visalia unified school district · 2020. 7. 1. · dtc book-entry only moody’s rating: “aa3”...

NEW ISSUE S&P Rating: “AA-” DTC BOOK-ENTRY ONLY Moody’s Rating: “Aa3”

See “RATINGS” herein

In the opinion of Parker & Covert LLP, Sacramento, California (“Bond Counsel”), based upon an analysis of existing statutes, regulations, rulings and court decisions and assuming, among other things, the accuracy of certain representations and compliance with certain covenants, interest on the Bonds is excludable from gross income for federal income tax purposes and is exempt from State of California personal income taxes. In the further opinion of Bond Counsel, interest on the Bonds is not an item of tax preference for purposes of the alternative minimum tax imposed on individuals. Bond Counsel expresses no opinion regarding any other tax consequences related to the ownership or disposition of, or the accrual or receipt of interest on, the Bonds. See “LEGAL MATTERS—Tax Matters” herein.

$35,170,000 VISALIA UNIFIED SCHOOL DISTRICT

(TULARE COUNTY, CALIFORNIA) GENERAL OBLIGATION BONDS, ELECTION OF 2018, SERIES 2020

DATED: Date of Delivery DUE: August 1, as shown on the inside cover

The Visalia Unified School District (Tulare County, California) General Obligation Bonds, Election of 2018, Series 2020 in the aggregate principal amount of $35,170,000 (the “Bonds”) are being issued by the Visalia Unified School District (the “District”) to (i) finance certain of the school facilities projects set forth in the ballot measure approved by the District’s voters at an election held on November 6, 2018, and (ii) pay certain costs of issuance of the Bonds. See “PLAN OF FINANCE” herein.

The Bonds are general obligation bonds of the District payable from ad valorem property taxes levied and collected by Tulare County (the “County”) against taxable property located within the District’s boundaries and other amounts on deposit in the Tax Collection Fund. The Board of Supervisors of Tulare County (the “County Board”) is empowered and obligated to annually levy and collect ad valorem property taxes without limitation as to rate or amount on all taxable property in the District (except for certain personal property which is taxable at limited rates) for the payment of principal of and interest on the Bonds. See “SECURITY AND SOURCE OF PAYMENT” herein.

The Bonds are being issued as current interest bonds in denominations of $5,000 principal amount or any integral multiple thereof. The Bonds mature on August 1 in the years and amounts set forth on the inside cover page hereof. Interest on the Bonds accrues from the date of delivery and is payable semiannually on February 1 and August 1 of each year, commencing February 1, 2021. The Bonds are subject to redemption prior to maturity. See “THE BONDS—Payment of Principal and Interest” and “—Redemption Provisions” herein.

The Bonds are being issued as fully registered bonds, without coupons, in book-entry form only. When delivered, the Bonds will be initially registered in the name of Cede & Co., as nominee of The Depository Trust Company (“DTC”), acting as securities depository for the Bonds. Individual purchases of the Bonds will be made in book-entry only form and only in authorized denominations as described in this Official Statement. So long as Cede & Co. is the registered owner of the Bonds, payments of principal of and interest on the Bonds will be made by The Bank of New York Mellon Company, N.A. as paying agent (the “Paying Agent”) to DTC for subsequent disbursement to DTC participants who will remit such payments to the Beneficial Owners. See “APPENDIX E—DTC BOOK-ENTRY ONLY SYSTEM” attached hereto.

THIS COVER PAGE CONTAINS CERTAIN INFORMATION FOR QUICK REFERENCE ONLY. IT IS NOT INTENDED TO BE A SUMMARY OF ALL FACTORS RELEVANT TO AN INVESTMENT IN THE BONDS. INVESTORS SHOULD READ THE ENTIRE OFFICIAL STATEMENT TO OBTAIN INFORMATION ESSENTIAL TO THE MAKING OF AN INFORMED INVESTMENT DECISION. CAPITALIZED TERMS USED ON THIS COVER PAGE NOT OTHERWISE DEFINED WILL HAVE THEIR MEANINGS SET FORTH HEREIN.

MATURITY SCHEDULE

See Inside Cover

The Bonds are offered when, as and if issued by the District and received by the Underwriter, subject to the approval as to their legality by Parker & Covert LLP, Sacramento, California, Bond Counsel, and subject to certain other conditions. It is anticipated that the Bonds, in book-entry form, will be available for delivery through the facilities of DTC on or about July 9, 2020.

This Official Statement is dated June 25, 2020.

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MATURITY SCHEDULE



Maturity Date

August 1 Principal Amount

Interest Rate Yield

Price

CUSIP+

2021 $3,550,000 5.000% 0.260% 105.019% 928278 JE1 2022 3,275,000 5.000 0.280 109.693 928278 JF8 2037 2,140,000 2.000 2.200 97.167 928278 JG6 2038 3,130,000 2.125 2.250 98.152 928278 JH4 2039 3,305,000 2.125 2.300 97.311 928278 JJ0 2040 3,490,000 3.000 2.180 106.030 928278 JK7 2041 3,715,000 3.000 2.220 105.727 928278 JL5 2042 3,945,000 3.000 2.250 105.500 928278 JM3 2043 4,190,000 3.000 2.280 105.273 928278 JN1 2044 4,430,000 3.000 2.310 105.047 928278 JP6

+ CUSIP is a registered trademark of the American Bankers Association. CUSIP data herein is provided by CUSIP Global Services, managed by S&P Capital IQ on behalf of The American Bankers Association. Copyright© 2020 CUSIP Global Services. All rights reserved. This data is not intended to create a database and does not serve in any way as a substitute for the CUSIP Services. Neither the District nor the Underwriter is responsible for the selection or correctness of the CUSIP numbers set forth herein.

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Use of Official Statement. This Official Statement is submitted with respect to the sale of the Bonds referred to herein and may not be reproduced or used, in whole or in part, for any other purpose. This Official Statement is not to be construed as a contract between any owner of Bonds and the District or the Underwriter.

No Securities Laws Registration. The Bonds have not been registered under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, in reliance upon exceptions therein for the issuance and sale of municipal securities. The Bonds have not been registered or qualified under the securities law of any state.

No Unlawful Offers of Solicitations. This Official Statement does not constitute an offer to sell nor the solicitation of an offer to buy nor shall there be any sale of the Bonds by a person in any jurisdiction in which it is unlawful for such person to make an offer, solicitation or sale.

No Offering Except by This Official Statement. No dealer, broker, salesperson or other person has been authorized by the District or the Underwriter to give any information or to make any representations, other than those contained herein, and if given or made, such other information or representations must not be relied upon as having been authorized by the District or the Underwriter.

Information in Official Statement. The information set forth herein has been furnished by the District and other sources that are believed to be reliable, but is not guaranteed as to accuracy or completeness. The information and expressions of opinion herein are subject to change without notice and neither delivery of this Official Statement nor any sale made hereunder shall, under any circumstances, create any implication that there has been no change in the affairs of the District since the date hereof. Website. The District maintains a website; however, the information presented there is not a part of this Official Statement and should not be relied upon in making an investment decision with respect to the Bonds.

Estimates and Projections. Certain statements included or incorporated by reference in this Official Statement constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 21E of the Securities Exchange Act of 1934, as amended, and Section 27A of the Securities Act of 1933, as amended. Such statements are generally identifiable by the terminology used such as “plan,” “expect,” “estimate,” “project,” “budget” or similar words. The achievement of certain results or other expectations contained in such forward-looking statements involves known and unknown risks, uncertainties and other factors which may cause actual results, performance or achievements described to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. The District does not plan to issue any updates or revisions to those forward-looking statements if or when its expectations or events, conditions or circumstances on which such statements are based change.

Statement of Underwriter. The Underwriter has reviewed the information in this Official Statement in accordance with, and as part of, its responsibilities under federal securities laws, as applied to the facts and circumstances of this transaction, but the Underwriter does not guarantee the accuracy or completeness of such information. Stabilization of and Changes to Offering Prices. In connection with the offering, the Underwriter may over-allot or effect transactions that stabilize or maintain the market price of the Bonds offered hereby at a level above that which might otherwise prevail in the open market. Such stabilizing, if commenced, may be discontinued at any time. The Underwriter may offer and sell the Bonds to certain dealers, institutional investors, banks or others at prices lower or higher than the public offering prices stated on the inside cover page hereof, and such public offering prices may be changed from time to time by the Underwriter.

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DISTRICT BOARD OF EDUCATION

John L. Crabtree, President Juan R. Guerrero, Clerk

Niessen E. Foster, Member William A. Fulmer, Member Walta S. Gamoian, Member

Joy M. Naylor, Member Lucia D. Vazquez, Ed.D., Member

DISTRICT ADMINISTRATION

Tamara Ravalín, Ed.D., Superintendent Robert Gröeber, Assistant Superintendent, Administrative Services

Dedi Somavia, Assistant Superintendent, Human Resources Development

Visalia Unified School District 5000 West Cypress Avenue Visalia, California 93277

(559) 730-7300

MUNICIPAL ADVISOR

Government Financial Strategies inc. 1228 N Street, Suite 13

Sacramento, California 95814 (916) 444-5100

BOND COUNSEL

Parker & Covert LLP 2520 Venture Oaks Way, Suite 190

Sacramento, California 95833 (916) 245-8677

PAYING AGENT

The Bank of New York Mellon Trust Company, N.A. 2001 Bryan Street, 10th Floor

Dallas, Texas 75201 (214) 468-6145

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TABLE OF CONTENTS

Page #

INTRODUCTORY STATEMENT ................................................................................................................................................. 1General ....................................................................................................................................................................................... 1The District ................................................................................................................................................................................. 1Changes from the Preliminary Official Statement ..................................................................................................................... 1Purpose of Issue ......................................................................................................................................................................... 1Authority for Issuance ................................................................................................................................................................ 1Description of the Bonds ............................................................................................................................................................ 2Source of Payment for the Bonds ............................................................................................................................................... 2Impact of COVID-19 ................................................................................................................................................................. 2Tax Matters ................................................................................................................................................................................ 2Continuing Disclosure ................................................................................................................................................................ 3Professionals Involved ............................................................................................................................................................... 3Other Information ....................................................................................................................................................................... 3

THE BONDS ................................................................................................................................................................................... 3Purpose of Issue ......................................................................................................................................................................... 3Authority for Issuance ................................................................................................................................................................ 3Form and Initial Registration ..................................................................................................................................................... 4Payment of Principal and Interest .............................................................................................................................................. 4Redemption Provisions .............................................................................................................................................................. 5Transfer and Exchange ............................................................................................................................................................... 6Defeasance ................................................................................................................................................................................. 7Unclaimed Moneys .................................................................................................................................................................... 7Paying Agent .............................................................................................................................................................................. 7

PLAN OF FINANCE ....................................................................................................................................................................... 7Application and Investment of Bond Proceeds .......................................................................................................................... 7Permitted Investments ................................................................................................................................................................ 8Sources and Uses of Funds ........................................................................................................................................................ 8Debt Service Schedules .............................................................................................................................................................. 8

SECURITY AND SOURCE OF PAYMENT ............................................................................................................................... 10Introduction .............................................................................................................................................................................. 10Statutory Lien on Ad Valorem Property Tax Revenues ........................................................................................................... 11Assessed Valuation of Property ............................................................................................................................................... 11Reassessments and Appeals of Assessed Value ....................................................................................................................... 15Tax Rates .................................................................................................................................................................................. 16Direct and Overlapping Bonded Debt ...................................................................................................................................... 18Tax Collections and Delinquencies .......................................................................................................................................... 19County Reserve Policy ............................................................................................................................................................. 20Waiver of State Laws Relating to Penalties for Non-Payment of Property Taxes .................................................................. 21

DISCLOSURE RELATED TO COVID-19 .................................................................................................................................. 21Background .............................................................................................................................................................................. 21Federal Action .......................................................................................................................................................................... 21State Action .............................................................................................................................................................................. 22Impact on the District ............................................................................................................................................................... 22

TULARE COUNTY TREASURY POOL ..................................................................................................................................... 23CITY AND COUNTY ECONOMIC PROFILE ........................................................................................................................... 24

General Information ................................................................................................................................................................. 25Population ................................................................................................................................................................................ 25Personal Income ....................................................................................................................................................................... 25Labor Force and Employment .................................................................................................................................................. 26

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Employment by Industry .......................................................................................................................................................... 27Major Employers ...................................................................................................................................................................... 28Commercial Activity ................................................................................................................................................................ 29Construction Activity ............................................................................................................................................................... 29

THE DISTRICT ............................................................................................................................................................................. 30General Information ................................................................................................................................................................. 30The District Board of Education and Key Administrative Personnel ...................................................................................... 30Enrollment ................................................................................................................................................................................ 31Charter Schools ........................................................................................................................................................................ 31Employee Relations ................................................................................................................................................................. 32Impact of COVID-19 on the District ....................................................................................................................................... 32Pension Plans ........................................................................................................................................................................... 33Other Postemployment Benefits (OPEB) ................................................................................................................................. 39

DISTRICT FINANCIAL INFORMATION .................................................................................................................................. 40Accounting Practices ................................................................................................................................................................ 40Budget and Financial Reporting Process ................................................................................................................................. 40Financial Statements ................................................................................................................................................................ 42Revenues .................................................................................................................................................................................. 44Expenditures ............................................................................................................................................................................. 46Short-Term Borrowings ........................................................................................................................................................... 47Capitalized Lease Obligations .................................................................................................................................................. 47Long-Term Borrowings ........................................................................................................................................................... 47

CONSTITUTIONAL AND STATUTORY PROVISIONS AFFECTING DISTRICT REVENUES AND EXPENDITURES .. 48Background .............................................................................................................................................................................. 48Article XIIIA of the State Constitution .................................................................................................................................... 48Article XIIIB of the State Constitution .................................................................................................................................... 49Articles XIIIC and XIIID of the State Constitution ................................................................................................................. 49Minimum Guarantee of State Funding for Education .............................................................................................................. 50Community Redevelopment and Revitalization ...................................................................................................................... 51Limits on State Authority Over Local Tax Revenues .............................................................................................................. 52Temporary State Tax Increases ................................................................................................................................................ 52Enacted Budget Required for Disbursement of State Funds .................................................................................................... 52State and School District Budgetary Reserves ......................................................................................................................... 53School Facilities Funding ......................................................................................................................................................... 53Impact of Future Legislation .................................................................................................................................................... 54

FUNDING OF PUBLIC EDUCATION IN THE STATE ............................................................................................................ 54Sources of Revenue for Public Education ................................................................................................................................ 54The State Budget Process ......................................................................................................................................................... 57The 2019-20 State Budget ........................................................................................................................................................ 57The Proposed 2020-21 State Budget ........................................................................................................................................ 60Future Budgets ......................................................................................................................................................................... 66

LEGAL MATTERS ....................................................................................................................................................................... 67Litigation .................................................................................................................................................................................. 67Legal Opinion ........................................................................................................................................................................... 67Limitations on Remedies; Amounts Held in the County Pool ................................................................................................. 67Tax Matters .............................................................................................................................................................................. 68Legality for Investment in California ....................................................................................................................................... 69

RATINGS ...................................................................................................................................................................................... 69MUNICIPAL ADVISOR ............................................................................................................................................................... 70INDEPENDENT AUDITOR ......................................................................................................................................................... 70UNDERWRITING AND INITIAL OFFERING PRICE .............................................................................................................. 70CONTINUING DISCLOSURE ..................................................................................................................................................... 70ADDITIONAL INFORMATION .................................................................................................................................................. 71

APPENDIX A—AUDITED FINANCIAL STATEMENTS OF THE DISTRICT FOR THE YEAR ENDED JUNE 30, 2019 APPENDIX B—FORM OF CONTINUING DISCLOSURE CERTIFICATE APPENDIX C—FORM OF OPINION OF BOND COUNSEL APPENDIX D—TULARE COUNTY INVESTMENT POLICY APPENDIX E—DTC BOOK-ENTRY ONLY SYSTEM

