX D—FORM OF OPINION OF SPECIAL COUNSEL” to this Official Statement. The opinion is based on existing laws, regulations, rulings and court decisions. Kronick, Moskovitz, Tiedemann & Girard, a Professional Corporation, has not undertaken a review of this Official Statement on behalf of Certificate owners and makes no representation as to the accuracy or completeness hereof.

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Tax Matters In the opinion of Kronick, Moskovitz, Tiedemann & Girard, a Professional Corporation, Special Counsel, based on an analysis of existing statutes, regulations, rulings, and court decisions and assuming, among other things, the accuracy of certain representations and compliance with certain covenants, the portion of the Rental Payments designated as and constituting interest paid by the District under the Facilities Lease and received by the owners of the Certificates is excludable from gross income for federal income tax purposes and is exempt from State of California personal income taxes. Special Counsel is also of the opinion that such interest is not an item of tax preference for purposes of the federal individual and corporate alternative minimum taxes, although Special Counsel observes that such interest is included in adjusted current earnings in calculating corporate alternative minimum taxable income. A complete copy of the proposed opinion of Special Counsel is attached hereto as “APPENDIX D – FORM OF OPINION OF SPECIAL COUNSEL”. The Internal Revenue Code of 1986, as amended (the “Code”) imposes various restrictions, conditions, and requirements relating to the exclusion from gross income for federal income tax purposes of interest on obligations such as the Facilities Lease. The District has covenanted to comply with certain restrictions designed to assure that the interest portion of the Rental Payments evidenced and represented by the Certificates will not be included in federal gross income. Failure to comply with these covenants may result in such interest’s being included in federal gross income, possibly from the date of initial delivery of the Certificates. The opinion of Special Counsel assumes compliance with these covenants. Special Counsel has not undertaken to determine (or to inform any person) whether any actions taken (or not taken) or events occurring (or not occurring) after the date of initial delivery of the Certificates may affect the value of, or the tax status of interest evidenced and represented by, the Certificates. Although Special Counsel has rendered an opinion that the interest portion of the Rental Payments to be paid by the District under the Facilities Lease and received by the owners of the Certificates is excludable from gross income for federal income tax purposes and is exempt from California personal income taxes, the ownership or disposition of Certificates or the accrual or receipt of such interest may otherwise affect an owner’s federal or state tax liability. The nature and extent of these other tax consequences will depend upon the owner’s particular tax status or the owner’s other items of income or deduction. Special Counsel expresses no opinion regarding any such other tax consequences. Special Counsel has expressed no opinion regarding any pending or proposed tax legislation or regulation. Legality for Investment Under provisions of the California Financial Code, the Certificates are legal investments for commercial banks in California to the extent that the Certificates, in the informed opinion of the investing bank, are prudent for the investment of funds of depositors. Under provisions of the California Government Code, the Certificates are eligible security deposits of public moneys in California.

RATINGS Standard & Poor's Financial Services LLC, a subsidiary of The McGraw-Hill Companies, Inc. ("Standard & Poor’s"), is expected to assign its municipal bond rating of “AA-” (stable outlook) to the Certificates with the understanding that upon delivery of the Certificates, a municipal bond insurance policy insuring the payment when due of the principal and interest with respect to the Certificates will be issued by AGM. The Certificates have been assigned an underlying rating of “A-” (stable outlook). Such ratings reflects only the views of Standard & Poor’s, and an explanation of the significance of such rating may be obtained from Standard & Poor’s at the following address: Standard & Poor's Financial Services LLC, 55 Water Street, New York, New York 10041. There is no assurance that any such rating will continue for any given period of time or that it will not be revised downward or withdrawn entirely by the rating agency, if in the judgment of the rating agency, circumstances so warrant. Any such downward revision or withdrawal of such ratings may have an adverse effect on the market price of the Certificates.

FINANCIAL ADVISOR Government Financial Strategies inc. has been employed by the District to perform financial advisory services in relation to the sale and delivery of the Certificates. Government Financial Strategies inc., in its capacity as Financial Advisor, has read and

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participated in drafting certain portions of 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 Certificates. Fees charged by Government Financial Strategies inc. are not contingent upon the sale of the Certificates.

INDEPENDENT AUDITORS The basic financial statements of the District as of and for the year ending June 30, 2011, have been audited by Crowe Horwath LLP, Sacramento, California. Selected information concerning the financial statements of the District as of and for the year ended June 30, 2011, are set forth in “APPENDIX B” attached hereto. Complete copies of all past and current financial statements may be obtained from the District. The auditor has not performed any subsequent events review or other procedures relative to these audited financial statements since the date of its letter. See “DISTRICT FINANCIAL INFORMATION—Financial Statements and District Budgets” herein.

UNDERWRITING AND INITIAL OFFERING PRICES The Certificates were sold to Morgan Stanley & Co. LLC (the “Underwriter”), pursuant to a certificate purchase agreement, for an amount equal to the principal amount of the Certificates of $18,376,098.50, less an underwriter’s discount of $716,089.50, for a total purchase price of $17,660,009.00, at a true interest cost (TIC) to the District of 6.078123%. The Underwriter has certified the initial reoffering yields of the Certificates to the general public (excluding bond houses, brokers, or similar persons or organizations acting in the capacity of underwriters or wholesalers), all as set forth on the inside cover page hereof. The initial offering prices or yields stated on the inside cover page to this Official Statement may be changed from time to time by the Underwriter. The Underwriter may offer and sell the Certificates to certain dealers (including dealers depositing Certificates into investment trusts), dealer banks, banks acting as agents and others at prices lower or yields higher than said public offering prices or yields. Morgan Stanley, parent company of Morgan Stanley & Co. LLC, an underwriter of the Bonds, has entered into a retail brokerage joint venture with Citigroup Inc. As part of the joint venture, Morgan Stanley & Co. LLC will distribute municipal securities to retail investors through the financial advisor network of a new broker-dealer, Morgan Stanley Smith Barney LLC. This distribution arrangement became effective on June 1, 2009. As part of this arrangement, Morgan Stanley & Co. LLC will compensate Morgan Stanley Smith Barney LLC for its selling efforts with respect to the Bonds.

CONTINUING DISCLOSURE The District has covenanted for the benefit of the holders and beneficial owners of the Certificates to provide certain financial information and operating data relating to the District (the “Annual Report”), by not later than April 15th after the end of the District’s fiscal year, commencing with the report for the 2011-12 fiscal year, and to provide notices of the occurrence of certain enumerated events. The Annual Report and any notices of significant events will be filed electronically by the District with the Municipal Securities Rulemaking Board or any other repository of disclosure information that may be designated by the Securities and Exchange Commission as such for purposes of the Rule in the future. The specific nature of the information to be contained in the Annual Report or the notices of significant events is summarized in “APPENDIX C—FORM OF CONTINUING DISCLOSURE CERTIFICATE.” These covenants have been made in order to assist the Underwriter in complying with S.E.C. Rule 15c2-12(b)(5). The District has never failed to comply in all material respects with any previous undertakings with regard to said Rule to provide annual reports or notices of significant events.

ADDITIONAL INFORMATION Additional information concerning the District, the Certificates or any other matters concerning the sale and delivery of the Certificates may be obtained from the District by contacting the District or by contacting the District’s Financial Advisor, Government Financial Strategies inc., at the address and telephone number set forth on page “iv” of this Official Statement.

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All of the preceding summaries of the Legal Documents 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 Certificates, 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. The execution and delivery of this Official Statement by the District has been duly authorized by its Board. MARYSVILLE JOINT UNIFIED SCHOOL DISTRICT By: /s/ Gay S. Todd______ _________________ ______________

Superintendent

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APPENDIX A

SUMMARY OF PRINCIPAL LEGAL DOCUMENTS

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APPENDIX A

SUMMARY OF PRINCIPAL LEGAL DOCUMENTS

Table of Contents Page

DEFINITIONS ........................................................................................................................................ A-2

GROUND LEASE ................................................................................................................................ A-10

FACILITIES LEASE ............................................................................................................................. A-10 General ..................................................................................................................................... A-10 Term ......................................................................................................................................... A-10 Substitution .............................................................................................................................. A-11 Rental Payments; Additional Payments ................................................................................... A-12 No Offsets; Net Lease .............................................................................................................. A-12 Abatement of Rental ................................................................................................................ A-12 Prepayments .............................................................................................................................. A-12 Covenants of the District .......................................................................................................... A-13

Maintenance of the Facilities ...................................................................................... A-13 Taxes and other Governmental Charges; Utility Charges .......................................... A-13 Liens ............................................................................................................................ A-13 Environmental Covenants ............................................................................................ A-13 Assignment and Subleasing ......................................................................................... A-13

Insurance ................................................................................................................................... A-14 Fire and Extended Coverage Insurance ....................................................................... A-14 Public Liability and Property Damage Insurance ........................................................ A-14 Rental Abatement Insurance ........................................................................................ A-15 Workers’ Compensation Insurance .............................................................................. A-15 Title Insurance ............................................................................................................. A-15

Eminent Domain ....................................................................................................................... A-15 Events of Default ...................................................................................................................... A-16 Remedies on Default ................................................................................................................. A-16

TRUST AGREEMENT ......................................................................................................................... A-17 General ...................................................................................................................................... A-17 Assignment ............................................................................................................................... A-17 Establishment of Funds and Accounts ...................................................................................... A-17

Certificate Fund ........................................................................................................... A-17 Allocation of Rental Payments .................................................................................... A-17 Application of Certificate Fund ................................................................................... A-18 Application of Certificate Reserve Fund ..................................................................... A-18 Application of Redemption Fund ................................................................................. A-20 Investment of Moneys in Funds and Accounts ............................................................ A-20

Events of Default; Remedies of Owners ................................................................................... A-21 Events of Default ......................................................................................................... A-21 Remedies ...................................................................................................................... A-21 Application of Money Collected .................................................................................. A-21 Trustee to Represent Owners ....................................................................................... A-22

Amendment of Trust Agreement .............................................................................................. A-22 Discharge of Trust Agreement .................................................................................................. A-24 Consent of Insurer...................................................................................................................... A-25

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The following are summaries of selected provisions of certain legal documents that are not

described elsewhere in this Official Statement. These summaries do not purport to be comprehensive and reference should be made to the Ground Lease, the Facilities Lease, and the Trust Agreement for a full and complete statement of their provisions. All capitalized terms not defined in this Official Statement have the meanings set forth in the Trust Agreement.

DEFINITIONS

Accreted Value means, with respect to any Capital Appreciation Certificate, the initial principal amount with respect thereto plus the interest accrued with respect thereto from its date, compounded at the Accreted Rate with respect thereto on each compounding date specified therein. The Accreted Values at any compounding date to which reference is made shall be the amounts set forth in the Accreted Value Table for such date. The Accreted Value between compounding dates shall be calculated assuming that the Accreted Values increase in equal daily amounts on the basis of a 360-day year of twelve 30-day months.

Accreted Value Table means the table by that name attached as an exhibit to the Trust Agreement or a Supplemental Trust Agreement for the Capital Appreciation Certificates.

Annual Debt Service means for each Bond Year the aggregate amount (without duplication) of Accreted Value scheduled to become due (either at maturity or by mandatory prepayment) and sinking fund payments (or lease or installment purchase payments with separately designated interest and principal components) required to be paid in that Bond Year on all Outstanding Certificates.

Applicable Environmental Laws means any local, state, and/or federal laws or regulations, whether currently in existence or enacted later, that govern (1) the existence, cleanup, and/or remedy of contamination on property; (2) the protection of the environment from spilled, deposited, or otherwise emplaced contamination; (3) the control of hazardous wastes; or (4) the use, generation, transport, treatment, removal, or recovery of Hazardous Substances, including building materials.

Board means the Board of Trustees of the Marysville Joint Unified School District.

Bond Year means the period ending on June 1 of each year with the first Bond Year beginning on the Closing Date and ending on June 1, 2013, and the last Bond Year ending on the date on which none of the Certificates remain outstanding.

Business Day means any day other than a Saturday, Sunday, or a day on which banking institutions in the State or the state in which the Corporate Trust Office is located are authorized or obligated by law or executive order to be closed.

Capital Appreciation Certificate means the Certificates designated as Capital Appreciation Certificates in the Trust Agreement, interest with respect to which is compounded and paid at maturity or on prior redemption.

Certificate Reserve Requirement means, as of any date of calculation, an amount equal to the least of (i) Maximum Annual Debt Service on all Certificates then Outstanding, (ii) 125% of average Annual Debt Service on all Certificates then Outstanding, and (iii) 10% of the initial proceeds of Certificates executed and delivered on the Closing Date (or, if the Certificates were sold with more than a de minimis amount of original issue discount or premium, the issue price of the Certificates (excluding pre-issuance accrued interest), as those terms are defined in the Internal Revenue Code).

1002416.2 3662. 018 A-3

Certificates means the 2012 Certificates of Participation (Refundings and Capital Projects) authorized by, and at any time Outstanding pursuant to, the Trust Agreement.

Defeasance Securities means direct non-callable obligations of the United States of America and securities fully and unconditionally guaranteed as to the timely payment of Accreted Value by the United States of America, to which direct obligation or guarantee the full faith and credit of the United States of America has been pledged, Refcorp interest strips, CATS, TIGRS, STRPS, or defeased municipal bonds rated AAA by S&P or Aaa by Moody’s (or any combination of the foregoing).

District means the Marysville Joint Unified School Distirct.

Facilities means the real property described in Exhibit A attached to the Facilities Lease and all improvements located thereon.

Hazardous Substance means any substance that shall, at any time, be listed as “hazardous” or “toxic” in any Applicable Environmental Law or that has been or shall be determined at any time by any agency or court to be a hazardous or toxic substance regulated under Applicable Environmental Laws; and also means, without limitation, any flammable explosives, radioactive materials, hazardous materials, hazardous wastes, hazardous or toxic substances, or related materials defined in the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended (42 USC Sections 9601 et seq.), the Hazardous Materials Transportation Act, as amended (42 USC Sections 1801 et seq.), the Resource Conservation and Recovery Act, as amended (42 USC Sections 9601 et seq.) and in the regulations adopted and publications promulgated pursuant thereto, or any other Federal, State or local environmental law, ordinance, rule, or regulation.

Insurer means Assured Guaranty Municipal Corp., a New York stock insurance company, or any successor thereto or assignee thereof.

Investment Securities means the following:

1. Direct obligations of the United States of America and securities fully and unconditionally guaranteed as to the timely payment of principal and interest by the United States of America (“U.S. Government Securities”).

2. Direct obligations* of the following federal agencies, which are fully guaranteed by the full faith and credit of the United State of America:

(a) Export-Import Bank of the United States – Direct obligations and fully guaranteed certificates of beneficial interest

(b) Federal Housing Administration – debentures

(c) General Services Administration – participation certificates

* The following are explicitly excluded from the securities enumerated in 2 and 3:

i. All derivative obligations, including without limitation inverse floaters, residuals, interest-only, principal-only and range notes;

ii. Obligations that have a possibility of returning a zero or negative yield if held to maturity; iii. Obligations that do not have a fixed par value or those whose terms do not promise a fixed dollar amount at

maturity or call date; and iv. Collateralized Mortgage-Backed Obligations (“CMOs”).

1002416.2 3662. 018 A-4

(d) Government National Mortgage Association (“GNMAs”) – guaranteed mortgage-backed securities and guaranteed participation certificates

(e) Small Business Administration – guaranteed participation certificates and guaranteed pool certificates

(f) U.S. Department of Housing & Urban Development – local authority bonds

(g) U.S. Maritime Administration – guaranteed Title XI financings

(h) Washington Metropolitan Area Transit Authority – guaranteed transit bonds

3. Direct obligations* of the following federal agencies, which are not fully guaranteed by the faith and credit of the United States of America:

(a) Federal National Mortgage Association (“FNMAs”) – senior debt obligations rated Aaa by Moody’s and AAA by S&P

(b) Federal Home Loan Mortgage Corporation (“FHLMCs”) – participation certificates and senior debt obligations rated Aaa by Moody’s and AAA by S&P

(c) Federal Home Loan Banks – consolidated debt obligations

(d) Student Loan Marketing Association – debt obligations

(e) Resolution Funding Corporation – debt obligations

4. Direct, general obligations of any state of the United States of America or any subdivision or agency thereof whose uninsured and unguaranteed general obligation debt is rated, at the time of purchase, A2 or better by Moody’s and A or better by S&P, or any obligation fully and unconditionally guaranteed by any state, subdivision or agency whose uninsured and unguaranteed general obligation debt is rated, at the time of purchase, A2 or better by Moody’s and A or better by S&P.

5. Commercial paper (having original maturities of not more than 270 days) rated, at the time of purchase, P-1 by Moody’s and A-1 or better by S&P.

6. Certificates of deposit, savings accounts, deposit accounts or money market deposits in amounts that are continuously and fully insured by the Federal Deposit Insurance Corporation (“FDIC”), including the Bank Insurance Fund and the Savings Association Insurance Fund and including the Trustee and its affiliates.

7. Certificates of deposit, deposit accounts, federal funds or bankers’ acceptances (in each case having maturities of not more than 365 days following the date of purchase) of any domestic commercial bank or United States branch office of a foreign bank, including the Trustee and its affiliates, provided that such bank’s short-term certificates of deposit are rated P-1 by Moody’s and A-1 or better by S&P (not considering holding company ratings).

8. Investments in money-market funds rated AAAm or AAAm-G by S&P, including such funds for which the Trustee, its affiliates or subsidiaries provide investment advisory or other management services or for which the Trustee or an affiliate of the Trustee serves as investment administrator, shareholder servicing agent, and/or custodian or subcustodian, notwithstanding that (i) the Trustee or an affiliate of the Trustee receives fees from funds for services rendered, (ii) the Trustee collects fees for services rendered pursuant to this Trust Agreement, which fees are separate from the fees received from such funds, and (iii) services performed for such funds and pursuant to this Trust Agreement may at times duplicate those provided to such funds by the Trustee or an affiliate of the Trustee.

1002416.2 3662. 018 A-5

9. State-sponsored investment pools (such as the Local Agency Investment Fund referred to in Section 16429.1 of the California Government Code) rated AA- or better by S&P.

10. Repurchase agreements that meet the following criteria:

(a) A master repurchase agreement or specific written repurchase agreement, substantially similar in form and substance to the master repurchase agreement promulgated by the Securities Industry and Financial Markets Association, governs the transaction.

(b) Acceptable providers shall consist of (i) registered broker/dealers subject to Securities Investors’ Protection Corporation (“SIPC”) jurisdiction or commercial banks insured by the FDIC, if such broker/dealer or bank has an uninsured, unsecured and unguaranteed rating of A3/P-1 or better by Moody’s and A-/A-1 or better by S&P, or (ii) domestic structured investment companies approved by Insurer and rated Aaa by Moody’s and AAA by S&P.

(c) The repurchase agreement shall require termination thereof if the counterparty’s ratings are suspended, withdrawn or fall below A3 or P-1 from Moody’s, or A- or A-1 from S&P. Within ten (10) days, the counterparty shall repay the principal amount plus any accrued and unpaid interest on the investments.

(d) The repurchase agreement shall limit acceptable securities to U.S. Government Securities and to the obligations of GNMA, FNMA or FHLMC described in 2(d), 3(a) and 3(b) above. The fair market value of the securities in relation to the amount of the repurchase obligation, including principal and accrued interest, is equal to a collateral level of at least 104% for U.S. Government Securities and 105% for GNMAs, FNMAs or FHLMCs. The repurchase agreement shall require (i) the Trustee or an independent third party acting solely as agent (“Agent”) for the Trustee to value the collateral securities no less frequently than weekly, (ii) the delivery of additional securities if the fair market value of the securities is below the required level on any valuation date, and (iii) liquidation of the repurchase securities if any deficiency in the required percentage is not restored within two (2) business days of such valuation.

(e) The repurchase securities shall be delivered free and clear of any lien to the Trustee or to the Agent, and such Agent is (i) a Federal Reserve Bank, or (ii) a bank which is a member of the FDIC and which has combined capital, surplus and undivided profits or, if appropriate, a net worth, of not less than $50 million, and the Trustee shall have received written confirmation from such third party that such third party holds such securities, free and clear of any lien, as agent for the Trustee.

(f) A perfected first security interest in the repurchase securities shall be created for the benefit of the Trustee, and the District and the Trustee shall receive an Opinion of Bond Counsel as to the perfection of the security interest in such repurchase securities and any proceeds thereof.

(g) The repurchase agreement shall have a term of one year or less, or shall be due on demand.

(h) The repurchase agreement shall establish the following as events of default, the occurrence of any of which shall require the immediate liquidation of the repurchase securities, unless the Insurer directs otherwise:

i. Insolvency of the broker/dealer or commercial bank serving as the counterparty under the repurchase agreement;

ii. Failure by the counterparty to remedy any deficiency in the required collateral level or to satisfy the margin maintenance call under item 10(d) above; or

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iii. Failure by the counterparty to repurchase the repurchase securities on the specified date for repurchase.

11. Investment agreements (also referred to as guaranteed investment contracts) that meet the following criteria:

(a) A master agreement or specific written investment agreement governs the transaction.

(b) Acceptable providers of uncollateralized investment agreements shall consist of (i) domestic FDIC-insured commercial banks, or U.S. branches of foreign banks, rated at least Aa2 by Moody’s and AA by S&P; (ii) domestic insurance companies rated Aaa by Moody’s and AAA by S&P; and (iii) domestic structured investment companies approved by the Insurer and rated Aaa by Moody’s and AAA by S&P.

(c) Acceptable providers of collateralized investment agreements shall consist of (i) registered broker/dealers subject to SIPC jurisdiction, if such broker/dealer has an uninsured, unsecured and unguaranteed rating of A1 or better by Moody’s and A+ or better by S&P; (ii) domestic FDIC-insured commercial banks, or U.S. branches of foreign banks, rated at least A1 by Moody’s and A+ by S&P; (iii) domestic insurance companies rated at least A1 by Moody’s and A+ by S&P; and (iv) domestic structured investment companies approved by the Insurer and rated Aaa by Moody’s and AAA by S&P. Required collateral levels shall be as set forth in 11(f) below.

(d) The investment agreement shall provide that if the provider’s ratings fall below Aa3 by Moody’s or AA- by S&P, the provider shall within ten (10) days either (i) repay the principal amount plus any accrued and interest on the investment; or (ii) deliver Permitted Collateral as provided below.

(e) The investment agreement must provide for termination thereof if the provider’s ratings are suspended, withdrawn or fall below A3 from Moody’s or A- from S&P. Within ten (10) days, the provider shall repay the principal amount plus any accrued interest on the agreement, without penalty to the District.

(f) The investment agreement shall provide for the delivery of collateral described in (i) or (ii) below (“Permitted Collateral”), which shall be maintained at the following collateralization levels at each valuation date:

i. U.S. Government Securities at 104% of principal plus accrued interest; or

ii. Obligations of GNMA, FNMA or FHLMC (described in 2(d), 3(a) and 3(b) above) at 105% of principal and accrued interest.

(g) The investment agreement shall require the Trustee or Agent to determine the market value of the Permitted Collateral not less than weekly and notify the investment agreement provider on the valuation day of any deficiency. Permitted Collateral may be released by the Trustee to the provider only to the extent that there are excess amounts over the required levels. Market value, with respect to collateral, may be determined by any of the following methods:

i. The last quoted “bid” price as shown in Bloomberg, Interactive Data Systems, Inc., The Wall Street Journal or Reuters;

ii. Valuation as performed by a nationally recognized pricing service, whereby the valuation method is based on a composite average of various bid prices; or

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iii. The lower of two bid prices by nationally recognized dealers. Such dealers or their parent holding companies shall be rated investment grade and shall be market makers in the securities being valued.

(h) Securities held as Permitted Collateral shall be free and clear of all liens and claims of third parties, held in a separate custodial account and registered in the name of the Trustee or the Agent.

(i) The provider shall grant the Trustee or the Agent a perfected first security interest in any collateral delivered under an investment agreement. For investment agreements collateralized initially and in connection with the delivery of Permitted Collateral under 11(f) above, the Trustee and the Insurer shall receive an opinion of counsel as to the perfection of the security interest in the collateral.

(j) The investment agreement shall provide that moneys invested under the agreement must be payable and putable at par to the Trustee without condition, breakage fee or other penalty, upon not more than two (2) business days’ notice, or immediately on demand for any reason for which the funds invested may be withdrawn from the applicable fund or account established under the authorizing document, as well as the following:

i. In the event of a deficiency in the Certificate Fund;

ii. Upon acceleration after an Event of Default;

iii. Upon refunding of the Certificates in whole or in part;

iv. Reduction of the Certificate Reserve Requirement; or

v. If a determination is later made by bond counsel that investments must be yield-restricted.

Notwithstanding the foregoing, the agreement may provide for a breakage fee or other penalty that is payable in arrears and not as a condition of a draw by the Trustee if the District’s obligation to pay such fee or penalty is subordinate to its obligation to pay Rental Payments and to make deposits to the Certificate Reserve Fund.

(k) The investment agreement shall establish the following as events of default, the occurrence of any of which shall require the immediate liquidation of the investment securities:

i. Failure of the provider or the guarantor (if any) to make a payment when due or to deliver Permitted Collateral of the character, at the times or in the amounts described above;

ii. Insolvency of the provider or the guarantor (if any) under the investment agreement;

iii. Failure by the provider to remedy any deficiency with respect to required Permitted Collateral;

iv. Failure by the provider to make a payment or observe any covenant under the agreement;

v. The guaranty (if any) is terminated, repudiated or challenged; or

vi. Any representation of warranty furnished to the Trustee or the District in connection with the agreement is false or misleading.

(l) The investment agreement must incorporate the following general criteria:

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i. “Cure periods” for payment default shall not exceed two (2) business days;

ii. The agreement shall provide that the provider shall remain liable for any deficiency after application of the proceeds of the sale of any collateral, including costs and expenses incurred by the Trustee or the Insurer;

iii. Neither the agreement nor guaranty agreement, if applicable, may be assigned (except to a provider that would otherwise be acceptable under these guidelines) or amended without the prior consent of the Insurer;

iv. If the investment agreement is for a debt service reserve fund, reinvestments of funds shall be required to bear interest at a rate at least equal to the original contract rate.

v. The provider shall be required to immediately notify the Insurer and the Trustee of any event of default or any suspension, withdrawal or downgrade of the provider’s ratings;

vi. The agreement shall be unconditional and shall expressly disclaim any right of set-off or counterclaim;

vii. The agreement shall require the provider to submit information reasonably requested by the Insurer, including balance invested with the provider, type and market value of collateral and other pertinent information.

