NEW ISSUE – FULL BOOK-ENTRY

RATINGS FOR THE IMPROVEMENT DISTRICT NO. 1 REFUNDING BONDS: Moody’s: “A1” Standard & Poor’s:“AA-” RATINGS FOR THE IMPROVEMENT DISTRICT NO. 2 REFUNDING BONDS: Moody’s:“Aa3” Standard & Poor’s:“AA-” (See “RATINGS” herein)

In the opinion of Stradling Yocca Carlson & Rauth, a Professional Corporation, San Francisco, California (“Bond Counsel”), under existing statutes, regulations, rulings and judicial decisions, and assuming the accuracy of certain representations and compliance with certain covenants and requirements described herein, interest (and original issue discount) on the Bonds is excluded from gross income for federal income tax purposes and is not an item of tax preference for purposes of calculating the federal alternative minimum tax imposed on individuals and corporations. In the further opinion of Bond Counsel, interest (and original issue discount) on the Bonds is exempt from State of California personal income tax. See “TAX MATTERS” herein with respect to tax consequences relating to the Bonds.

$17,390,000 FOLSOM CORDOVA UNIFIED SCHOOL DISTRICT (School Facilities Improvement District No. 1, Sacramento County, California) 2014 General Obligation Refunding Bonds

$21,145,000 FOLSOM CORDOVA UNIFIED SCHOOL DISTRICT (School Facilities Improvement District No. 2, Sacramento County, California) 2014 General Obligation Refunding Bonds

Dated: Date of Delivery

Due: October 1 as shown on the inside cover page

This cover page contains information for quick reference only. It is not a summary of this issue. Investors must read the entire official statement to obtain information essential to the making an informed investment decision. The Folsom Cordova Unified School District (School Facilities Improvement District No. 1, Sacramento County, California) 2014 General Obligation Refunding Bonds (the “Improvement District No. 1 Refunding Bonds”), are being issued by the Folsom Cordova Unified School District (the “School District”) to: (i) currently refund a portion of the outstanding Folsom Cordova Unified School District School Facilities Improvement District No. 1 (Sacramento County, California) Election of 2002 General Obligation Bonds, Series A, (ii) advance refund a portion of the outstanding Folsom Cordova Unified School District School Facilities Improvement District No. 1 (Sacramento County, California) Election of 2002 General Obligation Bonds, Series B, and (iii) pay the costs of issuing the Improvement District No. 1 Refunding Bonds. The Folsom Cordova Unified School District (School Facilities Improvement District No. 2, Sacramento County, California) 2014 General Obligation Refunding Bonds (the “Improvement District No. 2 Refunding Bonds,” and, together with the Improvement District No. 1 Refunding Bonds, the “Bonds”), are being issued by the School District to: (i) currently refund a portion of the outstanding Folsom Cordova Unified School District School Facilities Improvement District No. 2 (Sacramento County, California) Election of 2002 General Obligation Bonds, Series A, (ii) advance refund a portion of the outstanding Folsom Cordova Unified School District School Facilities Improvement District No. 2 (Sacramento County, California) Election of 2002 General Obligation Bonds, Series B, and (iii) pay the costs of issuing the Improvement District No. 2 Refunding Bonds. . The Improvement District No. 1 Refunding Bonds represent an obligation of the School District payable solely from ad valorem property taxes levied and collected by Sacramento County, California (the “County”) upon all property within the boundaries of the Folsom Cordova Unified School District School Facilities Improvement District No. 1 (“Improvement District No. 1”). The Improvement District No. 2 Refunding Bonds represent an obligation of the School District payable solely from ad valorem property taxes levied and collected by the County upon all property within the boundaries of the Folsom Cordova Unified School District School Facilities Improvement District No. 2 (“Improvement District No. 2,” and, together with Improvement District No. 1, the “Improvement Districts”). The Board of Supervisors of the County (the “County Board”) is empowered and obligated to annually levy ad valorem taxes for the payment of principal and interest on each respective series of the Bonds upon all property within the Improvement District subject to taxation without limitation of rate or amount (except as to certain personal property which is taxable at limited rates). The Bonds will be issued in book-entry form only, and will be initially issued and registered in the name of Cede & Co. as nominee of The Depository Trust Company, New York, New York (collectively referred to herein as “DTC”). Purchasers of the Bonds (the “Beneficial Owners”) will not receive physical certificates representing their interests in the Bonds. Interest on the Bonds accrues from the date of their delivery and is payable semiannually on April 1 and October 1 of each year, commencing April 1, 2014. The Bonds are issuable as fully registered current interest bonds in denominations of $5,000 principal amount, or any integral multiple thereof. Payments of principal and interest on the Bonds will be paid by the Director of Finance of the County, as Paying Agent, to DTC for subsequent disbursement to DTC Participants who will remit such payments to the Beneficial Owners of the Bonds. See “APPENDIX G – BOOK-ENTRY-ONLY SYSTEM” herein. The Improvement District No. 1 Refunding Bonds are not subject to redemption prior to their stated maturity dates. The Improvement District No. 2 Refunding Bonds are subject to optional redemption prior to their stated maturity dates. See “THE BONDS – Redemption” herein.

Maturity Schedule (see inside cover page) The Bonds are offered when, as and if issued and received by the Underwriter, subject to the approval as to their legality by Stradling Yocca Carlson & Rauth, a Professional Corporation, San Francisco, California, Bond Counsel and Disclosure Counsel. Certain legal matters will be passed upon for the Underwriter by Kutak Rock LLP, Denver, Colorado. The Bonds, in book-entry form, will be available for delivery through the facilities of the Depository Trust Company in New York, New York on or about February 13, 2014.

The date of this Official Statement is January 16, 2014.

MATURITY SCHEDULE $17,390,000 FOLSOM CORDOVA UNIFIED SCHOOL DISTRICT (School Facilities Improvement District No. 1, Sacramento County, California) 2014 General Obligation Refunding Bonds Base CUSIP†: 34440N Maturity October 1

Principal Amount

2014 2015 2015 2016 2017 2017 2018 2019 2020 2021 2022

$1,395,000 500,000 1,790,000 2,470,000 250,000 1,280,000 1,655,000 1,790,000 1,930,000 2,085,000 2,245,000

Interest Rate 3.000% 3.000 4.000 4.000 4.000 5.000 5.000 5.000 5.000 5.000 2.750

Yield 0.220% 0.310 0.310 0.500 0.750 0.750 1.160 1.550 2.030 2.410 2.750

CUSIP† DZ6 EA0 EJ1 EB8 EC6 EK8 ED4 EE2 EF9 EG7 EH5

$21,145,000 FOLSOM CORDOVA UNIFIED SCHOOL DISTRICT (School Facilities Improvement District No. 2, Sacramento County, California) 2014 General Obligation Refunding Bonds Base CUSIP†: 34440R

C

Maturity October 1

Principal Amount

2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029

$2,625,000 2,550,000 2,720,000 2,835,000 550,000 595,000 645,000 695,000 755,000 815,000 880,000 945,000 1,015,000 1,090,000 1,170,000 1,260,000

Interest Rate 4.000% 4.000 2.000 5.000 4.000 4.000 5.000 5.000 5.000 5.000 5.000 5.000 5.000 5.000 5.000 5.000

Yield

CUSIP†

0.190% 0.230 0.420 0.670 1.110 1.500 1.960 2.360 2.700 2.940 3.210 C 3.380 C 3.500 C 3.620 C 3.720 C 3.820 C

DA2 DB0 DC8 DD6 DE4 DF1 DG9 DH7 DJ3 DK0 DL8 DM6 DN4 DP9 DQ7 DR5

Priced to first par call date of October 1, 2023. † 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 Underwriter nor the School District is responsible for the selection or correctness of the CUSIP numbers set forth herein.

FOLSOM CORDOVA UNIFIED SCHOOL DISTRICT BOARD OF EDUCATION Zak Ford, President Teresa Stanley, Vice President JoAnne Reinking, Clerk Richard Shaw, Member Ed Short, Member DISTRICT ADMINISTRATION Deborah Bettencourt, Superintendent Rhonda Crawford, Chief Financial Officer/Chief Business Official Matt Washburn, Director of Facilities Development ___________________

PROFESSIONAL SERVICES BOND COUNSEL AND DISCLOSURE COUNSEL Stradling Yocca Carlson & Rauth, a Professional Corporation San Francisco, California PAYING AGENT, TRANSFER AGENT, AND BOND REGISTRAR Sacramento County Department of Finance Sacramento, California ESCROW AGENT U.S. Bank National Association San Francisco, California VERIFICATION AGENT Causey Demgen & Moore P.C. Denver, Colorado

TABLE OF CONTENTS Page

INTRODUCTION ....................................................................................................................................................... 1  THE SCHOOL DISTRICT .............................................................................................................................................. 1  THE IMPROVEMENT DISTRICTS .................................................................................................................................. 2  SOURCES OF PAYMENT FOR THE BONDS .................................................................................................................... 2  PURPOSE OF ISSUE ..................................................................................................................................................... 2  DESCRIPTION OF THE BONDS ..................................................................................................................................... 3  TAX MATTERS ........................................................................................................................................................... 4  AUTHORITY FOR ISSUANCE OF THE BONDS ................................................................................................................ 4  OFFERING AND DELIVERY OF THE BONDS .................................................................................................................. 4  CONTINUING DISCLOSURE ......................................................................................................................................... 4  CHANGES SINCE PRELIMINARY OFFICIAL STATEMENT .............................................................................................. 4  FORWARD-LOOKING STATEMENTS ............................................................................................................................ 4  PROFESSIONALS INVOLVED IN THE OFFERING ............................................................................................................ 5  OTHER INFORMATION ................................................................................................................................................ 5  THE BONDS ................................................................................................................................................................ 6  AUTHORITY FOR ISSUANCE ........................................................................................................................................ 6  SECURITY AND SOURCES OF PAYMENT ...................................................................................................................... 6  DESCRIPTION OF THE BONDS ..................................................................................................................................... 7  PAYING AGENT .......................................................................................................................................................... 7  PAYMENT ................................................................................................................................................................... 7  REDEMPTION.............................................................................................................................................................. 8  DEFEASANCE ........................................................................................................................................................... 10  REGISTRATION, TRANSFER AND EXCHANGE OF BONDS ........................................................................................... 11  ESTIMATED SOURCES AND USES OF FUNDS ................................................................................................ 12  DEBT SERVICE SCHEDULES .............................................................................................................................. 13  APPLICATION OF PROCEEDS OF BONDS ....................................................................................................... 14  IMPROVEMENT DISTRICT NO. 1 REFUNDING BONDS ................................................................................................ 14  IMPROVEMENT DISTRICT NO. 2 REFUNDING BONDS ................................................................................................ 17  ESCROW SUFFICIENCY ............................................................................................................................................. 19  INVESTMENT OF FUNDS............................................................................................................................................ 20  SACRAMENTO COUNTY INVESTMENT POOL .............................................................................................. 20  CONSTITUTIONAL AND STATUTORY PROVISIONS AFFECTING DISTRICT REVENUES AND APPROPRIATIONS .............................................................................................................. 21  ARTICLE XIIIA OF THE CALIFORNIA CONSTITUTION ............................................................................................... 21  LEGISLATION IMPLEMENTING ARTICLE XIIIA ......................................................................................................... 22  STATE-ASSESSED UTILITY PROPERTY ..................................................................................................................... 22  ARTICLE XIIIB OF THE CALIFORNIA CONSTITUTION ............................................................................................... 23  ARTICLE XIIIC AND ARTICLE XIIID OF THE CALIFORNIA CONSTITUTION .............................................................. 24  PROPOSITION 26 ....................................................................................................................................................... 24  PROPOSITIONS 98 AND 111....................................................................................................................................... 25  PROPOSITION 39 ....................................................................................................................................................... 26  JARVIS V. CONNELL ................................................................................................................................................... 27  PROPOSITION 1A AND PROPOSITION 22.................................................................................................................... 27  PROPOSITION 30 ....................................................................................................................................................... 28  FUTURE INITIATIVES ................................................................................................................................................ 29  STATE BUDGET ........................................................................................................................................................ 29  TAX BASE FOR REPAYMENT OF THE BONDS ............................................................................................... 36  AD VALOREM PROPERTY TAXATION ......................................................................................................................... 36  ASSESSED VALUATIONS ........................................................................................................................................... 37  APPEALS AND ADJUSTMENTS OF ASSESSED VALUATIONS ....................................................................................... 39  ASSESSED VALUATION AND PARCELS BY LAND USE ............................................................................................... 40  ASSESSED VALUATION PER PARCEL OF SINGLE-FAMILY HOMES ............................................................................ 42  TAX LEVIES, COLLECTIONS AND DELINQUENCIES ................................................................................................... 44  ALTERNATIVE METHOD OF TAX APPORTIONMENT .................................................................................................. 45  TAX RATES .............................................................................................................................................................. 47  LARGEST PROPERTY OWNERS.................................................................................................................................. 49  DEBT OBLIGATIONS ................................................................................................................................................. 50  i

TABLE OF CONTENTS (continued) Page

IMPROVEMENT DISTRICT NO. 1 ....................................................................................................................... 53  GENERAL DESCRIPTION ........................................................................................................................................... 53  LOCATION AND TERRITORY ..................................................................................................................................... 53  IMPROVEMENT DISTRICT NO. 2 ....................................................................................................................... 54  GENERAL DESCRIPTION ........................................................................................................................................... 54  LOCATION AND TERRITORY ..................................................................................................................................... 54  THE SCHOOL DISTRICT ...................................................................................................................................... 55  INTRODUCTION ........................................................................................................................................................ 55  ADMINISTRATION .................................................................................................................................................... 55  ENROLLMENT........................................................................................................................................................... 56  LABOR RELATIONS .................................................................................................................................................. 57  SCHOOL DISTRICT RETIREMENT SYSTEMS ............................................................................................................... 58  POST-EMPLOYMENT MEDICAL BENEFITS ................................................................................................................ 60  JOINT POWERS AGREEMENTS ................................................................................................................................... 61  SCHOOL DISTRICT FINANCIAL INFORMATION .......................................................................................... 62  STATE FUNDING OF EDUCATION .............................................................................................................................. 62  OTHER FUNDING SOURCES ...................................................................................................................................... 67  DISSOLUTION OF REDEVELOPMENT AGENCIES ........................................................................................................ 67  FINANCIAL STATEMENTS ......................................................................................................................................... 69  BUDGET PROCESS .................................................................................................................................................... 71  GENERAL FUND BUDGET ......................................................................................................................................... 72  ACCOUNTING PRACTICES ......................................................................................................................................... 75  SCHOOL DISTRICT DEBT STRUCTURE ...................................................................................................................... 75  TAX MATTERS ........................................................................................................................................................ 83  LEGAL MATTERS .................................................................................................................................................. 85  CONTINUING DISCLOSURE ....................................................................................................................................... 85  LEGALITY FOR INVESTMENT IN CALIFORNIA ........................................................................................................... 85  ABSENCE OF MATERIAL LITIGATION ....................................................................................................................... 85  INFORMATION REPORTING REQUIREMENTS ............................................................................................................. 86  FINANCIAL STATEMENTS ......................................................................................................................................... 86  CERTAIN LEGAL MATTERS ...................................................................................................................................... 86  ESCROW VERIFICATION ........................................................................................................................................... 86  RATINGS ................................................................................................................................................................... 87  UNDERWRITING .................................................................................................................................................... 87  ADDITIONAL INFORMATION............................................................................................................................. 88  APPENDIX A APPENDIX B APPENDIX C

– – –

APPENDIX D

–

APPENDIX E APPENDIX F

– –

APPENDIX G

–

VICINITY OF IMPROVEMENT DISTRICT NO. 1 .......................................................................... A-1 VICINITY OF IMPROVEMENT DISTRICT NO. 2 .......................................................................... B-1 EXCERPTS FROM THE 2012-13 AUDITED FINANCIAL STATEMENTS OF THE SCHOOL DISTRICT .................................................................................................................. C-1 GENERAL ECONOMIC AND DEMOGRAPHIC INFORMATION FOR THE CITY OF FOLSOM, CITY OF RANCHO CORDOVA AND SACRAMENTO COUNTY .................................................... D-1 FORMS OF OPINIONS OF BOND COUNSEL ................................................................................ E-1 FORM OF CONTINUING DISCLOSURE CERTIFICATE FOR THE IMPROVEMENT DISTRICT NO. 1 REFUNDING BONDS AND THE IMPROVEMENT DISTRICT NO. 2 REFUNDING BONDS ................................................................................................................ F-1 BOOK-ENTRY ONLY SYSTEM ................................................................................................. G-1

ii

This Official Statement does not constitute an offering of any security other than the original offering of the Bonds. No dealer, broker, salesperson or other person has been authorized by the School District or the Improvement Districts to give any information or to make any representations other than as contained in this Official Statement, and if given or made, such other information or representation not so authorized should not be relied upon as having been given or authorized by the School District or the Improvement Districts. The issuance and sale of the Bonds have not been registered under the Securities Act of 1933 or the Securities Exchange Act of 1934, both as amended, in reliance upon exemptions provided thereunder by Section 3(a)2 and 3(a)12, respectively, for the issuance and sale of municipal securities. This Official Statement does not constitute an offer to sell or a solicitation of an offer to buy in any state in which such offer or solicitation is not authorized or in which the person making such offer or solicitation is not qualified to do so or to any person to whom it is unlawful to make such offer or solicitation. Certain statements included or incorporated by reference in this Official Statement constitute “forward-looking statements” within the meaning of the United States Private Securities Litigation Reform Act of 1995, Section 21E of the United States Securities Exchange Act of 1934, as amended, and Section 27A of the United States Securities Act of 1933, as amended. Such statements are generally identifiable by the terminology used such as “plan,” “expect,” “estimate,” “project,” “budget” or other similar words. Such forward-looking statements include, but are not limited to, certain statements contained in the information regarding the Improvement Districts and the School District herein. Certain information set forth herein, other than that provided by the Improvement Districts and the School District, has been obtained from sources which are believed to be reliable, but is not guaranteed as to accuracy or completeness, and is not to be construed as a representation by the Improvement Districts or the School District. Statements contained in this Official Statement which involve estimates, forecasts or matters of opinion, whether or not expressly so described herein, are intended solely as such and are not to be construed as a representation of facts. The information and expressions of opinion herein are subject to change without notice, and neither the delivery of this Official Statement nor any sale made hereunder shall, under any circumstances, give rise to any implication that there has been no change in the affairs of the Improvement Districts or the School District since the date hereof. The Underwriter has provided the following sentence for inclusion in this Official Statement: “The Underwriter has reviewed the information in this Official Statement in accordance with, and as part of, its responsibilities to investors under the federal securities laws as applied to the facts and circumstances of this transaction, but the Underwriter does not guarantee the accuracy or the completeness of such information.” In connection with this offering, the Underwriter may overallot or effect transactions which stabilize or maintain the market prices of the Bonds at levels above those that might otherwise prevail in the open market. Such stabilizing, if commenced, may be discontinued at any time. The Underwriter may offer and sell the Bonds to certain securities dealers and dealer banks and banks acting as agent at prices lower than the public offering prices stated on the cover page hereof and said public offering prices may be changed from time to time by the Underwriter. The School District maintains a website. However, the information presented there is not part of this Official Statement and should not be relied upon in making an investment decision with respect to the Bonds.

$17,390,000 FOLSOM CORDOVA UNIFIED SCHOOL DISTRICT (School Facilities Improvement District No. 1, Sacramento County, California) 2014 General Obligation Refunding Bonds

$21,145,000 FOLSOM CORDOVA UNIFIED SCHOOL DISTRICT (School Facilities Improvement District No. 2, Sacramento County, California) 2014 General Obligation Refunding Bonds

INTRODUCTION This Official Statement, which includes the cover page and appendices hereto, provides information in connection with the sale of (i) Folsom Cordova Unified School District (School Facilities Improvement District No. 1, Sacramento County, California) 2014 General Obligation Refunding Bonds (the “Improvement District No. 1 Refunding Bonds”) and (ii) Folsom Cordova Unified School District (School Facilities District No. 2, Sacramento County, California) 2014 General Obligation Refunding Bonds (the “Improvement District No. 2 Refunding Bonds,” and, together with the Improvement District No. 1 Refunding Bonds, the “Bonds”). This Introduction is not a summary of this Official Statement. It is only a brief description of and guide to, and is qualified by, more complete and detailed information contained in the entire Official Statement, including the cover page and appendices hereto, and the documents summarized or described herein. A full review should be made of the entire Official Statement. The offering of the Bonds to potential investors is made only by means of the entire Official Statement. The School District The Folsom Cordova Unified School District (the “School District”) is located in the greater Sacramento metropolitan region, about 20 miles northeast of the City of Sacramento. The School District includes nearly all of the City of Folsom, a large portion of the City of Rancho Cordova, and adjacent unincorporated areas of Sacramento County (the “County”), encompassing a territory of about 96 square miles. The School District has an estimated population in 2012, the most recent year for which such information is available, of approximately 125,930 persons. The School District is a unified school district serving students in grades K-12. The School District operates 31 schools, including 19 elementary schools, four middle schools, three comprehensive high schools, four alternative high schools and one dependent charter elementary school. The School District also operates 14 preschool programs at eight sites, transitional kindergarten programs at six sites, a Montessori program at one site, 14 child care centers and an adult education program. The School District’s enrollment for fiscal year 2013-14 was budgeted to be 19,281 students, and the School District’s average daily attendance (“ADA”) for fiscal year 2013-14 was budgeted to be 18,308 students. For more complete information concerning the School District, including certain financial information, see “THE SCHOOL DISTRICT” and “SCHOOL DISTRICT FINANCIAL INFORMATION.” Excerpts from the School District’s audited financial statements for the fiscal year ended June 30, 2013 are included as Appendix C and should be read in their entirety. The discussion of the School District’s financial history and the financial information contained herein does not purport to be complete or definitive.

1

The Improvement Districts The Folsom Cordova Unified School District School` Facilities Improvement District No. 1 (“Improvement District No. 1”) is located in the western portion of the School District, and includes the City of Rancho Cordova and adjacent unincorporated territory of the School District. Improvement District No. 1 encompasses about 48 square miles, representing about 50% of the territory of the School District. Improvement District No. 1 has a 2013-14 total assessed valuation of $5,799,641,293. See “IMPROVEMENT DISTRICT NO. 1” herein and “APPENDIX A – VICINITY OF IMPROVEMENT DISTRICT NO. 1” attached hereto. The Folsom Cordova Unified School District School Facilities Improvement District No. 2 (“Improvement District No. 2”) is located in the eastern portion of the School District, and includes the City of Folsom and adjacent unincorporated territory of the School District. Improvement District No. 2 encompasses about 48 square miles, representing about 50% of the territory of the School District. Improvement District No. 2 has a 2013-14 total assessed valuation of $10,210,988,329. See “IMPROVEMENT DISTRICT NO. 2” herein and “APPENDIX B – VICINITY OF IMPROVEMENT DISTRICT NO. 2” attached hereto. Improvement District No. 1 and Improvement District No. 2 are together referred to herein as the “Improvement Districts” and each may be referred to as an “Improvement District.” Sources of Payment for the Bonds Improvement District No. 1 Refunding Bonds. The Improvement District No. 1 Refunding Bonds represent an obligation of the School District payable solely from ad valorem property taxes levied and collected by the County within the boundaries of Improvement District No. 1. The Board of Supervisors of the County (the “County Board”) is empowered and obligated to annually levy ad valorem taxes for the payment of the Improvement District No. 1 Refunding Bonds and the interest thereon upon all property within Improvement District No. 1 subject to taxation without limitation of rate or amount (except as to certain personal property which is taxable at limited rates). See “THE BONDS – Security and Sources of Payment” herein. Improvement District No. 2 Refunding Bonds. The Improvement District No. 2 Refunding Bonds represent an obligation of the School District payable solely from ad valorem property taxes levied and collected by the County within the boundaries of Improvement District No. 2. The County Board is empowered and obligated to annually levy ad valorem taxes for the payment of the Improvement District No. 2 Refunding Bonds and the interest thereon upon all property within Improvement District No. 2 subject to taxation without limitation of rate or amount (except as to certain personal property which is taxable at limited rates). See “THE BONDS – Security and Sources of Payment” herein. Purpose of Issue Improvement District No. 1 Refunding Bonds. The Improvement District No. 1 Refunding Bonds are being issued by the School District to: (i) currently refund a portion of the outstanding Folsom Cordova Unified School District School Facilities Improvement District No. 1 (Sacramento County, California) Election of 2002 General Obligation Bonds, Series A (the “Improvement District No. 1 2002 Series A Bonds”), (ii) advance refund a portion of the outstanding Folsom Cordova Unified School District School Facilities Improvement District No. 1 (Sacramento County, California) Election of 2002 General Obligation Bonds, Series B (the “Improvement District No. 1 2002 Series B Bonds”), and (iii) pay the costs of issuing the Improvement District No. 1 Refunding Bonds.

2

Improvement District No. 2 Refunding Bonds. The Improvement District No. 2 Refunding Bonds are being issued by the School District to: (i) currently refund a portion of the outstanding Folsom Cordova Unified School District School Facilities Improvement District No. 2 (Sacramento County, California) Election of 2002 General Obligation Bonds, Series A (the “Improvement District No. 2 Series A Bonds”), (ii) advance refund a portion of the outstanding Folsom Cordova Unified School District School Facilities Improvement District No. 2 (Sacramento County, California) Election of 2002 General Obligation Bonds, Series B (the “Improvement District No. 2 Series B Bonds,” and, together with the Improvement District No. 1 2002 Series A Bonds, the Improvement District No. 1 2002 Series B Bonds, and the Improvement District No. 2 Bonds, the “Refunded Bonds”), and (iii) pay the costs of issuing the Improvement District No. 2 Refunding Bonds. Description of the Bonds Form and Registration. The Bonds will be issued in fully registered form only, without coupons. The Bonds will be initially registered in the name of Cede & Co., as nominee of The Depository Trust Company, New York, New York (“DTC”). DTC will act as securities depository of the Bonds. See “THE BONDS – Description of the Bonds” and “APPENDIX G – BOOK-ENTRY ONLY SYSTEM.” In the event that the book-entry only system described below is no longer used with respect to the Bonds, the Bonds will be registered in accordance with the applicable Bond Resolution (defined herein). Denominations. Individual purchases of interests in the Bonds will be available to purchasers of the Bonds in the denominations of $5,000 principal amount or any integral multiple thereof. Payments. Interest with respect to the Improvement District No. 1 Refunding Bonds accrues from the date of delivery of the Bonds (the “Date of Delivery”), and is payable semiannually on April 1 and October 1(each a “Bond Payment Date”) of each year commencing April 1, 2014. Interest with respect to the Improvement District No. 2 Refunding Bonds accrues from the Date of Delivery, and is payable semiannually on April 1 and October 1 (each a “Bond Payment Date”) of each year commencing April 1, 2014. Principal on the Bonds is payable in the amounts and years as set forth on the inside cover page hereof. Payments of the principal of and interest on the Bonds will be made by the Director of Finance of the County (the “Director of Finance”), as the designated paying agent, bond registrar and transfer agent (in such capacity, the “Paying Agent”), to DTC for subsequent disbursement through DTC Participants to the Beneficial Owners of the Bonds. Redemption. The Improvement District No. 1 Refunding Bonds are not subject to optional redemption prior to their stated maturity dates. The Improvement District No. 2 Refunding Bonds maturing on or after October 1, 2024 are subject to redemption prior to their stated maturity dates, at the option of the School District, from any source of funds, on October 1, 2023, or on any date thereafter as a whole, or in part as described herein. See “THE BONDS – Redemption” herein.

3

Tax Matters In the opinion of Stradling Yocca Carlson & Rauth, a Professional Corporation, San Francisco, California (“Bond Counsel”), based on existing statutes, regulations, rulings and judicial decisions, and assuming the accuracy of certain representations and compliance with certain covenants and requirements described herein, interest (and original issue discount) on the Bonds is excluded from gross income for federal income tax purposes and is not an item of tax preference for purposes of calculating the federal alternative minimum tax imposed on individuals and corporations. In the further opinion of Bond Counsel, interest (and original issue discount) on the Bonds is exempt from State of California personal income tax. In addition, the difference between the issue price of a Bond (the first price at which a substantial amount of the Bonds of a maturity is to be sold to the public) and the stated redemption price at maturity with respect to such Bond constitutes original issue discount. See “TAX MATTERS” herein. Authority for Issuance of the Bonds The Bonds are issued pursuant to certain provisions of the State of California Government Code and other applicable law, and pursuant to separate resolutions adopted by the Board of Education of the School District. See “THE BONDS – Authority for Issuance” herein. Offering and Delivery of the Bonds The Bonds are offered when, as and if issued, subject to approval as to the validity by Bond Counsel. It is anticipated that the Bonds will be available for delivery in New York, New York on or about February 13, 2014. Continuing Disclosure The School District will covenant for the benefit of bondholders to make available certain financial information and operating data relating to the School District and to provide notices of the occurrence of certain enumerated events, in compliance with S.E.C. Rule 15c2-12(b)(5). The specific nature of the information to be made available and of the notices of material events is summarized in “APPENDIX F – FORM OF CONTINUING DISCLOSURE CERTIFICATE FOR THE IMPROVEMENT DISTRICT NO. 1 REFUNDING BONDS AND THE IMPROVEMENT DISTRICT NO. 2 REFUNDING BONDS,” attached hereto. Changes Since Preliminary Official Statement In addition to pricing-related information, this Official Statement contains the results of the School District’s first interim financial report for fiscal year 2013-14, pursuant to which the School District has reported a positive certification. Accordingly, the section entitled “SCHOOL DISTRICT FINANCIAL INFORMATION, General Fund Budget,” herein has been amended and restated in its entirety. Forward-Looking Statements When used in this Official Statement and in any continuing disclosure by the School District, in any press release and in any oral statement made with the approval of an authorized officer of any Improvement District or the School District, or any other entity described or referenced in this Official Statement, the words or phrases “will likely result,” “are expected to,” “will continue,” “is anticipated,” “estimate,” “project,” “forecast,” “expect,” “intend” and similar expressions identify “forward looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements are subject to risks and uncertainties that could cause actual results to differ materially from those

4

contemplated in such forward-looking statements. Any forecast is subject to such uncertainties. Inevitably, some assumptions used to develop the forecasts will not be realized and unanticipated events and circumstances may occur. Therefore, there are likely to be differences between forecasts and actual results, and those differences may be material. Professionals Involved in the Offering Stradling Yocca Carlson & Rauth, a Professional Corporation, San Francisco, California is acting as Bond Counsel and Disclosure Counsel to the School District with respect to the Bonds. Stradling Yocca Carlson & Rauth, a Professional Corporation will receive compensation from the School District contingent upon the sale and delivery of the Bonds. Certain matters will be passed on for the Underwriter (defined herein) by Kutak Rock LLP, Denver, Colorado. Causey Demgen & Moore P.C., Denver, Colorado, is acting as verification agent for the Bonds. Other Information This Official Statement speaks only as of its date, and the information contained herein is subject to change. Copies of documents referred to herein and information concerning the Bonds are available from the Chief Financial Officer/Chief Business Official, Folsom Cordova Unified School District, 1965 Birkmont Drive, Rancho Cordova, California, 95742, (916) 294-9004. The School District may impose a charge for copying, mailing and handling. This Official Statement is not to be construed as a contract with the purchasers of the Bonds. Statements contained in this Official Statement which involve estimates, forecasts or matters of opinion, whether or not expressly so described herein, are intended solely as such and are not to be construed as representations of fact. The summaries and references to documents, statutes and constitutional provisions referred to herein do not purport to be comprehensive or definitive, and are qualified in their entireties by reference to each of such documents, statutes and constitutional provisions. The information set forth herein, other than that provided by the School District, has been obtained from official sources which are believed to be reliable but it is not guaranteed as to accuracy or completeness, and is not to be construed as a representation by the School District. The information and expressions of opinions 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 School District or the Improvement Districts since the date hereof. This Official Statement is submitted in connection with the sale of the Bonds referred to herein and may not be reproduced or used, in whole or in part, for any other purpose. Capitalized terms used but not otherwise defined herein will have the meaning assigned to such terms by the respective Bond Resolution (defined herein).

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THE BONDS Authority for Issuance The Bonds are issued pursuant to the provisions of Articles 9 and 11 of Chapter 3 of Part 1 of Division 2 of the Government Code of the State of California and other applicable law, and pursuant to separate resolutions relating to each series of Bonds adopted by the Board of Education of the School District on December 12, 2013 (collectively, the “Bond Resolutions,” and each of such resolutions being a “Bond Resolution”). Security and Sources of Payment The Bonds represent general obligations of the applicable Improvement Districts, payable solely from ad valorem taxes levied by the County within the respective boundaries of each Improvement District. The County Board is empowered and obligated to annually levy ad valorem taxes for the payment of principal and interest on the applicable series of Bonds upon all property within the respective Improvement Districts subject to taxation by such Improvement Districts without limitation of rate or amount (except with respect to certain personal property which is taxable at limited rates). Such taxes will be levied annually in addition to all other taxes during the period that the Bonds are outstanding in an amount sufficient to pay the principal and interest on the Bonds when due. Such taxes, when collected, will be deposited into (i) with respect to the Improvement District No. 1 Refunding Bonds, the fund designated as “Folsom Cordova Unified School District Improvement District No. 1, 2014 General Obligation Refunding Bonds Debt Service Fund” (the “Improvement District No. 1 Debt Service Fund”), and (ii) with respect to the Improvement District No. 2 Refunding Bonds, the fund designated as “Folsom Cordova Unified School District Improvement District No. 2, 2014 General Obligation Refunding Bonds Debt Service Fund” (the “Improvement District No. 2 Debt Service Fund” and, together with the Improvement District No. 1 Debt Service Fund, the “Debt Service Funds,” and each of such funds being a “Debt Service Fund”). The Debt Service Funds are maintained by the County and are required by law, including by the Act, to be applied for the payment of principal and interest on the Bonds when due. Although the County is obligated to levy an ad valorem tax for the payment of the Bonds, and will maintain the Debt Service Funds, the Bonds are not a debt of the County. The moneys in the respective Debt Service Funds, to the extent necessary to pay the principal and interest on the related series of Bonds as the same becomes due and payable, shall be transferred by the Paying Agent to DTC for remittance of such principal and interest to DTC Participants for subsequent disbursement to the Beneficial Owners of the Bonds. The amounts of the annual ad valorem taxes levied by the County to repay the Bonds will be determined by the relationship between the assessed valuation of taxable property in the respective Improvement Districts and the amount of debt service due on the related series of Bonds in any year. Fluctuations in the annual debt service on the Bonds and the assessed value of taxable property in each Improvement District may cause the annual tax rate to fluctuate. Economic and other factors beyond the School District’s control, such as economic recession, deflation of land values, a relocation out of either Improvement District or financial difficulty or bankruptcy by one or more major property taxpayers, or the complete or partial destruction of taxable property caused by, among other eventualities, earthquake, flood or other natural disaster, could cause a reduction in the assessed value within either Improvement District and necessitate a corresponding increase in the annual tax rate in such Improvement District. For further information regarding the Improvement Districts’ assessed valuations, tax rates, overlapping debt, and other matters concerning taxation, see “TAX BASE FOR REPAYMENT OF THE BONDS” herein.

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Description of the Bonds The Bonds will be issued in book-entry form only, and will be initially issued and registered in the name of Cede & Co. as nominee for DTC. Purchasers will not receive certificates representing their interest in the Bonds. Interest with respect to the Improvement District No. 1 Refunding Bonds accrues from their Date of Delivery, and is payable semiannually on April 1 and October 1 of each year commencing April 1, 2014. Interest with respect to the Improvement District No. 2 Refunding Bonds accrues from their Date of Delivery, and is payable semiannually on April 1 and October 1 of each year commencing April 1, 2014. Interest on the Bonds shall be computed on the basis of a 360-day year of twelve 30-day months. Each Bond shall bear interest from the Bond Payment Date next preceding the date of authentication thereof unless it is authenticated as of a day during the period from the 16th day of the month next preceding any Bond Payment Date to that Bond Payment Date, inclusive, in which event it shall bear interest from such Bond Payment Date, or unless it is authenticated, (i) in the case of the Improvement District No. 1 Refunding Bonds, on or before March 15, 2014 and (ii) in the case of the Improvement District No. 2 Refunding Bonds, on or before March 15, 2014, in which event such bond shall bear interest from the Date of Delivery. The Bonds are issuable in denominations of $5,000 principal amount or any integral multiple thereof. The Bonds mature on October 1, in the years and amounts set forth on the inside cover page hereof. Paying Agent The Director of Finance will act as the Paying Agent for the Bonds. As long as DTC is the registered owner of the Bonds and DTC’s book-entry method is used for the Bonds, the Paying Agent will send any notice of prepayment or other notices to owners only to DTC. Neither the School District nor the Underwriter of the Bonds have any responsibility or liability for any aspects of the records relating to or payments made on account of beneficial ownership, or for maintaining, supervising or reviewing any records relating to beneficial ownership, of interests in the Bonds. See “APPENDIX G – BOOK-ENTRY ONLY SYSTEM” herein. Payment The principal of the Bonds will be payable in lawful money of the United States of America to the registered owner thereof, upon the surrender thereof at the principal office of the Paying Agent. The interest on the Bonds will be payable in lawful money to the person whose name appears on the bond registration books of the Paying Agent as the registered owner thereof as of the close of business on the 15th day of the month preceding any Bond Payment Date (a “Record Date”), whether or not such day is a business day, such interest to be paid by check or draft mailed on such Bond Payment Date to such registered owner at such registered owner’s address as it appears on such registration books or at such address as the registered owner may have filed with the Paying Agent for that purpose. The interest payments on the Bonds will be made in immediately available funds (e.g., by wire transfer) to any registered owner of at least $1,000,000 of outstanding Bonds, who shall have requested in writing such method of payment of interest on the Bonds prior to the close of business on the Record Date immediately preceding any Bond Payment Date.

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Redemption Optional Redemption. The Improvement District No. 1 Refunding Bonds are not subject to optional redemption prior to their stated maturity dates. The Improvement District No. 2 Refunding Bonds maturing on or before October 1, 2023, are not subject to redemption prior to their respective maturity dates. The Improvement District No. 2 Refunding Bonds maturing on or after October 1, 2024 are subject to redemption prior to their respective stated maturity dates, at the option of the School District, from any source of available funds, as a whole or in part on any date on or after October 1, 2023, at a redemption price equal to the principal amount of the Bonds to be redeemed, plus interest thereon to the date fixed redemption, without premium. Selection of Bonds for Redemption. Whenever provision is made for the redemption of Bonds, if less than all of the Bonds of any such series and any one maturity shall be called for redemption, the particular Bonds or portions of Bonds of such series and maturity to be redeemed shall be selected by lot by the School District in such manner as the School District in its discretion may determine; provided, however, that the portion of any Bond of any such series to be redeemed shall be in the principal amount of $5,000 or any integral multiple thereof. If less than all of the Bonds of a single series and stated to mature on different dates shall be called for redemption, the particular Bonds or portions thereof to be redeemed shall be called in any order of maturity selected by the School District or, if not so selected, in the inverse order of maturity. Notice of Redemption. Notice of any redemption of Bonds will be mailed, postage-prepaid, not less than 20 but not more than 45 days prior to the redemption date (i) by registered or certified mail to the respective registered owners thereof at the addresses appearing on the bond registration books, (ii) by registered or certified mail or overnight delivery service to the Securities Depository described below, and (iii) by registered or certified mail, telephonically confirmed transmission or overnight delivery service to one or more of the Information Services described below. Each notice of redemption will specify (a) the Bonds or designated portions thereof (in the case of redemption of the Bonds in part but not in whole) which are to be redeemed, (b) the date of redemption, (c) the place or places where the redemption will be made, including the name and address of the Paying Agent, (d) the redemption price, (e) the CUSIP numbers (if any) assigned to the Bonds to be redeemed, (f) the Bond numbers of the Bonds to be redeemed in whole or in part and, in the case of any Bond to be redeemed in part only, the principal amount of such Bond to be redeemed, and (g) the original issue date, interest rate, and stated maturity date of each Bond to be redeemed in whole or in part. Such notice will further state that on the specified date there shall become due and payable upon each Bond or portion thereof being redeemed at the redemption price thereof, together with the interest accrued to the redemption date, and that from and after such date, interest with respect thereto will cease to accrue. “Information Services” means Financial Information, Inc.’s “Financial Daily Called Bond Service,” 1 Cragwood Road, 2nd Floor, South Plainfield, New Jersey 07080, Attention: Editor; Mergent, Inc., 585 Kingsley Park Drive, Fort Mill, South Carolina 29715, Attention: Called Bond Department; and Standard and Poor’s J.J. Kenny Information Services’ “Called Bond Service,” 55 Water Street, 45th Floor, New York, New York 10041. “Securities Depository” shall mean The Depository Trust Company, 55 Water Street, New York, New York 10041, Tel: (212) 855-1000 or Fax: (212) 855-7320.

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The actual receipt by the owner of any Bond or of the Securities Depository or Information Service of notice of such redemption shall not be a condition precedent to redemption, and failure to receive such notice, or any defect in the notice mailed, will not affect the validity of the proceedings for the redemption of such Bond or the cessation of interest on the date fixed for redemption. A certificate of the Paying Agent or the School District that notice of call and redemption has been given to owners and the appropriate Securities Depository or Information Services will be conclusive as against all parties. The notice or notices required for redemption will be given by the Paying Agent or its designee. A certificate by the Paying Agent that notice of call and redemption has been given to owners of Bonds and to the appropriate Securities Depository and Information Services shall be conclusive as against all parties, and no Bondowner whose Bond is called for redemption may object thereto or object to the cessation of interest on the fixed redemption date by any claim or showing that said Bondowner failed to actually receive such notice of call and redemption. With respect to any notice of optional redemption of Bonds (or portions thereof) described above, unless upon the giving of such notice such Bonds or portions thereof shall be deemed to have been defeased, such notice shall state that such redemption shall be conditional upon the receipt by the Paying Agent (or an independent escrow agent selected by the School District) on or prior to the date fixed for such redemption of the moneys necessary and sufficient to pay the principal and interest on, such Bonds (or portions thereof) to be redeemed, and that if such moneys shall not have been so received said notice shall be of no force and effect, no portion of the Bonds shall be subject to redemption on such date and such Bonds shall not be required to be redeemed on such date. In the event that such Redemption Notice contains such a condition and such moneys are not so received, the redemption shall not be made and the Paying Agent shall within a reasonable time thereafter (but in no event later than the date originally set for redemption) give notice to the persons to whom and in the manner in which the Redemption Notice was given that such moneys were not so received. In addition, the School District shall have the right to rescind any Redemption Notice, by written notice to the Paying Agent, on or prior to the date fixed for such redemption. The Paying Agent shall distribute a notice of the rescission of such notice in the same manner as such notice was originally provided. Payment of Redeemed Bonds. When notice of redemption has been given, substantially as described above, and when the amount necessary for the payment of principal of and premium, if any, is set aside for the purpose in the applicable Debt Service Fund, the Bonds designated for redemption will become due and payable on the date fixed for redemption thereof, and upon presentation and surrender of said Bonds at the place specified in the notice of redemption, such Bonds will be redeemed and paid at said redemption price out of the applicable Debt Service Fund, and no interest will accrue on such Bonds called for redemption after the redemption date specified in such notice, and the owners of said Bonds so called for redemption after such redemption date will look for the payment of such Bonds and the premium, if any, thereon only to such applicable Debt Service Fund. All unpaid interest payable at or prior to the redemption date will continue to be payable to the respective Owners, but without interest thereon. Partial Redemption of Bonds. Upon the surrender of any Bond redeemed in part only, the Paying Agent will execute and deliver to the Owner thereof a new Bond or Bonds of like tenor and maturity and of authorized denominations equal in principal amount to the unredeemed portion of the Bond surrendered (the “Transfer Amount”). Such partial redemption is valid upon payment of the amount required to be paid to such Owner, and the School District and the respective Improvement District will be released and discharged thereupon from all liability to the extent of such payment.