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OFFICIAL STATEMENT

INTRODUCTORY STATEMENT General The purpose of this Official Statement, which includes the cover page, inside cover page, table of contents and attached appendices (the “Official Statement”) is to provide certain information concerning the sale and delivery of the Visalia Unified School District (Tulare County, California) General Obligation Bonds, Election of 2018, Series 2020 in the aggregate principal amount of $35,170,000 (the “Bonds”). This INTRODUCTORY STATEMENT is not a summary of this Official Statement—it is only a brief description of and guide to this Official Statement. This INTRODUCTORY STATEMENT is qualified by more complete and detailed information contained in this entire Official Statement. A full review of this entire Official Statement should be made by a person interested in investing in the Bonds. The offering of the Bonds to potential investors is made only by means of this entire Official Statement. The District Visalia Unified School District (the “District”), a political subdivision of the State of California (the “State”) established in 1885, is located in the central region of the State in the San Joaquin Valley. The District occupies approximately 214 square miles in Tulare County (the “County”) and serves a population of approximately 150,200 people residing in the city of Visalia (the “City”) and surrounding unincorporated areas. The District operates 41 schools, including four charter schools, serving approximately 29,375 students in transitional kindergarten through twelfth grade as well as additional students in preschool programs and an adult education school. The District is governed by a seven member elected Board of Education (the “District Board”). See “THE DISTRICT” and “DISTRICT FINANCIAL INFORMATION” herein. Changes from the Preliminary Official Statement Since June 17, 2020, the date of the Preliminary Official Statement relating to the Bonds, the District adopted its budget for fiscal year 2020-21 (the “District 2020-21 Budget”). The District 2020-21 Budget is substantially the same as the District’s preliminary budget for fiscal year 2020-21, summary information of which was included in the Preliminary Official Statement. This final Official Statement includes, in addition to pricing information relating to the Bonds, information regarding the District 2020-21 Budget. See “DISTRICT FINANCIAL INFORMATION” herein. Purpose of Issue The Bonds are being issued by the District to (i) finance certain of the school facilities projects set forth in the ballot measure approved by the District’s voters at an election held on November 6, 2018, and (ii) pay certain costs of issuance of the Bonds. See “THE BONDS—Authority for Issuance” and “PLAN OF FINANCE” herein. Authority for Issuance The Bonds are being issued by the District under and pursuant to the California Constitution (the “State Constitution”), certain provisions of the California Government Code (the “Government Code”) and the California Education Code (the “Education Code”), a resolution adopted by the District Board on June 9, 2020 (the “Resolution”), and a paying agent agreement dated

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July 1, 2020 (the “Paying Agent Agreement”) between the District and The Bank of New York Mellon Company, N.A. (the “Paying Agent”). See “THE BONDS—Authority for Issuance” herein. Description of the Bonds The Bonds are being issued as fully registered bonds, without coupons, in book-entry form only. When delivered, the Bonds will be initially registered in the name of Cede & Co. as nominee of The Depository Trust Company (“DTC”). So long as Cede & Co. is the registered owner of the Bonds, payments of principal of and interest on the Bonds will be made by the Paying Agent to DTC for subsequent disbursement to DTC participants who will remit such payments to the beneficial owners of the Bonds (the “Beneficial Owners”). See “APPENDIX E—DTC BOOK-ENTRY ONLY SYSTEM” attached hereto. The Bonds are being issued as current interest bonds in denominations of $5,000 principal amount or any integral multiple thereof. The Bonds are dated their date of delivery and mature on August 1 in each of the years and in the amounts set forth on the inside cover page hereof. Interest on the Bonds is payable semiannually on February 1 and August 1 of each year, commencing February 1, 2021. Interest on the Bonds is computed on the basis of a 360-day year comprised of 12 months of 30 days each. See “THE BONDS—Payment of Principal and Interest” herein. The Bonds are subject to redemption prior to maturity. See THE BONDS—Redemption Provisions” herein. Source of Payment for the Bonds The Bonds are general obligation bonds of the District payable from ad valorem property taxes, levied pursuant to the provisions of the State Constitution and other State law, which the Board of Supervisors of Tulare County (the “County Board”) is empowered and obligated to annually levy and collect, without limitation as to rate or amount, on all taxable property in the District (except for certain personal property which is taxable at limited rates) for the payment of principal of and interest on the Bonds, and from amounts on deposit in the Tax Collection Fund (as defined herein). See “SECURITY AND SOURCE OF PAYMENT” herein. Impact of COVID-19 An outbreak of a respiratory disease caused by a new strain of coronavirus (“COVID-19”) was first detected in China in late 2019 and has subsequently spread globally. The federal and State governments have both declared emergencies and taken action to limit the spread of the outbreak and reduce the resulting economic impact. The District cannot predict the outbreak’s extent or duration or what impact the outbreak as well as responses by federal, State or local authorities may have on the District’s financial condition, the assessed value of real property in the District or property tax collections within the District. See “DISCLOSURE RELATED TO COVID-19” herein. Tax Matters In the opinion of Parker & Covert LLP, Sacramento, California (“Bond Counsel”), based upon an analysis of existing statutes, regulations, rulings, and court decisions and assuming, among other things, the accuracy of certain representations and compliance with certain covenants, interest on the Bonds is excludable from gross income for federal income tax purposes and is exempt from State of California personal income taxes. In the further opinion of Bond Counsel, interest on the Bonds is not an item of tax preference for purposes of the alternative minimum tax imposed on individuals. Bond Counsel expresses no opinion regarding any other tax consequences related to the ownership or disposition of, or the accrual or receipt of interest on, the Bonds. See “LEGAL MATTERS—Tax Matters” herein. The form of the proposed opinion of Bond Counsel relating to the Bonds is included with this Official Statement. See “APPENDIX C—FORM OF OPINION OF BOND COUNSEL” attached hereto.

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Continuing Disclosure The District will covenant for the benefit of the Underwriter, the Registered Owners (as defined herein) and the Beneficial Owners to make available annually certain financial information and operating data relating to the District and to provide notices of the occurrence of certain enumerated events in compliance with Securities and Exchange Commission (the “SEC”) Rule 15c2-12(b)(5). The specific nature of the information to be made available annually and the enumerated events for which notice will be given are set forth in “APPENDIX B—FORM OF CONTINUING DISCLOSURE CERTIFICATE” attached hereto. See also “CONTINUING DISCLOSURE” herein. Professionals Involved Government Financial Strategies inc., Sacramento, California, has acted as municipal advisor (the “Municipal Advisor”) to the District with respect to the sale and delivery of the Bonds. See “MUNICIPAL ADVISOR” herein. Certain proceedings in connection with the sale and delivery of the Bonds are subject to the approving legal opinion of Parker & Covert LLP, Sacramento, California, Bond Counsel. The Bank of New York Mellon Company, N.A. will act as paying agent with respect to the Bonds. Parker & Covert LLP and The Bank of New York Mellon Company, N.A. will receive compensation contingent upon the sale and delivery of the Bonds. Other Information This Official Statement may be considered current only as of its date that has been made a part of the cover page hereof, and the information contained herein is subject to change. A description of the Bonds and the District, together with summaries of certain provisions of the Resolution, the Paying Agent Agreement, and other legal documents related to the Bonds (collectively, the “Legal Documents”) are included in this Official Statement. Such summaries do not purport to be comprehensive or definitive, and all references made herein to the Legal Documents approved by the District are qualified in their entirety by reference to such document, and all references made herein to the Bonds are qualified in their entirety by reference to the form thereof included in the Legal Documents. Interested parties may obtain copies of the Legal Documents, audited financial statements, annual budgets, or other information which is generally made available to the public by contacting Visalia Unified School District, 5000 West Cypress Avenue, Visalia, California 93277, telephone (559) 730-7300, Attention: Assistant Superintendent, Administrative Services, or by contacting the Municipal Advisor, Government Financial Strategies inc., 1228 N Street, Suite 13, Sacramento, California 95814-5609, telephone (916) 444-5100.

THE BONDS Purpose of Issue The Bonds are being issued by the District to (i) finance certain of the school facilities projects set forth in the ballot measure approved by the District’s voters at an election held on November 6, 2018, and (ii) pay certain costs of issuance of the Bonds. See “—Authority for Issuance” and “PLAN OF FINANCE” herein. Authority for Issuance The Bonds are being issued by the District in accordance with the provisions of Article XIIIA, Section 1 of the State Constitution, the provisions of Government Code Section 53506 et seq., and all laws amendatory to or supplemental thereof, certain provisions of the Education Code, including Section 15264 et seq., and all laws amendatory to or supplemental thereof, and pursuant to the provisions of the Resolution and the Paying Agent Agreement. Pursuant to provisions of State law, the District Board adopted a resolution calling for an election to authorize the issuance of $105.3 million in aggregate principal amount of general obligation bonds for authorized school purposes. On November 6, 2018, at an election duly held pursuant to State law (the “2018 Election”), more than 55 percent of the votes received from qualified voters within the boundaries of the District approved “Measure A” as follows:

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“To protect quality education with funding that cannot be taken by the State, shall Visalia Unified School District: upgrade classrooms, labs and computer systems to support science, technology, English, arts and math; prevent school/classroom overcrowding; and improve school safety/security; by issuing $105,300,000 in bonds at legal rates, repaying an annual average of $7,560,000 for 30 years, at approximately $36 per $100,000 of assessed value, with independent oversight, no money for administrators, and all funds staying local?”

The Tulare County Registrar of Voters certified the results of the election as follows:

General Obligation Bond Election of 2018 Visalia Unified School District

Yes Votes No Votes

24,297 (60.1%) 16,103 (39.9%) Source: Tulare County Registrar of Voters. The Bonds represent the first series of bonds to be issued by the District under the authorization of the 2018 Election. Upon the issuance of the Bonds, the District will have $70.13 million of authorized but unissued bonds remaining under the 2018 Election. See “DISTRICT FINANCIAL INFORMATION—Long-Term Borrowings” herein. Form and Initial Registration Pursuant to the Paying Agent Agreement, the Paying Agent will keep and maintain for and on behalf of the District registration books (the “Bond Register”) for recording the owners of the Bonds (the “Registered Owners”), the transfer and exchange of the Bonds, and the payment of the principal of and interest on the Bonds to the Registered Owners. The Bonds will be initially executed and delivered as one fully registered bond for each maturity, without coupons, in the name of Cede & Co., as nominee of DTC, acting as securities depository for the Bonds. Purchases of Bonds under the DTC book-entry system must be made by or through a DTC participant in the principal amount of $5,000 or integral multiples thereof for each maturity, and ownership interests in Bonds will be recorded as entries on the books of said participants. Except in the event that use of this book-entry system is discontinued for the Bonds, Beneficial Owners will not receive physical certificates representing their ownership interests in the Bonds. See “APPENDIX E—DTC BOOK-ENTRY ONLY SYSTEM” attached hereto. So long as the Bonds are registered in the name of Cede & Co., or its registered assigns, as nominee for DTC, references in this Official Statement to the Registered Owners mean Cede & Co., or its registered assigns, and do not mean the Beneficial Owners of the Bonds. Payment of Principal and Interest The Bonds are dated their date of delivery and mature on August 1 in each of the years and in the amounts set forth on the inside cover page hereof. Interest on the Bonds is computed on the basis of a 360-day year comprised of 12 months of 30 days each. Interest on the Bonds is payable semiannually on February 1 and August 1 of each year (each, an “Interest Payment Date”), commencing February 1, 2021, at the annual interest rates shown on the inside cover page hereof. Each Bond bears interest from the Interest Payment Date next preceding the date of authentication thereof, unless (i) it is authenticated as of a day during the period after the fifteenth day of the calendar month immediately preceding an Interest Payment Date (the “Regular Record Date”) to that Interest Payment Date, both dates inclusive, in which event it will bear interest from such Interest Payment Date, or (ii) it is authenticated on or before January 15, 2021, in which event it bears

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interest from its date of delivery, provided that if, at the time of authentication of a Bond, interest is in default thereon, such Bond bears interest from the Interest Payment Date to which interest has previously been paid or made available for payment. The principal or redemption price of and interest on the Bonds is payable in lawful money of the United States of America by wire transfer on each payment date to Cede & Co., or its registered assigns, as nominee of DTC, so long as Cede & Co. is the sole Registered Owner. In the event the book-entry system is no longer in use, the principal or redemption price of the Bonds is payable upon surrender thereof at maturity or earlier redemption at the designated office of the Paying Agent, and payments of interest will be made on each Interest Payment Date by check of the Paying Agent sent to the Registered Owner thereof, provided however, that payment of interest may be by wire transfer of immediately available funds to any Registered Owner in the aggregate principal amount of $1,000,000 or more who has provided the Paying Agent with wire transfer instructions to an account within the United States of America as of the close of business on the Regular Record Date. Redemption Provisions Optional Redemption. The Bonds maturing on or before August 1, 2028, are not subject to redemption at the option of the District prior to their respective maturity dates. The Bonds maturing on or after August 1, 2029, are subject to redemption prior to their respective stated maturities, at the option of the District, as a whole or in part among maturities on such basis as designated by the District and by lot within a maturity, from any source of available funds, on any date on or after August 1, 2028, at a redemption price equal to the principal amount of the Bonds called for redemption, plus accrued interest to the date fixed for redemption, without premium. Selection of Bonds for Redemption. In the case of any redemption at the election of the District of less than all the outstanding Bonds, the District will, at least 45 days prior to the date fixed for redemption (unless a shorter notice is satisfactory to the Paying Agent) notify the Paying Agent in writing of such redemption date and of the principal amount of Bonds to be redeemed. If less than all the outstanding Bonds of any maturity are to be redeemed, not more than 60 days prior to the redemption date, the Paying Agent will select the particular Bonds to be redeemed from the outstanding Bonds of such maturity that have not previously been called for redemption, in minimum amounts of $5,000 principal amount, by lot in any manner that the Paying Agent in its sole discretion deems appropriate and fair. For purposes of such selection, each $5,000 principal amount will be deemed to be a separate Bond. Notice of Redemption. The Paying Agent will mail notice of redemption not fewer than 30 nor more than 60 days prior to the redemption date by first-class mail, postage prepaid, to the respective Registered Owners of any Bonds designated for redemption at their addresses appearing on the Bond Register and will file such notice on the same day with the Municipal Securities Rulemaking Board (the “MSRB”) through its Electronic Municipal Market Access (“EMMA”) website. Each notice of redemption will contain: (i) the date of such notice; (ii) the series designation of the Bonds and date of issue of the Bonds; (iii) the redemption date; (iv) the redemption price; (v) the place or places of redemption (including the name and appropriate address or addresses of the Paying Agent); (vi) the CUSIP number (if any) of the maturity or maturities; and (vii) if less than all of any such maturity, the distinctive certificate numbers of the Bonds of such maturity to be redeemed and, in the case of Bonds to be redeemed in part only, the respective portions of the principal amount thereof to be redeemed. Each notice will either (i) explicitly state that the proposed redemption is conditioned on there being on deposit on the redemption date sufficient money to pay in full the redemption price of the Bonds or portions thereof to be redeemed; or (ii) be sent only if sufficient money to pay in full the redemption price of the Bonds or portions thereof to be redeemed is on deposit. Each such notice will also (i) state that on said date there will become due and payable on each of said Bonds the redemption price thereof or of said specified portion of the principal amount thereof in the case of a Bond to be redeemed in part only, together with interest accrued thereon to the date fixed for redemption; (ii) state that from and after such redemption date interest thereon shall cease to accrue; and (iii) require that such Bonds be then surrendered at the address or addresses of the Paying Agent specified in the redemption notice. Neither the District nor the Paying Agent has any responsibility for any defect in the CUSIP number that appears on any Bond or in any redemption notice with respect thereto, and any such redemption notice may contain a statement to the effect that CUSIP numbers have been assigned by an independent service for convenience of reference and that neither the District nor the Paying Agent is liable for any inaccuracy in such numbers. Defects in Notice or Procedure. Failure by the Paying Agent to file notice with the MSRB or failure of any Registered Owner to receive notice, or any defect in any such notice, will not affect the sufficiency of the proceedings for redemption. Failure by the Paying Agent to mail or otherwise deliver notice to any one or more of the respective Registered Owners of any Bonds designated for redemption will not affect the sufficiency of the proceedings for redemption with respect to the Registered Owner or Owners to whom such notice was mailed or delivered.

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Right to Rescind Notice. The District may rescind any optional redemption and notice thereof for any reason on any date prior to the date fixed for redemption by causing written notice of the rescission to be given to the Registered Owners of the Bonds so called for redemption. Any optional redemption and notice thereof will be rescinded if for any reason on the date fixed for redemption moneys are not available in the fund held by the Paying Agent for the payment of principal of and interest on the Bonds to the Registered Owners or otherwise held in trust for such purpose in an amount sufficient to pay in full on said date the principal of, interest, and any premium due on the Bonds called for redemption. Notice of rescission of redemption will be given in the same manner in which notice of redemption was originally given. The actual receipt by the Registered Owner of any Bond of notice of such rescission is not a condition precedent to rescission, and failure to receive such notice or any defect in such notice will not affect the validity of the rescission. Deposit of Redemption Price. Prior to any redemption date, the District will deposit with the Paying Agent an amount of money sufficient to pay the redemption price of all the Bonds that are to be redeemed on that date. Such money will be held for the benefit of the persons entitled to such redemption price. Effect of Redemption. When notice of redemption has been given substantially as provided in the Paying Agent Agreement and moneys for payment of the redemption price of the Bonds called for redemption are held by the Paying Agent, on the redemption date designated in such notice (i) the Bonds so to be redeemed will become due and payable at the redemption price specified in such notice; (ii) interest on such Bonds will cease to accrue; (iii) such Bonds will cease to be entitled to any benefit or security under the Paying Agent Agreement; and (iv) the Registered Owners of such Bonds will have no rights in respect thereof except to receive payment of said redemption price. Upon surrender of any such Bond for redemption in accordance with said notice, such Bond will be paid by the Paying Agent at the redemption price. Bonds Redeemed in Part. Upon surrender of any Bond redeemed in part only, the District will execute and the Paying Agent will authenticate, if required, and deliver to the Registered Owner thereof, at the expense of the District, a new Bond or Bonds of authorized denominations, and of the same maturity, equal in aggregate principal amount to the unredeemed portion of the Bond surrendered. Transfer and Exchange If the book-entry system as described herein is no longer used with respect to the Bonds, the provisions in the Paying Agent Agreement summarized below will govern the transfer and exchange of the Bonds. See “APPENDIX E—DTC BOOK-ENTRY ONLY SYSTEM” attached hereto. Upon surrender of a Bond for transfer at the Paying Agent’s office, the District will execute and, if required, the Paying Agent will authenticate and deliver, in the name of the designated transferee or transferees, one or more new Bonds of the same series, tenor, and maturity and for an equivalent aggregate principal amount. Bonds may be exchanged for an equivalent aggregate principal amount of Bonds of other authorized denominations of the same series, tenor, and maturity upon surrender of the Bonds for exchange at the Paying Agent’s office. Upon surrender of Bonds for exchange, the District will execute and, if required, the Paying Agent will authenticate and deliver the Bonds that the holder making the exchange is entitled to receive. Every Bond presented or surrendered for transfer or exchange must be accompanied by a written instrument of transfer, in a form satisfactory to the Paying Agent, that is duly executed by the Registered Owner or by his attorney duly authorized in writing. All fees and costs of any transfer or exchange of Bonds will be paid by the holder requesting such transfer or exchange. All Bonds issued upon any transfer or exchange of Bonds will be the valid obligations of the District, evidencing the same debt, and entitled to the same security and benefits under the Paying Agent Agreement, as the Bonds surrendered upon such transfer or exchange. All Bonds surrendered upon any exchange or transfer will be promptly cancelled by the Paying Agent. The Paying Agent is not required to transfer or exchange (i) Bonds during the period established by the Paying Agent for the selection of Bonds for redemption; or (ii) any Bond that has been selected for redemption in whole or in part, except the unredeemed portion of such Bond selected for redemption in part, from and after the day that such Bond has been selected for redemption in whole or in part.