12. Forward delivery agreements in which the securities delivered mature on or before each Payment Date (for the Certificate Fund or the Certificate Reserve Fund) or draw down date (construction funds) that meet the following criteria:

(a) A specific written investment agreement governs the transaction.

(b) Acceptable providers shall be limited to (i) any registered broker/dealer subject to the Securities Investors’ Protection Corporation jurisdiction, if such broker/dealer or bank has an uninsured, unsecured and unguaranteed obligation rated A3/P-1 or better by Moody’s and A-/A-1 or better by S&P; (ii) any commercial bank insured by the FDIC, if such bank has an uninsured, unsecured and unguaranteed obligation rated A3/P-1 or better by Moody’s and A-/A-1 or better by S&P; and (iii) domestic structured investment companies approved by the Insurer and rated Aaa by Moody’s and AAA by S&P.

(c) The forward delivery agreement shall provide for termination or assignment (to a qualified provider hereunder) of the agreement if the provider’s ratings are suspended, withdrawn or fall below A3 or P-1 from Moody’s or A- or A-1 from S&P. Within ten (10) days, the provider shall fulfill any obligations it may have with respect to shortfalls in market value. There shall be no breakage fee payable to the provider in such event.

(d) Permitted securities shall include the investments listed in 1, 2 and 3 above.

(e) The forward delivery agreement shall include the following provisions:

i. The permitted securities must mature at least one (1) business day before a debt service payment date or scheduled draw. The maturity amount of the permitted securities must equal or exceed the amount required to be in the applicable fund on the applicable valuation date.

ii. The agreement shall include market standard termination provisions, including the right to terminate for the provider’s failure to deliver qualifying securities

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or otherwise to perform under the agreement. There shall be no breakage fee or penalty payable to the provider in such event.

iii. Any breakage fees shall be payable only on debt service payment dates and shall be subordinated to the payment of debt service and Certificate Reserve Fund replenishments.

iv. The provider must submit at closing a bankruptcy opinion to the effect that upon any bankruptcy, insolvency or receivership of the provider, the securities will not be considered to be a part of the provider’s estate, and otherwise acceptable to the Insurer.

v. The agreement may not be assigned (except to a provider that would otherwise be acceptable under these guidelines) or amended without the prior written consent of the Insurer.

13. Forward delivery agreements in which the securities delivered mature after the funds may be required but provide for the right of the District or the Trustee to put the securities back to the provider under a put, guaranty or other hedging arrangement, only with the prior written consent of the Insurer.

Maximum Annual Debt Service shall mean the greatest amount of Accreted Value becoming due and payable with respect to all Certificates in any Bond Year including the Bond Year in which the calculation is made or any subsequent Bond Year.

Net Proceeds means the amount remaining from the gross proceeds of any insurance claim or condemnation award made in connection with the Facilities, after deducting all expenses (including attorneys’ fees) incurred in the collection of such claim or award.

Outstanding, when used as of any particular time with reference to Certificates, means all Certificates theretofore, or thereupon being, executed and delivered by the Trustee under the Trust Agreement, including those Certificates with respect to which all liabilities have been discharged in accordance with Section 11.2 (Payments Under the Policy) of the Trust Agreement, except (1) Certificates theretofore cancelled by the Trustee or surrendered to the Trustee for cancellation; (2) Certificates with respect to which all liability of the District shall have been discharged in accordance with Section 5.2 (Discharge of Liability on Certificates) of the Trust Agreement, including Certificates (or portions of Certificates) referred to in Section 6.11 (Money Held for Particular Certificates) of the Trust Agreement; and (3) Certificates for the transfer or exchange of or in lieu of or in substitution for which other Certificates shall have been executed and delivered by the Trustee pursuant to the Trust Agreement.

Permitted Encumbrances means (1) liens for general ad valorem taxes and assessment, if any, not then delinquent, or that the District may, pursuant to the Facilities Lease, permit to remain unpaid, (2) easements, rights of way, mineral rights, drilling rights, and other rights, reservations, covenants, conditions, or restrictions that exist of record as of the date of recordation of the Facilities Lease and that the District certifies in writing will not materially impair the use of the Facilities, (3) the Ground Lease, as it may be amended from time to time, (4) the Trust Agreement, as it may be amended from time to time, (5) any right or claim of any mechanic, laborer, materialman, supplier, or vendor not filed or perfected in the manner prescribed by law, (6) easements, rights of way, mineral rights, drilling rights, and other rights, reservations, covenants, conditions, or restrictions established following the date of recordation of the Facilities Lease and to which the Corporation consents in writing, and (7) liens relating to special assessments levied with respect to the Facilities.

Person means a corporation, firm, association, partnership, trust, or other legal entity or group of entities, including a governmental entity or any agency or political subdivision thereof.

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Policy means the municipal bond new issue insurance policy issued by the Insurer that guarantees payment of Accreted Value with respect to the Certificates.

Rating Category means (i) with respect to any long-term rating category, all ratings designated by a particular letter or combination of letters, without regard to any numerical modifier, plus or minus sign or other modifier and (ii) with respect to any short-term or commercial paper rating category, all ratings designated by a particular letter or combination of letters and taking into account any numerical modifier, but not any plus or minus sign or other modifier.

Redemption Price means, with respect to any Certificate (or portion thereof) the Accreted Value with respect thereto, plus interest represented thereby accrued to the date fixed for redemption, plus the applicable premium, if any, payable upon redemption thereof pursuant to the provisions of such Certificate and the Trust Agreement.

Rental Payments means the Rental Payments payable by the District pursuant to the provisions of the Facilities Lease.

Reserve Facility means any letter of credit, insurance policy, surety bond or other credit source deposited with the Trustee.

State means the State of California.

GROUND LEASE

Under the Ground Lease, the District will lease the Facilities to the Corporation for an advance rental equal to the proceeds of the sale of the Certificates. The term of the Ground Lease will commence on the Closing Date and will terminate on June 1, 2042, unless the term is sooner terminated because of payment in full or defeasance of the Certificates.

FACILITIES LEASE

General

Simultaneously with the delivery of the Ground Lease, the Corporation will sublease the Facilities to the District pursuant to the Facilities Lease. Certain of the provisions of the Facilities Lease are summarized below; this summary does not purport to be complete or definitive and is qualified in its entirety by reference to the full terms of the Facilities Lease.

Term

The term of the Facilities Lease shall commence on the Closing Date and shall end on June 1, 2042, unless such term is extended or sooner terminated. If on June 1, 2042, the Certificates have not been fully paid, or if the rental payable under the Facilities Lease has been abated at any time and for any reason, then the term of the Facilities Lease will be extended for a period of ten years. If the Certificates are fully paid or defeased, the term of the Facilities Lease shall end 10 days thereafter.

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Substitution

The District and the Corporation may substitute property as part of the Facilities for purposes of the Ground Lease and the Facilities Lease, but only after the District shall have filed with the Trustee all of the following:

Recording. A Statement of the District certifying that the amended Ground Lease and Facilities Lease, or memoranda thereof, and an amended memorandum of the Trust Agreement have been duly recorded in the official records of the county in which the real property is located;

Replacement Value. An MAI fair market appraisal demonstrating that the value of the property that will constitute the Facilities after the substitution will be at least equal to the value of the Facilities originally leased in the Facilities Lease or a Certificate of an Insurance Consultant stating that the replacement value (estimated for casualty insurance purposes) of the property that will constitute the Facilities after such substitution will be at least equal to the replacement value of the Facilities originally leased hereunder;

Title Insurance. A California Land Title Association leasehold owner’s policy or policies or a commitment for such policy or policies or an amendment or endorsement to an existing policy or policies in an amount or amounts such that the amount of title insurance coverage with respect to the Facilities after the substitution is at least equal to the amount of such insurance with respect to the Facilities prior to the substitution. Each such policy or endorsement, when issued, shall name the Trustee as the insured and shall insure the leasehold estate of the Corporation in such substituted property, subject only to the following exceptions: (i) Permitted Encumbrances, and (ii) exceptions that do not substantially interfere with the District’s right to use and occupy the substituted property and that will not result in an abatement of Rental Payments;

No Effect on Occupancy; Useful Life. A Statement of the District stating that such substitution does not adversely affect the District’s use and occupancy of the Facilities and that the Facilities, as amended, have a useful life extending at least to the date of termination of the Facilities Lease;

No Prior Liens. A Statement of the District certifying that the property that will constitute the Facilities after the substitution is not subject to any liens securing monetary obligations (other than Permitted Encumbrances), unless such liens are subordinate to the interests of the Corporation created by the Facilities Lease;

Essential Facilities. A Statement of the District certifying that the property that will constitute the Facilities after the substitution is essential to the fulfillment of the District’s governmental purposes;

Opinion of Counsel. An Opinion of Counsel stating that amendments to the Ground Lease and Facilities Lease that implement the substitution are authorized or permitted by and comply with the Constitution and laws of the State of California and the Trust Agreement; upon execution and delivery will be valid obligations of the District and the Corporation; and will not cause the interest component of the Rental Payments to be included in gross income for federal income tax purposes.

Consent of Insurer. So long as the Policy is in effect and the Insurer is not in default with respect to its payment obligations thereunder, the written consent of the Insurer to the substitution.

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Rental Payments; Additional Payments

Under the Facilities Lease, the District will pay Rental Payments for the use of the Facilities. Rental Payments will be payable in installments on May 15 (principal and interest) in each year, continuing to and including the date of termination of the Facilities Lease. The District also promises to pay Additional Payments, which include (i) all costs and expenses incurred by the Corporation or the Trustee in connection with the execution, performance, or enforcement of the Facilities Lease and the Trust Agreement, (ii) all amounts necessary to replenish valuation deficiencies in the Certificate Reserve Fund, (iii) amounts necessary to reimburse providers of Reserve Facilities (to the extent that such amounts and Rental Payments do not exceed annual fair rental value of the Facilities), and (iv) all amounts needed for deposit into the Rebate Fund.

No Offsets; Net Lease

The District promises to make all Rental Payments when due without deduction or offset of any kind, notwithstanding any dispute between the Corporation and the District, and not to withhold any Rental Payments pending the final resolution of any such dispute. The Facilities Lease will be deemed and construed to be a “net-net-net lease” and the District agrees that the Rental Payments shall be an absolute net return to the Corporation, free and clear of any expenses, charges, or setoffs whatsoever.

Abatement of Rental

Except to the extent of amounts held by the Trustee in the Certificate Reserve Fund or in any other funds held by the Trustee under the Trust Agreement otherwise available to the Trustee for payments in respect of the Certificates, Rental Payments and Additional Payments shall be abated proportionately during any period in which, by reason of damage to, destruction of, taking under the power of eminent domain (or sale to any entity threatening the use of such power) of, or title defect with respect to any portion of the Facilities, there is substantial interference with the use and possession of the Facilities or a portion thereof. The amount of abatement shall be such that the resulting Rental Payments and Additional Payments represent fair consideration for the use and possession of the portion of the Facilities not so interfered with. Such abatement shall commence with the date of such interference and shall end only with cure thereof. Any determination of remaining fair rental value will be made with reference to the greater of (i) the District’s fair rental value certification as of the date of execution and delivery of the Certificates or (ii) the fair rental value on the date of determination.

Prepayments

Casualty/Condemnation. The District will prepay from net insurance proceeds and eminent domain proceeds, to the extent described below, all or a proportionate amount of each (such that the remaining Rental Payments are substantially equal in each year thereafter) of the principal components of the Rental Payments then unpaid, at a prepayment amount equal to the sum of the principal components prepaid plus the interest component of such Rental Payments accrued to the date of prepayment.

Optional Prepayment. The District may prepay, from any source of available funds, all or any portion of the Rental Payments by depositing with the Trustee moneys or securities as provided in the Trust Agreement sufficient to make such Rental Payments when due. The District agrees that, if following such prepayment the Facilities are damaged or destroyed or taken by eminent domain, it is not entitled to, and by such prepayment waives the right of, abatement of such prepaid Rental Payments and shall not be entitled to any reimbursement of such Rental Payments. Any such prepayment shall be applied by the Trustee to pay the principal and interest components of the Certificates and to prepay Certificates if such Certificates are subject to redemption pursuant to the terms of the Trust Agreement.

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Covenants of the District

Maintenance of the Facilities. The District agrees that, at all times during the term of the Facilities Lease, the District will, at the District’s own cost and expense, maintain, preserve, and keep the Facilities and every portion thereof in good repair, working order, and condition and that the District will from time to time make or cause to be made all necessary and proper repairs, replacements, and renewals.

Taxes and other Governmental Charges; Utility Charges. If the use, possession, or acquisition by the District or the Corporation of the Facilities is found to be subject to taxation in any form (except for income or franchise taxes of the Corporation), the District will pay during the term of the Facilities Lease, as the same respectively become due, all taxes and governmental charges of any kind whatsoever that may at any time be lawfully assessed or levied against or with respect to the Facilities, and any equipment or other property acquired by the District in substitution for, as a renewal or replacement of, or a modification, improvement or addition to the Facilities; provided that, with respect to any governmental charges or taxes that may lawfully be paid in installments over a period of years, the District shall be obligated to pay only such installments as are accrued during such time as the Facilities Lease is in effect. The District shall pay or cause to be paid all gas, water, steam, electricity, heat, power, air conditioning, telephone, utility, and other charges incurred in the operation, maintenance, use, occupancy, and upkeep of the Facilities.

Liens. In the event the District shall at any time during the term of the Facilities Lease cause any changes, alterations, additions, improvements, or other work to be done or performed or materials to be supplied, in or upon the Facilities, the District shall pay, when due, all sums of money that may become due for, or purporting to be for, any labor, services, materials, supplies, or equipment furnished or alleged to have been furnished to or for the District in, upon or about the Facilities and shall keep the Facilities free of any and all mechanics’ or materialmen’s liens or other liens against the Facilities or the Corporation’s interest therein. In the event any such lien attaches to or is filed against the Facilities or the Corporation’s interest therein, the District shall cause each such lien to be fully discharged and released at the time the performance of any obligation secured by any such lien matures or becomes due, except that if the District desires to contest any such lien it may do so in good faith. If any such lien is reduced to final judgment and such judgment or such process as may be issued for the enforcement thereof is not promptly stayed, or if so stayed and said stay thereafter expires, the District shall forthwith pay and discharge such judgment.

Environmental Covenants. The Corporation and the District will comply with all Applicable Environmental Laws with respect to the Facilities and will not use, store, generate, treat, transport, or dispose of any Hazardous Substance thereon or in a manner that would cause any Hazardous Substance to later flow, migrate, leak, leach, or otherwise come to rest on or in the Facilities.

Assignment and Subleasing. Neither the Facilities Lease nor any interest of the District thereunder shall be mortgaged, pledged, assigned, sublet, encumbered (except for Permitted Encumbrances), or transferred by the District by voluntary act or by operation of law or otherwise, except with the prior written consent of the Corporation and the Insurer, which, in the case of subletting, shall not be unreasonably withheld; provided such subletting shall not affect the tax-exempt status of the interest components of the Rental Payments payable by the District thereunder. Any sublease entered into subsequent to closing shall be subject to Insurer consent. No such mortgage, pledge, assignment, sublease or transfer shall in any event affect or reduce the obligation of the District to make the Rental Payments and Additional Payments required under the Facilities Lease.

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Insurance

Fire and Extended Coverage Insurance. 1. Coverage. The District shall maintain throughout the term of the Facilities Lease insurance against loss or damage to the Facilities and to any structures constituting any part of the Facilities by fire and lightning, with extended coverage insurance, vandalism and malicious mischief insurance and sprinkler system leakage insurance. Said extended coverage insurance shall, as nearly as practicable, cover loss or damage by explosion, windstorm, riot, aircraft, vehicle damage, smoke, and such other hazards as are normally covered by such insurance. Full payment of proceeds of the insurance proceeds up to the required policy dollar limit in connection with damage to the Facilities shall, under no circumstances, be contingent on the degree of damage sustained at other facilities owned or leased by the District.

2. Amount. Such insurance shall be in an amount equal to the greater of (a) the replacement cost (without deduction for depreciation) of all structures constituting any part of the Facilities, excluding the cost of excavations, of grading and filling, and of the land (except that such insurance may be subject to deductible clauses for any one loss of not to exceed $5,000) and (b) the principal amount of the Certificates.

3. Application of Net Proceeds. a. Repair or Replacement of Facilities. In the event of any damage to or destruction of any part of the Facilities caused by the perils covered by such insurance, if the proceeds of such insurance exceed $200,000, the District, except as described below, shall cause the proceeds to be utilized for the repair, reconstruction, or replacement of the damaged or destroyed item or items, and the Trustee shall hold the proceeds separate and apart from all other funds, to the end that the proceeds shall be applied to the repair, reconstruction, or replacement of the Facilities to at least the same good order, repair, and condition as they were in prior to the damage or destruction, insofar as the same may be accomplished by the use of said proceeds.

b. Prepayment of Lease. Alternatively, the District, at its option, may apply the proceeds to the redemption of Certificates; provided that, unless the District redeems all the Outstanding Certificates, the prior written consent of the Insurer is required for any such redemption.

4. Self-Insurance. As an alternative to providing a policy of fire and extended coverage insurance, the District, may provide a self-insurance method or plan of protection if and to the extent such self-insurance method or plan of protection shall afford reasonable coverage for the risks required to be insured against, in light of all circumstances, giving consideration to cost, availability, and similar plans or methods of protection adopted by public entities in the State of California other than the District. So long as the Policy is in effect and the Insurer is not in default with respect to its payment obligations thereunder, the District shall not self-insure for this risk beyond any pooled insurance program in existence as of the date of delivery of the Certificates, unless the Insurer approves such self-insurance in writing.

Public Liability and Property Damage Insurance. Except as described below, the District shall maintain throughout the term of the Facilities Lease a standard comprehensive general liability insurance policy or policies in protection of the Corporation and its directors, officers, agents, and employees and the Trustee, indemnifying said parties against all direct or contingent loss or liability for damages for personal injury, death, or property damage occasioned by reason of the operation of the Facilities. The minimum liability limits of such insurance shall be $1,000,000 for personal injury or death of each person and $3,000,000 for personal injury or deaths of two or more persons in each accident or event and shall be $1,000,000 (subject to a deductible clause of not to exceed $10,000) for damage to property resulting from each accident or event. Such public liability and property damage insurance may, however, be in the form of a single limit policy in the amount of $3,000,000 covering all such risks. As an alternative to

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providing a policy of public liability and property damage insurance, the District may provide a self-insurance method or plan of protection if and to the extent such self-insurance method or plan of protection shall afford reasonable coverage for the risks required to be insured against, in light of all circumstances, giving consideration to cost, availability, and similar plans or methods of protection adopted by public entities in the State of California other than the District. So long as the Policy is in effect and the Insurer is not in default with respect to its payment obligations thereunder, the District shall not self-insure for this risk, unless the Insurer approves such self-insurance in writing.

Rental Abatement Insurance. The District shall maintain throughout the term of the Facilities Lease rental abatement insurance to cover loss, total or partial, of the Rental Payments due thereunder owing to an abatement of rental as the result of any of the hazards covered by fire and extended coverage insurance. Such insurance shall be maintained in an amount sufficient to pay the Rental Payments for a period of at least 24 months. So long as the Policy is in effect and the Insurer is not in default with respect to its payment obligations thereunder, the District shall not self-insure for this risk, unless the Insurer approves such self-insurance in writing.

Workers’ Compensation Insurance. The District shall maintain workers’ compensation insurance covering all employees working at the Facilities in the amounts as required by law. Such insurance may be maintained by the District as part of or in conjunction with any other insurance maintained by the District. As an alternative to providing such insurance, the District may file a resolution with the State Department of Industrial Relations, Division of Self-Insurance Plans, declaring the District to be legally self-insured against workers’ compensation claims and may maintain that status; provided that the District shall annually employ an actuary to review the District’s workers’ compensation claims experience and project future claims exposure. The District covenants to budget the amounts and comply with the other actions recommended by the actuary. The District further agrees to comply with any requirements made by the Division of Self-Insurance Plans as a result of any audit performed by that office.

Title Insurance. The District shall provide a title insurance policy payable to the Trustee for the use and benefit of the Owners of the Certificates. Such policy shall be in the form of a CLTA leasehold title policy, in the amount of the principal amount of Certificates then Outstanding, and issued by a company of recognized standing duly authorized to issue the same, subject only to Permitted Encumbrances, as defined below. All proceeds received by the Trustee under said policy shall be applied and disbursed by the Trustee in the same order and priority and for the same purposes as proceeds received in eminent domain proceedings.

Eminent Domain

So long as any of the Certificates shall be outstanding, any award made in eminent domain proceedings for taking the Facilities or any portion thereof shall be applied to the prepayment of Rental Payments. Any such award made after all of the Certificates have been fully paid and retired shall be paid to the District.

If the whole of the Facilities, or so much thereof as to render the remainder unusable for the purposes for which it was used by the District, shall be taken under the power of eminent domain, the term of the Facilities Lease shall cease as of the day that possession shall be so taken. If the award on a partial or complete taking, together with other funds available therefor, is insufficient to prepay all of the Outstanding Certificates, the District shall use all reasonable efforts to appeal such award to obtain an award that will be sufficient in amount to prepay the Certificates in full for a complete taking, or, in the event of a partial taking, an amount sufficient such that remaining Rental Payments will be sufficient to pay the remaining Outstanding Certificates. If less than the whole of the Facilities shall be taken under the power of eminent domain and the remainder is usable for the purposes for which it was used by the

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District at the time of such taking, then the Facilities Lease shall continue in full force and effect as to such remainder, and the parties waive the benefits of any law to the contrary, and in such event there shall be a partial abatement of rental.

Events of Default

The following events shall be Events of Default:

Payment Default. Failure of the District to pay any Rental Payments payable under the Facilities Lease when the same becomes due and payable, time being expressly declared to be of the essence of the Facilities Lease

Breach of Covenant. Failure of the District to keep, observe, or perform any other term, covenant or condition contained in the Facilities Lease or in the Trust Agreement to be kept or performed by the District for a period of 30 days after notice of the same has been given to the District by the Corporation, the Insurer, or the Trustee or for such additional time as is reasonably required to correct the same not in excess of a total of 90 days;

Transfer of District’s Interest. Assignment or transfer of the District’s interest in the Facilities Lease or any part thereof without the written consent of the Corporation, either voluntarily or by operation of law or otherwise;

Bankruptcy or Insolvency. Institution of any proceeding under the United States Bankruptcy Code or any federal or state bankruptcy, insolvency, or similar law or any law providing for the appointment of a receiver, liquidator, trustee, or similar official of the District or of all or substantially all of its assets, by or with the consent of the District, or institution of any such proceeding without its consent that is not permanently stayed or dismissed within sixty days, or agreement by the District with the District’s creditors to effect a composition or extension of time to pay the District’s debts, or request by the District for a reorganization or to effect a plan of reorganization, or for a readjustment of the District’s debts, or a general or any assignment by the District for the benefit of the District’s creditors;

Abandonment of the Facilities. Abandonment by the District of any part of the Facilities (except any portion thereof for which a substitution of property has been made).

Remedies on Default

Upon the occurrence and during the continuance of an Event of Default, it shall be lawful for the Corporation to exercise any and all remedies available pursuant to law or granted pursuant to the Facilities Lease. Upon an Event of Default, the Corporation, in addition to all other rights and remedies it may have at law, shall have the option to do any of the following:

Termination of Lease. By written notice to the District, to terminate the Facilities Lease and to re-enter the Facilities and remove all persons in possession thereof and all personal property whatsoever situated upon the Facilities and place such personal property in storage in any warehouse or other suitable place in the County of Yuba, State of California. In the event of such termination, the District agrees to surrender immediately possession of the Facilities, without let or hindrance, and to pay the Corporation all damages recoverable at law that the Corporation may incur by reason of default by the District, including, without limitation, any costs, loss or damage whatsoever arising out of, in connection with, or incident to any such re-entry upon the Facilities and removal or storage of such property by the Corporation or its duly authorized agents.

1002416.2 3662. 018 A-17

Continuation of Lease; Reletting. Without terminating the Facilities Lease, (a) to collect each installment of rent as it becomes due and enforce any other term or provision hereof to be kept or performed by the District, regardless of whether or not the District has abandoned the Facilities, and/or (b) to enter, retake possession of, and re-let the Facilities. If the Corporation does not elect to terminate the Facilities Lease in the manner described in the preceding paragraph, the District agrees to keep or perform all covenants and conditions contained in the Facilities Lease. If the Facilities are not re-let, the District agrees to pay the full amount of the rent to the end of the term of the Facilities Lease; if the Facilities are re-let, the District agrees to pay any deficiency in rent that results therefrom. The District further agrees to pay said rent punctually at the same time and in the same manner as for the payment of rent hereunder (without acceleration), notwithstanding the fact that the Corporation may have received in previous years or may receive thereafter in subsequent years rental in excess of the rental specified in the Facilities Lease and notwithstanding any entry or re-entry by the Corporation or proceeding brought by the Corporation to recover possession of the Facilities.

No Acceleration. Notwithstanding anything in the Facilities Lease or in the Trust Agreement to the contrary, there shall be no right under any circumstance to accelerate the Rental Payments or otherwise declare any Rental Payments not yet due to be immediately due and payable.

TRUST AGREEMENT

General

The Trust Agreement sets forth the terms of the Certificates, the application of the proceeds of the sale of the Certificates, the nature and extent of the security for the Certificates, various rights of the Owners, and the rights, duties, and immunities of the Trustee. Certain provisions of the Trust Agreement are summarized below. Other provisions are summarized in this Official Statement under the caption “THE CERTIFICATES.” This summary does not purport to be complete or definitive and is qualified in its entirety by reference to the full terms of the Trust Agreement.

Assignment

Under the Trust Agreement, the Corporation assigns to the Trustee, for the benefit of the Owners, certain of its rights and interests under the Facilities Lease, including its right to receive the Rental Payments and the right to enforce the payment of Rental Payments.

Establishment of Funds and Accounts

The Trust Agreement establishes the Costs of Issuance Fund and the Construction Fund (which are to be held by the District) and the Certificate Fund, the Certificate Reserve Fund, and the Redemption Fund (which are to be held by the Trustee).

Certificate Fund. All Rental Payments will be deposited by the Trustee upon receipt in the Certificate Fund, which fund the Trustee will maintain and apply in accordance with the Trust Agreement.