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Effect of Notice of Redemption. If on the applicable designated redemption date, money for the redemption of the Bonds to be redeemed, together with interest accrued to such redemption date, is held by the Paying Agent so as to be available therefor on such redemption date, and if notice of redemption thereof will have been given substantially as described above, then from and after such redemption date, interest with respect to the Bonds to be redeemed shall cease to accrue and become payable. Bonds No Longer Outstanding. When any Bonds (or portions thereof), which have been duly called for redemption prior to maturity, or with respect to which irrevocable instructions to call for redemption prior to maturity at the earliest redemption date have been given to the Paying Agent, in form satisfactory to it, and sufficient moneys shall be held by the Paying Agent irrevocably in trust for the payment of the redemption price of such Bonds or portions thereof, and, accrued interest with respect thereto to the date fixed for redemption, then such Bonds will no longer be deemed Outstanding and shall be surrendered to the Paying Agent for cancellation. Defeasance All or any portion of the outstanding maturities of the Bonds may be defeased at any time prior to maturity in the following ways: (a)

Cash: by irrevocably depositing with an independent escrow agent selected by the School District an amount of cash which together with amounts transferred from the applicable Debt Service Fund is sufficient to pay all Bonds outstanding and designated for defeasance, including all principal, interest and premium, if any; or

(b)

Government Obligations: by irrevocably depositing with an independent escrow agent selected by the School District noncallable Government Obligations together with cash, if required, in such amount as will, in the opinion of an independent certified public accountant, together with interest to accrue thereon and moneys transferred from the applicable Debt Service Fund together with the interest to accrue thereon, be fully sufficient to pay and discharge all Bonds outstanding and designated for defeasance (including all principal and interest represented thereby and prepayment premiums, if any) at or before their maturity date;

then, notwithstanding that any Bonds shall not have been surrendered for payment, all obligations of the School District, the respective Improvement District and the Paying Agent with respect to all outstanding Bonds shall cease and terminate, except only the obligation of the Paying Agent or an independent escrow agent selected by the School District to pay or cause to be paid from funds deposited pursuant to paragraphs (a) or (b) above, to the owners of the Bonds not so surrendered and paid all sums due with respect thereto. “Government Obligations” means direct and general obligations of the United States of America (which may consist of obligations of the Resolution Funding Corporation that constitute interest strips), or obligations that are unconditionally guaranteed as to principal and interest by the United States of America, or “prerefunded” municipal obligations rated in the highest rating category by Moody’s Investors Service or Standard & Poor’s. In the case of direct and general obligations of the United States of America, Government Obligations shall include evidences of direct ownership of proportionate interests in future interest or principal payments of such obligations. Investments in such proportionate interests must be limited to circumstances where (a) a bank or trust company acts as custodian and holds the underlying United States obligations; (b) the owner of the investment is the real party in interest and has the right to proceed directly and individually against the obligor of the underlying United States obligations; and (c) the underlying United States obligations are held in a special account, segregated

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from the custodian’s general assets, and are not available to satisfy any claim of the custodian, any person claiming through the custodian, or any person to whom the custodian may be obligated; provided that such obligations are rated or assessed at least as high as direct and general obligations of the United States of America by either Standard & Poor’s or by Moody’s Investors Service. Registration, Transfer and Exchange of Bonds So long as any of the Bonds remain outstanding, the School District will cause the Paying Agent to maintain and keep at its principal office all books and records necessary for the registration, exchange and transfer of the Bonds as provided in the applicable Bond Resolution. Subject to the provisions of the applicable Bond Resolution, the person in whose name a Bond is registered on the Bond Register will be regarded as the absolute owner of that Bond for all purposes of such Bond Resolution. Payment of or on account of the principal of and premium, if any, and interest on any Bond will be made only to or upon the order of that person; none of the School District, the respective Improvement District, or the Paying Agent will be affected by any notice to the contrary, but the registration may be changed as provided in the applicable Bond Resolution. All such payments will be valid and effectual to satisfy and discharge the School District’s liability upon the Bonds, including interest, to the extent of the amount or amounts so paid. Any Bond may be exchanged for Bonds of like tenor, maturity and Transfer Amount upon presentation and surrender at the principal office of the Paying Agent, together with a request for exchange signed by the owner or by a person legally empowered to do so in a form satisfactory to the Paying Agent. A Bond may be transferred on the Bond Register only upon presentation and surrender of the Bond at the principal office of the Paying Agent together with an assignment executed by the owner or by a person legally empowered to do so in a form satisfactory to the Paying Agent. Upon exchange or transfer, the Paying Agent will complete, authenticate and deliver a new Bond or Bonds of like tenor and of any authorized denomination or denominations requested by the owner equal to the Transfer Amount of the Bond surrendered and bearing or accruing interest at the same rate and maturing on the same date. In all cases of exchanged or transferred Bonds, the Paying Agent shall sign and authenticate and deliver Bonds in accordance with the provisions of the applicable Bond Resolution. All fees and costs of transfer will be paid by the requesting party. Those charges may be required to be paid before the procedure is begun for the exchange or transfer. All Bonds issued upon any exchange or transfer will be valid obligations of the respective Improvement District, evidencing the same debt, and entitled to the same security and benefit under the applicable Bond Resolution as the Bonds surrendered upon that exchange or transfer. Any Bond surrendered to the Paying Agent for payment, retirement, exchange, replacement or transfer shall be canceled by the Paying Agent. The School District may at any time deliver to the Paying Agent for cancellation any previously authenticated and delivered Bonds that the School District may have acquired in any manner whatsoever, and those Bonds shall be promptly cancelled by the Paying Agent. As requested, written reports of the surrender and cancellation of Bonds shall be made to the School District by the Paying Agent. The cancelled Bonds shall be retained for six years, then returned to the School District or destroyed by the Paying Agent as directed by the School District. Neither the School District nor the Paying Agent will be required (a) to issue or transfer any Bonds during a period beginning with the opening of business on the 15th business day next preceding either any Bond Payment Date or any date of selection of Bonds to be redeemed and ending with the close of business on the Bond Payment Date or any day on which the applicable notice of redemption is given or (b) to transfer any Bonds which have been selected or called for redemption in whole or in part.

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ESTIMATED SOURCES AND USES OF FUNDS The estimated sources and uses of funds with respect to the Bonds will be applied as follows: Improvement District No. 1 Refunding Bonds

Improvement District No. 2 Refunding Bonds

$17,390,000.00 1,949,576.15

$21,145,000.00 2,184,008.45

$19,339,576.15

$23,329,008.45

Costs of Issuance(1) Deposit to Escrow Fund

$135,826.39 19,203,749.76

$166,519.07 23,162,489.38

Total Uses

$19,339,576.15

$23,329,008.45

Sources of Funds Principal Amount of Bonds Net Original Issue Premium (Discount) Total Sources Uses of Funds

(1) Reflects all costs of issuance, including Underwriter’s discount, printing costs, demographics fees, legal fees, the costs and fees of the Verification Agent, Paying Agent and Escrow Agent, and other costs of issuance of the Improvement District No. 1 Refunding Bonds and the Improvement District No. 2 Refunding Bonds.

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DEBT SERVICE SCHEDULES The following table shows the debt service schedule with respect to the Improvement District No. 1 Refunding Bonds: Period Ending October 1 2014 2015 2016 2017 2018 2019 2020 2021 2022 Totals (1)

Annual Principal Payment $1,395,000 2,290,000 2,470,000 1,530,000 1,655,000 1,790,000 1,930,000 2,085,000 2,245,000

Annual Interest Payment(1) $466,125.41 694,137.50 607,537.50 508,737.50 434,737.50 351,987.50 262,487.50 165,987.50 61,737.50

Total Debt Service $1,861,125.41 2,984,137.50 3,077,537.50 2,038,737.50 2,089,737.50 2,141,987.50 2,192,487.50 2,250,987.50 2,306,737.50

$17,390,000 $3,553,475.41

$20,943,475.41

Interest payments will be made semiannually on April 1 and October 1 of each year, commencing April 1, 2014.

The following table shows the debt service schedule with respect to the Improvement District No. 2 Refunding Bonds (assuming no optional redemptions): Period Ending October 1 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 Totals (1)

Annual Principal Payment $2,625,000 2,550,000 2,720,000 2,835,000 550,000 595,000 645,000 695,000 755,000 815,000 880,000 945,000 1,015,000 1,090,000 1,170,000 1,260,000

Annual Interest Payment(1) $577,885 807,450 705,450 651,050 509,300 487,300 463,500 431,250 396,500 358,750 318,000 274,000 226,750 176,000 121,500 63,000

$21,145,000 $6,567,685

Total Debt Service $3,202,885 3,357,450 3,425,450 3,486,050 1,059,300 1,082,300 1,108,500 1,126,250 1,151,500 1,173,750 1,198,000 1,219,000 1,241,750 1,266,000 1,291,500 1,323,000 $27,712,685

Interest payments will be made semiannually on April 1 and October 1 of each year, commencing April 1, 2014.

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APPLICATION OF PROCEEDS OF BONDS Improvement District No. 1 Refunding Bonds The Improvement District No. 1 Refunding Bonds are being issued by the School District to: (i) currently refund a portion of the outstanding Improvement District No. 1 2002 Series A Bonds, (ii) advance refund a portion of the outstanding Improvement District No. 1 2002 Series B Bonds, and (iii) pay the costs of issuing the Improvement District No. 1 Refunding Bonds. See “IMPROVEMENT DISTRICT NO. 1 - General Description” herein and “SCHOOL DISTRICT FINANCIAL INFORMATION - School District Debt Structure, Improvement District No. 1 General Obligation Bonds” herein. Information regarding specific maturities of the Improvement District No. 1 2002 Series A Bonds and the Improvement District No. 1 2002 Series B Bonds to be refunded is listed in the following tables. REFUNDED BONDS FOLSOM CORDOVA UNIFIED SCHOOL DISTRICT School Facilities Improvement District No. 1 (Sacramento County, California) Election of 2002 General Obligation Bonds, Series A

Maturity Date

Principal Amount

CUSIP

Redemption Date

Redemption Price (% of Par Amount)

10/1/2014 10/1/2015 10/1/2016

$955,000.00 1,035,000.00 1,130,000.00

34440NBX3 34440NBZ8 34440NCB0

3/17/2014 3/17/2014 3/17/2014

100.00% 100.00 100.00

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REFUNDED BONDS FOLSOM CORDOVA UNIFIED SCHOOL DISTRICT School Facilities Improvement District No. 1 (Sacramento County, California) Election of 2002 General Obligation Bonds, Series B

Maturity Date

Principal Amount

CUSIP

Redemption Date

Redemption Price (% of Par Amount)

10/1/2015 10/1/2016 10/1/2017 10/1/2018 10/1/2019 10/1/2020 10/1/2021 10/1/2022

$1,430,000.00 1,540,000.00 1,670,000.00 1,810,000.00 1,960,000.00 2,115,000.00 2,285,000.00 2,460,000.00

34440NDJ2 34440NDK9 34440NDL7 34440NDM5 34440NDN3 34440NDP8 34440NDQ6 34440NDR4

10/1/2014 10/1/2014 10/1/2014 10/1/2014 10/1/2014 10/1/2014 10/1/2014 10/1/2014

100.00% 100.00 100.00 100.00 100.00 100.00 100.00 100.00

Any accrued interest and surplus moneys from the sale of the Improvement District No. 1 Refunding Bonds, or following the redemption of the Improvement District No. 1 2002 Series A Bonds and the Improvement District No. 1 2002 Series B Bonds, shall be kept separate and apart in the Improvement District No. 1 Debt Service Fund and used only for payment of principal of and interest on the Improvement District No. 1 Refunding Bonds, and for no other purpose. Any excess proceeds of the Improvement District No. 1 Refunding Bonds not needed for the authorized purposes for which the Improvement District No. 1 Refunding Bonds are being issued shall be transferred to the Improvement District No. 1 Debt Service Fund and applied to the payment of principal of and interest on the Improvement District No. 1 Refunding Bonds. If, after payment in full of Improvement District No. 1 Refunding Bonds, there remain excess proceeds, any such excess amounts shall be transferred to the general fund of the School District.

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Information regarding specific maturities of the Improvement District No. 1 2002 Series A Bonds and the Improvement District No. 1 2002 Series B Bonds to be remain Outstanding following the issuance of the Improvement District No. 1 Refunding Bonds is listed in the following tables. UNREFUNDED BONDS FOLSOM CORDOVA UNIFIED SCHOOL DISTRICT School Facilities Improvement District No. 1 (Sacramento County, California) Election of 2002 General Obligation Bonds, Series A

Maturity Date 10/1/2017 10/1/2018 10/1/2019 10/1/2020 10/1/2021 10/1/2022 10/1/2023 10/1/2024 10/1/2025 10/1/2026 7/1/2027

Original Principal Amount $563,794.00 539,847.00 519,818.00 501,749.60 485,028.60 469,651.50 452,333.40 434,914.90 422,058.10 408,608.00 402,946.50

Maturity Value $1,225,000.00 1,260,000.00 1,300,000.00 1,340,000.00 1,380,000.00 1,425,000.00 1,465,000.00 1,505,000.00 1,555,000.00 1,600,000.00 1,650,000.00

CUSIP 34440NCC8 34440NCE4 34440NCG9 34440NCJ3 34440NCL8 34440NCN4 34440NCQ7 34440NCS3 34440NCU8 34440NCW4 34440NCX2

UNREFUNDED BONDS FOLSOM CORDOVA UNIFIED SCHOOL DISTRICT School Facilities Improvement District No. 1 (Sacramento County, California) Election of 2002 General Obligation Bonds, Series B

Maturity Date 10/1/2014 10/1/2023 10/1/2024 10/1/2025 10/1/2026 10/1/2027 10/1/2028 10/1/2029

Original Principal Amount $1,330,000.00 1,006,761.50 964,748.10 924,146.55 885,221.30 846,261.00 818,250.00 788,460.75

Maturity Value Not applicable $2,650,000.00 2,715,000.00 2,785,000.00 2,855,000.00 2,925,000.00 3,000,000.00 3,075,000.00

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CUSIP 34440NDH6 34440NDS2 34440NDT0 34440NDU7 34440NDV5 34440NDW3 34440NDX1 34440NDY9

Improvement District No. 2 Refunding Bonds The Improvement District No. 2 Refunding Bonds are being issued by the School District to (i) currently refund a portion of the outstanding Improvement District No. 2 2002 Series A Bonds, (ii) advance refund a portion of the outstanding Improvement District No. 2 2002 Series B Bonds, and (iii) pay the costs of issuing the Improvement District No. 2 Refunding Bonds. See “IMPROVEMENT DISTRICT NO. 2 - General Description” herein and “SCHOOL DISTRICT FINANCIAL INFORMATION - School District Debt Structure, Improvement District No. 2 General Obligation Bonds” herein. Information regarding specific maturities of the Improvement District No. 2 Series A Bonds and the Improvement District No. 2 Series B Bonds to be refunded is listed in the following tables. REFUNDED BONDS FOLSOM CORDOVA UNIFIED SCHOOL DISTRICT School Facilities Improvement District No. 2 (Sacramento County, California) Election of 2002 General Obligation Bonds, Series A

Maturity Date

Principal Amount

CUSIP

Redemption Date

10/1/2014 10/1/2015 10/1/2016 10/1/2017

$2,115,000.00 2,255,000.00 2,425,000.00 2,610,000.00

34440RAY3 34440RBA4 34440RBC0 34440RBE6

3/17/2014 3/17/2014 3/17/2014 3/17/2014

Redemption Price (% of Par Amount) 100.00% 100.00 100.00 100.00

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

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REFUNDED BONDS FOLSOM CORDOVA UNIFIED SCHOOL DISTRICT School Facilities Improvement District No. 2 (Sacramento County, California) Election of 2002 General Obligation Bonds, Series B

Maturity Date

Principal Amount

CUSIP

Redemption Date

10/1/2015 10/1/2016 10/1/2017 10/1/2018 10/1/2019 10/1/2020 10/1/2021 10/1/2022 10/1/2023 10/1/2024 10/1/2025 10/1/2026 10/1/2027 10/1/2028 10/1/2029

$480,000.00 520,000.00 560,000.00 605,000.00 660,000.00 710,000.00 765,000.00 825,000.00 885,000.00 955,000.00 1,030,000.00 1,105,000.00 1,185,000.00 1,275,000.00 1,370,000.00

34440RCK1 34440RCL9 34440RCM7 34440RCN5 34440RCP0 34440RCQ8 34440RCR6 34440RCS4 34440RCT2 34440RCU9 34440RCV7 34440RCW5 34440RCX3 34440RCY1 34440RCZ8

10/1/2014 10/1/2014 10/1/2014 10/1/2014 10/1/2014 10/1/2014 10/1/2014 10/1/2014 10/1/2014 10/1/2014 10/1/2014 10/1/2014 10/1/2014 10/1/2014 10/1/2014

Redemption Price (% of Par Amount) 100.00% 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00

Any accrued interest and surplus moneys from the sale of the Improvement District No. 2 Refunding Bonds, or following the redemption of the Improvement District No. 2 2002 Series A Bonds and the Improvement District No. 2 2002 Series B Bonds, shall be kept separate and apart in the Improvement District No. 2 Debt Service Fund and used only for payment of principal of and interest on the Improvement District No. 2 Refunding Bonds, and for no other purpose. Any excess proceeds of the Improvement District No. 2 Refunding Bonds not needed for the authorized purposes for which the Improvement District No. 2 Refunding Bonds are being issued shall be transferred to the Improvement District No. 2 Debt Service Fund and applied to the payment of principal of and interest on the Improvement District No. 2 Refunding Bonds. If, after payment in full of Improvement District No. 2 Refunding Bonds, there remain excess proceeds, any such excess amounts shall be transferred to the general fund of the School District.

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Information regarding specific maturities of the Improvement District No. 2 2002 Series A Bonds and the Improvement District No. 2 2002 Series B Bonds to be remain Outstanding following the issuance of the Improvement District No. 2 Refunding Bonds is listed in the following tables. UNREFUNDED BONDS FOLSOM CORDOVA UNIFIED SCHOOL DISTRICT School Facilities Improvement District No. 2 (Sacramento County, California) Election of 2002 General Obligation Bonds, Series A

Maturity Date 10/1/2018 10/1/2019 10/1/2020 10/1/2021 10/1/2022 10/1/2023 10/1/2024 10/1/2025 10/1/2026 7/1/2027

Original Principal Amount $1,203,944.50 1,145,598.90 1,093,364.80 1,047,380.60 1,001,923.20 957,156.00 914,621.70 876,686.60 840,200.20 820,545.60

Maturity Value $2,810,000.00 2,865,000.00 2,920,000.00 2,980,000.00 3,040,000.00 3,100,000.00 3,165,000.00 3,230,000.00 3,290,000.00 3,360,000.00

CUSIP 34440RBF3 34440RBH9 34440RBK2 34440RBM8 34440RBP1 34440RBR7 34440RBT3 34440RBV8 34440RBX4 34440RBY2

UNREFUNDED BONDS FOLSOM CORDOVA UNIFIED SCHOOL DISTRICT School Facilities Improvement District No. 2 (Sacramento County, California) Election of 2002 General Obligation Bonds, Series B

Maturity Date 10/1/2014

Original Principal Amount $440,000.00

Maturity Value Not applicable

CUSIP 34440RCJ4

Escrow Sufficiency The proceeds from the sale of the Improvement District No. 1 Refunding Bonds, net of costs of issuance, shall be paid to U.S. Bank National Association, acting as escrow agent (the “Escrow Agent”), to the credit of the “Folsom Cordova Unified School District Improvement District No. 1 2014 General Obligation Refunding Bonds Escrow Fund” (the “Improvement District No. 1 Escrow Fund”). The proceeds from the sale of the Improvement District No. 2 Refunding Bonds, net of costs of issuance, shall be paid to the Escrow Agent, to the credit of the “Folsom Cordova Unified School District Improvement District No. 2 2014 General Obligation Refunding Bonds Escrow Fund” (the “Improvement District No. 2 Escrow Fund,” and, together with the Improvement District No. 1 Escrow Fund, the “Escrow Funds”). Pursuant to an escrow agreement (the “Escrow Agreement”) by and between the School District and the Escrow Agent, certain amounts deposited in each Escrow Fund will be used to purchase certain Federal Securities (as such term is defined in the Bond Resolutions) the principal of and interest on which will be sufficient, together with any monies deposited in such Escrow Fund and held as cash, to enable the Escrow Agent to pay the principal, redemption premium (if any), and interest due on the applicable series of Refunded Bonds on the respective first optional redemption dates therefor, as well as the debt service due on each respective series of the Refunded Bonds on and before such dates.

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The sufficiency of the securities and cash on deposit in the Escrow Funds, together with realizable interest and earnings thereon, to pay the redemption price of and the accrued interest due on the Refunded Bonds, on the above-referenced dates, will be verified by Causey Demgen & Moore P.C. (the “Verification Agent”). As a result of the deposit and application of funds so provided in the Escrow Agreement, and assuming the accuracy of the Underwriter’s and Verification Agent’s computations, the Refunded Bonds will be defeased and the obligation of the County to levy ad valorem taxes for payment thereof will terminate. Investment of Funds Moneys in the Escrow Funds will be invested as described above, subject to the provisions of the Escrow Agreement. Moneys in the Debt Service Funds may be invested in any one or more investments generally permitted to school districts under the laws of the State of California or as permitted by the Bond Resolutions. Moneys in the Debt Service Funds are expected to be invested through the Sacramento County Investment Pool. See “SACRAMENTO COUNTY INVESTMENT POOL” herein. SACRAMENTO COUNTY INVESTMENT POOL The following information provides a general description of current portfolio holdings of the Sacramento County Pooled Investment Fund. The information has been furnished by the Sacramento County Director of Finance for use as disclosure information on securities issues. Neither the School District nor the Underwriter make any guaranty as to the accuracy or completeness of this information. Further information may be obtained directly from the Sacramento County Chief Investment Officer. The following table reflects certain limited information with respect to the Sacramento County Pooled Investment Fund (the “County Pool”) for the month ending on December 31, 2013. A wide range of investments is authorized under state law. The value of the various investments in the County Pool will fluctuate on a daily basis as a result of a multitude of factors, including, generally prevailing interest rates and other economic conditions. Therefore, there can be no assurance that the values of the various investments in the County Pool will not vary significantly from the values described below. In addition, the values specified in the following tables were based upon estimates of market values provided to Sacramento County by a third party. Accordingly, there can be no assurance that if these securities had been sold on the date indicated, the County Pool necessarily would have received the values specified. December 31, 2013 Month-End Report Portfolio’s Month-End Balance Earned Income Yield for the Month Weighted Average Maturity (Days) Estimated Duration (Years) Historical Book Value Month-End Market Value Percent of Mark to Book Value(1)

$2,629,844,328 0.337% 291 0.790 $2,618,462,593 $2,619,038,538 100.02%

____________ Source: Sacramento County

As of December 31, 2013 the County Pool had approximately 52.62% of its assets invested in U.S. Government Securities, United States Agency Securities and municipal notes. Approximately 47.38% of the County Pool’s assets were invested in highly liquid short-term money market instruments (certificates of deposit, commercial paper, the Local Agency Investment Fund and money market funds). The detailed composition, cost and market value of the County Pool were as follows:

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Investment Description

Portfolio at Cost

Yield at Month End

U.S. Agency, Treasury & Municipal Notes (USATM): U.S. Agency Notes U.S. Treasury Notes Municipal Notes

50.60% 0.00 2.02

0.528% 0.000 0.392

Total USATM

52.62

0.523

Commercial Paper (CP)

22.85

0.119

Certificates of Deposit (CD)

22.63

0.159

1.90

0.266

0.00

0.000

LAIF/Money Market Funds (MMF) Repurchase Agreements (REPO) ____________ Source: Sacramento County

CONSTITUTIONAL AND STATUTORY PROVISIONS AFFECTING DISTRICT REVENUES AND APPROPRIATIONS The principal of and interest on the Bonds are payable from the proceeds of an ad valorem tax levied by the County for the payment thereof. (See “THE BONDS – Security and Sources of Payment” herein.) Articles XIIIA, XIIIB, XIIIC and XIIID of the Constitution, Propositions 98 and 111, and certain other provisions of law discussed below, are included in this section to describe the potential effect of these Constitutional and statutory measures on the ability of the County to levy taxes and the ability of the School District to spend tax proceeds for operating and other purposes, and it should not be inferred from the inclusion of such materials that these laws impose any limitation on the ability of the County to levy taxes for payment of the Bonds. The taxes levied by the County for payment of the Bonds were approved by the voters of the respective Improvement Districts in compliance with Article XIIIA, Article XIIIC, and all applicable laws. Article XIIIA of the California Constitution Article XIIIA (“Article XIIIA”) of the State Constitution limits the amount of ad valorem taxes on real property to 1% of “full cash value” as determined by the county assessor. Article XIIIA defines “full cash value” to mean “the county assessor’s valuation of real property as shown on the 1975-76 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 exemptions in certain circumstances of property transfer or reconstruction. Determined in this manner, the full cash value is also referred to as the “base year value.” The full cash value is subject to annual adjustment to reflect increases, not to exceed 2% for any year, or decreases in the consumer price index or comparable local data, or to reflect reductions in property value caused by damage, destruction or other factors. Article XIIIA has been amended to allow for temporary reductions of assessed value in instances where the fair market value of real property falls below the adjusted base year value described above. Proposition 8—approved by the voters in November of 1978—provides for the enrollment of the lesser of the base year value or the market value of real property, taking into account reductions in value due to damage, destruction, depreciation, obsolescence, removal of property, or other factors causing a similar decline. In these instances, the market value is required to be reviewed annually until the market value

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exceeds the base year value. Reductions in assessed value could result in a corresponding increase in the annual tax rate levied by the County to pay debt service on the Bonds. See “THE BONDS – Security and Sources of Payment” and “TAX BASE FOR REPAYMENT OF BONDS – Assessed Valuations” herein. Article XIIIA requires a vote of two-thirds or more of the qualified electorate of a city, county, special district or other public agency to impose special taxes, while totally precluding the imposition of any additional ad valorem, sales or transaction tax on real property. Article XIIIA exempts from the 1% tax limitation any taxes above that level required to pay debt service (a) on any indebtedness approved by the voters prior to July 1, 1978, or (b) as the result of an amendment approved by State voters on June 3, 1986, on any bonded indebtedness approved by two-thirds or more of the votes cast by the voters for the acquisition or improvement of real property on or after July 1, 1978, or (c) bonded indebtedness incurred by a school district or community college district for the construction, reconstruction, rehabilitation or replacement of school facilities or the acquisition or lease of real property for school facilities, approved by 55% or more of the votes cast on the proposition, but only if certain accountability measures are included in the proposition. The tax for payment of the Bonds falls within the exception described in (c) of the immediately preceding sentence. In addition, Article XIIIA requires the approval of two-thirds of all members of the State legislature to change any state taxes for the purpose of increasing tax revenues. Legislation Implementing Article XIIIA Legislation has been enacted and amended a number of times since 1978 to implement Article XIIIA. Under current law, local agencies are no longer permitted to levy directly any property tax (except to pay voter-approved indebtedness). The 1% property tax is automatically levied by the relevant county and distributed according to a formula among taxing agencies. The formula apportions the tax roughly in proportion to the relative shares of taxes levied prior to 1979. Increases of assessed valuation resulting from reappraisals of property due to new construction, change in ownership or from the annual adjustment not to exceed 2% are allocated among the various jurisdictions in the “taxing area” based upon their respective “situs.” Any such allocation made to a local agency continues as part of its allocation in future years. All taxable property value included in this Official Statement is shown at 100% of taxable value (unless noted differently) and all tax rates reflect the $1 per $100 of taxable value. Both the United States Supreme Court and the California State Supreme Court have upheld the general validity of Article XIIIA. State-Assessed Utility Property Some amount of property tax revenue of the School District and the Improvement Districts is derived from utility property which is considered part of a utility system with components located in many taxing jurisdictions. Under the State Constitution, such property is assessed by the State Board of Equalization (“SBE”) as part of a “going concern” rather than as individual pieces of real or personal property. Such State-assessed property is allocated to the counties by the SBE, taxed at special countywide rates, and the tax revenues distributed to taxing jurisdictions (including the School District and the Improvement Districts) according to statutory formulae generally based on the distribution of taxes in the prior year. The California electric utility industry has been undergoing significant changes in its structure and in the way in which components of the industry are regulated and owned. Sale of electric generation assets to largely unregulated, nonutility companies may affect how those assets are assessed, and which

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local agencies are to receive the property taxes. The School District and the Improvement Districts are unable to predict the impact of these changes on its utility property tax revenues, or whether legislation may be proposed or adopted in response to industry restructuring, or whether any future litigation may affect ownership of utility assets or the State’s methods of assessing utility property and the allocation of assessed value to local taxing agencies, including the Improvement Districts. So long as the School District is not a basic aid district, taxes lost through any reduction in assessed valuation will be compensated by the State as equalization aid under the State’s school financing formula. See “SCHOOL DISTRICT FINANCIAL INFORMATION – State Funding of Education” herein. Article XIIIB of the California Constitution Article XIIIB (“Article XIIIB”) of the State Constitution, as subsequently amended by Propositions 98 and 111, respectively, limits the annual appropriations of the State and of any city, county, school district, authority or other political subdivision of the State to the level of appropriations of the particular governmental entity for the prior fiscal year, as adjusted for changes in the cost of living and in population and for transfers in the financial responsibility for providing services and for certain declared emergencies. As amended, Article XIIIB defines (a)

“change in the cost of living” with respect to school districts to mean the percentage change in California per capita income from the preceding year, and

(b)

“change in population” with respect to a school district to mean the percentage change in the average daily attendance of the school district from the preceding fiscal year.

For fiscal years beginning on or after July 1, 1990, the appropriations limit of each entity of government shall be the appropriations limit for the 1986-87 fiscal year adjusted for the changes made from that fiscal year pursuant to the provisions of Article XIIIB, as amended. The appropriations of an entity of local government subject to Article XIIIB limitations include the proceeds of taxes levied by or for that entity and the proceeds of certain state subventions to that entity. “Proceeds of taxes” include, but are not limited to, all tax revenues and the proceeds to the entity from (a) regulatory licenses, user charges and user fees (but only to the extent that these proceeds exceed the reasonable costs in providing the regulation, product or service), and (b) the investment of tax revenues. Appropriations subject to limitation do not include (a) refunds of taxes, (b) appropriations for debt service such as the Bonds, (c) appropriations required to comply with certain mandates of the courts or the federal government, (d) appropriations of certain special districts, (e) appropriations for all qualified capital outlay projects as defined by the State legislature, (f) appropriations derived from certain fuel and vehicle taxes and (g) appropriations derived from certain taxes on tobacco products. Article XIIIB includes a requirement that all revenues received by an entity of government other than the State in a fiscal year and in the fiscal year immediately following it in excess of the amount permitted to be appropriated during that fiscal year and the fiscal year immediately following it shall be returned by a revision of tax rates or fee schedules within the next two subsequent fiscal years. Article XIIIB also includes a requirement that 50% of all revenues received by the State in a fiscal year and in the fiscal year immediately following it in excess of the amount permitted to be appropriated during that fiscal year and the fiscal year immediately following it shall be transferred and allocated to the State School Fund pursuant to Section 8.5 of Article XVI of the State Constitution. See “—Propositions 98 and 111” below.

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

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governmental activity, and that the manner in which those costs are allocated to a payor bear a fair or reasonable relationship to the payor’s burdens on, or benefits received from, the governmental activity. Propositions 98 and 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” (the “Accountability Act”). Certain provisions of the Accountability Act have, however, been modified by Proposition 111, discussed below, the provisions of which became effective on July 1, 1990. The Accountability Act changed State funding of public education below the university level and the operation of the State’s appropriations limit. The Accountability Act guarantees State funding for K-12 school districts and community college districts (hereinafter referred to collectively as “K-14 school districts”) at a level equal to the greater of (a) the same percentage of the State general fund revenues as the percentage appropriated to such districts in 1986-87, and (b) the amount actually appropriated to such districts from the State general fund in the previous fiscal year, adjusted for increases in enrollment and changes in the cost of living. The Accountability Act permits the Legislature to suspend this formula for a one-year period. The Accountability Act also changed how tax revenues in excess of the State appropriations limit are distributed. Any excess State tax revenues up to a specified amount are, instead of being returned to taxpayers, transferred to K-14 school districts. Any such transfer to K-14 school districts would be excluded from the appropriations limit for K-14 school districts and the K-14 school district appropriations limit for the next year is automatically be increased by the amount of such transfer. These additional moneys would enter the base funding calculation for K-14 school districts for subsequent years, creating further pressure on other portions of the State budget, particularly if revenues decline in a year following an Article XIIIB surplus. The maximum amount of excess tax revenues which can be transferred to K-14 school districts is 4% of the minimum State spending for education mandated by the Accountability Act. Since the Accountability Act is unclear in some details, there can be no assurances that the Legislature or a court might not interpret the Accountability Act to require a different percentage of State general fund revenues to be allocated to K-14 school districts, or to apply the relevant percentage to the State’s budgets in a different way than is proposed in the Governor’s Budget. On June 5, 1990, the voters of the State approved Proposition 111 (Senate Constitutional Amendment No. 1) called the “Traffic Congestion Relief and Spending Limitation Act of 1990” (“Proposition 111”) which further modified Article XIIIB and Sections 8 and 8.5 of Article XVI of the State Constitution with respect to appropriations limitations and school funding priority and allocation. The most significant provisions of Proposition 111 are summarized as follows: a.

Annual Adjustments to Spending Limit. The annual adjustments to the Article XIIIB spending limit were liberalized to be more closely linked to the rate of economic growth. Instead of being tied to the Consumer Price Index, the “change in the cost of living” is now measured by the change in California per capita personal income. The definition of “change in population” specifies that a portion of the State’s spending limit is to be adjusted to reflect changes in school attendance.

b.

Treatment of Excess Tax Revenues. “Excess” tax revenues with respect to Article XIIIB are now determined based on a two-year cycle, so that the State can avoid having to return to taxpayers excess tax revenues in one year if its appropriations in the next fiscal

25

year are under its limit. In addition, the Proposition 98 provision regarding excess tax revenues was modified. After any two-year period, if there are excess State tax revenues, 50% of the excess are to be transferred to K-14 school districts with the balance returned to taxpayers; under prior law, 100% of excess State tax revenues went to K-14 school districts, but only up to a maximum of 4% of the schools’ minimum funding level. Also, reversing prior law, any excess State tax revenues transferred to K-14 school districts are not built into the school districts’ base expenditures for calculating their entitlement for State aid in the next year, and the State’s appropriations limit is not to be increased by this amount. c.

Exclusions from Spending Limit. Two exceptions were added to the calculation of appropriations which are subject to the Article XIIIB spending limit. First, there are excluded all appropriations for “qualified capital outlay projects” as defined by the Legislature. Second, there are excluded any increases in gasoline taxes above the 1990 level (then nine cents per gallon), sales and use taxes on such increment in gasoline taxes, and increases in receipts from vehicle weight fees above the levels in effect on January 1, 1990. These latter provisions were necessary to make effective the transportation funding package approved by the Legislature and the Governor, which expected to raise over $15 billion in additional taxes from 1990 through 2000 to fund transportation programs.

d.

Recalculation of Appropriations Limit. The Article XIIIB appropriations limit for each unit of government, including the State, is to be recalculated beginning in fiscal year 1990-91. It is based on the actual limit for fiscal year 1986-87, adjusted forward to 199091 as if Proposition 111 had been in effect.

e.

School Funding Guarantee. There is a complex adjustment in the formula enacted in Proposition 98 which guarantees K-14 school districts a certain amount of State general fund revenues. Under prior law, K-14 school districts were guaranteed the greater of (1) 40.9% of State general fund revenues (the “first test”) or (2) the amount appropriated in the prior year adjusted for changes in the cost of living (measured as in Article XIIIB by reference to per capita personal income) and enrollment (the “second test”). Under Proposition 111, schools will receive the greater of (1) the first test, (2) the second test, or (3) a third test, which will replace the second test in any year when growth in per capita State general fund revenues from the prior year is less than the annual growth in California per capita personal income. Under the third test, schools will receive the amount appropriated in the prior year adjusted for change in enrollment and per capita State general fund revenues, plus an additional small adjustment factor. If the third test is used in any year, the difference between the third test and the second test will become a “credit” to schools which will be paid in future years when State general fund revenue growth exceeds personal income growth.

Proposition 39 On November 7, 2000, California voters approved an amendment (commonly known as Proposition 39) to the California Constitution. This amendment (1) allows school facilities bond measures to be approved by 55% (rather than two-thirds) of the voters in local elections and permits property taxes to exceed the current 1% limit in order to repay the bonds and (2) changes existing statutory law regarding charter school facilities. As adopted, the constitutional amendments may be changed only with another statewide vote of the people. The statutory provisions could be changed by a majority vote of both houses of the Legislature and approval by the Governor, but only to further the purposes of the

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proposition. The local school jurisdictions affected by this proposition are K-12 school districts, including the School District, community college districts, and county offices of education. As noted above, the California Constitution previously limited property taxes to 1% of the value of property. Property taxes could only exceed this limit to pay for (1) any local government debts approved by the voters prior to July 1, 1978 or (2) bonds to acquire or improve real property that receive two-thirds voter approval after July 1, 1978. The 55% vote requirement applies only if the local bond measure presented to the voters includes: (1) a requirement that the bond funds can be used only for construction, rehabilitation, equipping of school facilities, or the acquisition or lease of real property for school facilities; (2) a specific list of school projects to be funded and certification that the school board has evaluated safety, class size reduction, and information technology needs in developing the list; and (3) a requirement that the school board conduct annual, independent financial and performance audits until all bond funds have been spent to ensure that the bond funds have been used only for the projects listed in the measure. Legislation approved in June 2000 placed certain limitations on local school bonds to be approved by 55% of the voters. These provisions require that the tax rate levied as the result of any single election be no more than $60 (for a unified school district), $30 (for an elementary or high school district), or $25 (for a community college district), per $100,000 of taxable property value, when assessed valuation is projected to increase in accordance with Article XIIIA of the Constitution. These requirements are not part of Proposition 39 and can be changed with a majority vote of both houses of the Legislature and approval by the Governor. Jarvis v. Connell On May 29, 2002, the California Court of Appeal for the Second District decided the case of Howard Jarvis Taxpayers Association, et al. v. Kathleen Connell (as Controller of the State of California). The Court of Appeal held that either a final budget bill, an emergency appropriation, a selfexecuting authorization pursuant to state statutes (such as continuing appropriations) or the California Constitution or a federal mandate is necessary for the Controller of the State of California (the “State Controller”) to disburse funds. The foregoing requirement could apply to amounts budgeted by the School District as being received from the State. To the extent the holding in such case would apply to State payments reflected in the School District’s budget, the requirement that there be either a final budget bill or an emergency appropriation may result in the delay of such payments to the School District if such required legislative action is delayed, unless the payments are self-executing authorizations or are subject to a federal mandate. On May 1, 2003, the California Supreme Court upheld the holding of the Court of Appeal, stating that the State Controller is not authorized under State law to disburse funds prior to the enactment of a budget or other proper appropriation, but under federal law, the State Controller is required, notwithstanding a budget impasse and the limitations imposed by State law, to timely pay those State employees who are subject to the minimum wage and overtime compensation provisions of the federal Fair Labor Standards Act. Proposition 1A and Proposition 22 On November 2, 2004, California voters approved Proposition 1A, which amends the State constitution to significantly reduce the State’s authority over major local government revenue sources. Under Proposition 1A, the State cannot (i) reduce local sales tax rates or alter the method of allocating the revenue generated by such taxes, (ii) shift property taxes from local governments to schools or community colleges, (iii) change how property tax revenues are shared among local governments without two-third approval of both houses of the State Legislature or (iv) decrease Vehicle License Fee revenues without providing local governments with equal replacement funding. Proposition 1A does allow the State to approve voluntary exchanges of local sales tax and property tax revenues among local

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governments within a county. Proposition 1A also amends the State Constitution to require the State to suspend certain State laws creating mandates in any year that the State does not fully reimburse local governments for their costs to comply with the mandates. This provision does not apply to mandates relating to schools or community colleges or to those mandates relating to employee rights. Proposition 22, The Local Taxpayer, Public Safety, and Transportation Protection Act, approved by the voters of the State on November 2, 2010, prohibits the State from enacting new laws that require redevelopment agencies to shift funds to schools or other agencies and eliminates the State’s authority to shift property taxes temporarily during a severe financial hardship of the State. In addition, Proposition 22 restricts the State’s authority to use State fuel tax revenues to pay debt service on state transportation bonds, to borrow or change the distribution of State fuel tax revenues, and to use vehicle license fee revenues to reimburse local governments for state mandated costs. Proposition 22 impacts resources in the State’s general fund and transportation funds, the State’s main funding source for schools and community colleges, as well as universities, prisons and health and social services programs. According to an analysis of Proposition 22 submitted by the Legislative Analyst’s Office (the “LAO”) on July 15, 2010, the expected reduction in resources available for the State to spend on these other programs as a consequence of the passage of Proposition 22 will be approximately $1 billion in fiscal year 2010-11, with an estimated immediate fiscal effect equal to approximately 1% of the State’s total general fund spending. The longer-term effect of Proposition 22, according to the LAO analysis, will be an increase in the State’s general fund costs by approximately $1 billion annually for several decades. Proposition 30 On November 6, 2012, voters of the State approved the Temporary Taxes to Fund Education, Guaranteed Local Public Safety Funding, Initiative Constitutional Amendment (also known as “Proposition 30”), which temporarily increases the State Sales and Use Tax and personal income tax rates on higher incomes. Proposition 30 temporarily imposes an additional tax on all retailers, at the rate of 0.25% of gross receipts from the sale of all tangible personal property sold in the State from January 1, 2013 to December 31, 2016. Proposition 30 also imposes an additional excise tax on the storage, use, or other consumption in the State of tangible personal property purchased from a retailer on and after January 1, 2013 and before January 1, 2017, for storage, use, or other consumption in the State. This excise tax will be levied at a rate of 0.25% of the sales price of the property so purchased. Beginning in the taxable year commencing January 1, 2012 and through the taxable year ending December 31, 2018, Proposition 30 increases the marginal personal income tax rate by: (i) 1% for taxable income over $250,000 but less than $300,000 for single filers (over $340,000 but less than $408,000 for joint filers), (ii) 2% for taxable income over $300,000 but less than $500,000 for single filers (over $408,000 but less than $680,000 for joint filers), and (iii) 3% for taxable income over $500,000 for single filers (over $608,000 for joint filers). The revenues generated from the temporary tax increases will be included in the calculation of the Proposition 98 minimum funding guarantee for school districts and community college districts. See “CONSTITUTIONAL AND STATUTORY PROVISIONS AFFECTING DISTRICT REVENUES AND APPROPRIATIONS – Propositions 98 and 111” herein. From an accounting perspective, the revenues generated from the temporary tax increases will be deposited into the State account created pursuant to Proposition 30 called the Education Protection Account (the “EPA”). Pursuant to Proposition 30, funds in the EPA will be allocated quarterly, with 89% of such funds provided to schools districts and 11% provided to community college districts. The funds will be distributed to school districts and community college districts in the same manner as existing unrestricted per-student funding, except that no school district will receive less than $200 per unit of ADA and no community college district will receive less than $100 per full time equivalent student. The governing board of each school district and community college district is granted sole authority to determine how the moneys received from the EPA are spent,

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provided that, the appropriate governing board is required to make these spending determinations in open session at a public meeting and such local governing boards are prohibited from using any funds from the EPA for salaries or benefits of administrators or any other administrative costs. Future Initiatives Article XIIIA, Article XIIIB, Article XIIIC and Article XIIID of the California Constitution and Propositions 98, 39, 22, 26 and 30 were each adopted as measures that qualified for the ballot pursuant to the State’s initiative process. From time to time other initiative measures could be adopted further affecting the School District revenues or the School District’s ability to expend revenues. The nature and impact of these measures cannot be anticipated by the School District. State Budget The following information concerning the State’s budgets has been obtained from publicly available information which the School District believes to be reliable; however, the School District does not guarantee the accuracy or completeness of this information and has not independently verified such information. 2013-14 Budget. On June 27, 2013, the Governor signed into law the State budget for fiscal year 2013-14 (the “2013-14 Budget”). In July 2013, the Legislative Analyst’s Office (the “LAO”) released a preliminary version of a report entitled “California Spending Plan” which outlined key provisions of the 2013-14 Budget. The LAO released the final version of the California Spending Plan in November of 2013, updated to reflect various budget-related bills signed by the Governor between July and October of 2013. The following information is drawn from the final version of the California Spending Plan. The 2013-14 Budget generally adopts the revenue projections included in the Governor’s May revision to the proposed budget. However, the 2013-14 Budget also adopts certain LAO estimates regarding tax increment revenue collections and baseline property tax revenues. The 2013-14 Budget projects total general fund revenues for fiscal year 2012-13 of $98.2 billion, and general fund expenditures of $95.7 billion. The 2013-14 Budget projects that the State will end the 2012-13 fiscal year with a $254 million general fund surplus. For fiscal year 2013-14, general fund revenues are projected at $97.1 billion and expenditures at $96.3, leaving the State with a projected general fund surplus for fiscal year 2013-14 of approximately $1.1 billion. As adopted, the 2013-14 Budget did not reflect the adoption of Senate Bill 105 in September of 2013, which appropriated $315 million of general fund support to the State Department of Corrections and Rehabilitation. After accounting for this legislation, the LAO estimates the projected general fund surplus for fiscal year 2013-14 to be approximately $700 million. For fiscal year 2012-13, the Proposition 98 minimum funding guarantee is set at $56.5 billion, including $40.5 billion of support from the State general fund. This funding level is approximately $2.9 billion higher than that set by the adopted budget for fiscal year 2012-13, due largely to an increase in State general fund revenues that count towards the minimum funding guarantee, as well as a growth in baseline property tax revenues. Although the minimum funding guarantee is higher, fiscal year 2012-13 local property tax collections are $734 million lower than projected by the prior State budget, largely as a result of lower-than projected tax increment revenue collections. As a result, the State general fund cost to support the fiscal year 2012-13 minimum funding guarantee increases by approximately $3.7 billion. For fiscal year 2013-14, the Proposition 98 minimum funding guarantee is set at $55.3 billion, including $39.1 billion of support from the State general fund. This funding level reflects a total decline of $1.2 billion from the prior year, and results largely from certain provisions of Proposition 98 that exclude a portion of the prior-year appropriation from the calculation of the minimum funding guarantee

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in fiscal year 2013-14. These provisions are designed to prevent funding appropriations from permanently increasing the minimum funding guarantee in future years, and are implemented when, as in fiscal year 2012-13, the minimum funding guarantee increased at a much faster rate than per capita personal income. The 2013-14 Budget also projects that property tax collections will be approximately $215 million higher than the prior year, such that the State general fund cost to support the fiscal year 2013-14 minimum funding guarantee is reduced. The budget package authorizes a general fund backfill for school districts and community college districts if redevelopment agency property tax revenues come in lower than anticipated. The 2013-14 Budget provides $48.6 billion of Proposition 98 funding for K-12 education, including $34.7 billion from the State general fund. Significant features related to funding of K-12 education include the following: 

Local Control Funding Formula – $2.1 billion of Proposition 98 funding for school districts and charter schools to support the first-year implementation of the Local Control Funding Formula (the “LCFF”). This amount is expected to close approximately 12% of funding gap between each district’s current revenue limit entitlement and the target funding rates set by the LCFF. See also “DISTRICT FINANCIAL INFORMATION – State Funding of Education – Local Control Funding Formula” herein. The 2013-14 Budget also provides $32 million to fund implementation of the LCFF for county offices of education, amounting to almost two-thirds of their LCFF target levels.