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Defeasance Upon the deposit with the Paying Agent, escrow agent, or other fiduciary, at or before maturity, of money or Defeasance Securities (as defined herein) in the necessary amount as provided in the Paying Agent Agreement to pay or redeem any outstanding Bond (whether upon or prior to its maturity or the redemption date of such Bond), provided that, if such Bond is to be redeemed prior to maturity, notice of such redemption has been given or provision satisfactory to the Paying Agent has been made for the giving of such notice, then all liability of the District in respect of such Bond will cease, terminate, and be completely discharged, except that thereafter (i) the Registered Owner thereof will be entitled to payment of the principal amount or redemption price of and interest on such Bond by the District and the District will remain liable for such payment, but only out of such money or securities deposited with the Paying Agent, escrow agent, or other fiduciary for their payment; and (ii) the Registered Owner thereof will retain its rights of transfer or exchange of Bonds. Defeasance Securities means (i) cash; (ii) direct obligations (other than an obligation subject to variation in principal repayment) of the United States of America; (iii) obligations fully and unconditionally guaranteed as to timely payment of principal and interest by the United States of America; (iv) obligations fully and unconditionally guaranteed as to timely payment of principal and interest by any agency or instrumentality of the United States of America when such obligations are backed by the full faith and credit of the United States of America; or (v) evidences of ownership of proportionate interests in future interest and principal payments on obligations described above held by a bank or trust company as custodian, under which the owner of the investment is the real party in interest and has the right to proceed directly and individually against the obligor and the underlying government obligations are not available to any person claiming through the custodian or to whom the custodian may be obligated. Unclaimed Moneys Subject to applicable escheatment laws, any moneys held by the Paying Agent for the payment of the principal amount or redemption price of or interest on any Bonds and remaining unclaimed for three years after the date when such Bonds have become due and payable (whether at maturity or upon call for redemption), if such moneys were so held at such date, or three years after the date of deposit of such moneys if deposited after the date when such Bonds became due and payable, will be repaid to the District. Thereafter, Registered Owners will look solely to the District for the payment of such funds and the Paying Agent will have no further liability for such funds. Paying Agent The Bank of New York Mellon Company, N.A. will act as the bond registrar, authenticating agent, paying agent and transfer agent for the Bonds unless and until replaced by the District with a successor paying agent as described in the Paying Agent Agreement. As long as Cede & Co or a successor nominee or 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 to owners only to DTC. Any failure of DTC to advise any DTC participant or of any DTC participant to notify any Beneficial Owner of any such notice and its content or effect will not affect the validity or sufficiency of the proceedings relating to any action premised on such notice. The Paying Agent, the District and the Underwriter have no responsibility or liability for any aspects of the records relating to, or payments made on account of, beneficial ownership, or for maintaining, supervising, or reviewing any records relating to beneficial ownership of interests in the Bonds.

PLAN OF FINANCE Application and Investment of Bond Proceeds A portion of the proceeds of the sale of the Bonds, exclusive of any premium, will be transferred to the Tulare County Treasurer-Tax Collector (the “County Treasurer”) for deposit in the Visalia Unified School District Building Fund (the “Building Fund”) to be established and maintained in the Tulare County treasury (the “County Treasury”) in accordance with Education Code Section 15146(g) and accounted for, together with the proceeds of other bonds of the District, separately from all other District and County funds. Moneys deposited in the Building Fund will be used solely for the purpose for which the Bonds are authorized. Any proceeds of the sale of the Bonds deposited in the Building Fund not needed for the purposes of the Bonds will be transferred to the tax collection fund (the “Tax Collection Fund”) maintained by the County Treasurer in the County Treasury pursuant to Education Code Section 15251 to be applied to the payment of principal of and interest on general obligations bonds of the District including the Bonds.

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A portion of the proceeds from the sale of the Bonds, exclusive of any premium, will be transferred to the Paying Agent for deposit into a costs of issuance fund (the “Costs of Issuance Fund”) to be created and maintained by the Paying Agent to pay costs associated with the issuance of the Bonds. Any proceeds of the sale of the Bonds deposited in the Costs of Issuance Fund not needed to pay the costs of issuance of the Bonds will be transferred by the Paying Agent to the debt service fund (the “Debt Service Fund”) held by the Paying Agent for the payment of principal of and interest on the Bonds. The premium, if any, received by the District from the sale of the Bonds will be transferred to the County Treasurer for deposit in the Tax Collection Fund. Moneys deposited in the Tax Collection Fund will be used solely for the payment of principal of and interest on the general obligation bonds of the District. Any moneys remaining in the Tax Collection Fund after the principal of and interest on the Bonds have been paid will be used to pay other general obligation bonds of the District, or, if there are no other general obligation bonds of the District outstanding, will be transferred to the general fund of the District (the “General Fund”) pursuant to Education Code Section 15234. Permitted Investments Under State law, the District is generally required to pay all moneys received from any source into the County Treasury to be held on behalf of the District. All funds held by the County Treasurer in the Building Fund and the Tax Collection Fund are expected to be invested at the sole discretion of the County Treasurer, on behalf of the District, in such investments as are authorized by Government Code Sections 16429.1, 53601 and 53635 and following and the investment policy of the County (the “County Investment Policy”), as either may be amended or supplemented from time to time. Under existing law, amounts in the Building Fund are required to be held in the County Treasury and will be invested in the Tulare County Treasury Pool. At no time shall the proceeds of the Bonds be withdrawn by the District for investment outside the County Treasury. See “TULARE COUNTY TREASURY POOL” herein and “APPENDIX D—TULARE COUNTY INVESTMENT POLICY” attached hereto for a description of the permitted investments under the County Investment Policy. Sources and Uses of Funds The sources and uses of funds in connection with the sale and delivery of the Bonds are set forth in the following table.

Sources and Uses of Funds General Obligation Bonds, Election of 2018. Series 2020

Sources of Funds Par Amount of Bonds $35,170,000.00 Net Original Issue Premium 1,372,981.05 Total Sources of Funds $36,542,981.05 Uses of Funds Building Fund $35,000,000.00 Tax Collection Fund 1,181,866.04 Costs of Issuance Fund1 170,000.00 Underwriter’s Discount 191,115.01 Total Uses of Funds $36,542,981.05

1The Costs of Issuance Fund will be used to pay costs of issuance of the Bonds including fees and expenses of Bond Counsel, the Municipal Advisor, the Paying Agent, the rating agencies and certain other expenses related to the issuance of the Bonds. Debt Service Schedules Scheduled debt service on the Bonds (assuming no optional redemption of Bonds) is shown in the table on the following page.

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Debt Service Schedule General Obligation Bonds, Election of 2018, Series 2020

Date Principal Interest Semiannual Debt Service

February 1, 2021 $625,018.16 $625,018.16

August 1, 2021 $3,550,000.00 556,946.88 4,106,946.88 February 1, 2022 - 468,196.88 468,196.88

August 1, 2022 3,275,000.00 468,196.88 3,743,196.88 February 1, 2023 - 386,321.88 386,321.88

August 1, 2023 - 386,321.88 386,321.88 February 1, 2024 - 386,321.88 386,321.88

August 1, 2024 - 386,321.88 386,321.88 February 1, 2025 - 386,321.88 386,321.88

August 1, 2025 - 386,321.88 386,321.88 February 1, 2026 - 386,321.88 386,321.88

August 1, 2026 - 386,321.88 386,321.88 February 1, 2027 - 386,321.88 386,321.88

August 1, 2027 - 386,321.88 386,321.88 February 1, 2028 - 386,321.88 386,321.88

August 1, 2028 - 386,321.88 386,321.88 February 1, 2029 - 386,321.88 386,321.88

August 1, 2029 - 386,321.88 386,321.88 February 1, 2030 - 386,321.88 386,321.88

August 1, 2030 - 386,321.88 386,321.88 February 1, 2031 - 386,321.88 386,321.88

August 1, 2031 - 386,321.88 386,321.88 February 1, 2032 - 386,321.88 386,321.88

August 1, 2032 - 386,321.88 386,321.88 February 1, 2033 - 386,321.88 386,321.88

August 1, 2033 - 386,321.88 386,321.88 February 1, 2034 - 386,321.88 386,321.88

August 1, 2034 - 386,321.88 386,321.88 February 1, 2035 - 386,321.88 386,321.88

August 1, 2035 - 386,321.88 386,321.88 February 1, 2036 - 386,321.88 386,321.88

August 1, 2036 - 386,321.88 386,321.88 February 1, 2037 - 386,321.88 386,321.88

August 1, 2037 2,140,000.00 386,321.88 2,526,321.88 February 1, 2038 - 364,921.88 364,921.88

August 1, 2038 3,130,000.00 364,921.88 3,494,921.88 February 1, 2039 - 331,665.63 331,665.63

August 1, 2039 3,305,000.00 331,665.63 3,636,665.63 February 1, 2040 - 296,550.00 296,550.00

August 1, 2040 3,490,000.00 296,550.00 3,786,550.00 February 1, 2041 - 244,200.00 244,200.00

August 1, 2041 3,715,000.00 244,200.00 3,959,200.00 February 1, 2042 - 188,475.00 188,475.00

August 1, 2042 3,945,000.00 188,475.00 4,133,475.00 February 1, 2043 - 129,300.00 129,300.00

August 1, 2043 4,190,000.00 129,300.00 4,319,300.00 February 1, 2044 - 66,450.00 66,450.00

August 1, 2044 4,430,000.00 66,450.00 4,496,450.00

Total $35,170,000.00 $16,951,140.22 $52,121,140.22

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Upon issuance of the Bonds, scheduled debt service on the District’s outstanding general obligation bond debt (assuming no optional redemption of such general obligation bond debt) is shown in the following table. See “DISTRICT FINANCIAL INFORMATION—Long-Term Borrowings” for more information on the District’s outstanding bonded debt.

Outstanding General Obligation Bond Debt Service Visalia Unified School District

Year Ended Outstanding General General Obligation Bonds Total General Obligation June 30 Obligation Bonds Election of 2018, Series 2020 Bond Debt Service

2021 $3,462,688 $625,018 $4,087,706 2022 3,524,313 4,575,144 8,099,456 2023 3,583,563 4,129,519 7,713,081 2024 3,649,938 772,644 4,422,581 2025 3,706,181 772,644 4,478,825 2026 3,825,550 772,644 4,598,194 2027 3,810,175 772,644 4,582,819 2028 3,879,925 772,644 4,652,569 2029 3,947,550 772,644 4,720,194 2030 4,017,925 772,644 4,790,569 2031 4,100,675 772,644 4,873,319 2032 4,181,300 772,644 4,953,944 2033 4,270,200 772,644 5,042,844 2034 4,347,200 772,644 5,119,844 2035 4,432,600 772,644 5,205,244 2036 4,525,900 772,644 5,298,544 2037 4,616,800 772,644 5,389,444 2038 4,700,700 2,891,244 7,591,944 2039 4,727,900 3,826,588 8,554,488 2040 4,732,400 3,933,216 8,665,616 2041 4,810,100 4,030,750 8,840,850 2042 3,256,250 4,147,675 7,403,925 2043 3,403,250 4,262,775 7,666,025 2044 2,316,500 4,385,750 6,702,250 2045 - 4,496,450 4,496,450

Total $95,829,581 $52,121,140 $147,950,721

SECURITY AND SOURCE OF PAYMENT Introduction The Bonds are general obligation bonds of the District payable from ad valorem property taxes levied and collected by the County solely for the payment of principal of and interest on the Bonds, and from amounts on deposit in the Tax Collection Fund. The County Board is empowered and obligated to levy ad valorem property taxes upon all property subject to taxation by the District, without limitation as to rate or amount (except as to certain personal property which is taxable at limited rates), in order to provide sufficient funds for repayment of principal of and interest on the Bonds when due. Although the County is obligated to levy and collect the ad valorem property tax for the payment of the Bonds, the Bonds are not a debt of the County. The proceeds of such ad valorem property tax, when collected, will be deposited into the Tax Collection Fund pursuant to Education Code Section 15251, which ad valorem property taxes, together with the amounts on deposit in the Tax Collection Fund, are irrevocably pledged pursuant to Government Code Sections 5450 and 5451 to the payment of principal of and

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interest on the Bonds when and as the same fall due. Pursuant to Government Code 53515 (discussed below), the Bonds are secured by a statutory lien on all revenues received pursuant to the levy and collection of ad valorem property taxes for the payment of the Bonds. The County will take all actions necessary to levy such ad valorem property taxes in accordance with Education Code Section 15250 et seq. and to cause the proceeds from such levy to be deposited into the Tax Collection Fund to pay the principal of and interest on the Bonds when due. The District will direct the County Treasurer to transfer, at least one business day prior to each Interest Payment Date, from the Tax Collection Fund to the Paying Agent for deposit in the Debt Service Fund an amount sufficient to pay the principal and interest becoming due and payable on the Bonds on the next succeeding Interest Payment Date. Various officers of the County are responsible for the performance of each function in the property taxation system within the County. Property tax revenues result from the application of the appropriate tax rate to the total net assessed value of taxable property in the District. All property, including real, personal and intangible property, is taxable, unless granted an exemption by the State Constitution or United States law. Under the State Constitution, exempt classes of property include household and personal effects, intangible personal property (such as bank accounts, stocks and bonds), business inventories, and property used for religious, hospital, scientific and charitable purposes. The California Legislature (the “State Legislature”) may create additional exemptions for personal property, but not for real property. Taxes on property located in a school district with boundaries extending into more than one county are administered separately by each county in which the property is located (the District is located solely in the County). In such school districts, the rate of tax is determined by the school district’s primary county, and the primary county directs the secondary county to place the tax on the tax rolls. Taxes collected by the secondary county are sent to the primary county. Taxes on real property located within the District are assessed and collected by the County in the same manner, at the same time, and in the same installments as other ad valorem property taxes on real property located in the County. In addition to general obligation bonds issued by the District, other entities with jurisdiction in or overlapping with the District may issue debt payable from ad valorem property taxes also levied on parcels in the District. Such taxes have the same priority, become delinquent at the same times and in the same proportionate amounts, and bear the same proportionate penalties and interest after delinquency, as ad valorem property taxes levied for the payment of the Bonds and other general obligation bonds of the District. In no event is the District obligated to pay principal of and interest and redemption premium, if any, on the Bonds from any source of funds other than ad valorem property taxes and other amounts in the Tax Collection Fund. However, nothing in the Resolution prevents the District from making advances of its moneys, howsoever derived, to any use or purpose permitted by law. Statutory Lien on Ad Valorem Property Tax Revenues Government Code Section 53515 provides that all general obligation bonds issued and sold by or on behalf of a local agency in the State are secured by a statutory lien on all revenues received pursuant to the levy and collection of the tax. The lien automatically arises without the need for any action or authorization by the local agency or its governing board and is valid and binding from the time the bonds are executed and delivered. In addition, the revenues received pursuant to the levy and collection of the tax will be immediately subject to the lien, and the lien will automatically attach to the revenues and be effective, binding, and enforceable against the local agency, such as the District, as applicable, its successor, transferees, and creditors, and all others asserting rights therein, irrespective of whether those parties have notice of the lien and without the need for physical delivery, recordation, filing, or further tax. Government Code Section 53515 applies to the Bonds. Assessed Valuation of Property The Tulare County Assessor (the “County Assessor”) must annually assess all taxable property in the County (except for “utility” property, assessed by the State) to the person, business or legal entity owning, claiming, possessing or controlling the property on January 1, the lien date. Property assessed by the County Assessor is subject to the reappraisal provisions set forth in the State Constitution. See “CONSTITUTIONAL AND STATUTORY PROVISIONS AFFECTING DISTRICT REVENUES AND EXPENDITURES—Article XIIIA of the State Constitution” herein. The duties of the County Assessor are to discover all assessable property, to inventory and list all taxable property, to value the property, and to enroll the property on the local assessment roll. Locally-assessed taxable property is classified as either “secured” or “unsecured” and is listed accordingly on separate parts of the assessment roll. The secured roll contains real property sufficient, in the opinion of the

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County Assessor, to secure the payment of the taxes as a lien on real property. All other property is unsecured and assessed on the unsecured roll. The secured roll also includes certain “utility” property, entered on the utility roll, located in the County but assessed by the State Board of Equalization (the “SBE”) rather than by the County Assessor. Such property includes property owned or used by State-regulated transportation and communications utilities such as railways, telephone and telegraph companies, companies transmitting or selling gas or electricity, and pipelines, flumes, canals and aqueducts lying within two or more counties. Property assessed by the SBE is not subject to the provisions of Proposition 13 (1978) and is annually reappraised at its market value as of January 1 and then allocated by formula among all the taxing jurisdictions in the County, including the District. The growth or decline in the assessed valuation of utility property is shared by all jurisdictions in the County. The District can make no predictions regarding the impact of the reorganization of regulated utilities and the transfer of electricity-generating property to non-utility companies on the amount of tax revenue collected. In general, the transfer of State-assessed property located in the District to non-utility companies will increase the assessed value of property in the District, since the property’s value will no longer be divided among taxing jurisdictions in the County; the transfer of property located and taxed in the District to a State-assessed utility will, in general, reduce the assessed value in the District, as the value is shared among the other jurisdictions in the County. The greater the total assessed value of all taxable property in the District, the lower the tax rate necessary to generate taxes sufficient to pay scheduled debt service on the Bonds. Shown in the following table are 10 years of the District’s historical assessed valuation. Total secured assessed value includes net local secured assessed value, the assessed value of the secured homeowner exemption and the assessed value on “utility” property as allocated by the SBE. Total unsecured assessed value includes net local unsecured assessed value and the assessed value of the unsecured homeowner exemption.