Allocation of Rental Payments. The Trustee will transfer from the Certificate Fund and deposit in the following respective funds the following amounts on the dates described. The requirements of each such fund at the time of deposit to be satisfied before any deposit is made to any fund subsequent in priority:

1002416.2 3662. 018 A-18

First: On each Payment Date, commencing June 1, 2023, the Trustee shall maintain on deposit in the Certificate Fund an amount equal to the aggregate amount of Accreted Value and interest becoming due and payable with respect to the Outstanding Certificates; and

Second: The Trustee, on the date specified in a Written Request of the District filed with the Trustee, at the time that any prepaid Rental Payment is paid to the Trustee, shall deposit in the Redemption Fund that amount of moneys representing the portion of the Rental Payments designated as prepaid Rental Payments.

Any moneys remaining in the Certificate Fund after the foregoing transfers shall be transferred, in order of priority, (i) into the Certificate Reserve Fund to the extent that the amount therein is less than the certificate reserve requirement, (ii) into the Rebate Fund if so directed by the District, and (iii) to the District.

Application of Certificate Fund. All amounts in the Certificate Fund shall be used and withdrawn by the Trustee solely for the purposes of paying the Accreted Value and interest represented by the Certificates when due and payable.

Application of Certificate Reserve Fund. 1. Replenishment of Certificate Reserve Fund. The Trustee shall deposit as soon as possible in each month in the Certificate Reserve Fund, upon the occurrence of any deficiency therein, one-twelfth of the aggregate amount of each unreplenished prior withdrawal from the Certificate Reserve Fund and one-third of the aggregate amount of any deficiency due to any required valuations of the investments in the Certificate Reserve Fund until the balance in the Certificate Reserve Fund is at least equal to the Certificate Reserve Requirement.

2. Letter of Credit. a. In lieu of making the Certificate Reserve Requirement deposit as described in (1) above, or in replacement of moneys then on deposit in the Certificate Reserve Fund, the District may deliver to the Trustee an irrevocable letter of credit issued by a financial institution having unsecured debt obligations rated in one of the two highest Rating Categories of Standard & Poor’s, in an amount, together with moneys, Investment Securities or other Reserve Facilities (as described in (3) below) on deposit in the Certificate Reserve Fund, equal to the Certificate Reserve Requirement. Such letter of credit shall have a term no less than three years or, if less, the maturity of the Certificates. If a drawing is made on the letter of credit, the District shall make such payments as may be required by the terms of the letter of credit or any obligations related thereto (but no less than quarterly pro rata payments) so that the letter of credit shall be reinstated in the amount of such drawing within one year of the date of such drawing.

b. The issuer of the letter of credit shall be required to notify the District and the Trustee, not later than 30 months prior to the stated expiration date of the letter of credit, as to whether such expiration date shall be extended, and if so, shall indicate the new expiration date. If the notice indicates that the expiration date shall not be extended, the District shall deposit in the Certificate Reserve Fund an amount sufficient to cause the cash or Investment Securities on deposit in the Certificate Reserve Fund together with any other Reserve Facilities, to equal the Certificate Reserve Requirement, such deposit to be paid in equal installments on at least a semiannual basis over the remaining term of the letter of credit, unless the Reserve Facility is replaced by another qualifying Reserve Facility. The letter of credit shall permit a draw in full not less than two weeks prior to the expiration or termination of such letter of credit if the letter of credit has not been replaced or renewed. The Trustee shall draw upon the letter of credit prior to its expiration or termination unless an acceptable replacement is in place or the Certificate Reserve Fund is fully funded in its required amount.

1002416.2 3662. 018 A-19

3. Other Reserve Facility. In lieu of making the Certificate Reserve Requirement deposit described in (1) above, or in replacement of moneys then on deposit in the Certificate Reserve Fund, the District may also deliver to the Trustee an insurance policy, surety bond or other Reserve Facility securing an amount, together with moneys, Investment Securities or other Reserve Facilities on deposit in the Certificate Reserve Fund, no less than the Certificate Reserve Requirement.

If the insurance policy or surety bond is issued by a company licensed to issue an insurance policy guaranteeing the timely payment of debt service with respect to the Certificates (a “municipal bond insurer”), the claims paying ability of the issuer thereof shall be rated “AAA” or “Aaa” by Standard & Poor’s or Moody’s, respectively, if the Certificate Reserve Fund was funded with cash on the Closing Date, or (ii) at least as highly as the claims-paying ability as of the Closing Date of the issuer of the Reserve Facility delivered then, if the Certificate Reserve Requirement was initially satisfied with a Reserve Facility.

If the insurance policy or surety bond is issued by an entity other than a municipal bond insurer, the form and substance of such instrument and the issuer thereof shall be approved by the Insurer.

Such Reserve Facility shall have a term of no less than the maturity of the Certificates in connection with which such Reserve Facility was obtained. If such Reserve Facility for any reason lapses or expires, the District shall immediately (i) deliver to the Trustee a letter of credit satisfying the requirements described above, (ii) deliver to the Trustee a Reserve Facility satisfying the requirements described herein, or (iii) make the required deposits to the Certificate Reserve Fund.

4. Use of Amounts in Certificate Reserve Fund. All amounts in the Certificate Reserve Fund (including all amounts that may be obtained from Reserve Facilities on deposit in the Certificate Reserve Fund) shall be used and withdrawn by the Trustee solely for the purpose of making up any deficiency in the Certificate Fund, or (together with any other moneys available therefor) for the payment or redemption of all Certificates then Outstanding, or for the payment of the final Accreted Value and interest payment with respect to the Certificates if following such payment the amounts in the Certificate Reserve Fund will equal the Certificate Reserve Requirement.

The Trustee shall first draw on the Certificate Reserve Fund held in cash or Investment Securities, and then, on a pro rata basis with respect to amounts held in the form of Reserve Facilities (calculated by reference to the maximum amounts of such Reserve Facilities and the amount of the initial deposit of such cash and Investment Securities), draw under each Reserve Facility issued with respect to the Certificate Reserve Fund, in a timely manner and pursuant to the terms of such Reserve Facility to the extent necessary in order to obtain sufficient funds on or prior to the date such funds are needed to pay the Accreted Value of the Certificates when due.

If the Trustee has notice that any payment of Accreted Value of a Certificate has been recovered from an Owner pursuant to the United States Bankruptcy Code by a trustee in bankruptcy in accordance with the final, nonappealable order of a court having competent jurisdiction, the Trustee, pursuant to and provided that the terms of the Reserve Facility, if any, securing the Certificates so provide, shall so notify the issuer thereof and draw on such Reserve Facility to the lesser of the extent required or the maximum amount of such Reserve Facility in order to pay to such Owners the Accreted Value so recovered. If and to the extent that the Certificate Reserve Requirement is satisfied by a deposit of cash or Investment Securities and one or more Reserve Facilities (or any combination thereof), the Trustee shall first draw on the Certificate Reserve Fund held in cash or Investment Securities and then drawings under such Reserve Facilities shall be made on a pro rata basis (calculated by reference to the maximum amounts of such Reserve Facilities).

1002416.2 3662. 018 A-20

Any Reserve Facility shall provide for a revolving feature under which the amount available thereunder will be reinstated to the extent of any reimbursement of draws or claims paid. If a drawing is made on a Reserve Facility, the Trustee shall use amounts deposited in the Certificate Reserve Fund by the District following such draw first to make the payments required by the terms of the Reserve Facility or related reimbursement or loan agreement so that the Reserve Facility shall, absent the delivery to the Trustee of a substitute qualifying Reserve Facility or the deposit in the Certificate Reserve Fund of an amount sufficient to increase the balance in the Certificate Reserve Fund to the Certificate Reserve Requirement, be reinstated in the amount of such drawing within one year of the date of such drawing. After such reinstatement, the Trustee shall use amounts deposited in the Certificate Reserve Fund by the District for the replenishment of the portion of Certificate Reserve Fund held in cash or Investment Securities.

The obligation to reimburse the issuer of a Reserve Facility for any fees, expenses, claims or draws upon such Reserve Facility shall be subordinate to the payment of debt service represented by the Certificates. The right of the issuer of a Reserve Facility to payment or reimbursement of its fees and expenses shall be subordinated to cash replenishment of the Certificate Reserve Fund, and, subject to the next sentence, its right to reimbursement for claims or draws shall be on a parity with the cash replenishment of the Certificate Reserve Fund. If the revolving feature is suspended or terminated for any reason, the right of the issuer of the Reserve Facility to reimbursement will be further subordinated to cash replenishment of the Certificate Reserve Fund to an amount equal to the difference between the full original amount available under the Reserve Facility and the amount then available for further draws or claims. If (a) the issuer of a Reserve Facility becomes insolvent, or (b) the issuer of a Reserve Facility defaults in its payment obligations thereunder, or (c) the rating of the issuer of the letter of credit falls below its rating at the time of delivery, the obligation to reimburse the issuer of the Reserve Facility shall be subordinate to the cash replenishment of the Certificate Reserve Fund.

Application of Redemption Fund. All amounts deposited in the Redemption Fund shall be used and withdrawn by the Trustee solely for the purpose of redeeming Certificates or for the purchase of Certificates by the District at public or private sale, in the manner, at the times and upon the terms and conditions specified in the Trust Agreement.

Investment of Moneys in Funds and Accounts. All moneys in any of the funds and accounts held by the Trustee and established pursuant to the Trust Agreement shall be invested solely as directed by the District, solely in Investment Securities.

Moneys in the Certificate Reserve Fund shall be invested in Investment Securities maturing within five years of the date of such investment, but in no event later than the final maturity of the Certificates or, in the case of Investment Agreements, available by the terms thereof for withdrawal at the times and for the purposes required for the application of funds in the Certificate Reserve Fund. Moneys in the remaining funds and accounts shall be invested in Investment Securities maturing or available on demand not later than the date on which it is estimated that such moneys will be required by the Trustee.

Unless otherwise provided in a Supplemental Trust Agreement, all interest, profits, and other income received from the investment of moneys in any fund or account held by the Trustee, other than the Rebate Fund, shall be transferred to the Certificate Fund.

1002416.2 3662. 018 A-21

Events of Default; Remedies of Owners

Events of Default. The following events shall be Events of Default:

Payment Default. Default in the due and punctual payment of any Rental Payment when and as the same shall become due and payable;

Breach of Covenant. Default by the District in the observance or performance of any covenant, condition, agreement, or provision in the Trust Agreement on its part to be observed or performed, for a period of 30 days after written notice, specifying such failure and requesting that it be remedied, has been given to the District by the Trustee, or the Insurer; and

Facilities Lease Default. An event of default as defined under the Facilities Lease.

Remedies. If an Event of Default shall occur, then, and in each and every such case during the continuance of such Event of Default, the Trustee or the Owners of not less than a majority in aggregate Accreted Value of the Certificates at the time Outstanding, may, upon notice in writing to the District, exercise the remedies provided to the Corporation in the Facilities Lease. In such event, the Trustee shall have the right:

Mandamus; Specific Performance. By mandamus or other action or proceeding or suit at law or in equity to enforce its rights against the Corporation or the District or any director, member, officer or employee thereof, and to compel the Corporation or the District or any such director, member, officer or employee to perform or carry out its or his or her duties under law and the agreements required to be performed by it or him or her contained in the Trust Agreement;

Injunction. By suit in equity to enjoin any acts or things that are unlawful or violate the rights of the Trustee or any Owner; or

Accounting. By suit in equity upon the happening of any event hereunder to require the Corporation and the District and any directors, members, officers and employees thereof to account as the trustee of an express trust.

Application of Money Collected. If an Event of Default shall occur and be continuing, the Trustee shall apply all funds then held or thereafter received by the Trustee under any of the provisions of the Trust Agreement (except as otherwise provided in the Trust Agreement) as follows and in the following order:

1. To the payment of any expenses necessary in the opinion of the Trustee to protect the interests of the Owners of the Certificates, including the costs and expenses of the Trustee and the Owners in declaring such Event of Default, and payment of reasonable fees and expenses of the Trustee (including reasonable fees and disbursements of its counsel and other agents) incurred in and about the performance of its powers and duties under the Trust Agreement;

2. To the payment of the whole amount of Accreted Value then due with respect to the Certificates (upon presentation of the Certificates to be paid, and stamping thereon of the payment if only partially paid, or surrender thereof if fully paid) subject to the provisions of the Trust Agreement, with interest on such Accreted Value, at the rate or rates of interest with respect to the respective Certificates as follows:

1002416.2 3662. 018 A-22

a. Unless the Accreted Value of all the Certificates shall have become due and payable, first to the payment to the persons entitled thereto of all installments of interest then due in the order of their due dates, and, if the amount available shall not be sufficient to pay in full any installment or installments due on the same date, then to the payment thereof ratably, according to the amounts due on such date, to the persons entitled thereto, without any discrimination or preference; and second to the payment to the persons entitled thereto of all unpaid Accreted Value or Redemption Price of any Certificates that shall have become due, whether at maturity or by call for redemption, in the order of their due dates, and, if the amount available shall not be sufficient to pay in full all the Certificates due on any date, then to the payment thereof ratably, according to the amounts of Accreted Value due on such date, to the persons entitled thereto, without any discrimination or preference.

b. If the Accreted Value of all of the Certificates shall have become due and payable, to the payment of the Accreted Value then due and unpaid with respect to the Certificates, if the amount available shall not be sufficient to pay in full the whole amount so due and unpaid, then to the payment thereof ratably, without preference or priority of any payment of Accreted Value over any other payment of Accreted Value, or of any Certificate over any other Certificate, according to the amounts due respectively for Accreted Value, to the persons entitled thereto without any discrimination or preference.

Trustee to Represent Owners. Upon the occurrence and continuance of an Event of Default, the Trustee in its discretion may, and upon the written request of the Owners of not less than 25% in aggregate amount of Accreted Value represented by the Certificates then Outstanding (provided that, if more than one such request is received by the Trustee from Owners, the Trustee shall follow the written request executed by the Owners of the greatest percentage of Accreted Value represented by the Certificates then Outstanding in excess of 25%), and upon being indemnified to its satisfaction therefor, shall, proceed to protect or enforce its rights or the rights of such Owners by such appropriate action, suit, mandamus, or other proceedings as it shall deem most effectual to protect and enforce any such right, at law or in equity, either for the specific performance of any covenant or agreement contained in the Trust Agreement, or in aid of the execution of any power granted in the Trust Agreement, or for the enforcement of any other appropriate legal or equitable right or remedy vested in the Trustee or in such Owners under the Trust Agreement or any applicable law.

Amendment of Trust Agreement

Supplemental Trust Agreements without Consent of Owners. The Trust Agreement and the rights and obligations of the District, of the Trustee, and of the Owners of the Certificates may be modified or amended from time to time and at any time by a Supplemental Trust Agreement, which the District may adopt without the consent of any Owners but only to the extent permitted by law and only for any one or more of the following purposes:

1. to add to the covenants and agreements of the District contained in the Trust Agreement other covenants and agreements thereafter to be observed, to pledge or assign additional security for the Certificates (or any portion thereof), or to surrender any right or power reserved to or conferred upon the District in the Trust Agreement;

2. to make such provisions for the purpose of curing any ambiguity, inconsistency, or omission, or of curing or correcting any defective provision, contained in the Trust Agreement, or in regard to matters or questions arising under the Trust Agreement, as the District may deem necessary or desirable, and that shall not materially and adversely affect the interests of the Owners of the Certificates;

1002416.2 3662. 018 A-23

3. to modify, amend, or supplement the Trust Agreement in such manner as to permit its qualification under the Trust Indenture Act of 1939, as amended, or any similar federal statute then in effect, and to add such other terms, conditions, and provisions as may be permitted by said act or similar federal statute, and that shall not materially and adversely affect the interests of the Owners of the Certificates;

4. to modify or supplement the procedures for giving notice of redemption of Certificates in order to comply with regulations promulgated by the United States Securities and Exchange Commission;

5. to make modifications or adjustments necessary, appropriate, or desirable to accommodate credit enhancements including letters of credit and insurance policies delivered with respect to the Certificate Reserve Fund;

6. to amend, modify, or eliminate the book-entry registration system for the Certificates;

7. to make such provisions as are necessary or appropriate to ensure the exclusion of interest represented by the Certificates from gross income for purposes of federal income taxation; and

8. for any other purpose that does not materially and adversely affect the interests of the Owners of the Certificates.

Supplemental Trust Agreements with Consent of Owners or Credit Enhancers. The Trust Agreement and the rights and obligations of the District, the Owners of the Certificates, and the Trustee may be modified or amended from time to time and at any time by a Supplemental Trust Agreement, which the District, the Corporation, and the Trustee may enter into with the written consent of the Owners of a majority in aggregate amount of Accreted Value represented by the Certificates then Outstanding shall have been filed with the Trustee; provided that, if such modification or amendment will, by its terms, not take effect so long as any Certificates of any particular maturity remain Outstanding, the consent of the Owners of such Certificates shall not be required and such Certificates shall not be deemed to be Outstanding for the purpose of any calculation of Certificates Outstanding.

The Trust Agreement and the rights and obligations of the District and of the Owners of the Certificates and of the Trustee may also be modified or amended at any time by a Supplemental Trust Agreement entered into by the District, the Corporation, and the Trustee, which shall become binding when the written consents of each provider of a letter of credit or a policy of bond insurance for the Certificates shall have been filed with the Trustee, provided that at such time the payment of the Accreted Value of all Outstanding Certificates shall be insured by a policy or policies of municipal bond insurance or payable under a letter of credit the provider of which shall be a financial institution or association having unsecured debt obligations rated, or insuring or securing other debt obligations rated on the basis of such insurance or letters of credit, in one of the two highest Rating Categories of Moody’s and Standard and Poor’s.

No such modification or amendment shall (1) extend the fixed maturity of any Certificate, or reduce the Accreted Value thereof, or extend the time of payment, or reduce the rate of interest with respect thereto, or reduce any premium payable upon the redemption thereof, without the consent of the Owner of each Certificate so affected, or (2) reduce the aforesaid percentage of Accreted Value the consent of the Owners of which is required to effect any such modification or amendment, or permit the creation of any lien on the Rental Payments and other assets pledged under the Trust Agreement prior to

1002416.2 3662. 018 A-24

or on a parity with the lien created by the Trust Agreement, or deprive the Owners of the Certificates of the lien created by the Trust Agreement on such assets (in each case, except as expressly provided in the Trust Agreement), without the consent of the Owners of all of the Certificates then Outstanding.

Discharge of Trust Agreement

Discharge of Trust Agreement. Certificates may be paid by the District in any of the following ways:

1. by paying or causing to be paid the Accreted Value represented by the Certificate, as and when the same become due and payable;

2. by depositing with the Trustee, an escrow agent or other fiduciary, in trust, at or before maturity, money or Defeasance Securities in the necessary amount to pay or redeem the Certificate; or

3. by delivering the Certificate to the Trustee for cancellation.

If all Certificates that are Outstanding have been paid and the District has also paid or caused to be paid all other sums payable under the Trust Agreement and under the Facilities Lease by the District, then and in that case, at the election of the District, evidenced by a Statement of the District filed with the Trustee signifying the intention of the District to discharge all such obligations and the Trust Agreement, and notwithstanding that any Certificates shall not have been surrendered for payment, the Trust Agreement, the pledge of assets made thereunder, all covenants and agreements and other obligations of the District under the Trust Agreement, and the rights and interests created thereby (except as to any surviving rights of transfer or exchange of Certificates and rights to payment from moneys deposited with the Trustee) shall cease, terminate, become void, and be completely discharged and satisfied.

In such event, upon request of the District, the Trustee shall cause an accounting for such period or periods as may be requested by the District to be prepared and filed with the District and shall execute and deliver to the District all such instruments as may be necessary or desirable to evidence such discharge and satisfaction, and the Trustee shall pay over, transfer, assign, or deliver to the District all moneys or securities or other property held by it pursuant to the Trust Agreement that, as evidenced by a verification report (upon which the Trustee may conclusively rely) from an independent certified public accountant, are not required for the payment or redemption of Certificates not theretofore surrendered for such payment or redemption.

Discharge of Liability on Certificates. Upon the deposit with the Trustee, escrow agent, or other fiduciary, in trust, at or before maturity, of money or securities in the necessary amount to pay or redeem any Outstanding Certificate (whether upon or prior to its maturity or the redemption date of such Certificate), then all liability of the District in respect of such Certificate shall cease, terminate, and be completely discharged, except that thereafter (i) the Owner thereof shall be entitled to payment of the Accreted Value and interest of such Certificate and premium, if any, thereon by the District and the District shall remain liable for such payment, but only out of such money or securities deposited with the Trustee as aforesaid for their payment, and (ii) the Owner thereof shall retain its rights of transfer or exchange of Certificates.

The District may at any time surrender to the Trustee for cancellation by it any Certificates previously executed and delivered, which the District may have acquired in any manner whatsoever, and such Certificates, upon such surrender and cancellation, shall be deemed to be paid and retired.

1002416.2 3662. 018 A-25

Consent of Insurer

So long as the Policy is in effect and the Insurer is not in default with respect to its payment obligations thereunder, the following provisions shall be in effect:

1. Control of Remedies. Any provision of the Trust Agreement to the contrary notwithstanding, upon the occurrence and continuance of an Event of Default, the Insurer shall be entitled to control and direct the enforcement of all rights and remedies granted to the Owners or the Trustee for the benefit of the Owners under the Trust Agreement; and the Insurer shall also be entitled to approve all waivers of Events of Default concerning the Certificates.

2. Amendments and Supplements. The Insurer’s consent shall be required for the execution and delivery of any Supplemental Trust Agreement.

APPENDIX B

THE FINANCIAL STATEMENTS OF THE DISTRICT AS OF AND FOR THE YEAR ENDING JUNE 30, 2011


MARYSVILLE JOINT UNIFIED SCHOOL DISTRICT Marysville, California

FINANCIAL STATEMENTS JUNE 30, 2011

MARYSVILLE JOINT UNIFIED SCHOOL DISTRICT

FINANCIAL STATEMENTS WITH SUPPLEMENTARY INFORMATION

For the Year Ended June 30, 2011

TABLE OF CONTENTS

I ndependent Auditors' Report

Management's Discussion and Analysis

Basic Financial Statements:

Government-Wide Financial Statements:

Statement of Net Assets

Statement of Activities

Fund Financial Statements:

Balance Sheet - Governmental Funds

Reconciliation of the Governmental Funds Balance Sheet - to the Statement of Net Assets

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 Fund Net Assets - Proprietary Fund - Self-Insurance Fund

Statement of Revenues, Expenses and Change in Fund Net Assets -Proprietary Fund - Self-Insurance Fund

Statement of Cash Flows - Proprietary Fund - Self-Insurance Fund

Statement of Fiduciary Net Assets - Trust and Agency Funds

Statement of Change in Fiduciary Net Assets - Fiduciary Funds

Notes to Basic Financial Statements

Page

1-2

3-12

13

14

15

16

17

18

19

20

21

22

23

24-46




TABLE OF CONTENTS (Continued)

Required Supplementary Information:

General Fund Budgetary Comparison Schedule

Schedule of Other Postemployment Benefits (OPEB) Funding Progress

Notes to Required Supplementary Information

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 Liabilities - 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

Schedule of Charter Schools

Notes to Supplementary Information

Independent Auditors' Report on Compliance with State Laws and Regulations

Independent Auditors' 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

Page

47

48

49

50

51

52-53

54

55-56

57-58

59-61

62

63

64

65-66

67-69

70-71




Supplementary Information:

TABLE OF CONTENTS (Continued)

Independent Auditors' Report on Compliance with Requirements That Could Have a Direct and Material Effect on Each Major Program and on Internal Control over Compliance in Accordance with OMB Circular A-133

Findings and Recommendations:

Schedule of Audit Findings and Questioned Costs

Status of Prior Year Findings and Recommendations

Page

72-73

74-80

81

Crowe Horwath®

INDEPENDENT AUDITORS' REPORT

Board of Trustees Marysville Joint Unified School District Marysville, California

Crowe Horwath LLP Independent Member Crowe Horwath International

We have audited the accompanying financial statements of the governmental activities, each major fund and the aggregate remaining fund information of Marysville Joint Unified School District, as of and for the year ended June 30, 2011, which collectively comprise Marysville Joint Unified School District's basic financial statements as listed in the Table of Contents. These financial statements are the responsibility of the District's management. Our responsibility is to express opinions on these financial statements based on our audit.

We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in 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 of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinions.

In our opinion the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, each major fund and the aggregate remaining fund information of Marysville Joint Unified School District as of June 30, 2011, and the respective changes in financial position and cash flows, where applicable, for the year then ended, in conformity with accounting principles generally accepted in the United States of America.

In accordance with Government Auditing Standards, we have also issued our report dated December 9, 2011 on our consideration of Marysville Joint Unified School District's internal control over financial reporting and our tests of its compliance with certain provisions of laws, regulations, contracts and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be considered in assessing the results of our audit.

INDEPENDENT AUDITORS' REPORT (Continued)

Management's Discussion and Analysis and the Required Supplementary Information, such as the General Fund Budgetary Comparison Schedule and the Schedule of Other Postemployment Benefits (OPEB) Funding Progress, are not required parts of the basic financial statements, but are supplementary information required by accounting principles generally accepted in the United States of America. We have applied certain limited procedures, which consisted principally of inquiries of management regarding the methods of measurement and presentation of the required suppiementary information. However, we did not audit the information and express no opinion on it.

Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise Marysville Joint Unified School District's basic financial statements. The accompanying financial and statistical information listed in the Table of Contents, including the Schedule of Expenditure of Federal Awards, which is required by U.S. Office of Management and Budget Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations, is presented for purposes of additional analysis and is not a required part of the basic financial statements of Marysville Joint Unified School District. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, is fairly stated, in all material respects, in relation to the basic financial statements taken as a whole.

Sacramento, California December 9,2011

Crowe Horwath LLP

Management's Discussion and Analysis Concerning the 2010/2011 Marysville Joint Unified School District Financial Statements

Management's Discussion and Analysis is District management's view of the District's financial condition, and provides an opportunity to discuss important fiscal issues with the board and the public. This reporting of the District's finances is similar to requirements for private industry.

BRIEF DESCRIPTION OF FINANCIAL STATEMENTS HIGHLIGHTS

FINANCIAL

Based on the District's Third Interim Budget, the District would experience an increase to the General Fund Unrestricted balance of $2,703,149 during 2010111. The actual 2010/11 General Fund Unrestricted balance increased by $3,118,598, a positive difference of $415,449. Each budget cycle, the following general disclosure is made: "A level of "Budget Savings" is likely, but unpredictable, in any fiscal year. In addition, the District's unrestricted beginning General Fund balance could withstand a reasonable level of deficit spending for a limited period." Stated another way, if we cannot spend more than the appropriated amount, we will spend less. Hence, "Budget Savings."