Common Core Implementation – $1.25 billion in one-time funding to support the implementation of the new Common Core standards for evaluating student achievement in English-language, arts and math. Of this amount, the 2013-14 Budget counts $250 million towards meeting the 2013-14 minimum funding guarantee. Funding must be spent in fiscal years 2013-14 or 2014-15 for professional development, instructional materials and technology that assist schools align instruction with the Common Core standards. Local governing boards will be required, in a series of public meetings, to discuss and adopt a plan for spending the funds, and must report such expenditures to the California Department of Education by July 1, 2015. To begin the transition to Common Core, the State legislature adopted AB 484, which authorizes the suspension of most California standardized tests in fiscal year 2013-14.



Career Technical Education Pathways Grant Program – $250 million in one-time Proposition 98 funding to create the California Career Pathways Trust, the primary purpose of which will be to improve linkages between career technical (vocational) programs and schools and community colleges, as well as between K-14 education and local businesses. The program authorizes several types of activities, such as creating new technical programs and curriculum. The program is open to school districts, county offices of education, charter schools and community college districts. Funds will be allocated through a competitive grant process, and the State Superintendent of Instruction, in consultation with the Community College Chancellor’s Office and interested business organizations, is charged with reviewing grant applications. Grant funds will be available for expenditure in fiscal years 2013-14 through 2015-16. By December 1, 2014, grant recipients must report program outcomes to the State Legislature and the Governor.



K-12 Mandates Block Grant – The 2013-14 Budget increases funding for the K-12 mandates block grant by $50 million, for a total of $217 million, to account for the inclusion of the Graduation Requirements mandate within the block grant program. Since the mandate pertains only to high schools, the augmentation will only be available on a per-student basis

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in grades 9-12. All other block grant funding continues to be distributed across all students without regard to grade level. 

Repayment of K-12 Deferrals – Since 2002, the State has engaged in the practice of deferring certain apportionments to school districts in order to manage the State’s cash flow. This practice has included deferring certain apportionments from one fiscal year to the next. The 2013-14 Budget includes $1.6 billion in Proposition 98 funding to reduce such apportionment deferrals attributable to fiscal year 2012-13, and $242 million to reduce such deferrals attributable to fiscal year 2013-14. When combined, total funding over the two-year period will reduce outstanding deferrals to $5.6 billion by the end of the 2013-14 fiscal year.



Adult Education – $25 million of Proposition 98 funding for a new Adult Education Consortium Program. School districts and community college districts that form regional consortia are eligible to apply for funds. While the funds are allocated to the State budget for community college districts, the 2013-14 Budget charges both the State Department of Education and the Community College Chancellor’s Office with awarding grants to consortium applicants. The grants, which may be spent over two years, are to be used by consortium members to develop joint plans for serving adult learners in their area. In a related action, the 2013-14 Budget eliminates school district adult education categorical programs and consolidates the associated funding within the LCFF. However, school districts (through their adult schools) are required to spend no less on adult education in fiscal years 2013-14 and 2014-15 than such districts did in fiscal year 2012-13. The 2013-14 Budget maintains the Adults in Correctional Facilities categorical program separate from the LCFF, and provides $15 million in Proposition 98 funding to reimburse program costs.



Proposition 39 Implementation – Proposition 39 (approved at the November 2012 general election) increases state corporate tax revenues and requires that, for a five-year period beginning in fiscal year 2013-14, a portion of these revenues be applied to energy efficiency and alternative energy projects. The 2013-14 Budget allocates the entire increase associated with these supplemental corporate tax revenues to the calculation of the minimum funding guarantee, and appropriates a total of $467 million for Proposition 39-related programs and support. This includes $381 million for a new energy project grant program for school districts, charter schools and county offices of education. Of this amount, 85% will be distributed based on a per-student basis, and 15% will be distributed based on student eligibility for free and reduced-price meals. In lieu of the per-student allocation, local education agencies with fewer than 2,000 students will receive a minimum grant amount ranging from $15,000 to $100,000, depending on their size. Local education agencies must prioritize projects according to certain criteria, such as the age of facilities to be improved, and must receive approval from the California Energy Commission (“CEC”) for projects prior to expending funds. The 2013-14 Budget also provides $28 million to the CEC to provide low and no-interest loans to school districts, charter schools, community college districts, and county offices of education for eligible energy projects and technical assistance.



Special Education Funding Reform – Under the 2013-14 Budget, the State’s approach to distributing funding for special education local plan areas (“SELPAs”) is simplified by delinking State and federal allocation formulas. The 2013-14 Budget also mitigates federal sequestration cuts by providing $2.6 million in Proposition 98 funding for preschoolers and infants/toddlers with disabilities and allocating $2.1 million of federal carryover funds to K12 students with disabilities. The 2013-14 Budget also consolidates 11 special education grants into five larger grants.

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

Redevelopment – The 2013-14 Budget anticipates Proposition 98 general fund savings resulting from the dissolution of redevelopment agencies. For fiscal years 2012-13 and 201314, these savings are projected to be $2.1 billion and $1.5 billion, respectively. On an ongoing basis, the 2013-14 Budget estimates annual savings of $825 million.

For additional information regarding the State’s budgets and revenue projections and a more detailed description of the 2013-14 Budget, see the State Department of Finance website at www.dof.ca.gov and the LAO’s website at www.lao.ca.gov. However, the information presented on such websites is not incorporated herein by reference. Fiscal Outlook Report. In November 2013, the LAO released a summary of its revised projections for State general fund tax revenues and related spending (the “Fiscal Outlook Report”). The following information is drawn from the Fiscal Outlook Report. The Fiscal Outlook Report provided the LAO’s projections of the State’s general fund revenues and expenditures for fiscal years 2013-14 through 2019-20 under current law. The LAO’s projections primarily reflected current-law spending requirements and tax provisions, while relying on the LAO’s independent assessment of the outlook for the State’s economy, demographics, revenues, and expenditures. The LAO projects that the State will have a $5.6 billion general fund reserve at the end of fiscal year 2014-15. This projected reserve is the sum of (i) a $234 million ending reserve for fiscal year 201213, (ii) a $2.2 billion projected operating surplus in fiscal year 2013-14 and (iii) a $3.2 billion projected operating surplus in fiscal year 2014-15. The LAO currently projects that general fund revenue for fiscal year 2012-13 will be $99.8 billion (approximately $1.65 billion higher than projected in the State’s 2013-14 Budget). This increase is principally due to higher than expected personal income tax collections. As a result the LAO currently projects that the Proportion 98 minimum funding guarantee for fiscal year 2012-13 will be $58.2 billion (approximately $1.74 billion more than was projected in the 2012-13 Budget), including $42.2 billion of support from the State’s general fund (approximately $1.75 billion more than was assumed in the 2013-14 Budget). The higher State revenues result in more than a dollar-for-dollar increase in the Proposition 98 minimum funding guarantee due to the State’s decision to make maintenance factor payments under Test 1 of Proposition 98. The State will be making a $5.4 billion maintenance factor payment in fiscal year 2012-13, which will leave approximately $5.6 billion in outstanding maintenance factor). See “CONSTITUTINAL AND STATUTORY PROVISIONS AFFECTING DISTRICT REVENEUES AND APPROPRIATIONS – Propositions 98 and 111” herein. For fiscal year 2013-14, the LAO currently projects an operating surplus of approximately $1.1 billion higher than was assumed in the 2013-14 Budget. This projection is based primarily on $4.7 billion in higher revenues, largely due to (i) approximately $5.2 billion in higher-than-assumed personal income tax collections, (ii) approximately $3.1 billion in higher-than-assumed general fund Proposition 98 spending, and (iii) $300 million in higher-than-assumed non-Proposition 98 general fund spending. The LAO currently projects that Proposition 98 minimum funding guarantee for fiscal year 2013-14 will be $57.96 billion (approximately $2.67 billion more than was projected in the 2013-14 Budget), including $42.1 billion of support from the State’s general fund (approximately $3.07 billion more than was assumed in the 2013-14 Budget). This projected increase in the general fund Proposition 98 funding is due in part to the LAO’s forecast that local property taxes will be $393 million lower than assumed in 2013-14 Budget. In fiscal year 2013-14, the LAO estimates that a $941 million maintenance factor will be created (increasing the State’s outstanding maintenance factor to approximately $6.8 billion).

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For fiscal year 2014-15, the LAO projects an operating surplus of approximately $3.2 billion. This projection is based primarily on the LAO’s assumption that: (i) general fund revenues will increase to $107.62 billion ($5.8 billion more than projected 2013-14 general fund revenues of $101.85 billion), (ii) approximately $3.3 billion in higher general fund Proposition 98 minimum funding spending over the projected fiscal year 2013-14 levels and (iii) $1.5 billion in higher non-Proposition 98 general fund spending over projected fiscal year 2013-14 levels. The LAO currently projects that Proposition 98 minimum funding guarantee for fiscal year 2014-15 will be $62.2 billion, including $45.4 billion of support from the State’s general fund. The Fiscal Outlook Report provides projections through fiscal year 2019-20. While the LAO projects that the Proposition 98 minimum funding guarantee will increase to $73.7 billion in fiscal year 2019-20, the LAO currently projects that the general fund contribution to Proposition 98 funding over that period will only increase to $49.1 billion due to expected increases in property tax revenues. The LAO also notes, that under their current forecast, the State will be unable to meet the time frame it set for full implementation of the LCFF. By 2019-20, the LAO currently forecasts that the State can fund approximately 90% of the full LCFF cost. See “SCHOOL DISTRICT FINANCIAL INFORMATION – State Funding of Education” herein. Additional information regarding the Fiscal Outlook Report may be obtained from the LAO at www.lao.ca.gov. However, such information is not incorporated herein by any reference. Governor’s Proposed 2014-15 Budget. On January 9, 2014, the Governor released his proposed State budget for fiscal year 2014-15 (the “Proposed Budget”). The following information is drawn from the State Department of Finance’s summary of the Proposed Budget. The Proposed Budget assumes, for fiscal year 2013-14, total general fund revenues of $100.1 billion and total expenditures of $98.5 billion. The State is projected to end the 2013-14 fiscal year with a general fund surplus of $3.3 billion. For fiscal year 2014-15, the Proposed Budget assumes total general fund revenues of $104.5 billion and authorizes expenditures of $106.8 billion. The Proposed Budget also authorizes a deposit of $1.6 billion to the Budget Stabilization Account (discussed herein). The State is projected to end the 2014-15 fiscal year with a $967 million general fund surplus. The Proposed Budget retroactively increases the Proposition 98 minimum funding guarantee for fiscal year 2012-13 to $58.3 billion, an increase of $1.8 billion over the revised level set by the 2013-14 Budget. For fiscal year 2013-14, the Proposition 98 minimum funding guarantee is revised to $56.8 billion, an increase of $1.5 billion over the prior level. The Proposed Budget allocates this two-year increase, totaling $3.3 billion, to retire outstanding K-12 apportionment deferrals, as further discussed herein. The growth in prior year revenues also drives a growth in the minimum funding guarantee for fiscal year 2014-15, which the Proposed Budget sets at $61.6 billion. Ongoing Proposition 98 per-pupil expenditures are projected to be $9,194, and total per-pupil expenditures from all sources are projected to be $12,833. Other significant proposals or adjustments with respect to K-12 education funding include the following: 

Repayment of K-12 Deferrals. An increase of $2.2 billion in Proposition 98 funding which, together with the $3.3 billion increase in funding allocable to fiscal years 2012-13 and 201314 (as discussed above), would be used to eliminate all remaining outstanding K-12 apportionment deferrals.

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

Local Control Funding Formula. $4.5 billion of Proposition 98 funding to school districts and charter schools to continue the implementation of the LCFF, reflecting an increase of 10.9% from the prior year. This amount would be sufficient to eliminate more than 28% of the remaining funding gap. The Governor also proposes legislation to create a continuous appropriation for LCFF funding in future years. With respect to county offices of education, the Proposed Budget provides an increase of $25.9 million of Proposition 98 funding to continue the implementation of the LCFF.



Common Core. An increase of $46.5 million in Proposition 98 funding to implement Assembly Bill 484 (Stats. 2013, Chapter 489), which established a revised student assessment system aligned with the new Common Core standards.



Charter Schools. An increase of $74.3 million in Proposition 98 funding to support a projected growth in charter school ADA.



Categorical Programs. $33.3 million to support a 0.86% COLA for categorical programs outside of the LCFF, including the Special Education, Child Nutrition, American Indian Education Centers, and American Indian Early Childhood Education Programs.



Special Education. A decrease of $16.2 million in Proposition 98 funding to reflect a decline in special education ADA.



Stability Funding. As part of the Proposed Budget, the Governor proposes a constitutional amendment to strengthen existing provisions of law that require the State to adopt a balanced budget in each year and deposit a portion of State general fund revenues into a Budget Stabilization Account. A key component of this constitutional amendment would be the creation of a Proposition 98 reserve account to smooth out year-to-year school spending. The Governor’s proposed amendment would not make changes to the guaranteed funding levels required under Proposition 98.



Proposition 39 Implementation. The Proposed Budget allocated $316 million of funds derived from Proposition 39 state corporate tax revenues to K-12 school districts to fund energy efficiency project grants. The Proposed Budget also allocates $5 million of such funds to the California Conservation Corps for continued technical assistance to K-12 school districts.



School Facilities Funding. The Proposed Budget authorizes the transfer of $211 million of remaining State bonding authority from specialized programs to the school facility core new construction and modernization programs. The Proposed Budget also dedicates $188.1 million of one-time Proposition 98 funding to the State’s Emergency Repair Program to provide grants or reimbursement to local educational agencies for the cost of repairing or replacing building systems that pose a health and safety threat to students and staff at eligible school sites.

For additional information regarding the Proposed Budget, see the Department of Finance website at www.dof.ca.gov. However, the information presented on such website is not incorporated herein by reference.

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Recent Litigation Regarding State Budgetary Provisions. On September 28, 2011, the California School Boards Association, the Association of California School Administrators, the Los Angeles Unified School District, the San Francisco Unified School District and the Turlock Unified School District filed a petition for a writ of mandate in the Superior Court of the State of California in and for the County of San Francisco (the “CSBA Petition”). The petitioners allege that the fiscal year 201112 State budget improperly diverted sales tax revenues away from the State general fund, resulting in a reduction to the minimum funding guarantee of approximately $2.1 billion. The CSBA Petition seeks an order from the Court compelling the State Director of Finance, Superintendent of Public Instruction and the State Controller to recalculate the minimum funding guarantee in accordance with the provisions of the California Constitution. On May 31, 2012, the court denied the CSBA Petition, finding that Proposition 98 does not prohibit the State from assigning sales tax revenues to a special fund that previously were deposited into the State general fund. The court also found that, upon doing so, the State was not required to rebench the minimum funding guarantee. On July 27, 2012, the petitioners filed a notice of appeal of the court’s decision. On March 1, 2013, the California State Court of Appeals, First District, determined that the lawsuit was made moot by the passage of Proposition 30; the court did not rule on the merits of the case. The School District makes no representations regarding the viability of the claims in the CSBA Petition. Moreover, the School District makes no representations as to how a subsequent review of the legal issues presented in the case would affect the State’s ability to fund education in future fiscal years. Future Actions. The School 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. The School District also cannot predict 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 School District will have no control. Certain actions or results could produce a significant shortfall of revenue and cash, and could consequently impair the State’s ability to fund schools. State budget shortfalls in future fiscal years may also have an adverse financial impact on the financial condition of the School District. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

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TAX BASE FOR REPAYMENT OF THE BONDS The information in this section describes ad valorem property taxation, assessed valuation, and other measures of the tax base of the Improvement Districts. The Bonds are payable solely from ad valorem taxes levied and collected by the County on taxable property in the respective Improvement Districts. The School District’s general fund is not a source for the repayment of the Bonds. Ad Valorem Property Taxation Property taxes within each Improvement District are assessed and collected by the County at the same time and on the same rolls as the special district property taxes. Assessed valuations are the same for Improvement District and County’s taxing purposes. Taxes are levied for each fiscal year on taxable real and personal property which is located in each Improvement District as of the preceding January 1. For assessment and collection purposes, property is classified either as “secured” or “unsecured” and is listed accordingly on separate parts of the assessment roll. The “secured roll” is that part of the assessment roll containing State assessed public utilities property and real property having a tax lien which is sufficient, in the opinion of the assessor, to secure payment of the taxes. Other property is assessed on the “unsecured roll.” A supplemental roll is developed when property changes hands or new construction is completed. Each county levies and collects all property taxes for property falling within that county’s taxing boundaries. The valuation of secured property is established as of January 1 and is subsequently equalized in August. Property taxes are payable in two installments, due November 1 and February 1 respectively and become delinquent on December 10 and April 10 respectively. A 10% penalty attaches to any delinquent installment plus a $10 cost on the second installment, and any additional amount determined by the Director of Finance of the County. Property on the secured roll with delinquent taxes is declared taxdefaulted on or about June 30 of the calendar year. Such property may thereafter be redeemed by payment of the delinquent taxes and the delinquency penalty, plus a $15 redemption fee and a redemption penalty of 1.5% per month to the time of redemption. If taxes are unpaid for a period of five years or more, the property is subject to sale by the tax-collecting authority of the relevant county Property taxes on the unsecured roll are due as of the January 1 lien date and become delinquent if they are not paid by August 31. In the case of unsecured property taxes, a 10% penalty attaches to delinquent taxes on property on the unsecured roll, and an additional penalty of 1.5% per month begins to accrue beginning November 1 of the fiscal year, and a lien may be recorded against the assessee. The taxing authority has four ways of collecting unsecured personal property taxes: (1) a civil action against the assessee; (2) filing a certificate in the office of the County Clerk specifying certain facts in order to obtain a judgment lien on specific property of the assessee; (3) filing a certificate of delinquency for record in the County Recorder’s office in order to obtain a lien on specified property of the assessee; and (4) seizure and sale of personal property, improvements or possessory interests belonging or assessed to the assessee. State law exempts from taxation $7,000 of the full cash value of an owner-occupied dwelling, but this exemption does not result in any loss of revenue to local agencies, since the State reimburses local agencies for the value of the exemptions. All property is assessed using full cash value as defined by Article XIIIA of the State Constitution. State law provides exemptions from ad valorem property taxation for certain classes of property such as churches, colleges, non-profit hospitals, and charitable institutions.

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Future assessed valuation growth allowed under Article XIIIA (new construction, certain changes of ownership, 2% inflation) will be allocated on the basis of “situs” among the jurisdictions that serve the tax rate area within which the growth occurs. Local agencies and schools will share the growth of “base” revenues from the tax rate area. Each year’s growth allocation becomes part of each agency’s allocation in the following year. Assessed Valuations Improvement District No. 1. Property within Improvement District No. 1 had a total taxable assessed valuation for fiscal year 2012-13 of $5,761,861,745 and has a total assessed valuation for fiscal year 2013-14 of $5,799,641,293. Shown in the following tables are the assessed valuations for Improvement District No. 1 from fiscal year 2009-10 through fiscal year 2013-14 and the distribution of assessed valuation of taxable property within Improvement District No. 1 by jurisdiction for fiscal year 2013-14. ASSESSED VALUATION Folsom Cordova Unified School District School Facilities Improvement District No. 1 Fiscal Years 2009-10 through 2013-14

2009-10 2010-11 2011-12 2012-13 2013-14

Local Secured

Utility

Unsecured

Total

$5,843,963,530 5,590,267,797 5,328,487,426 5,148,540,339 5,196,906,685

$146,908 24,877,908 8,340,752 10,522,382 10,418,711

$708,244,789 600,851,273 548,790,416 602,799,024 592,315,897

$6,552,355,227 6,215,996,978 5,885,618,594 5,761,861,745 5,799,641,293

Annual % Change -(5.1%) (5.3) (2.1) 0.7

____________ Source: California Municipal Statistics, Inc.

2013-14 ASSESSED VALUATION BY JURISDICTION(1) Folsom Cordova Unified School District School Facilities Improvement District No. 1

Jurisdiction: City of Rancho Cordova Unincorporated Sacramento County Total District Sacramento County ____________

Assessed Valuation % of in Improvement Improvement District District $4,844,446,235 83.53% 16.47 955,195,058 $5,799,641,293 100.00%

% of Jurisdiction Assessed Valuation in Improvement of Jurisdiction(1) District $6,462,071,423 74.97% 45,114,217,587 2.12

$5,799,641,293

$121,048,098,414

100.00%

(1)

Before deduction of redevelopment incremental valuation. Source: California Municipal Statistics, Inc.

37

4.79%

Improvement District No. 2. Property within Improvement District No. 2 had a total taxable assessed valuation for fiscal year 2012-13 of $9,746,465,051 and has a total assessed valuation for fiscal year 2013-14 of $10,210,988,329. Shown in the following tables are the assessed valuations for Improvement District No. 2 from fiscal year 2009-10 through fiscal year 2013-14 and the distribution of assessed valuation of taxable property within Improvement District No. 2 by jurisdiction for fiscal year 2013-14. ASSESSED VALUATION Folsom Cordova Unified School District School Facilities Improvement District No. 2 Fiscal Years 2009-10 through 2013-14 2009-10 2010-11 2011-12 2012-13 2013-14

Local Secured $10,035,369,036 9,895,602,257 9,649,630,078 9,460,382,157 9,935,573,995

Utility $1,725 151,725 122,013 122,013 122,013

Unsecured $282,705,390 293,442,428 304,397,449 285,960,881 275,292,321

Total $10,318,076,151 10,189,196,410 9,954,149,540 9,746,465,051 10,210,988,329

Annual % Change -(1.2) (2.3) (2.1) 4.8

____________ Source: California Municipal Statistics, Inc.

2013-14 ASSESSED VALUATION BY JURISDICTION(1) Folsom Cordova Unified School District School Facilities Improvement District No. 2

Jurisdiction: City of Folsom Unincorporated Sacramento County Total District

Assessed Valuation % of in Improvement Improvement District District $10,184,207,851 99.74% 0.26 26,780,478 $10,210,988,329 100.00%

% of Jurisdiction Assessed Valuation in Improvement of Jurisdiction(1) District $10,389,406,704 98.02% 45,114,217,587 0.06

Sacramento County

$10,210,988,329

$121,048,098,414

100.00%

____________ (1) Before deduction of redevelopment incremental valuation. Source: California Municipal Statistics, Inc.

38

8.44%

Economic and other factors beyond the School District’s control, such as general market decline in property values, disruption in financial markets that may reduce availability of financing for purchasers of property, reclassification of property to a class exempt from taxation, whether by ownership or use (such as exemptions for property owned by the State and local agencies and property used for qualified education, hospital, charitable or religious purposes), or the complete or partial destruction of the taxable property caused by a natural or man-made disaster, such as earthquake, flood or toxic contamination, could cause a reduction in the assessed value of taxable property within the Improvement Districts. Any such reduction would result in a corresponding increase in the annual tax rates levied by the County to pay the debt service with respect to the Improvement Districts’ general obligation bonds. See “CONSTITUTIONAL AND STATUTORY PROVISIONS AFFECTING DISTRICT REVENUES – Article XIIIA of the California Constitution” and “THE BONDS – Security and Sources of Payment” herein. Appeals and Adjustments of Assessed Valuations Under Proposition 8, property owners may apply for a temporary reduction of their property tax assessment by filing a written application, in form prescribed by the State Board of Equalization, with the appropriate county board of equalization or assessment appeals board. In most cases, the appeal is filed because the applicant believes that present market conditions (such as recent residential home sales prices or the occurrence of a calamity) cause the current market value of the real property to be worth less than the current assessed, factored, Article XIIIA base year value of such property, as of the annual property tax lien date, January 1. Any reduction in the assessment ultimately granted as a result of such owner appeal applies to the year for which application is made and during which the written application was filed. County assessors, at their discretion, may also, from time to time, review certain property types purchased between specific time periods (e.g., all single family homes and condominiums purchased shortly prior to widespread declines in the fair market value of residential real estate within the county, as occurred between 2009 and 2011) and may proactively, temporarily reduce the assessed value of qualifying properties to Proposition 8 assessed values without owner appeal therefor. A property that has been reassessed under Proposition 8, whether pursuant to owner appeal or due to county assessor review, is subsequently reviewed annually to determine its lien date value. Assuming no change in ownership or new construction, and if and as market conditions improve, the assessed value of a property with a Proposition 8 assessed value in place may increase each property tax lien date by more than the standard annual inflationary factor growth rate allowed under Article XIIIA (currently, a two percent maximum) until such assessed value again equals the Article XIIIA base year value for such property as-adjusted for inflation and years of ownership, at which point such property is again taxed pursuant to Article XIIIA and base year values may not be increased more than the standard Article XIIIA annual inflationary factor growth rate. A change in ownership or new construction while a property is subject to a Proposition 8 reassessment assessed valuation will cause such assessed valuation to become fixed as a new Article XIIIA base year value for such property. See “CONSTITUTIONAL AND STATUTORY PROVISIONS AFFECTING DISTRICT REVENUES AND APPROPRIATIONS – Article XIIIA of the California Constitution” herein. A second type of assessment appeal involves an owner appeal of the Article XIIIA base year value of an assessed property. Appeals for reduction in the base year value of an assessment, if successful, reduce the assessment for the year in which the appeal is taken and prospectively thereafter. The Article XIIIA base year value is determined by the completion date of new construction or the date of change of ownership. Any Article XIIIA base year value appeal must be made within four years of the change of ownership or new construction date.

39

No assurance can be given that property tax owner appeals or county assessor reviews in the future will not significantly reduce the assessed valuation of property within the Improvement Districts. Assessed Valuation and Parcels by Land Use The following tables show the assessed valuation and parcels by land use in fiscal year 2013-14 in each of the Improvement Districts. 2013-14 ASSESSED VALUATION AND PARCELS BY LAND USE Folsom Cordova Unified School District School Facilities Improvement District No. 1 2013-14 % of Assessed Valuation(1) Total

No. of Parcels

% of Total

No. of Taxable Parcels

% Total

Non-Residential: Commercial Vacant Commercial Office Building Industrial Vacant Industrial Recreational Government/Social/Institutional Miscellaneous Subtotal Non-Residential

$426,422,439 41,575,006 989,041,598 958,688,087 87,931,480 14,342,314 25,567,164 1,874,969 $2,545,443,057

8.21% 0.80 19.03 18.45 1.68 0.28 0.49 0.04 48.98%

307 72 227 679 177 19 379 227 2,087

1.79% 0.42 1.32 3.95 1.03 0.11 2.20 1.32 12.14%

300 69 227 670 166 17 49 35 1,533

1.82% 0.42 1.38 4.07 1.01 0.10 0.30 0.21 9.31%

Residential: Single Family Residence Condominium/Townhouse Mobile Home Mobile Home Park Hotel/Motel 2-4 Residential Units 5+ Residential Units/Apartments Vacant Residential Subtotal Residential

$2,047,682,092 52,220,376 187,887 1,434,821 106,950,905 94,600,885 310,465,067 37,921,595 $2,651,463,628

39.40% 1.00 0.00 0.03 2.06 1.82 5.97 0.73 51.02%

12,635 663 13 3 25 598 114 1,058 15,109

73.48% 3.86 0.08 0.02 0.15 3.48 0.66 6.15 87.86%

12,534 663 13 3 25 598 102 1,004 14,942

76.08% 4.02 0.08 0.02 0.15 3.63 0.62 6.09 90.69%

Total $5,196,906,685 100.00% ____________ (1) Local secured assessed valuation; excluding tax-exempt property. Source: California Municipal Statistics, Inc.

17,196

100.00%

16,475

100.00%

40

2013-14 ASSESSED VALUATION AND PARCELS BY LAND USE Folsom Cordova Unified School District School Facilities Improvement District No. 2 2013-14 % of Assessed Valuation(1) Total

No. of Parcels

% of Total

No. of Taxable Parcels

% Total

Non-Residential: Agricultural Commercial Vacant Commercial Office Building Industrial Vacant Industrial Recreational Government/Social/Institutional Miscellaneous Subtotal Non-Residential

$80,022,598 939,447,648 77,276,159 1,166,865,909 170,161,550 2,856,069 68,465,565 27,506,823 586,145 $2,533,188,466

0.81% 9.46 0.78 11.74 1.71 0.03 0.69 0.28 0.01 25.50%

76 355 87 259 63 10 19 393 452 1,714

0.32% 1.49 0.36 1.08 0.26 0.04 0.08 1.65 1.89 7.17%

70 335 87 254 60 8 19 139 55 1,027

0.31% 1.46 0.38 1.11 0.26 0.03 0.08 0.61 0.24 4.48%

Residential: Single Family Residence Condominium/Townhouse Mobile Home Mobile Home Park Hotel/Motel 2-4 Residential Units 5+ Residential Units/Apartments Vacant Residential Subtotal Residential

$6,391,958,382 355,857,305 7,205,494 13,563,836 104,970,483 63,056,109 412,681,937 53,091,983 $7,402,385,529

64.33% 3.58 0.07 0.14 1.06 0.63 4.15 0.53 74.50%

18,221 2,050 258 10 12 254 44 1,327 22,176

76.27% 8.58 1.08 0.04 0.05 1.06 0.18 5.55 92.83%

18,213 2,050 254 10 12 252 41 1,088 21,920

79.37% 8.93 1.11 0.04 0.05 1.10 0.18 4.74 95.52%

Total

$9,935,573,995 100.00%

23,890

100.00%

22,947

100.00%

____________ (1) Local secured assessed valuation; excluding tax-exempt property. Source: California Municipal Statistics, Inc.

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Assessed Valuation Per Parcel of Single-Family Homes The following tables show the assessed valuation per parcel of single-family homes in fiscal year 2013-14 in each of the Improvement Districts. 2013-14 ASSESSED VALUATION PER PARCEL OF SINGLE-FAMILY HOMES Folsom Cordova Unified School District School Facilities Improvement District No. 1

Single Family Residential

No. of Parcels 12,534

2013-14 Assessed Valuation $2,047,682,092

Average Assessed Valuation $163,253

Median Assessed Valuation $157,334

2013-14 No. of % of Cumulative Total % of Cumulative Parcels(1) Total % of Total Valuation Total % of Total Assessed Valuation $0 - $24,999 32 0.255% 0.255% $412,775 0.020% 0.020% 25,000 - 49,999 452 3.606 3.861 20,227,924 0.988 1.008 50,000 - 74,999 1,210 9.654 13.515 74,933,063 3.659 4.667 75,000 - 99,999 966 7.707 21.222 84,921,287 4.147 8.815 100,000 - 124,999 1,344 10.723 31.945 151,849,617 7.416 16.230 125,000 - 149,999 1,724 13.755 45.700 237,485,621 11.598 27.828 150,000 - 174,999 1,857 14.816 60.515 301,874,288 14.742 42.570 175,000 - 199,999 1,535 12.247 72.762 286,923,482 14.012 56.582 200,000 - 224,999 1,203 9.598 82.360 254,794,238 12.443 69.025 225,000 - 249,999 731 5.832 88.192 172,866,650 8.442 77.468 250,000 - 274,999 525 4.189 92.381 137,590,686 6.719 84.187 275,000 - 299,999 319 2.545 94.926 91,324,374 4.460 88.647 300,000 - 324,999 256 2.042 96.968 79,875,140 3.901 92.548 325,000 - 349,999 176 1.404 98.372 59,173,669 2.890 95.437 350,000 - 374,999 83 0.662 99.035 29,936,753 1.462 96.899 375,000 - 399,999 49 0.391 99.426 18,972,995 0.927 97.826 400,000 - 424,999 20 0.160 99.585 8,202,374 0.401 98.226 425,000 - 449,999 13 0.104 99.689 5,668,132 0.277 98.503 450,000 - 474,999 4 0.032 99.721 1,846,780 0.090 98.593 475,000 - 499,999 4 0.032 99.753 1,964,252 0.096 98.689 500,000 and greater 31 0.247 100.000 26,837,992 1.311 100.000 Total 12,534 100.000% $2,047,682,092 100.000% ____________ (1) Improved single family residential parcels. Excludes condominiums and parcels with multiple family units. Source: California Municipal Statistics, Inc.

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2013-14 ASSESSED VALUATION PER PARCEL OF SINGLE-FAMILY HOMES Folsom Cordova Unified School District School Facilities Improvement District No. 2

Single Family Residential

No. of Parcels 18,213

2013-14 Assessed Valuation $6,391,958,382

Average Assessed Valuation $350,840

Median Assessed Valuation $336,940

2013-14 No. of % of Cumulative Total % of Cumulative Assessed Valuation Parcels(1) Total % of Total Valuation Total % of Total $0 - $24,999 82 0.450% 0.450% $1,131,651 0.018% 0.018% 25,000 - 49,999 186 1.021 1.471 7,618,792 0.119 0.137 50,000 - 74,999 153 0.840 2.312 9,683,613 0.151 0.288 75,000 - 99,999 129 0.708 3.020 11,393,936 0.178 0.467 100,000 - 124,999 188 1.032 4.052 20,893,577 0.327 0.794 125,000 - 149,999 187 1.027 5.079 25,799,540 0.404 1.197 150,000 - 174,999 258 1.417 6.495 42,118,875 0.659 1.856 175,000 - 199,999 600 3.294 9.790 113,215,224 1.771 3.627 200,000 - 224,999 810 4.447 14.237 172,788,571 2.703 6.331 225,000 - 249,999 1,108 6.084 20.321 263,542,166 4.123 10.454 250,000 - 274,999 1,329 7.297 27.618 349,287,528 5.464 15.918 275,000 - 299,999 1,563 8.582 36.199 449,311,107 7.029 22.947 300,000 - 324,999 1,680 9.224 45.424 524,692,953 8.209 31.156 325,000 - 349,999 1,670 9.169 54.593 563,205,233 8.811 39.967 350,000 - 374,999 1,519 8.340 62.933 550,145,405 8.607 48.574 375,000 - 399,999 1,284 7.050 69.983 497,018,895 7.776 56.350 400,000 - 424,999 1,121 6.155 76.138 461,911,507 7.226 63.576 425,000 - 449,999 912 5.007 81.145 398,608,630 6.236 69.812 450,000 - 474,999 683 3.750 84.895 315,456,832 4.935 74.747 475,000 - 499,999 549 3.014 87.910 267,163,058 4.180 78.927 12.090 100.000 1,346,971,289 21.073 100.000 500,000 and greater 2,202 Total 18,213 100.000% $6,391,958,382 100.000% ____________ (1) Improved single family residential parcels. Excludes condominiums and parcels with multiple family units. Source: California Municipal Statistics, Inc.

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Tax Levies, Collections and Delinquencies Taxes are levied for each fiscal year on taxable real and personal property which is situated in each Improvement District as of the preceding January 1. A supplemental tax is levied when property changes hands or new construction is completed which produces additional revenue. Beginning in 1978-79, Proposition 13 and its implementing legislation provided for each county to levy and collect all property taxes, and prescribed how levies on county-wide property values (except for levies to support prior voter-approved indebtedness) are to be shared with local taxing entities within each county. The following table shows secured ad valorem taxes for the payment of bonded indebtedness of each Improvement District, and amounts delinquent as of June 30, for fiscal years 200405 through 2012-13: SECURED TAX CHARGES AND DELINQUENCIES Fiscal Years 2004-05 through 2012-13 Folsom Cordova Unified School District School Facilities Improvement District No. 1 Fiscal Year 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13

Secured Tax Charge(1) $2,392,178 2,670,809 2,804,856 2,997,898 2,839,708 3,069,469 3,220,802 3,638,546 3,525,028

(1)

District’s general obligation bond debt service levy. Source: California Municipal Statistics, Inc.

44

Amt. Del. June 30 $21,851 36,631 70,970 91,921 75,262 68,175 66,458 44,277 30,364

% Del. June 30 0.91% 1.37 2.53 3.07 2.65 2.22 2.06 1.22 0.86

SECURED TAX CHARGES AND DELINQUENCIES Fiscal Years 2004-05 through 2012-13 Folsom Cordova Unified School District School Facilities Improvement District No. 2 Fiscal Year 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13

Secured Tax Charge(1) $2,706,834 2,596,551 2,672,111 2,850,657 2,915,914 3,073,614 3,101,426 3,297,923 3,458,019

Amt. Del. June 30 $21,260 25,302 49,943 63,636 72,137 56,362 42,764 39,982 28,401

% Del. June 30 0.79% 0.97 1.87 2.23 2.47 1.83 1.38 1.21 0.82

(1)

District’s general obligation bond debt service levy. Source: California Municipal Statistics, Inc.