Historical Total Secured and Unsecured Assessed Valuation Visalia Unified School District

Year Ended Total Secured Total Unsecured Total Percentage June 30 Assessed Value Assessed Value Assessed Value Change

2011 $9,561,855,084 $607,247,410 $10,169,102,494 0.2% 2012 9,459,419,032 636,086,719 10,095,505,751 (0.7) 2013 9,207,968,383 650,370,512 9,858,338,895 (2.4) 2014 9,636,274,336 618,355,076 10,254,629,412 4.0 2015 10,211,839,953 666,617,759 10,878,457,712 6.1 2016 10,788,743,170 666,866,519 11,455,609,689 5.3 2017 11,349,348,074 680,411,336 12,029,759,410 5.0 2018 11,833,733,661 725,277,837 12,558,592,973 4.4 2019 12,515,275,850 772,280,629 13,287,556,479 5.8 2020 13,184,609,750 797,543,082 13,982,152,832 5.2

Source: Tulare County Assessor. The District may not issue bonds in excess of 2.5 percent of the assessed valuation of taxable property within its boundaries. The District’s gross bonding capacity in fiscal year 2019-20 is approximately $349.6 million. Upon issuance of the Bonds, the District will have remaining bonding capacity of approximately $261.2 million. See “CONSTITUTIONAL AND STATUTORY PROVISIONS AFFECTING DISTRICT REVENUES AND EXPENDITURES—Article XIIIA of the State Constitution” herein.

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The remaining tables under this caption “SECURITY AND SOURCE OF PAYMENT” have been prepared by California Municipal Statistics, Inc. They have been included for general information purposes only. The District has not independently verified and does not guarantee the accuracy of the information in such tables. Shown in the following table is the distribution of total assessed value among the cities and unincorporated areas encompassed by the District for fiscal year 2019-20.

Assessed Valuation by Jurisdiction

Visalia Unified School District

Assessed Valuation Percent of Assessed Valuation Percent of Jurisdiction Jurisdiction: in District District of Jurisdiction in District City of Farmersville $1,032,465 0.01% $341,902,058 0.30% City of Visalia 12,069,190,963 86.32 12,126,134,678 99.53 Unincorporated Tulare County 1,911,929,403 13.67 13,938,861,269 13.72 Total District $13,982,152,831 100.00% Tulare County $13,982,152,831 100.00% $36,755,167,903 38.04%

Source: California Municipal Statistics, Inc.

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Shown in the following table is a distribution of taxable real property located in the District by principal purpose for which the parcels are used along with the local secured assessed valuation (excluding homeowners’ exemption) and number of parcels for each use for fiscal year 2019-20.

Assessed Valuation and Parcels by Land Use


2019-20 Percent of Number of Percent of Non-Residential: Assessed Valuation1 Total Parcels Total Agricultural $709,714,680 5.38% 1,604 3.23% Commercial 2,103,999,659 15.96 2,256 4.54 Vacant Commercial 115,801,448 0.88 320 0.64 Industrial 620,019,406 4.70 154 0.31 Vacant Industrial 98,811,674 0.75 179 0.36 Recreational 33,879,674 0.26 14 0.03 Government/Social/Institutional 77,554,210 0.59 234 0.47 Miscellaneous 72,124,686 0.55 339 0.68 Subtotal Non-Residential $3,831,905,437 29.07% 5,100 10.27% Residential: Single Family Residence $8,253,120,256 62.60% 38,691 77.94% Condominium/Townhouse 238,081,845 1.81 1,821 3.67 Mobile Home 43,291,197 0.33 844 1.70 Mobile Home Park 38,109,397 0.29 14 0.03 2-4 Residential Units 330,152,318 2.50 1,364 2.75 5+ Residential Units/Apartments 293,227,595 2.22 319 0.64 Vacant Residential 155,156,146 1.18 1,492 3.01 Subtotal Residential $9,351,138,754 70.93% 44,545 89.73% Total $13,183,044,191 100.00% 49,645 100.00%

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

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The following table sets forth the assessed valuation of single-family homes within the District’s boundaries for fiscal year 2019-20.

Per-Parcel Assessed Valuation of Single-Family Homes


Number of 2019-20 Average Median Parcels Assessed Valuation Assessed Valuation Assessed Valuation Single Family Residential 38,691 $8,253,120,256 $213,309 $193,185

2019-20 No. of Percent of Cumulative Total Percent of Cumulative

Assessed Valuation Parcels1 Total Percent of Total Valuation Total Percent of Total

$0 - $49,999 1,445 3.735% 3.735% $53,041,159 0.643% 0.643% $50,000 - $99,999 4,566 11.801 15.536 349,627,987 4.236 4.879

$100,000 - $149,999 6,718 17.363 32.899 847,165,374 10.265 15.144 $150,000 - $199,999 7,641 19.749 52.648 1,339,857,115 16.235 31.378 $200,000 - $249,999 6,676 17.255 69.903 1,493,721,783 18.099 49.477 $250,000 - $299,999 4,723 12.207 82.110 1,293,283,824 15.670 65.147 $300,000 - $349,999 3,015 7.793 89.902 974,827,155 11.812 76.959 $350,000 - $399,999 1,445 3.735 93.637 536,261,493 6.498 83.457 $400,000 - $449,999 886 2.290 95.927 374,561,835 4.538 87.995 $450,000 - $499,999 446 1.153 97.079 211,167,425 2.559 90.554 $500,000 - $549,999 291 0.752 97.832 152,459,422 1.847 92.401 $550,000 - $599,999 182 0.470 98.302 103,990,029 1.260 93.661 $600,000 - $649,999 165 0.426 98.728 103,145,856 1.250 94.911 $650,000 - $699,999 127 0.328 99.057 85,371,377 1.034 95.945 $700,000 - $749,999 91 0.235 99.292 65,648,742 0.795 96.741 $750,000 - $799,999 56 0.145 99.437 43,301,582 0.525 97.265 $800,000 - $849,999 50 0.129 99.566 41,064,349 0.498 97.763 $850,000 - $899,999 37 0.096 99.661 32,290,991 0.391 98.154 $900,000 - $949,999 20 0.052 99.713 18,444,247 0.223 98.378 $950,000 - $999,999 23 0.059 99.773 22,347,911 0.271 98.649

$1,000,000 and greater 88 0.227 100.000 111,540,600 1.351 100.000

Total 38,691 100.000% $8,253,120,256 100.000% 1Improved single family residential parcels. Excludes condominiums and parcels with multiple family units. Source: California Municipal Statistics, Inc. Reassessments and Appeals of Assessed Value State law allows for the appeal of a property’s assessed value by property owners. Appeals may be based on Proposition 8 (1978) which requires that for each January 1 lien date, the taxable value of real property must be the lesser of its base year value, annually adjusted by the inflation factor pursuant to Article XIIIA of the State Constitution, or its full cash value, taking into account reductions in value due to damage, destruction, depreciation, obsolescence, removal of property or other factors causing a decline in value. See “CONSTITUTIONAL AND STATUTORY PROVISIONS AFFECTING DISTRICT REVENUES AND APPROPRIATIONS – Article XIIIA of the State Constitution” herein. Under State law, property owners in the District may apply for a Proposition 8 reduction of their property tax assessment by filing a written application, in form prescribed by the SBE, with the 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 residential home prices) cause the property to be worth less than its current assessed value.

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Any reduction in the assessment ultimately granted as a result of such appeal applies to the year for which application is made and during which the written application was filed. These reductions are subject to yearly reappraisals and are adjusted back to their original values, adjusted for inflation, when market conditions improve. Once the property has regained its prior value, adjusted for inflation, it once again is subject to the annual inflationary factor growth rate allowed under Article XIIIA. A second type of assessment appeal involves a challenge to the base year value of an assessed property. Appeals for reduction in the base year value of an assessment, if successful, reduce the assessment for the year in which the appeal is taken and prospectively thereafter. The base year is determined by the completion date of new construction or the date of change of ownership. Any base year appeal must be made within four years of the change of ownership or new construction date. Proposition 8 reductions may also be unilaterally applied by the County Assessor. The District can make no predictions as to the changes in assessed values within the District that might result from pending or future appeals of assessed valuation by taxpayers or temporary reductions in assessed valuation of property, as allowed under the State Constitution. Any reduction in aggregate District assessed valuation will cause the tax rate necessary to repay the Bonds to increase accordingly. Any refund of paid taxes triggered by a successful assessment appeal will be debited by the County Treasurer against all taxing agencies receiving tax revenues, including the District. Tax Rates The State Constitution permits the levy of an ad valorem property tax on taxable property not to exceed one percent of the property’s full cash value, plus the amount necessary to make annual payments due on general obligation bonds or other indebtedness incurred prior to July 1, 1978, any bonded indebtedness for the acquisition or improvement or real property approved by a two-thirds majority of voters on or after July 1, 1978, and certain bonded indebtedness for school facilities approved by 55 percent of the voters. The Tulare County Auditor-Controller (the “County Auditor-Controller”) computes the additional rate of tax necessary to pay such scheduled debt service and presents the tax rates for all taxing jurisdictions in the County to the County Board. The tax rate necessary to pay debt service in a given year largely depends on the net assessed value of taxable property in that year. The net assessed value of taxable property may be affected by several factors, such as a general market decline in property values, reclassification of property to a class exempt from taxation, such as property owned by federal, State and local agencies or property used for certain educational, hospital, charitable or religious purposes, or the destruction of taxable property caused by natural or manmade disaster, such as earthquake, flood, fire, drought, toxic dumping, etc. Any of these instances could cause a reduction in the net assessed value of taxable property within the District, necessitating a corresponding increase in the annual tax rate to be levied to pay the principal of and interest on the Bonds. Issuance of additional authorized bonds in the future might also cause the tax rate to increase.

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One factor in the ability of taxpayers to pay additional taxes for general obligation bonds is the cumulative rate of tax on each parcel. The following table shows ad valorem property tax rates per $100 of assessed value for the last five years in a typical tax rate area of the District (TRA 6-003). The fiscal year 2019-20 assessed valuation of TRA 6-003 is $1,437,892,499, approximately 10.28 percent of the total assessed value of taxable property in the District.

Typical Total Tax Rates per $100 of Assessed Valuation TRA 6-003


2015-16 2016-17 2017-18 2018-19 2019-20 General Tax Rate $1.000000 $1.000000 $1.000000 $1.000000 $1.000000 College of the Sequoias - Visalia SFID 0.014500 0.012100 0.013300 0.008000 0.007300 Visalia Unified School District 0.022600 0.027000 0.018300 0.022500 0.022500 Kaweah Delta Hospital District 0.023743 0.020569 0.019767 0.018094 0.018136 Total Tax Rate $1.060843 $1.059669 $1.051367 $1.048594 $1.047936 Kaweah Delta Water District $0.000400 $0.000300 $0.000400 $0.000400 $0.000300 Total Land and Improvement Only $0.000400 $0.000300 $0.000400 $0.000400 $0.000300

Source: California Municipal Statistics, Inc. The more property (by assessed value) that is owned by a single taxpayer, the more tax collections are exposed to weakness in the taxpayer’s financial situation and their ability or willingness to pay property taxes. In fiscal year 2019-20, no single taxpayer owned more than 1.26 percent of the total secured taxable property in the District. The 20 taxpayers in the District with the greatest combined secured assessed valuation of taxable property on the fiscal year 2019-20 tax roll own property that comprises 6.45 percent of the local assessed valuation of secured property in the District. These taxpayers, ranked by aggregate assessed value of taxable property as shown on the fiscal year 2019-20 secured tax roll and the amount of each owner’s assessed valuation for all taxing jurisdictions within the District, are shown in the following table.

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Each taxpayer listed is a unique name on the tax rolls. The District cannot determine from assessment records whether individual persons, corporations or other organizations are liable for tax payments with respect to multiple properties held in various names that in aggregate may be larger than is suggested by the list of largest taxpayers identified in the following table.

Largest Taxpayers Visalia Unified School District

2019-20 Percent of Property Owner Primary Land Use Assessed Valuation Total1

1. California Dairies Inc. Industrial $165,980,299 1.26% 2. Perfection Pet Foods LLC Industrial 55,629,114 0.42 3. Visalia Mall LP Shopping Center 54,551,182 0.41 4. Western Milling LLC Industrial 54,538,477 0.41 5. California Water Service Company Water Company 43,579,140 0.33 6. Ventura Coastal LLC Industrial 41,692,542 0.32 7. Target Corporation Shopping Center 39,588,193 0.30 8. Darlene & Jay Te Velde Jr. Agricultural/Dairy 38,081,732 0.29 9. VWR International LLC Industrial 37,634,178 0.29

10. Cottonwood Fresno Holdings LLC Warehouse 36,500,000 0.28 11. G4 Enterprises Ltd Warehouse 34,089,420 0.26 12. Blam Jade LP Auto Dealership 31,306,998 0.24 13. Exeter 2500 N. Plaza LLC Warehouse 30,909,389 0.23 14. Wal-Mart Real Estate Business Trust Commercial 30,103,373 0.23 15. Lowes HIW Inc. Commercial 30,017,323 0.23 16. Crystal J LP Warehouse 27,961,063 0.21 17. Visalia Oak View LLC Apartments 26,062,290 0.20 18. Costco Wholesale Corporation Shopping Center 24,838,430 0.19 19. Advanced Food Products LLC Industrial 24,550,941 0.19 20. CCE Visalia LLC Apartments 22,285,928 0.17

Total $849,900,012 6.45%

1Fiscal year 2019-20 local secured assessed valuation: $13,183,044,191. Source: California Municipal Statistics, Inc. Direct and Overlapping Bonded Debt Contained within the District’s boundaries are numerous overlapping local entities providing public services which may have outstanding long-term obligations in the form of general obligation, lease revenue and special assessment bonds. Such obligations generally are not payable from revenues of the District (except as indicated) nor are they necessarily obligations secured by land within the District. In many cases, long-term obligations issued by a public agency are payable only from the general fund or other revenues of such public agency.

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The following table generally includes long-term obligations sold in the public credit markets by the public agencies listed. The first column in the table names each public agency which has outstanding debt as of June 1, 2020 and whose territory overlaps the District in whole or in part. The second column shows the percentage of each overlapping agency’s assessed value located within the boundaries of the District. This percentage, multiplied by the total outstanding debt of each overlapping agency (not shown) produces the amount shown in the third column, which is the apportionment of each overlapping agency’s outstanding debt to taxable property in the District. Property owners within the District may be subject to other special taxes and assessments levied by other taxing authorities providing services within the District. Such non-ad valorem special taxes and assessments (which are not levied to fund debt service) are not represented in the statement of direct and overlapping bonded debt.