Total 2010/11 General Fund Unrestricted Expenditures Positive Difference Percentage

3

$48,392,535 $ 415,449

0.00860/0

General Fund Sources of Revenue Total: $82,123,523

Lottery

General Fund Expenditures by Object Total: $80,757,885

4

CONDENSED FINANCIAL STATEMENT

ST A TEMENT OF NET ASSESTS

Assets

Capital Assets Other Assets

Total Assets

Liabilities

Long-term liabilities Other liabilities

Total Liabilities

Net Assets

Invested in capital assets, net of related debt Restricted Unrestricted

Total net assets

STATEMENT OF ACTIVITIES - For the Year Ended

Revenues

Program Revenues General Revenues

Total Revenues

Expenses

Change in Net Assets Net Assets Beginning

Net Assets Ending

5

June 30, 2010

$135,826,378 49,636,976

185,463,354

97,236,737 13,658,662

110,895,399

55,890,012 18,230,379

447,564

$74,567,955 =========

June 30, 2010

$28,122,659 65,285,790 --------------93,408,449

97,98'0,199 --------------(4,571,750) 79,139,705 ---------------

$74,567,955 =========

June 30, 2011

$149,796,566 55,025,377

204,821,943

96,265,553 16,117,266

112,382,819

56,687,026 32,617,328

3,134,770

$92,439,124 =========

June 30~ 2011

$50,722,350 65,245,472 ---------------115,967,822

98,096,653 --------------17,871,169 74,567,955 --------------

$92,439,124 =========

GASB34

Commencing fiscal year 2002/03, the District is subject to additional reporting requirements under GASB (Governmental Accounting Standards Board) Statement #34 ("GASB 34"). GASB 34 continues a long standing trend seeking to alter public agency financial statements and reporting requirements to more closely conform to private industry.

OVERVIEW OF THE FINANCIAL STATEMENTS

The annual report consists of three parts-management's discussion and analysis (this memo), the basic financial statements, and required supplementary information. The basic financial statements include two kinds of statements that present different views of the District:

• District-wide financial statements that provide both short-term and long-term information about the District's overall financial status.

• 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 were financed in the ShOl1 term as well as what resources remain for future spending.

• Governmental activities-Most of the District's basic services are included here, such as regular and special education, transportation, and administration. Property taxes and state formula aid finance most of these activities.

Governmental funds-Most of the District's basic services are included in governmental funds, which generally focus on (1) how cash and other financial assets can readily be converted to cash flow in and out and (2) the balances left at year-end that are available for spending. Consequently, the gove-rnmental funds statements provide a detailed short-term view that helps you determine whether there are more or fewer financial resources that can be spent in the near future to finance the District's programs.

Fund Financial Statements

The fund financial statements provide more detailed information about the District's most significant funds-not the District as a whole. Funds are accounting devices the District uses to keep track of specific sources of funding and spending on particular programs:

• Some funds are required by State law and by bond covenants.

• The District establishes other funds to control and manage money for particular purposes (e.g. repaying its long-term debts) or to show that it is properly using certain revenues (e.g. Developer Fees).

District-wide Statements

The district-wide statements report information about the District as a whole using accounting methods similar to those used by private-sector companies. The statement of net assets includes all of the District's assets and liabilities. All of the current year's revenues and expenses are accounted for in the statement of activities regardless of when cash is received or paid.

The two district-wide statements report the District's net assets and how they have changed. Net assets-the difference between the District's assets and liabilities-is one way to measure the District's financial health or position. Over time, increases or decreases in the District's net assets are an indicator of whether its financial position is improving or deteriorating, respectively.

COMPONENTS OF THE JUNE 30, 2011 ENDING GENERAL FUND BALANCE

Components of Fund Balance June 30, 2011

Revolving Cash Stores Legally Restricted Balances Designated for Economic Uncertainties, 3% Other Designations Undesignated

Total Ending General Fund Balance June 30, 2011

$ 30,000 305,909

1,504,529 2,416,557

798,119 5,951.324

$11 006438

ANALYSIS OF THE EFFECT OF POSITIVEIDEFICIT SPENDING ON FUND BALANCE

Effect of Positive/Deficit Spending on Fund Balance

Total Beginning General Fund Balance July 1,2010 $9,404,820

2010111 General Fund" Actuals" $ 1 ,601,618

Total Ending General Fund Balance June 30,2011 $11,006,438

INCREASE (DECREASE) IN THE GENERAL FUND BALANCE

The District ended 2010/11 with a Net Change of$I,601,618 of which $(1,516,980) was "Restricted", and $3,118,598 was "Unrestricted". The fiscal year 201112012 Adopted Budget currently indicates a Net Change of$(1,331,711), of which $147,772 is "Restricted", and $(1,479,483) is "Unrestricted".

The District's increase in the unrestricted ending fund balance can be attributed to numerous differences between budgeted and actual revenues and expenditures.

7

A level of "Budget Savings" is likely, but unpredictable, in any fiscal year.

Change in Fund Balance Fund Balance June 30, 2010 $ 9,404,820 Fund Balance June 30, 2011 $11,006,438

Change $1,601,618

The District has sufficient fund balances to withstand a reasonable level of "Unrestricted" deficit spending through the 2011112 fiscal year, and for the two succeeding fiscal years.

ANALYSIS OF SIGNIFICANT VARIATIONS BETWEEN BUDGETED AMOUNTS AND THE ACTUAL REVENUE AND EXPENSE IN THE GENERAL FUND

Significant Variations are described as follows:

There was a change in the estimate for local property taxes vs. State aid received in the Revenue Limit. As property taxes increase, State aid decreases and vice versa.

Various budgeted accounts for salaries, benefits, supplies and operating costs were partially unexpended at year-end. The District updates these accounts, and related encumbrances, periodically during the fiscal year.

There were changes to estimated program contributions to restricted programs such as Special Education and Home-to-School Transportation.

AMERICAN RECOVERY AND REINVESTMENT ACT OF 2009 ("ARRA")

By June 30, 2009, the District received $2,549,970 of ARRA State Fiscal Stabilization Funds ("SFSF"). In addition, based on direction from the California Department of Education ("CDE") we accrued an additional $955,880 of SFSF Categorical funds as an account receivable. ARRA funds are comlnonly referred to as "Federal Stimulus" funds. The District elected not to expend these funds during the 2008/09 fiscal year, but will expend the funds during fiscal years 2009110 and 201011l. These are onetime funds. CDE accounting procedures required us to record 2008/09 ARRA funds as Restricted revenue. Therefore, the Legally Restricted Balance of ARRA: State Fiscal Stabilization Fund at June 30,2010 was $1,634,439 and is zero at June 30, 2011.

8

LISTING OF CATEGORICAL PROGRAMS WITH LEGALLY RESTRICTED BALANCES

The District has received categorical funding in several programs not subject to deferred revenue. This results in a "Legally Restricted Balance" and has the effect of reducing expenditures in the current year and increasing expenditures in subsequent year(s).

Resource Description 2010/11 2009110

3200 ARRA: State Fiscal Stabilization Fund $ $1,634,439 5640 Medi-Cal Billing Option 73,211 40,784 6286 English Language Acquisition 71,486 86,237 6300 Lottery - Instructional Materials 285,679 181,354 7090 Economic Impact Aid (EIA) 523,085 519,439 7091 EIA: Limited English Proficiency (LEP) 379,642 314,747 7400 Quality Education Investment Act 17,717 46,405 9010 Other Local 153,709 198,104

-------------- --------------Total $1,504,529 $3,021,509

Significant carryover balances, such as listed above, can produce wide swings in Fund Balance and positive/deficit spending from year to year. However, when reviewed over several years, the net effect on Fund Balance may not be material. Similar carryover balances could occur in future years.

FLEXIBILITY TRANSFERS

The Legislature, in the current State budget, included unprecedented Flexibility Transfer provisions. Essentially, this allows the District to transfer funds fronl restricted State categorical programs, with certain exceptions, to the unrestricted General Fund. The Legislature has enabled Districts to use the flexibility transfer provisions for the fiscal years 2008/09 - 2012113. The intent is to allow Districts to use otherwise restricted funds to "backfill" cuts to unrestricted budgets, principally the revenue limit. The transferred funds can be used for any educational purpose.

EDUCATION JOB FUNDS PROGRAM

The Education Jobs Fund (Ed Jobs) program is a new Federal program that provides assistance to States to save or create jobs. Funding under this program includes providing educational and related services for early childhood, elementary and secondary education. The District currently anticipates receiving approximately $1,745,000 in Ed Jobs funding. This is one-time funding that will be used during 2010111 and 2011112. The funding must be expended by September 30, 2012.

9

ANALYSIS OF FINANCIAL POSITION OF THE GENERAL FUND

Financial Condition of the General Fund

The Marysville Joint Unified School District continues to maintain its solid financial condition. The following table summarizes operational fund financial statements:

Summary of Financial Operations - General Fund June 30, 2010 June 30, 2011

Revenues $77,890,965 $82,123,523

Expenditures $82,418,270 $80,757,885 Other Financing SourceslUses $4,030,925 $ 235,980

Difference ($496,380) $1,601,618

ANALYSIS OF BALANCES OF INDIVIDUAL FUNDS

CHARTER SCHOOLS SPECIAL REVENURE FUND #09

This fund accounts for the activity of the independent charter school Yuba Environmental Science Charter Academy (YESCA).

ADULT EDUCATION FUND # 11

This fund accounts for the activity of Adult Education programs in the District. Revenue is generated by program attendance and is provided primarily by the State. State revenue for this fund is cunently based on fiscal year 2007/08 due to current State requirements. Expenditures are related to instructional services, primarily salaries and benefits.

CHILD DEVELOPMENT FUND #12

This fund accounts for educational and other services related to younger children, before and after school services, and grant related activities. The primary revenue sources are State funds based on participation and Federal and State grants. Expenditures for related services are primarily salaries and benefits.

CAFETERIA SPECIAL REVENUE FUND #13

The District's Child Nutrition program is a part of the National School Lunch program. The Disttict's program provides breakfasts, lunches and snacks at all District sites. A significant percentage of District students qualify for free and reduced price meals.

10

DEFERRED MAINTENANCE FUND #14

The Deferred Maintenance Fund is used to perfonn State approved major deferred maintenance within the District. The State has suspended this funding source for the fiscal years 2008/09 - 2012/13. The District intends to complete major maintenance projects based on the approved Five Year Plan.

BUILDING FUND #21

The Building Fund is used to account for the proceeds of General Obligation Bonds issued in conjunction with Measures Hand P. The Building Fund will also account for related project expenditures. The Measure H bonds, and Series A of Measure P bonds have been issued and the proceeds have been placed in this fund. Certain expenditures have been recorded for proJects.

CAPITAL FACILITIES FUND #25

State law has authorized the collection of building fees since 1986 to assist school districts with the mitigation of facility costs related to enrollment growth. Our District has also entered into Agreements which generate additional fee revenue. This revenue source allows the District to pay for growth related expenditures which can include; portable classrooms at our sites, provide necessary furniture and equipment, purchase and develop school sites, school and classroom construction, and related expenditures.

STA TE SCHOOL BUILDING LEASE-PURCHASE FUND #30

This fund is related to the prior receipt of State lease purchase funds.

COUNTY SCHOOL FACILITIES FUND #35

This fund is used to account for the receipt of State construction funds, either Modernization or New Construction. The District has received funds for New Construction and Modernization projects.

BOND INTEREST AND REDEMPTION FUND #51 and #52

The Bond Interest and Redemption Funds are used to account for tax collections, interest and other sources of revenue collected to retire General Obligation Bonds issued. In this regard, the Bond Interest and Redemption Funds are related to the Building Fund #21. However, while the Building Fund is used to account for the actual construction projects, the Bond Interest and Redemption Funds renlain open for the life of the outstanding General Obligation Bonds.

The County Auditor's Office is responsible for tax collections necessary for debt repayment. The County Auditor sets the applicable tax rates, not the District. However, since the General Obligation Bonds are issued by the District, this fund is included with the District's financial statements.

TAX OVERRIDE FUND #53

This fund represents prior year local property taxes, and interest.

11

DEBT SERVICE FUND #56

This fund is considered a "sinking fund", and is related to the District's QZAB debt issuances. The District is required to set aside funds sufficient to retire the QZAB issuances. This "set aside" is based on a set schedule.

SELF INSURANCE FUND #67

The Self Insurance Fund is designed is maintain assets sufficient to fund the high deductib!es on the District's property and liability programs. The District does not have a current actuarial study which would indicate the appropriate funding levels required for this purpose. Therefore there is currently no ability to determine if this fund has adequate resources.

FOUNDATION PRIVATE-PURPOSE TRUST FUND #73

This fund is related to a prior donation used for Scholarships. This fund is also be used for the MJUSD Education Foundation. Historically, there is nlinimal activity in the Fund.

Comparative Schedule of Capital Assets (net of Accumulated Depreciation)

Land Buildings and Improvements Equipment Work-in-progress Improvement of sites

Totals

Comparative Schedule of Long

General Obligation Bonds Certificates of Participation Qualified Zone Academy Bonds Capitalized Lease Obligations Unamortized premium on

long-term liabilities Other Post Employment Benefits Compensated absences

Totals

June 30, 2010

$ 5,224,767 15,877,778 2,864,308

83,386,402 28,473,123

$135,826,378

Liabilities

June 30, 2010

$69,493,777 18,610,000 4,451,939 1,535,000

358,265 2,508,622

279,134

$97,236,737

June 30, 2011

$ 7,144,767 15,006,413 2,651,695

96,181,229 28,812,462

$149,796,566

June 30, 2011

$69,533,650 17,370,000 4,451,939 1,411,265

342,686 2,882,328

273,685

$96,265,553

This financial report is designed to provide our citizens, taxpayers, customers, investors, and creditors with a general overview of the District's finances and to denlonstrate the District's accountability for the funds it receives. If there are any questions about this report, or there is a need for additional information, contact the Assistant Superintendent, Business Services, Marysville Joint Unified School District, 1919 B Street, Marysville, CA. 95901,530-749-6115.

12

BASIC NANCIAL STATEMENTS

MARYSVILLE JOINT UNifiED SCHOOL DISTRICT

ASSETS

Cash and investments (Note 2) Receivables Prepaid expenditures Stores inventory

STATEMENT Of NET ASSETS

June 30, 2011

Non-depreciable capital assets (Note 4) Depreciable capital assets, net of accumulated

depreciation (Note 4)

Total assets

LIABILITIES

Accounts payable Deferred revenue Long-term liabilities (Note 5):

Due within one year Due after one year

Total liabilities

NET ASSETS

Invested in capital assets, net of related debt Restricted (Note 6) Unrestricted

Total net assets

The accompanying notes are an integral part of these financial statements.

13

Governmental

$ 37,844,949 15,929,054

737,112 514,262

103,325,996

46.470,570

204,821,943

14,928,800 1,188,466

3,257,470 93,008,083

112,382,819

56,687,026 32,617,328

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 Enterprise activities Other outgo Depreciation (Note 4) Interest on long-term liabilities

Total governmental activities


STA TEMENT OF ACTIVITIES


Program Revenues Charges Operating

for Grants and Expenses Contributions

$ 49,505,652 $ 9,715 $ 14,608,929

2,640,754 1,769 2,396,007

500,658 39 396,709 5,703,119 20 484,723

4,095,430 92,711 2,025,787 5,222,592 546,866 4,690,876 3,950,792 172,643 2,564,263

1,040,395 (546,528) 5,089,176 25,178 866,835 8,435,861 2,650 83,250

303,063 107,329

2,890,378 20,784 1,564,151 3,449,030 51162 1424

$ 98.096.653 $ 872 1375 $ 29 11351002

General revenues: Taxes and sUbventions:

Taxes levied for general purposes Taxes levied for debt service

Federal and state aid not restricted to specific purposes Interest and investment earnings Interagency revenues Miscellaneous

Total general revenues

Change in net assets

Net assets, July 1, 2010

Net assets, June 30, 2011


14

Net (Expense) Revenues and

Changes in Net Assets

Capital Grants and Governmental

Contributions Activities

$ 20,714,973 $ (14,172,035)

(242,978)

(103,910) {5,218,376)

(1,976,932) 15,150

(1,213,886)

(1,586,923) (4,197,163) (8,349,961 )

(303,063) (107,329)

(1,305,443) (3,449,030) (5 11621424)

$ 20 1714.973 (47.374.303)

13,542,545 3,658,366

45,868,073 274,178 773,976

111281334

65 1245 1472

17,871,169

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

Total assets

LIABILITIES AND FUND BALANCES

Liabilities: Accounts payable Deferred revenue Due to other funds

Total liabilities

Fund balances: Nonspendable Restricted Assigned Unassigned

Total fund balances

Total liabilities and fund balances


$

General Fund

1,811,501

30,000

15,576,734

618,004 305 1909

~ 181342 1148

$ 6,146,253 1,188,466

991

71335 1710

335,909 1,504,529

798,119 81367 1881

11 1006 1438

~ 181342 1148

BALANCE SHEET

GOVERNMENTAL FUNDS

June 30, 2011

Building Fund

$ 19,277,040

~ 191277 1040

$ 5,628,549

5 1628 1549

13,648,491

131648 1491

~ 191277 1040

$

~

$

~

Capital Facilities

Fund

8,499,574

26,818

81526 1392

148,854

1481854

8,377,538

81377 1538

8 1526 1392


15

$

~

$

~

County School

Facilities Fund

91,868

21,807

1131675

65

65

113,610

113 1610

113 1675

$

~

$

~

All Non-Major

Funds

3,159,807 2,002,822

1,597 2,970,740

303,695 6,664

991 208 1353

81654 1669

129,862

618 1004

747 1866

216,614 7,227,662

462,527

71906 1803

81654 1669

Total Governmental Funds

$ 32,839,790 2,002,822

31,597 2,970,740

15,929,054 6,664

618,995 514 1262

~ 54 1913 1924

$ 12,053,583 1,188,466

618 1995

131861 1044

552,523 30,871,830

1,260,646 81367 1881

41 1052 1880

~ 54 1913 1924


RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEETTO THE STATEMENT OF NET ASSETS

June 30, 2011

Total fund balances - Governmental Funds

Amounts reported for governmental activities in the statement of net assets 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 $198,133,558 and the accumulated depreciation is $48,336,992 (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, 2011 consisted of (Note 5):

General Obligation Bonds Accreted Interest Certificates of Participation Qualified Zone Academy Bonds Capitalized lease obligations Unamortized premium on long-term liabilities Other postemployment benefits (OPEB) (Note 8) Compensated absences

In the governmental funds, debt issue costs are recognized as expenditures in the period they are incurred. In the government-wide statements, debt issue costs are amortized over the life of the debt.

Unmatured interest is not recognized until it is due and, therefore, it is not accrued as a payable in governmental funds.

Total net assets - governmental activities

$ (69,118,777) (414,873)

(17,370,000) (4,451,939) (1,411,265)

{342,686) (2,882,328)

(273.685)

The accompanying notes are an integral part of th,ese financial statements.

16

$ 41,052,880

149,796,566

{96,265,553)

730,448

,(2.875.217)

$ 92.439.124

Revenues: Revenue limit sources:

State apportionment Local sources

Total revenue limit

Federal sources Other state sources Other local sources

Total revenues

Expenditures: Certificated salaries Classified salaries Employee benefits Books and supplies Contract services and operating

expenditures Capital outlay Other outgo Debt service:

Principal retirement Interest

Total expenditures

Excess (deficiency) of revenues over (under) expenditures

Other finanCing sources (uses): Operating transfers in Operating transfers out

Total other financing sources (uses)

Change in fund balances

Fund balances, July 1, 2010

Fund balances, June 30, 2011


STATEMENT OF REVENUES, EXPENDITURES AND CHANGE IN FUND BALANCES

GOVERNMENTAL FUNDS


Capital General Building Facilities

$ 36,232,875 131321 1656

4915541531

12,733,287 14,369,020 5A66 1685 $ 851962 ~ 564 1540

82 1123,523 85 1962 564 1540

35,490,052 12,695,111 364,738 15,942,971 146,809 5,467,536 687,877 76,063

7,527,316 45,145 693,817 538,237 14,194,586 1,522,099

2,463,237 400 1,000

529,477 834,258 1031948 671 1651

801757 1885 1419281008

(141842 1046) (3 1745 1895)

396,704 16,540,483 5,961,262 (160 1724)

5.556 1540

1,601,618 1,698,437 1,810,645

9A04 1820 11 19501054 6 1566 1893


17

County School

Facilities

$ 20,658,340

20}141974

(56,475)

27 (22 14931323)

(22.493,296)

(1,721,847)

Total All Govern-

Non-Major mental

$ 12,749 $ 36,245,624 91 1648 131413 1304

1041397 491658 1928

4,598,829 17,332,116 3,233,232 38,260,592 413241848 101498 1669

12,261 1306 11517501305

1,169,885 36,659,937 2,691,949 15,751,798 1,695,841 17,785,621 2,376,609 8,608,085

339,403 8,605,681 36,970 16,235,417

2,464,637

375,000 1,738,735 318831236 4 1658 1835

121568.893 112 15081746

(307 1587) 31241 1559

1,162,335 24,060,811 (24 11801324)

{266,807) 3,122,046

3719301834


RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES AND CHANGE IN FUND BALANCES - GOVERNMENTAL FUNDS -

TO THE STATEMENT OF ACTIVITIES


Net change in fund balances - Total Governmental Funds

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 assets (Note 4).

Depreciation of capital assets is an expense that is not recorded in the governmental funds (Note 4).

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 assets (Note 5).

Debt issue premiums are recognized as revenues in the period they are incurred. In government-wide statements, issue premiums are amortized over the life of the debt (Note 5).

Unmatured interest is an expense that is not recorded in the governmental funds.

Accreted interest is an expense that is not recognized in the governmental funds (Note 5).

In the governmental funds, debt issue costs are recognized as expenditures in the period they are incurred. In the government-wide statements, debt issue costs are amortized over the life of the debt.

Internal service funds are used to conduct certain activities for which costs are charged to other funds on a full cost recovery basis. Increase in net assets for the Self-Insurance Fund was:

$ 17,419,218

(3,449,030)

1,738,735

15,579

(88,718)

(414,873)

(35,857)

(67,674)

$ 3,122,046

In the statement of activities, expenses related to compensated absences and other post employment benefits 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). (368,257) 14.749.123

Change in net assets of governmental activities


18

$ 17.871.169

STATEMENT

30, 1

Cash in County Treasury $

LIABILITIES

Accounts payable

ASSETS

Net assets

accompanying notes are an part of these financial statements.

19

Operating expenses: Payments for claims

Non-operating income: Interest income Other income Transfers in from other funds

Total non-operating income

Change in net assets

Total net assets, July 1, 2010

Total net assets, June 30, 2011

30, 1

accompanying notes are an integral part financial statements.

20

494 17

119,513

(67,674)


STATEMENT OF CASH FLOWS - PROPRIETARY FUND

SELF-INSURANCE FUND


Cash flows from operating activities: Cash received from self-insurance premiums Other cash received Cash paid for claims

Net cash used in operating activities

Cash flows provided by investing activities: Interest income received

Decrease in cash and cash equivalents

Cash in County Treasury, July 1, 2010

Cash in County Treasury, June 30, 2011

Reconciliation of operating loss to net cash used in operating activities:

Operating loss Adjustments to reconcile operating loss to net cash

used in operating activities: Transfers in from other funds Other cash received Decrease in:

Accounts payable

Total adjustments

Net cash used in operating activities


21

$ 119,513 17

(187.728)

(68,198)

494

(67,704)

67.704

~

$ (187.698)

$

119,513 17

(30)

119.500

(68.198)


STATEMENT OF FIDUCIARY NET ASSETS

TRUST AND AGENCY FUNDS

June 30, 2011

Agency Trust Funds Funds

Educational Scholarship Student Foundation Trust Body

Fund Fund Funds

ASSETS

Cash on hand and in banks (Note 2) $ 40,902 $ 254,199 $ 686,338 Receivables Stores inventory

Total assets

LIABILITIES

Accounts payable Due to stUdent groups

Total Liabilities

NET ASSETS

Restricted (Note 6)

711 890

41 .613 255,089

39

39

$ 41 1574 ~ 255 1089


22

10,365

696,703

696,703

696,703

~

Total

$ 981,439 1,601

10.365

993.405

39 696.703

696.742

§ 296 1663


STATEMENT OF CHANGE IN FIDUCIARY NET ASSETS

FIDUCIARY FUNDS


Educational Scholarship Foundation Trust

Revenues: Other local sources $ 241 ,290 .;:::...$ _..::2.:.,;88:::..1.,3::;,.:.7.....:,3

Expenses: Books and supplies Contract services and operating expenditures Other outgo

8,498 14,005

Total expenditures

Change in fund balance

Net assets, July 1, 2010

Net assets, June 30, 2011

20,702

20,872


$

229,184

25,905

255,089 $

8,498 14,005 15,984

249,886

46,777

296.663


NOTES TO BASIC FINANCIAL STATEMENTS

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Marysville Joint Unified School District (the "District") accounts for its financial transactions in accordance with the policies and procedur:es of the California Department of Education's California School Accounting Manual. The accounting policies of the District conform to generally accepted aocounting principles 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 Trustees 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 has determined the following represent component units:

The District and the Marysville Joint Unified School District Financing Corporation (the "Corporation") have a financial and operational relationship which meet the reporting entity definition criteria of Codification of Governmental Accounting and Financial Reporting Standards, Section 2100, for inclusion of the Corporation as a component unit of the District.

The following are those aspects of the relationship between the District and the Corporation which satisfy Codification of Governmental Accounting and Financial Reporting Standards, Section 2100, as amended by GASB Statement No. 39 criteria:

A Accountability:

1. The Corporation's Board of Directors was appointed by the District's Board of Trustees.

2. The Corporation has no employees. The District's Assistant Superintendent of Business Services functions as the agent of the Corporation and does not receive additional compensation for work performed in this capacity.

3. The District's Board exercises significant influence over operations of the Corporation as the District is the sole Jessee of all facilities owned by the Corporation.

4. All major financing arrangements, contracts, and other transactions of the Corporation must have the consent of the District.

5. Any deficits incurred by the Corporation will be reflected in the ~ease payments of the District. Any surpluses of the Corporation revert to the District at the end of the lease period.

24

1.

BASIC FINANCIAL (Continued)

SUMMARY OF SIGNIFICANT

Reporting Entity (Continued)

A Accountability: (Continued)

.... _ ..... ..., (Continued)

6. The District's lease payments are the sole revenue source of the Corporation.

7. The District has assumed a "moral obligation," and potentially a legal obligation, for any debt incurred by the Corporation.