Alternative Method of Tax Apportionment In June of 1993, the County Board approved the implementation of the Alternative Method of Distribution of Tax Levies and Collections and of Tax Sale Proceeds (the “Teeter Plan”), as provided for in Section 4701 et seq. of the California Revenue and Taxation Code. Under the Teeter Plan, typically, each county apportions secured property taxes on an accrual basis (irrespective of actual collections) to local political subdivisions, for which such county acts as the tax-levying or tax-collecting agency. Counties may adopt modified versions of the Teeter Plan, as Sacramento County has, as described below. The Teeter Plan was effective for the fiscal year commencing July 1, 1993, and pursuant to the Teeter Plan the County purchased all delinquent receivables (comprised of delinquent taxes, penalties, and interest) which had accrued as of June 30, 1993, from local taxing entities and selected special assessment districts and community facilities districts. Under the Teeter Plan, Sacramento County distributes tax collections on a cash-basis to taxing entities, such as the Improvement District and the School District, during the fiscal year and at year-end distributes 100% of any taxes delinquent as of June 30th to the respective taxing entities and those special assessment districts and community facilities districts which the County determines are eligible to participate in the Teeter Plan. The County reserves the right to exclude from the Teeter Plan any special tax levying agency or assessment levying agency if such agency has provided for accelerated foreclosure proceedings in the event of non-payment of such special taxes or assessments except that, if such agency has a delinquency rate in the collection of such special tax or assessment as of June 30 of any fiscal year that is equal to or less than the County's delinquency rate on the collection of current year ad valorem taxes on the countywide secured assessment roll, such agency's special taxes or assessments may, at the County's option, be included in the Teeter Plan. The ad valorem property taxes to be levied to pay the interest on and principal of the Bonds will be subject to the Teeter Plan. The Improvement Districts will receive 100% of the ad valorem property tax levied to pay their respective Bonds irrespective of actual delinquencies in the collection of the tax by the County. The Teeter Plan is to remain in effect unless the County Board orders its discontinuance or unless, prior to the commencement of any fiscal year of the County (which commences on July 1), the

45

County Board receives a petition for its discontinuance joined in by resolutions adopted by at least twothirds 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. The County Board may, by resolution adopted not later than July 15 of the fiscal year for which it is to apply after holding a public hearing on the matter, discontinue the procedures under the Teeter Plan with respect to any tax levying agency or assessment levying agency in the County if the rate of secure tax delinquency in that agency in any year exceeds 3% of the total of all taxes and assessments levied on the secured rolls for that agency. If the Teeter Plan is discontinued subsequent to its implementation, only those secured property taxes actually collected would be allocated to political subdivisions (including the School District and the Improvement Districts) for which the County acts as the tax-levying or taxcollecting agency. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

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Tax Rates Improvement District No. 1. The following tables summarize the total ad valorem tax rates levied by all taxing entities in two typical tax rate areas (each, a “TRA”) within Improvement District No. 1 between fiscal years 2009-10 through 2013-14. SUMMARY OF AD VALOREM TAX RATES per $100 of Assessed Valuation Folsom Cordova Unified School District School Facilities Improvement District No. 1 2009-10

2010-11

2011-12

2012-13

2013-14

$1.0000 .0192 .0702 .0756 $1.1650

$1.0000 .0193 .0708 .0726 $1.1627

$1.0000 .0181 .0739 .1314 $1.2234

$1.0000 .0193 .0708 .0726 $1.1627

$1.0000 .0181 .0739 .1314 $1.2234

TRA 8-076 (within City of Rancho Cordova) 2013-14 Assessed Valuation: $1,179,896,874 General, Countywide Los Rios Community College District Folsom Cordova Unified School District SFID No. 1 Folsom Cordova Unified School District SFID No. 4 Total

$1.0000 .0124 .0537 .0599 $1.1260

$1.0000 .0090 .0587 .0735 $1.1412

TRA 52-074 (within Unincorporated Sacramento County) 2013-14 Assessed Valuation: $280,324,746 General, Countywide Los Rios Community College District Folsom Cordova Unified School District SFID No. 1 Folsom Cordova Unified School District SFID No. 4 Total

$1.0000 .0124 .0537 .0599 $1.1260

$1.0000 .0090 .0587 .0735 $1.1412

$1.0000 .0192 .0702 .0756 $1.1650

Total Number of Tax Rate Areas within Improvement District No. 1: 66 _________________ Source: California Municipal Statistics, Inc.

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Improvement District No. 2. The following tables summarize the total ad valorem tax rates levied by all taxing entities in two typical TRAs within Improvement District No. 2 between fiscal years 2009-10 through 2013-14. SUMMARY OF AD VALOREM TAX RATES per $100 of Assessed Valuation Folsom Cordova Unified School District School Facilities Improvement District No. 2 2009-10

2010-11

2011-12

2012-13

2013-14

$1.0000 .0192 .0330 .0349 $1.0871

$1.0000 .0193 .0346 .0371 $1.0910

$1.0000 .0181 .0245 .0341 $1.0767

$1.0000 .0193 .0371 .1155 $1.1719

$1.0000 .0181 .0341 .1125 $1.1647

TRA 4-000 (within City of Folsom) 2013-14 Assessed Valuation: $3,030,319,066 General, Countywide Los Rios Community College District City of Folsom Folsom Cordova Unified School District SFID No. 2 Total

$1.0000 .0124 .0294 .0312 $1.0730

$1.0000 .0090 .0290 .0318 $1.0698

TRA 52-045 (within Unincorporated Sacramento County) 2013-14 Assessed Valuation: $20,556,974 General, Countywide Los Rios Community College District Folsom Cordova Unified School District SFID No. 2 Folsom Cordova Unified School District SFID No. 3 Total

$1.0000 .0124 .0312 .0985 $1.1421

$1.0000 .0090 .0318 .0962 $1.1370

$1.0000 .0192 .0349 .0916 $1.1457

Total Number of Tax Rate Areas within Improvement District No. 2: 26 _________________ Source: California Municipal Statistics, Inc.

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Largest Property Owners The following tables show the 20 largest property taxpayers in each of the Improvement Districts as determined by secured assessed valuation in fiscal year 2013-14. LARGEST 2013-14 LOCAL SECURED PROPERTY TAXPAYERS Folsom Cordova Unified School District School Facilities Improvement District No. 1

1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19. 20.

Property Owner Easton Development Company LLC Franklin Resources Inc. VSP Holding Company Inc. MSCP Capital Center Investors LLC Karlin Capital Center LLC Aerojet General Corp. Rreef American REIT II Corporation Cordova LLC Bishops Court I & II Ltd. Wasatch Pool Holdings LLC Mather Development Partners LP FJM Sunrise Associates LLC C.C. Myers Inc. Digital 11085 Sun Center Dr. LLC Teledyne Wireless Inc. Oak Brook Estates Elliott Whiterock LLC AMFP I Ashgrove LLC Lexington Lion Rancho Cordova LP Pacific Zinfandel Apartments LLC

Primary Land Use Industrial Office Building Office Building Office Building Office Building Industrial Office Building Office Building Apartments Apartments Office Building Industrial Industrial Industrial Industrial Apartments Industrial Apartments Office Building Apartments

________________ (1) 2013-14 local secured assessed valuation: $5,196,906,685. Source: California Municipal Statistics, Inc.

49

2013-14 Assessed Valuation $192,829,568 81,071,456 81,039,446 71,787,594 61,200,000 55,752,819 49,314,176 39,333,385 36,057,597 35,454,506 30,689,540 30,083,436 29,785,820 28,561,267 26,510,811 26,316,000 26,000,000 25,249,957 25,000,000 20,480,778 $972,518,156

% of Total(1) 3.71% 1.56 1.56 1.38 1.18 1.07 0.95 0.76 0.69 0.68 0.59 0.58 0.57 0.55 0.51 0.51 0.50 0.49 0.48 0.39 18.71%

LARGEST 2012-13 LOCAL SECURED PROPERTY TAXPAYERS Folsom Cordova Unified School District School Facilities Improvement District No. 2

1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19. 20.

Property Owner Primary Land Use Intel Corporation Office Building/Industrial Broadstone Land LLC Commercial Kaiser Foundation Hospitals Medical Buildings Kikkoman Foods Inc. Industrial Chelsea Financing Partnership LP Commercial Spectrum Waples Street LP Apartments Overlook at Blue Ravine LLC Apartments Sherwood Iron Point LP Apartments CW Parkshore Plaza LLC Office Building Broadstone Market Place LLC Commercial IMS Associates LLC Office Building Cole Mt. Folsom CA LP Commercial Iron Point LLC Apartments Braddock & Logan Venture Group Commercial Folsom Broadstone Inc. Commercial SIR Properties Trust Office Building Rollingwood Commons Apartments LLC Apartments Gekkeikan Sake Inc. Industrial Glacier & Preserve at Blue Ravine Apartments W2005 & Fargo Hotels Realty LP Hotel

2013-14 Assessed Valuation $539,957,627 97,488,385 66,023,698 61,804,255 61,288,098 56,782,880 53,333,235 52,436,160 48,170,520 45,977,583 39,895,353 37,454,400 35,792,357 35,000,000 33,900,000 33,552,900 32,944,131 32,178,211 30,745,902 29,170,000 $1,423,895,695

% of Total(1) 5.43% 0.98 0.66 0.62 0.62 0.57 0.54 0.53 0.48 0.46 0.40 0.38 0.36 0.35 0.34 0.34 0.33 0.32 0.31 0.29 14.33%

________________ (1) 2013-14 local secured assessed valuation: $9,935,573,995. Source: California Municipal Statistics, Inc.

Debt Obligations Set forth below are direct and overlapping debt reports regarding each of the Improvement Districts (each a “Debt Report”) prepared by California Municipal Statistics, Inc. and effective November 7, 2013, for debt issued as of December 1, 2013. The Debt Reports are included for general information purposes only. The School District has not reviewed the Debt Reports for completeness or accuracy and makes no representation in connection therewith. The Debt Reports, generally, include long-term obligations sold in the public credit markets by public agencies whose boundaries overlap the boundaries of the respective Improvement Districts in whole or in part. Such long-term obligations generally are not payable from revenues of the School District (except as indicated) nor are they necessarily obligations secured by land within the respective Improvement Districts. In many cases, long-term obligations issued by a public agency are payable only from the general fund or other revenues of such public agency.

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The contents of the Debt Reports are as follows: (1) the first column indicates the public agencies which have outstanding debt as of the date of the Debt Report and whose territory overlaps the respective Improvement District; (2) the second column shows the respective percentage of the assessed valuation of the overlapping public agencies identified in column 1 which is represented by property located in the respective Improvement District; and (3) the third column is an apportionment of the dollar amount of each public agency’s outstanding debt (which amount is not shown in the table) to property in the respective Improvement District, as determined by multiplying the total outstanding debt of each agency by the percentage of the respective Improvement District’s assessed valuation represented in column 2. STATEMENT OF DIRECT AND OVERLAPPING BONDED DEBT Folsom Cordova Unified School District School Facilities Improvement District No. 1 2013-14 Assessed Valuation: $5,799,641,293 DIRECT AND OVERLAPPING TAX AND ASSESSMENT DEBT: Los Rios Community College District Folsom Cordova Unified School District School Facilities Improvement District No. 1 Folsom Cordova Unified School District School Facilities Improvement District No. 3 Folsom Cordova Unified School District School Facilities Improvement District No. 4 Sacramento Area Flood Control Consolidated Capital Assessment District Sacramento Area Flood Control District Operations and Maintenance Assessment District TOTAL DIRECT AND OVERLAPPING TAX AND ASSESSMENT DEBT OVERLAPPING GENERAL FUND DEBT: Sacramento County General Fund Obligations Sacramento County Pension Obligations Sacramento County Board of Education Certificates of Participation Los Rios Community College District Certificates of Participation Folsom Cordova Unified School District Certificates of Participation City of Rancho Cordova Certificates of Participation Sacramento Metropolitan Fire District Pension Obligations TOTAL GROSS OVERLAPPING GENERAL FUND DEBT Less: Sacramento County supported obligations TOTAL NET OVERLAPPING GENERAL FUND DEBT

(3)

4.791% 4.791 4.791 3.935 36.224 74.967 11.289

$14,928,088 47,445,634 418,733 231,772 8,753,530 16,515,230 6,923,992 $95,216,979 (309,259) $94,907,720

$265,998,286(3) $265,689,027

GROSS COMBINED TOTAL DEBT NET COMBINED TOTAL DEBT (2)

Debt 12/1/13 $14,570,125 34,226,487(1) 37,143,785 57,698,831(2) 1,149,882 102,557 $144,891,667

$25,889,640

OVERLAPPING TAX INCREMENT DEBT:

(1)

% Applicable 3.935% 100.000 91.693 100.000 0.597 3.220

Excludes the Improvement District No. 1 Refunding Bonds to be sold pursuant hereto. Excludes the Improvement District No. 4 Series A Bonds to be issued concurrently with the Improvement District No. 1 Refunding Bonds. Excludes tax and revenue anticipation notes, revenue, mortgage revenue and non-bonded capital lease obligations.

Ratios to 2013-14 Assessed Valuation: Direct Debt ($34,226,487) .............................................................. 0.59% Total Direct and Overlapping Tax and Assessment Debt ................. 2.50% Gross Combined Total Debt ............................................................. 4.59% Net Combined Total Debt ................................................................. 4.58% Ratios to Redevelopment Incremental Valuation ($434,133,370): Total Overlapping Tax Increment Debt ............................................ 5.96% Source: California Municipal Statistics, Inc.

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STATEMENT OF DIRECT AND OVERLAPPING BONDED DEBT Folsom Cordova Unified School District School Facilities Improvement District No. 2 2013-14 Assessed Valuation: $10,210,988,329 DIRECT AND OVERLAPPING TAX AND ASSESSMENT DEBT: Los Rios Community College District Folsom Cordova Unified School District School Facilities Improvement District No. 2 Folsom Cordova Unified School District School Facilities Improvement District No. 3 City of Folsom City of Folsom Community Facilities Districts City of Folsom 1915 Act Bonds Sacramento Area Flood Control Consolidated Capital Assessment District Sacramento Area Flood Control District Operations and Maintenance Assessment District California Statewide Community Development Authority Assessment District TOTAL DIRECT AND OVERLAPPING TAX AND ASSESSMENT DEBT OVERLAPPING GENERAL FUND DEBT: Sacramento County General Fund Obligations Sacramento County Pension Obligations Sacramento County Board of Education Certificates of Participation Los Rios Community College District Certificates of Participation Folsom Cordova Unified School District Certificates of Participation City of Folsom General Fund Obligations Sacramento Area Fire District Pension Obligations TOTAL GROSS OVERLAPPING GENERAL FUND DEBT Less: Sacramento County supported obligations TOTAL NET OVERLAPPING GENERAL FUND DEBT OVERLAPPING TAX INCREMENT DEBT:

% Applicable 6.928% 100.000 8.307 98.025 100.000 100.000 0.007 0.101 100.000

Debt 12/1/13 $25,652,306 32,676,422(1) 3,365,071 6,072,649 109,530,000 14,260,561 13,483 3,217 961,627 $192,535,336

8.435% 8.435 8.435 6.928 63.776 98.025 0.135

$26,282,284 83,532,441 737,219 408,059 15,411,470 8,719,324 82,801 $135,173,598 (544,479) $134,629,119 $62,000,000 $389,708,934(2) $389,164,455

GROSS COMBINED TOTAL DEBT NET COMBINED TOTAL DEBT

(1) Excludes the Improvement District No. 2 Refunding Bonds to be sold pursuant hereto. (2) Excludes tax and revenue anticipation notes, enterprise revenue, mortgage revenue and non-bonded capital lease obligations. Ratios to 2013-14 Assessed Valuation: Direct Debt ($32,676,422) .............................................................. 0.32% Total Direct and Overlapping Tax and Assessment Debt ................. 1.89% Gross Combined Total Debt ............................................................. 3.82% Net Combined Total Debt ................................................................. 3.81% Ratios to Redevelopment Incremental Valuation ($700,647,803): Total Overlapping Tax Increment Debt ............................................ 8.85% Source: California Municipal Statistics, Inc.

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IMPROVEMENT DISTRICT NO. 1 General Description The Improvement District No. 1 Refunding Bonds are being issued by the School District on behalf of Improvement District No. 1. In June 1997, Improvement District No. 1 was established by the Board of Education of the School District pursuant to its Resolution No. 06-26-97-41 and the Act. On November 4, 1997, registered voters residing in Improvement District No. 1 approved the issuance of not to exceed $10,400,000 principal amount of general obligation bonds (the “Improvement District No. 1 1997 Authorization”). The School District and the County sold a single series of bonds on behalf of Improvement District No. 1 in April 1998, which series constituted substantially all of the remaining Improvement District No. 1 1997 Authorization. With respect to the authorization for the Improvement District No. 1 2002 Series A Bonds and the Improvement District No. 1 2002 Series B Bonds, the Board of Education ordered an election of the registered voters residing in the territory of Improvement District No. 1, which was held on March 5, 2002. At this election, 73.0% of the voters voting on the measure approved the issuance of not-to-exceed $49,000,000 principal amount of general obligation bonds for Improvement District No. 1 (the “Improvement District No. 1 2002 Authorization”). In July 2002, the School District and the County issued on behalf of Improvement District No. 1 the Improvement District No. 1 2002 Series A Bonds, the first series of bonds under the Improvement District No. 1 2002 Authorization, in the aggregate principal amount of $17,995,749.60, a portion of which are Refunded Bonds. In December 2004, the School District and the County issued on behalf of Improvement District No. 1 the Improvement District No. 1 2002 Series B Bonds, the second series of bonds under the Improvement District No. 1 2002 Authorization, in the aggregate principal amount of $30,998,849.20, a portion of which are Refunded Bonds. The Improvement District No. 1 2002 Series B Bonds were the second and final series of bonds issued pursuant to the, and constituted substantially all of the remaining, Improvement District No. 1 2002 Authorization. See “APPLICATION OF PROCEEDS OF BONDS - Application and Investment of Refunding Bonds Proceeds, Improvement District No. 1 Refunding Bonds” and “SCHOOL DISTRICT FINANCIAL INFORMATION - School District Debt Structure, Improvement District No. 1 General Obligation Bonds” herein. Location and Territory Improvement District No. 1 is located in the western portion of the School District, and consists of territory west of Prairie City Road. The area of Improvement District No. 1 includes areas of the School District that are also part of Improvement District No. 4 (defined below). See “APPENDIX A – VICINITY OF IMPROVEMENT DISTRICT NO. 1” herein. The area of Improvement District No. 1 is about 48 square miles, representing about 50% of the territory of the School District, and includes a large portion of the recently incorporated City of Rancho Cordova. Improvement District No. 1 has over 9,500 single family homes. The territory of Improvement District No. 1 also includes one of the largest concentrations of office buildings and business parks in the Sacramento region. Improvement District No. 1 has an estimated population in 2012, the most recent year for which such information is available, of approximately 57,298 persons, accounting for approximately 45.5% of the total population of the School District. Improvement District No. 1 has a 2013-14 total assessed valuation of $5,799,641,293, accounting for approximately 36.2% of the total assessed valuation in the School District.

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IMPROVEMENT DISTRICT NO. 2 General Description The Improvement District No. 2 Refunding Bonds are being issued by the School District on behalf of Improvement District No. 2. In October 1998, Improvement District No. 2 was established by the Board of Education of the School District pursuant to its Resolution No. 10-29-98-13 and the Act. With respect to the authorization for the Improvement District No. 2 2002 Series A Bonds and the Improvement District No. 2 2002 Series B Bonds, the Board of Education ordered an election of the registered voters residing in the territory of Improvement District No. 2, which was held on March 5, 2002. At this election, 68.6% of the voters voting on the measure approved the issuance of not-to-exceed $53,000,000 principal amount of general obligation bonds for Improvement District No. 2 (the “Improvement District No. 2 2002 Authorization”). In July 2002, the School District and the County issued on behalf of Improvement District No. 2 the Improvement District No. 2 Series A Bonds, the first series of bonds under the Improvement District No. 2 Authorization, in the aggregate principal amount of $36,966,422.10, a portion of which are Refunded Bonds. In December 2004, the School District and the County issued on behalf of Improvement District No. 2 the Improvement District No. 2 Series B Bonds, the second series of bonds under the Improvement District No. 2 Authorization, in the aggregate principal amount of $16,000,000, a portion of which are Refunded Bonds. The Improvement District No. 2 2002 Series B Bonds were the second and final series of bonds issued pursuant to the, and constituted substantially all of the remaining, Improvement District No. 2 2002 Authorization. See “APPLICATION OF PROCEEDS OF BONDS - Application and Investment of Refunding Bonds Proceeds, Improvement District No. 2 Refunding Bonds” and “SCHOOL DISTRICT FINANCIAL INFORMATION - School District Debt Structure, Improvement District No. 2 General Obligation Bonds” herein. Location and Territory Improvement District No. 2 is located in the eastern portion of the School District, and consists of territory east of Prairie City Road. See “APPENDIX B – VICINITY OF IMPROVEMENT DISTRICT NO. 2” herein. The area of Improvement District No. 2 is about 48 square miles, representing about 50% of the territory of the School District, and includes nearly all of the City of Folsom. Improvement District No. 2 has an estimated population in 2012, the most recent year for which such information is available, of approximately 68,632 persons, accounting for approximately 54.5% of the total population of the School District. Improvement District No. 2 has a 2013-14 total assessed valuation of $10,210,988,329, accounting for approximately 63.8% of the total assessed valuation in the School District.

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THE SCHOOL DISTRICT Introduction The School District is located in the greater Sacramento metropolitan region about 20 miles northeast of the City of Sacramento. The School District includes nearly all of the City of Folsom, a large portion of the City of Rancho Cordova, and adjacent unincorporated areas in Sacramento County. The School District encompasses a territory of about 96 square miles and was established in 1949. The School District has an estimated population in 2012, the most recent year for which such information is available, of approximately 125,930 persons. The School District is a unified school district serving students in grades K-12. The School District operates 31 schools, including 19 elementary schools, four middle schools, three comprehensive high schools, four alternative high schools and one dependent charter elementary school. The School District also operates 14 preschool programs at eight sites, transitional kindergarten programs at six sites, a Montessori program at one site, 14 child care centers and an adult education program. Unless otherwise indicated, the following financial, statistical and demographic data has been provided by the School District. Additional information concerning the School District and copies of the most recent and subsequent audited financial reports of the School District may be obtained by contacting the Chief Financial Officer/Chief Business Official, Folsom Cordova Unified School District, 1965 Birkmont Drive, Rancho Cordova, California, 95742, (916) 294-9004. The School District may impose a charge for copying, mailing and handling. Administration The School District is governed by a five-member Board of Education (the “Board”), each of whom is elected at-large to a four-year term. Elections for positions to the Board are held every two years, alternating between two and three available positions. Current members of the Board, together with their offices and the dates their terms expire, are listed below: Board Member Zak Ford Teresa Stanley JoAnne Reinking Richard Shaw Ed Short

Office President Vice President Clerk Member President

The management and policies of the appointed by the Board, who is responsible for supervision of the School District’s other Superintendent of the School District. Rhonda Official. Their biographies are listed below.

Term Expires December 2014 December 2016 December 2016 December 2014 December 2014

School District are administered by a Superintendent the day-to-day School District operations as well as the personnel. Currently, Deborah Bettencourt is the Crawford is the Chief Financial Officer/Chief Business

Deborah Bettencourt, Superintendent. Ms. Bettencourt has served as Superintendent of the School District since 2010. Prior to serving as Superintendent, Ms. Bettencourt served as the Deputy Superintendent/Chief Financial Officer of the School District from 1997 through 2010. She has over 38 years of school district management experience. Ms. Bettencourt has previously been employed by the Roseville City School District and the Tracy Unified School District. Ms. Bettencourt graduated from the University of San Francisco with degrees in Business and Human Resources.

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Rhonda Crawford, Chief Financial Officer/Chief Business Official. Ms. Crawford has served as Chief Financial Officer/Chief Business Official since 2010. Ms. Crawford previously served as the Director of Fiscal Services from 2003 through 2010. She has over 26 years of school district financial management experience. Ms. Crawford has previously been employed by the Sylvan Union School District, California State University, Stanislaus, and the Grant Joint Union High School District. Ms. Crawford earned both a Bachelor of Science and Master’s Degree in Business Administration from California State University, Stanislaus, and a Chief Business Official Certification from California Association of School Business Officials. Enrollment School District enrollment increased by 94.2% over the past 30 years, representing an average annual compound growth rate of approximately 3.3%. The following table shows a 30-year enrollment history for the School District. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

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ANNUAL ENROLLMENT Folsom Cordova Unified School District Fiscal Years 1984-85 through 2013-14

Year 1984-85 1985-86 1986-87 1987-88 1988-89 1989-90 1990-91 1991-92 1992-93 1993-94 1994-95 1995-96 1996-97 1997-98 1998-99 1999-00 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14(2)

Enrollment(1)

Annual Change

Annual % Change

10,148 10,479 10,807 11,339 11,613 11,952 12,656 13,105 13,242 12,676 12,975 13,349 13,716 14,184 14,823 15,620 16,277 16,987 17,591 17,950 18,305 18,584 18,826 19,066 19,119 19,214 18,926 19,253 19,281 19,359

-331 328 532 274 339 704 449 137 (566) 299 374 367 468 639 797 657 710 604 359 355 279 242 240 53 95 (288) 327 28 78

-3.26% 3.13 4.92 2.42 2.92 5.89 3.55 1.05 (4.27) 2.36 2.88 2.75 3.41 4.51 5.38 4.21 4.36 3.56 2.04 1.98 1.52 1.30 1.27 0.28 0.50 (1.50) 1.73 0.15 0.40

(1)

Enrollment as of October CBEDS reports in each school year. Projected. Source: Folsom Cordova Unified School District.

(2)

On average throughout the School District, the pupil-teacher ratio is approximately 31-to-1 for kindergarten, 30-to-1 for first and second grades, 30-to-1 for third through fifth grades, 29.5-to-1 for sixth through eighth grades and 29.5-to-1 for ninth through twelfth grades. Labor Relations As of October 2013, the School District employed 959.37 full-time equivalent certificated and administrative employees, and 630.79 full-time equivalent classified employees. School District employees, except management employees and some part-time employees, are represented by two bargaining units as noted below:

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LABOR BARGAINING UNITS Folsom Cordova Unified School District Number of Employees In Organization

Labor Organization Folsom Cordova Educational Association California School Employees Association

987 960

Contract Expiration Date June 30, 2014 June 30, 2014

Source: Folsom Cordova Unified School District.

School District Retirement Systems The information set forth below regarding the CalSTRS and CalPERS programs, other than the information provided by the School District regarding its annual contributions thereto, has been obtained from publicly available sources which are believed to be reliable but are not guaranteed as to accuracy or completeness, and should not to be construed as a representation by either the School District or the Underwriter. CalSTRS. All School District full-time certificated employees, as well as certain classified employees, are members of the State Teachers’ Retirement System (“CalSTRS”). CalSTRS provides retirement, disability and survivor benefits to plan members and beneficiaries. Benefit provisions are established by State statutes, as legislatively amended, within the State Teachers’ Retirement Law. The School District is currently required by such statutes to contribute 8.25% of eligible salary expenditures, while participants contribute 8% of their respective salaries. The State also contributes to CalSTRS, currently in an amount equal to 3.041% of teacher payroll. The State’s contribution reflects a base contribution of 2.017% and a supplemental contribution of 1.024% that will vary from year-to-year based on statutory criteria. The School District’s contributions to CalSTRS were $5,746,737 in fiscal year 2010-11, $5,732,312 in fiscal year 2011-12, and $5,653,642 in fiscal year 2012-13, and in each such year was equal to 100% of the required contributions. The School District has budgeted $5,832,242 for its contribution to CalSTRS for fiscal year 2013-14. CalPERS. School District classified employees working four or more hours per day are members of the Public Employees’ Retirement System (“CalPERS”). CalPERS provides retirement and disability benefits, annual cost-of-living adjustments, and death benefits to plan members and beneficiaries. Benefit provisions are established by the State statutes, as legislatively amended, with the Public Employees’ Retirement Laws. The School District is currently required to contribute to CalPERS at an actuarially determined rate, which is 11.442% for fiscal year 2013-14, while participants enrolled in CalPERS prior to the Implementation Date (defined herein) contribute 7% of their respective salaries. Participants enrolled after the Implementation Date contribute at an actuarially determined rate, which is 6% of their respective salaries for fiscal year 2013-14. See “—California Public Employees’ Pension Reform Act of 2013” herein. The School District’s contributions to CalPERS were $2,596,139 in fiscal year 2010-11, $2,662,515 in fiscal year 2011-12, and $2,809,787 in fiscal year 2012-13, and in each such year was equal to 100% of the required contributions. The School District has budgeted $3,088,798 for its contribution to CalPERS for fiscal year 2013-14.

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State Pension Trusts. Each of CalSTRS and CalPERS issues a separate comprehensive financial report that includes financial statements and required supplemental information. Copies of such financial reports may be obtained from each of CalSTRS and CalPERS as follows: (i) CalSTRS, P.O. Box 15275, Sacramento, California 95851-0275; (ii) CalPERS, P.O. Box 942703, Sacramento, California 942292703. Moreover, each of CalSTRS and CalPERS maintains a website, as follows: (i) CalSTRS: www.calstrs.com; (ii) CalPERS: www.calpers.ca.gov. However, the information presented in such financial reports or on such websites is not incorporated into this Official Statement by any reference. Both CalSTRS and CalPERS have substantial statewide unfunded liabilities. The amount of these unfunded liabilities will vary depending on actuarial assumptions, returns on investments, salary scales and participant contributions. The following table summarizes information regarding the actuarially-determined accrued liability for both CalSTRS and CalPERS. FUNDED STATUS CalSTRS (Defined Benefit Program) and CalPERS (Dollar Amounts in Millions) (1) Accrued Liability $59,439 215,189

Plan Public Employees Retirement Fund (CalPERS) State Teachers’ Retirement Fund Defined Benefit Program (CalSTRS)

Value of Trust Assets $44,854(2) 144,232(3)

Unfunded Liability $(14,585) (70,957)

____________________ (1)

Amounts may not add due to rounding. Reflects market value of assets as of June 30, 2012. (3) Reflects actuarial value of assets as of June 30, 2012. Source: CalPERS State & Schools Actuarial Valuation; CalSTRS Defined Benefit Program Actuarial Valuation. (2)

On April 17, 2013, the CalPERS board of administration (the “CalPERS Board”) approved new actuarial policies aimed at returning CalPERS to fully-funded status within 30 years. The policies include a rate smoothing method with a 30-year amortization period for gains and losses and a five-year ramp-up of rates of rates at the start and a five year ramp-down of rates at the end. The CalPERS Board delayed the implementation of the new policies until fiscal year 2015-16 for the State, K-14 school districts and all other public agencies. Unlike CalPERS, CalSTRS contribution rates for participant employers and employees hired prior to the Implementation Date (defined herein), as well as the State’s base contribution rate, are set by statute and do not currently vary from year-to-year based on actuarial valuations. As a result, and due in part to investment losses, the unfunded liability of CalSTRS has increased significantly. This unfunded liability is expected to continue to increase in the absence of legislation requiring additional or increased contributions. The School District can make no representations regarding the future program liabilities of CalSTRS, or whether the School District will be required to make larger contributions to CalSTRS in the future. The School District can also provide no assurances that the School District’s required contributions to CalPERS will not increase in the future. California Public Employees’ Pension Reform Act of 2013. On September 12, 2012, the Governor signed into law the California Public Employees’ Pension Reform Act of 2013 (the “Reform Act”), which makes changes to both CalSTRS and CalPERS, most substantially affecting new employees hired after January 1, 2013 (the “Implementation Date”). For CalSTRS participants hired after the Implementation Date, the Reform Act changes the normal retirement age by increasing the eligibility for the 2% age factor (the age factor is the percent of final compensation to which an employee is entitled to for each year of service) from age 60 to 62 and increasing the eligibility of the maximum age factor of 2.4% from age 63 to 65. Similarly, for non-safety CalPERS participants hired after the Implementation

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Date, the Reform Act changes the normal retirement age by increasing the eligibility for the 2% age factor from age 55 to 62 and increases the eligibility requirement for the maximum age factor of 2.5% to age 67. Among the other changes to CalPERS and CalSTRS, the Reform Act also: (i) requires all new participants enrolled in CalPERS and CalSTRS after the Implementation Date to contribute at least 50% of the total annual normal cost of their pension benefit each year as determined by an actuary, (ii) requires CalSTRS and CalPERS to determine the final compensation amount for employees based upon the highest annual compensation earnable averaged over a consecutive 36-month period as the basis for calculating retirement benefits for new participants enrolled after the Implementation Date (currently 12 months for CalSTRS members who retire with 25 years of service), and (iii) caps “pensionable compensation” for new participants enrolled after the Implementation Date at 100% of the federal Social Security contribution and benefit base for members participating in Social Security or 120% for members not participating in social security, while excluding previously allowed forms of compensation under the formula such as payments for unused vacation, annual leave, personal leave, sick leave, or compensatory time off. For further information about the School District’s participation in CalSTRS and CalPERS, see “APPENDIX C – EXCERPTS FROM THE 2012-13 AUDITED FINANCIAL STATEMENTS OF THE SCHOOL DISTRICT– Notes to Financial Statements, Note 7, Employee Retirement Systems” herein. Post-Employment Medical Benefits The School District provides post-employment medical benefits (the “Benefits”) to School District employees meeting certain eligibility requirements. The School District pays the cost of medical insurance coverage for such retirees up to a monthly maximum amount. This amount is established in the year during which an eligible employee chooses to retire. Currently, monthly maximums are $500 for classified employees and $475 for all other employees. The Benefits continue until age 65; managerial employees may continue to receive a monthly benefit of $175 after age 65. The School District has commissioned and received an actuarial study (the “Study”), dated as of July 1, 2012, with respect to its accrued liability in connection with the Benefits. The Study concluded that the unfunded actuarially accrued liability (the “AAL”) of the School District with respect to the Benefits, as of June 30, 2013, was $23,115,538. The Study also concluded that the annual required contribution (the “ARC”) was $25,625,106. The ARC is the annual amount that would be necessary to fund the Benefits in accordance with Governmental Accounting Standards Board Statements Nos. 43 and 45. The ARC is expected to increase each year based on covered payroll. The School District established an irrevocable trust to meet negotiated obligations for retiree benefits on February 15, 2007. The plan is currently operated as a pay-as-you-go plan. As of June 30, 2013, the value of assets held in the trust was $5,837,885. The Study factored in the value of these assets when calculating the AAL. For further information about the School District’s postemployment benefits, see “APPENDIX C – EXCERPTS FROM THE 2012-13 AUDITED FINANCIAL STATEMENTS OF THE SCHOOL DISTRICT– Notes to Financial Statements, Note 8, Other Postemployment Benefits” herein.

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Joint Powers Agreements The School District participates in joint powers agreements (“JPAs”) with each of (i) the Schools Insurance Authority (“SIA”), which arranges for and provides property and liability insurance to its member school districts, (ii) the Schools Excess Liability Fund (“SELF”), which provides excess liability self-funding and risk management, and (iii) the School Project for Utility Rate Reduction (“SPURR”), which provides for the direct purchase of natural gas, electricity, and other utility services. The School District pays premiums commensurate with the levels of coverage requested. The JPAs are governed by boards consisting of members elected from the participating districts, which control the operations of the JPAs independent of any influence by the School District beyond the School District's representation on the governing boards. The JPAs are independently accountable for their fiscal matters, and thus are not components of the School District for financial reporting purposes. For further information about the School District’s participation in the JPAs, see “APPENDIX C – EXCERPTS FROM THE 2012-13 AUDITED FINANCIAL STATEMENTS OF THE SCHOOL DISTRICT– Notes to Financial Statements, Note 9, Joint Powers Agreements” herein. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

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SCHOOL DISTRICT FINANCIAL INFORMATION The information in this section concerning the School District’s general fund finances is provided as supplementary information only, and it should not be inferred from the inclusion of this information in this Official Statement that the principal of and interest on the Bonds is payable from the general fund of the School District. The Bonds are payable from the proceeds of an ad valorem tax required to be levied by the County on property in each respective Improvement District in amounts sufficient for the payment thereof. See “THE BONDS – Security and Sources of Payment” herein. State Funding of Education School district revenues consist primarily of guaranteed State moneys, local property taxes and funds received from the State in the form of categorical aid under ongoing programs of local assistance. All State aid is subject to the appropriation of funds in the State’s annual budget. Revenue Limit Funding. Previously, school districts operated under general purpose revenue limits established by the State Department of Education. In general, revenue limits were calculated for each school district by multiplying the ADA for such district by a base revenue limit per unit of ADA. Revenue limit calculations were subject to adjustment in accordance with a number of factors designed to provide cost of living adjustments (“COLAs”) and to equalize revenues among school districts of the same type. Funding of a school district’s revenue limit was provided by a mix of local property taxes and State apportionments of basic and equalization aid. Beginning in fiscal year 2013-14, school districts will be funded based on uniform funding grants assigned to certain grade spans. See “—Local Control Funding Formula” herein. The following table reflects the School District’s historical ADA and the revenue limit rates per unit of ADA for fiscal years 2007-08 through 2012-13. AVERAGE DAILY ATTENDANCE AND REVENUE LIMIT Folsom Cordova Unified School District Fiscal Years 2007-08 through 2012-13 Fiscal Year

Average Daily Attendance(1)

Annual Change In ADA

Base Revenue Limit per ADA(2)

Deficited Revenue Limit per ADA(2)

Enrollment(3)

2007-08 2008-09 2009-10 2010-11 2011-12 2012-13

18,105 18,191 18,154 17,837 18,243 18,247

--86 (37) (317) 406 4

$5,784 6,110 6,342 6,381 6,493 6,705

$5,784 5,633 4,951 5,235 5,155 5,211

19,027 19,029 19,182 18,893 19,154 19,117

(1)

Reflects ADA as of the second principal reporting period (P-2 ADA), ending on or before the last attendance month prior to April 15 of each school year. (2) Deficit revenue limit funding, if provided for in State budget legislation, previously reduced the revenue limit allocations received by school districts by applying a deficit factor to the base revenue limit for a given fiscal year, and resulted from an insufficiency of appropriation funds in the State budget to provide for State aid owed to school districts. The State’s practice of deficit limit funding was most recently reinstated beginning in fiscal year 2008-09, and discontinued following the implementation of the LCFF. (3) Enrollment as of October California Basic Educational Data System (“CBEDS”) in each school year. Source: Folsom Cordova Unified School District.

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Local Control Funding Formula. State Assembly Bill 97 (Stats. 2013, Chapter 47) (“AB 97”), enacted as part of the 2013-14 State budget, establishes a new system for funding school districts, charter schools and county offices of education. Certain provisions of AB 97 were amended and clarified by Senate Bill 91 (Stats. 2013, Chapter 49). The primary component of AB 97, as amended by SB 91, is the implementation of the Local Control Funding Formula, which replaces the revenue limit funding system for determining State apportionments, as well as the majority of categorical program funding. State allocations will be provided on the basis of target base funding grants per unit of ADA (a “Base Grant”) assigned to each of four grade spans. Each Base Grant is subject to certain adjustments and add-ons, as discussed below. Full implementation of the LCFF is expected to occur over a period of eight fiscal years. Beginning in fiscal year 2013-14, an annual transition adjustment will be calculated for each school district, equal to such district’s proportionate share of appropriations included in the State budget to close the gap between the prior-year funding level and the target allocation following full implementation of the LCFF. In each year, school districts will have the same proportion of their respective funding gaps closed, with dollar amounts varying depending on the size of a district’s funding gap. For fiscal year 2013-14, the Base Grants per unit of ADA for each grade span are as follows: (i) $6,845 for grades K-3; (ii) $6,947 for grades 4-6; (iii) $7,154 for grades 7-8; and (iv) $8,289 for grades 912. In each subsequent year, the Base Grants are to be adjusted for cost-of-living increases by applying the implicit price deflator for government goods and services. Following full implementation of the LCFF, the provision of COLAs will be subject to appropriation for such adjustment in the annual State budget. The differences among Base Grants are linked to differentials in statewide average revenue limit rates by district type, and are intended to recognize the generally higher costs of education at higher grade levels. The Base Grants for grades K-3 and 9-12 are subject to adjustments of 10.4% and 2.6%, respectively, to cover the costs of class size reduction in early grades and the provision of career technical education in high schools. Following full implementation of the LCFF, and unless otherwise collectively bargained for, school districts serving students in grades K-3 must maintain an average class enrollment of 24 or fewer students in grades K-3 at each school site in order to continue receiving the adjustment to the K-3 Base Grant. Such school districts must also make progress towards this class size reduction goal in proportion to the growth in their funding over the implementation period. Additional add-ons are also provided to school districts that received categorical block grant funding pursuant to the Targeted Instructional Improvement and Home-to-School Transportation programs during fiscal year 2012-13. School districts that serve students of limited English proficiency (“EL” students), students from low income families that are eligible for free or reduced priced meals (“LI” students) and foster youth are eligible to receive additional funding grants. Enrollment counts are unduplicated, such that students may not be counted as both EL and LI. Foster youth automatically meet the eligibility requirements for free or reduced priced meals, and are therefore not discussed herein separately. A supplemental grant add-on (each, a “Supplemental Grant”) is authorized for school districts that serve EL/LI students, equal to 20% of the applicable Base Grant multiplied by such districts’ percentage of unduplicated EL/LI student enrollment. School districts whose EL/LI populations exceed 55% of their total enrollment are eligible for a concentration grant add-on (each, a “Concentration Grant”) equal to 50% of the applicable Base Grant multiplied the percentage of such district’s unduplicated EL/LI student enrollment in excess of the 55% threshold.

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The following table shows a breakdown of the School District’s projected ADA by grade span, total enrollment, and the percentage of EL/LI student enrollment, for fiscal year 2013-14. ADA, ENROLLMENT AND EL/LI ENROLLMENT PERCENTAGE Folsom Cordova Unified School District Fiscal Year 2013-14 Average Daily Attendance(1) Fiscal Year

K-3

4-6

7-8

2013-14(2)

5,880

4,319

2,743

9-12

Total School District ADA

Total School District Enrollment

% of El/LI Enrollment(3)(4)

5,366

18,308

19,359

38.2%

(1)

ADA is as of the second principal reporting period (P-2 ADA), ending on or before the last attendance month prior to April 15 of each school year. (2) Projected. (3) Budgeted. (4) For purposes of calculating Supplemental and Concentration Grants, a school district’s fiscal year 2013-14 percentage of unduplicated EL/LI students will be expressed solely as a percentage of its total fiscal year 2013-14 total enrollment. For fiscal year 2014-15, the percentage of unduplicated EL/LI enrollment will be based on the two-year average of EL/LI enrollment in fiscal years 2013-14 and 2014-15. Beginning in fiscal year 2015-16, a school district’s percentage of unduplicated EL/LI students will be based on a rolling average of such district’s EL/LI enrollment for the then-current fiscal year and the two immediately preceding fiscal years Source: Folsom Cordova Unified School District.

For certain school districts that would have received greater funding levels under the prior revenue limit system, the LCFF provides for a permanent economic recovery target (“ERT”) add-on, equal to the difference between the revenue limit allocations such districts would have received under the prior system in fiscal year 2020-21, and the target LCFF allocations owed to such districts in the same year. To derive the projected funding levels, the LCFF assumes the discontinuance of deficit revenue limit funding, implementation of a 1.94% COLA in fiscal years 2014-15 through 2020-21, and restoration of categorical funding to pre-recession levels. The ERT add-on will be paid incrementally over the eightyear implementing period of the LCFF. The School District does not qualify for the ERT add-on. The sum of a school district’s adjusted Base, Supplemental and Concentration Grants will be multiplied by such district’s P-2 ADA for the current or prior year, whichever is greater (with certain adjustments applicable to small school districts). This funding amount, together with any applicable ERT or categorical block grant add-ons, will yield a district’s total LCFF allocation. Generally, the amount of annual State apportionments received by a school district will amount to the difference between such total LCFF allocation and such district’s share of applicable local property taxes. Most school districts receive a significant portion of their funding from such State apportionments. As a result, decreases in State revenues may significantly affect appropriations made by the Legislature to school districts. Certain schools districts, known as “basic aid” districts, have allocable local property tax collections that equal or exceed such districts’ total LCFF allocation, and result in the receipt of no State apportionment aid. Basic aid school districts receive only special categorical funding, which is deemed to satisfy the “basic aid” requirement of $120 per student per year guaranteed by Article IX, Section 6 of the State Constitution. The implication for basic aid districts is that the legislatively determined allocations to school districts, and other politically determined factors, are less significant in determining their primary funding sources. Rather, property tax growth and the local economy are the primary determinants. The School District does not currently qualify as a basic aid district.