Statement of Direct and Overlapping Bonded Debt (As of June 1, 2020) Visalia Unified School District

2019-20 Assessed Valuation: $13,982,152,831 Percent Debt as of DIRECT AND OVERLAPPING TAX AND ASSESSMENT DEBT: Applicable June 1, 2020 College of the Sequoias Visalia School Facilities Improvement District 78.376% $20,259,431 Visalia Unified School District 100.000 53,134,971 1

Kaweah Delta Hospital District 98.120 41,239,836 City of Visalia 1915 Act Bonds 100.000 315,000 TOTAL DIRECT AND OVERLAPPING TAX AND ASSESSMENT DEBT $114,949,238 DIRECT AND OVERLAPPING GENERAL FUND DEBT: Tulare County Certificates of Participation 38.041% $11,832,653 Tulare County Pension Obligation Bonds 38.041 88,587,979 Tulare County Office of Education Certificates of Participation 38.041 14,442,266 College of Sequoias Certificates of Participation 41.169 1,969,937 Visalia Unified School District Certificates of Participation 100.000 73,190,000 City of Visalia Certificates of Participation 99.530 17,223,667 TOTAL DIRECT AND OVERLAPPING GENERAL FUND DEBT $207,246,502 OVERLAPPING TAX INCREMENT DEBT: $1,465,000 COMBINED TOTAL DEBT $323,660,740 2

Ratios to 2019-20 Assessed Valuation: Direct Debt ($53,134,971) ........................................................... 0.38% Total Direct and Overlapping Tax and Assessment Debt ............. 0.82% Combined Direct Debt ($126,324,971) ...................................... 0.90% Combined Total Debt .................................................................... 2.31% Ratio to Redevelopment Incremental Valuation ($1,198,109,537): Total Overlapping Tax Increment Debt ........................................ 0.12% 1Excludes the Bonds to be sold. 2Excludes tax and revenue anticipation notes, enterprise revenue, mortgage revenue and non-bonded capital lease obligations. Source: California Municipal Statistics, Inc. Tax Collections and Delinquencies Property taxes are levied for each fiscal year on taxable real and personal property situated in the taxing jurisdiction assessed as of January 1, at which time the tax lien attaches. The County Treasurer is presented with a tax roll created from the

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combined rolls of the County Assessor and the SBE. The County Treasurer prepares and mails tax bills to taxpayers and collects the taxes. Property taxes on the regular secured roll are due in two equal installments. The first installment is due on November 1 and is delinquent at 5:00 p.m. on December 10, after which a 10 percent penalty is assessed. The second installment is due on February 1 of the following year and is delinquent at 5:00 p.m. on April 10, after which a 10 percent penalty and a $10 cost are assessed. Tax bills unpaid by the due date are subject to delinquent penalty of 10 percent and a $15 cost. If taxes remain unpaid for five years or more, the County Treasurer may sell tax-defaulted property that is not redeemed; proceeds from such sale are applied to the payment of the delinquent taxes. Property taxes on the unsecured roll are due annually. The single installment is due on August 31. Taxes on the unsecured roll as of July 31 if unpaid are delinquent at 5:00 p.m. on August 31 and thereafter are subject to a delinquent penalty of 10 percent. Taxes added to the unsecured roll after July 31 if unpaid as of 5:00 p.m. on the last day of the month succeeding the month of enrollment, are delinquent and subject to a 10 percent penalty. Additional collection costs on delinquent taxes may be collected. Upon delinquency, the County Treasurer may use the following collection methods: filing of liens, filing of summary judgments, seizure and sale of personal property, or seizure of State tax refunds or State lottery winnings. The following table shows a five-year history of real property tax collections and delinquencies in the District.

Secured Tax Charges and Delinquencies


Fiscal Secured Amount Delinquent Percent Delinquent Year Tax Charge1 As of June 30 As of June 30

2014-15 $3,026,655.65 $48,903.76 1.62% 2015-16 2,399,593.87 35,053.17 1.46 2016-17 3,025,533.69 39,012.85 1.29 2017-18 2,149,881.94 31,014.77 1.44 2018-19 2,825,080.52 46,807.94 1.66

1The District’s general obligation bond debt service levy. Source: California Municipal Statistics, Inc. County Reserve Policy Under the Alternative Method of Distribution of Tax Levies and Collections and of Tax Sale Proceeds (the “Teeter Plan”) available under the California Revenue and Taxation Code (the “Revenue and Taxation Code”) Section 4701 et seq., each participating local agency levying property taxes, including school districts, receives from its county the amount of uncollected taxes credited to its fund in the same manner as if the amount credited had been collected. In return, the county receives and retains delinquent payments, penalties and interest, as collected, that would have been due to the local agency. The County discontinued the use of the Teeter Plan in fiscal year 2009-2010. Consequently, the District will receive ad valorem property taxes (including penalties and interest) to pay debt service on the Bonds based on actual collections for that purpose, rather than the amount levied. In order to ensure the timely payment of debt service, the County maintains a reserve for each general obligation bond issuance within the County. The reserve is funded over a period of years from property taxes collected over and above that necessary to pay debt service on the general obligation bond issuance. The County has several methods of determining the size of the reserve as well as the number of years over which the reserve will be funded. The County has historically maintained a reserve for the District’s general obligation bonds in an amount equal to the following fiscal year’s debt service. The District will request that the County establish and maintain such a reserve for the Bonds.

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Waiver of State Laws Relating to Penalties for Non-Payment of Property Taxes Pursuant to Executive Order N-61-20 signed by the Governor on May 6, 2020 to alleviate the impact of the COVID-19 outbreak on State property taxpayers, certain provisions of the State Revenue and Taxation Code are suspended until May 6, 2021, to the extent such provisions require a tax collector to impose penalties, costs or interest for the failure to pay secured or unsecured property taxes, or to pay a supplemental bill, before the date that such taxes become delinquent. Such penalties, costs and interest shall be cancelled under the conditions provided for in Executive Order N-61-20, including if the property is residential real property occupied by the taxpayer or the real property qualifies as a small business under certain State laws, the taxes were not delinquent prior to March 4, 2020, the taxpayer files a claim for relief with the tax collector, and the taxpayer demonstrates economic hardship or other circumstances that have arisen due to the COVID-19 pandemic or due to a local, state, or federal governmental response to COVID-19. The impacts the waiver of penalties, costs or interest on delinquent property taxes under the circumstances described in Executive Order N-61-20 have on property tax revenues are unknown at this time.

DISCLOSURE RELATED TO COVID-19 Background An outbreak of a respiratory disease caused by a new strain of coronavirus, COVID-19, was first detected in China in late 2019 and has subsequently spread globally. The World Health Organization declared the COVID-19 outbreak as a Public Health Emergency of International Concern on January 30, 2020, further characterizing the outbreak as a pandemic on March 11, 2020. As of June 16, 2020, the Center for Systems Science and Engineering at Johns Hopkins University reports there were more than 2.1 million confirmed cases of COVID-19 in the United States, of which more than 150,000 were located in the State. Federal Action On March 6, 2020, President Trump signed a COVID-19 relief bill providing $8.3 billion in emergency funding to support development of vaccines and treatment, grants for state and local governments, preparedness activities for U.S. government facilities, and humanitarian foreign assistance. President Trump declared a national emergency on March 13, 2020, making available more than $50 billion in federal funds for disaster relief and assistance. The Families First Coronavirus Response Act of 2020 was signed into law on March 18, 2020, providing paid sick leave, free testing, expanded food assistance and unemployment benefits, and requiring additional protections for healthcare workers. On March 27, 2020, President Trump signed the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) into law authorizing more than $2 trillion to battle COVID-19 and its economic effects, including immediate cash relief for individual citizens, expanded unemployment insurance for workers, loan programs for small business (including $349 billion for the Paycheck Protection Program), additional funds for state and local governments, support for hospitals and other medical providers, and various types of economic relief for impacted businesses and industries. The CARES Act designates approximately $31 billion for K–12 and higher education assistance and more than $4 billion for childcare and early education programs, including $13.5 billion to be distributed to states based on their state-level Title I allocation, with states passing on ninety percent of the funds to school districts and charter schools using the Title I formula; $3 billion for state governors to spend on K–12 or higher education in regions that have been hit hardest by COVID-19, $8.8 billion for child nutrition programs, $3.5 billion for child care and development block grants and $750 million for Head Start early education programs. On April 9, 2020, the Federal Reserve took additional actions to provide up to $2.3 trillion in loans to support the economy. Such actions include supplying liquidity to participating financial institutions through term financing backed by Paycheck Protection Program loans, purchasing up to $600 billion in loans through the Main Street Lending Program, and establishing a Municipal Liquidity Facility that will offer up to $500 billion in lending to states and municipalities to help manage cash flow stresses caused by the coronavirus pandemic. On April 24, 2020, a new $484 billion federal aid package was signed, including an additional $310 billion for the Paycheck Protection Program, $60 billion for Small Business Administration disaster assistance loans and grants, $75 billion for hospitals and $25 billion to a new COVID-19 testing program.

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State Action On March 4, 2020, less than six weeks after the first confirmed case of COVID-19 in the State, the Governor declared a state of emergency, thereby making additional resources available, formalizing emergency actions already underway across multiple State agencies and departments, and helping the State prepare for broader spread of COVID-19. The Governor issued Executive Order N-26-20 on March 13, 2020, ensuring California public school districts retain State funding even in the event of physical closure. The order directed school districts to use those State dollars to fund distance learning and high quality educational opportunities, provide school meals, continue to pay employees, and, as practicable, arrange for the supervision for students during school hours. On March 17, 2020, the Governor signed Senate Bill 89 (“SB 89”) appropriating $500 million from the State general fund for any purpose related to the Governor’s March 4 emergency declaration. SB 89 allows additional funds to be appropriated in $50 million increments up to a total of not to exceed $1 billion. The Governor also signed Senate Bill 117 (“SB 117”), which, among other items, provides that, for all school districts that comply with Executive Order N-26-20, attendance during full school months from July 1, 2019, to February 29, 2020, inclusive, will be reported for apportionment purposes. SB 117 also holds harmless school districts not meeting minimum instructional day and minute requirements during the academic year. Additionally, SB 117 appropriates $100 million for local educational agencies to purchase protective equipment and supplies and labor related to cleaning school sites as a result of COVID-19, to be allocated to local education agencies on the basis of average daily attendance (“ADA”). On March 18, 2020, the California Franchise Tax Board announced updated special tax relief for all State taxpayers due to the COVID-19 outbreak, postponing from April 15, 2020 until July 15, 2020 the filing and payment deadlines for all individuals and business entities for, among other items, 2019 tax returns and tax return payments. On March 19, 2020, the Governor issued Executive Order N-33-20 ordering all State residents to stay home except to get food, care for a relative, get necessary healthcare or go to an essential job. The shelter-in-place order went into effect immediately, thereby suspending classroom instruction indefinitely throughout State schools. On April 14, 2020, the State presented its Pandemic Resilience Roadmap, a four-stage plan for modifying Executive Order N-33-20 regarding shelter-in-place guidelines, and defining the statewide status under the plan as being at Stage 1. On May 4, 2020, the Governor issued Executive Order N-60-20 directing the State’s Public Health Officer to establish criteria to determine whether and how local jurisdictions may implement public health measures that depart from statewide directives. On May 7, 2020, the State’s Public Health Officer released an order supporting the gradual movement of the State from Stage 1 to Stage 2 of the Pandemic Resilience Roadmap. The order allows for the return of certain kinds of retail, manufacturing and other “low risk” businesses if physical distancing measures are implemented, and identifies criteria and procedures for reducing restrictions by local officers that might be less restrictive than statewide measures. On June 5, 2020, the Public Health Officer released new industry guidance documents effective June 12, 2020 providing information for businesses to safely reopen following the statewide stay-at-home order. Local jurisdictions within the State also issued their own shelter-in-place orders to slow the spread of COVID-19. The County’s shelter-in-place order was originally issued on March 19, 2020, extended indefinitely on April 8, 2020 and amended on May 5, 2020. The County Health Officer issued a new health order for the prevention of the spread of COVID-19 on May 18, 2020, replacing the prior health order. The new order, to remain in effect until it is terminated or modified by the County Health Officer, adopts the emergency orders of the State Public Health Director related to the COVID-19 pandemic as well as the Pandemic Resilience Roadmap and guidance issued with respect to the roadmap, as they may be amended, modified, or supplemented, as emergency orders of the County Health Officer. On May 27, 2020, the County received approval from the California Department of Public Health to move forward in accelerated reopening under the statewide stay-at-home order, enabling the County to move fully into Stage 2 of the Pandemic Resilience Roadmap. Impact on the District On March 13, 2020, the District announced the closure of all schools from March 16, 2020 through at least April 13, 2020 due to the COVID-19 outbreak, on March 27, 2020, the District extended the closure of all schools through May 1, 2020, and on April 21, 2020, the District announced that its campuses would remain closed until further notice. For the period between the initial school closure through April 13, 2020, materials for enrichment and review were developed and made available on the

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District website and in printed format for pick up. Beginning April 14, 2020, new standards-aligned lessons including concepts not previously covered in the classroom were also made available. Pursuant to SB 89 and SB 117, the District expects to receive local control funding formula (“LCFF”) funding in fiscal year 2019-20 based on its ADA through February 29, 2020, and will be held harmless for not meeting minimum instructional day and minute requirements during the academic year. In addition to SB 89 and SB 117, existing State law also allows the District to apply for a waiver to hold them harmless from the loss of LCFF funding based on attendance and State instructional time penalties when they are forced to close schools due to emergency conditions. The District anticipates an overall reduction in expenses in fiscal year 2019-20 mainly as a consequence of lower utility, transportation and substitute teacher costs associated with school closures. Such cost savings are expected to more than offset additional cleaning and sanitizing costs incurred by the District as well as costs associated with implementing distance learning. The District expects to receive emergency federal funding of approximately $8.4 million under the CARES Act from the Elementary and Secondary School Emergency Relief (“ESSER”) Fund to address costs which may have resulted from the COVID-19 outbreak response as well as additional funds allocated from CARES Act moneys received by the State. The District receives a significant portion of its revenues from State funds and local property taxes. The COVID-19 outbreak may result in a material change in the State’s financial position. Declines in State revenues as a consequence of the COVID-19 outbreak could result in a corresponding decline in revenues available for the District. See “FUNDING OF PUBLIC EDUCATION IN THE STATE” herein. The District cannot predict the outbreak’s extent or duration or what impact the outbreak as well as responses by federal, State or local authorities may have on the District’s financial condition. Notwithstanding the impact that the COVID-19 outbreak may have on the economy in the State and the District’s financial condition, the Bonds are payable from the proceeds of an ad valorem property tax, approved by the voters of the District pursuant to applicable laws and State Constitutional requirements, and required to be levied by the County on all taxable property in the District in an amount sufficient for the timely payment of principal of and interest on the Bonds. See “SECURITY AND SOURCE OF PAYMENT” herein. The District cannot predict the outbreak’s extent or duration or what impact the outbreak may have on the assessed value of real property or property tax collections in the District.

TULARE COUNTY TREASURY POOL This section provides a general description of the County Investment Policy and current portfolio holdings. The information set forth under this section relating to the Tulare County Treasury Pool has been obtained from the County Treasurer and is believed to be reliable but is not guaranteed as to accuracy or completeness. The District makes no representation as to the accuracy or completeness of such information. Further information may be obtained by contacting the Tulare County Office of the Treasurer-Tax Collector, 221 South Mooney Boulevard, Room 104E, Visalia, California, 93291-4593, telephone (559) 636-5250. The County Treasurer manages the Tulare County Treasury Pool (the “County Pool”) in which certain funds of the County and certain funds of other participating entities are pooled and invested pending disbursement. General participants are those government agencies within the County, including the District, for which the County Treasurer is statutorily designated as the custodian of such funds. The County Treasurer is the ex officio treasurer of each of these participating entities, and such entities are legally required to deposit their cash receipts and revenues in the County Treasury. Under State law, withdrawals are allowed only to pay for expenses that have become due. The governing board of each school district and special district within the County may allow, by appropriate board resolution, certain withdrawals of non-operating funds for purposes of investing outside the County Pool. Other local agencies, such as special districts and cities for which the County Treasurer is not the statutorily designated fund custodian, may participate in the County Pool. Such participation is subject to the consent of the County Treasurer and must be in accordance with State law. Funds held in the County Pool are invested by the County Treasurer in accordance with State law and the County Investment Policy, which is prepared by the County Treasurer and approved by the County Board. A copy of the County Investment Policy for fiscal year 2019-20 approved by the County Board on June 18, 2019 is attached hereto as “APPENDIX D.” The County Investment Policy sets forth the investment goals as, in order of priority, safety of capital, liquidity and yield. In addition, the County Investment Policy describes the instruments eligible for inclusion in the County Pool and the limitations applicable to each type. The Tulare County Treasury Oversight Committee (which includes, among others, a representative of

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the Tulare County Superintendent of Schools and a representative of the area school and community college districts) monitors the performance of the County Pool quarterly. A summary description of the composition of the County Pool from the quarterly investment report as of March 31, 2020 is provided in the following table.