B Scope of Public Service:

The Corporation was formed for the sole purpose of financially assisting the District. The Corporation was formed to provide financing assistance to the District for construction, rehabilitation and acquisition of major capital facilities to support the student population.

C Financial Presentation:

For financial presentation purposes, the Corporation's financial activity has been blended with the financial data of the District. The basic financial statements present the Corporation's financial activity within the Capital Facilities Fund.

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 Assets 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 Assets and the Statement of Change in Fiduciary Net Assets at the fund financial statement level.

The Statement of Net Assets 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 Codification Section (GASB Cod. Sec.) NSO.118-.121.

1. SUMMARY

TO BASIC FINANCIAL STATEMENTS (Continued)

ACCOUNTING (Continued)

Basis of Presentation - Government-Wide Financial Statements (Continued)

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.

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. The District's accounts are organized into three broad categories which, in aggregate, include seven fund types as follows:

A Governmental Fund Types

1. General Fund:

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.

2. Special Revenue Funds:

The 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 Charter School, Adult Education, Child Development, Cafeteria and Deferred Maintenance Funds.


NOTES TO BASIC FINANCIAL STATEMENTS (Continued)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Basis of Presentation - Fund Accounting (Continued)

A Governmental Fund Types (Continued)

3. Capital Projects Funds:

The Capital Projects Funds are used to account for resources used for the acquisition or construction of capital facilities by the District. This classification includes the Building, Capital Facilities, County School Facilities and State School Building Funds.

4. Debt Service Funds:

The Debt Service Funds are used to account for the accumulation of resources for, and the payment of, general long-term debt principal, interest, and related costs. This classification includes the Bond Interest and Redemption, Tax Override, Debt Service for Blended Component Units and Debt Service Funds.

B Proprietary Fund

1. Self-Insurance Fund:

The Self-Insurance Fund is an internal service fund used to account for services rendered on a cost-reimbursement basis within the District. The Self-Insurance Fund is used to provide for the District's deductible portion of any future insurance liabilities.

C Fiduciary Funds

1. Trust Funds:

Education Foundation Fund:

The Educational Foundation Fund is a Trust Fund used to account for amounts held by the District as Trustee, to be used to build and maintain community supporters to advance academic achievement within the District schools, foster social and ethical development and promote 'Civic responsibility.

Scholarship Trust Fund:

The Scholarship Trust Fund is a Trust Fund used to account for amounts held by the District as Trustee, to be used to provide scholarships to students of the District.

27



1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES{Continued)

Basis of Presentation - Fund Accounting (Continued)

C Fiduciary Funds (Continued)

2. Agency Funds:

Student Body Funds:

Student Body Funds are used to account for revenues and expenditures of the various student body organizations. All cash activity, assets and liabilities of the various student bodies of the District are accounted for in Student Body Funds.

Basis of Accounting

Basis of accounting refers to when revenues and expenditures or expenses are recognized in the accounts and reported in the financial statements. Basis of accounting relates to the timing of the measurement made, regardless of the measurement focus applied.

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 recogniz.ed 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 Budgetary Accounting

By state law, the Board of Trustees must adopt a final budget by July 1. A public hearing is conducted to receive comments prior to adoption. The Board of Trustees complied with these requirements.

28

1.

· .-.. " ... ~ FINANCIAL (Continued)

SUMMARY (Continued)

Stores Inventory

Inventories in the General, Student Body and Cafeteria Funds are valued at average cost. Inventory recorded in the General, Student Body and Cafeteria Funds consists mainly of school supplies and consumable supplies. Inventories are recorded as an expenditure at the time the individual inventory items are transferred from the warehouse to schools and offices.

Cafeteria Food Purchases

Cafeteria purchases include food purchased through the State of California Office of Surplus Property, for which the District is required to pay only a handling charge. The state does not require the Cafeteria Fund to record the fair market value of these commodities. The expenditures for these items would have been greater had the District paid fair market value for the government surplus food commodities.

Capital Assets

Capital assets purchased or acquired, with an original cost of $15,000 or more, are recorded at historical cost or estimated historical cost. Contributed assets are reported at fair market value as of the date received. Additions, improvements and other capital 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 - 30 years depending on asset types.

Compensated Absences

Compensated absences totaling $273,685 are recorded as a liability of the District. The liability is for the earned but unused benefits.

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.

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 deferred revenue until earned.

1.


SUMMARY OF SIGNIFICANT

Restricted Net Assets

(Continued)

Restrictions of the ending net assets indicate the portions of net assets not appropriable for expenditure or amounts legally segregated for a specific future use. The restrictions for revolving cash fund, prepaid expenditures and stores inventory reflect the portions of net assets represented by revolving cash fund, prepaid expenditures and stores inventory, respectively. These amounts are not available for appropriation and expenditure at the balance sheet date. The restriction for unspent categorical program revenues are state programs where the revenue received is restricted for expenditures only in that particular program. The restriction for special revenues represents the portion of net assets restricted for special purposes. The restriction for debt service repayments represents the portion of net assets which the District plans to expend on debt repayment. The restriction for capital projects represents the portion of net assets restricted for capital projects. The restriction for education foundation represents the portion of net assets to be used to provide community development. The restriction for scholarships represents the portion of net assets to be used to provide financial assistance to students of the District.

Fund Balance Classifications

Governmental Accounting Standards Board Codification Sections 1300 and 1800, Fund Balance Reporting and Governmental Fund Type Definitions (GASB Cod. Sec. 1300 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 assets as reported in the government-wide, proprietary fund, and fiduciary trust fund statements.

1. SUMMARY

NOTES TO BASIC FINANCIAL (Continued)

SIGNIFICANT ACCOUNTING

Fund Balance Classifications (Continued)

C - Committed Fund Balance:

(Continued)

The committed fund balance classification reflects amounts subject to internal constraints self-imposed by formal action of the Board of Trustees. 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 Trustees is required to remove any commitment from any fund balance. At June 30, 2011, the District had no committed fund balances.

D - Assigned Fund Balance:

The assigned fund balance classification reflects amounts that the District's Board of Trustees has approved to be used for specific purposes, based on the District's intent related to those specific purposes. The Board of Trustees can designate personnel with the authority to assign fund balances, however, as of June 30, 2011, 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.

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. 1300 and 1800 do not require Districts to establish a minimum fund balance policy or a stabilization arrangement, GASB Cod. Sec. 1300 and 1800 do require the disclosure of a minimum fund balance policy and stabilization arrangements, if they have been adopted by the Board of Trustees. At June 30, 2011, the District has not established a minimum fund balance policy nor has it established a stabilization arrangement.

31

1. SUMMARY

Property Taxes

NOTES BASIC FINANCIAL (Continued)

SIGNIFICANT (Contin ued)

Secured property taxes are attached as an enforceable lien on property as of March 1. Taxes are due in two installments on or before December 10 and April 10. Unsecured property taxes are due in one installment on or before August 31. The County of Yuba bills and collects taxes for the District. Tax revenues are recognized by the District when received.

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 employee salaries and benefits, purchase orders, contracts, and other commitments when they are written. All encumbrances are liquidated as of June 30.

Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions. 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.

CASH AND INVESTMENTS

Cash and investments at June 30, 2011 consisted of the following:

Pooled Funds: Cash in County Treasury

Deposits: Cash on hand and in banks Revolving cash fund

Investments: Cash with Fiscal Agent

Total

Governmental Activities

$ 32,839,790 $

2,002,822 31,597

Fiduciary Activities

295,101

686,338



2. CASH AND INVESTMENTS (Continued)

Pooled Funds

In accordance with Education Code Section 41001, the District maintains substantially all of its cash in the Yuba County Treasury. The County pools these funds with those of school districts and other agencies in the County and invests the {;ash. These pooled funds are carried at cost which approximates fair value. Interest earned is deposited monthly into participating funds. Any investment losses are proportionately shared by all funds in the pool.

Because the District's deposits are maintained in a recognized pooled investment fund under the care of a third party and the District's share of the pooled investment fund does not consist of specific, identifiable investment securities owned by the District, no disclosure of the individual deposits and investments or related custodial credit risk classifications is required.

In accordance with applicable state laws, the Yuba County Treasurer may invest in derivative securities. However, at June 30, 2011, the Yuba County Treasurer has represented that the Treasurer's pooled investment fund contained no derivatives or other investments with similar risk profiles.

Custodial Credit Risk - Deposits

The District limits custodial credit risk by ensuring uninsured balances are collateralized by the respective financial institution. Under Section 343 of the Dodd-Frank Wall Street Reform and Consumer Protection Act, interest-bearing cash balances held in banks are insured up to $250,000 and noninterest-bearing cash balances held in banks are fully insured by the Federal Deposit Insurance Corporation (FDIC) and are collateralized by the respective financial institution. At June 30, 2011, the carrying amount of the District's accounts was $2,720,757 and the bank balance was $2,185,839. $1,026,910 of the bank balance was FDIC insured and $1,158,929 remained uninsured.

Investments

The Cash with Fiscal Agent represents debt proceeds that have been set aside in the Debt Service Fund for the repayment of long-term liabilities. These amounts are held by a third party custodian in the District's name.

I nterest 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, 2011, 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.

33



2. CASH AND INVESTMENTS (Continued)

Concentration of Credit Risk

The District does not place limits on the amount it may invest in anyone issuer. At June 30, 2011, the District had no concentration of credit risk.

3. INTERFUND TRANSACTIONS

Interfund Activity

Transactions between funds of the District are recorded as interfund transfers, except for the Self-Insurance Fund activity which is recorded as income and expenditures of the Self-Insurance Fund and the funds which incur payroll costs, respectively. 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, 2011 were as follows:

Interfund Interfund Fund Receivables Payables

Major Fund: General Fund $ 618,004 $ 991

Non-Major Fund: Cafeteria Fund 991 618.004

Totals $ 618,995 $ 618,995

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 2010-2011 fiscal year were as follows:

Transfer from the General Fund to the Self-Insurance Fund to fund the reserve for future deductibles.

Transfer from the General Fund to the Debt Service for Blended Component Units Fund to cover tax collection shortages for debt payment.

Transfer from the General Fund to the Capital Facilities Fund to cover COP expenditures.

Transfer from the General Fund to the Child Development Fund to correct overage to required restricted balance.

Transfer from the Capital Facilities Fund to the Debt Service Fund for the QZAB deposit.

34

$ 119,513

9,431

8,422

23,358

404,722

NOTES TO BASIC FINANCIAL (Continued)

TRANSACTIONS (Continued)

Interfund Transfers (Continued)

Transfer from the County Schools Facilities Fund to the Capital Facilities Fund for project expenditures and CEQA and DTSC fees.

Transfer from the County Schools Facilities Fund to the Building Fund for OS PC reimbursements and project expenditures.

Transfer from the Adult Education Fund to the General Fund for indirect support.

Transfer from the Child Development Fund to the General Fund for indirect support.

Transfer from the Child Development Fund to the General Fund to correct indirect costs.

Transfer from the Cafeteria Fund to the General Fund for indirect support.

Transfer from the State School Building Lease Purchase Fund to the County School Facilities Fund to close out fund balance.

Transfer from the Bond Interest and Redemption Fund to the Debt Service for Blended Component Units Fund to correct prior period tax revenue posting error.

Transfer from the Tax Override Fund to the Bond Interest and Redemption Fund for tax reimbursement.

4. CAPITAL ASSETS

$ 5,952,840

16,540,483

21,906

104,405

38,416

231,977

27

716,558

8,266

~ 24,180,324

A schedule of changes in capital assets for the year ended June 30, 2011 is shown below:

Governmental Activities

Non-depreciable: Land Work-in-process

Depreciable: Buildings Site improvements Equipment

Totals, at cost

Less accumulated depreciation:

Buildings Site improvements Equipment

Total accumulated depreciation

Capital assets, net

$

Balance July 1, 2010

5,224,767 83,386,402

48,232,295 36,183,219 7,946,940

180,973,623

(32,354,517) (7,710,096) (5 ,082,632)

Additions

$ 1,920,000 14,825,450

159,323 25,031

489,414

17,419,218

(2,747,003)

(702 ,027)

(3,449,030)

Deductions

(2591283)

Transfers

Balance June 30,

2011

$ 7,144,767 $ (2,030,623) 96,181,229

1,716,315 50,107,933 314,308 36,522,558

198,133,558

(35,101,520) (7,710,096) (51525,376)

(481336,992)



4. CAPITAL ASSETS (Continued)

5.

Depreciation expense was charged to governmental activities as follows:

Instruction $ 2,897,185 Home to school transportation 103,471 Food services 34,490 All other general admin 241,432 Plant services 172.452

Total depreciation expense $ 3A49,030

LONG-TERM LIABILITIES

General Obligation Bonds

On August 5, 2009, the District issued $34,433,777 of General Obligation Bonds to raise money for authorized school purposes. The bonds mature serially in varying amounts during the succeeding years through 2037, with interest rates ranging from 5.00/0 through 5.50%. .

Year Ended June 30, Principal Interest Total

2012 $ 200,000 $ 1,576,656 $ 1,776,656 2013 210,000 1,566,656 1,776,656 2014 245,000 1,556,156 1,801,156 2015 310,000 1,543,906 1,853,906 2016 400,000 1,528,406 1,928,406

2017-2021 3,700,000 7,222,931 10,922,931 2022-2026 3,596,123 6,203,031 9,799,154 2027-2031 9,982,891 5,382,544 15,365,435 2032-2036 14,838,929 1,893,738 16,732,667

2037 685,834 685,834

$ 34,168,777 ~ 28A74,024 ~ 62,642,801

36


5. LONG-TERM LIABILITIES (Continued)

General Obligation Bonds (Continued)

On August 30, 2006, the District issued $18,000,000 of General Obligation Bonds to raise money for authorized school purposes. The bonds mature serially in varying amounts during the succeeding years through 2032, with interest rates ranging from 4.0% through 12%.

Year Ended Principal Interest

2012 $ 712,674 $ 712,674 2013 712,674 712,674 2014 712,674 712,674 2015 $ 200,000 707,674 907,674 2016 360,000 693,674 1,053,674

2017-2021 2,565,000 3,160,070 5,725,070 2022-2026 4,400,000 2,443,023 6,843,023 2027-2031 7,005,000 1,234,253 8,239,253

2032 1 ,800,000 40,500 1 ,840.500

$ 161330 1000 ~ 10,4171216 ~ 26 1747 1216

On September 18, 2008, the District issued $19,000,000 of General Obligation Bonds to raise money for authorized school purposes. The bonds mature serially in varying amounts during the succeeding years through 2033, with interest rates ranging from 4.0% through 5.5%.

The following is a schedule of future payments on the Bonds, as of June 30, 2011:

Year Ended

2012 $ 155,000 $ 895,571 $ 1,050,571 2013 205,000 887,821 1,092,821 2014 290,000 887,851 1,177,851 2015 195,000 863,071 1,058,071 2016 145,000 853,321 998,321

2017-2021 1,640,000 4,099,455 5,739,455 2022-2026 3,105,000 3,625,378 6,730,378 2027-2031 4,975,000 2,775,388 7,750,388 2032-2033 71910 1000 8,819,565


(Continued)

Certificates of Participation (COPs)

On August 9, 2006, the District issued $22,145,000 in Certificates of Participation for the purpose of providing funds for the District's 2006 capital projects. The District is required to make lease payments of principal and interest in conjunction with these Certificates of Participation. Interest represented by the Certificates is payable on August 1, 2007 and each February 1 and August 1 thereafter until 2022. Principal amounts are due each August 1, beginning in 2007 and ending in 2021. Interest rates range from 3.6% to 4.25%.

Scheduled payments for the COPs are as follows:

Year Ending June 30.

2012 2013 2014 2015 2016

2017 -2021 2022

Total payments

Less amount representing interest

Net present value of minimum payments

Qualified Zone Academv Sonds

COPs Payments

$ 1,950,102 1,957,504 1,957,319 1,959,324 1,963,446 9,774,478 1 ,950,589

21,512,762

(4,142,762)

~ 17,370,000

In April 2004, the District entered into an agreement with Washington Mutual Community Development, Inc. for a $4,451,939 QZAS Lease Purchase to finance renovation and modernization projects of the District's school buildings. The District is required to deposit $404,722 each year commencing August 15, 2005 and ending August 15, 2014 to a QZAS sinking fund to accumUlate resources to repay the $4,451,939 QZAS principal in August 2014.




Qualified Zone Academy Bonds {Continued)

In February 2010, the District entered into a capital lease purchase agreement with Capital One Bank, for $1,535,000 to finance the purchase of District school buses. The District is required to make lease payments of principal and interest in conjunction with these capital leases. The District has capitalized in the category of Equipment, $1,535,000 of school buses, with an accumulated depreciation of $153,500, as of June 30, 2011.

Scheduled payments for the capital lease are as follows:

Year Ending June 30,

2012 2013 2014 2015 2016

2017-2021

Total payments

Less amount representing interest

Net present value of minimum payments

Schedule of Changes in Long-Term Liabilities

Capital Lease Payments

$ 199,512 199,785 200,072 200,372 200,687 774,764

1,775,192

(363,927)

§ 1 A11,265

A schedule of changes in long-term liabilities for the year ended June 30, 2011 is shown below:

Balance Balance Amounts July 1, June 30, Due Within 2010 Additions Deductions 2011 One Year

Governmental activities: General Obligation Bonds $ 69,493,777 $ 375,000 $ 69,118,777 $ 355,000 Accreted Interest $ 414,873 414,873 Certificates of Participation 18,610,000 1,240,000 17,370,000 1,290,000 Qualified Zone Academy

Bond 4,451,939 4,451,939 Capitalized lease obligations 1,535,000 123,735 1,411,265 129,556 Unamortized premium on

long-term liabilities 358,265 15,579 342,686 15,579 Other postemployment

benefits (Note 8) 2,508,622 1,406,230 1,032,524 2,882,328 1,193,650 Compensated absences 279 1134 51449 273 1685 2731685

Total ~ 97 1236,737 ~ 11821,103 ~ 21792 1287 ~ 96265 1553 ~ 31257 1470

39




Schedule of Changes in Long-Term Liabilities (Continued)

Payments on the Certificates of Participation are made from the General and Capital Facilities Funds. Payments on the General Obligations Bonds are made from the Bond Interest and Redemption Fund. Payments on compensated absences and other postemployment benefits are made from the fund for which the related employee worked.

6. NET ASSETS I FUND BALANCES

Restricted net assets consisted of the following at June 30, 2011:

Governmental Fiduciary Activities Activities

Restricted for revolving cash $ 31,597 Restricted for stores inventory 514,262 Restricted for prepaid expenditures 737,112 Restricted for unspent categorical

program revenues 1,504,529 Restricted for special revenues 2,148,325 Restricted for debt service 5,541,864 Restricted for capital projects 22,139,639 Restricted for scholarships $ 296,663

Total restricted net assets $ 32 1617 1328 ~ 296 1663

40

6.

MARYSVILLE JOINT SCHOOL DISTRICT

BASIC FINANCIAL STATEMENTS (Continued)

ASSETS I BALANCES (Continued)

Fund balances, by category, at June 30,2011 consisted of the following:

Nonspendable: .... C\lr\IHlnln cash fund Prepaid expenses Stores inventory

Subtotal nons pend able

Restricted: Unspent categorical revenues Capital projects Food service operations Child development Adult education Debt service

Subtotal restricted

Assigned: Board assignments

Unassigned: Designated for economic

uncertainty Undesignated

Subtotal unassigned

$

General Fund

30,000

305.909

335.909

1,504,529

1.504.529

798.119

6,557 5.951.324

8.367.881

Capital Building Facilities Fund Fund

$ 13,648,491 $ 8,377,538

13.648.491 8.377.538

$

County School

Facilities Fund

113,610

113.610

All

Funds

$ 1,597 $ 6,664

208.353

216.614

1,555,342 82,987 47,469

5.541.864

7.227.662

462.527

Total

31,597 6,664

514.262

552.523

1,504,529 22,139,639

1,555,342 82,987 47,469

5.541.864

30.871 .830

1.260.646

2,416,557 5.951.324

8.367.881

Total fund balances $ 11.006.438 $ 13.648.491 $ 8.377.538 $ 113.610 $ 7.906.803 $ 4.1.052.880


SYSTEMS

Qualified employees are covered under multiple-employer defined benefit pension plans maintained by agencies of the State of California. Certificated employees are members of the State Teachers' Retirement System (STRS), and classified employees are members of the California Public Employees' Retirement System (CaIPERS).

Plan Description and Provisions

California Public Employees' Retirement System (CaIPERS)

Plan Description

The District contributes to the School Employer Pool under the California Public Employees' Retirement System (CaIPERS), a cost-sharing multiple-employer public employee retirement system defined benefit pension plan administered by CaIPERS. The plan provides retirement and disability benefits, annual cost-of-living adjustments, and death benefits to plan members and beneficiaries. Benefit provisions are established by state statutes, as legislatively amended, within the Public Employees' Retirement Law. CalPERS issues a separate comprehensive annual financial report that includes financial statements and required supplementary information. Copies of the CalPERS annual financial report may be obtained from the CalPERS Executive Office, 400 Q Street, Sacramento, California 95811.

Funding Policy

Active plan members are required to contribute 7% of their salary and the District is required to contribute an actuarially determined rate. The actuarial methods and assumptions used for determining the rate are those adopted by the CalPERS Board of Administration. The required employer contribution rate for fiscal year 2010-2011 was 10.707% of annual payroll. The contribution requirements of the plan members are established by state statute. The District's contributions to CalPERS for the fiscal years ending June 30, 2009, 2010 and 2011 were $1,408,184, $1,452,112 and $1,525,843, respectively, and equal 100% of the required contributions for each year.

State Teachers' Retirement System (STRS)

Plan Description

The District contributes to the State Teachers' Retirement System (STRS), a costsharing multiple-employer public employee retirement system defined benefit pension plan administered by STRS. The plan provides retirement, disability and survivor benefits to beneficiaries. Benefit provisions are established by state statutes, as legislatively amended, within the State Teachers' Retirement Law. STRS issues a separate comprehensive annual financial report that includes financial statements and required supplementary information. Copies of the annual financial report may be obtained from the STRS Executive Office, 100 Waterfront Place, West Sacramento, California 95605.

BASIC FINANCIAL STATEMENTS (Continued)

RETIREMENT SYSTEMS (Continued)

Plan Description and Provisions (Continued)

State Teachers' Retirement System (STRS) (Continued)

Funding Policy

Active plan members are required to contribute 8% of their salary. The required employer contribution rate for fiscal year 2010-2011 was 8.25% of annual payroll. The contribution requirements of the plan members are established by state statute. The District's contributions to STRS for the fiscal years ending June 30, 2009, 2010 and 2011 were $2,762,638, $2,949,262 and $2,870,593, respectively, and equal 100% of the required contributions for each year.

8. OTHER POSTEMPLOYMENT BENEFITS

Plan Description

Marysville Joint Unified School District's Retired Employees Healthcare Plan (REHP) is a single-employer defined benefit healthcare plan administered by the Marysville Joint Unified School District. REHP provides medical and dental insurance benefits to eligible retirees, their spouses and if applicable, dependents.

The District issues a publicly available financial report that includes financial statements and required supplementary information for REHP. That report may be obtained by writing to Marysville Joint Unified School District, 1919 B Street, Marysville, California 95901, or by calling (530) 749-6125.

Funding Policy

The contribution requirements of plan members and the District are established and may be amended by the Board of Trustees. The required contribution is based on projected "pay-as-you-go" financing requirements. For the fiscal year ended June 30, 2011, the District's "pay-as-you-go" expenses were $1,032,524.

NOTES BASIC FINANCIAL STATEMENTS (Continued)

(Continued)

Annual OPES Cost and Net OPES Obligation

The Districts 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 GASS Cod. Sec. P50.1 08-.1 09. 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 OPES obligation - end of year

$ 1,280,799

125,431

1,406,230

(1.032.524)

373,706

2.508.622

$ 2.882.328

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, 2011 and preceding two years were as follows:

Percentage of Annual

Fiscal Year Annual Cost Net Contributed Obligation

June 30, 2009 $ 1,077,957 91.0% $ 1,844,692 June 30, 2010 $ 1,575,876 57.90/0 $ 2,508,622 June 30, 2011 $ 1,406,230 73.4% $ 2,882,328

As of March 25, 2010, the most recent actuarial valuation date, the plan was unfunded. The actuarial accrued liability for benefits was $11.4 million, all of which is unfunded, resulting in an unfunded actuarial accrued liability (UAAL) of $11.4 million. The covered payroll (annual payroll of active employees covered by the Plan) was $48.8 million, and the ratio of the UAAL to the covered payroll was percent. The plan is currently being operated as a pay-as-you-go plan.

44



8. OTHER POSTEMPLOYMENT BENEFITS (Continued)

Funded Status and Fund Progress (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.

Actuarial Methods and Assumptions

Projections of benefits for financial reporting purposes are based on the substantive plan (the plan as understood by the employer and the plan members) and include the types of benefits provided at the time of each valuation and the historical pattern of sharing of 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 March 25, 2010 actuarial valuation, the entry age actuarial cost method was used. The actuarial assumptions included a 5.0 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 4.0 percent initially. An inflation rate of 3.0 percent was used. The UAAL is being amortized as a level percentage of projected payroll on an open basis. The remaining amortization period at June 30, 2011, was 29 years.

9. JOINT POWERS AGREEMENT

The District is a member with other school districts in two Joint Powers Authorities, Schools Insurance Group (SIG) for workers' compensation and Northern California Schools Insurance Group (NCSIG) for property and liability. The following is a summary of financial information for SIG at June 30, 2011 and NCSIG at June 30, 2010 ,the most recent information available):

Total assets Total liabilities Total net assets Total revenues Total expenses

45

SIG NCSIG

$ 79,363,266 $ 6,543,514 $ 27,067,732 $ 3,481,062 $ 52,295,534 $ 3,062,452 $ 73,921,196 $ 7,072,842 $ 70,953,211 $ 6,710,727



9. JOINT POWERS AGREEMENT (Continued)

The relationship between the District and the Joint Powers Authorities is such that the Joint Powers Authorities are not component units of the District for financial reporting purposes.

10. CONTINGENCIES

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.