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The following table shows the total taxable assessed valuation of property within the School District between 1979-80 and 2013-14, upon which amounts the School District’s shares of applicable local property taxes have been calculated. TAXABLE ASSESSED VALUATION Folsom Cordova Unified School District Fiscal Years 1979-80 through 2013-14

Fiscal Year 1979-80 1080-81 1081-82 1982-83 1983-84 1984-85 1985-86 1986-87 1987-88 1988-89 1989-90 1990-91 1991-92 1992-93 1993-94 1994-95 1995-96 1996-97 1997-98 1998-99 1999-00 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14

Net Taxable Assessed Valuation(1) $705,240,804 845,573,192 996,143,642 1,150,000,096 1,325,064,019 1,613,951,515 1,950,219,659 2,361,233,353 2,705,173,168 3,004,816,676 3,458,808,087 4,066,267,071 4,785,658,683 5,008,867,818 5,264,323,288 5,369,664,654 5,633,310,044 5,519,732,821 5,670,991,826 6,071,384,930 6,834,807,435 7,840,832,331 8,835,826,535 9,934,162,483 10,946,068,421 12,147,885,540 13,769,261,533 15,700,200,929 16,915,530,309 17,373,242,979 16,870,431,378 16,405,193,388 15,839,768,134 15,508,326,796 16,010,629,622

Annual % Change -19.9% 17.8 15.4 15.2 21.8 20.8 21.1 14.6 11.1 15.1 17.6 17.7 4.7 5.1 2.0 4.9 (2.0) 2.7 7.1 12.6 14.7 12.7 12.4 10.2 11.0 13.4 14.0 7.7 2.7 (2.9) (2.8) (3.4) (2.1) 3.2

______________________ (1) Excludes assessed valuation from unitary utility roll, beginning in 1988-89. Source: California Municipal Statistics, Inc.

Accountability. The State Board of Education is required to promulgate regulations on or before January 31, 2014 regarding the expenditure of supplemental and concentration funding. These regulations will include a requirement that school districts increase or improve services for EL/LI students in proportion to the increase in funds apportioned to such districts on the basis of the number and concentration of such EL/LI students, as well as the conditions under which school districts can use supplemental or concentration funding on a school-wide or district-wide basis.

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School districts are also required to adopt local control and accountability plans (“LCAPs”) disclosing annual goals for all students, as well as certain numerically significant student subgroups, to be achieved in eight areas of State priority identified by the LCFF. LCAPs may also specify additional local priorities. LCAPs must specify the actions to be taken to achieve each goal, including actions to correct identified deficiencies with regard to areas of State priority. LCAPs are required to be adopted every three years, beginning in fiscal year 2014-15, and updated annually thereafter. The State Board of Education is required to develop and adopt a template LCAP on or before March 31, 2014 for use by school districts. Support and Intervention. AB 97, as amended by SB 91, establishes a new system of support and intervention to assist school districts to meet the performance expectations outlined in their respective LCAPs. School districts must adopt their LCAPs (or annual updates thereto) in tandem with their annual operating budgets, and not later than five days thereafter submit such LCAPs or updates to their respective county superintendents of schools. On or before August 15 of each year, a county superintendent may seek clarification regarding the contents of a district’s LCAP (or annual update thereto), and the district is required to respond to such a request within 15 days. Within 15 days of receiving such a response, the county superintendent can submit non-binding recommendations for amending the LCAP or annual update, and such recommendations must be considered by the respective school district at a public hearing within 15 days. A district’s LCAP or annual update must be approved by the county superintendent by October 8 of each year if the superintendent determines that (i) the LCAP or annual update adheres to the State template, and (ii) the district’s budgeted expenditures are sufficient to implement the actions and strategies outlined in the LCAP. A school district is required to receive additional support if its respective LCAP or annual update thereto is not approved, if the district requests technical assistance from its respective county superintendent, or if the district does not improve student achievement across more than one State priority for one or more student subgroups. Such support can include a review of a district’s strengths and weaknesses in the eight State priority areas, or the assignment of an academic expert to assist the district identify and implement programs designed to improve outcomes. Assistance may be provided by the California Collaborative for Educational Excellence, a state agency created by the LCFF and charged with assisting school districts achieve the goals set forth in their LCAPs. On or before October 1, 2015, the State Board of Education is required to develop rubrics to assess school district performance and the need for support and intervention. The State Superintendent of Public Instruction (the “State Superintendent”) is further authorized, with the approval of the State Board of Education, to intervene in the management of persistently underperforming school districts. The State Superintendent may intervene directly or assign an academic trustee to act on his or her behalf. In so doing, the State Superintendent is authorized (i) to modify a district’s LCAP, (ii) impose budget revisions designed to improve student outcomes, and (iii) stay or rescind actions of the local governing board that would prevent such district from improving student outcomes; provided, however, that the State Superintendent is not authorized to rescind an action required by a local collective bargaining agreement. Other State Sources. In addition to State allocations determined pursuant to the LCFF, the School District receives other State revenues consisting primarily of restricted revenues designed to implement State mandated programs. Beginning in fiscal year 2013-14, categorical spending restrictions associated with a majority of State mandated programs were eliminated, and funding for these programs was folded into the LCFF. Categorical funding for 14 programs was excluded from the LCFF— including, among others, child nutrition, after school education and safety, special education, and State preschool—and school districts will continue to receive restricted State revenues to fund these programs.

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Other Funding Sources Other Sources. The federal government provides funding for several school district programs, including specialized programs such as No Child Left Behind, special education programs, and programs under the Educational Consolidation and Improvement Act. In addition, a small part of a school district’s budget is from local sources other than property taxes, including but not limited to interest income, leases and rentals, educational foundations, donations and sales of property. Developer Fees. The School District maintains a fund, separate and apart from its general fund, to account for developer fees assessed by the School District on residential and commercial development. The following table lists the historical developer collections generated from fiscal year 1997-98 through fiscal year 2012-13 and the estimated collections amount for fiscal year 2013-14. DEVELOPER FEES Folsom Cordova Unified School District Fiscal Years 1997-98 through 2013-14 Fiscal Year

Developer Fees Collected

1997-98 1998-99 1999-00 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14(1)

$6,396,849 11,903,328 12,800,884 13,047,026 8,355,083 9,581,762 10,309,989 11,010,252 8,618,402 5,050,294 3,321,092 3,490,894 2,155,744 1,565,333 1,310,826 4,395,341 6,411,000

(1) Estimated Source: Folsom Cordova Unified School District.

Dissolution of Redevelopment Agencies On December 30, 2011, the California Supreme Court issued its decision in the case of California Redevelopment Association v. Matosantos (“Matosantos”), finding ABx1 26, a trailer bill to the 2011-12 State budget, to be constitutional. As a result, all Redevelopment Agencies in California ceased to exist as a matter of law on February 1, 2012. The Court in Matosantos also found that ABx1 27, a companion bill to ABx1 26, violated the California Constitution, as amended by Proposition 22. See “CONSTITUTIONAL AND STATUTORY PROVISIONS AFFECTING DISTRICT REVENUES AND APPROPRIATIONS – Proposition 1A and Proposition 22” herein. ABx1 27 would have permitted redevelopment agencies to continue operations provided their establishing cities or counties agreed to make specified payments to school districts and county offices of education, totaling $1.7 billion statewide.

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ABx1 26 was modified by Assembly Bill No. 1484 (Chapter 26, Statutes of 2011-12) (“AB 1484”), which, together with ABx1 26, is referred to herein as the “Dissolution Act.” The Dissolution Act provides that all rights, powers, duties and obligations of a redevelopment agency under the California Community Redevelopment Law that have not been repealed, restricted or revised pursuant to ABx1 26 will be vested in a successor agency, generally the county or city that authorized the creation of the redevelopment agency (each, a “Successor Agency”). All property tax revenues that would have been allocated to a redevelopment agency, less the corresponding county auditor-controller’s cost to administer the allocation of property tax revenues, are now allocated to a corresponding Redevelopment Property Tax Trust Fund (“Trust Fund”), to be used for the payment of pass-through payments to local taxing entities, and thereafter to bonds of the former redevelopment agency and any “enforceable obligations” of the Successor Agency, as well as to pay certain administrative costs. The Dissolution Act defines “enforceable obligations” to include bonds, loans, legally required payments, judgments or settlements, legal binding and enforceable obligations, and certain other obligations. Among the various types of enforceable obligations, the first priority for payment is tax allocation bonds issued by the former redevelopment agency; second is revenue bonds, which may have been issued by the host city, but only where the tax increment revenues were pledged for repayment and only where other pledged revenues are insufficient to make scheduled debt service payments; third is administrative costs of the Successor Agency, equal to at least $250,000 in any year, unless the oversight board reduces such amount for any fiscal year or a lesser amount is agreed to by the Successor Agency; then, fourth tax revenues in the Trust Fund in excess of such amounts, if any, will be allocated as residual distributions to local taxing entities in the same proportions as other tax revenues. Moreover, all unencumbered cash and other assets of former redevelopment agencies will also be allocated to local taxing entities in the same proportions as tax revenues. Notwithstanding the foregoing portion of this paragraph, the order of payment is subject to modification in the event a Successor Agency timely reports to the State Controller and the Department of Finance that application of the foregoing will leave the Successor Agency with amounts insufficient to make scheduled payments on enforceable obligations. If the county auditorcontroller verifies that the Successor Agency will have insufficient amounts to make scheduled payments on enforceable obligations, it shall report its findings to the State Controller. If the State Controller agrees there are insufficient funds to pay scheduled payments on enforceable obligations, the amount of such deficiency shall be deducted from the amount remaining to be distributed to taxing agencies, as described as the fourth distribution above, then from amounts available to the Successor Agency to defray administrative costs. In addition, if a taxing agency entered into an agreement pursuant to Health and Safety Code Section 33401 for payments from a redevelopment agency under which the payments were to be subordinated to certain obligations of the redevelopment agency, such subordination provisions shall continue to be given effect. As noted above, the Dissolution Act expressly provides for continuation of pass-through payments to local taxing entities. Per statute, 100% of contractual and statutory two percent passthroughs, and 56.7% of statutory pass-throughs authorized under the Community Redevelopment Law Reform Act of 1993 (AB 1290, Chapter 942, Statutes of 1993) (“AB 1290”), are restricted to educational facilities without offset against revenue limit apportionments by the State. Only 43.3% of AB 1290 passthroughs are offset against State aid so long as the School District uses the moneys received for land acquisition, facility construction, reconstruction, or remodeling, or deferred maintenance as provided under Education Code Section 42238(h). ABX1 26 states that in the future, pass-throughs shall be made in the amount “which would have been received had the redevelopment agency existed at that time,” and that the county auditor-controller shall “determine the amount of property taxes that would have been allocated to each redevelopment agency had the redevelopment agency not been dissolved pursuant to the operation of [ABX1 26] using

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current assessed values and pursuant to statutory [pass-through] formulas and contractual agreements with other taxing agencies.” Successor Agencies continue to operate until all enforceable obligations have been satisfied and all remaining assets of the Successor Agency have been disposed of. AB 1484 provides that once the debt of the Successor Agency is paid off and remaining assets have been disposed of, the Successor Agency shall terminate its existence and all pass-through payment obligations shall cease. The School District can make no representations as to the extent to which its revenue limit apportionments from the State may be offset by the future receipt of residual distributions or from unencumbered cash and assets of former redevelopment agencies any other surplus property tax revenues pursuant to the Dissolution Act. Financial Statements The School District’s general fund finances the legally authorized activities of the School District for which restricted funds are not provided. General fund revenues are derived from such sources as State school fund apportionments, taxes, use of money and property, and aid from other governmental agencies. Audited financial statements for the School District for the fiscal year ended June 30, 2013, and prior fiscal years are on file with the School District and available for public inspection at the office of the Chief Financial Officer/Chief Business Official of the School District, 1965 Birkmont Drive, Rancho Cordova, California, 95742, (916) 294-9004. Portions of the audited financial statements for the year ended June 30, 2013, are included in Appendix C hereto. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

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The following table reflects the School District’s general fund revenues, expenditures and fund balances for fiscal years 2008-09 through 2012-13. AUDITED GENERAL FUND REVENUES, EXPENDITURES AND FUND BALANCES Folsom Cordova Unified School District Fiscal Years 2008-09 through 2012-13

Revenues Revenue Limit Sources State Apportionments Local Sources Total Revenue Limit Sources Federal Sources Other State Sources Other Local Sources Total Revenues Expenditures Certificated Salaries Classified Salaries Employee Benefits Books and Supplies Contract Services and Operating Expenses Capital Outlay Debt Service Other Expenditures Total Expenditures EXCESS OF REVENUES OVER/ (UNDER) EXPENDITURES Other Financing Sources/(Uses) Operating Transfers In Operating Transfers Out Other Financing Sources (Uses) Total Other Financing Sources/(Uses) EXCESS OF REVENUES AND OTHER FINANCING SOURCES OVER/(UNDER) EXPENDITURES AND OTHER USES Fund Balance, July 1 Fund Balance, June 30

Audited Actuals Fiscal Year 2008-09

Audited Actuals Fiscal Year 2009-10

Audited Actuals Fiscal Year 2010-11

Audited Actuals Fiscal Year 2011-12

Audited Actuals Fiscal Year 2012-13

$60,307,552 42,891,305 103,198,857

$49,741,994 41,306,975 91,048,969

$57,520,259 39,046,702 96,296,961

$57,808,895 38,136,561 95,945,456

$60,306,553 37,104,245 97,410,798

13,090,326 25,557,799 5,175,051 147,022,033

11,218,544 29,601,519 5,027,825 136,896,857

11,315,138 29,136,849 5,097,021 141,845,969

11,038,361 29,261,962 5,263,473 141,509,252

7,282,703 29,403,316 5,700,001 139,796,818

74,249,958 25,433,982 24,581,472 6,006,849 12,302,305 569,289 1,044,177 -144,188,032

71,092,354 25,583,549 23,574,833 5,336,032 11,528,462 3,857,295 406,833 345,524 141,724,900

68,217,700 24,588,509 22,999,699 4,451,678 11,347,921 301,042 406,833 199,973 132,513,355

67,876,932 24,425,740 23,475,376 4,997,932 11,937,682 869,861 406,833 299,654 134,290,010

69,465,659 25,011,066 23,022,996 5,026,866 12,921,871 388,950 411,672 206,409 136,455,489

2,834,001

(4,828,043)

9,332,614

7,219,242

3,341,329

411,605 (1,000,000) -(588,395)

304,525 (1,971,312) 3,397,605 (1,730,818)

988,645 (2,036,620) -(1,047,975)

389,090 (2,061,795) -(1,672,705)

379,655 (1,986,772) 204,941 (1,402,176)

2,245,606)

(3,097,225)

8,284,639

5,546,537

1,939,153

19,405,206

21,650,812

18,553,587

26,838,226

32,384,763

$21,650,812

$18,553,587

$26,838,226

$32,384,763

$34,323,916

____________ Source: Folsom Cordova Unified School District.

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Budget Process State Budgeting Requirements. The School District is required by provisions of the State Education Code to maintain a balanced budget each year, in which the sum of expenditures and the ending fund balance cannot exceed the sum of revenues and the carry-over fund balance from the previous year. The State Department of Education imposes a uniform budgeting and accounting format for school districts. The budget process for school districts was substantially amended by Assembly Bill 1200 (“AB 1200”), which became State law on October 14, 1991. Portions of AB 1200 are summarized below. School districts must adopt a budget on or before July 1 of each year. The budget must be submitted to the county superintendent within five days of adoption or by July 1, whichever occurs first. A district may be on either a dual or single budget cycle. The dual budget option requires a revised and readopted budget by September 1 that is subject to State-mandated standards and criteria. The revised budget must reflect changes in projected income and expenses subsequent to July 1. The single budget is only readopted if it is disapproved by the county office of education, or as needed. The School District is on a single budget cycle and adopts its budget on or before July 1. For both dual and single budgets submitted on July 1, the county superintendent will examine the adopted budget for compliance with the standards and criteria adopted by the State Board of Education and identify technical corrections necessary to bring the budget into compliance, will determine if the budget allows the district to meet its current obligations and will determine if the budget is consistent with a financial plan that will enable the district to meet its multi-year financial commitments. On or before August 15, the county superintendent will approve, conditionally approve or disapprove the adopted budget for each school district. Budgets will be disapproved if they fail the above standards. The district board must be notified by August 15 of the county superintendent’s recommendations for revision and reasons for the recommendations. The county superintendent may assign a fiscal advisor or appoint a committee to examine and comment on the superintendent’s recommendations. The committee must report its findings no later than August 20. Any recommendations made by the county superintendent must be made available by the district for public inspection. No later than August 20, the county superintendent must notify the Superintendent of Public Instruction of all school districts whose budget has been disapproved. For all dual budget options and for single and dual budget option districts whose budgets have been disapproved, the district must revise and readopt its budget by September 8, reflecting changes in projected income and expense since July 1, including responding to the county superintendent’s recommendations. The county superintendent must determine if the budget conforms with the standards and criteria applicable to final district budgets and not later than October 8, will approve or disapprove the revised budgets. If the budget is disapproved, the county superintendent will call for the formation of a budget review committee pursuant to Education Code Section 42127.1. Until a district’s budget is approved, the district will operate on the lesser of its proposed budget for the current fiscal year or the last budget adopted and reviewed for the prior fiscal year. Interim Financial Reports. Under the provisions of AB 1200, each school district is required to file interim certifications with the county office of education as to its ability to meet its financial obligations for the remainder of the then-current fiscal year and, based on current forecasts, for the subsequent fiscal year. The county office of education reviews the certification and issues either a positive, negative or qualified certification. A positive certification is assigned to any school district that will meet its financial obligations for the current fiscal year and subsequent two fiscal years. A negative certification is assigned to any school district that will be unable to meet its financial obligations for the remainder of the current fiscal year or the subsequent fiscal year. A qualified certification is assigned to

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any school district that may not meet its financial obligations for the current fiscal year or two subsequent fiscal years. The School District has never had an adopted budget disapproved by the County superintendent of schools. The School District self-certified as “qualified” its second interim financial report for fiscal year 2008-09 and each of its first and second interim financial reports for fiscal years 2009-10 through 2012-13. In its first interim financial report for fiscal year 2013-14, the School District will be reporting a positive certification. The School District attributes recent fiscal improvement to the passage of Proposition 30 by the voters in November 2012 and the new LCFF formula which will bring funding levels back to pre-recession levels over the next eight years. General Fund Budget The School District’s general fund adopted budgets for fiscal years 2009-10 through 2013-14, general fund actual and audited results for the fiscal years 2009-10 through 2012-13, and first interim financial report for fiscal year 2013-14 are set forth in the following table. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

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GENERAL FUND BUDGETS AND AUDITED ACTUALS Folsom Cordova Unified School District Fiscal Years Ending June 30, 2010 through June 30, 2014

Fiscal Year 2009-10

Fiscal Year 2010-11

Fiscal Year 2011-12

Fiscal Year 2012-13

Fiscal Year 2013-14

Adopted Budget

Audit

Adopted Budget

Audit

Adopted Budget

Audit

Adopted Budget

REVENUES Revenue Limit Sources Federal Revenue Other State Revenues Other Local Revenues TOTAL REVENUES

$90,903,432 11,696,003 26,222,880 3,691,592 132,513,907

$91,048,969 11,218,544 29,601,519 5,027,825 136,896,857

$91,229,543 9,074,813 27,089,905 3,589,607 130,983,868

$96,296,961 11,315,138 29,136,849 5,097,021 141,845,969

$84,181,772 10,049,430 26,490,528 2,521,278 123,243,008

$95,945,456 11,038,361 29,261,962 5,263,473 141,509,252

$88,941,284 7,443,465 27,484,680 3,968,035 127,837,464

$97,410,798 7,282,703 29,403,316 5,700,001 139,796,818

$100,147,282 7,514,089 29,517,539 4,631,624 141,810,534

EXPENDITURES Certificated Salaries Classified Salaries Employee Benefits Books and Supplies Services and Other Operating Expenses Capital Outlay Debt Service Other Outgo Direct Support/Indirect Costs Total Expenditures

72,573,579 26,205,348 24,720,982 7,406,539 14,543,660 220,152 -409,045 (298,701) 145,780,604

71,092,354 25,583,549 23,574,833 5,336,032 11,528,462 3,857,295 406,833 345,524 -141,724,900

69,603,914 24,516,187 23,013,918 5,222,007 12,613,384 258,016 -902,632 (255,261) 135,874,797

68,217,700 24,588,509 22,999,699 4,451,678 11,347,921 301,042 406,833 199,973 -132,513,355

65,638,414 23,250,363 23,235,865 4,581,138 10,596,517 189,962 -652,078

67,876,932 24,425,740 23,475,376 4,997,932 11,937,682 869,861 406,833 299,654

70,341,200 24,484,024 23,748,951 4,710,957 13,361,519 81,265 -755,046

64,465,659 25,011,066 23,022,996 5,026,866 12,921,871 388,950 411,672 206,409 -136,455,489

70,682,732 24,876,610 23,159,100 5,409,044 15,503,777 157,767 -656,040 (332,137) 140,112,933

Excess (Deficiency) Of Revenues Over Expenditures

(13,266,697)

(4,828,043)

(4,890,929)

9,332,614

(4,649,307)

7,219,242

(9,387,957)

3,341,329

1,697,601

2,198,017

(923,124)

(1,730,818)

(641,715)

(1,047,975)

(1,180,979)

(1,672,705)

(1,350,623)

(1,402,176)

(1,690,582)

(1,307,901)

(14,189,821)

(3,097,225)

(5,532,644)

8,284,639

(5,830,286)

5,546,537

(10,738,580)

1,939,153

7,019

890,116

24,257,776

21,650,812

16,235,237

18,553,587

26,030,378

26,838,226

31,541,735

32,384,763

34,323,916

34,323,916

$10,067,954

$18,553,587

$10,702,593

$26,838,226

$20,200,092

$32,384,763

$20,803,155

$34,323,916

$34,330,935

$35,214,032

Other Financing Sources/Uses Net Increase (Decrease) In Fund Balance Beginning Fund Balance (July 1) Ending Fund Balance (June 30)

____________ Source: Folsom Cordova Unified School District.

73

(252,021)

127,892,316

--

134,290,010

(257,541)

137,225,421

Audit

Adopted Budget

First Interim Financial Report $113,689,374 7,970,027 19,759,210 4,969,316 146,387,927 71,859,590 25,285,799 23,246,258 7,329,525 13,904,398 326,450 -2,575,408 (337,518) 144,189,910

Accounting Practices The accounting policies of the School District conform to generally accepted accounting principles in accordance with policies and procedures of the California School Accounting Manual. This manual, according to Section 41010 of the California Education Code, is to be followed by all California school districts. Revenues are recognized in the period in which they become both measurable and available to finance expenditures of the current fiscal period. Expenditures are recognized in the period in which the liability is incurred. School District Debt Structure Changes in Long-Term Debt. A schedule of changes in long-term liabilities for the fiscal year ended June 30, 2013 is shown below: SCHEDULE OF LONG TERM DEBT as of June 30, 2013 Folsom Cordova Unified School District

Certificates of Participation General Obligation Bonds Accreted Interest on General Obligation Bonds Capital Lease Net OPEB obligation Compensated Absences Total

Balance July 1, 2012

Additions

$26,602,349 178,004,649 27,055,801 2,421,268 27,982,309 896,472

--$5,172,145 204,942 2,704,238 --

$2,500,000 6,128,976 436,025 348,124 695,150 37,776

$24,102,349 171,875,673 31,791,922 2,278,086 29,991,396 858,696

$262,962,848

$8,081,325

$10,146,051

$260,898,123

Deductions

Balance June 30, 2013

Source: Folsom Cordova Unified School District.

Certificates of Participation. On June 1, 1998, the School District caused its Certificates of Participation (1998 Financing Project) (the “1998 Certificates”) to be executed and delivered in the principal amount of $15,245,000 to refund outstanding leases and certificates of participation, construct portions of Sutter Middle School, and to acquire land and various items of equipment. A portion of the 1998 Certificates was called and redeemed on September 1, 2003. On January 25, 2007, the School District caused its Certificates of Participation (2007 Financing Project) (the “2007 Certificates”) to be executed and delivered in the principal amount of $35,860,000 to finance the construction of Russell Ranch Elementary School, complete construction of Vista Del Lago High School, finance a portion of the interest evidenced by the 2007 Certificates, and to purchase a debt service reserve fund surety.

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The current annual lease payments for the School District’s certificates of participation are as follows: ANNUAL LEASE PAYMENTS Folsom Cordova Unified School District Certificates of Participation Year 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024

1998 Certificates(1) $163,143.76 158,275.00 158,406.26 158,281.26 157,900.00 162,262.50 160,962.50 159,400.00 157,575.00 160,487.50 157,875.00

Total

$1,754,568.78

2007 Certificates(2) $3,396,722.50 3,399,407.50 3,396,032.50 3,400,345.00 3,397,232.50 3,396,432.50 3,396,032.50 3,396,920.00 ---$27,179,125.00

Total $3,559,866.26 3,557,682.50 3,554,438.76 3,558,626.26 3,555,132.50 3,558,695.00 3,556,995.00 3,556,320.00 157,575.00 160,487.50 157,875.00 $28,933,693.78

____________ (1) Semi-annual payments of interest with respect to the 1998 Certificates due on September 1 and March 1 of each year; annual payments of principal and interest due on March 1 of each year. (2) Semi-annual payments of interest with respect to the 2007 Certificates due on April 1 and October 1 of each year; annual payments of principal and interest due on April 1 of each year. Source: Folsom Cordova Unified School District.

Improvement District No. 1 General Obligation Bonds. Pursuant to the Improvement District No. 1 1997 Authorization, the voters of Improvement District No. 1 authorized the issuance of not to exceed $10,400,000 of general obligation bonds of Improvement District No. 1. In April 1998, the School District and the County issued on behalf of Improvement District No. 1 the first series of bonds under the Improvement District No. 1 1997 Authorization in the aggregate principal amount of $10,396,454.85 (the “Improvement District No. 1 1997 Series A Bonds”). The Improvement District No. 1 1997 Series A Bonds were the first and only series of bonds issued pursuant to the, and constituted substantially all of the remaining, Improvement District No. 1 1997 Authorization. Pursuant to the Improvement District No. 1 2002 Authorization, the voters of Improvement District No. 2 authorized the issuance of not to exceed $49,000,000 of general obligation bonds of Improvement District No. 2. In July 2002, the School District and the County issued on behalf of Improvement District No. 1 the Improvement District No. 1 2002 Series A Bonds, the first series of bonds under the Improvement District No. 1 2002 Authorization, in the aggregate principal amount of $17,995,749.60, a portion of which are Refunded Bonds. In December 2004, the School District and the County issued on behalf of Improvement District No. 1 the Improvement District No. 1 2002 Series B Bonds, the second series of bonds under the Improvement District No. 1 2002 Authorization, in the aggregate principal amount of $30,998,849.20, a portion of which are Refunded Bonds. The Improvement District No. 1 2002 Series B Bonds were the second and final series of bonds issued pursuant to the, and constituted substantially all of the remaining, Improvement District No. 1 2002 Authorization. See “APPLICATION OF PROCEEDS OF BONDS - Application and Investment of Refunding Bonds Proceeds, Improvement District No. 1 Refunding Bonds” and “IMPROVEMENT DISTRICT NO. 1 - General Description” herein.

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The following tables illustrate the debt service requirements on the outstanding general obligation bonds for Improvement District No. 1 (assuming no optional redemptions): OUTSTANDING GENERAL OBLIGATION BONDED DEBT SERVICE Folsom Cordova Unified School District Improvement District No. 1

Year Ending (October 1) 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 Total

Improvement Improvement Improvement Improvement District No. 1 District No. 1 District No. 1 District No. 1 1997 Series A Bonds(1) 2002 Series A Bonds(2) (3) 2002 Series B Bonds(2) (4) Refunding Bonds(5) $890,000.00 915,000.00 935,000.00 960,000.00 985,000.00 1,010,000.00 1,035,000.00 1,060,000.00 1,085,000.00 -------$8,875,000.00

---$1,225,000.00 1,260,000.00 1,300,000.00 1,340,000.00 1,380,000.00 1,425,000.00 1,465,000.00 1,505,000.00 1,555,000.00 1,600,000.00 1,650,000.00 --$15,705,000.00

$1,376,550.00 --------2,650,000.00 2,715,000.00 2,785,000.00 2,855,000.00 2,925,000.00 3,000,000.00 3,075,000.00 $21,381,550.00

$1,861,125.41 2,984,137.50 3,077,537.50 2,038,737.50 2,089,737.50 2,141,987.50 2,192,487.50 2,250,987.50 2,306,737.50 -------$20,943,475.41

Combined Debt Service $4,127,675.41 3,899,137.50 4,012,537.50 4,223,737.50 4,334,737.50 4,451,987.50 4,567,487.50 4,690,987.50 4,816,737.50 4,115,000.00 4,220,000.00 4,340,000.00 4,455,000.00 4,575,000.00 3,000,000.00 3,075,000.00 $66,905,025.41

____________________ Semi-annual payments of interest with respect to the Improvement District No. 1 1997 Series A Bonds due on April 1 and October 1 of each year; annual payments of principal due on October 1 of each year. (2) Excludes debt service on such Bonds to be refinanced with proceeds of the Improvement District No. 1 Refunding Bonds. (3) Semi-annual payments of interest with respect to the Improvement District No. 1 2002 Series A Bonds due April 1 and October 1 of each year; annual payments of principal due on October 1 of each year, except the annual payment of principal due in 2027 shall be due on July 1 of that year. (4) Semi-annual payments of interest with respect to the Improvement District No. 1 2002 Series B Bonds due on April 1 and October 1 of each year; annual payments of principal due on October 1 of each year. (5) Semi-annual payments of interest with respect to the Improvement District No. 1 Refunding Bonds due April 1 and October 1 of each year; annual payments of principal due on October 1 of each year. (1)

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Improvement District No. 2 General Obligation Bonds. Pursuant to the Improvement District No. 2 Authorization, the voters of Improvement District No. 2 authorized the issuance of not to exceed $53,000,000 of general obligation bonds of Improvement District No. 2. In July 2002, the School District and the County issued on behalf of Improvement District No. 2 the Improvement District No. 2 Series A Bonds, the first series of bonds under the Improvement District No. 2 Authorization, in the aggregate principal amount of $36,966,422.10, a portion of which are Refunded Bonds. In December 2004, the School District and the County issued on behalf of Improvement District No. 2 the Improvement District No. 2 Series B Bonds, the second series of bonds under the Improvement District No. 2 Authorization, in the aggregate principal amount of $16,000,000, a portion of which are Refunded Bonds. The Improvement District No. 2 2002 Series B Bonds were the second and final series of bonds issued pursuant to the, and constituted substantially all of the remaining, Improvement District No. 2 2002 Authorization. See “APPLICATION OF PROCEEDS OF BONDS - Application and Investment of Refunding Bonds Proceeds, Improvement District No. 2 Refunding Bonds” and “IMPROVEMENT DISTRICT NO. 2 - General Description” herein. The following tables illustrate the debt service requirements on the outstanding general obligation bonds for Improvement District No. 2 (assuming no optional redemptions): OUTSTANDING GENERAL OBLIGATION BONDED DEBT SERVICE Folsom Cordova Unified School District Improvement District No. 2

Year Ending (October 1) 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 Total

Improvement District No. 2 Series A Bonds(1)(2) ----$2,810,000.00 2,865,000.00 2,920,000.00 2,980,000.00 3,040,000.00 3,100,000.00 3,165,000.00 3,230,000.00 3,290,000.00 3,360,000.00 --$30,760,000.00

Improvement District No. 2 Series B Bonds(2)(3) $455,400.00 ---------------$455,400.00

Improvement District No. 2 Refunding Bonds(4) $3,202,885.00 3,357,450.00 3,425,450.00 3,486,050.00 1,059,300.00 1,082,300.00 1,108,500.00 1,126,250.00 1,151,500.00 1,173,750.00 1,198,000.00 1,219,000.00 1,241,750.00 1,266,000.00 1,291,500.00 1,323,000.00 $27,712,685.00

Combined Debt Service $3,658,285.00 3,357,450.00 3,425,450.00 3,486,050.00 3,869,300.00 3,947,300.00 4,028,500.00 4,106,250.00 4,191,500.00 4,273,750.00 4,363,000.00 4,449,000.00 4,531,750.00 4,626,000.00 1,291,500.00 1,323,000.00 $58,928,085.00

____________________ Semi-annual payments of interest with respect to the Improvement District No. 1 2002 Series A Bonds due April 1 and October 1 of each year; annual payments of principal due on October 1 of each year, except the annual payment of principal due in 2027 shall be due on July 1 of that year. (2) Excludes debt service on such Bonds to be refinanced with proceeds of the Improvement District No. 2 Refunding Bonds. (3) Semi-annual payments of interest with respect to the Improvement District No. 2 Series B Bonds due on April 1 and October 1 of each year; annual payments of principal due on October 1 of each year. (4) Semi-annual payments of interest with respect to the Improvement District No. 2 Refunding Bonds due on April 1 and October 1 of each year; annual payments of principal due on October 1 of each year. (1)

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Improvement District No. 3 General Obligation Bonds. The Folsom Cordova Unified School District School Facilities Improvement District No. 3 (“Improvement District No. 3”) received authorization at an election held on March 27, 2007, to issue not to exceed $750,000,000 of general obligation bonds (the “Improvement District No. 3 Authorization”). On November 8, 2007, the School District and the County issued on behalf of Improvement District No. 3 the first series of bonds under the Improvement District No. 3 Authorization in the aggregate principal amount $24,998,630.35 (the “Improvement District No. 3 Series A Bonds”). On December 3, 2009, the School District and the County issued on behalf of Improvement District No. 3 the second series of bonds under the Improvement District No. 3 Authorization, a portion of which bonds were tax-exempt and issued in the aggregate principal amount of $10,550,225.55 (the “Improvement District No. 3 Series B Bonds”), and the remainder of which bonds were federally taxable Build America Bonds and issued in the aggregate principal amount of $8,585,000.00 (the “Improvement District No. 3 Series B-1 Bonds”). Following the issuance of the Improvement District No. 3 Series B Bonds and the Improvement District No. 3 Series B1 Bonds, $705,866,144.10 of the Improvement District No. 3 Authorization remains. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

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The following table illustrates the debt service requirements on the outstanding general obligation bonds for Improvement District No. 3 (assuming no optional redemptions): OUTSTANDING GENERAL OBLIGATION BONDED DEBT SERVICE Folsom Cordova Unified School District Improvement District No. 3 Improvement Improvement District No. 3 District No. 3 Series B Bonds(2) Series B-1 Bonds(3)

Combined Debt Service

$1,202,275.00 1,318,775.00 1,357,025.00 1,569,750.00 1,775,000.00 2,015,000.00 2,155,000.00 2,450,000.00 2,630,000.00 2,875,000.00 2,945,000.00 3,055,000.00 2,985,000.00 2,980,000.00 2,875,000.00 2,825,000.00 2,725,000.00 2,785,000.00 2,810,000.00 ---

$20,000.00 -50,000.00 -190,000.00 220,000.00 580,000.00 ----2,565,000.00 3,025,000.00 3,050,000.00 3,425,000.00 3,400,000.00 3,745,000.00 3,850,000.00 4,365,000.00 6,980,000.00 4,885,000.00

$586,352.30 586,352.30 586,352.30 586,352.30 586,352.30 586,352.30 586,352.30 1,331,352.30 1,804,879.20 2,019,071.00 2,527,078.20 213,033.60 213,033.60 213,033.60 213,033.60 213,033.60 213,033.60 213,033.60 213,033.60 213,033.60 3,058,033.60

$1,808,627.30 1,905,127.30 1,993,377.30 2,156,102.30 2,551,352.30 2,821,352.30 3,321,352.30 3,781,352.30 4,434,879.20 4,894,071.00 5,472,078.20 5,833,033.60 6,223,033.60 6,243,033.60 6,513,033.60 6,438,033.60 6,683,033.60 6,848,033.60 7,388,033.60 7,193,033.60 7,943,033.60

$45,332,825.00

$40,350,000.00

$16,762,182.80

$102,445,007.80

Year Ending (October 1)

Improvement District No. 3 Series A Bonds(1)

2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 Total

____________________ (1) Semi-annual payments of interest with respect to the Improvement District No. 3 Series A Bonds due on April 1 and October 1 of each year; annual payments of principal due on October 1 of each year. (2) Semi-annual payments of interest with respect to the Improvement District No. 3 Series B Bonds due on April 1 and October 1 of each year; annual payments of principal due on October 1 of each year. (3) Semi-annual payments of interest with respect to the Improvement District No. 3 Series B-1 Bonds due on April 1 and October 1 of each year; annual payments of principal due on October 1 of each year, without regard to federal subsidy.

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Improvement District No. 4 General Obligation Bonds. The Folsom Cordova Unified School District School Facilities Improvement District No. 4 (“Improvement District No. 4”) received authorization at an election held on November 7, 2006, to issue not to exceed $125,000,000 of general obligation bonds (the “Improvement District No. 4 2006 Authorization”). On November 8, 2007, the School District and the County issued on behalf of Improvement District No. 4 the first series of bonds under the Improvement District No. 4 2006 Authorization in the aggregate principal amount $39,995,205.05 (the “Improvement District No. 4 2006 Series A Bonds”). On December 3, 2009, the School District and the County issued on behalf of Improvement District No. 4 the second series of bonds under the Improvement District No. 4 2006 Authorization, a portion of which bonds were tax-exempt and issued in the aggregate principal amount of $2,628,625.65 (the “Improvement District No. 4 2006 Series B Bonds”), and the remainder of which bonds were federally taxable Build America Bonds and issued in the aggregate principal amount of $22,375,000.00 (the “Improvement District No. 4 2006 Series B-1 Bonds”). Following the issuance of the Improvement District No. 4 Series B Bonds and the Improvement District No. 4 Series B-1 Bonds, $60,001,169.30 of the Improvement District No. 4 2006 Authorization remains. Improvement District No. 4 received authorization at an election held on November 6, 2012, to issue not to exceed $68,000,000 of general obligation bonds (the “Improvement District No. 4 2012 Authorization”). Concurrently with the issuance of the Bonds, the School District shall issue the Folsom Cordova Unified School District School Facilities District No. 4 (Sacramento County, California) Election of 2012 General Obligation Bonds, Series A (the “Improvement District No. 4 Series A Bonds”) in order to: (i) to finance the renovation, acquisition, construction, repair, and equipping of classrooms, schools, sites, and facilities and costs related thereto, as approved by the voters, for schools in Improvement District No. 4 pursuant to the Improvement District No. 4 2012 Authorization, and (ii) pay the costs of issuing the Improvement District No. 4 Bonds. The Improvement District No. 4 2012 Series A Bonds are the first issuance of bonds under the Improvement District No. 4 2012 Authorization, and following the issuance thereof, $43,000,000 of the Improvement District No. 4 2012 Authorization will remain. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

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The following table illustrates the debt service requirements on the outstanding general obligation bonds for Improvement District No. 4 (assuming no optional redemptions): OUTSTANDING GENERAL OBLIGATION BONDED DEBT SERVICE Folsom Cordova Unified School District Improvement District No. 4

Year Ending (October 1)

Improvement District No. 4 2006 Series A Bonds(1)

Improvement District No. 4 2006 Series B Bonds(2)

Improvement District No. 4 2006 Series B-1 Bonds(3)

Improvement District No. 4 2012 Series A Bonds(4)

Combined Debt Service

2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038

$1,950,850.00 2,066,100.00 2,187,850.00 2,320,350.00 2,462,600.00 2,608,600.00 2,763,500.00 2,930,250.00 3,102,750.00 3,290,000.00 3,490,000.00 3,700,000.00 3,920,000.00 4,160,000.00 4,410,000.00 4,675,000.00 4,950,000.00 5,250,000.00 5,560,000.00 -------

$134,050.00 145,750.00 157,000.00 167,800.00 171,600.00 --------------215,000.00 8,895,000.00 -----

$1,640,396.26 1,640,396.26 1,640,396.26 1,640,396.26 1,640,396.26 1,850,396.26 1,923,346.46 2,000,829.36 2,076,891.16 2,161,079.96 2,237,130.06 2,325,056.46 2,411,889.06 2,497,639.66 2,586,569.46 2,682,570.26 2,784,164.46 2,882,686.96 2,988,929.56 8,386,014.00 ------

$3,166,576.67 2,795,100.00 1,021,900.00 1,021,900.00 1,021,900.00 1,021,900.00 1,021,900.00 1,021,900.00 1,021,900.00 1,021,900.00 1,551,900.00 1,615,400.00 1,679,400.00 1,748,650.00 1,817,650.00 1,886,150.00 1,964,350.00 2,042,750.00 2,123,250.00 2,211,500.00 2,296,750.00 2,388,750.00 2,486,750.00 2,585,000.00 2,688,000.00

$6,891,872.93 6,647,346.26 5,007,146.26 5,150,446.26 5,296,496.26 5,480,896.26 5,708,746.46 5,952,979.36 6,201,541.16 6,472,979.96 7,279,030.06 7,640,456.46 8,011,289.06 8,406,289.66 8,814,219.46 9,243,720.26 9,698,514.46 10,175,436.96 10,672,179.56 10,812,514.00 11,191,750.00 2,388,750.00 2,486,750.00 2,585,000.00 2,688,000.00

$65,797,850.00

$9,886,200.00

$49,997,174.44

$45,223,126.67

Total

$170,904,351.11

____________________ Semi-annual payments of interest with respect to the Improvement District No. 4 2006 Series A Bonds due on April 1 and October 1 of each year; annual payments of principal due on October 1 of each year. (2) Semi-annual payments of interest with respect to the Improvement District No. 4 2006 Series B Bonds due on April 1 and October 1 of each year; annual payments of principal due on October 1 of each year. (3) Semi-annual payments of interest with respect to the Improvement District No. 4 2006 Series B-1 Bonds due on April 1 and October 1 of each year; annual payments of principal due on October 1 of each year, without regard to federal subsidy. (4) Semi-annual payments of interest with respect to the Improvement District No. 4 2012 Series A Bonds due on April 1 and October 1 of each year; annual payments of principal due on October 1 of each year. (1)

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Capital Lease. In May 2010, the School District entered into a capital lease (the “2010 Capital Lease”) for the acquisition of 23 buses, totaling $3,397,605. The current annual lease payments for the 2010 Capital Lease are as follows: ANNUAL LEASE PAYMENTS Folsom Cordova Unified School District 2010 Capital Lease Year 2014 2015 2016 2017 2018-19

Payments $406,833 406,833 406,833 406,833 813,666

Total

$2,440,998

____________ Source: Folsom Cordova Unified School District.

General. For further information about the School District’s long-term liabilities for the fiscal year ended June 30, 2013, see “APPENDIX C – EXCERPTS FROM THE 2012-13 AUDITED FINANCIAL STATEMENTS OF THE SCHOOL DISTRICT– Notes to Financial Statements, Note 5, Long-Term Liabilities” herein. TAX MATTERS In the opinion of Stradling Yocca Carlson & Rauth, a Professional Corporation, San Francisco, California (“Bond Counsel”), under existing statutes, regulations, rulings and judicial decisions, and assuming the accuracy of certain representations and compliance with certain covenants and requirements described herein, interest on the Bonds is excluded from gross income for federal income tax purposes and is not an item of tax preference for purposes of calculating the federal alternative minimum tax imposed on individuals and corporations. In the further opinion of Bond Counsel, interest on the Bonds is exempt from State of California personal income tax. Bond Counsel notes that, with respect to corporations, interest on the Bonds may be included as an adjustment in the calculation of alternative minimum taxable income which may affect the alternative minimum tax liability of corporations. The difference between the issue price of a Bond (the first price at which a substantial amount of the Bonds of the same series and maturity is to be sold to the public) and the stated redemption price at maturity with respect to such Bond constitutes original issue discount. Original issue discount accrues under a constant yield method, and original issue discount will accrue to a Bond Owner before receipt of cash attributable to such excludable income. The amount of original issue discount deemed received by the Bond Owner will increase the Bond Owner’s basis in the Bond. In the opinion of Bond Counsel, the amount of original issue discount that accrues to the owner of the Bond is excluded from the gross income of such owner for federal income tax purposes, is not an item of tax preference for purposes of the federal alternative minimum tax imposed on individuals and corporations, and is exempt from State of California personal income tax.