Securities by Type as of March 31, 2020 Tulare County Treasury Pool

Security Type Book Value Market Value Percent of Portfolio

Permitted by Policy

U.S. Treasuries $465,662,553 $488,222,129 27% 100% Federal Agencies 232,027,825 240,919,603 14% 75% Agency Mortgage Backed Securities (MBS) 54,815,786 55,395,6902 3% 75% U.S. Instrumentalities-Supranationals 37,727,259 38,720,260 2% 30% Negotiable CDs 203,153,593 204,050,082 12% 30% Floating Rate Negotiable CD 4,730,000 4,729,953 <1% 30% Corporate Bonds and Notes 345,313,173 349,084,827 20% 30% Municipal Obligations 30,768,249 30,893,697 2% 30% Asset Backed Securities 45,908,743 46,014,554 3% 20% Commercial Paper 121,486,903 121,622,370 7% 40% Local Agency Investment Fund (LAIF) 73,976,732 73,976,732 4% $75 million California Asset Management Program (CAMP) 68,797,763 68,797,763 4% 50% Money Market Funds 1,310,508 1,310,508 <1% 15% Money Market Accounts 2,388,327 2,388,327 <1% 50% Cash 12,781,390 12,781,390 1% 100% Total $1,700,848,806 $1,700,848,806 100%

Source: Tulare County Treasurer-Tax Collector. The County Treasurer neither monitors investments for arbitrage compliance, nor does it perform arbitrage calculations. The District will maintain or cause to be maintained detailed records with respect to the applicable proceeds. Neither the District nor the Underwriter has made an independent investigation of the investments in the County Pool and has made no assessment of the current County Investment Policy. The value of the various investments in the 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. Additionally, the County Treasurer, upon the approval by the County Board, may change the County Investment Policy at any time. Therefore, there can be no assurance that the values of the various investments in the County Pool will not vary significantly from the values described therein.

CITY AND COUNTY ECONOMIC PROFILE The information in this section concerning the economy of the City and County is provided as supplementary information only and is not intended to be an indication of security for the Bonds. The Bonds are payable from the proceeds of an ad valorem property tax, approved by the voters of the District pursuant to applicable laws and State Constitutional requirements, and required to be levied by the County on all taxable property in the District in an amount sufficient for the timely payment of principal of and interest on the Bonds. See “SECURITY AND SOURCE OF PAYMENT” herein.

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General Information The County, incorporated in 1852, is located in the central region of the State, in the southern region of the San Joaquin Valley. A principal feature of the County is its diverse agricultural production. Comprised of approximately 4,840 square miles, the County has eight incorporated cities. Based on data compiled by CoreLogic, the median sale price of a single-family home in the County was $253,000 in April 2020, an increase of approximately 7.7 percent from $235,000 in April 2019. The City, founded in 1852, is the County seat of government. Comprised of approximately 38 square miles located in the western portion of the County, the City is the principal trading center for the County. Based on data compiled by CoreLogic, Inc., the median sale price of a single-family home in the was $278,000 in April 2020, an increase of approximately 6.9 percent from $260,000 in April 2019. Population The following table displays estimated population as of January 1 for the past five calendar years for the City, the County and the State.

Historical Population City of Visalia, Tulare County, and the State of California

2016 2017 2018 2019 2020

City of Visalia 132,397 133,872 135,892 137,696 138,649 Tulare County 465,544 468,735 472,915 476,588 479,977 State of California 39,131,307 39,398,702 39,586,646 39,695,376 39,782,870

Source: State Department of Finance. Personal Income Total personal income includes income from all sources including net earnings, dividends, interest and rent, and personal current transfer receipts received by residents in the region. Per capita personal income (“PCPI”) was $40,420 in the County in 2018, an increase of 3.6 percent from 2017 levels, compared to an increase of 5.7 percent statewide and 4.9 percent nationally. The following table shows PCPI for the County as well as for the State and the United States for the past five calendar years for which data is available.

Per Capita Personal Income Tulare County, State of California and United States

2014 2015 2016 2017 2018 Tulare County $37,121 $37,366 $38,198 $39,018 $40,420 State of California 52,324 55,758 57,739 60,156 63,557 United States 47,058 48,978 49,870 51,885 54,446

Source: U.S. Department of Commerce, Bureau of Economic Analysis.

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Labor Force and Employment The following table contains a summary of the City’s historical unemployment data for the past four calendar years and for the most recent month available in the current year, not seasonally adjusted.

Historical Unemployment City of Visalia

Annual Annual Annual Annual April 2016 2017 2018 2019 20201

Total Labor Force 60,500 61,300 61,300 61,600 61,000 Number of Employed 56,800 58,000 58,200 58,500 51,600 Number of Unemployed 3,700 3,300 3,100 3,100 9,400 Unemployment Rate 6.2% 5.5% 5.1% 5.1% 15.5%

1Preliminary. Source: State Employment Development Department. The following table contains a summary of the County’s historical unemployment data for the past four calendar years and for the most recent month available in the current year, not seasonally adjusted.

Historical Unemployment County of Tulare

Annual Annual Annual Annual April 2016 2017 2018 2019 20201

Total Labor Force 203,200 204,600 203,300 204,000 207,000 Number of Employed 180,500 183,200 183,300 184,400 162,600 Number of Unemployed 22,700 21,400 20,000 19,600 38,100 Unemployment Rate 11.2% 10.4% 9.8% 9.6% 19.0%

1Preliminary. Source: State Employment Development Department.

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Employment by Industry The following table shows labor patterns by type of industry from calendar years 2015 through 2019 by annual average, not seasonally adjusted, in the County.

Historical Employment by Industry County of Tulare1

Type of Industry 2015 2016 2017 2018 2019 Total, All Industries 157,600 160,900 164,100 165,300 167,100 Total Farm 39,100 38,800 38,700 38,800 38,400 Total Nonfarm 118,400 122,100 125,400 126,500 128,700 Total Private 88,200 90,800 93,600 94,200 95,700 Goods Producing 17,200 18,200 18,500 19,000 19,200 Mining, Logging, and Construction 4,900 5,300 5,700 6,100 6,300 Manufacturing 12,300 12,800 12,800 13,000 12,800 Service Providing 101,300 104,000 106,900 107,500 109,500 Private Service Providing 71,000 72,600 75,100 75,200 76,500 Trade, Transportation & Utilities 26,700 27,200 27,600 28,000 27,800 Wholesale Trade 3,900 4,100 4,200 4,300 4,400 Retail Trade 15,900 16,200 16,200 16,300 16,200 Transportation, Warehousing & Utilities 6,900 6,900 7,300 7,400 7,200 Information 1,000 1,000 900 900 900 Financial Activities 4,000 4,100 4,100 4,100 4,000 Professional & Business Services 10,900 11,100 12,000 11,000 11,100 Educational & Health Services 13,800 14,400 15,500 16,100 17,100 Leisure & Hospitality 11,100 11,500 11,500 11,800 12,100 Other Services 3,400 3,500 3,500 3,500 3,500 Government 30,300 31,300 31,800 32,300 33,000 Federal Government 1,000 1,000 1,000 1,100 1,100 State Government 1,700 1,800 1,800 1,700 1,700

1Visalia-Porterville Metropolitan Statistical Area. Figures may not foot due to rounding. Source: State Employment Development Department.

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Major Employers The following table provides a list of 10 major employers, corresponding number of employees and percent of total employment in the City for fiscal year 2018-19.

Major Employers City of Visalia

Employer

Number of Employees

Percent of Employment

1 County of Tulare 5,033 2.68% 2 Visalia Unified School District 2,943 1.57 3 Kaweah Delta Healthcare 2,132 1.14 4 College of the Sequoias 1,160 0.62 5 CIGNA Health Care 700 0.37 6 City of Visalia 642 0.34 7 VF Outdoor Inc 600 0.32 8 Walmart 400 0.21 9 International Paper 350 0.19

10 Jostens 320 0.17 Total 187,800

1Full-time employees only. Source: City of Visalia, Comprehensive Annual Financial Report for the Year Ended June 30, 2019. The following table provides a list of 10 major employers, corresponding number of employees and percent of total employment in the County for fiscal year 2018-19.

Major Employers County of Tulare

Employer Number of Employees

Percent of Total County Employment

1 County of Tulare 5,034 2.68% 2 Visalia Unified School District 3,014 1.60 3 Kaweah Delta Health Care 2,000 1.06 4 Sierra View District Hospital 1,800 0.96 5 Ruiz Food Production, Inc. 1,800 0.96 6 Wal-Mart Distribution Center 1,692 0.90 7 Porterville Development Center 1,240 0.66 8 College of the Sequoias 817 0.44 9 Jostens 720 0.38

10 City of Visalia 642 0.34 Total 18,759 9.98%

Source: Tulare County, Comprehensive Annual Financial Report for the Fiscal Year Ended June 30, 2019.

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Commercial Activity Total taxable sales during calendar year 2019 in the City were $3,087,083,635, a 5.3 percent increase from total taxable sales of $2,930,884,806 during calendar year 2018. The number of establishments selling merchandise subject to sales tax and the valuation of taxable transactions (in thousands of dollars) in the City for the past five calendar years for which data are available are presented in the following table.

Taxable Retail Sales City of Visalia

2015 2016 2017 2018 2019 Sales Tax Permits 3,022 3,111 3,060 3,128 3,227 Taxable Sales (000’s) $2,647,854 $2,761,941 $2,812,429 $2,930,885 $3,087,084

Source: California Department of Tax and Fee Administration. Total taxable sales during calendar year 2019 in the County were $7,935,857,490, a 6.6 percent increase from total taxable sales of $7,444,728,405 during calendar year 2018. The number of establishments selling merchandise subject to sales tax and the valuation of taxable transactions (in thousands of dollars) in the County for the past five calendar years for which data are available are presented in the following table.

Taxable Retail Sales County of Tulare

2015 2016 2017 2018 2019 Sales Tax Permits 9,159 9,306 9,081 9,151 9,524 Taxable Sales (000’s) $6,319,791 $6,731,447 $7,153,012 $7,444,728 $7,935,857

Source: California Department of Tax and Fee Administration. Construction Activity Estimated new privately-owned residential housing units authorized by building permits and total construction costs in the County for the past five calendar years for which data is available are shown in the following table.

New Residential Building Permits County of Tulare

2015 2016 2017 2018 2019 Single-Family Residential Units 1,129 1,190 1,162 1,206 1,619 Multi-Family Residential Units 146 126 152 322 253 Total New Building Permits 1,275 1,316 1,314 1,528 1,872 Total Construction Costs $257,547,592 $266,645,872 $256,652,869 $292,423,223 $399,377,099

Source: U.S. Bureau of the Census, Building Permit Estimates.

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THE DISTRICT It should not be inferred from the inclusion of the information in this section concerning the operations of the District and its finances that the principal of or interest on the Bonds is payable from the General Fund. The Bonds are payable from the proceeds of an ad valorem property tax, approved by the voters of the District pursuant to applicable laws and State Constitutional requirements, and required to be levied by the County on all taxable property in the District in an amount sufficient for the timely payment of principal of and interest on the Bonds. See “SECURITY AND SOURCE OF PAYMENT” herein. All tables in this section “THE DISTRICT” are from the District unless a source is otherwise indicated. General Information The District, a unified school district established in 1885, is a political subdivision of the State. Encompassing approximately 214 square miles, the District serves a population of approximately 150,200 people residing in the City and surrounding unincorporated areas. The District provides education to approximately 29,375 students in transitional kindergarten through twelfth grade, as well as students in preschool and adult education programs. The District operates 26 elementary schools, 5 middle schools, 5 high schools, a community day school and four charter schools along with preschool programs and an adult education school. The District Board of Education and Key Administrative Personnel The District Board governs all activities related to public education within the jurisdiction of the District. The District Board has decision-making authority, the power to designate management, the responsibility to significantly influence operations and is accountable for all fiscal matters relating to the District. The District Board consists of seven members. Each member of the District Board is elected by the public by area for a four-year term of office. Elections for the District Board are held every two years, alternating between two and three positions available. A president of the District Board is elected by the members each year. The members of the District Board, together with their office and the date their term expires, are set forth in the following table.

District Board of Education Visalia Unified School District

Name Title Term Expires

John L. Crabtree President December 2022 Juan R. Guerrero Clerk December 2022 Niessen E. Foster Member December 2020 William A. Fulmer Member December 2020 Walta S. Gamoian Member December 2022 Joy M. Naylor Member December 2022 Lucia D. Vazquez, Ed.D. Member December 2020

The Superintendent of the District is appointed by and reports to the District Board. The Superintendent is responsible for managing the District’s day-to-day operations and supervising the work of other key District administrators. The current members of the District’s administration and positions held are set forth on page “iv” of this Official Statement.

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Enrollment Student enrollment determines to a large extent the amount of funding a State public school district receives for program, facilities and staff needs. ADA is a measurement of the number of pupils attending classes of the District. The purpose of attendance accounting from a fiscal standpoint is to provide the basis on which apportionments of State funds are made to school districts. Enrollment can fluctuate due to factors such as population growth, competition from private, parochial, and public charter schools, inter-district transfers in or out, and other causes. Losses in enrollment will cause a school district to lose operating revenues, without necessarily permitting the school district to make adjustments in fixed operating costs. The ADA as of the last day of the last full attendance month concluding prior to April 15 (“P-2 ADA”) is used by the State as the basis for State apportionments. Set forth in the following table is the historical and estimated P-2 ADA for the District.

Average Daily Attendance


2015-16 2016-17 2017-18 2018-19 2019-201 2020-212

P-2 ADA 26,066 26,575 26,291 26,485 26,774 26,774 District Charter Schools 932 910 1,267 1,263 1,219 1,219 Total P-2 ADA 26,998 27,485 27,558 27,748 27,993 27,993

1Unaudited. 2Estimated in the District 2020-21 Budget. Charter Schools The District operates four fiscally dependent charter schools: • Visalia Technical Early College serves ninth through twelfth grade with total enrollment of 228 in fiscal year 2019-20 • Charter Home School Academy serves kindergarten through eighth grade with total enrollment of 114 in fiscal year 2019-

20 • Visalia Charter Independent Study serves ninth through twelfth grade with total enrollment of 510 in fiscal year 2019-20 • Global Learning Charter School serves kindergarten through eighth grade with total enrollment of 432 in fiscal year 2019-

20 Fiscally dependent schools operate, to a certain extent, under the financial control of the District, with their financial activities presented in the District’s financial statements. See “APPENDIX A—THE FINANCIAL STATEMENTS OF THE DISTRICT AS OF AND FOR THE YEAR ENDED JUNE 30, 2019” attached hereto. In addition, there are six independent charter schools operating within the District: • Blue Oak Academy serves kindergarten through fourth grade with total enrollment of 213 in fiscal year 2019-20 • Eleanor Roosevelt Community Learning Center serves kindergarten through twelfth grade with total enrollment of 286 in

fiscal year 2019-20 • La Sierra Military Academy serves seventh through twelfth grade with total enrollment of 239 in fiscal year 2019-20 • Sycamore Valley Academy serves kindergarten through eighth grade with total enrollment of 378 in fiscal year 2019-20 • University Preparatory High serves ninth through twelfth grade with total enrollment of 234 in fiscal year 2019-20 • Valley Life Charter School serves kindergarten through twelfth grade with total enrollment of 669 in fiscal year 2019-20 The financial activities of fiscally independent charter schools are not presented in the District’s financial statements. Charter schools can adversely affect school district funding, either by reducing funded enrollment at the school district or, for community-funded districts, by increasing the in-lieu property tax transfer. However, certain per-pupil expenditures of a school district also decrease based upon the number of students enrolled in charter schools. Pursuant to Proposition 39, school

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districts are required to provide facilities reasonably equivalent to those provided to regular district students for charter schools having a projected average daily attendance of at least 80 or more students from that district. Employee Relations State law provides that employees of public school districts of the State are to be divided into appropriate bargaining units which then may be represented by an exclusive bargaining agent. The District has two recognized bargaining agents representing its employees. The Visalia Unified Teachers Association (“VUTA”) represents non-management, certificated employees of the District. The California School Employees Association, Chapter #83 (“CSEA #83”) represents non-management classified employees of the District. Set forth in the following table are the District’s bargaining units, estimated number of full-time equivalents (“FTEs”) for fiscal year 2019-20 and contract status.

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

Bargaining Unit Full-Time Equivalents Contract Status

VUTA 1,408 Settled for fiscal year 2019-20 CSEA #83 1,194 Settled for fiscal year 2019-20

The District has an estimated 267 management and confidential FTEs not represented by a bargaining unit for fiscal year 2019-20. Impact of COVID-19 on the District On March 13, 2020, the District announced the closure of all schools from March 16, 2020 through at least April 13, 2020 due to the COVID-19 outbreak, on March 27, 2020, the District extended the closure of all schools through May 1, 2020, and on April 21, 2020, the District announced that its campuses would remain closed until further notice. For the period between the initial school closure through April 13, 2020, materials for enrichment and review were developed and made available on the District website and in printed format for pick up. Beginning April 14, 2020, new standards-aligned lessons including concepts not previously covered in the classroom were also made available. Pursuant to SB 89 and SB 117, the District expects to receive LCFF funding in fiscal year 2019-20 based on its ADA through February 29, 2020, and will be held harmless for not meeting minimum instructional day and minute requirements during the academic year. The District anticipates an overall reduction in expenses in fiscal year 2019-20 mainly as a consequence of lower utility, transportation and substitute teacher costs associated with school closures. Such cost savings are expected to more than offset additional cleaning and sanitizing costs incurred by the District as well as costs associated with implementing distance learning. The District expects to receive emergency federal funding of approximately $8.4 million under the CARES Act from the ESSER Fund to address costs which may have resulted from the COVID-19 outbreak response as well as additional funds allocated from CARES Act moneys received by the State. The District receives a significant portion of its revenues from State funds and local property taxes. Declines in State revenues as a consequence of the COVID-19 outbreak could result in a corresponding decline in revenues available for the District. See “FUNDING OF PUBLIC EDUCATION IN THE STATE” herein. The District cannot predict the outbreak’s extent or duration or what impact the outbreak as well as responses by federal, State or local authorities may have on the District’s financial condition. See “DISCLOSURE RELATED TO COVID-19” herein.