46

REQUI SUPPLEMENTARY INFORMATION



State apportionment Local sources

Total revenue limit

Federal sources Other state sources Other local sources

Total revenues

Expenditures: Certificated salaries Classified salaries Employee benefits Books and supplies Contract services and operating

expenditures Capital outlay Other outgo Debt service:

Principal retirement Interest

Total expenditures

(Deficiency) excess of revenues (under) over expenditures

Other financing sources (uses): Operating transfers in Operating transfers out

GENERAL fUND

BUDGETARY COMPARISON SCHEDULE


$ 34,639,607 $ 12,715,347

47,354,954

9,208,926 13,327,146 4.479,204

74,370,230

34,375,472 12,639,760 16,041,231

3,984,516

8,184,506 224,409

2,347,470

524,396 109,121

78.430,881

(4,060,651)

367,362 (45,000)

36,310,581 $ 13.469.925

49,780,506

17,488,290 15,095,287 5,656,191

88,020,274

37,654,808 13,298,602 16,538,401 7,290,972

9,443,387 583,494

2,463,237

529,477 104,040

87,906.418

372,286

Total other financing sources (uses):


Fund balance, July 1, 2010

Fund balance, June 30, 2011

(3,738,289)

9.404,820

357,198

9.404.820


Variance Favorable

(Unfavorable)

36,232,875 $ 13,321,656

49,554,531

12,733,287 14,369,020

5.466,685

35,490,052 12,695,111 15,942,971 5,467,536

7,527,316 538,237

2,463,237

529,477 103,948

80,757,885

1 ,365,638

396,704 (160,724)

1,601,618

9.404.820

(77,706) (148,269)

.(225,975)

(4,755,003) (726,267) (189,506)

(5,896,751 )

2,164,756 603,491 595,430

1,823,436

1,916,071 45,257

7,148,533

24,418

1,244,420

Fiscal Year

6/30/2009 6i30i20; 0 6/30/2011

Actuarial Valuation

Date

MARYSVillE JOINT UNIFtED SCHOOL DISTRICT

SCHEDULE 'OF OTHER POSTEMPlOYMENT BENEfiTS {OPES) FUNDING PROGRESS


Actuarial Actuarial Actuarial Accrued Accrued Value of liability liability Funded Assets {AAL} {UAAL} Ratio

November ii, 2009 $ $11.4 million $11.4 million 0% March 25, 2010 $ March 25, 2010 $

$11.4 million $11.4 million $11.4 million $11 .4 million


48

0% 0%

as a Percentage

of Covered Covered Pall roll Pall roll

$49.3 million 23.1% $52.3 million 21.8% $48.8 million 23.4%

1.

A

JOINT

NOTES REQUIRED SUPPLEMENTARY INFORMATION

OF SCHEDULES

Budgetary Comparison Schedule

The District employs budget control by obJect codes and by individual appropriation accounts. Budgets are prepared on the modified accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America as prescribed by the Governmental Accounting Standards Board. The budgets are revised during the year by the Board of Trustees to provide for revised priorities. Expenditures cannot legally exceed appropriations by major object code. The originally adopted and final revised budgets for the General Fund are presented as Required Supplementary Information. The basis of budgeting is the same as GAAP.

B Schedule of Other Postemployment Benefits Fundina Progress

The Schedule of Funding Progress presents multi-year trend information which compares, over time, the actuarially accrued liability for benefits with the actuarial value of accumulated plan assets.

SUPPLEMENTARY INFORMATION

ASSETS

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

Total assets

LIABILITIES AND FUND BALANCES

Liabilities: Accounts payable Due to other funds

Total liabilities

Fund balances: Nonspendable Restricted Assigned

Total fund balances:

Total liabilities and fund balances

$

$

Charter Adult Schools Education

Fund Fund

$ 110.778

19.562

$ 130.340

$ 19.791

19791

47,469 63.080

110sg

$ 130.340


COMBINING BALANCE SHEET

ALL NON-MAJOR FUNDS

June 30, 2011

Child Deferred State School Development Cafeteria Maintenance Building

$

$

$

$

Fund Fund Fund

142,467 $ 341.698 $ 2.002.822

1.597

46.284 230.685 904 6.664

991 208~

188.751 $ 2.451.112 $ 342.602 $

48.919 $ 61.152 618~

48919 679156

216.614 82,987 1.555.342 56~ ~ 3421602

1391832 1 771 1956 3421602

188.751 $ 2,451.112 $ 342.602 $


50

Fund

Debt Service Bond Fund for

Interest and Tax Blended Debt Redemption Override Component Service

Fund Fund Units Fund Total

$ 1.532.213 $ 1.032.651 $ 3.159.807 2.002.822

1.597 $ 2.970.740 2.970.740

4.023 2.237 303.695 6.664

991 208.353

$ 1.536.236 $ $ 1.034.888 $ 2.970.740 $ 8.654.669

$ 129.862 6181004

747866

216.614 $ 1.536.236 $ 1.034.888 $ 2.970.740 7.227.662

462527

115361236 11034888 21970740 79061803

$ 1.536.236 $ $ 1.034.888 $ 2.970.740 $ 8.654.669


COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGE IN FUND BALANCES

ALL NON-MAJOR FUNDS

For the Year Ended June 30,2011

Debt Service Bond Fund for

Charter Adult Child Deferred State School Interest and Tax Blended Debt Schools Education Development Cafeteria Maintenance Building Redemption Override Component Service ~ Fund Fund Fund Fund Fund Fund Fund Units Fund Total


State apportionment $ 12,749 $ 12,749 Local sources 91 648 ~648

Total revenue limit 104397 --1.Q1,397

Federal sources 17,857 $ 74,080 $ 4,506,892 4,598,829 Other state sources 63,967 $ 477,699 2,004,675 390,463 $ 225,420 $ 70,728 $ 280 3,233,232 Other local sources 10,516 125,846 (23,581) 586,211 7,125 1,775,089 1,839,185 L-.,i.457 4,324,848

Total revenues 196737 603,545 2,055174 5,483566 232545 1,845817 _~465 4,457 12.261.306

salaries 204,086 284,723 673,635 7,441 1,169,885 Classified salaries 42,675 142,456 610,654 1,896,164 2,691,949

benefits 78,699 91,423 550,826 974,893 1,695,841 and 36,811 55,798 117,103 2,166,897 2,376,609

Contract expenditures 128,970 43,918 12,232 154,283 339,403

Capital outlay 36,970 36,970 Debt service:

Principal 110,000 265,000 375,000 Interest 1,610,995 ~241 3.883,236

Total __ 4~LZAl ____ Q1e.31e 2,001,420 5,199,678 1.720,995 2.537.241 12,568,893

(Deficiency) excess of revenues (under) over expenditures (294,504) P4,773) 53,754 283888 232545 124,822 (697,776) 4457 (307,587)

Other financing sources (uses): Operating transfers in 23,358 8,266 725,989 404,722 1,162,335 Operating transfers out (21 906) P42,821) (231,977) ~ (27) (716,558) ~ (8266) - (1,121555)

Total other finanCing sources (uses) (21,906) (119463) (231 977) (27) (708,292) (8266) 725.989 404.722 40,780

Net change in fund balances (294,504) (36,679) (65,709) 51,911 232,545 (27) (583,470) (8,266) 28,213 409,179 (266,807)

Fund balances, July 1, 2010 294504 147228 205540 1 720046 110057 27 2119706 8266 1 006675 2561 561 8173610

Fund balances, June 30, 2011 $ $ 110,549 $ 139.831 $ 1.771.957 $ 342.602 $ $ 1.536.236 $ $ 1.034.888 $ 2,970,740 $ 7.906.803

The accompanying part

51


COMBINING STATEMENT OF CHANGES IN ASSETS AND LIABILITIES

Student Body Funds

Marysville High School

Assets: Cash on hand and in banks Inventory

Total assets

Liabilities: Due to stUdent groups

Lindhurst High School


Total assets

Liabilities: Due to student groups

Elementary and Middle Schools


Total assets


ALL AGENCY FUNDS


$

$

$

$

$

$

Balance July 1,

434,010 $

437.068 $

437.068 $

169,811 $ 5.106

174.917 $

$

89,338 $

(Continued)

324,486 $ 1.583

326.069

326.069 $

210,016 $

210.016 $

210.016 $

227,079 $

Balance June 30,

327,572 $ 430,924

$ 435.565

327.572 $ 435.565

202,947 $ 176,880

204.566 =$ ===1=80=.3=6=7

204.566 =$ ===1=80=. 3=6=7

237,883 $ 78,534


COMBINING STATEMENT Of CHANGES IN ASSETS AND LIABILITIES

ALL AGENCY fUNDS (Continued)

for the Year Ended June 30, 2011

Balance July 1,

Student Body funds (Continued)

Total Agency Funds


Total assets


$ 693,159 $ 761,581 9,865

$ 703,024 $ 765,745

~ 703.024 ~ 765,745


$ 768,402 3,664

$ 772,066

~ 772 1066

$

$

~

Balance June 30,

686,338 10,365

696,703

696,703

JOINT UNIFIED

ORGANIZA TION

30,2011

Marysville Joint Unified School District was established in 1966. The District is a political subdivision of the State of California. The District currently operates 23 individual school sites. The District also operates Day Care/Latchkey/Preschool Programs in 9 locations, an adult education program, New Day Charter School and Marysville Charter Academy of the Arts. Effective July 1 j 2011 j New Day Charter School was closed. There were no changes in District boundaries for the year.

Jeff Boom Glen E. Harris Frank Crawford Margaret Markle Jim Flurry Bernard Rechs Philip Miller

BOARD OF TRUSTEES

President Vice President

Trustee Representative Clerk

Member Member Member

ADMINISTRATION

Gay S. Todd Superintendent/Secretary of the Board

Ramiro Carreon Assistant Superintendent Personnel Services

Mark Allgire Assistant Superintendent Business Services

November 2014 November 2012 November 2014 November 2012 November 2012 November 2012 November 2014


SCHEDULE OF AVERAGE DAILY ATTENDANCE


Audited Original Second Period Second Period Annual

Reaort Reaort Reaort

DISTRICT

Elementary: Kindergarten 817 817 816 First through Third 2,296 2,296 2,290 Fourth through Sixth 1,993 1,993 1,987 Seventh and Eighth 1,137 1,137 1,132 Home and Hospital 3 3 4 Special Education 233 233 233 Extended Year Program 1 1 1

Total Elementary 6A80 6A80 6A63

Secondary: Regular Classes 1,994 1,994 1,981 Continuation Education 195 184 176 Home and Hospital 2 2 2 Special Education 180 177 180

Total Secondary 2.371 2.357 2.339

Total District 8.851 8.837 81802

CHARTER SCHOOLS

Marysville Charter Academy of the Arts -Classroom-Based:

Seventh and Eighth 124 122 Ninth through Twelfth 209 333 208

Subtotal Classroom-Based 333 333 330

Marysville Charter Academy of the Arts -Non-Classroom-Based:

Seventh and Eighth 1 1 Ninth through Twelfth 3 4 3

Subtotal Non-Classroom Based 4 4 4

Subtotal Marysville Charter Academy of the Arts 337 337 334

(Continued)

55


SCHEDULE OF AVERAGE DAILY ATTENDANCE (Continued)


Audited Second Period

Report

Original Second Period

Report

CHARTER SCHOOLS (Continued)

New Day Charter School - Classroom-Based:

Kindergarten First through Third Fourth through Sixth Seventh and Eighth

Subtotal Classroom Based

New Day Charter School - Non- Classroom-Based:

Kindergarten First through Third Fourth through Sixth Seventh and Eighth

Subtotal Non-Classroom Based

Subtotal New Day Charter School

Total Charter Schools

6 23 26 30

85

1 3 4

13

21

106

443

See accompanying notes to supplementary information.

56

7 26 27 31

91

1 4 8

16

29

120

457

Annual Report

7 26 27 31

91

1 5 9

17

32

123

457


SCHEDULE OF INSTRUCTIONAL TIME


Statutory Reduced 1986-87 1986-87 Statutory Reduced Number Minutes Minutes 1982-83 1982-83 2010-11 of Days Require- Require- Actual Actual Actual Traditional

Minutes Calendar

TRADITIONAL SCHOOLS

Kindergarten 36,000 N/A 31,250 N/A 36,000 180 In Compliance Grade 1 50AOO N/A 47,125 N/A 51,190 180 In Compliance Grade 2 50AOO N/A 47,125 N/A 51,190 180 In Compliance Grade 3 50AOO N/A 47,125 N/A 51,190 180 In Compliance Grade 4 54,000 N/A 52,812 N/A 54,114 180 In Compliance Grade 5 54,000 N/A 52,812 N/A 54,114 180 In Compliance Grade 6 54,000 N/A 57,342 N/A 60,080 180 In Compliance Grade 7 54,000 N/A 57,342 N/A 60,820 180 In Compliance Grade 8 54,000 N/A 57,342 N/A 60,820 180 In Compliance Grade 9 64,800 N/A 60,958 N/A 64,828 180 In Compliance Grade 10 64,800 N/A 60,958 N/A 64,828 180 In Compliance Grade 11 64,800 N/A 60,958 N/A 64,828 180 In Compliance Grade 12 64,800 N/A 60,958 N/A 64,828 180 In Compliance

(Continued)


SCHEDULE OF INSTRUCTIONAL TIME {Continued)


1986-87 Number Minutes 1982-83 2010-11 of Days Require- Actual Actual Traditional

Minutes Minutes

CHARTER SCHOOLS

Marysville Charter Academy for the Arts

Grade 7 54,000 Grade 8 54,000 Grade 9 64,800 Grade 10 64,800 Grade 11 64,800 Grade 12 64,800

New Day Charter School

Kindergarten 36,000 Grade 1 50,400 Grade 2 50,400 Grade 3 50,400 Grade 4 54,000 Grade 5 54,000 Grade 6 54,000 Grade 7 54,000 Grade 8 54,000

N/A 64,330 180 N/A 64,330 180 N/A 64,330 180 N/A 64,330 180 N/A 64,330 180 N/A 64,330 180

N/A 37,950 180 N/A 51,195 180 N/A 51,195 180 N/A 51,195 180 N/A 54,775 180 N/A 54,775 180 N/A 60,845 180 N/A 60,845 180 N/A 60,845 180


Number of Days

Year Round Calendar

N/A N/A N/A N/A N/A N/A

N/A N/A N/A N/A N/A N/A N/A N/A N/A

In Compliance In Compliance I n Compliance In Compliance In Compliance I n Compliance

In Compliance In Compliance I n Compliance In Compliance I n Compliance In Compliance In Compliance I n Compliance In Compliance

Federal Catalog Number


SCHEDULE OF EXPENDITURE OF FEDERAL AWARDS


Federa I Grantor/Pass-Throug h Grantor/Program or Cluster Title

Pass-Through Entity

Identifying

U.S. Department of Education - Passed though California Department of Education

84.010 84.010

84.010 84.389

84.377

84.377

84.377 84.388

84.027

84.391

84.318

84.318

84.386

84.365 84.365

Title I, Part A, Cluster: NClB: Title I, Part A, Basic Grants NClB: Title I, Part A, Program Improvement

lEA Corrective Action NClB: Title I, Part A, School Improvement Grant NClB: ARRA Title I, Part A

Subtotal Title I, Part A, Cluster

Title I, School Improvement Grant Cluster: NClB: Title I, Part A, School Improvement Grant

for QEIA Schools NClB: Title I, Part A, School Improvement Grant for QEIA Schools NClB: Title I, Part A, School Improvement Grant NClB: ARRA Title I, Part A, School Improvement

Grant

Subtotal Title I, School Improvement Grant Cluster

Special Education Cluster: Special Ed IDEA: Basic and local Assistance

Entitlement, Part B, Sec 611 (Formerly 94-142) ARRA: IDEA, Basic local Assistance, Part B

Subtotal Special Education Cluster

Title II, Part D, Enhancing Education Through Technology Cluster: NClB: Title II, Part D, Enhancing Education Through

Technology, Competitive Grants NClB: Title II, Part D, Enhancing Education Through

Technology, Formula Grants NClB: Title II, Part D, Enhancing Education Through

Technology, Formula Grants

Subtotal Title II, Part D, Enhancing Education Through Technology Cluster

Title III Cluster: NClB: Title III, Limited English Proficiency NClB: Title III, Immigrant Education Program

Subtotal Title III Cluster

(Continued)

13797

14957 15123 15005

15124

14971 15127

15020

13379 15003

14369

14334

15019

10084 10011

Federal Expend-

$ 3,482,153

108,785 24,940

1.550.839

121,517

24,884 259,229

932.968

1.338.598

1,190,980

2.023.067

52,045

32,237

316,352

Federal Catalog


.B- ..... LIIL.L.. OF EXPENDITURE OF FEDERAL AWARDS (Continued)


Federal Grantor/Pass-Through Grantor/Program or Cluster Title

Pass-Through Entity

Identifying

U.S. Department of Education - Passed though California Department of Education (Continued)

84.196

84.387A

84.282 84.366B

84.394 84.367

84.060 84.186

84.048

84.410

Title X, McKinney-Vento Cluster: NClB: Title X, McKinney-Vento Homeless Children

Assistance Grants NClB: ARRA Title X, McKinney-Vento Homeless

Children Assistance Grants

Subtotal Title X, McKinney-Vento Cluster

NClB: Title V, Part B, Public School Charter Grant NClB: Title II, Part B, CA Mathematics and Science

Partnerships ARRA: State Fiscal Stabilization Fund NClB: Title II, Part A, Improving Teacher Quality

local Grants Title IX, Part A, Indian Education NClB: Title IV, Safe and Drug Free Schools and

Communities, Formula Grants Vocational Programs: Voc & Appl Tech Secondary II C,

Sec 131 (Carl Perkins Act) Education Jobs Funds

Total U.S. Department of Education

U.S. Department of Agriculture - Passed through California Department of Education

10.665 10.582 10.555

Forest Reserve Funds Child Nutrition: Fresh Fruit and Vegetable Program National School lunch Program

Total U.S. Department of Agriculture

U.S. Department of Health and Human Services - Passed through California Department of Education

14332

15007

14531

14513 25008

14341 10011

14347

13924 25125

10044 14968 13396

93.778 Medi-Cal Billing Option 10013

Child Development Cluster: 93.713 Child Development: ARRA quality improvement

activities 15011 93.596 Child Development: Federal Child Care, Center Based 13609

Subtotal Child Development Cluster

Total U.S Department of Health and Human Services

(Continued)

60

$

Federal Expend-

28,105

110,901

287,424 2,082,773

1,148,217 339,354

14,281

98,193 886,624

141065 1104

21,263 132,105

240,896

23,819


SCHEDULE OF EXPENDITURE OF FEDERAL AWARDS {Continued)

Federal Catalog Number


Federal Grantor/Pass-Through Grantor/Program or Cluster Title

U.S. Department of the Interior - Passed through California Department of Education

15.130 Johnson O'Malley: Indian Education Assistance to Schools

Total Federal Awards

* District is unable to provide PCA number.


'61

Pass-Through Entity

Identifying Number

* $

Federal Expend

itures

8,023

$ 18,918,548


RECONCILIATION OF UNAUDITED ACTUAL FINANCIAL REPORT WITH AUDITED FINANCIAL STATEMENTS


There were no audit adjustments proposed to any funds of the District.


62


SCHEDULE OF FINANCIAL TRENDS AND ANALYSIS

General Fund

Revenues and other financing sources

Expenditures Other uses and transfers out

Total outgo


Ending fund balance

Available reserves

Designated for economic u ncerta i nties

Undesignated fund balance

Available reserves as percentages of total outgo

All Funds

Total long-term liabilities

Average daily attendance at P-2, excluding Adult


(Budget)

$ 76.775.066 $ 81.966.258

78,106,777 80,757,885 82,418,270 160.724 44.368

78.106.777 80.918.609 82.462.638

$ (496.380)

$ 9.674.727 $ 11 .006.438 $ 9.404.820

$ 7.306.080 $ 8,367.881 $ 5.376.104

$ 2.343.204 $ 2.416.557 $ 2.459.738

~ 4,962 1876 ~ 5 1951 1324 ~ 2 1916 1366

$ 93 1008,083 $ 96,265.553

$ 85.884.983

85,004,217 40.000

85.044.217

$ 9.901 .200

$ 5.306.530

$ 2.537.718

~ 2 1768.812

The General Fund fund balance has increased by $1,946,004 over the past three years. The District has incurred operating surpluses in two of the past three years and anticipates incurring an operating deficit during the 2011-2012 fiscal year. For a district this size, the state recommends available reserves of at least 3% of total General Fund expenditures, transfers out, and other uses, for which the District is in compliance.

Total long-term liabilities have increased by $34,203,476 over the past two years.

Average daily attendance has decreased by 352 over the past two years. The District anticipates an increase of 138 ADA for the 2011-2012 fiscal year.


63


SCHEDULE OF CHARTER SCHOOLS


Included in District Financial Statements, or

Marysville Charter Academy for the Arts Included in the General Fund of the District Financial Statements.

New Day Charter Included in the General Fund of the District Financial Statements.

Yuba Environmental Science Charter Academy Seperate Report


1.

A

MARYSVILLE JOINT

NOTES TO SUPPLEMENTARY INFORMATION

OF SCHEDULES

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. 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 46201 through 46206.

C Schedule of Expenditure of Federal Awards

OMB Circular A-133 requires a disclosure of the financial activities of all federally funded programs. This schedule was prepared to comply with A-133 requirements, and is presented on the modified accrual basis of accounting.

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, 2011.

Total Federal revenues, Statement of Revenues, Expenditures and Change in Fund Balances

Add: ARRA: State Fiscal Stabilization Funds spent from prior year awards

Less: Medi-Cal Billing Funds unspent from current year awards

Total Schedule of Expenditure of Federal Awards

CFOA Number

84.394

93.778

Amount

$ 17,332,116

1,634,439

1.

NOTES

UNIFIED

SUPPLEMENTARY INFORMATION (Continued)

(Continued)

D Reconciliation of Unaudited Actual Financial Report with Audited Financial Statements

This schedule provides the information necessary to reconci1e the Unaudited Actual Financial Report to the audited financial statements.

E Schedule of Financial Trends and Analysis

This schedule provides information on the District's financial condition over the past three years and its anticipated condition for the 2011-2012 fiscal year, as required by the State Controller's Office.

F Schedule of Charter Schools

This schedule provides information for the CaHfornia Department of Education to monitor financial reporting by Charter Schools.

2. EARLY RETIREMENT INCENTIVE PROGRAM

Education Code Section 14502 requires certain disclosure in the financial statements of districts which adopt Early Retirement Incentive Programs pursuant to Education Code Sections 22714 and 44929. For the fiscal year ended June 30, 2011, the District did not adopt this program.

INDEPENDENT AUDITORS' REPORT ON COMPLIANCE WITH STATE LAWS AND REGULATIONS


We have audited the compliance of Marysville Joint Unified School District with the types of compliance requirements described in the State of California's Standards and Procedures for Audits of California K-12 Local Educational Agencies (the "Audit Guide") to the state laws and regulations listed below for the year ended June 30, 2011. Compliance with the requirements of state laws and regulations is the responsibility of Marysville Joint Unified School District's management. Our responsibility is to express an opinion on Marysville Joint Unified School District's compliance based on our audit.

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 State of California's Standards and Procedures for Audits of California K-12 Local Educational Agencies. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the state laws and regulations listed below occurred. An audit includes examining, on a test basis, evidence about Marysville Joint 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. Our audit does not provide a legal determination of Marysville Joint Unified School District's compliance with those requirements.

Audit Guide Procedures Description Procedures Performed

Regular and Special Day Classes 8 No, see below Kindergarten Continuance 3 Yes Independent Study 23 Yes Continuation Education 10 Yes Instructional Time:

School Districts 6 Yes County Offices of Education 3 No, see below

I nstructional Materials: General requirements 8 Yes

Ratio of Administrative Employees to Teachers 1 Yes Classroom Teacher Salaries 1 Yes Early Retirement Incentive Program 4 No, see below Gann Limit Calculation 1 Yes School Accountability Report Card 3 No, see below Public Hearing Requirements - Receipt of Funds 1 Yes Class Size Reduction Program:

General requirements 7 Yes Option one classes 3 Yes Option two classes 4 No, see below Districts with only one school serving K-3 4 No, see below

After School Education and Safety Program: General requirements 4 Yes After school 4 Yes Before school 5 No, see below

67

INDEPENDENT AUDITORS' REPORT ON COMPLIANCE WITH STATE LAWS AND REGULATIONS

(Continued)

Description·

Contemporaneous Records of Attendance, for charter schools Mode of Instruction, for charter schools Nonclassroom-Based I nstruction/l ndependent Study,

for charter schools Determination of Funding for Nonclassroom-Based

Instruction, for charter schools Annual Instructional Minutes - Classroom-Based,

for charter schools

Audit Guide Procedures

1 1

15

3

3

Procedures Performed

Yes Yes

Yes

Yes

Yes

We did not perform procedure (d) related to Attendance Reporting for one school site because the District did not retain documentation to support absences.

We did not perform any procedures related to Instructional Time for County Offices of Education because the District is not a County Office of Education.

We did not perform any procedures related to Early Retirement Incentive Program because the District did not offer the program in the current year.

The 2010-11 School Accountability Report Cards specified by Education Code Section 33126 are not required to be completed, nor were they completed, prior to the 'completion of our audit procedures for the year ended June 30, 2011. Accordingly, we could not perform the portions of audit steps (a), (b) and (c) of Section 19837 of the 2010-11 Audit Guide relating to the comparison of tested data from the 2010-11 fiscal year to the 2010-11 School Accountability Report Cards.

We did not perform any procedures related to Class Size Reduction Program - Option Two and Districts with only one school serving K-3 because the District did not offer Option Two and has more than one school serving K-3.

We did not perform any procedures related to After School Education and Safety Program - Before School because the District does not operate a program before school.

As described in Findings 2011-02, 2011-03 and 2011-04 in the accompanying Schedule of Audit Findings and Questioned Costs, Marysville Joint Unified School District did not comply with requirements regarding Attendance Reporting. Compliance with such requirements is necessary, in our opinion, for Marysville Joint Unified School District to comply with state laws and regulations applicable to Attendance Reporting.

In our opinion, except for the noncompliance with Attendance Reporting identified in the Schedule of Audit Findings and Questioned Costs as Findings 2011-02, 2011-03 and 2011-04, Marysville Joint Unified School District complied with the state laws and regulations referred to above for the year ended June 30, 2011. Further, based on our examination, for items not tested, nothing came to our attention to indicate the Marysville Joint Unified School District had not complied with the state laws and regulations.

Marysville Joint Unified School District's responses to the findings identified in our audit are included in the accompanying Schedule of Audit Findings and Questioned Costs. We did not audit the District's responses and, accordingly, -express no opinion on them.

68

(Continued)

This report is intended solely for the information of the Board of Trustees, management, the State Controller's Office, the California Department of Education and the California Department of Finance, and is not intended to be and should not be used by anyone other than these specified parties.