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Bond Counsel’s opinion as to the exclusion from gross income of interest (and original issue discount) on the Bonds is based upon certain representations of fact and certifications made by the School District and others and is subject to the condition that the School District complies with all requirements of the Internal Revenue Code of 1986, as amended (the “Code”), that must be satisfied subsequent to the issuance of the Bonds to assure that interest (and original issue discount) on the Bonds will not become includable in gross income for federal income tax purposes. Failure to comply with such requirements of the Code might cause the interest (and original issue discount) on the Bonds to be included in gross income for federal income tax purposes retroactive to the date of issuance of the Bonds. The School District has covenanted to comply with all such requirements. The amount by which a Bond Owner’s original basis for determining loss on sale or exchange in the applicable Bond (generally, the purchase price) exceeds the amount payable on maturity (or on an earlier call date) constitutes amortizable Bond premium, which must be amortized under Section 171 of the Code; such amortizable Bond premium reduces the Bond Owner’s basis in the applicable Bond (and the amount of tax-exempt interest received), and is not deductible for federal income tax purposes. The basis reduction as a result of the amortization of Bond premium may result in a Bond Owner realizing a taxable gain when a Bond is sold by the Owner for an amount equal to or less (under certain circumstances) than the original cost of the Bond to the Owner. Purchasers of the Bonds should consult their own tax advisors as to the treatment, computation and collateral consequences of amortizable Bond premium. The Internal Revenue Service (the “IRS”) has initiated an expanded program for the auditing of tax-exempt bond issues, including both random and targeted audits. It is possible that the Bonds will be selected for audit by the IRS. It is also possible that the market value of the Bonds might be affected as a result of such an audit of the Bonds (or by an audit of similar bonds). No assurance can be given that in the course of an audit, as a result of an audit, or otherwise, Congress or the IRS might not change the Code (or interpretation thereof) subsequent to the issuance of the Bonds to the extent that it adversely affects the exclusion from gross income of interest on the Bonds or their market value. Subsequent to the issuance of the Bonds, there might be federal, state or local statutory changes (or judicial or regulatory interpretations of federal, state or local law) that affect the federal, state or local tax treatment of the interest on the Bonds or the market value of the Bonds. Legislative changes have been proposed in Congress, which, if enacted, would result in additional federal income tax being imposed on certain owners of tax-exempt state or local obligations such as the Bonds. The introduction or enactment of any such changes could adversely affect the market value or liquidity of the Bonds. No assurance can be given that subsequent to the issuance of the Bonds such changes (or other changes) will not be introduced or enacted or interpretations will not occur. Before purchasing any of the Bonds, all potential purchasers should consult their tax advisors regarding possible statutory changes or judicial or regulatory changes or interpretations, and their collateral tax consequences relating to the Bonds. Bond Counsel’s opinions may be affected by actions taken (or not taken) or events occurring (or not occurring) after the date hereof. Bond Counsel has not undertaken to determine, or to inform any person, whether any such actions or events are taken or do occur. The Bond Resolutions and the Tax Certificate relating to the Bonds permit certain actions to be taken or to be omitted if a favorable opinion of bond counsel is provided with respect thereto. Bond Counsel expresses no opinion as to the effect on the exclusion from gross income of interest (and original issue discount) on the Bonds for federal income tax purposes with respect to any Bond if any such action is taken or omitted based upon the advice of counsel other than Stradling Yocca Carlson & Rauth.

84

Although Bond Counsel has rendered an opinion that interest (and original issue discount) on the Bonds is excluded from gross income for federal income tax purposes provided that the School District continues to comply with certain requirements of the Code, the ownership of the Bonds and the accrual or receipt of interest (and original issue discount) with respect to the Bonds may otherwise affect the tax liability of certain persons. Bond Counsel expresses no opinion regarding any such tax consequences. Accordingly, before purchasing any of the Bonds, all potential purchasers should consult their tax advisors with respect to collateral tax consequences relating to the Bonds. The proposed forms of opinions of Bond Counsel for the Bonds are included in Appendix E hereto. LEGAL MATTERS Continuing Disclosure The School District has covenanted for the benefit of holders and Beneficial Owners of the Bonds to provide certain financial information and operating data relating to the School District and each of Improvement District No. 1 and Improvement District No. 2 (each an “Annual Report”) by not later than eight months following the end of the School District’s fiscal years (which shall be March 1 of each year, so long as the School District’s fiscal year ends on June 30), commencing with the report for the 2013-14 fiscal year, and to provide notices of the occurrence of certain enumerated events. The Annual Reports and notices of material events will be filed by the School District with the Municipal Securities Rulemaking Board. The specific nature of the information to be made available and of the notices of material events is summarized in “APPENDIX F – FORM OF CONTINUING DISCLOSURE CERTIFICATE FOR THE IMPROVEMENT DISTRICT NO. 1 REFUNDING BONDS AND THE IMPROVEMENT DISTRICT NO. 2 REFUNDING BONDS,” attached hereto. These covenants have been made in order to assist the Underwriter in complying with S.E.C. Rule 15c2-12(b)(5) (the “Rule”). Within the past five years, from time to time, the School District has failed to file its Annual Reports in compliance with certain of its previous continuing disclosure undertakings under the Rule in a timely manner. The School District has since filed all such Annual Reports, and is currently in compliance with all existing continuing disclosure obligations. Legality for Investment in California Under provisions of the California Financial Code, the Bonds are legal investments for commercial banks in California to the extent that the Bonds, in the informed opinion of the bank, are prudent for the investment of funds of depositors, and under provisions of the California Government Code, are eligible for security for deposits of public moneys in California. Absence of Material Litigation No litigation is pending or threatened concerning the validity of the Bonds, and a certificate or certificates to that effect will be furnished to purchasers at the time of the original delivery of the Bonds. The School District is not aware of any litigation pending or threatened questioning the political existence of the Improvement Districts or the School District or contesting the Improvement Districts’ ability to levy ad valorem taxes for payment of the Bonds or contesting the School District’s ability to request the issuance the Bonds.

85

The School District is occasionally subject to lawsuits and claims in the ordinary course of its operations. In the opinion of the School District, the aggregate amount of the uninsured liabilities of the School District under these lawsuits and claims will not materially affect the finances of the School District or the Improvement Districts’ ability to levy ad valorem taxes for payment of the Bonds. Information Reporting Requirements On May 17, 2006, the President signed the Tax Increase Prevention and Reconciliation Act of 2005 (the “TIPRA”). Under Section 6049 of the Internal Revenue Code of 1986, as amended by TIPRA, interest paid on tax-exempt obligations will be subject to information reporting in a manner similar to interest paid on taxable obligations. The effective date for this provision is for interest paid after December 31, 2005, regardless of when the tax-exempt obligations were issued. The purpose of this change was to assist in relevant information gathering for the IRS relating to other applicable tax provisions. TIPRA provides that backup withholding may apply to such interest payments made after March 31, 2007 to any Owner who fails to file an accurate Form W-9 or who meets certain other criteria. The information reporting and backup withholding requirements of TIPRA do not affect the excludability of such interest from gross income for federal income tax purposes. Financial Statements Excerpts from the financial statements with supplemental information for the year ended June 30, 2013, the independent auditor’s report of the School District, and the related statements of activities and of cash flows for the year then ended, and the report dated December 12, 2013 of Crowe Horwarth LLP, independent accountants (the “Auditor”), are included in this Official Statement as Appendix C. In connection with the inclusion of the financial statements and the report of the Auditor thereon in Appendix C to this Official Statement, the School District did not request the Auditor to, and the Auditor has not undertaken to, update its report or to take any action intended or likely to elicit information concerning the accuracy, completeness or fairness of the statements made in this Official Statement, and no opinion is expressed by the Auditor with respect to any event subsequent to the date of its report. Certain Legal Matters The validity of the Bonds and certain other legal matters are subject to the approving opinion of Stradling Yocca Carlson & Rauth, a Professional Corporation, San Francisco, California, as Bond Counsel. Bond Counsel undertakes no responsibility for the accuracy, completeness or fairness of this Official Statement. Certain legal matters will be passed upon for the Underwriter by Kutak Rock LLP, Denver, Colorado. Stradling Yocca Carlson & Rauth and Kutak Rock LLP will receive compensation contingent upon the sale and delivery of the Bonds. Escrow Verification Upon delivery of the Bonds, Causey Demgen & Moore P.C., Denver, Colorado, will deliver a report on the mathematical accuracy of certain computations based upon certain information and assertions assumptions provided to them by the Underwriter (defined herein) relating to (a) the adequacy of the maturing principal of and interest on the Federal Securities in the Escrow Funds, together with any moneys held therein as cash, to pay the redemption price of and interest on the Refunded Bonds and (b) the computations of yield of the Bonds and the Federal Securities in the Escrow Funds which support Bond Counsel’s opinion that the interest on the Bonds is excluded from gross income for federal income tax purposes.

86

RATINGS Standard & Poor’s Ratings Services, a Standard & Poor’s Financial Services LLC business (“S&P”) and Moody’s Investor’s Service (“Moody’s”) have assigned ratings of “AA-” and “A1,” respectively, to the Improvement District No. 1 Refunding Bonds. S&P and Moody’s have assigned ratings of “AA-” and “Aa3,” respectively, to the Improvement District No. 2 Refunding Bonds. Such ratings reflects only the views of S&P and Moody’s and any desired explanation of the significance of such ratings should be obtained from S&P and Moody’s at the following addresses: Standard & Poor’s, a Standard & Poor’s Financial Services LLC business, 55 Water Street, 45th Floor, New York, NY 10041 and Moody’s Investors Service, 7 World Trade Center at 250 Greenwich, New York, New York 10007. Generally, a rating agency bases its rating on the information and materials furnished to it and on investigations, studies and assumptions of its own. There is no assurance such ratings will continue for any given period of time or that such ratings will not be revised downward or withdrawn entirely by the rating agency, if in the judgment of such rating agency, circumstances so warrant. Any such downward revision or withdrawal of such ratings may have an adverse effect on the market price for the Bonds. UNDERWRITING The Improvement District No. 1 Refunding Bonds are being purchased by Stifel, Nicolaus & Company, Incorporated (the “Underwriter”) pursuant to a purchase contract by and among the School District and the Underwriter, at a purchase price of $19,258,712.65 (which is equal to the principal amount of the Improvement District No. 1 Refunding Bonds of $17,390,000, plus net original issue premium of $1,949,576.15, and less Underwriter’s discount of $80,863.50). The Improvement District No. 2 Refunding Bonds are being purchased the Underwriter pursuant to a purchase contract by and among the School District and the Underwriter, at a purchase price of $23,226,455.20 (which is equal to the principal amount of the Improvement District No. 2 Refunding Bonds of $21,145,000, plus net original issue premium of $2,184,008.45, and less Underwriter’s discount of $102,553.25). The respective purchase contracts for the Improvement District No. 1 Refunding Bonds and the Improvement District No. 2 Refunding Bonds provide that the Underwriter will purchase all of the applicable Bonds if any are purchased, the obligations to make such purchases being subject to certain terms and conditions set forth in said agreements, the approval of certain legal matters by Bond Counsel, and certain other conditions. The Underwriter may offer and sell Bonds to certain dealers and others at prices lower than the offering prices stated on the inside cover page hereof. The offering prices may be changed from time to time by the Underwriter.

87

ADDITIONAL INFORMATION Quotations from and summaries and explanations of the Bonds, the Bond Resolutions providing for issuance of the Bonds, and the constitutional provisions, statutes and other documents referenced herein, do not purport to be complete, and reference is made to said documents, constitutional provisions and statutes for full and complete statements of their provisions. Some of the data contained herein has been taken or constructed from School District records. Appropriate officials of each of the Improvement Districts and the School District, acting in their official capacities, have reviewed this Official Statement and have determined that, as of the date hereof, the information contained herein is, to the best of their knowledge and belief, true and correct in all material respects and does not contain an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements made herein, in light of the circumstances under which they were made, not misleading. This Official Statement has been approved by the School District’s Board of Education. FOLSOM CORDOVA UNIFIED SCHOOL DISTRICT By

/s/ Rhonda Crawford Rhonda Crawford Chief Financial Officer/Chief Business Official

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APPENDIX A VICINITY OF IMPROVEMENT DISTRICT NO. 1

A-1

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APPENDIX B VICINITY OF IMPROVEMENT DISTRICT NO. 2

B-1

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APPENDIX C EXCERPTS FROM THE 2012-13 AUDITED FINANCIAL STATEMENTS OF THE SCHOOL DISTRICT

C-1

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FOLSOM CORDOVA UNIFIED SCHOOL DISTRICT Folsom, California

FINANCIAL STATEMENTS June 30, 2013

FOLSOM CORDOVA UNIFIED SCHOOL DISTRICT FINANCIAL STATEMENTS WITH SUPPLEMENTARY INFORMATION For the Year Ended June 30, 2013 TABLE OF CONTENTS Page Independent Auditor's Report

1

Management's Discussion and Analysis

3

Basic Financial Statements: Government-Wide Financial Statements: Statement of Net Position

11

Statement of Activities

12

Fund Financial Statements: Balance Sheet - Governmental Funds

13

Reconciliation of the Governmental Funds Balance Sheet to the Statement of Net Position

14

Statement of Revenues, Expenditures and Change in Fund Balances - Governmental Funds

15

Reconciliation of the Statement of Revenues, Expenditures and Change in Fund Balances - Governmental Funds - to the Statement of Activities

16

Statement of Net Position - Proprietary Fund - Student Care Center Fund

17

Statement of Change in Net Position Proprietary Fund - Student Care Center Fund

18

Statement of Cash Flows - Proprietary Fund - Student Care Center Fund

19

Statement of Fiduciary Net Position - Trust and Agency Funds

20

Statement of Change in Fiduciary Net Position Trust Fund

21

Notes to Basic Financial Statements

22

FOLSOM CORDOVA UNIFIED SCHOOL DISTRICT FINANCIAL STATEMENTS WITH SUPPLEMENTARY INFORMATION For the Year Ended June 30, 2013 TABLE OF CONTENTS (Continued) Page Required Supplementary Information: General Fund Budgetary Comparison Schedule

46

Schedule of Other Postemployment Benefits (OPEB) Funding Progress

47

Notes to Required Supplementary Information

48

Supplementary Information: Combining Balance Sheet - All Non-Major Funds

49

Combining Statement of Revenues, Expenditures and Change in Fund Balances - All Non-Major Funds

50

Combining Statement of Changes in Assets and Liabilities - All Agency Funds

51

Organization

53

Schedule of Average Daily Attendance

54

Schedule of Instructional Time

55

Schedule of Expenditure of Federal Awards

56

Reconciliation of Unaudited Actual Financial Report with Audited Financial Statements

58

Schedule of Financial Trends and Analysis - Unaudited

59

Schedule of Charter Schools

60

Schedule of First 5 Revenues and Expenditures

61

Notes to Supplementary Information

62

Independent Auditor's Report on Compliance with State Laws and Regulations

64

FOLSOM CORDOVA UNIFIED SCHOOL DISTRICT FINANCIAL STATEMENTS WITH SUPPLEMENTARY INFORMATION For the Year Ended June 30, 2013 TABLE OF CONTENTS (Continued) Page Independent Auditor's Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards

66

Independent Auditor's Report on Compliance for Each Major Federal Program and Report on Internal Control Over Compliance

68

Report of Independent Auditor's on Compliance with Requirements Applicable to the First 5 Sacramento County Program and on Internal Control over Compliance in Accordance with A Program-Specific Audit

70

Findings and Recommendations: Schedule of Audit Findings and Questioned Costs

72

Status of Prior Year Findings and Recommendations

76

Management Discussion & Analysis The Management Discussion and Analysis Section of the audit is management’s view of the District’s financial condition, and provides an opportunity to discuss important fiscal issues with the board and the public. Financial Reports Two financial reports are included in the audit this year, the Statement of Net Position and the Statement of Activities, which begin on page 11. These two statements report the district-wide financial condition and activities. The individual fund statements which focus on reporting the District’s operations in more detail begin on page 13. Overview of the Financial Statements This annual report consists of three parts—management’s discussion and analysis (this section), the basic financial statements, and required supplementary information. The basic financial statements include two kinds of statements that present different views of the District: x

The first two statements are district-wide financial statements that provide both short-term and long-term information about the District’s overall financial status.

x

The remaining statements are fund financial statements that focus on individual parts of the District, reporting the District’s operations in more detail than the District-wide statements.

x

The governmental funds statements tell how basic services like regular and special education were financed in the short term as well as what remains for future spending.

x

Proprietary funds statements offer short- and long-term financial information about the activities the District operates like businesses, such as food services.

x

Fiduciary funds statements provide information about the financial relationships in which the District acts solely as a trustee or agent for the benefit of others to whom the resources belong.

The financial statements also include notes that explain some of the information in the statements and provide more detailed data. The statements are followed by a section of required supplementary information that further explains and supports the financial statements with a comparison of the District’s budget for the year. Figure A-1 shows how the various parts of this annual report are arranged and related to one another. Figure A-2 summarizes the major features of the District’s financial statements, including the portion of the District’s activities they cover and the types of information they contain. The remainder of this overview section of management’s discussion and analysis highlights the structure and contents of each of the statements.

3

Figure A-1. Organization of Folsom Cordova USD Annual Financial Report

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 position 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 position and how they have changed. Net position—the difference between the District’s assets and liabilities—is one way to measure the District’s financial health or position.

Figure A-2. Major Features of the District-Wide and Fund Financial Statements Type of Statements

Fund Statements Proprietary Funds Activities the district operates similar to private businesses: food services and adult education

District-wide Entire district, except fiduciary activities

Governmental Funds The activities of the district that are not proprietary or fiduciary, such as special education and building maintenance

Šstatement of net assets

Šbalance sheet

Required financial statements

Šstatement of activities

Accounting basis and measurement focus

Accrual accounting and economic resources focus

Šstatement of revenues, Šstatement of revenues, expenditures & changes in expenses & changes in fund balances fund net assets Šstatement of cash flows Modified accrual Accrual accounting and accounting and current economic resources focus financial resources focus Only assets expected to be All assets and liabilities, used up and liabilities that both financial and capital, come due during the year and short-term and longor soon thereafter; no term capital assets included

Scope

Type of asset/liability information

Type of inflow/outflow information

All assets and liabilities, both financial and capital, short-term and long-term

Šstatement of net assets

Fiduciary Funds Instances in which the district administers resources on behalf of someone else, such as scholarship programs and student activities monies Šstatement of fiduciary net assets Šstatement of changes in fiduciary net assets

Accrual accounting and economic resources focus

All assets and liabilities, both short-term and longterm; Standard's funds do not currently contain nonfinancial assets, though they can All revenues and expenses Revenues for which cash is All revenues and expenses All revenues and expenses during year, regardless of received during or soon during year, regardless of during year, regardless of when cash is received or after the end of the year; when cash is received or when cash is received or paid expenditures when goods paid paid or services have been received and payment is due during the year or soon thereafter

x

Over time, increases or decreases in the District’s net position are an indicator of whether its financial position is improving or deteriorating, respectively.

x

To assess the overall health of the District you need to consider additional nonfinancial factors such as changes in the District’s property tax base and the condition of school buildings and other facilities.

In the district-wide financial statements the District’s activities are divided into two categories: x

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.

x

Business-type activities—The District charges fees to help it cover the costs of certain services it provides. The District’s adult education programs and food services are included here.

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: x

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

x

The District establishes other funds to control and manage money for particular purposes (like repaying its long-term debts) or to show that it is properly using certain revenues (like federal grants).

The District has three kinds of funds: x

Governmental funds—Most of the District’s basic services are included in governmental funds, which generally focus on (1) how cash and other financial assets that can readily be converted to cash flow in and out and (2) the balances left at year-end that are available for spending. Consequently, the governmental funds statements provide a detailed 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. Because this information does not encompass the additional long-term focus of the districtwide statements, we provide additional information at the bottom of the governmental funds statements that explains the relationship (or differences) between them. 4

x

Proprietary funds—Services for which the District charges a fee are generally reported in proprietary funds. Proprietary funds are reported in the same way as the district-wide statements.

x

In fact, the District’s enterprise funds (one type of proprietary fund) are the same as its business-type activities, but provide more detail and additional information, such as cash flows.

x

Fiduciary funds—The District is the trustee, or fiduciary, for assets that belong to others, such as the scholarship fund and the student activities funds. The District is responsible for ensuring that the assets reported in these funds are used only for their intended purposes and by those to whom the assets belong. All of the District’s fiduciary activities are reported in a separate statement of fiduciary net assets and a statement of changes in fiduciary net position. We exclude these activities from the district-wide financial statements because the District cannot use these assets to finance its operations.

Statement of Net Position Beginning in fiscal year 2001-2002, the District accounted for the value of fixed assets and included these values as part of the financial statements. Listed below is the value of all assets including buildings, land and equipment. Depreciation is included.

Current and other assets Capital assets Total assets

All Funds Governmental Activities 2012 2013 65,098,410 64,678,602 453,872,778 445,890,058 518,971,188 510,568,660

Percentage Change 2012-2013

Long-term debt outstanding Other liabilities Total liabilities

262,953,207 6,223,564 269,176,771

255,836,681 4,593,899 260,430,580

-3.2%

Net investment in capital assets Restricted Unrestricted Total net position

225,949,252 27,965,667 -4,120,502 249,794,417

215,842,029 35,123,954 -827,903 250,138,080

0.1%

-1.6%

Land is accounted for at purchase value, not market value, and is not depreciated. Many of our school sites have low values for today’s market because the District acquired the land many decades ago. We have determined the value of school buildings to be the depreciated cost of modernization unless the building is less than 25 years old. For newer buildings, the value is the construction cost less depreciation. Increases in assets and liabilities are due to construction of buildings and new bonds that have been issued.

5

Statement of Activities Governmental Activities 2012

2013

Revenues Program Revenues: Charges for Services Operating Grants Capital Grants and Contributions General Revenues Property Taxes Federal and State Aid Other Total Revenues

$

1,823,422 32,010,636 0

$

1,840,657 27,611,431 0

50,971,210 71,800,896 7,334,373 $163,940,537

49,919,108 75,442,103 11,619,786 $166,433,085

98,986,306 16,298,074 15,176,619 2,590,882 3,143 8,635,697 13,626,368 12,191,093 318,038

94,821,365 16,660,064 15,444,422 2,860,499 0 9,216,377 14,782,920 112,086,606 217,169

167,826,220

166,089,422

(3,885,683)

343,663

Program Expenses Instruction Instruction Related Services Pupil Services Ancillary Services Community Services General Administration Plant Services Interest Other Total Expenses (Decrease) Increase in Net Position Net Position – Beginning

253,680,100

Net Position – Ending

$ 249,794,417

6

249,794,417 $ 250,138,080

Financial Condition of General Fund Folsom Cordova Unified School District is striving to maintain its solid financial condition. Ending fund balance has averaged 17.2% over the last ten (10) years and is currently five (5) times the minimum required reserve of 3%. The following table summarizes operational fund financial statements: General Fund Total Revenues Expenses Other financing sources Excess of revenues over expenses

2012 $ 141,509,252 134,290,010 -1,672,705 $ 5,546,537

2013 $ 139,796,818 136,455,489 -1,402,176 $ 1,939,153

Percentage Change 2012-2013

-65.0%

Future good financial performance will depend on management’s ability to continue to control expenses, and to maintain current and generate new revenues. Capital Assets At year-end, the District has invested $4,725,095 in modernization and new construction from the following combined sources for 2012-13. This represents a -80.7% decrease from last year’s amount of $24,442,581.

Land Improvement of sites Buildings Equipment Work-in-process Total

All Funds 2012 $ 49,116,097 25,560,285 424,297,733 26,891,821 78,300,495 $ 604,166,431

2013 $ 49,116,097 27,331,840 483,495,744 33,977,277 14,970,568 $ 608,891,526

Percentage Change 2012-2013

0.78%

District Indebtedness At year-end, the District has incurred $255,836,681 of long-term debt. Of that, $203,667,597 is General Obligation Bonds secured by property tax increases voted on by local residents. In January 2007, the District issued $35.8 million in Certificates of Participation for new school construction projects in Folsom. In October 2007, the District sold $64 million in bonds for SFID #3 (Measure M) and SFID #4 (Measure N). Proceeds from Measure M will be used to acquire land and construct new facilities. Proceeds from Measure N will fund a wide variety of projects throughout the existing campuses in Rancho Cordova.

Compensated absences Certificates of participation General obligation bonds Capital lease Post-employment medical benefits Total

Governmental Activities 2013 2012 $ 886,831 $ 858,696 26,602,349 24,102,349 205,060,450 203,667,597 2,421,268 2,278,085 27,055,802 24,929,954 $ 262,953,207 $ 255,836,681

7

Percentage Change 2012-2013

-.2.71%

Cost of Governmental Services At year-end, the District’s General Fund cost of operation was $135,976,898. Total District expenditures were $1,932,239 more than the previous year due to step and column adjustments, staff development and sites spending carryover money.

Instruction Pupil services Ancillary services Community services General Administration Enterprise Plant Services Other Outgo Total

General Fund 2012 2013 $ 99,977,671 $ 100,751,960 11,010,436 9,989,495 2,585,865 2,874,333 28 0 6,871,419 7,547,652 -13,595 -17,411 12,906,350 14,212,788 706,487 618,081 $ 134,044,659 $ 135,976,898

Percentage Change 2012-2013

1.4 %

Budget to Actual Analysis The District develops its budget pursuant to the Governor’s proposals. Throughout the year the budget is adjusted primarily due to new or adjusted funding levels. A comparison of the General Fund Budget to Actual Revenues and Expenditures is as follows: Estimated June 2013 Revenues Revenue Limit Federal Revenues State Revenues Local Revenues Total Revenues Expenditures Salaries & Benefits Books & Supplies Services & Other Operating Capital Outlay/Other Outgo Total Expenditures

Actual 2013

Percentage Variance

97,547,442 8,118,275 29,594,108 5,823,147 141,082,972

97,410,798 7,282,703 29,403,316 5,700,001 139,796,818

-0.91%

118,454,805 4,987,577 13,601,765 827,100 137,871,247

117,499,721 5,026,866 12,921,871 1,007,031 136,455,489

-1.03%

Total budgeted revenues were $1,286,154 lower than actual revenues received. Total expenditures were $1,415,758 less than budgeted due to close management of expenditures by the District, lower than expected expenses for summer projects, and lower categorical and department expenses which resulted in higher than anticipated carryovers.

8

Financial Issues Per Pupil Funding Since 2008-09, the State of California had been experiencing a severe economic down-turn causing concern for future funding sources. With the passage of Proposition 30 by the voters in November 2012, the State did not impose mid-year reductions, and school districts were flat-funded for 2012-13. Beginning in 2013-14, the State has eliminated revenue limits and most State categorical funding with a new LCFF funding model. During the phase-in period over the next eight (8) years, per pupil funding is expected to increase until the new target levels are reached. The table below shows a five year trend in State school funding. Increase/Decrease in Per Pupil Funding 0 -200 -400 -600

Increase/Decrease in Funding per Student

-800 -1000 -1200 -1400 -1600

2008-09

2009-10

2010-11

2011-12

2012-13

State Budget Shortfall The state borrowed significant funds to continue reduced spending levels. The state deferred paying for certain school programs until after July 1, 2013. Program School Safety and Violence Prevention

Apportionments for Folsom Cordova USD $ .231 million

GATE

Dollar Amount Deferred for Folsom Cordova USD $ .11 million

$ .135 million

P-2 Apportionments (including Revenue limit, hourly programs, Class Size Reduction, Community Day School and Special Education) Total Amount of Apportionments Delayed Until 2013-14

$ .05 million $18.6 million $18.76 million

Health Care Cost Trends District-Wide Health Care costs in the past had a 5% average annual increase due to increased costs for dental premiums, and additional positions for growth and program staffing. However, over the last few years with cuts and layoffs, the trend has been decreasing despite the increased cost. The graph below shows the trends: Trends in District-Wide Health Care Costs

$11,000,000 $10,566,644 $10,500,000 $10,000,000 $9,500,000

$10,108,296 $9,724,858 $9,488,305 $9,221,818 $9,145,442

$9,000,000 $8,500,000 $8,000,000 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 Projected 9

Health care…

BASIC FINANCIAL STATEMENTS

FOLSOM CORDOVA UNIFIED SCHOOL DISTRICT STATEMENT OF NET POSITION June 30, 2013 Governmental Activities

Business-Type Activities

Total

ASSETS Cash and investments (Note 2) Receivables Due (to) from other funds (Note 3) Prepaid expenses Stores inventory Non-depreciable capital assets (Note 4) Depreciable capital assets, net of accumulated depreciation (Note 4)

$

38,316,770 26,265,039 67,172 3,392 26,229 64,086,665

$

-

381,803,393

Total assets

1,187,534 $ 1,546 (67,172) 2,177 -

510,568,660

39,504,304 26,266,585 5,569 26,229 64,086,665 381,803,393

1,124,085

511,692,745

23,568

LIABILITIES Accounts payable Unearned revenue Long-term liabilities (Note 5): Due within one year Due after one year Total liabilities

-

4,227,334 390,133

10,137,304 245,699,377

-

10,137,304 245,699,377

260,430,580

NET POSITION Net investment in capital assets Restricted (Note 6) Unrestricted Total net position

4,203,766 390,133

23,568

215,842,029 35,123,954 (827,903) $

250,138,080

1,100,517 $

1,100,517

See accompanying notes to financial statements.

11

260,454,148 215,842,029 36,224,471 (827,903) $

251,238,597

FOLSOM CORDOVA UNIFIED SCHOOL DISTRICT STATEMENT OF ACTIVITIES For the Year Ended June 30, 2013

Expenses Governmental activities (Note 4): 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 Interest on long-term liabilities Other outgo Business-type activities: Enterprise activities Total governmental and businesstype activities

$

94,821,365

$

7,832

5,145,938 468,096 11,046,030

2,199,559 7,016,818 14,782,920 2,860,499 10,760 12,086,606 206,409

15,508,738

$

-

Governmental Activities $

Business-Type Activities

(79,304,795) $

-

Total $

(79,304,795)

1,760,427

-

(3,383,989)

-

(3,383,989)

229

1,931 426,502

-

(465,936) (10,619,528)

-

(465,936) (10,619,528)

178,114 1,408,409 2,471

938,363 3,398,244 2,004,451

-

(2,332,387) (534,407) (4,647,576)

-

(2,332,387) (534,407) (4,647,576)

1,681,151 140,694 708,755 1,042,175

-

(2,199,559) (5,261,674) (14,614,134) (2,148,389) (10,760) (12,086,606) 972,406

-

(2,199,559) (5,261,674) (14,614,134) (2,148,389) (10,760) (12,086,606) 972,406

73,993 28,092 3,355 136,640 2,699,024 $

Net (Expense) Revenue and Changes in Net Position Capital Grants and Contributions

1,522

-

1,904,292 167,993,714

$

-

3,448,864 5,341,060 6,654,498

$

Program Revenues Operating Grants and Contributions

Charges For Services

7,238,705

$

27,611,431

$

-

-

794,732

(136,637,334)

General revenues: Taxes and subventions: Taxes levied for general purposes Taxes levied for debt service Taxes levied for other specific purposes Federal and state aid not restricted to specific purposes Interest and investment earnings Interagency revenues Miscellaneous Internal transfers

37,363,905 12,376,268 178,935 75,442,103 177,277 344,326 10,941,737 156,446

794,732

794,732

(135,842,602)

3,242 (156,446)

37,363,905 12,376,268 178,935 75,442,103 180,519 344,326 10,941,737 -

(153,204)

136,827,793

-

Total general revenues

136,980,997

Change in net position

343,663

641,528

985,191

249,794,417

458,989

250,253,406

Net position, July 1, 2012, Net position, June 30, 2013

See accompanying notes to financial statements.

12

$

250,138,080

$

1,100,517

$

251,238,597

FOLSOM CORDOVA UNIFIED SCHOOL DISTRICT BALANCE SHEET GOVERNMENTAL FUNDS June 30, 2013 Special Reserve for Capital Projects Fund

General Fund

Bond Interest and Redemption Fund

All Non-Major Fund

Total Governmental Funds

ASSETS Cash and investments: Cash in County Treasury Cash on hand and in banks Cash in revolving fund Cash with Fiscal Agent Receivables Due from other funds Prepaid expenditures Stores inventory Total assets

$

12,137,521 372,555 75,000 25,413,941 366,293 3,392 -

$

4,807,501 7,436 17,005 800,000 -

$

11,695,739 112,365 -

$

9,006,889 187,654 10,000 16,475 721,728 603,637 26,229

$

37,647,650 567,645 85,000 16,475 26,265,039 1,769,930 3,392 26,229

$

38,368,702

$

5,631,942

$

11,808,104

$

10,572,612

$

66,381,360

$

2,383,668 385,767 1,275,351

$

580,564 -

$

14,344 4,366 -

$

296,791 427,407

$

3,275,367 390,133 1,702,758

LIABILITIES AND FUND BALANCES Liabilities: Accounts payable Unearned revenue Due to other funds Total liabilities Fund balances: Nonspendable Restricted Assigned Unassigned Total fund balances Total liabilities and fund balances

$

4,044,786

580,564

18,710

724,198

5,368,258

78,392 8,434,768 19,748,558 6,062,198

5,051,378 -

11,789,394 -

36,229 9,812,185 -

114,621 35,087,725 19,748,558 6,062,198

34,323,916

5,051,378

11,789,394

9,848,414

61,013,102

38,368,702

$

5,631,942

$

11,808,104

See accompanying notes to financial statements.

13

$

10,572,612

$

66,381,360

FOLSOM CORDOVA UNIFIED SCHOOL DISTRICT RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET TO THE STATEMENT OF NET POSITION June 30, 2013 Total fund balances - Governmental Funds

$

61,013,102

Amounts reported for governmental activities in the statement of net position are different because: Capital assets used for governmental activities are not financial resources and, therefore, are not reported as assets in governmental funds. The cost of the assets is $608,891,526 and the accumulated depreciation is $163,001,468 (Note 4). Long-term liabilities are not due and payable in the current period and, therefore, are not reported as liabilities in the funds. Long-term liabilities at June 30, 2013 consisted of (Note 5): Certificates of Participation General Obligation Bonds Accreted interest Capital lease Other postemployment benefits (Note 8) Compensated absences

445,890,058

$ (24,102,349) (171,875,674) (31,791,923) (2,278,085) (24,929,954) (858,696) (255,836,681)

Unmatured interest on long-term liabilities is not recorded in the governmental funds until it becomes due, but increases the liabilities in the statement of net position. Total net position - governmental activities

(928,399) $ 250,138,080

See accompanying notes to financial statements.

14

FOLSOM CORDOVA UNIFIED SCHOOL DISTRICT STATEMENT OF REVENUES, EXPENDITURES AND CHANGE IN FUND BALANCES GOVERNMENTAL FUNDS For the Year Ended June 30, 2013 Special Reserve for Capital Projects Fund

General Fund Revenues: Revenue limit sources: State apportionment Local sources

$

Total revenue limit

60,306,553 37,104,245

$

97,410,798

Federal sources Other state sources Other local sources

-

Bond Interest and Redemption Fund

$

-

-

All Non-Major Funds

$

-

372,095 252,876

Total Governmental Funds

$

60,678,648 37,357,121

624,971

98,035,769

7,282,703 29,403,316 5,700,001

821,474

115,375 13,471,769

3,624,617 1,100,567 6,925,995

10,907,320 30,619,258 26,919,239

139,796,818

821,474

13,587,144

12,276,150

166,481,586

69,465,659 25,011,066 23,022,996 5,026,866

10,408

-

912,358 3,147,739 1,232,956 2,693,934

70,378,017 28,158,805 24,255,952 7,731,208

12,921,871 388,950 206,409

14,777 612,355 -

-

797,076 3,840,111 -

13,733,724 4,841,416 206,409

309,267 102,405

38,857 -

6,128,974 6,235,259

2,500,000 1,061,843

8,977,098 7,399,507

136,455,489

676,397

12,364,233

16,186,017

165,682,136

Excess (deficiency) of revenues over (under) expenditures

3,341,329

145,077

1,222,911

(3,909,867)

Other financing sources (uses): Operating transfers in Operating transfers out Proceeds from issuance of capital lease

379,655 (1,986,772) 204,941

200,000 -

-

2,059,924 (496,361) -

Total other financing sources (uses)

(1,402,176)

200,000

-

1,563,563

1,939,153

345,077

1,222,911

(2,346,304)

1,160,837

32,384,763

4,706,301

10,566,483

12,194,718

59,852,265

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

Net change in fund balances Fund balances, July 1, 2012 Fund balances, June 30, 2013

$

34,323,916

$

5,051,378

$

11,789,394

See accompanying notes to financial statements.

15

$

9,848,414

799,450 2,639,579 (2,483,133) 204,941 361,387

$

61,013,102

FOLSOM CORDOVA UNIFIED SCHOOL DISTRICT RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES AND CHANGE IN FUND BALANCES - GOVERNMENTAL FUNDS TO THE STATEMENT OF ACTIVITIES For the Year Ended June 30, 2013 Net change in fund balances - Total Governmental Funds

$

1,160,837

Amounts reported for governmental activities in the statement of activities are different because: Acquisition of capital assets is an expenditure in the governmental funds, but increases capital assets in the statement of net position (Note 4).

$

4,725,095

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

(12,707,815)

Repayment of principal on long-term liabilities is an expenditure in the governmental funds, but decreases the long-term liabilities in the statement of net position (Note 5).

8,977,098

Debt proceeds are recognized as other financing sources in the governmental funds, but are recognized as an increase to liabilities in the statement of net position. (Note 5).

(204,941)

Accretion of interest is not recorded in the governmental funds, but increases the long-term liabilities in the statement of net position (Note 5).

(4,736,121)

Other postemployment benefits (OPEB) costs are recognized when employer contributions are made in the governmental net position (Notes 5 and 8).

3,052,355

Unmatured interest on long-term liabilities is not recorded in the governmental funds until it becomes due, but increases the liabilities in the statement of net position.

49,020

In the statement of activities, expenses related to compensated absences are measured by the amounts earned during the year. In the governmental funds, expenditures are measured by the amount of financial resources used (Note 5).

28,135

Change in net position of governmental activities

(817,174) $

See accompanying notes to financial statements.

16

343,663

FOLSOM CORDOVA UNIFIED SCHOOL DISTRICT STATEMENT OF NET POSITION - PROPRIETARY FUND STUDENT CARE CENTER FUND June 30, 2013 ASSETS Current assets: Cash in County Treasury Cash in banks Receivables Due from other funds Prepaid expenditures

$

Total current assets

1,106,720 80,814 1,546 1,155 2,177 1,192,412

LIABILITIES Current liabilities: Accounts payable Due to other funds

23,568 68,327

Total current liabilities

91,895

NET POSITION Net position - restricted

$

See accompanying notes to financial statements.

17

1,100,517

FOLSOM CORDOVA UNIFIED SCHOOL DISTRICT STATEMENT OF CHANGE IN NET POSITION PROPRIETARY FUND STUDENT CARE CENTER FUND For the Year Ended June 30, 2013 Operating revenues: Children Center fees Other local revenues

$

Total operating revenues

2,696,689 2,335 2,699,024

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

119,206 1,165,913 381,261 124,373 113,539

Total operating expenses

1,904,292

Operating income

794,732

Non-operating income (expense): Interest income Transfers to other funds

3,242 (156,446)

Total non-operating income (expense)

(153,204)

Change in net position

641,528

Net position, July 1, 2012

458,989

Net position, June 30, 2013

$

See accompanying notes to financial statements.

18

1,100,517

FOLSOM CORDOVA UNIFIED SCHOOL DISTRICT STATEMENT OF CASH FLOWS - PROPRIETARY FUND STUDENT CARE CENTER FUND For the Year Ended June 30, 2013 Cash flows from operating activities: Cash received for children center fees Cash paid for employee benefits and operating expenses

$

Net cash provided by operating activities

2,697,710 (1,909,986) 787,724

Cash flows used in noncapital financing activities: Transfer to other funds

(102,848)

Cash flows provided by investing activities: Interest income

3,242

Change in cash and investments

688,118

Cash and investments, July 1, 2012

499,416

Cash and investments, June 30, 2013 Reconciliation of operating income to net cash provided by operating activities: Operating income Adjustments to reconcile operating income to net cash provided by operating activities: Increase in: Receivables Decrease in: Accounts payable

$

1,187,534

$

794,732

(1,314) (5,694)

Total adjustments

(7,008)

Net cash provided by operating activities

$

See accompanying notes to financial statements.

19

787,724

FOLSOM CORDOVA UNIFIED SCHOOL DISTRICT STATEMENT OF FIDUCIARY NET POSITION TRUST AND AGENCY FUNDS June 30, 2013 Trust Fund

Agency Funds Deferred CompenStudent sation Body

Retiree Benefit

Total

ASSETS Cash and investments (Note 2): Cash in County Treasury Cash on hand and in banks Deferred compensation Receivables

$

Total assets

5,837,649 12,270

$

858,696 -

$

1,000,255 -

$

5,837,649 1,000,255 858,696 12,270

5,849,919

858,696

1,000,255

7,708,870

Accounts payable Deferred compensation Due to student groups

12,034 -

858,696 -

1,000,255

12,034 858,696 1,000,255

Total liabilities

12,034

858,696

1,000,255

1,870,985

LIABILITIES

NET POSITION Net position held in trust for retiree benefits - restricted (Note 6)

$

5,837,885

$

-

$

See accompanying notes to financial statements.