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Pension Plans All full-time employees of the District, as well as certain part-time employees, are eligible to participate under defined benefit retirement plans maintained by agencies of the State. Qualified certificated employees are eligible to participate in the cost-sharing multiple-employer State Teachers’ Retirement System (“STRS”). Qualified classified employees are eligible to participate in the cost-sharing multiple-employer Public Employees’ Retirement Fund of the Public Employees’ Retirement System (“PERS”), which acts as a common investment and administrative agent for participating public entities within the State. The District accounts for its pension costs and obligations pursuant to Governmental Accounting Standards Board (“GASB”) Statement No. 67, Financial Reporting for Pension Plans (“GASB 67”) and Statement No. 68, Accounting and Financial Reporting for Pensions (“GASB 68”). GASB 68 requires an employer that provides a defined benefit pension, such as the District, to recognize and report its long-term obligation for pension benefits as a liability as it is earned by employees. See “APPENDIX A—AUDITED FINANCIAL STATEMENTS OF THE DISTRICT FOR THE YEAR ENDED JUNE 30, 2019” attached hereto. STRS—Description and Contributions. STRS operates under the Education Code sections commonly known as the State Teachers’ Retirement Law. Membership is mandatory for all certificated employees of State public schools meeting the eligibility requirements. STRS provides retirement, disability and death benefits to beneficiaries. Benefits are based on members’ final compensation, age and years of service credit. Members hired on or before December 31, 2012, with five years of credited service are eligible for the normal retirement benefit at age 60. Members hired on or after January 1, 2013, with five years of credited service are eligible for the normal retirement benefit at age 62. The normal retirement benefit is equal to 2.0 percent of final compensation for each year of credited service. Prior to fiscal year 2014-15, and unlike typical defined benefit programs, none of the employee, employer nor State contribution rates to the STRS Defined Benefit Program varied annually to make up funding shortfalls or assess credits for actuarial surpluses. This resulted in the combined employer, employee and State contributions to the STRS Defined Benefit Program not being sufficient to pay actuarially required amounts. As a result, and due to significant investment losses and changes in actuarial assumptions by STRS, the unfunded actuarial liability of the STRS Defined Benefit Program has increased significantly in recent fiscal years. In September 2013, STRS projected that the STRS Defined Benefit Program would be depleted in 31 years assuming existing contribution rates continued, and other significant actuarial assumptions were realized. In an effort to reduce the unfunded actuarial liability of the STRS Defined Benefit Program, in 2014 the State passed the legislation described below to increase contribution rates. Prior to July 1, 2014, K-14 school districts were required by statute to contribute 8.25 percent of eligible salary expenditures, while participants contributed 8.0 percent of their respective salaries. On June 24, 2014, the Governor of California (the “Governor”) signed AB 1469 (“AB 1469”) into law as a part of the State’s fiscal year 2014-15 budget. AB 1469 sought to fully fund the unfunded actuarial obligation with respect to service credited to members of the STRS Defined Benefit Program before July 1, 2014 (the “2014 Liability”), within 32 years, by increasing member, K-14 school district and State contributions to STRS. Commencing on July 1, 2014, the employee contribution rate increased over a three-year phase-in period. Pursuant to the California Public Employees’ Pension Reform Act of 2013, the contribution rates for members hired after January 1, 2013 will be adjusted if the normal cost increases by more than one percent since the last time the member contribution was set. The following table sets forth STRS member contribution rates for the past five years and the current year.

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Member Contribution Rates STRS (Defined Benefit Program)

Effective Date STRS Members Hired

Prior to January 1, 2013 STRS Members Hired

On or after January 1, 2013

July 1, 2014 8.150% 8.150% July 1, 2015 9.200 8.560 July 1, 2016 10.250 9.205 July 1, 2017 10.250 9.205 July 1, 2018 10.250 10.205 July 1, 2019 10.250 10.205

Sources: AB 1469 and STRS. Pursuant to AB 1469, K-14 school districts’ contribution rates will increase over a seven-year phase in period in accordance with the schedule set forth in the following table.

Employer Contribution Rates STRS (Defined Benefit Program)

Effective Date K-14 School Districts1

July 1, 2014 8.88% July 1, 2015 10.73 July 1, 2016 12.58 July 1, 2017 14.43 July 1, 2018 16.28 July 1, 2019 17.10 2 July 1, 2020 18.40 2

1Percentage of eligible salary expenditures to be contributed. 2The State budget for fiscal year 2019-20 (the “2019-20 State Budget”) provides supplemental payments to STRS to reduce the unfunded actuarial obligation of STRS and reduce contribution rates for employers and the State. Based on the additional amounts paid to STRS by the State, the employer contribution rate for fiscal year 2019-20 has been reduced from 18.13 percent to 17.10 percent, and the employer contribution rate for fiscal year 2020-21 has been reduced from 19.10 percent to 18.40 percent. The May 2020 revision to the proposed State budget for fiscal year 2020-21 proposes to further reduce the employer contribution rate for fiscal year 2020-21 to 16.15 percent. Sources: AB 1469 and the 2019-20 State Budget. Based upon the recommendation from its actuary, for fiscal year 2021-22 and each fiscal year thereafter, the STRS Teachers’ Retirement Board (the “STRS Board”) is required to increase or decrease the K-14 school districts’ contribution rate to reflect the contribution required to eliminate the remaining 2014 Liability by June 30, 2046; provided that the rate cannot change in any fiscal year by more than one percent of creditable compensation upon which members’ contributions to the STRS Defined Benefit Program are based; and provided further that such contribution rate cannot exceed a maximum of 20.25 percent. In addition to the increased contribution rates discussed above, AB 1469 also requires the STRS Board to report to the State Legislature every five years (commencing with a report due on or before July 1, 2019) on the fiscal health of the STRS Defined Benefit Program and the unfunded actuarial obligation with respect to service credited to members of that program before July 1, 2014. The reports are also required to identify adjustments required in contribution rates for K-14 school districts and the State in order to eliminate the 2014 Liability. The State also contributes to STRS, currently in an amount equal to 7.828 percent of covered STRS member payroll for fiscal year 2019-20. The State’s contribution reflects a base contribution rate of 2.017 percent plus a supplemental contribution rate that will vary from year to year based on statutory criteria. Based upon the recommendation from its actuary, for fiscal year 2017-18 and each fiscal year thereafter, the STRS Board is required, with certain limitations, to increase or decrease the State’s contribution rates to reflect the contribution required to eliminate the unfunded actuarial accrued liability attributed to

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benefits in effect before July 1, 1990. In addition, the State is currently required to make an annual general fund contribution up to 2.5 percent of the fiscal year covered STRS member payroll to the Supplemental Benefit Protection Account (the “SBPA”), which was established by statute to provide supplemental payments to beneficiaries whose purchasing power has fallen below 85 percent of the purchasing power of their initial allowance. The District’s actual STRS contributions for fiscal years 2011-12 through 2018-19, estimated STRS contributions for fiscal year 2019-20 and budgeted STRS contributions for fiscal year 2020-21 are set forth in the following table.

STRS Employer Contributions Visalia Unified School District

Fiscal Year District

Contribution Rate District

Contributions1

Total District Governmental Funds

Expenditures

District Contributions as Percentage of Total

Governmental Funds Expenditures

2011-12 8.25% $7,512,603 $192,165,967 3.91% 2012-13 8.25 7,769,219 196,556,058 3.95 2013-14 8.25 8,175,777 211,197,824 3.87 2014-15 8.88 9,268,239 240,248,011 3.86 2015-16 10.73 12,275,486 271,471,717 4.52 2016-17 12.58 15,332,634 342,206,809 4.48 2017-18 14.43 18,555,488 360,170,386 5.15 2018-19 16.28 21,978,106 429,844,613 5.11 2019-202 17.10 32,339,543 3 468,264,342 6.91 2020-214 18.40 41,376,129 5 384,290,424 10.77

1In each instance equal to 100 percent of the required contribution. 2Estimated. 3Includes State on-behalf payment of $6,920,153. Excluding the State on-behalf payment would reduce the District contribution as percentage of total governmental funds expenditures in fiscal year 2019-20 to 5.51 percent. 4District 2020-21 Budget. 5Includes State on-behalf payment of $16,967,729. Excluding the State on-behalf payment would reduce the District contribution as percentage of total governmental funds expenditures in fiscal year 2020-21 to 6.64 percent. PERS—Description and Contributions. All full-time classified employees of the District as well as certain part-time classified employees participate in PERS, which provides retirement and disability benefits, annual cost-of-living adjustments and death benefits to plan members and beneficiaries. Benefits are based on years of service credit, a benefit factor and the member’s final compensation. Members hired on or before December 31, 2012, with five years of total service are eligible to retire at age 55 with benefits equal to 2.0 percent of final compensation for each year of service credit. Members hired on or after January 1, 2013, with five years of total service are eligible to retire at age 62 with benefits equal to 2.0 percent of final compensation for each year of service credit. All members are eligible for non-duty disability benefits after five years of service. Active plan members with an enrollment date prior to January 1, 2013 are required to contribute 7.0 percent of their salary, while active plan members with an enrollment date on or after January 1, 2013 are required to contribute the greater of 50 percent of normal costs or 6.0 percent of their salary, and for fiscal year 2019-20 the rate is 7.0 percent. The District is required to pay an actuarially determined rate.

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The District’s actual PERS contributions for fiscal years 2011-12 through 2018-19, estimated PERS contributions for fiscal year 2019-20 and budgeted PERS contributions for fiscal year 2020-21 are set forth in the following table.

PERS Employer Contributions Visalia Unified School District

Fiscal Year District

Contribution Rate District

Contributions1

Total District Governmental Funds

Expenditures

District Contributions as Percentage of Total

Governmental Funds Expenditures

2011-12 10.923% $3,099,751 $192,165,967 1.61% 2012-13 11.417 3,238,109 196,556,058 1.65 2013-14 11.442 3,442,050 211,197,824 1.63 2014-15 11.771 3,883,945 240,248,011 1.62 2015-16 11.847 4,438,484 271,471,717 1.63 2016-17 13.888 5,766,707 342,206,809 1.69 2017-18 15.531 7,137,659 360,170,386 1.98 2018-19 18.062 9,035,122 429,844,613 2.10 2019-202 19.721 11,020,712 468,264,342 2.35 2020-213 20.700 14,713,992 384,290,424 3.83

1In each instance equal to 100 percent of the required contribution. 2Estimated. 3District 2020-21 Budget. Unfunded Liabilities and Pension Expense Reporting. Both STRS and PERS have substantial statewide, unfunded liabilities. The amount of these liabilities will vary depending on actuarial assumptions, returns on investment, salary scales and participant contributions. The actuarial funding method used in the STRS actuarial valuation as of June 30, 2019 is the entry age normal cost method, and assumes, among other things, a 7.0 percent investment rate of return, 3.0 percent interest on member accounts, projected 2.75 percent inflation, and projected payroll growth of 3.5 percent.

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The following table shows the statewide funding progress of the STRS plan for the previous nine years.

Funding Progress California State Teachers’ Retirement System (STRS)1

Actuarial Valuation Date as of June 30

Actuarial Value of

Plan Assets

Actuarial Accrued Liability

Total Unfunded Actuarial Liability

Funded Ratio

Covered Payroll

Unfunded Liability as a Percentage of Payroll

2011 $143,930 $208,405 $64,475 69% $26,592 242% 2012 144,232 215,189 70,957 67 26,404 269 2013 148,614 222,281 73,667 67 26,483 278 2014 158,495 231,213 72,718 69 26,398 275 2015 165,553 241,753 76,200 69 28,640 266 2016 169,976 266,704 96,728 64 30,324 319 2017 179,689 286,950 107,261 63 31,961 336 2018 190,451 297,603 107,152 64 32,613 329 2019 205,016 310,719 105,703 66 n/a n/a

1Dollars in millions. Sources: California State Teachers’ Retirement System, Comprehensive Annual Financial Report for the Fiscal Year Ended June 30, 2019; California State Teachers’ Retirement System, Defined Benefit Program Actuarial Valuation for Fiscal Year Ended June 30, 2019. Pursuant to Government Code Section 20840 et seq., PERS is authorized to create risk pools for public agencies, combining assets and liabilities across employers in large risk-sharing pools to help reduce the large fluctuations in the employer’s contribution rate caused by unexpected demographic events. The “Schools Pool” provides identical retirement benefits to nearly all classified school employees in the State. The actuarial funding method used in the Schools Pool Actuarial Valuation as of June 30, 2018 (the “2018 PERS Actuarial Valuation”) is the entry age normal cost method, and assumes, among other things, a 7.25 percent investment rate of return, 2.625 percent annual inflation; and 2.875 percent annual payroll growth. In December 2016, PERS approved a plan to reduce the assumed investment rate of return from 7.5 percent to 7.0 percent over a three-year period. Based on the 2018 PERS Actuarial Valuation, the three-year phased in reduction of the discount rate is currently projected to result in a 26.6 percent employer contribution rate by fiscal year 2024-25. Such projections contained in the 2018 PERS Actuarial Valuation assume that all other actuarial assumptions will be realized and no changes to assumptions, contributions, benefits or funding will occur during the projected period.

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The following table shows the statewide funding progress of the PERS plan for the previous eight years.

Funding Progress Public Employees’ Retirement System (PERS)1

Actuarial Valuation Date as of June 30

Market Value of

Plan Assets

Actuarial Accrued Liability

Total Unfunded Actuarial Liability

Funded Ratio

Covered Payroll

Unfunded Liability as a Percentage of Payroll

2011 $45,901 $58,358 $12,457 78.7% $10,540 118.2% 2012 44,854 59,439 14,585 75.5 10,242 142.4 2013 49,482 61,487 12,005 80.5 10,424 115.2 2014 56,838 65,600 8,761 86.6 11,294 77.6 2015 56,814 73,325 16,511 77.5 12,098 136.5 2016 55,785 77,544 21,759 71.9 13,022 167.1 2017 60,865 84,416 23,551 72.1 13,683 172.1 2018 64,846 92,071 27,225 70.4 14,234 191.3

1Dollars in millions. Source: California Public Employees’ Retirement System, Schools Pool Actuarial Valuation as of June 30, 2018. The District’s proportionate share of the State net pension liability as reported in the audited financial statements for fiscal years 2014-15, the first year for which the data was provided, through 2018-19 are set forth in the following tables.