Sacramento, California December 9, 2011

Crowe Horwath LLP

INDEPENDENT AUDITORS' REPORT ON INTERNAL CONTROL FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH


We have audited the financial statements of Marysville Joint Unified School District as of and for the year ended June 30, 2011, and have issued our report thereon dated December 9, 2011. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States.

Internal Control Over Financial Reporting

Management of Marysville Joint Unified School District is responsible for establishing and maintaining effective internal control over financial reporting. In planning and performing our audit, we considered Marysville Joint Unified School District's internal control over financial reporting as a basis for designing our auditing procedures for the purpose of expressing our opinion on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of Marysville Joint Unified School District's internal control over financial reporting. Accordingly, we do not express an opinion of the effectiveness of Marysville Joint Unified School District's internal control over financial reporting.

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 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.

Our consideration of internal control over financial reporting 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 financial reporting that might be deficiencies, significant deficiencies or material weaknesses. We did not identify any deficiencies in internal control over financial reporting that we consider to be material weaknesses, as defined above.

Compliance and Other Matters

As part of obtaining reasonable assurance about whether Marysville Joint 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.

70

INDEPENDENT AUDITORS' ON INTERNAL CONTROL FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH

GOVERNMENT AUDITING STANDARDS (Continued)

Compliance and Other Matters (Continued)

This report is intended solely for the information of the Board of Trustees, management, the California Department of Education, the California State Controller's Office and federal awarding agencies and pass=through entities, and is not intended to be and should not be used by anyone other than these specified parties.


71

Crowe Horwath LLP

INDEPENDENT REPORT ON COMPLIANCE WITH REQUIREMENTS THAT COULD HAVE A DIRECT AND MATERIAL

EFFECT ON EACH MAJOR PROGRAM AND ON INTERNAL CONTROL


Compliance

We have audited Marysville Joint Unified School District's compliance with the types of compliance requirements described in the U. S. Office of Management and Budget (OMB) Circular A-133 Compliance Supplement that could have a direct and material effect on each of Marysville Joint Unified School District's major federal programs for the year ended June 30, 2011. Marysville Joint Unified School District's major federal programs are identified in the summary of auditors' results section of the accompanying Schedule of Audit Findings and Questioned Costs. Compliance with the requirements of laws, regulations, contracts and grants applicable to each of its major federal programs is the responsibility of Marysville Joint Unified School District's management. Our responsibility is to express an opinion on Marysville Joint Unified School District's compliance based on our audit.

We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States of America; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; and OMB Circular A-133. Those standards and OMB Circular A-133 require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the types of compliance requirements referred to above that could have a direct and material effect on a major federal program occurred. An audit includes examining, on a test basis, evidence about Marysville Joint 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. Our audit does not provide a legal determination on Marysville Joint Unified School District's compliance with those requirements.

In our opinion, Marysville Joint Unified School District complied, in all material respects, with the 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, 2011. However, we noted immaterial instances of non-compliance as noted as 2011-01 in the Schedule of Audit Findings and Questioned Costs section of this report.

Internal Control Over Compliance

Management of Marysville Joint Unified School District is responsible for establishing and maintaining effective internal control over compliance with the requirements of laws, regulations, contracts and grants applicable to federal programs. In planning and performing our audit, we considered Marysville Joint Unified School District's internal control over compliance with the requirements that could have a direct and material effect on a major federal program in order to determine the auditing procedures for the purpose of expressing our opinion on compliance and to test and report on internal control over compliance in accordance with OMB Circular A-133, but not for the purpose of expressing an opinion on the effectiveness of internal control over compliance. Accordingly, we do not express an opinion on the effectiveness of Marysville Joint Unified School District's internal control over compliance.

INDEPENDENT AUDITORS' REPORT ON COMPLIANCE WITH REQUIREMENTS THAT COULD HAVE A DIRECT AND MATERIAL

EFFECT ON EACH MAJOR PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE IN ACCORDANCE WITH OMS CIRCULAR A-133

(Continued)

Internal Control Over Compliance (Continued)

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.

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 deficiencies, significant deficiencies or material weaknesses. We did not identify any deficiencies in internal control over compliance that we consider to be material weaknesses, as defined above.

Marysville Joint Unified School District's response to the finding identified in our audit is included in the accompanying Schedule of Audit Findings and Questioned Costs. We did not audit the District's response and, accordingly, express no opinion on it.

This report is intended solely for the information of the Board of Trustees, management, the California Department of Education, the California State Controller's Office and federal awarding agencies and pass-through entities, and is not intended to be and should not be used by anyone other than these specified parties.


73

Crowe Horwath LLP

FINDINGS AND RECOMMENDATIONS


SCHEDULE OF AUDIT FINDINGS AND QUESTIONED COSTS

Year Ended June 30, 2011

FINANCIAL STATEMENTS

Type of auditors' report issued:

Internal control over financial reporting: Material weakness(es) identified? Significant deficiency(ies) identified not considered

to be material weakness(es)?

Noncompliance material to financial statements noted?

FEDERAL AWARDS

Internal control over major programs: Material weakness(es) identified? Significant deficiency(ies) identified not considered

to be material weakness(es)?

Type of auditors' report issued on compliance for major programs:

Any audit findings disclosed that are required to be reported in accordance with Circular A-133, Section .510(a)?

Identification of major programs:

CFDA Number(s)

Unqualified

___ Yes

___ Yes ~"--- None reported

___ Yes ----=-=--_ No

___ Yes

__ Yes ----=-=--_ None reported

Unqualified

___ No

Name of Federal Program or Cluster

84.010, 84.389 84.377, 84.388

Title I, Part A, Cluster (including ARRA)

84.027, 84.391 84.318, 84.386

84.394 84.410

Title I, Part A, School Improvement Grant Cluster (including ARRA)

IDEA Basic Local Assistance Cluster (including ARRA) Title II, Part D, Enhancing Education Through

Technology Cluster ARRA: State Fiscal Stabilization Funds Education Job Funds

Dollar threshold used to distinguish between Type A and Type B programs: $567,556

Auditee qualified as low-risk auditee?

STATE AWARDS

Internal control over state programs: Material weakness(es) identified? Significant deficiency(ies) identified not considered

to be material weaknesses?

Type of auditors' report issued on compliance for state programs:

~"--- Yes __ No

___ Yes

___ Yes ----:~_ None reported

Qualified

No matters were reported.

OF AUDIT FINDINGS AND QUESTIONED COSTS (Continued)

Ended June 30, 2011

MARYSVillE JOINT

SCHEDULE OF AUDIT FINDINGS AND QUESTIONED COSTS (Continued)


2011-01 DEFICIENCY - EQUIPMENT PURCHASED WITH FEDERAL FUNDS (30000)

Criteria

Common Rule A-102 requires the District to maintain adequate records, perform a physical inventory of equipment at least once every two years and provide proper safeguards for equipment purchases over $5,000 per unit.

Condition

The District did not properly identify two purchases of equipment with a per unit cost of over $5,000 for capitalization. The purchased equipment was improperly coded and not included on the listing of equipment purchases made during the year for tracking and depreciation expense calculation purposes.

The District's capital asset listing and federal equipment inventory is misstated.

Cause

Internal controls in place failed to identify a capital asset purchase.

Fiscal Impact

Total equipment inventory is understated by $14,573.

Recommendation

Controls should be implemented and enforced to ensure that all purchases with federal funds are coded appropriately.

Corrective Action Plan

On a quarterly basis all federal purchases coded to object 4450 will be reviewed to ensure that all equipment purchased over the value of $5,000 is flagged for capitalization and depreciated.

76

SCHOOL

AUDIT FINDINGS AND QUESTIONED (Continued)

June 30,2011

2011-02 COMPLIANCE - REGULAR AND SPECIAL DAY CLASSES (10000)

Criteria

Attendance Accounting and Reporting in California Public Schools, Title 5, CCR, Sections 401 and 421 (b), and Education Code Section 44809 - Each LEA must develop and maintain accurate and adequate records to support the attendance reported to the State.

Condition

At New Day Charter School, two students were improperly included for a total misstatement of two days.

This effect is an extrapolated overstatement of .19 ADA.

Cause

The errors were the result of clerical errors in accounting for attendance.

Fiscal Impact

As the extrapolated overstatement is less than .50 ADA there is no fiscal impact on the District.

Recommendation

The District should revise and resubmit the Second Period Report of Attendance removing the disallowed ADA. The originally submitted Annual Report of Attendance reflected the corrected ADA.


The District will revise and resubmit the Second Period Report of Attendance .

1 .." .... ,.,~ ............ _ ..... (10000)

Attendance Accounting and Reporting in California Public Schools, Title 5, Sections 401 and 421 (b), and Education Code Section 44809 - Each LEA must develop and maintain accurate and adequate records to support the attendance reported to the State.




SECTION IV - STATE AWARD FINDINGS AND QUESTIONED COSTS (Continued)

2011-03 STATE COMPLIANCE - REGULAR AND SPECIAL DAY CLASSES (10000) (Continued)

Condition

At Kynoch Elementary School, student absence notes/logs were not maintained by the school site to support the attendance reported to the State.

An overstatement or understatement of ADA may be reported.

Cause

Control procedures were not implemented to ensure documentation of student attendance absences were maintained to support the attendance reported. The site mistakenly threw the records away.

Fiscal Impact

Not determinable.

Recommendation

The District should implement policies to maintain adequate support for student absence records.


The District has scheduled site visits by District personnel to all schools for training and protocol establishment in regards to attendance tracking, reporting and document retention.

2011-04 STATE COMPLIANCE - INDEPENDENT STUDY (40000)

Criteria

Pursuant to California Education Code section 51747 paragraph (8) each written agreement shall be signed, prior to the commencement of independent study, by the pupil, the pupil's parent, legal guardian, or caregiver, if the pupil is less than 18 years of age, the certificated employee who has been designated as having responsibility for the general supervision of independent study, and all persons who have direct responsibility for providing assistance to the pupil. For purposes of this paragraph "caregiver" means a person who has met the requirements of Part 1.5 (commencing with Section 6550) of the Family Code.

78




SECTION IV - STATE AWARD FINDINGS AND QUESTIONED COSTS (Continued)

2011-04 STATE COMPLIANCE - INDEPENDENT STUDY (40000){Continued)

Condition

At South Lindhurst High School, daily apportionment for six students was reported prior to their independent study contracts being signed by the student, parent, teacher and principal.

At New Day Charter School, daily apportionment was reported for thirteen students was reported prior to their independent study contract being signed by the appropriate individuals, fourteen students that did not have an Independent Study contract, and eight students that had a Independent Study contract that was not signed by the student, parent, teacher and principal.

This effect is an extrapolated overstatement of .11 ADA. for South Lindhurst High School. For New Day Charter School, an overstatement of 7.45 ADA was reported.

Cause

Proper controls and oversight were not in place to ensure daily attendance was not reported prior to the execution of the independent study contract by the student, parent, teacher and principal.

Fiscal Impact

As the extrapolated overstatement for South Lindhurst High School is less than .50 ADA there is no fiscal impact on the District.

For New Day Charter School the misstatement caused an overstatement of 7.45 ADA representing approximately $47,367 in funding.

Recommendation

The District should ensure that no attendance is reported for students on independent study prior to the signing of the independent study contract by all applicable parties.

The District should revise and resubmit the Second Period Report of Attendance for New Oay Charter School.

79

2011-04

AUDIT FINDINGS AND (Continued)

Ended June 30, 2011

COMPLIANCE - STUDY (40000) (Continued)

The District has established policies and procedures to review each student contract against the attendance system to ensure to ADA is reported prior to the authorization of Independent Study contracts.

The District will revise and resubmit the Second Period Report of Attendance for New Day Charter School.

STATUS OF PRIOR YEAR

NDINGS AND RECOMMENDATIONS


STATUS Of PRIOR YEAR FINDINGS AND RECOMMENDATIONS


2010-01

At Marysville High School: There was no documentation detailing the number of Homecoming tickets sold. There is no invoice supporting an expenditure of ASS funds. Equipment purchased with ASS funds are not kept on a detailed capital asset listing for tracking purposes.

At Marysville High School: Adequate sales receipts or documentation should be maintained to support all sales activities. All equipment purchases should be donated to the District for use by specific ASS programs so that the equipment will be inventoried and traced by the District.

2010-02

At Foothill Intermediate School, two students were improperly included for a total misstatement of three days. At Edgewater Elementary School, one student was improperly included for a total misstatement of one day At Covillaud Elementary School, three students were improperly included for a total misstatement of three days.

The District should revise the Second Period Report of Attendance removing the disallowed ADA.

Implemented.

Partially implemented.

District Explanation

See current year finding 2011-02.

APPENDIX C

FORM OF CONTINUING DISCLOSURE CERTIFICATE

997472.2 3662.018 C-1

APPENDIX C

FORM OF CONTINUING DISCLOSURE CERTIFICATE $18,376,098.50

MARYSVILLE JOINT UNIFIED SCHOOL DISTRICT YUBA COUNTY, CALIFORNIA

2012 CERTIFICATES OF PARTICIPATION (Refunding and Capital Projects)

[Closing Date]

This Continuing Disclosure Certificate (the “Disclosure Certificate”) is executed and delivered by

the Marysville Joint Unified School District (the “District”) in connection with the execution and delivery of $18,376,098.50 aggregate principal amount of 2012 Certificates of Participation (Refunding and Capital Projects) (the “Certificates”) pursuant to a trust agreement dated July 1, 2012, between The Bank of New York Mellon Trust Company, N.A., the District, and the Marysville Joint Unified School District Financing Corporation (the “Trust Agreement”); and in connection therewith the District covenants and agrees as follows:

SECTION 1. Purpose of the Disclosure Certificate. This Disclosure Certificate is being executed and delivered by the District for the benefit of the Certificateholders and Beneficial Owners of the Certificates and in order to assist the Participating Underwriters in complying with S.E.C. Rule 15c2-12(b)(5).

SECTION 2. Definitions. In addition to the definitions set forth in the Trust Agreement, which apply to any capitalized term used in this Disclosure Certificate unless otherwise defined in this Section, the following capitalized terms shall have the following meanings:

Annual Report means any Annual Report provided by the District pursuant to, and as described in, Sections 3 (Provision of Annual Reports) and 4 (Content of Annual Reports) of this Disclosure Certificate.

Beneficial Owner means any person that (a) has or shares the power, directly or indirectly, to make investment decisions concerning ownership of any Certificates (including persons holding Certificates through nominees, depositories or other intermediaries), or (b) is treated as the owner of any Certificates for federal income tax purposes.

Certificateholders means either the registered owners of the Certificates, or, if the Certificates are registered in the name of The Depository Trust Company or another recognized depository, any Beneficial Owner or applicable participant in its depository system.

Dissemination Agent means the District, or any successor Dissemination Agent designated in writing by the District and that has filed with the District a written acceptance of such designation.

MSRB means the Municipal Securities Rulemaking Board.

Official Statement means the final Official Statement relating to the Certificates dated __________, 2012.

Opinion of Counsel means a written opinion of a law firm or attorney experienced in matters relating to interpretation of the Rule.

997472.2 3662.018 C-2

Participating Underwriter means any of the original underwriters of the Certificates required to comply with the Rule in connection with offering of the Certificates.

Repository shall mean MSRB or any other repository of disclosure information that may be designated by the Securities and Exchange Commission as such for purposes of the Rule in the future.

Rule means Rule 15c2-12(b)(5) adopted by the Securities and Exchange Commission under the Securities Exchange Act of 1934, as the same may be amended from time to time.

Significant Event means any of the events listed in subsection (a) of Section 5 (Reporting of Significant Events) of this Disclosure Certificate.

SECTION 3. Provision of Annual Reports.

a. Delivery of Annual Report to Repository. The District shall, or shall cause the Dissemination Agent to, not later than the April 15 next following the end of the District’s fiscal year (which currently ends on June 30), commencing with the report for the 2011-2012 fiscal year, provide to the Repository an Annual Report that is consistent with the requirements of Section 4 (Content of Annual Reports) 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 (Content of Annual Reports) 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 Significant Event under Section 5(d) (Notice of Significant Events).

c. Delivery of Annual Report to Dissemination Agent. Not later than fifteen (15) Business Days prior to the date specified in subsection (a) (Delivery of Annual Report to Repository) for providing the Annual Report to the Repository, 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 unable to provide an Annual Report to the Repository by the date required in subsection (a) (Delivery of Annual Report to Repository), the Dissemination Agent shall send a notice to the Repository in substantially the form attached as Exhibit A.

e. Annual Compliance Certification. 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 provided pursuant to this Disclosure Certificate and stating the date it was provided.

SECTION 4. Content of Annual Reports. The District’s Annual Report shall contain or include by reference the following:

a. Financial Statements. The audited financial statements of the District for the prior fiscal year, prepared in accordance with 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) (Delivery of Annual Report to Repository), 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;

997472.2 3662.018 C-3

b. Annual Budget. The District’s approved annual budget for the then-current fiscal year;

c. Interim Financial Report. The most recent Interim Financial Report submitted to the District’s governing board in accordance with Education Code section 42130 (or its successor statutory provision).

Any or all of the items listed above may be included by specific reference to other documents available to the public on the MSRB’s Internet Web site or filed with the Securities and Exchange Commission. The District shall clearly identify each such other document so included by reference.

SECTION 5. Reporting of Significant Events.

a. Significant Events. Pursuant to the provisions of this Section, the District shall give, or cause to be given, notice of the occurrence of any of the following events with respect to the Certificates:

(1) principal and interest payment delinquencies; (2) non-payment related defaults, if material; (3) unscheduled draws on debt service reserves reflecting financial difficulties; (4) unscheduled draws on credit enhancements reflecting financial difficulties; (5) substitution of credit or liquidity providers, or their failure to perform; (6) adverse tax opinions, the issuance by the Internal Revenue Service of proposed or final

determinations of taxability, Notices of Proposed Issue (IRS Form 5701-TEB) or other material notices or determinations with respect to the tax status of the Certificates, or other material events affecting the tax status of the Certificates;

(7) modifications to rights of Certificateholders, if material; (8) Bond calls, if material, and tender offers; (9) defeasances; (10) release, substitution, or sale of property securing repayment of the Certificates, if

material; (11) rating changes; (12) bankruptcy, insolvency, receivership or similar event of the District; (13) the consummation of a merger, consolidation, or acquisition, or certain asset sales,

involving the District, or entry into or termination of a definitive agreement relating to the foregoing, if material;

(14) appointment of a successor or additional trustee or the change of name of the Trustee, if material.

b. Determination of Materiality. Whenever the District obtains knowledge of the occurrence of one of the foregoing events notice of which must be given only if material, the District shall immediately determine if such event would be material under applicable federal securities laws.

c. Notice to Dissemination Agent. The District shall notify the Dissemination Agent (if other than the District) in writing of the occurrence of any Significant Event in sufficient time to allow timely filing of the notice required by subsection (d) (Notice of Significant Events).

d. Notice of Significant Events. The District shall file, or cause the Dissemination Agent to file, a notice of the occurrence of a Significant Event with the Repository not later then ten (10) business days after the occurrence of the event.

SECTION 6. Submissions to Repository. All documents shall be submitted to the Repository in an electronic format and shall be accompanied by identifying information, all as prescribed by the Repository.

997472.2 3662.018 C-4

SECTION 7. Termination of Reporting Obligation. The District’s obligations under this Disclosure Certificate shall terminate upon the legal defeasance, prior redemption or payment in full of all of the Certificates or upon the delivery to the District of an Opinion of Counsel to the effect that continuing disclosure is no longer required by the Rule. If such termination occurs prior to the final maturity of the Certificates, the District shall give notice of such termination in the same manner as for a Significant Event under Section 5(d) (Notice of Significant Events).

SECTION 8. Dissemination Agent.

a. Appointment of Dissemination Agent. The District may, from time to time, appoint or engage a Dissemination Agent to assist it in carrying out its obligations under this Disclosure Certificate, and may discharge any such Agent, with or without appointing a successor Dissemination Agent. 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. The initial Dissemination Agent shall be 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 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, Certificateholders 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 Counsel. The Dissemination Agent may at any time resign by giving written notice of such resignation to the District.

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 the following conditions are satisfied:

a. Change in Circumstances. If the amendment or waiver relates to the provisions of Sections 3(a) (Delivery of Annual Report to Repository), 4 (Content of Annual Reports), or 5(a) (Significant Events), 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 Certificates, or the type of business conducted;

b. Compliance as of Issue Date. The undertaking, as amended or taking into account such waiver, would, based upon an Opinion of Counsel, have complied with the requirements of the Rule at the time of the original delivery of the Certificates, after taking into account any amendments or interpretations of the Rule, as well as any change in circumstances; and

c. Consent of Certificateholders; Non-impairment Opinion. The amendment or waiver either (i) is approved by the Certificateholders in the same manner as provided in the Trust Agreement for amendments to the Trust Agreement with the consent of Certificateholders, or (ii) does not, based on an Opinion of Counsel, materially impair the interests of the Certificateholders 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 Significant Event under Section 5(d) (Notice of Significant Events), and (ii) the

997472.2 3662.018 C-5

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 Significant 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 Significant Event in addition to that which is specifically required by this Disclosure Certificate, the District shall have no obligation under this Certificate to update such information or include it in any future Annual Report or notice of occurrence of a Significant Event.

SECTION 11. Default. If District fails to comply with any provision of this Disclosure Certificate, any Certificateholder or Beneficial Owner of the Certificates may take such actions as may be necessary and appropriate, including seeking mandate or specific performance by court order, to cause the District to comply with its obligations under this Disclosure Certificate. A default under this Disclosure Certificate shall not be deemed an Event of Default under the Trust Agreement, and the sole remedy under this Disclosure Certificate in the event of any failure of the District to comply with this Disclosure Certificate shall be an action to compel performance.

SECTION 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 the District agrees to indemnify and save the Dissemination Agent, its officers, directors, employees and agents, harmless against any loss, expense and liabilities which it may incur arising out of or in the exercise or performance of its powers and duties hereunder, including the costs and expenses (including attorneys fees) of defending against any claim of liability, but excluding liabilities due to the Dissemination Agent’s negligence or willful misconduct. The Dissemination Agent shall not be deemed to be acting in any fiduciary capacity for the District, Certificateholders, 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 Counsel. The obligations of the District under this Section shall survive resignation or removal of the Dissemination Agent and payment of the Certificates. No person shall have any right to commence any action against the Dissemination Agent seeking any remedy other than to compel specific performance of this Disclosure Certificate.

SECTION 13. Beneficiaries. This Disclosure Certificate shall inure solely to the benefit of the District, the Dissemination Agent, the Participating Underwriters and Certificateholders and Beneficial Owners from time to time of the Certificates, and shall create no rights in any other person or entity.

IN WITNESS WHEREOF the District has caused this Continuing Disclosure Certificate to be signed by its authorized officer on the date first written above.


By:_________________________________ Authorized Officer

997472.2 3662.018 C-6

EXHIBIT A

FORM OF NOTICE TO REPOSITORY OF FAILURE TO FILE ANNUAL REPORT Name of District: Marysville Joint Unified School District

Name of Certificates: 2012 Certificates of Participation (Refunding and Capital Projects)

Date of Issuance: [Closing Date]

NOTICE IS HEREBY GIVEN that Marysville Joint Unified School District (the “District”) has

not provided an Annual Report with respect to the above-named Certificates for the fiscal year ended June 30, 20___, as required by a Continuing Disclosure Certificate executed on [Closing Date], with respect to the above-captioned certificates of participation. The District anticipates that the Annual Report will be filed by ___________________. Dated: __________, 20__ MARYSVILLE JOINT UNIFIED SCHOOL DISTRICT By: [sample only]


APPENDIX D

FORM OF OPINION OF SPECIAL COUNSEL

D-1

APPENDIX D

PROPOSED FORM OF SPECIAL COUNSEL OPINION

[Closing Date] Marysville Joint Unified School District Board of Trustees

Re: Marysville Joint Unified School District


Members of the Board of Trustees:

We have acted as special counsel in connection with the execution and delivery of $18,376,098.50 aggregate principal amount of 2012 Certificates of Participation (Refunding and Capital Projects) (the “Certificates”) evidencing fractional interests of the owners thereof in rental payments to be made by the Marysville Joint Unified School District (the “District”) pursuant to a facilities lease dated July 1, 2012 (the “Facilities Lease”), between the District and the Marysville Joint Unified School District Financing Corporation (the “Corporation”). The Certificates have been executed and delivered pursuant to a trust agreement dated July 1, 2012 (the “Trust Agreement”), between The Bank of New York Mellon Trust Company, N.A., as trustee (the “Trustee”), the District, and the Corporation. In connection therewith, the District and the Corporation have also executed and entered into a ground lease dated July 1, 2012 (the “Ground Lease”). Capitalized terms used herein and not otherwise defined have the meanings ascribed thereto in the Trust Agreement.

We have examined the law and such certified proceedings and other papers as we deem necessary to render this opinion. As to questions of fact material to our opinion, we have relied upon the representations of the District contained in the Facilities Lease, the Trust Agreement, and the certified proceedings and other certifications of public officials furnished to us. In the course of our representation, nothing has come to our attention that caused us to believe that any of the factual representations upon which we have relied are untrue, but we have made no other factual investigations.

Based upon the foregoing, we are of the opinion, under existing law, as follows:

1. The District is duly created and validly existing as a school district under and by virtue of the laws of the State of California with the power to enter into the Ground Lease, the Facilities Lease, and the Trust Agreement and to perform the agreements on its part contained therein.

2. The Ground Lease, the Facilities Lease, and the Trust Agreement have been duly authorized, executed, and delivered by the District and, assuming due authorization, execution, and delivery by and enforceability against the other parties thereto, constitute valid and binding obligations of the District enforceable in accordance with their respective terms, except as enforcement may be limited by bankruptcy, insolvency, reorganization, arrangement, fraudulent conveyance, moratorium, or other laws affecting the enforceability of creditors’ rights generally, by the application of equitable principles, by the possible unavailability of specific performance

D-2

or injunctive relief, and by the limitations on legal remedies against public agencies in the State of California.

3. Subject to the terms and provisions of the Facilities Lease, the Rental Payments are payable solely from the sources provided therefore in the Facilities Lease and the Trust Agreement. The obligation of the District to make Rental Payments pursuant to the Facilities Lease does not constitute a debt of the District or of the State of California or of any political subdivision thereof within the meaning of any constitutional or statutory debt limitation or restriction, and does not constitute an obligation for which the District is obligated to levy or pledge any form of taxation or for which the District has levied or pledged any form of taxation.