20

-

$

5,837,885

FOLSOM CORDOVA UNIFIED SCHOOL DISTRICT STATEMENT OF CHANGE IN FIDUCIARY NET POSITION TRUST FUND For the Year Ended June 30, 2013 Retiree Benefit Revenues: Local sources

$

Expenditures: Contract services and operating expenditures

791,471 695,151

Change in net assets

96,320

Net position held in trust for retiree benefits, July 1, 2012 Net position held in trust for retiree benefits, June 30, 2013

See accompanying notes to financial statements.

21

5,741,565 $

5,837,885

FOLSOM CORDOVA UNIFIED SCHOOL DISTRICT NOTES TO BASIC FINANCIAL STATEMENTS

1.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Folsom Cordova Unified School District (the "District") accounts for its financial transactions in accordance with the policies and procedures of the California Department of Education's California School Accounting Manual. The accounting policies of the District conform to accounting principles generally accepted in the United States of America as prescribed by the Governmental Accounting Standards Board. The following is a summary of the more significant policies: Reporting Entity The Board of Education is the level of government which has governance responsibilities over all activities related to public school education in the District. The Board is not included in any other governmental "reporting entity" as defined by the Governmental Accounting Standards Board since Board members have decision-making authority, the power to designate management, the responsibility to significantly influence operations and primary accountability for fiscal matters. Basis of Presentation - Financial Statements The financial statements include a Management Discussion and Analysis (MD & A) section providing an analysis of the District's overall financial position and results of operations, financial statements prepared using full accrual accounting for all of the District's activities, including infrastructure, and a focus on the major funds. Basis of Presentation - Government-Wide Financial Statements The Statement of Net Position and the Statement of Activities display information about the reporting government as a whole. Fiduciary funds are not included in the government-wide financial statements. Fiduciary funds are reported only in the Statement of Fiduciary Net Position and the Statement of Revenues, Expenditures and Change in Fiduciary Net Position at the fund financial statement level. The Statement of Net Position and the Statement of Activities are prepared using the economic resources measurement focus and the accrual basis of accounting. Revenues, expenses, gains, losses, assets and liabilities resulting from exchange and exchange-like transactions are recognized when the exchange takes place. Revenues, expenses, gains, losses, assets and liabilities resulting from nonexchange transactions are recognized in accordance with the requirements of Governmental Accounting Standards Board Codification Section (GASB Cod. Sec.) N50.118-.121. 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.

22

FOLSOM CORDOVA UNIFIED SCHOOL DISTRICT NOTES TO BASIC FINANCIAL STATEMENTS (Continued) 1.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Basis of Presentation - Government-Wide Financial Statements (Continued) 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, as appropriate. District resources are allocated to and accounted for in individual funds based upon the purpose for which they are to be spent and the means by which spending activities are controlled: A -

Major Funds 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 Reserve for Capital Projects Fund: The Special Reserve for Capital Projects Fund is used to account for resources used for the acquisition or construction of major capital facilities and equipment.

3 -

Bond Interest and Redemption Fund: The Bond Interest and Redemption Fund is used to account for the accumulation of resources for, and the repayment of, general long-term debt principal, interest, and related costs.

23

FOLSOM CORDOVA UNIFIED SCHOOL DISTRICT NOTES TO BASIC FINANCIAL STATEMENTS (Continued) 1.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Basis of Presentation - Fund Accounting (Continued) B - Other Funds Special Revenue Funds are used to account for the proceeds of specific revenue sources that are legally restricted to expenditures for specified purposes. This includes the Charter School, Adult Education, Child Development, Cafeteria and Deferred Maintenance Funds. Capital Projects Funds are used to account for resources used for the acquisition or construction of major capital facilities and equipment. This classification includes the Building, Capital Facilities and County School Facilities Funds. The Student Care Center is an enterprise fund which accounts for child care services that are financed and operated in a manner similar to a private business enterprise with the objective of providing child care services on a continuing basis with costs partially financed or recovered through user charges. The Retiree Benefits Fund is used to account for assets held by the District as trustee. Agency Funds are used to account for assets of others for which the District has an agency relationship with the activity of the fund. This consists of the Deferred Compensation and the 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. A - Accrual Both governmental and business-type activities in the government-wide financial statements and the proprietary and fiduciary fund financial statements are presented on the accrual basis of accounting. Revenues are recognized when earned and expenses are recognized when incurred.

24

FOLSOM CORDOVA UNIFIED SCHOOL DISTRICT NOTES TO BASIC FINANCIAL STATEMENTS (Continued) 1.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Basis of Accounting (Continued) B - 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 Education must adopt a final budget by July 1. A public hearing is conducted to receive comments prior to adoption. The Board of Education complied with these requirements. Receivables Receivables are made up principally of amounts due from the State of California for Revenue Limit funding and Categorical programs. The District has determined that no allowance for doubtful accounts was needed as of June 30, 2013. Stores Inventory Stores inventory in the Cafeteria Fund consists mainly of consumable supplies held for future use and are valued at average cost. Inventories are recorded as expenditures at the time individual inventory items are transferred from the warehouse to schools. Maintenance and other supplies held for physical plant repair, transportation supplies, and operating supplies are not included in inventories; rather, these amounts are recorded as expenditures when purchased. Cafeteria Food Purchases The Cafeteria Fund reflects supplies expense of $2,470,760. Included in this amount is a handling charge for the delivery of government surplus food commodities. The state does not require the Cafeteria Fund to record the fair market value of these commodities. The supplies expenditures would have been greater had the District paid fair market value for the government surplus food commodities.

25

FOLSOM CORDOVA UNIFIED SCHOOL DISTRICT NOTES TO BASIC FINANCIAL STATEMENTS (Continued) 1.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Capital Assets Capital assets purchased or acquired, with an original cost of $5,000 or more, are recorded at historical cost or estimated historical cost. Contributed assets are reported at 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 4 - 30 years depending on asset types. Compensated Absences Compensated absences totaling $858,696 are recorded as a liability of the District. The liability is for earned but unused benefits. Accumulated Sick Leave Accumulated sick leave benefits are not recognized as liabilities of the District. The District's policy is to record sick leave as an operating expenditure in the period taken since such benefits do not vest nor is payment probable; however, unused sick leave is added to the creditable service period for calculation of retirement benefits when the employee retires. Unearned Revenue Revenue from federal, state, and local special projects and programs is recognized when qualified expenditures have been incurred. Funds received but not earned are recorded as unearned revenue until earned. Property Taxes 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 Sacramento bills and collects taxes for the District. Tax revenues are recognized by the District when received. Restricted Net Position Restrictions of the ending net position indicate the portions of net position not appropriable for expenditure or amounts legally segregated for a specific future use. The restriction for unspent categorical program revenues represents the portion of net position restricted to specific program expenditures. The restriction for capital projects represents the amount the District plans to expend for capital projects. The restriction for debt service represents the portion of net position available for the retirement of debt. The restriction for special revenue represents the amount the District plans to expend for special revenue activities. The restriction for student care center represents the portion of net position available for the student center activities. The restriction for retiree benefits represents the portion of net position available for retiree benefits. It is the District's policy to use restricted net position first when allowable expenditures are incurred. 26

FOLSOM CORDOVA UNIFIED SCHOOL DISTRICT NOTES TO BASIC FINANCIAL STATEMENTS (Continued) 1.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Fund Balance Classifications Governmental Accounting Standards Board Codification Sections 1300 and 1800, Fund Balance Reporting and Governmental Fund Type Definitions (GASB Cod. Sec. 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 position as reported in the government-wide, proprietary fund, and fiduciary trust fund statements.

C-

Committed Fund Balance: The committed fund balance classification reflects amounts subject to internal constraints self-imposed by formal action of the Board of Education. The constraints giving rise to committed fund balance must be imposed no later than the end of the reporting period. The actual amounts may be determined subsequent to that date but prior to the issuance of the financial statements. Formal action by the Board of Education is required to remove any commitment from any fund balance. At June 30, 2013, the District had no committed fund balances.

D-

Assigned Fund Balance: The assigned fund balance classification reflects amounts that the District's Board of Education has approved to be used for specific purposes, based on the District's intent related to those specific purposes. The Board of Education can designate personnel with the authority to assign fund balances, however, as of June 30, 2013, no such designation has occurred.

27

FOLSOM CORDOVA UNIFIED SCHOOL DISTRICT NOTES TO BASIC FINANCIAL STATEMENTS (Continued) 1.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Fund Balance Classifications (Continued) 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 Education. At June 30, 2013, the District has not established a minimum fund balance policy nor has it established a stabilization arrangement. Custodial Relationships The balance sheet for agency funds represents the assets, liabilities and trust accounts of various student organizations and scholarship funds within the District. As the funds are custodial in nature, no measurement of operating results is involved. The District's deferred compensation investment and liability is also recorded in the Agency Fund. Deferred Compensation The District has established a voluntary deferred compensation plan for its employees. The agreements provide for periodic payroll deductions from the participating employees. An amount equal to the reduction in compensation is invested by the District and is available to meet the general obligations of the District. The employee has no preferential right, title or claim to the assets of the Plan, except as a general creditor of the District. The principal portion of the account is invested with a credit union. The investment is recorded in the Agency Fund at cost plus accumulated interest, which approximates market value.

28

FOLSOM CORDOVA UNIFIED SCHOOL DISTRICT NOTES TO BASIC FINANCIAL STATEMENTS (Continued) 1.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Encumbrances Encumbrance accounting is used in all budgeted funds to reserve portions of applicable appropriations for which commitments have been made. Encumbrances are recorded for purchase orders, contracts and other commitments when they are written. Encumbrances are liquidated when the commitments are paid. All encumbrances are liquidated at June 30. 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. New Accounting Pronouncements In November 2010 GASB issued Statement No. 61, The Financial Reporting Entity: Omnibus. The Statement improves financial reporting for a governmental financial reporting entity. The requirements of Statement No. 14, The Financial Reporting Entity, and the related financial reporting requirements of Statement No. 34, Basic Financial Statements—and Management’s Discussion and Analysis—for State and Local Governments, were amended to better meet user needs and to address reporting entity issues. This statement was adopted for the District’s fiscal year ended June 30, 2013 with no material impact on the District. In December 2010 GASB issued Statement No. 62, Codification of Accounting and Financial Reporting Guidance Contained in Pre-November 30, 1989 FASB and AICPA Pronouncements. The Statement incorporates into the GASB’s authoritative literature certain accounting and financial reporting guidance that is included in the following pronouncements issued on or before November 30, 1989, which does not conflict with or contradict GASB pronouncements: (1) Financial Accounting Standards Board (FASB) Statements and Interpretations; (2) Accounting Principles Board Opinions; and (3) Accounting Research Bulletins of the American Institute of Certified Public Accountants’ (AICPA) Committee on Accounting Procedure. This statement was adopted for the District’s fiscal year ended June 30, 2013 with no material impact on the District. In June 2011 GASB issued Statement No. 63, Financial Reporting of Deferred Outflows of Resources, Deferred Inflows of Resources, and Net Position. This Statement provides a new statement of net position format to report all assets, deferred outflows of resources, liabilities, deferred inflows of resources, and net position (which is the net residual amount of the other elements). This Statement requires that deferred outflows of resources and deferred inflows of resources be reported separately from assets and liabilities. 29

FOLSOM CORDOVA UNIFIED SCHOOL DISTRICT NOTES TO BASIC FINANCIAL STATEMENTS (Continued) 1.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) New Accounting Pronouncements (Continued) This Statement also amends certain provisions of GASB Statement No. 34, Basic Financial Statement – and Management’s Discussion and Analysis – for State and Local Governments, and related pronouncements to reflect the residual measure in the statement of financial position as net position, rather than net assets. This statement was adopted for the District’s fiscal year ended June 30, 2013 with no material impact on the District. In March, 2012 GASB issued Statement No. 65, Items Previously Reported as Assets and Liabilities. This Statement establishes accounting and financial reporting standards that reclassify, as deferred outflows of resources or deferred inflows of resources, certain items that were previously reported as assets and liabilities and recognizes, as outflows of resources or inflows of resources, certain items that were previously reported as assets and liabilities. This Statement also provides other financial reporting guidance related to the impact of the financial statement elements deferred outflows of resources and deferred inflows of resources, such as changes in the determination of the major fund calculations and limiting the use of the term deferred in financial statement presentations. This statement was adopted for the District’s fiscal year ended June 30, 2013 with no material impact on the District. In March 2012 GASB issued Statement No. 66, Technical Corrections – 2013, an amendment of GASB Statements No. 10 and No. 61. The objective of this Statement is to improve accounting and financial reporting for a governmental financial reporting entity by resolving conflicting guidance that resulted from the issuance of two pronouncements, Statements No. 64, Fund Balance Reporting and Governmental Fund Type Definitions, and No. 62, Codification of Accounting and Financial Reporting Guidance Contained in Pre- November 30, 1989 FASB and AICPA Pronouncements. This Statement amends Statement No. 10, Accounting and Financial Reporting for Risk Financing and Related Insurance Issues, by removing the provision that limits fundbased reporting of an entity’s risk financing activities to the general fund and the internal service fund type. As a result, Districts should base their decisions about fund type classification on the nature of the activity to be reported, as required in Statement No. 54 and Statement No. 34, Basic Financial Statements-and Management’s Discussion and Analysis-for State and Local Governments. This Statement also amends Statement No. 62 by modifying the specific guidance on accounting for (1) operating lease payments that vary from a straight line basis, (2) the difference between the initial investment (purchase price) and the principal amount of a purchased loan or group of loans, and (3) servicing fees related to mortgage loans that are sold when the stated service fee rate differs significantly from a current (normal) servicing fee rate. These changes clarify how to apply Statement No. 13, Accounting for Operating Leases with Scheduled Rent Increases, and result in guidance that is consistent with the requirements in Statement No. 48, Sales and Pledges of Receivables and Future Revenues and Intra-Entity Transfers of Assets and Future Revenues, respectively. The provisions of this Statement are effective for the District’s fiscal year ended June 30, 2014, with earlier application encouraged. Management has not determined what impact, if any, this GASB statement will have on the District’s financial statements. 30

FOLSOM CORDOVA UNIFIED SCHOOL DISTRICT NOTES TO BASIC FINANCIAL STATEMENTS (Continued) 1.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) New Accounting Pronouncements (Continued) In June 2012 GASB issued Statement No. 67, Financial Reporting for Pension Plans. This Statement replaces the requirements of Statement No. 25, Financial Reporting for Defined Benefit Pension Plans and Note Disclosures for Defined Contribution Plans and Statement No. 50 as they relate to pension plans that are administered through trusts or similar arrangements meeting certain criteria. The Statement builds upon the existing framework for financial reports of defined benefit pension plans, which includes a statement of fiduciary net position (the amount held in a trust for paying retirement benefits) and a statement of changes in fiduciary net position. Statement No. 67 enhances note disclosures and RSI for both defined benefit and defined contribution pension plans. Statement No. 67 also requires the presentation of new information about annual money-weighted rates of return in the notes to the financial statements and in 10year RSI schedules. This Statement is effective for the District’s financial period beginning June 30, 2014. Management has not determined what impact, if any, this GASB statement might have on its financial statements. In June 2012 GASB issued Statement No. 68, Accounting and Financial Reporting for Pensions. This Statement replaces the requirements of Statement No. 27, Accounting for Pensions by State and Local Governmental Employers and Statement No. 50, Pension Disclosures, as they relate to governments that provide pensions through pension plans administered as trusts or similar arrangements that meet certain criteria. Statement No. 68 requires governments providing defined benefit pensions to recognize their long-term obligation for pension benefits as a liability for the first time, and to more comprehensively and comparably measure the annual costs of pension benefits. The Statement also enhances accountability and transparency through revised and new note disclosures and required supplementary information (RSI). This Statement is effective for the District’s financial period beginning June 30, 2015. Management has not determined what impact, if any, this GASB statement might have on its financial statements.

2.

CASH AND INVESTMENTS Cash and investments at June 30, 2013 consisted of the following: BusinessType Activities

Governmental Activities Pooled Funds: Cash in County Treasury

$ 37,647,650

Deposits: Cash on hand and in banks Cash in revolving fund

$

567,645 85,000

Investments: Cash with Fiscal Agent Deferred compensation

$ 38,316,770

31

$

80,814 -

16,475 -

Total

1,106,720

Fiduciary Activities

1,000,255 -

$

1,187,534

5,837,649

858,696 $

7,696,600

FOLSOM CORDOVA UNIFIED SCHOOL DISTRICT NOTES TO BASIC FINANCIAL STATEMENTS (Continued) 2.

CASH AND INVESTMENTS (Continued) Pooled Funds In accordance with Education Code Section 41001, the District maintains substantially all of its cash in the Sacramento County Treasury. The County pools and invests the cash. These pooled funds are carried at cost which approximates fair value. Interest earned is deposited annually to 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 pool 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 Sacramento County Treasurer may invest in derivative securities with the State of California. However, at June 30, 2013, the Sacramento County Treasurer has represented that the Pooled Investment Fund contained no derivatives or other investments with similar risk profiles. Deposits - Custodial Credit Risk The District limits custodial credit risk by ensuring uninsured balances are collateralized by the respective financial institution. Cash balances held in banks are insured up to $250,000 by the Federal Deposit Insurance Corporation (FDIC) and are collateralized by the respective financial institution. At June 30, 2013, the carrying amount of the District's accounts were $1,733,714, and the bank balances were $1,709,582, of which $393,335 was insured. Investments Investments at June 30, 2013 consisted of the following: Carrying Amount Cash with Fiscal Agent Deferred compensation

Fair Value

$

16,475 $ 858,696

16,475 858,696

$

875,171 $

875,171

Cash with Fiscal Agent represents proceeds from issuance of long-term liabilities held by the Sacramento County Treasurer, to be used for the construction of facilities. Deferred compensation represents the cash balance of the Deferred Compensation Fund held in trust by the District in savings accounts with a credit union, with individual employee accounts insured by the National Credit Union Association.

32

FOLSOM CORDOVA UNIFIED SCHOOL DISTRICT NOTES TO BASIC FINANCIAL STATEMENTS (Continued) 2.

CASH AND INVESTMENTS (Continued) Interest Rate Risk The District does not have a formal investment policy that limits cash and investment maturities as a means of managing its exposure to fair value losses arising from increasing interest rates. At June 30, 2013, the District had no significant interest rate risk related to cash and investments held. Credit Risk The District does not have a formal investment policy that limits its investment choices other than the limitations of state law. Concentration of Credit Risk The District does not place limits on the amount it may invest in any one issuer. At June 30, 2013, the District had no concentration of credit risk.

3.

INTERFUND TRANSACTIONS Interfund Activity Transactions between funds of the District are recorded as interfund transfers. The unpaid balances at year end, as a result of such transactions, are shown as due to and due from other funds. Interfund Receivables/Payables Individual fund interfund receivable and payable balances at June 30, 2013 were as follows: Interfund Receivables

Fund Major Governmental Funds: General Special Reserve for Capital Projects

$

Non-Major Governmental Funds: Charter School Adult Education Child Development Cafeteria Deferred Maintenance Capital Facilities Building County School Facilities Proprietary Fund: Student Care Center Totals

$ 33

Interfund Payables

366,293 $ 800,000

1,275,351 -

20,244 72,348 1,535 408,837 59,372 41,301 -

139,812 482 14,234 188,678 84,200 1

1,155

68,327

1,771,085

$

1,771,085

FOLSOM CORDOVA UNIFIED SCHOOL DISTRICT NOTES TO BASIC FINANCIAL STATEMENTS (Continued) 3.

INTERFUND TRANSACTIONS (Continued) 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 2012-2013 fiscal year were as follows: Transfer from the General Fund to the Deferred Maintenance Fund for the current year allocation of deferred maintenance funding. Transfer from the General Fund to the Special Reserve for Capital Projects Fund for the cell tower repayment. Transfer from the General Fund to the Adult Education Fund for direct and indirect support costs. Transfer from the General Fund to the Charter School Fund for the Charter School summer project. Transfer from the Child Development Fund to the General Fund for indirect costs. Transfer from the Cafeteria Fund to the General Fund for indirect costs. Transfer from the Cafeteria Fund to the Capital Facilities Fund for the Williamson Kitchen Renovation. Transfer from the Deferred Maintenance Fund to the Building Fund for contributions to projects. Transfer from the Student Care Fund to the Capital Facilities Fund for the student care portable. Transfer from the Student Care Fund to the General Fund for indirect costs.

$

200,000 463,962 22,244 40,915 232,734 212,712 10,000 50,440 106,006 $

34

1,300,566

2,639,579

FOLSOM CORDOVA UNIFIED SCHOOL DISTRICT NOTES TO BASIC FINANCIAL STATEMENTS (Continued) 4.

CAPITAL ASSETS A schedule of changes in capital assets for the year ended June 30, 2013 is shown below: Balance July 1, 2012 Non-depreciable: Land Work-in-process Depreciable: Improvement of sites Buildings Equipment

$

Additions and Transfers

49,116,097 78,300,495

$

1,604,855

Deductions and Transfers $

Balance June 30, 2013

$ (64,934,782)

25,560,285 424,297,733 26,891,821

1,771,555 59,198,011 7,085,456

Totals, at cost

604,166,431

69,659,877

Less accumulated depreciation: Improvement of sites Buildings Equipment

(18,385,310) (123,235,373) (8,672,970)

(1,644,955) (10,831,979) (230,881)

-

(20,030,265) (134,067,352) (8,903,851)

(150,293,653)

(12,707,815)

-

(163,001,468)

Total accumulated depreciation Governmental activities capital assets, net

$ 453,872,778

$

56,952,062

-

49,116,097 14,970,568

(64,934,782)

27,331,840 483,495,744 33,977,277 608,891,526

$ (64,934,782) $ 445,890,058

Depreciation expense was charged to governmental activities as follows: Instruction Supervision of instruction Instructional library, media and technology School site administration Home-to-school transportation Food services All other pupil services Ancillary services Enterprise activities All other general administration Data processing Plant services Total depreciation expense

$ 11,860,298 142,613 12,201 5,174 18,140 30,988 35,104 2,020 28,171 270,154 262,664 40,288 $ 12,707,815

35

FOLSOM CORDOVA UNIFIED SCHOOL DISTRICT NOTES TO BASIC FINANCIAL STATEMENTS (Continued) 5.

LONG-TERM LIABILITIES Certificates of Participation In June 1998, the District issued $15,245,000 in Certificates of Participation. The proceeds from the 1998 Certificates of Participation were to be used to provide financing for the construction of new school facilities and refunded the 1991 Certificates of Participation. The 1998 Certificates of Participation mature through March 2024, and have interest rates ranging from 4.00% to 5.35%. In January 2007, the District issued $35,860,000 in Certificates of Participation to finance the construction of Russell Ranch Elementary School and complete the construction of Vista Del Lago High School. The 2007 Certificates of Participation mature through April 2021, and have interest rates ranging from 3.50% to 4.20%. The following is a schedule of the future payments for the Certificates of Participation: Year Ending June 30,

Payments

2014 2015 2016 2017 2018 2019-2023 2024

$

3,554,866 3,557,939 3,554,695 3,563,879 3,555,133 10,990,862 95,225 28,872,599

Less amount representing interest

(4,770,250) $ 24,102,349

36

FOLSOM CORDOVA UNIFIED SCHOOL DISTRICT NOTES TO BASIC FINANCIAL STATEMENTS (Continued) 5.

LONG-TERM LIABILITIES (Continued) General Obligation Bonds In April 1998, the District issued current interest and capital appreciation General Obligation Bonds in an aggregate principal amount of $10,396,455, maturing through October 2022, with interest rates from 4.30% to 5.35%. The annual payments required to amortize the 1998 General Obligation Bonds outstanding as of June 30, 2013, are as follows: Year Ending June 30, 2014 2015 2016 2017 2018 2019-2023

Principal

Interest

Total

$

400,078 $ 386,073 374,052 363,098 350,813 1,597,852

469,922 $ 503,927 540,948 571,902 609,187 3,577,148

870,000 890,000 915,000 935,000 960,000 5,175,000

$

3,471,966

6,273,034

9,745,000

$

$

In July 2002, the District issued current interest and capital appreciation General Obligation Bonds, in an aggregate principal amount of $54,992,172, maturing through July 2027, with interest rates from 3.00% to 5.73%. The annual payments required to amortize the 2002 General Obligation Bonds outstanding as of June 30, 2013, are as follows: Year Ending June 30, 2014 2015 2016 2017 2018 2019-2023 2024-2028

Principal $

Total

2,845,000 $ 786,347 $ 3,631,347 3,070,000 647,220 3,717,220 3,290,000 510,913 3,800,913 3,555,000 332,781 3,887,781 3,173,794 801,494 3,975,288 8,008,308 13,311,692 21,320,000 6,530,070 17,389,930 23,920,000

$ 30,472,172

37

Interest

$ 33,780,377

$ 64,252,549

FOLSOM CORDOVA UNIFIED SCHOOL DISTRICT NOTES TO BASIC FINANCIAL STATEMENTS (Continued) 5.

LONG-TERM LIABILITIES (Continued) General Obligation Bonds (Continued) In December 2004, the District issued current interest and capital appreciation General Obligation Bonds, in an aggregate principal amount of $46,998,849, maturing through October 2029, with interest rates from 2.50% to 5.56%. The annual payments required to amortize the 2004 General Obligation Bonds outstanding as of June 30, 2013, are as follows: Year Ending June 30, 2014 2015 2016 2017 2018 2019-2023 2024-2028 2029-2030

Principal $

Interest

Total

1,635,000 $ 1,479,038 $ 3,114,038 1,770,000 1,415,663 3,185,663 1,910,000 1,353,713 3,263,713 2,060,000 1,284,475 3,344,475 2,230,000 1,186,675 3,416,675 14,195,000 4,121,911 18,316,911 9,787,138 10,775,612 20,562,750 4,251,711 4,669,039 8,920,750

$ 37,838,849

$ 26,286,126

$ 64,124,975

In October 2007, the District issued current interest and capital appreciation General Obligation Bonds in an aggregate principal amount of $64,993,835 maturing through October 2032, with interest rates from 4% to 5%. The annual payments required to amortize the 2007 General Obligation Bonds outstanding as of June 30, 2013, are as follows: Year Ending June 30, 2014 2015 2016 2017 2018 2019-2023 2024-2028 2029-2033

Principal $

Total

1,785,000 $ 1,159,525 $ 2,944,525 2,065,000 1,088,125 3,153,125 2,400,000 984,875 3,384,875 2,680,000 864,875 3,544,875 3,150,000 740,100 3,890,100 18,223,016 6,669,684 24,892,700 14,748,680 18,651,320 33,400,000 13,332,139 25,532,861 38,865,000

$ 58,383,835

38

Interest

$ 55,691,365

$114,075,200

FOLSOM CORDOVA UNIFIED SCHOOL DISTRICT NOTES TO BASIC FINANCIAL STATEMENTS (Continued) 5.

LONG-TERM LIABILITIES (Continued) General Obligation Bonds (Continued) In October 2009, the District issued current interest and capital appreciation General Obligation Bonds in an aggregate principal amount of $44,138,852 maturing through October 2035, with interest rates from 2.00% to 6.50%. The annual payments required to amortize the 2009 General Obligation Bonds outstanding as of June 30, 2013, are as follows: Year Ending June 30, 2014 2015 2016 2017 2018 2019-2023 2024-2028 2029-2033 2034-2036

Principal $

Interest

Total

100,000 $ 2,452,299 $ 2,552,299 126,875 2,472,273 2,599,148 125,000 2,495,624 2,620,624 177,196 2,534,453 2,711,649 155,000 2,546,449 2,701,449 4,127,744 14,411,906 18,539,650 11,006,738 22,873,532 33,880,270 13,462,792 37,662,018 51,124,810 12,427,507 36,432,302 48,859,809

$ 41,708,852

$123,880,856

$165,589,708

Capital Lease The District has entered into capital lease agreements for the acquisition of school busses and electronic equipment totaling $3,602,547. At June 30, 2013, the accumulated depreciation related to these assets totaled $1,402,740. The following is a schedule of the future payments for the capital lease: Year Ending June 30, Payments 2014 2015 2016 2017 2018 2019-2020

$

450,529 450,529 450,529 450,529 406,833 406,833 2,615,782

Less amount representing interest

(337,697) $

39

2,278,085

FOLSOM CORDOVA UNIFIED SCHOOL DISTRICT NOTES TO BASIC FINANCIAL STATEMENTS (Continued) 5.

LONG-TERM LIABILITIES (Continued) Schedule of Changes in Long-Term Liabilities A schedule of changes in long-term liabilities for the fiscal year ended June 30, 2013 is shown below: Balance July 1, 2012 Certificates of Participation General Obligation Bonds Accreted interest on General Obligation Bonds Capital lease Other postemployment benefits (Note 8) Compensated absences Totals

$

26,602,349 178,004,648

Additions $

27,055,802 2,421,268

-

$ 262,953,207

Deductions $

5,172,145 204,941

27,982,309 886,831

$

5,377,086

Balance June 30, 2013

$

2,500,000 6,128,974

$

Amounts Due Within One Year

24,102,349 171,875,674

436,024 348,124

31,791,923 2,278,085

3,052,355 28,135

24,929,954 858,696

12,493,612

$ 255,836,681

$

2,585,000 6,765,078 469,922 317,304 -

$

10,137,304

Payments on the Certificates of Participation are made from the Capital Facilities Fund, the Child Development Fund, and the Cafeteria Fund. Payments on the General Obligation Bonds are made from the Bond Interest and Redemption Fund. Payments on the capital lease are made from the General Fund and the Special Revenue for Capital Outlay Projects Fund. Payments on the other postemployment benefits and compensated absences are made from the Fund for which the related employee worked. 6.

NET POSITION / FUND BALANCES Restricted net position consisted of the following at June 30, 2013: Governmental Activities Restricted for unspent categorical program revenues Restricted for special revenues Restricted for capital projects Restricted for debt service

$

8,434,768 4,738,670 10,161,122 11,789,394

$

35,123,954

Business-Type Activities Restricted for student care center

$

1,100,517 Fiduciary Activities

Restricted for retiree benefits

$

40

5,837,885

FOLSOM CORDOVA UNIFIED SCHOOL DISTRICT NOTES TO BASIC FINANCIAL STATEMENTS (Continued) 6.

NET POSITION / FUND BALANCES (Continued) Fund balances, by category, at June 30, 2013 consisted of the following: Special Reserve for Capital Projects Fund

General Fund Nonspendable: Revolving cash fund Prepaid expenditures Stores inventory Subtotal nonspendable Restricted: Unspent categorical revenues Special revenue Capital projects Debt service Subtotal restricted Assigned: Previously restricted funds Mandated cost reimbursements School site carryovers Additional 2014/15 sweep Categorical 2014/15 sweep Set-aside for structural deficit Projected local carryover Local grant carryover Other assignments Subtotal assigned Unassigned: Designated for economic uncertainty Undesignated Subtotal unassigned Total fund balances

$

75,000 3,392 -

$

-

78,392

Bond Interest and Redemption Fund $

-

All Non-Major Funds $

-

10,000 26,229

Total $

85,000 3,392 26,229

36,229

114,621

8,434,768 -

5,051,378 -

11,789,394

4,702,441 5,109,744 -

8,434,768 4,702,441 10,161,122 11,789,394

8,434,768

5,051,378

11,789,394

9,812,185

35,087,725

1,809,745

-

-

-

1,809,745

594,060 2,179,319

-

-

-

594,060 2,179,319

3,435,228

-

-

-

3,435,228

3,665,626

-

-

-

3,665,626

4,115,575 1,463,880 1,980,125 505,000

-

-

-

4,115,575 1,463,880 1,980,125 505,000

19,748,558

-

-

-

19,748,558

4,365,000 1,697,198

-

-

-

4,365,000 1,697,198

6,062,198

-

-

-

6,062,198

$ 34,323,916

$

5,051,378

41

$ 11,789,394

$

9,848,414

$ 61,013,102

FOLSOM CORDOVA UNIFIED SCHOOL DISTRICT NOTES TO BASIC FINANCIAL STATEMENTS (Continued) 7.

EMPLOYEE RETIREMENT SYSTEMS Qualified employees are covered under a cost sharing 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 (CalPERS). Plan Description and Provisions California Public Employees' Retirement System (CalPERS) Plan Description The District contributes to the School Employer Pool under the California Public Employees' Retirement System (CalPERS), a cost-sharing multiple-employer public employee retirement system defined benefit pension plan administered by CalPERS. The plan provides retirement and disability benefits, annual cost-of-living adjustments, and death benefits to plan members and beneficiaries. Benefit provisions are established by state statutes, as legislatively amended, within the Public Employees' Retirement Law. CalPERS issues a separate comprehensive annual financial report that includes financial statements and required supplementary information. Copies of the CalPERS annual financial report may be obtained from the CalPERS Executive Office, 400 Q Street, Sacramento, California 95811. Funding Policy Active plan members are required to contribute 7.0% 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 2012-2013 was 11.417% 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, 2011, 2012 and 2013 were $2,596,139, $2,662,515 and $2,809,787, 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 STRS annual financial report may be obtained from the STRS Executive Office, 100 Waterfront Place, West Sacramento, California 95605. 42

FOLSOM CORDOVA UNIFIED SCHOOL DISTRICT NOTES TO BASIC FINANCIAL STATEMENTS (Continued) 7.

EMPLOYEE RETIREMENT SYSTEMS (Continued) Plan Description and Provisions (Continued) State Teachers' Retirement System (STRS) (Continued) Funding Policy Active plan members are required to contribute 8.0% of their salary. The required employer contribution rate for fiscal year 2012-2013 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, 2011, 2012 and 2013 were $5,746,737, $5,732,312 and $5,653,642, respectively, and equal 100% of the required contributions for each year.

8.

OTHER POSTEMPLOYMENT BENEFITS The District's annual other postemployment benefit (OPEB) cost (expense) is calculated based on the annual required contribution of the employer (ARC), an amount actuarially determined in accordance with the parameters of GASB Cod. Sec. P50.108-.109. The ARC represents a level of funding that, if paid on an ongoing basis, is projected to cover normal cost each year. The District elected to recognize past service costs in first year of implementation. The following table shows the components of the District's annual OPEB cost for the year, the amount actually contributed to the plan, and changes in the District's net OPEB obligation: Annual required contribution

$

Interest on net OPEB obligation

1,584,946 1,119,292

Adjustment to annual required contribution Annual OPEB cost (expense)

(5,061,442) (2,357,204)

Contributions made

(695,151)

Decrease in net OPEB obligation Net OPEB obligation - beginning of year Net OPEB obligation - end of year

(3,052,355) 27,982,309 $ 24,929,954

43

FOLSOM CORDOVA UNIFIED SCHOOL DISTRICT NOTES TO BASIC FINANCIAL STATEMENTS (Continued) 8.

OTHER POSTEMPLOYMENT BENEFITS (Continued) The District's annual OPEB cost, the percentage of annual OPEB cost (expense) contributed to the plan, and the net OPEB obligation for the year ended June 30, 2013 and preceding two years were as follows:

Fiscal Year Ended

Annual OPEB Cost (Expense)

Percentage of Annual OPEB Cost Contributed

Net OPEB Obligation

June 30, 2011 June 30, 2012 June 30, 2013

$ 620,538 $ 2,030,908 $ (2,357,204)

113% 32% 25.7%

$ 26,602,679 $ 27,982,309 $ 24,929,954

As of July 1, 2012, the most recent actuarial valuation date, the plan was unfunded. The actuarial accrued liability for benefits was $23,115,538, and the actuarial value of assets was zero, resulting in an unfunded actuarial accrued liability (UAAL) of $23,115,538. The covered payroll (annual payroll of active employees covered by the Plan) was $99.8 million, and the ratio of the UAAL to the covered payroll was 23.1 percent. The OPEB plan is currently operated as a pay-as-you-go plan. Actuarial valuations of an ongoing plan involve estimates of the value of reported amounts and assumptions about the probability of occurrence of events far into the future. Examples include assumptions about future employment, mortality, and the healthcare cost trend. Amounts determined regarding the funded status of the plan and the annual required contributions of the employer are subject to continual revision as actual results are compared with past expectations and new estimates are made about the future. The schedule of funding progress, presented as required supplementary information following the notes to the financial statements, presents multiyear trend information about whether the actuarial value of plan assets is increasing or decreasing over time relative to the actuarial accrued liabilities for benefits. Projections of benefits for financial reporting purposes are based on the substantive plan (the plan as understood by the employer and the plan members) and include the types of benefits provided at the time of each valuation and the historical pattern of sharing of benefit costs between the employer and plan members to that point. The actuarial methods and assumptions used include techniques that are designed to reduce the effects of short-term volatility in actuarial accrued liabilities and the actuarial value of assets, consistent with the long-term perspective of the calculations. In the July 1, 2012 actuarial valuation, the projected unit credit actuarial cost method was used. The actuarial assumptions included a 4.0 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 7.3 percent initially, reduced by decrements to an ultimate rate of 5.5 percent after 7 years. Both rates included a 1.5 percent inflation assumption. The actuarial value of assets was determined using techniques that spread the effects of short-term volatility in the market value of investments over a five-year period. The District's obligation was fully amortized as of June 30, 2010. 44

FOLSOM CORDOVA UNIFIED SCHOOL DISTRICT NOTES TO BASIC FINANCIAL STATEMENTS (Continued) 9.

JOINT POWERS AGREEMENTS The District is a member with other school districts in three Joint Powers Authorities, Schools Excess Liability Fund (SELF), Schools Insurance Authority (SIA) (Deductible Fund, only) and School Project for Utility Rate Reduction (SPURR). The following is a summary of condensed financial information of SELF and SIA as of June 30, 2013 and SPURR as of June 30, 2012 (the most recent information available): SELF Total assets Total liabilities Net position Total revenue Total expenses Change in net position

166,243,000 129,963,000 36,280,000 11,589,000 14,165,000 (2,576,000)

SIA 110,869,154 48,458,959 62,410,195 41,915,136 42,863,046 (947,910)

SPURR 12,712,307 6,292,890 6,419,417 33,252,050 33,030,650 221,400

The relationship between Folsom Cordova Unified School District and each Joint Powers Authority 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 or future revenue offsets subsequently determined will not have a material effect.

45

REQUIRED SUPPLEMENTARY INFORMATION

FOLSOM CORDOVA UNIFIED SCHOOL DISTRICT GENERAL FUND BUDGETARY COMPARISON SCHEDULE For the Year Ended June 30, 2013 Budget Final

Original 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

50,094,248 38,847,036

$

59,762,968 37,784,474

Actual

$

60,306,553 37,104,245

Variance Favorable (Unfavorable)

$

543,585 (680,229)

88,941,284

97,547,442

97,410,798

(136,644)

7,443,465 27,484,680 3,968,035

8,118,275 29,594,108 5,823,147

7,282,703 29,403,316 5,700,001

(835,572) (190,792) (123,146)

127,837,464

141,082,972

139,796,818

(1,286,154)

70,341,200 24,484,024 23,748,951 4,710,957

69,868,554 25,310,106 23,276,145 4,987,577

69,465,659 25,011,066 23,022,996 5,026,866

402,895 299,040 253,149 (39,289)

13,361,519 81,265 348,213

13,601,765 209,019 206,409

12,921,871 388,950 206,409

679,894 (179,931) -

304,428 102,405

309,267 102,405

309,267 102,405

137,482,962

137,871,247

136,455,489

1,415,758

-

(Deficiency) excess of revenues (under) over expenditures

(9,645,498)

3,211,725

3,341,329

129,604

Other financing sources (uses): Operating transfers in Operating transfers out Proceeds from issuance of capital lease

468,713 (1,561,795) -

493,153 (1,986,772) -

379,655 (1,986,772) 204,941

(113,498) 204,941

Total other financing sources (uses)

(1,093,082)

(1,493,619)

(1,402,176)

91,443

(10,738,580)

1,718,106

1,939,153

221,047

32,384,763

32,384,763

32,384,763

Net change in fund balance Fund balance, July 1, 2012 Fund balance, June 30, 2013

$

21,646,183

$

34,102,869

$

34,323,916

See accompanying notes to required supplementary information.

46

$

221,047

FOLSOM CORDOVA UNIFIED SCHOOL DISTRICT SCHEDULE OF OTHER POSTEMPLOYMENT BENEFITS (OPEB) FUNDING PROGRESS For the Year Ended June 30, 2013

Fiscal Year Ended 6/30/2009 6/30/2010 6/30/2011 6/30/2012 6/30/2013

Actuarial Valuation Date March 1, 2009 March 1, 2009 July 1, 2010 July 1, 2010 July 1, 2012

Actuarial Value of Assets $ $ $ $ $

-

Schedule of Funding Progress Unfunded Actuarial Actuarial Accrued Accrued Liability Liability (AAL) (UAAL) $ $ $ $ $

23,379,435 23,379,435 24,280,260 24,280,260 23,115,538

$ $ $ $ $

23,379,435 23,379,435 24,280,260 24,280,260 23,115,538

Funded Ratio 0% 0% 0% 0% 0%

See accompanying notes to required supplementary information.

47

Covered Payroll $105.8 million $105.8 million $102.4 million $102.4 million $99.8 million

UAAL as a Percentage of Covered Payroll 22% 22% 24% 24% 23%

FOLSOM CORDOVA UNIFIED SCHOOL DISTRICT NOTES TO REQUIRED SUPPLEMENTARY INFORMATION 1.

PURPOSE OF SCHEDULES A

-

Budgetary Comparison Schedule The District employs budget control by object codes and by individual appropriation accounts. Expenditures cannot legally exceed appropriations by major object code. Budgets are prepared on the modified accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America as prescribed by the Governmental Accounting Standards Board. The budgets are revised during the year by the Board of Education to provide for revised priorities. 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. Excess of expenditures over appropriations for the year ended June 30, 2013 were as follows: Excess Expenditures

Fund General Fund: Books and supplies B

-

$

39,289

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

48

APPENDIX D

GENERAL ECONOMIC AND DEMOGRAPHIC INFORMATION FOR THE CITY OF FOLSOM, CITY OF RANCHO CORDOVA AND SACRAMENTO COUNTY The following material is descriptive of Sacramento County (the “County”) and the cities of Folsom and Rancho Cordova (the “Cities”). This material has been prepared by or excerpted from the sources as noted herein and has not been reviewed for accuracy by the School District, Bond Counsel, or the Underwriter. General The County was incorporated in 1850 as one of the original 27 counties of the State. The County's largest city, the City of Sacramento, is the seat of government for the State of California and also serves as the County Seat. The County encompasses approximately 1,015 square miles and is a long-established center of commerce for the surrounding area. Trade and services, federal, state and local government, and food processing are important economic sectors. Visitors and tourists are attracted to the State Capitol, historical sights and natural resources. The Cities are suburbs of the City of Sacramento. Folsom is perhaps most famous as the home of Folsom Prison and for the presence of the largest corporate employer in the County, Intel Corporation. Rancho Cordova is the largest employment center in the County after the City of Sacramento. Healthcare and educational institutions are the largest employers in Rancho Cordova.