4. Assuming due authorization, execution, and delivery of the Trust Agreement by the Trustee and its enforceability against the Trustee, the owners of the Certificates are entitled to receive their proportionate share of the Rental Payments in accordance with the terms and provisions of the Trust Agreement.

5. The portion of the Rental Payments designated as and constituting interest paid by the District and received by the owners of the Certificates is excludable from gross income for federal income tax purposes and is not an item of tax preference for purposes of the federal alternative minimum tax imposed on individuals and corporations; however, such interest is taken into account in determining adjusted current earnings for purposes of computing the alternative minimum tax imposed on corporations. The opinions set forth in the preceding sentence are subject to the condition that the District comply with all requirements of the Internal Revenue Code of 1986, as amended, that must be satisfied subsequent to the delivery of the Certificates in order that such interest be, or continue to be, excludable from gross income for federal income tax purposes. The District has covenanted to comply with each such requirement. Failure to comply with certain of such requirements may cause the inclusion of such interest in gross income for federal income tax purposes to be retroactive to the date of delivery of the Certificates. We express no opinion regarding other federal tax consequences arising with respect to the accrual or receipt of such interest or the ownership or disposition of the Certificates.

6. The portion of the Rental Payments designated as and constituting interest paid by the District and received by the owners of the Certificates is exempt from State of California personal income taxes.

The opinions set forth above are further qualified as follows:

a. Our opinions are limited to the matters expressly set forth herein and no opinion is to be implied or may be inferred beyond the matters expressly so stated;

b. We are licensed to practice law in the State of California; accordingly, the foregoing opinions only apply insofar as the laws of the State of California and the United States may be concerned, and we express no opinion with respect to the laws of any other jurisdiction;

c. We express no opinion as to the state or quality of title to any of the real or personal property described in the Ground Lease or the Facilities Lease, nor do we express any opinion as to the accuracy or sufficiency of the description of any such property contained therein;

d. We express no opinion as to the enforceability under certain circumstances of contractual provisions respecting various summary remedies without notice or opportunity for

D-3

hearing or correction, especially if their operation would work a substantial forfeiture or impose a substantial penalty upon the burdened party;

e. We express no opinion as to the effect or availability of any specific remedy provided for in any agreement under particular circumstances, except that we believe such remedies are, in general, sufficient for the practical realization of the rights intended thereby;

f. We express no opinion as to the enforceability of any remedies under the Facilities Lease with respect to environmental matters to the extent that the exercise or application of such remedies is inconsistent with or in violation of California Code of Civil Procedure section 726.5 or 736 or of California Civil Code section 2929.5;

g. We express no opinion as to the enforceability of any indemnification, contribution, choice of law, choice of forum, or waiver provisions contained in the Ground Lease, the Facilities Lease, or the Trust Agreement;

h. We undertake no responsibility for the accuracy, completeness, or fairness of the Official Statement or any other offering materials relating to the Certificates and express no opinion herein with respect thereto;

i. We disclaim any obligation to update this opinion for events occurring after the date hereof.

Very truly yours,

KRONICK, MOSKOVITZ, TIEDEMANN & GIRARD A Professional Corporation

APPENDIX E

ACCRETED VALUE TABLE

1

BOND ACCRETED VALUE TABLE

M ied School Distric

CAB Bond CAB Bond CAB Bond CAB Bond CAB Bond CAB Bond CAB Bond CAB Bond CAB Bond06/01/2013 06/01/2014 06/01/2015 06/01/2016 06/01/2017 06/01/2018 06/01/2019 06/01/2020 06/01/2021

Date 2.2% 2.42% 2.67% 2.87% 3.19% 3.55% 3.88% 4.22% 4.52%

Jul 17, 2012 4,905.45 4,779.80 4,633.20 4,477.60 4,285.50 4,066.55 3,839.50 3,599.10 3,363.10Dec 1, 2012 4,945.55 4,822.80 4,679.20 4,525.35 4,336.25 4,120.15 3,894.80 3,655.45 3,419.55Jun 1, 2013 5,000.00 4,881.15 4,741.65 4,590.30 4,405.45 4,193.30 3,970.40 3,732.60 3,496.85Dec 1, 2013 - 4,940.20 4,804.95 4,656.15 4,475.70 4,267.75 4,047.40 3,811.35 3,575.85Jun 1, 2014 - 5,000.00 4,869.10 4,723.00 4,547.10 4,343.50 4,125.90 3,891.80 3,656.65Dec 1, 2014 - - 4,934.10 4,790.75 4,619.60 4,420.60 4,205.95 3,973.90 3,739.30Jun 1, 2015 - - 5,000.00 4,859.50 4,693.30 4,499.05 4,287.55 4,057.75 3,823.80Dec 1, 2015 - - - 4,929.25 4,768.15 4,578.90 4,370.75 4,143.35 3,910.25Jun 1, 2016 - - - 5,000.00 4,844.20 4,660.20 4,455.55 4,230.80 3,998.60Dec 1, 2016 - - - - 4,921.50 4,742.90 4,541.95 4,320.05 4,089.00Jun 1, 2017 - - - - 5,000.00 4,827.10 4,630.10 4,411.20 4,181.40Dec 1, 2017 - - - - - 4,912.75 4,719.90 4,504.30 4,275.90Jun 1, 2018 - - - - - 5,000.00 4,811.50 4,599.35 4,372.55Dec 1, 2018 - - - - - - 4,904.80 4,696.40 4,471.35Jun 1, 2019 - - - - - - 5,000.00 4,795.45 4,572.40Dec 1, 2019 - - - - - - - 4,896.65 4,675.75Jun 1, 2020 - - - - - - - 5,000.00 4,781.40Dec 1, 2020 - - - - - - - - 4,889.45Jun 1, 2021 - - - - - - - - 5,000.00Dec 1, 2021 - - - - - - - - -Jun 1, 2022 - - - - - - - - -Dec 1, 2022 - - - - - - - - -Jun 1, 2023 - - - - - - - - -Dec 1, 2023 - - - - - - - - -Jun 1, 2024 - - - - - - - - -Dec 1, 2024 - - - - - - - - -Jun 1, 2025 - - - - - - - - -Dec 1, 2025 - - - - - - - - -Jun 1, 2026 - - - - - - - - -

e 2


M ied School District


Date 2.2% 2.42% 2.67% 2.87% 3.19% 3.55% 3.88% 4.22% 4.52%

Dec 1, 2026 - - - - - - - - -Jun 1, 2027 - - - - - - - - -Dec 1, 2027 - - - - - - - - -Jun 1, 2028 - - - - - - - - -Dec 1, 2028 - - - - - - - - -Jun 1, 2029 - - - - - - - - -Dec 1, 2029 - - - - - - - - -Jun 1, 2030 - - - - - - - - -Dec 1, 2030 - - - - - - - - -Jun 1, 2031 - - - - - - - - -Dec 1, 2031 - - - - - - - - -Jun 1, 2032 - - - - - - - - -Dec 1, 2032 - - - - - - - - -Jun 1, 2033 - - - - - - - - -Dec 1, 2033 - - - - - - - - -Jun 1, 2034 - - - - - - - - -Dec 1, 2034 - - - - - - - - -Jun 1, 2035 - - - - - - - - -Dec 1, 2035 - - - - - - - - -Jun 1, 2036 - - - - - - - - -Dec 1, 2036 - - - - - - - - -Jun 1, 2037 - - - - - - - - -Dec 1, 2037 - - - - - - - - -Jun 1, 2038 - - - - - - - - -Dec 1, 2038 - - - - - - - - -Jun 1, 2039 - - - - - - - - -Dec 1, 2039 - - - - - - - - -Jun 1, 2040 - - - - - - - - -

3

ACCRETED VALUE TABLE



Date 2.2% 2.42% 2.67% 2.87% 3.19% 3.55% 3.88% 4.22% 4.52%

Dec 1, 2040 - - - - - - - - -Jun 1, 2041 - - - - - - - - -Dec 1, 2041 - - - - - - - - -Jun 1, 2042 - - - - - - - - -

e 4




Date 4.76% 5% 5.15% 5.3% 5.4% 5.5% 5.6% 5.7% 5.8%

Jul 17, 2012 3,142.50 2,922.70 2,733.95 2,549.95 2,387.55 2,231.10 2,080.90 1,937.05 1,799.65Dec 1, 2012 3,198.00 2,976.90 2,786.20 2,600.10 2,435.35 2,276.65 2,124.10 1,978.00 1,838.35Jun 1, 2013 3,274.10 3,051.35 2,857.95 2,669.00 2,501.10 2,339.25 2,183.60 2,034.35 1,891.65Dec 1, 2013 3,352.05 3,127.60 2,931.55 2,739.75 2,568.65 2,403.55 2,244.75 2,092.35 1,946.50Jun 1, 2014 3,431.80 3,205.80 3,007.00 2,812.35 2,638.00 2,469.65 2,307.60 2,151.95 2,002.95Dec 1, 2014 3,513.50 3,285.95 3,084.45 2,886.90 2,709.25 2,537.60 2,372.20 2,213.30 2,061.05Jun 1, 2015 3,597.10 3,368.10 3,163.85 2,963.40 2,782.40 2,607.35 2,438.60 2,276.40 2,120.80Dec 1, 2015 3,682.75 3,452.30 3,245.35 3,041.90 2,857.50 2,679.05 2,506.90 2,341.25 2,182.30Jun 1, 2016 3,770.40 3,538.60 3,328.90 3,122.50 2,934.65 2,752.75 2,577.10 2,408.00 2,245.60Dec 1, 2016 3,860.10 3,627.10 3,414.65 3,205.25 3,013.90 2,828.45 2,649.25 2,476.60 2,310.75Jun 1, 2017 3,952.00 3,717.75 3,502.55 3,290.20 3,095.25 2,906.25 2,723.45 2,547.20 2,377.75Dec 1, 2017 4,046.05 3,810.70 3,592.75 3,377.40 3,178.85 2,986.15 2,799.70 2,619.80 2,446.70Jun 1, 2018 4,142.35 3,905.95 3,685.25 3,466.90 3,264.65 3,068.25 2,878.10 2,694.45 2,517.65Dec 1, 2018 4,240.95 4,003.60 3,780.15 3,558.80 3,352.80 3,152.65 2,958.65 2,771.25 2,590.65Jun 1, 2019 4,341.85 4,103.70 3,877.50 3,653.10 3,443.35 3,239.35 3,041.50 2,850.25 2,665.80Dec 1, 2019 4,445.20 4,206.30 3,977.35 3,749.90 3,536.30 3,328.45 3,126.70 2,931.45 2,743.10Jun 1, 2020 4,551.00 4,311.45 4,079.75 3,849.25 3,631.80 3,419.95 3,214.25 3,015.00 2,822.65Dec 1, 2020 4,659.30 4,419.25 4,184.80 3,951.25 3,729.85 3,514.00 3,304.25 3,100.95 2,904.50Jun 1, 2021 4,770.20 4,529.75 4,292.60 4,056.00 3,830.55 3,610.65 3,396.75 3,189.30 2,988.75Dec 1, 2021 4,883.75 4,642.95 4,403.10 4,163.45 3,934.00 3,709.95 3,491.85 3,280.20 3,075.40Jun 1, 2022 5,000.00 4,759.05 4,516.50 4,273.80 4,040.20 3,811.95 3,589.65 3,373.70 3,164.60Dec 1, 2022 - 4,878.00 4,632.80 4,387.05 4,149.30 3,916.80 3,690.15 3,469.85 3,256.40Jun 1, 2023 - 5,000.00 4,752.10 4,503.30 4,261.35 4,024.50 3,793.45 3,568.75 3,350.80Dec 1, 2023 - - 4,874.45 4,622.65 4,376.40 4,135.20 3,899.70 3,670.45 3,448.00Jun 1, 2024 - - 5,000.00 4,745.15 4,494.55 4,248.90 4,008.85 3,775.05 3,548.00Dec 1, 2024 - - - 4,870.90 4,615.90 4,365.75 4,121.10 3,882.65 3,650.90Jun 1, 2025 - - - 5,000.00 4,740.55 4,485.80 4,236.50 3,993.30 3,756.75Dec 1, 2025 - - - - 4,868.50 4,609.15 4,355.15 4,107.10 3,865.70Jun 1, 2026 - - - - 5,000.00 4,735.90 4,477.10 4,224.15 3,977.80

e 5



Date 4.76% 5% 5.15% 5.3% 5.4% 5.5% 5.6% 5.7% 5.8%

Dec 1, 2026 - - - - - 4,866.15 4,602.45 4,344.55 4,093.15Jun 1, 2027 - - - - - 5,000.00 4,731.30 4,468.40 4,211.85Dec 1, 2027 - - - - - - 4,863.80 4,595.75 4,334.00Jun 1, 2028 - - - - - - 5,000.00 4,726.70 4,459.70Dec 1, 2028 - - - - - - - 4,861.40 4,589.05Jun 1, 2029 - - - - - - - 5,000.00 4,722.10Dec 1, 2029 - - - - - - - - 4,859.05Jun 1, 2030 - - - - - - - - 5,000.00Dec 1, 2030 - - - - - - - - -Jun 1, 2031 - - - - - - - - -Dec 1, 2031 - - - - - - - - -Jun 1, 2032 - - - - - - - - -Dec 1, 2032 - - - - - - - - -Jun 1, 2033 - - - - - - - - -Dec 1, 2033 - - - - - - - - -Jun 1, 2034 - - - - - - - - -Dec 1, 2034 - - - - - - - - -Jun 1, 2035 - - - - - - - - -Dec 1, 2035 - - - - - - - - -Jun 1, 2036 - - - - - - - - -Dec 1, 2036 - - - - - - - - -Jun 1, 2037 - - - - - - - - -Dec 1, 2037 - - - - - - - - -Jun 1, 2038 - - - - - - - - -Dec 1, 2038 - - - - - - - - -Jun 1, 2039 - - - - - - - - -Dec 1, 2039 - - - - - - - - -Jun 1, 2040 - - - - - - - - -

6




Date 4.76% 5% 5.15% 5.3% 5.4% 5.5% 5.6% 5.7% 5.8%

Dec 1, 2040 - - - - - - - - -Jun 1, 2041 - - - - - - - - -Dec 1, 2041 - - - - - - - - -Jun 1, 2042 - - - - - - - - -

e 7




Date 5.9% 6% 6.05% 6.11% 6.17% 6.22% 6.25% 6.27% 6.28%

Jul 17, 2012 1,668.75 1,544.40 1,441.05 1,340.50 1,245.50 1,158.55 1,081.90 1,012.20 949.15Dec 1, 2012 1,705.25 1,578.75 1,473.40 1,370.85 1,274.00 1,185.30 1,106.95 1,035.75 971.25Jun 1, 2013 1,755.55 1,626.10 1,517.95 1,412.75 1,313.30 1,222.15 1,141.55 1,068.20 1,001.75Dec 1, 2013 1,807.35 1,674.90 1,563.85 1,455.90 1,353.80 1,260.15 1,177.20 1,101.70 1,033.20Jun 1, 2014 1,860.65 1,725.15 1,611.20 1,500.40 1,395.55 1,299.35 1,214.00 1,136.25 1,065.60Dec 1, 2014 1,915.55 1,776.90 1,659.90 1,546.20 1,438.65 1,339.75 1,251.95 1,171.85 1,099.10Jun 1, 2015 1,972.05 1,830.20 1,710.15 1,593.45 1,483.00 1,381.45 1,291.05 1,208.60 1,133.60Dec 1, 2015 2,030.25 1,885.10 1,761.85 1,642.15 1,528.75 1,424.40 1,331.40 1,246.50 1,169.20Jun 1, 2016 2,090.15 1,941.65 1,815.15 1,692.30 1,575.90 1,468.70 1,373.00 1,285.55 1,205.90Dec 1, 2016 2,151.80 1,999.90 1,870.05 1,744.00 1,624.55 1,514.35 1,415.90 1,325.85 1,243.75Jun 1, 2017 2,215.25 2,059.90 1,926.65 1,797.30 1,674.65 1,561.45 1,460.15 1,367.45 1,282.85Dec 1, 2017 2,280.60 2,121.70 1,984.90 1,852.20 1,726.30 1,610.05 1,505.80 1,410.30 1,323.10Jun 1, 2018 2,347.90 2,185.35 2,044.95 1,908.75 1,779.60 1,660.10 1,552.85 1,454.50 1,364.65Dec 1, 2018 2,417.15 2,250.90 2,106.85 1,967.10 1,834.50 1,711.75 1,601.40 1,500.10 1,407.50Jun 1, 2019 2,488.45 2,318.45 2,170.55 2,027.20 1,891.10 1,764.95 1,651.45 1,547.15 1,451.70Dec 1, 2019 2,561.90 2,388.00 2,236.20 2,089.10 1,949.40 1,819.85 1,703.05 1,595.65 1,497.30Jun 1, 2020 2,637.45 2,459.65 2,303.85 2,152.95 2,009.55 1,876.45 1,756.25 1,645.70 1,544.30Dec 1, 2020 2,715.25 2,533.45 2,373.55 2,218.70 2,071.55 1,934.80 1,811.15 1,697.25 1,592.80Jun 1, 2021 2,795.35 2,609.45 2,445.35 2,286.50 2,135.45 1,995.00 1,867.75 1,750.50 1,642.80Dec 1, 2021 2,877.85 2,687.70 2,519.35 2,356.35 2,201.35 2,057.05 1,926.10 1,805.35 1,694.40Jun 1, 2022 2,962.75 2,768.35 2,595.55 2,428.35 2,269.25 2,121.00 1,986.30 1,861.95 1,747.60Dec 1, 2022 3,050.15 2,851.40 2,674.05 2,502.50 2,339.25 2,186.95 2,048.40 1,920.35 1,802.45Jun 1, 2023 3,140.10 2,936.95 2,754.95 2,578.95 2,411.45 2,255.00 2,112.40 1,980.55 1,859.05Dec 1, 2023 3,232.75 3,025.05 2,838.30 2,657.75 2,485.80 2,325.10 2,178.40 2,042.60 1,917.45Jun 1, 2024 3,328.10 3,115.80 2,924.15 2,738.95 2,562.50 2,397.45 2,246.50 2,106.65 1,977.65Dec 1, 2024 3,426.30 3,209.30 3,012.60 2,822.65 2,641.55 2,472.00 2,316.70 2,172.70 2,039.75Jun 1, 2025 3,527.35 3,305.55 3,103.75 2,908.85 2,723.05 2,548.85 2,389.10 2,240.80 2,103.80Dec 1, 2025 3,631.45 3,404.75 3,197.60 2,997.75 2,807.05 2,628.15 2,463.75 2,311.05 2,169.85Jun 1, 2026 3,738.55 3,506.85 3,294.35 3,089.30 2,893.65 2,709.90 2,540.75 2,383.50 2,238.00

e 8




Date 5.9% 6% 6.05% 6.11% 6.17% 6.22% 6.25% 6.27% 6.28%

Dec 1, 2026 3,848.85 3,612.10 3,394.00 3,183.70 2,982.95 2,794.15 2,620.15 2,458.25 2,308.25Jun 1, 2027 3,962.40 3,720.45 3,496.70 3,280.95 3,074.95 2,881.05 2,702.00 2,535.30 2,380.75Dec 1, 2027 4,079.25 3,832.05 3,602.45 3,381.20 3,169.80 2,970.65 2,786.45 2,614.80 2,455.50Jun 1, 2028 4,199.60 3,947.00 3,711.45 3,484.50 3,267.60 3,063.05 2,873.50 2,696.75 2,532.60Dec 1, 2028 4,323.50 4,065.45 3,823.70 3,590.95 3,368.40 3,158.30 2,963.30 2,781.30 2,612.15Jun 1, 2029 4,451.05 4,187.40 3,939.35 3,700.65 3,472.35 3,256.55 3,055.95 2,868.50 2,694.15Dec 1, 2029 4,582.35 4,313.00 4,058.55 3,813.70 3,579.45 3,357.80 3,151.45 2,958.45 2,778.75Jun 1, 2030 4,717.55 4,442.40 4,181.30 3,930.20 3,689.90 3,462.25 3,249.90 3,051.20 2,866.00Dec 1, 2030 4,856.70 4,575.70 4,307.80 4,050.25 3,803.70 3,569.90 3,351.45 3,146.85 2,956.00Jun 1, 2031 5,000.00 4,712.95 4,438.10 4,174.00 3,921.05 3,680.95 3,456.20 3,245.50 3,048.80Dec 1, 2031 - 4,854.35 4,572.35 4,301.50 4,042.00 3,795.40 3,564.20 3,347.25 3,144.55Jun 1, 2032 - 5,000.00 4,710.65 4,432.95 4,166.70 3,913.45 3,675.60 3,452.20 3,243.30Dec 1, 2032 - - 4,853.15 4,568.35 4,295.25 4,035.15 3,790.45 3,560.40 3,345.15Jun 1, 2033 - - 5,000.00 4,707.95 4,427.80 4,160.65 3,908.90 3,672.05 3,450.20Dec 1, 2033 - - - 4,851.75 4,564.35 4,290.05 4,031.05 3,787.15 3,558.50Jun 1, 2034 - - - 5,000.00 4,705.20 4,423.50 4,157.05 3,905.90 3,670.25Dec 1, 2034 - - - - 4,850.35 4,561.05 4,286.95 4,028.35 3,785.50Jun 1, 2035 - - - - 5,000.00 4,702.90 4,420.90 4,154.60 3,904.35Dec 1, 2035 - - - - - 4,849.15 4,559.05 4,284.85 4,026.95Jun 1, 2036 - - - - - 5,000.00 4,701.55 4,419.20 4,153.40Dec 1, 2036 - - - - - - 4,848.45 4,557.75 4,283.85Jun 1, 2037 - - - - - - 5,000.00 4,700.60 4,418.35Dec 1, 2037 - - - - - - - 4,848.00 4,557.10Jun 1, 2038 - - - - - - - 5,000.00 4,700.15Dec 1, 2038 - - - - - - - - 4,847.75Jun 1, 2039 - - - - - - - - 5,000.00Dec 1, 2039 - - - - - - - - -Jun 1, 2040 - - - - - - - - -

e 9




Date 5.9% 6% 6.05% 6.11% 6.17% 6.22% 6.25% 6.27% 6.28%

Dec 1, 2040 - - - - - - - - -Jun 1, 2041 - - - - - - - - -Dec 1, 2041 - - - - - - - - -Jun 1, 2042 - - - - - - - - -

10


M ied School Distri

CAB Bond CAB Bond CAB Bond06/01/2040 06/01/2041 06/01/2042

Date 6.29% 6.3% 6.31%

Jul 17, 2012 889.80 834.05 781.60Dec 1, 2012 910.55 853.50 799.90Jun 1, 2013 939.20 880.40 825.15Dec 1, 2013 968.75 908.15 851.15Jun 1, 2014 999.20 936.75 878.00Dec 1, 2014 1,030.65 966.25 905.70Jun 1, 2015 1,063.05 996.70 934.30Dec 1, 2015 1,096.50 1,028.10 963.75Jun 1, 2016 1,130.95 1,060.45 994.20Dec 1, 2016 1,166.55 1,093.85 1,025.55Jun 1, 2017 1,203.20 1,128.35 1,057.90Dec 1, 2017 1,241.05 1,163.90 1,091.30Jun 1, 2018 1,280.10 1,200.55 1,125.70Dec 1, 2018 1,320.35 1,238.35 1,161.25Jun 1, 2019 1,361.90 1,277.35 1,197.85Dec 1, 2019 1,404.70 1,317.60 1,235.65Jun 1, 2020 1,448.90 1,359.10 1,274.65Dec 1, 2020 1,494.45 1,401.90 1,314.85Jun 1, 2021 1,541.45 1,446.10 1,356.35Dec 1, 2021 1,589.95 1,491.65 1,399.15Jun 1, 2022 1,639.95 1,538.60 1,443.30Dec 1, 2022 1,691.50 1,587.10 1,488.80Jun 1, 2023 1,744.70 1,637.10 1,535.80Dec 1, 2023 1,799.60 1,688.65 1,584.25Jun 1, 2024 1,856.20 1,741.85 1,634.25Dec 1, 2024 1,914.55 1,796.70 1,685.80Jun 1, 2025 1,974.80 1,853.30 1,739.00Dec 1, 2025 2,036.90 1,911.70 1,793.85Jun 1, 2026 2,100.95 1,971.90 1,850.45

11




Date 6.29% 6.3% 6.31%

Dec 1, 2026 2,167.05 2,034.05 1,908.80Jun 1, 2027 2,235.20 2,098.10 1,969.05Dec 1, 2027 2,305.50 2,164.20 2,031.15Jun 1, 2028 2,378.00 2,232.35 2,095.25Dec 1, 2028 2,452.75 2,302.70 2,161.35Jun 1, 2029 2,529.90 2,375.20 2,229.55Dec 1, 2029 2,609.50 2,450.05 2,299.90Jun 1, 2030 2,691.55 2,527.20 2,372.45Dec 1, 2030 2,776.20 2,606.85 2,447.30Jun 1, 2031 2,863.50 2,688.95 2,524.50Dec 1, 2031 2,953.55 2,773.65 2,604.15Jun 1, 2032 3,046.45 2,861.00 2,686.35Dec 1, 2032 3,142.25 2,951.15 2,771.10Jun 1, 2033 3,241.10 3,044.10 2,858.50Dec 1, 2033 3,343.05 3,140.00 2,948.70Jun 1, 2034 3,448.15 3,238.90 3,041.75Dec 1, 2034 3,556.60 3,340.95 3,137.70Jun 1, 2035 3,668.45 3,446.15 3,236.70Dec 1, 2035 3,783.85 3,554.70 3,338.80Jun 1, 2036 3,902.85 3,666.70 3,444.15Dec 1, 2036 4,025.60 3,782.20 3,552.85Jun 1, 2037 4,152.20 3,901.35 3,664.90Dec 1, 2037 4,282.80 4,024.25 3,780.55Jun 1, 2038 4,417.50 4,151.00 3,899.80Dec 1, 2038 4,556.40 4,281.75 4,022.85Jun 1, 2039 4,699.70 4,416.65 4,149.80Dec 1, 2039 4,847.50 4,555.75 4,280.70Jun 1, 2040 5,000.00 4,699.25 4,415.75

12



Date 6.29% 6.3% 6.31%

Dec 1, 2040 - 4,847.30 4,555.10Jun 1, 2041 - 5,000.00 4,698.80Dec 1, 2041 - - 4,847.05Jun 1, 2042 - - 5,000.00


APPENDIX F

SPECIMEN MUNICIPAL BOND INSURANCE POLICY

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

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 Form 500NY (5/90)


1228 N Street, Suite 13 Sacramento, CA 95814

(916) 444-5100