Population The following table summarizes population estimates for the Cities, County and State of California from 2001 through 2013. POPULATION ESTIMATES City of Folsom, City of Rancho Cordova, Sacramento County and State of California 2001-2013 Year(1) 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

City of Folsom 56,759 59,186 62,433 64,396 66,362 67,936 69,257 71,064 71,625 72,139 72,393 72,651 72,294

Rancho Cordova --(2) --(2) --(2) 54,979 55,476 56,866 59,502 61,526 62,724 64,024 65,475 65,973 66,927

(1)

Sacramento County 1,248,072 1,279,588 1,307,189 1,331,910 1,350,523 1,365,214 1,380,172 1,394,510 1,406,168 1,417,259 1,427,961 1,433,525 1,445,806

January 1 data. Data is unavailable. Source: California Department of Finance and the U.S. Census Bureau. March 2010 Benchmark. (2)

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State of California 34,256,789 34,725,516 35,163,609 35,570,847 35,869,173 36,116,202 36,399,676 36,704,375 36,966,713 37,223,900 37,427,946 37,668,804 37,966,471

Personal Income The following tables summarize personal income and per capita personal income for the County, State of California and United States from 2005 to 2011. PERSONAL INCOME Sacramento County, State of California, and United States 2005-2011 (Dollars in Thousands) Year 2005 2006 2007 2008 2009 2010 2011

County of Sacramento $47,563,421 50,165,916 52,572,684 54,078,812 52,150,896 52,811,960 54,861,602

California $1,387,661,013 1,495,533,388 1,566,400,134 1,610,697,843 1,516,676,660 1,564,209,194 1,645,138,372

United States $10,476,669,000 11,256,516,000 11,900,562,000 12,451,660,000 11,852,715,000 12,308,496,000 12,949,905,000

Note: Dollars in Thousands. Source: U.S. Department of Commerce, Bureau of Economic Analysis.

PER CAPITA PERSONAL INCOME(1) Sacramento County, State of California, and United States 2005-2011 Year 2005 2006 2007 2008 2009 2010 2011

County of Sacramento $34,952 36,629 38,064 38,782 37,023 37,137 38,202

California $38,731 41,518 43,211 44,003 41,034 41,893 43,647

(1)

United States $35,452 37,725 39,506 40,947 38,637 39,791 41,560

Per capita personal income is the total personal income divided by the total mid-year population estimates of the U.S. Bureau of the Census. All dollar estimates are in current dollars (not adjusted for inflation). Source: U.S. Department of Commerce, Bureau of Economic Analysis.

D-2

Employment The following table summarizes the labor force, employment and unemployment figures for years 2008 through 2012 for the Cities, County and State. CIVILIAN LABOR FORCE, EMPLOYMENT AND UNEMPLOYMENT RATE City of Folsom, City of Rancho Cordova, Sacramento County and the State of California 2008-2012(1) Year and Area

Labor Force

Employment(2)

Unemployment(3)

Unemployment Rate (%)

2008 City of Folsom Rancho Cordova Sacramento County State of California

27,700 30,700 680,500 18,203,100

26,900 28,200 631,700 16,890,000

900 2,500 48,800 1,313,100

2009 City of Folsom Rancho Cordova Sacramento County State of California

27,100 31,000 681,600 18,208,300

25,700 27,000 604,900 16,144,500

1,400 4,000 76,700 2,063,900

5.1 12.9 11.3 11.3

2010 City of Folsom Rancho Cordova Sacramento County State of California

26,900 31,100 682,600 18,316,400

25,300 26,600 595,700 16,051,500

1,600 4,500 86,900 2,264,900

5.8 14.5 12.7 12.4

2011 City of Folsom Rancho Cordova Sacramento County State of California

26,800 30,900 678,400 18,404,500

25,400 26,600 596,500 16,237,300

1,500 4,300 81,900 2,167,200

5.5 13.8 12.1 11.8

2012 City of Folsom Rancho Cordova Sacramento County State of California

27,200 30,900 680,200 18,494,900

25,900 27,100 608,400 16,560,300

1,300 3,700 71,800 1,934,500

4.8 12.1 10.6 10.5

(1)

3.2% 8.3 7.2 7.2

Data is based on annual averages, unless otherwise specified, and is not seasonally adjusted. Includes persons involved in labor-management trade disputes. (3) Includes all persons without jobs who are actively seeking work. Source: U.S. Department of Labor – Bureau of Labor Statistics, California Employment Development Department. March 2010 Benchmark. (2)

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Industry The following table summarizes the average annual industry employment in the County from 2008 through 2012. LABOR FORCE AND INDUSTRY EMPLOYMENT ANNUAL AVERAGES Sacramento County 2008-2012 Total Farm Goods Producing Service Providing: Wholesale Trade Retail Trade Transportation, Warehousing & Utilities Information Financial Activities Professional & Business Services Education & Health Services Leisure & Hospitality Other Services Government Total (all industries)

2008 2,700 57,200 540,000 16,000 60,400 13,700 15,000 39,900 80,700 69,400 52,600 20,800 171,500 599,900

2009 2,700 47,500 517,300 14,700 55,400 12,800 14,200 36,000 75,400 69,500 50,200 20,400 168,800 567,500

2010 2,600 42,900 505,000 14,100 55,600 12,000 13,200 32,100 76,600 68,500 48,500 20,100 164,300 550,400

2011 2,600 42,500 498,800 14,200 55,900 11,300 13,000 30,300 75,800 70,500 48,300 19,700 159,600 543,800

2012 2,600 44,300 509,200 16,100 57,900 12,300 11,600 30,900 83,100 71,400 50,300 19,500 156,300 553,400

Note: Items may not add to total due to independent rounding. Source: California Employment Development Department, Labor Market Information Division. March 2010 Benchmark.

Largest Employers The following tables list the ten largest employers in the Cities and County as of Fiscal Year 2012. LARGEST EMPLOYERS City of Folsom 2012 Employer Name Intel Corporation California State Prison Verizon Folsom Prison Folsom Cordova Unified School District Worthington Imports Peterson’s Folsom Lake Enterprises California ISO Maximus City of Folsom

Employees 6,515 1,450 1,100 975 875 680 654 600 550 448

Source: City of Folsom Comprehensive Annual Financial Report’ For Year Ended June 30, 2012.

D-4

LARGEST EMPLOYERS City of Rancho Cordova 2012 Employer Name Health Net Federal Services Vision Service Plan GenCorp, Inc. (Aerojet) Sutter Health/Sutter Connect Delta Dental Verizon Franklin Templeton Investments Catholic Healthcare West Bank of America Volcano Corporation

Employees 2,544 1,850 1,665 1,400 1,328 1,000 1,000 900 800 700

Source: Rancho Cordova Comprehensive Annual Financial Report’ For Year Ended June 30, 2012.

LARGEST EMPLOYERS Sacramento County 2012 Employer Name Kaiser Permanente Sutter / California Health Services CHW / Mercy Health Care Intel Corporation Hewlett-Packard Wells Fargo & Co. Health Net of California Cache Creek Casino Resort(1) Pacific Gas and Electric Co. Thunder Valley Casino Resort(1) (1)

Employees 9,932 9,609 7,107 6,147 3,500 2,986 2,440 2,376 2,060 2,025

Not located in Sacramento County.

Source: Sacramento County Comprehensive Annual Financial Report’ For Year Ended June 30, 2012.

D-5

Commercial Activity Taxable sales in the County and Cities for years 2007 through 2011 are summarized in the following tables. TAXABLE TRANSACTIONS City of Folsom (Dollars In Thousands) 2007-2011 Year 2007 2008 2009 2010 2011

Retail Permits 941 1,063 1,290 1,336 1,333

Retail Stores Taxable Transactions $1,432,997 1,233,849 1,098,859 1,146,226 1,229,502

Total Permits 1,847 1,932 1,807 1,878 1,881

Total Outlets Taxable Transactions $1,631,190 1,364,172 1,227,668 1,293,811 1,333,031

Note: In 2009, retail permits expanded to include permits for food services. Source: “Taxable Sales in California (Sales & Use Tax),” California Board of Equalization.

TAXABLE TRANSACTIONS City of Rancho Cordova (Dollars In Thousands) 2007-2011 Year 2007 2008 2009 2010 2011

Retail Permits 742 796 944 1,161 1,108

Retail Stores Taxable Transactions $553,957 538,229 480,853 619,057 766,808

Total Permits 1,633 1,650 1,511 1,914 1,834

Total Taxable Transactions $860,872 809,294 722,685 924,225 1,158,566

Note: In 2009, retail permits expanded to include permits for food services. Source: “Taxable Sales in California (Sales & Use Tax),” California Board of Equalization.

TAXABLE TRANSACTIONS Sacramento County (Dollars In Thousands) 2007-2011 Year 2007 2008 2009 2010 2011

Retail Permits 15,724 17,363 22,197 23,158 22,198

Retail Stores Taxable Transactions $14,253,867 12,973,537 11,252,319 11,615,687 12,502,808

Total Permits 35,023 35,547 31,644 32,789 31,682

Note: In 2009, retail permits expanded to include permits for food services. Source: “Taxable Sales in California (Sales & Use Tax),” California Board of Equalization.

D-6

Total Taxable Transactions $20,560,510 19,331,847 16,563,853 16,904,528 18,003,765

Construction Activity The following tables reflect the six-year history of building permit valuations and new housing units for the Cities and the County. BUILDING PERMITS AND VALUATIONS City of Folsom 2007-2012 Valuation ($000): Residential Non-residential Total* Residential Units: Single family Multiple family Total

2007

2008

2009

2010

2011

$52,973 54,925 $107,898

$40,171 120,511 $160,682

171 27 198

117 15 132

2012

$37,997 101,985 $139,982

$44,397 46,678 $91,075

$32,423 15,871 $48,294

$54,342 20,632 $74,974

93 0 93

48 26 74

59 95 154

158 57 215

2011

2012

_________________________ * Totals may not add to sums because of rounding. Source: Construction Industry Research Board.

BUILDING PERMITS AND VALUATIONS City of Rancho Cordova 2007-2012 2007 Valuation ($000): Residential Non-residential Total* Residential Units: Single family Multiple family Total

2008

2009

2010

$147,142 64,294 $211,436

$69,140 70,866 $140,006

$71,184 33,620 $104,804

$53,532 22,295 $75,827

$68,029 22,014 $90,043

$57,048 22,596 $79,644

575 6 581

377 0 377

305 0 305

187 18 205

148 0 148

215 0 215

_________________________ * Totals may not add to sums because of rounding. Source: Construction Industry Research Board.

BUILDING PERMITS AND VALUATIONS Sacramento County 2007-2012 2007 Valuation ($000): Residential Non-residential Total* Residential Units: Single family Multiple family Total

2008

2009

2010

2011

2012

$992,619 888,309 $1,880,928

$704,570 1,165,508 $1,870,078

$381,628 507,903 $889,531

$412,765 353,973 $766,738

$407,619 521,650 $929,269

$440,750 577,226 $1,017,976

3,366 839 4,205

1,933 1,231 3,164

881 92 973

843 338 1,181

727 606 1,333

1,290 343 1,633

_________________________ * Totals may not add to sums because of rounding. Source: Construction Industry Research Board.

D-7

Transportation The County's location and transportation network have contributed to the County's economic growth. The County is traversed by the main east-west and north-south freeways serving northern and central California. U.S. Interstate Highway 80 connects Sacramento with the San Francisco Bay Area, Reno, Nevada, and points east. U.S. Highway 50 carries traffic from Sacramento to the Lake Tahoe area. U.S. Interstate Highway 5 is the main north-south route through the interior of California; it runs from Mexico to Canada. State Highway 99 parallels U.S. Interstate Highway 5 through central California and passes through Sacramento. Transcontinental and intrastate rail service is provided by the Union Pacific Railroad. The Sacramento Northern is a short line owned by Union Pacific; it offers rail service to Sacramento Valley markets. Passenger rail service is provided by Amtrak. Bus lines offering intercity as well as local service include Greyhound and Sacramento Regional Transit. The Port of Sacramento provides direct ocean freight service to all major United States and world ports through its deep-water ship channel. The Port of Sacramento is located 79 nautical miles northeast of San Francisco. The three major rail links serving Sacramento connect with the Port of Sacramento. U.S. Interstate Highway 80 and U.S. Interstate Highway 5 are immediately adjacent to the Port of Sacramento. Sacramento Metropolitan Airport is about 12 miles northwest of downtown Sacramento. The airport is served by eight major carriers, two regional carriers, and four commuter carriers. Executive Airport, located in Sacramento, is a full-service, 680-acre facility serving general aviation. In addition to Metropolitan Airport and Executive Airport, there are two other County-operated general airports and numerous private airports.

D-8

APPENDIX E FORMS OF OPINIONS OF BOND COUNSEL Upon issuance and delivery of the Bonds, Stradling Yocca Carlson & Rauth, Bond Counsel, proposes to render its final approving opinion with respect to the Improvement District No. 1 Refunding Bonds substantially in the following form

[Closing Date] Governing Board Folsom Cordova Unified School District Elementary Schools Facilities Improvement District No. 1 Members of the Governing Board: We have examined a certified copy of the record of the proceedings relative to the issuance and sale of $17,390,000 Folsom Cordova Unified School District 2014 General Obligation Refunding Bonds, (School Facilities Improvement District No. 1, Sacramento County, California) (the “Bonds”). As to questions of fact material to our opinion, we have relied upon the certified proceedings and other certifications of public officials furnished to us without undertaking to verify the same by independent investigation. Based on our examination as bond counsel of existing law, certified copies of such legal proceedings and such other proofs as we deem necessary to render this opinion, we are of the opinion, as of the date hereof and under existing law, that: 1. Such proceedings and proofs show lawful authority for the issuance and sale of the Bonds pursuant to (i) Articles 9 and 11 of Chapter 3 of Part 1 of Division 2 of Title 5 of the California Government Code, and (ii) a resolution (the “Bond Resolution”) of the Board of Education of the Folsom Cordova Unified School District (the “School District”). 2. The Bonds constitute valid and binding general obligations of the School District, payable as to both principal and interest from the proceeds of a levy of ad valorem taxes on all property within the Folsom Cordova Unified School District School Facilities Improvement District No. 1 subject to such taxes, which taxes are unlimited as to rate or amount. 3. Under existing statutes, regulations, rulings and judicial decisions, interest on the Bonds is excluded from gross income for federal income tax purposes and is not an item of tax preference for purposes of calculating the federal alternative minimum tax imposed on individuals and corporations; however, it should be noted that, with respect to corporations, such interest on the Bonds may be included as an adjustment in the calculation of alternative minimum taxable income, which may affect the alternative minimum tax liability of such corporations. 4. Interest on the Bonds is exempt from State of California personal income tax. 5. The difference between the issue price of a Bond (the first price at which a substantial amount of the Bonds of a maturity is to be sold to the public) and the stated redemption price at

E-1

maturity with respect to such Bonds constitutes original issue discount. Original issue discount accrues under a constant yield method, and original issue discount will accrue to a Bondowner before receipt of cash attributable to such excludable income. The amount of original issue discount deemed received by a Bondowner will increase the Bondowner’s basis in the applicable Bond. Original issue discount that accrues to the Bondowner is excluded from the gross income of such owner for federal income tax purposes, is not an item of tax preference for purposes of the federal alternative minimum tax imposed on individuals and corporations, and is exempt from State of California personal income tax. 6. The amount by which a Bondowner’s original basis for determining loss on sale or exchange in the applicable Bond (generally, the purchase price) exceeds the amount payable on maturity (or on an earlier call date) constitutes amortizable Bond premium, which must be amortized under Section 171 of the of the Internal Revenue Code of 1986, as amended (the “Code”); such amortizable Bond premium reduces the Bondowner’s basis in the applicable Bond (and the amount of tax-exempt interest received), and is not deductible for federal income tax purposes. The basis reduction as a result of the amortization of Bond premium may result in a Bondowner realizing a taxable gain when a Bond is sold by the Bondowner for an amount equal to or less (under certain circumstances) than the original cost of the Bond to the Bondowner. Purchasers of the Bonds should consult their own tax advisors as to the treatment, computation and collateral consequences of amortizable Bond premium. The opinions expressed herein may be affected by actions taken (or not taken) or events occurring (or not occurring) after the date hereof. We have not undertaken to determine, or to inform any person, whether any such actions or events are taken or do occur. The Bond Resolution and the Tax Certificate relating to the Bonds permit certain actions to be taken or to be omitted if a favorable opinion of Bond Counsel is provided with respect thereto. No opinion is expressed herein as to the effect on the exclusion from gross income of interest (and original issue discount) for federal income tax purposes with respect to any Bond if any such action is taken or omitted based upon the advice of counsel other than ourselves. Other than expressly stated herein, we express no opinion regarding tax consequences with respect to the Bonds. The opinions expressed herein as to the exclusion from gross income of interest (and original issue discount) on the Bonds are based upon certain representations of fact and certifications made by the School District and others and are subject to the condition that the School District complies with all requirements of the Code, that must be satisfied subsequent to the issuance of the Bonds to assure that such interest (and original issue discount) will not become includable in gross income for federal income tax purposes. Failure to comply with such requirements of the Code might cause interest (and original issue discount) on the Bonds to be included in gross income for federal income tax purposes retroactive to the date of issuance of the Bonds. The School District has covenanted to comply with all such requirements.

E-2

It is possible that subsequent to the issuance of the Bonds there might be federal, state, or local statutory changes (or judicial or regulatory interpretations of federal, state, or local law) that affect the federal, state, or local tax treatment of the Bonds or the market value of the Bonds. No assurance can be given that subsequent to the issuance of the Bonds such changes or interpretations will not occur. The rights of the owners of the Bonds and the enforceability thereof may be subject to bankruptcy, insolvency, reorganization, moratorium and other similar laws affecting creditors’ rights heretofore or hereafter enacted to the extent constitutionally applicable and their enforcement may also be subject to the exercise of judicial discretion in appropriate cases. Respectfully submitted,

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Upon issuance and delivery of the Bonds, Stradling Yocca Carlson & Rauth, Bond Counsel, proposes to render its final approving opinion with respect to the Improvement District No. 2 Refunding Bonds substantially in the following form

[Closing Date] Governing Board Folsom Cordova Unified School District Elementary Schools Facilities Improvement District No. 2 Members of the Governing Board: We have examined a certified copy of the record of the proceedings relative to the issuance and sale of $21,145,000 Folsom Cordova Unified School District 2014 General Obligation Refunding Bonds, (School Facilities Improvement District No. 2, Sacramento County, California) (the “Bonds”). As to questions of fact material to our opinion, we have relied upon the certified proceedings and other certifications of public officials furnished to us without undertaking to verify the same by independent investigation. Based on our examination as bond counsel of existing law, certified copies of such legal proceedings and such other proofs as we deem necessary to render this opinion, we are of the opinion, as of the date hereof and under existing law, that: 1. Such proceedings and proofs show lawful authority for the issuance and sale of the Bonds pursuant to (i) Articles 9 and 11 of Chapter 3 of Part 1 of Division 2 of Title 5 of the California Government Code, and (ii) a resolution (the “Bond Resolution”) of the Board of Education of the Folsom Cordova Unified School District (the “School District”). 2. The Bonds constitute valid and binding general obligations of the School District, payable as to both principal and interest from the proceeds of a levy of ad valorem taxes on all property within the Folsom Cordova Unified School District School Facilities Improvement District No. 2 subject to such taxes, which taxes are unlimited as to rate or amount. 3. Under existing statutes, regulations, rulings and judicial decisions, interest on the Bonds is excluded from gross income for federal income tax purposes and is not an item of tax preference for purposes of calculating the federal alternative minimum tax imposed on individuals and corporations; however, it should be noted that, with respect to corporations, such interest on the Bonds may be included as an adjustment in the calculation of alternative minimum taxable income, which may affect the alternative minimum tax liability of such corporations. 4. Interest on the Bonds is exempt from State of California personal income tax. 5. The difference between the issue price of a Bond (the first price at which a substantial amount of the Bonds of a maturity is to be sold to the public) and the stated redemption price at maturity with respect to such Bonds constitutes original issue discount. Original issue discount accrues under a constant yield method, and original issue discount will accrue to a Bondowner before receipt of cash attributable to such excludable income. The amount of original issue discount deemed received by a Bondowner will increase the Bondowner’s basis in the applicable

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Bond. Original issue discount that accrues to the Bondowner is excluded from the gross income of such owner for federal income tax purposes, is not an item of tax preference for purposes of the federal alternative minimum tax imposed on individuals and corporations, and is exempt from State of California personal income tax. 6. The amount by which a Bondowner’s original basis for determining loss on sale or exchange in the applicable Bond (generally, the purchase price) exceeds the amount payable on maturity (or on an earlier call date) constitutes amortizable Bond premium, which must be amortized under Section 171 of the of the Internal Revenue Code of 1986, as amended (the “Code”); such amortizable Bond premium reduces the Bondowner’s basis in the applicable Bond (and the amount of tax-exempt interest received), and is not deductible for federal income tax purposes. The basis reduction as a result of the amortization of Bond premium may result in a Bondowner realizing a taxable gain when a Bond is sold by the Bondowner for an amount equal to or less (under certain circumstances) than the original cost of the Bond to the Bondowner. Purchasers of the Bonds should consult their own tax advisors as to the treatment, computation and collateral consequences of amortizable Bond premium. The opinions expressed herein may be affected by actions taken (or not taken) or events occurring (or not occurring) after the date hereof. We have not undertaken to determine, or to inform any person, whether any such actions or events are taken or do occur. The Bond Resolution and the Tax Certificate relating to the Bonds permit certain actions to be taken or to be omitted if a favorable opinion of Bond Counsel is provided with respect thereto. No opinion is expressed herein as to the effect on the exclusion from gross income of interest (and original issue discount) for federal income tax purposes with respect to any Bond if any such action is taken or omitted based upon the advice of counsel other than ourselves. Other than expressly stated herein, we express no opinion regarding tax consequences with respect to the Bonds. The opinions expressed herein as to the exclusion from gross income of interest (and original issue discount) on the Bonds are based upon certain representations of fact and certifications made by the School District and others and are subject to the condition that the School District complies with all requirements of the Code, that must be satisfied subsequent to the issuance of the Bonds to assure that such interest (and original issue discount) will not become includable in gross income for federal income tax purposes. Failure to comply with such requirements of the Code might cause interest (and original issue discount) on the Bonds to be included in gross income for federal income tax purposes retroactive to the date of issuance of the Bonds. The School District has covenanted to comply with all such requirements. It is possible that subsequent to the issuance of the Bonds there might be federal, state, or local statutory changes (or judicial or regulatory interpretations of federal, state, or local law) that affect the federal, state, or local tax treatment of the Bonds or the market value of the Bonds. No assurance can be given that subsequent to the issuance of the Bonds such changes or interpretations will not occur. The rights of the owners of the Bonds and the enforceability thereof may be subject to bankruptcy, insolvency, reorganization, moratorium and other similar laws affecting creditors’ rights heretofore or hereafter enacted to the extent constitutionally applicable and their enforcement may also be subject to the exercise of judicial discretion in appropriate cases. Respectfully submitted,

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APPENDIX F FORM OF CONTINUING DISCLOSURE CERTIFICATE FOR THE IMPROVEMENT DISTRICT NO. 1 REFUNDING BONDS AND THE IMPROVEMENT DISTRICT NO. 2 REFUNDING BONDS This Continuing Disclosure Certificate (the “Disclosure Certificate”) is executed and delivered by the Folsom Cordova Unified School District (the “School District”) in connection with the issuance of $17,390,000 of Folsom Cordova Unified School District School Facilities District No. 1 (Sacramento County, California) 2014 General Obligation Refunding Bonds (the “Improvement District No. 1 Refunding Bonds”) and $21,145,000 of Folsom Cordova Unified School District School Facilities District No. 2 (Sacramento County, California) 2014 General Obligation Refunding Bonds (the “Improvement District No. 2 Refunding Bonds,” and, together with the Improvement District No. 1 Refunding Bonds, the “Bonds”). The Improvement District No. 1 Refunding Bonds are being issued pursuant to a Resolution of the Board of Education of the School District dated December 12, 2013 (the “Improvement District No. 1 Resolution”). The Improvement District No. 2 Refunding Bonds are being issued pursuant to a Resolution of the Board of Education of the School District dated December 12, 2013 (the “Improvement District No. 2 Resolution”). The Improvement District No. 1 Resolution and the Improvement District No. 1 Resolution are together referred to as the “Resolution.” The Improvement District No. 1 Refunding Bonds represent an obligation of the School District payable solely from ad valorem property taxes levied and collected by Sacramento County, California (the “County”) within the Folsom Cordova Unified School District School Facilities Improvement District No. 1 (“Improvement District No. 1”) boundaries. The Improvement District No. 2 Refunding Bonds represent an obligation of the School District payable solely from ad valorem property taxes levied and collected by the County within the Folsom Cordova Unified School District School Facilities Improvement District No. 2 (“Improvement District No. 2,” and, together with Improvement District No. 1, the “Improvement Districts”) boundaries. The School District covenants and agrees as follows: SECTION 1. Purpose of the Disclosure Certificate. This Disclosure Certificate is being executed and delivered by the School District for the benefit of the Holders and Beneficial Owners of the Bonds and in order to assist the Participating Underwriters in complying with S.E.C. Rule 15c2-12(b)(5). SECTION 2. Definitions. In addition to the definitions set forth in the Resolution, 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” shall mean any Annual Report provided by the School District pursuant to, and as described in, Sections 3 and 4 of this Disclosure Certificate. “Beneficial Owner” shall mean any person which (a) has the power, directly or indirectly, to vote or consent with respect to, or to dispose of ownership of, any Bonds (including persons holding Bonds through nominees, depositories or other intermediaries), or (b) is treated as the owner of any Bonds for federal income tax purposes. “Dissemination Agent” shall mean initially the School District, or any successor Dissemination Agent designated in writing by the School District (which may be the School District) and which has filed with the School District a written acceptance of such designation.

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“Holders” shall mean registered owners of the Bonds. “Listed Events” shall mean any of the events listed in Section 5(a) and 5(b) of this Disclosure Certificate. “Participating Underwriter” shall mean Stifel, Nicolaus & Company, Incorporated or any of the original underwriters of the Bonds required to comply with the Rule in connection with offering of the Bonds. “Repository” shall mean the Municipal Securities Rulemaking Board, which can be found at http://emma.msrb.org/, 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” shall mean 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. “State” shall mean the State of California. SECTION 3. Provision of Annual Reports. (a) The School District shall, or shall cause the Dissemination Agent to, not later than eight months following the end of the School District’s fiscal year (which shall be March 1 of each year, so long as the School District’s fiscal year ends on June 30), commencing with the report for the 2013-14 Fiscal Year, provide to the Participating Underwriter and each Repository an Annual Report which is consistent with the requirements of Section 4 of this Disclosure Certificate. The Annual Report may be submitted as a single document or as separate documents comprising a package, and may cross-reference other information as provided in Section 4 of this Disclosure Certificate; provided that the audited financial statements of the School 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. If the School District’s fiscal year changes, it shall give notice of such change in the same manner as for a Listed Event under Section 5(f). (b) Not later than thirty (30) days (nor more than sixty (60) days) prior to said date the Dissemination Agent shall give notice to the School District that the Annual Report shall be required to be filed in accordance with the terms of this Disclosure Certificate. Not later than fifteen (15) Business Days prior to said date, the School District shall provide the Annual Report in a format suitable for reporting to the Repositories to the Dissemination Agent (if other than the School District). If the School District is unable to provide to the Repositories an Annual Report by the date required in subsection (a), the School District shall send a notice to each Repository in substantially the form attached as Exhibit A with a copy to the Dissemination Agent. The Dissemination Agent shall not be required to file a Notice to Repositories of Failure to File an Annual Report. (c) The Dissemination Agent shall file a report with the School District stating it has filed the Annual Report in accordance with its obligations hereunder, stating the date it was provided and listing all the Repositories to which it was provided. SECTION 4. Content and Form of Annual Reports. (a) The School District’s Annual Report shall contain or include by reference the following: 1. The audited financial statements of the School District for the preceding fiscal year, prepared in accordance with the laws of the State of California and including all statements and

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information prescribed for inclusion therein by the Controller of the State of California. If the School District’s audited financial statements are not available by the time the Annual Report is required to be filed pursuant to Section 3(a), the Annual Report shall contain unaudited financial statements in a format similar to the financial statements contained in the final Official Statement, and the audited financial statements shall be filed in the same manner as the Annual Report when they become available. 2. Material financial information and operating data with respect to the School District and the Improvement District of the type included in the Official Statement in the following categories (to the extent not included in the School District’s audited financial statements): (a)

The School District’s approved annual budget for the then-current fiscal year;

(b)

So long as the Improvement District No. 1 Refunding Bonds remain outstanding, the assessed value of taxable property in Improvement District No. 1 as shown on the most recent equalized assessment roll;

(c)

So long as the Improvement District No. 2 Refunding Bonds remain outstanding, the assessed value of taxable property in Improvement District No. 2 as shown on the most recent equalized assessment roll;

(d)

So long as the Improvement District No. 1 Refunding Bonds remain outstanding, and only if the County no longer includes the tax levy for payment of the Bonds in its Teeter Plan, the property tax levies, collections and delinquencies for Improvement District No. 1 for the most recently completed fiscal year;

(e)

So long as the Improvement District No. 2 Refunding Bonds remain outstanding, and only if the County no longer includes the tax levy for payment of the Bonds in its Teeter Plan, the property tax levies, collections and delinquencies for Improvement District No. 2 for the most recently completed fiscal year;

(f)

So long as the Improvement District No. 1 Refunding Bonds remain outstanding, Top ten property owners in Improvement District No. 1 for the then-current fiscal year, as measured by secured assessed valuation, the amount of their respective taxable value and their percentage of total secured assessed value, if material; and

(g)

So long as the Improvement District No. 2 Refunding Bonds remain outstanding, Top ten property owners in Improvement District No. 2 for the then-current fiscal year, as measured by secured assessed valuation, the amount of their respective taxable value and their percentage of total secured assessed value, if material.

Any or all of the items listed above may be included by specific reference to other documents, including official statements of debt issues of the School District or related public entities, which have been submitted to each of the Repositories or the Securities and Exchange Commission. If the document included by reference is a final official statement, it must be available from the Municipal Securities Rulemaking Board. The School District shall clearly identify each such other document so included by reference. (b) The Annual Report shall be filed in an electronic format accompanied by identifying information prescribed by the Municipal Securities Rulemaking Board.

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SECTION 5. Reporting of Significant Events. (a) Pursuant to the provisions of this Section 5, the School District shall give, or cause to be given, notice of the occurrence of any of the following events with respect to the Bonds in a timely manner not in excess of 10 business days after the occurrence of the event: 1. principal and interest payment delinquencies. 2. tender offers. 3. defeasances. 4. rating changes. 5. the issuance by the Internal Revenue Service of adverse tax opinions, proposed or final determinations of taxability, or Notices of Proposed Issue (IRS Form 5701-TEB). 6. unscheduled draws on the debt service reserves reflecting financial difficulties. 7. unscheduled draws on credit enhancement reflecting financial difficulties. 8. substitution of the credit or liquidity providers or their failure to perform. 9. bankruptcy, insolvency, receivership or similar event of the School District. For the purposes of the event identified in this Section 5(a)(9), the event is considered to occur when any of the following occur: the appointment of a receiver, fiscal agent or similar officer for the School District in a proceeding under the U.S. Bankruptcy Code or in any other proceeding under state or federal law in which a court or governmental authority has assumed jurisdiction over substantially all of the assets or business of the School District, or if such jurisdiction has been assumed by leaving the existing governmental body and officials or officers in possession but subject to the supervision and orders of a court or governmental authority, or the entry of an order confirming a plan of reorganization, arrangement or liquidation by a court or governmental authority having supervision or jurisdiction over substantially all of the assets or business of the School District. (b) Pursuant to the provisions of this Section 5, the School District shall give, or cause to be given, notice of the occurrence of any of the following events with respect to the Bonds, if material: 1. non-payment related defaults. 2. modifications to rights of Bondholders. 3. optional, contingent or unscheduled bond calls. 4. unless described under Section 5(a)(5) above, other material notices or determinations with respect to the tax status of the Bonds, or other material events affecting the tax status of the Bonds. 5. release, substitution or sale of property securing repayment of the Bonds.

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6. the consummation of a merger, consolidation, or acquisition involving the School District or the sale of all or substantially all of the assets of the School District, other than in the ordinary course of business, the entry into a definitive agreement to undertake such an action or the termination of a definitive agreement relating to any such actions, other than pursuant to its terms. 7. Appointment of a successor or additional trustee or paying agent with respect to the Bonds or the change of name of such a trustee or paying agent. (c) Whenever the School District obtains knowledge of the occurrence of a Listed Event under Section 5(b) hereof, the School District shall as soon as possible determine if such event would be material under applicable federal securities laws. (d) If the School District determines that knowledge of the occurrence of a Listed Event under Section 5(b) hereof would be material under applicable federal securities laws, the School District shall (i) file a notice of such occurrence with the Repository in a timely manner not in excess of 10 business days after the occurrence of the event or (ii) provide notice of such reportable event to the Dissemination Agent in format suitable for filing with the Repository in a timely manner not in excess of 10 business days after the occurrence of the event. The Dissemination Agent shall have no duty to independently prepare or file any report of Listed Events. The Dissemination Agent may conclusively rely on the School District’s determination of materiality pursuant to Section 5(c). SECTION 6. Termination of Reporting Obligation. The School District’s obligations under this Disclosure Certificate shall terminate upon the legal defeasance, prior redemption or payment in full of all of the Bonds. If such termination occurs prior to the final maturity of the Bonds, the School District shall give notice of such termination in the same manner as for a Listed Event under Section 5(a) or 5(b), as applicable. SECTION 7. Dissemination Agent. The School District may, from time to time, appoint or engage a Dissemination Agent (or substitute 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. The Dissemination Agent may resign upon fifteen (15) days written notice to the School District. Upon such resignation, the School District shall act as its own Dissemination Agent until it appoints a successor. The Dissemination Agent shall not be responsible in any manner for the content of any notice or report prepared by the School District pursuant to this Disclosure Certificate and shall not be responsible to verify the accuracy, completeness or materiality of any continuing disclosure information provided by the School District. The School District shall compensate the Dissemination Agent for its fees and expenses hereunder as agreed by the parties. Any entity succeeding to all or substantially all of the Dissemination Agent’s corporate trust business shall be the successor Dissemination Agent without the execution or filing of any paper or further act. SECTION 8. Amendment; Waiver. Notwithstanding any other provision of this Disclosure Certificate, the School District may amend this Disclosure Certificate, and any provision of this Disclosure Certificate may be waived, provided that the following conditions are satisfied: (a) If the amendment or waiver relates to the provisions of Sections 3(a), 4, 5(a) of 5(b), it may only be made in connection with a change in circumstances that arises from a change in legal requirements, change in law, or change in the identity, nature or status of an obligated person with respect to the Bonds, or the type of business conducted;

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(b) The undertaking, as amended or taking into account such waiver, would, in the opinion of nationally recognized bond counsel, have complied with the requirements of the Rule at the time of the original issuance of the Bonds, after taking into account any amendments or interpretations of the Rule, as well as any change in circumstances; (c) The amendment or waiver does not, in the opinion of nationally recognized bond counsel, materially impair the interests of the Holders or Beneficial Owners of the Bonds; and (d) No duties of the Dissemination Agent hereunder shall be amended without its written consent thereto. In the event of any amendment or waiver of a provision of this Disclosure Certificate, the School District shall describe such amendment in the next 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 School District. In addition, if the amendment relates to the accounting principles to be followed in preparing financial statements, (i) notice of such change shall be given in the same manner as for a Listed Event under Section 5(b), and (ii) the Annual Report for the year in which the change is made should present a comparison (in narrative form and also, if feasible, in quantitative form) between the financial statements as prepared on the basis of the new accounting principles and those prepared on the basis of the former accounting principles. SECTION 9. Additional Information. Nothing in this Disclosure Certificate shall be deemed to prevent the School District from disseminating any other information, using the means of dissemination set forth in this Disclosure Certificate or any other means of communication, or including any other information in any Annual Report or notice of occurrence of a Listed Event, in addition to that which is required by this Disclosure Certificate. If the School District chooses to include any information in any Annual Report or notice of occurrence of a Listed Event in addition to that which is specifically required by this Disclosure Certificate, the School 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 Listed Event. SECTION 10. Default. In the event of a failure of the School District to comply with any provision of this Disclosure Certificate any Holder or Beneficial Owner of the Bonds may take such actions as may be necessary and appropriate, including seeking mandate or specific performance by court order, to cause the School 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 Resolution, and the sole remedy under this Disclosure Certificate in the event of any failure of the School District to comply with this Disclosure Certificate shall be an action to compel performance. SECTION 11. Duties, Immunities and Liabilities of Dissemination Agent. The Dissemination Agent shall have only such duties as are specifically set forth in this Disclosure Certificate. The Dissemination Agent acts hereunder solely for the benefit of the School District; this Disclosure Certificate shall confer no duties on the Dissemination Agent to the Participating Underwriter, the Holders and the Beneficial Owners. The School 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 gross negligence or willful misconduct. The obligations of the School District under this Section shall survive resignation or removal of the Dissemination Agent and payment of the Bonds. The Dissemination Agent shall have no liability for the failure to report any event or any financial information as to which the School District has not provided an

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information report in format suitable for filing with the Repositories. The Dissemination Agent shall not be required to monitor or enforce the School District’s duty to comply with its continuing disclosure requirements hereunder. SECTION 12. Beneficiaries. This Disclosure Certificate shall inure solely to the benefit of the School District, the Dissemination Agent, the Participating Underwriter and Holders and Beneficial Owners from time to time of the Bonds, and shall create no rights in any other person or entity. Dated: February 13, 2014 FOLSOM CORDOVA UNIFIED SCHOOL DISTRICT

By: Rhonda Crawford Chief Financial Officer/Chief Business Official

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EXHIBIT A NOTICE TO REPOSITORIES OF FAILURE TO FILE ANNUAL REPORT Name of School District: Folsom Cordova Unified School District Name of Bond Issues: 2014 General Obligation Refunding Bonds, (School Facilities Improvement District No. 1, Sacramento County, California) 2014 General Obligation Refunding Bonds, (School Facilities Improvement District No. 2, Sacramento County, California) Date of Issuance: February 13, 2014 NOTICE IS HEREBY GIVEN that the School District has not provided an Annual Report with respect to the above-named Bonds as required by the Continuing Disclosure Certificate relating to the Bonds. The School District anticipates that the Annual Report will be filed by _____________. Dated:_______________________ FOLSOM CORDOVA UNIFIED SCHOOL DISTRICT By

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[form only; no signature required]

APPENDIX G BOOK-ENTRY ONLY SYSTEM The information in this section concerning DTC and DTC’s book-entry system has been obtained from sources that the School District believes to be reliable, but the School District takes no responsibility for the accuracy or completeness thereof. The School District cannot and does not give any assurances that DTC, DTC Participants or Indirect Participants will distribute to the Beneficial Owners (a) payments of interest, principal or premium, if any, with respect to the Bonds, (b) certificates representing ownership interest in or other confirmation or ownership interest in the Bonds, or (c) redemption or other notices sent to DTC or Cede & Co., its nominee, as the registered owner of the Bonds, or that they will so do on a timely basis or that DTC, DTC Participants or DTC Indirect Participants will act in the manner described in this Official Statement. The current “Rules” applicable to DTC are on file with the Securities and Exchange Commission and the current “Procedures” of DTC to be followed in dealing with DTC Participants are on file with DTC. The Depository Trust Company (“DTC”), New York, NY, will act as securities depository for the Bonds. The Bonds will be issued as fully-registered securities registered in the name of Cede & Co. (DTC’s partnership nominee) or such other name as may be requested by an authorized representative of DTC. One fully-registered Bond certificate will be issued for each maturity of the Bonds, in the aggregate principal amount of such maturity, and will be deposited with DTC. DTC, the world’s largest securities depository, is a limited-purpose trust company organized under the New York Banking Law, a “banking organization” within the meaning of the New York Banking Law, a member of the Federal Reserve System, a “clearing corporation” within the meaning of the New York Uniform Commercial Code, and a “clearing agency” registered pursuant to the provisions of Section 17A of the Securities Exchange Act of 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 Bonds under the DTC system must be made by or through Direct Participants, which will receive a credit for the Bonds on DTC’s records. The ownership interest of each actual purchaser of each Bond (“Beneficial Owner”) is in turn to be recorded on the Direct and Indirect Participants’ records. Beneficial Owners will not receive written confirmation from DTC of their purchase. Beneficial Owners are, however, expected to receive written confirmations providing details of the transaction, as well as periodic statements of their holdings, from the Direct or Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers of ownership interests in the Bonds are to be accomplished by entries made on the books of Direct and Indirect Participants acting on

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behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interests in Bonds, except in the event that use of the book-entry system for the Bonds is discontinued. To facilitate subsequent transfers, all Bonds deposited by Direct Participants with DTC are registered in the name of DTC’s partnership nominee, Cede & Co., or such other name as may be requested by an authorized representative of DTC. The deposit of Bonds with DTC and their registration in the name of Cede & Co. or such other DTC nominee do not effect any change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the Bonds; DTC’s records reflect only the identity of the Direct Participants to whose accounts such Bonds are credited, which may or may not be the Beneficial Owners. The Direct and Indirect Participants will remain responsible for keeping account of their holdings on behalf of their customers. Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. Redemption notices shall be sent to DTC. If less than all of the Bonds within an issue are being redeemed, DTC’s practice is to determine by lot the amount of the interest of each Direct Participant in such issue to be redeemed. Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to Bonds unless authorized by a Direct Participant in accordance with DTC’s Procedures. Under its usual procedures, DTC mails an Omnibus Proxy to the School District as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co.’s consenting or voting rights to those Direct Participants to whose accounts Bonds are credited on the record date (identified in a listing attached to the Omnibus Proxy). Redemption proceeds and distribution on the Bonds will be made to Cede & Co., or such other nominee as may be requested by an authorized representative of DTC. DTC’s practice is to credit Direct Participants’ accounts upon DTC’s receipt of funds and corresponding detail information from the School District or Paying Agent, on payable date in accordance with their respective holdings shown on DTC’s records. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered in “street name,” and will be the responsibility of such Participant and not of DTC nor its nominee, Paying Agent, or the School District, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of redemption proceeds and distribution to Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) is the responsibility of the School District or Paying Agent, disbursement of such payments to Direct Participants will be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners will be the responsibility of Direct and Indirect Participants. DTC may discontinue providing its services as depository with respect to the Bonds at any time by giving reasonable notice to the School District or Paying Agent. Under such circumstances, in the event that a successor depository is not obtained, Bond certificates are required to be printed and delivered. The School District may decide to discontinue use of the system of book-entry transfers through DTC (or a successor securities depository). In that event, Bond certificates will be printed and delivered.

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The information in this section concerning DTC and DTC’s book-entry system has been obtained from sources that the School District believes to be reliable, but the School District takes no responsibility for the accuracy thereof.

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