Proportionate Share of the Net Pension Liability—STRS Visalia Unified School District

Fiscal Year

Proportion of Statewide

Net Pension Liability

Proportionate Share of Statewide


Covered Employee

Payroll

Proportionate Share of Statewide Liability as Percentage of Covered

Employee Payroll

Fiduciary Net Position as

Percentage of Total Pension Liability

2014-15 0.220% $128,708,000 $98,100,000 131.20% 76.52% 2015-16 0.225 151,391,000 104,372,000 145.05 74.02 2016-17 0.230 185,666,000 114,403,000 162.29 70.04 2017-18 0.229 211,382,000 121,141,000 174.49 69.46 2018-19 0.239 219,911,000 127,370,000 172.66 70.99

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Proportionate Share of the Net Pension Liability—PERS Visalia Unified School District

Fiscal Year

Proportion of Statewide


Proportionate Share of Statewide


Covered Employee

Payroll

Proportionate Share of Statewide Liability as Percentage of Covered

Employee Payroll

Fiduciary Net Position as

Percentage of Total Pension Liability

2014-15 0.285% $32,390,000 $29,950,000 108.15% 83.38% 2015-16 0.298 43,931,000 32,996,000 133.14 79.43 2016-17 0.312 61,677,000 37,465,000 164.63 73.89 2017-18 0.326 77,748,000 41,524,000 187.24 71.87 2018-19 0.349 92,964,000 45,988,000 202.15 70.85

For the year ended June 30, 2019, the District’s combined recognized pension expense (net of the State on-behalf STRS payment) was $48,697,147. The District’s net pension liability (“NPL”) as of June 30, 2019 was $312,875,000. The District is unable to predict the future amount of State pension liabilities or the amount of required District contributions. Pension plan, annual contribution requirements and liabilities are more fully described in “APPENDIX A—AUDITED FINANCIAL STATEMENTS OF THE DISTRICT FOR THE YEAR ENDED JUNE 30, 2019” attached hereto. Other Postemployment Benefits (OPEB) In addition to the pension benefits described above, the District provides postemployment health care benefits (known as “other postemployment benefits,” or “OPEB”) as part of a single-employer defined benefit plan (the “OPEB Plan”). The OPEB Plan is administered by the District and allows employees who retire after achieving retirement eligibility requirements to receive medical insurance coverage. Benefits are provided through a third-party insurer, and the full cost of benefits is covered by the OPEB Plan. The District Board has the authority to establish or amend benefit terms offered by the OPEB Plan, and also retains the authority to establish the requirements for paying for the OPEB Plan’s benefits as they come due. As of June 30, 2019, there were 2,774 participants in the OPEB Plan, including 351 inactive employees or beneficiaries receiving benefit payments and 2,423 active employees. The District accounts for its pension costs and obligations pursuant to GASB Statement No. 74 Financial Reporting for Post Employment Benefit Plans Other Than Pension Plans (“GASB 74”) and Statement No. 75 Accounting and Financial Reporting for Post Employment Benefits Other Than Pensions (“GASB 75”). GASB 74 and GASB 75 require a liability for OPEB obligations, known as the net OPEB liability (the “NOL”), to be recognized on the balance sheet of the plan and the participating employer’s financial statements. In addition, an OPEB expense will be recognized in the income statement of the participating employers. In the notes to its financial statements, employers providing OPEB will also have to include information regarding the year-to-year change in the NOL and a sensitivity analysis of the NOL to changes in the discount rate and healthcare trend rate. GASB 74 and GASB 75 are directed at quantifying and disclosing OPEB obligations, and do not impose any requirement on public agencies to fund such obligations. The District completed an actuarial report assessing the District’s OPEB liability as of June 30, 2017 (the “OPEB Actuarial Report”). Based on the OPEB Actuarial Report and subsequent calculations, the District’s total OPEB liability (the “TOL”) as of June 30, 2019 was $93,524,158 for GASB 75 reporting purposes. The District has established a trust account with PARS for the pre-funding of OPEB. As of June 30, 2019, trust assets had an actuarial value of $2,518,693, leaving a net OPEB liability (the “NOL”) of $91,005,465. In addition, the District set aside approximately $21.0 million in a Special Reserve Fund for OPEB as of June 30, 2019; however, the District plans to transfer approximately $4.8 million out of the fund in fiscal year 2019-20. Balances in the Special Reserve Fund for OPEB are not in an irrevocable trust and can be used for any legal purpose upon Board action. Every year, active employees earn additional future benefits, an amount known as the “service cost,” which is added to the NOL. The service cost for fiscal year 2018-19 was $4,968,971. The service cost changes each year based on covered payroll. The OPEB expense for fiscal year 2018-19 was $9,166,295. The OPEB expense is the amount recognized in accrual basis

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financial statements as the current period expense. The OPEB expense includes the service cost, interest, benefit payments, changes in benefit terms, and certain changes in the NOL. The District funds its OPEB liability on a “pay-as-you go” basis. The District’s contributions to the OPEB Plan were $6,537,924 in fiscal year 2017-18, were $6,537,924 in fiscal year 2018-19, are estimated to be $4,182,091 in fiscal year 2019-20 and are budgeted to be $4,016,406 in fiscal year 2020-21. See “APPENDIX A—AUDITED FINANCIAL STATEMENTS OF THE DISTRICT FOR THE YEAR ENDED JUNE 30, 2019” for additional information regarding the District’s OPEB.

DISTRICT FINANCIAL INFORMATION It should not be inferred from the inclusion of the information in this section concerning the operations of the District and its finances that the principal of or interest on the Bonds is payable from the General Fund. The Bonds are payable from the proceeds of an ad valorem property tax, approved by the voters of the District pursuant to applicable laws and State Constitutional requirements, and required to be levied by the County on all taxable property in the District in an amount sufficient for the timely payment of principal of and interest on the Bonds. See “SECURITY AND SOURCE OF PAYMENT” herein. All tables in this section “DISTRICT FINANCIAL INFORMATION” are from the District unless a source is otherwise indicated. Accounting Practices The District accounts for its financial transactions in accordance with the policies and procedures of the State Department of Education’s California School Accounting Manual, which, pursuant to Education Code Section 41010, is to be followed by all school districts in the State. The accounting policies of the District conform to accounting principles generally accepted in the United States of America as prescribed by GASB and the American Institute of Certified Public Accountants. The District’s financial statements consist of government-wide statements and fund-based financial statements. Government-wide statements, consisting of a statement of net position and a statement of activities, report all the assets, liabilities, revenue and expenses of the District and are accounted for using the economic resources measurement focus and accrual basis of accounting. The fund-based financial statements consist of a series of statements that provide information about the District’s major and non-major funds. Governmental funds, including the General Fund, special revenues funds, capital project funds and debt service funds, are accounted for using the modified accrual basis of accounting. Under the modified accrual basis of accounting, revenues are recognized in the accounting period in which they become measurable and available, while expenditures are recognized in the period in which the liability is incurred, if measurable. Proprietary funds and fiduciary funds are accounted for using the economic resources measurement focus and accrual basis of accounting. See “NOTE 1” in “APPENDIX A” attached hereto for a further discussion of applicable accounting policies. The independent auditor for the District in fiscal year 2018-19 was Crowe LLP, Sacramento, California (the “Auditor”). The financial statements of the District as of and for the year ended June 30, 2019, are set forth in “APPENDIX A” attached hereto. The District has not requested nor did the District obtain permission from the Auditor to include the audited financial statements as an appendix to this Official Statement. The Auditor has not been engaged to perform and has not performed, since the date of its report attached hereto, any procedures on the financial statements addressed in that report. The Auditor also has not performed any procedures relating to this Official Statement. Budget and Financial Reporting Process The General Fund finances the legally authorized activities of the District for which restricted funds are not provided. General Fund revenues are derived from such sources as federal and State school apportionments, taxes, use of money and property, and aid from other governmental agencies. The District is required by provisions of the Education Code to maintain a balanced budget each year, where the sum of expenditures plus the ending fund balance cannot exceed revenues plus the carry-over fund balance from the previous year. The State Department of Education imposes a uniform budgeting format for all school districts.

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The fiscal year for all State school districts and county offices of education is July 1 to June 30. Because most school districts depend on State funds for a substantial portion of revenue, the State budget is an extremely important input in the school district budget preparation process. However, there is very close timing between final approval of the State budget (legally required by June 15), the adoption of the associated school finance legislation, and the adoption of local school district budgets. In some years, the State budget is not approved by the legal deadline which forces school districts to begin the new fiscal year with only estimates of the amount of funding they will actually receive. The school district budgeting process involves continuous planning and evaluation. Within the deadlines, school districts work out their own schedules for considering whether or not to hire or replace staff, negotiating contracts with all employees, reviewing programs, and assessing the need to repair existing or acquire new facilities. Decisions depend on the critical estimates of enrollment, fixed costs, commitments in contracts with employees as well as best guesses about how much money will be available for elementary and secondary education. The timing of some decisions is forced by legal deadlines. For example, preliminary layoff notices to certificated employees must be delivered by March 15, with final notices by May 15 (should the enacted State budget not increase funding per ADA by at least two percent, an additional layoff window for certificated employees is opened until August 15). This necessitates projecting enrollments and determining staffing needs long before a school district will know either its final financial position for the current year or its revenue for the next year. School districts must adopt an annual budget on or before July 1 of each year. The budget must be submitted to the county superintendent within five days of adoption or by July 1, whichever occurs first. The governing board of the school district must not adopt a budget before the governing board adopts a local control and accountability plan (the “LCAP”) for that budget year. See “FUNDING OF PUBLIC EDUCATION IN THE STATE” herein. The county superintendent will examine the adopted budget for compliance with the standards and criteria adopted by the State Board of Education and identify technical corrections necessary to bring the budget into compliance, will determine if the budget allows the school district to meet its current obligations, will determine if the budget is consistent with a financial plan that will enable the school district to meet its multi-year financial commitments, and will determine if the budget ensures the fiscal solvency and accountability for the goals outlined in the LCAP. On or before September 15, the county superintendent will approve or disapprove the adopted budget for each school district within its jurisdiction based on these standards. The school district board must be notified by September 15 of the county superintendent’s recommendations for revision and reasons for the recommendations. The county superintendent may assign a fiscal advisor or appoint a committee to examine and comment on the superintendent’s recommendations. The committee must report its findings no later than September 20. Any recommendations made by the county superintendent must be made available by the school district for public inspection. The law does not provide for conditional approvals; budgets must be either approved or disapproved. No later than October 22, the county superintendent must notify the State Superintendent of Public Instruction (the “State Superintendent”) of all school districts whose budget may be disapproved, and no later than November 8, the county superintendent must notify the State Superintendent of all school district budgets that have been disapproved or budget committees waived. For school districts whose budgets have been disapproved, the school district must revise and readopt its budget by October 8, reflecting changes in projected income and expense since July 1, and responding to the county superintendent’s recommendations. The county superintendent must determine if the budget conforms with the standards and criteria applicable to final school district budgets and not later than November 8, will approve or disapprove the revised budgets. If the budget is disapproved, the county superintendent will call for the formation of a budget review committee pursuant to Education Code Section 42127.1. Until a school district’s budget is approved, the school district will operate on the lesser of its proposed budget for the current fiscal year or the last budget adopted and reviewed for the prior fiscal year. Under the provisions of State Assembly Bill 1200, each school district is required to file interim certifications with the county office of education as to its ability to meet its financial obligations for the remainder of the then-current fiscal year and, based on current forecasts, for the subsequent two fiscal years. Each school district is required by the Education Code to file two interim reports each year—the first report for the period ending October 31 by not later than December 15, and the second report for the period ending January 31 by not later than March 15. Each interim report shows fiscal year-to-date financial operations and the current budget, with any budget amendments made in light of operations and conditions to that point. The county office of education reviews the certification and issues either a positive, negative or qualified certification. A positive certification is assigned to any school district that will meet its financial obligations for the current fiscal year and subsequent two fiscal years. A negative certification is assigned to any school district that will be unable to meet its financial obligations for the remainder of the fiscal year or subsequent fiscal year. A qualified certification is assigned to any school district that may not meet its financial obligations for the current fiscal year or subsequent two fiscal years. If either the first or second

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interim report is not positive, the county superintendent may require the school district to provide a third interim report by June 1 covering the period ending April 30. If not required, a third interim report is generally not prepared (though may be at the election of the school district). The county superintendent must annually present a report to the governing board of the school district and the State Superintendent regarding the fiscal solvency of any school district with a disapproved budget, qualified interim certification, or negative interim certification, or that is determined at any time to be in a position of fiscal uncertainty pursuant to Education Code Section 42127.6. Any school district with a qualified or negative certification must allow the county office of education at least 10 working days to review and comment on any proposed agreement made between its bargaining units and the school district before it is ratified by the school district board (or the state administrator). The county superintendent will notify the school district, the county board of education, the school district governing board and the school district superintendent (or the state administrator), and each parent and teacher organization of the school district within those 10 days if, in his or her opinion, the agreement would endanger the fiscal well-being of the school district. Also, pursuant to Education Code Section 42133, a school district that has a qualified or negative certification in any fiscal year may not issue, in that fiscal year or the next succeeding fiscal year, non-voter approved debt unless the county superintendent of schools determines that the repayment of that debt by the school district is probable. The filing status for each of the District’s interim reports for the previous five fiscal years and the current fiscal year appears in the following table.

Certifications of Interim Financial Reports Visalia Unified School District

Fiscal Year First Interim Second Interim

2014-15 Positive Positive 2015-16 Positive Positive 2016-17 Positive Positive 2017-18 Positive Positive 2018-19 Positive Positive 2019-20 Positive Positive

Financial Statements Figures presented in summarized form herein have been gathered from the District’s financial statements. The audited financial statements of the District for the fiscal year ended June 30, 2019, have been included in “APPENDIX A” attached hereto. Audited financial statements and other financial reports for prior fiscal years are available on the EMMA website and are on file with the District and available for public inspection during normal business hours. Copies of financial statements relating to any year are available to prospective investors and their representatives upon request by contacting Visalia Unified School District, 5000 West Cypress Avenue, Visalia, California 93277, telephone (559) 730-7300, Attention: Assistant Superintendent, Administrative Services, or by contacting the Municipal Advisor, Government Financial Strategies inc., 1228 N Street, Suite 13, Sacramento, California 95814-5609, telephone (916) 444-5100.

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The following table sets forth the District’s audited General Fund balance sheet data for fiscal years 2014-15 through 2018-19.

General Fund Balance Sheet Visalia Unified School District

2014-15 2015-16 2016-17 2017-18 2018-19 Audited Audited Audited Audited Audited

Assets Cash and Investments $74,516,155 $103,125,812 $100,728,418 $107,168,719 $120,766,819 Receivables 15,857,057 15,672,472 16,828,131 18,598,678 20,680,838 Due from Other Funds 4,438,596 2,708,885 2,839,878 1,643,202 3,358,803 Prepaid Expenditures 0 0 0 0 92,000 Stores Inventory 192,951 332,508 147,328 190,430 206,464

Total Assets $95,004,759 $121,839,677 $120,543,755 $127,601,029 $145,104,924 Liabilities and Fund Balances Liabilities

Accounts Payable $9,706,931 $7,617,713 $7,897,944 $7,561,478 $9,122,080 Unearned Revenue 3,727,814 7,578,876 11,154,954 9,977,959 6,569,526 Due to Other Funds 10,533,975 25,354,952 4,947,071 6,024,986 19,014,222

Total Liabilities $23,968,720 $40,551,541 $23,999,969 $23,564,423 $34,705,828 Fund Balances

Nonspendable $235,627 $382,251 $180,892 $230,085 $342,492 Restricted 12,315,202 13,834,757 15,279,705 16,473,369 22,130,148 Assigned 31,625,789 25,874,634 36,029,412 40,887,184 43,409,459 Unassigned 26,859,421 41,196,494 45,053,777 46,445,968 44,516,997

Total Fund Balances $71,036,039 $81,288,136 $96,543,786 $104,036,606 $110,399,096 Total Liabilities and Fund Balances $95,004,759 $121,839,677 $120,543,755 $127,601,029 $145,104,924

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The following table sets forth the District’s audited General Fund activity for fiscal years 2015-16 through 2018-19, estimated activity for fiscal year 2019-20, and budgeted activity for fiscal year 2020-21.

General Fund Activity Visalia Unified School District

2015-16 2016-17 2017-18 2018-19 2019-20 2020-21 Audited Audited Audited Audited Estimated Budget

Beginning Balance $71,036,039 $81,288,136 $96,543,786 $104,036,606 $110,399,096 $90,127,454

Balance, Special Reserve for OPEB1 0 0 0 0 (21,011,107) (16,258,407) Adjusted Beginning Balance $71,036,039 $81,288,136 $96,543,786 $104,036,606 $89,387,989 $73,869,047

Revenues

LCFF $233,918,683 $250,948,237 $261,134,657 $284,721,810 $296,921,877 $273,376,077 Federal Revenue 18,681,490 16,256,180 19,367,167 22,566,290 25,632,196 28,202,126 Other State Revenues 34,829,890 27,148,012 28,495,962 44,245,958 22,775,779 29,734,654 Other Local Revenues 16,883,999 15,311,069 16,538,126 20,949,419 15,559,642 11,993,510

Total Revenues $304,314,062 $309,663,498 $325,535,912 $372,483,477 $360,889,494 $343,306,367

Expenditures

Certificated Salaries $114,430,593 $121,589,551 $128,907,862 $135,364,818 $148,136,790 $146,965,917 Classified Salaries 35,327,890 38,204,652 42,337,605 46,381,965 50,595,376 51,182,302 Employee Benefits 63,565,137 70,734,373 80,509,545 99,724,176 92,512,685 105,096,501 Books and Supplies 18,081,192 18,515,932 16,913,348 22,349,096 32,196,393 12,093,237 Services and Operating Exp. 24,141,343 27,288,635 29,593,604 30,237,486 31,190,435 20,645,697 Capital Outlay 11,309,447 11,636,180 10,232,577 8,763,146 15,213,724 1,800,621 Other Outgo 2,526,884 2,634,114 5,029,246 4,202,579 2,466,890 2,330,105 Debt Service 2,089,231 431,522 274,798 1,670,572 n/a n/a

Total Expenditures $271,471,717 $291,034,959 $313,798,585 $348,693,838 $372,312,293 $340,114,380

Other Financing Sources ($22,590,248) ($3,372,889) ($4,244,507) ($17,427,149) ($4,096,143) ($1,843,608)

Net Increase (Decrease) $10,252,097 $15,255,650 $7,492,820 $6,362,490 ($15,518,942) $1,348,379 Ending Balance $81,288,136 $96,543,786 $104,036,606 $110,399,096 $73,869,047 $75,217,426

Balance, Special Reserve for OPEB1 0 0 0 0 16,258,407 16,924,952 Ending Balance, GAAP Basis $81,288,136 $96,543,786 $104,036,606 $110,399,096 $90,127,454 $92,142,378 1The District has implemented Government Accounting Standard Board Statement No. 54, Fund Balance Reporting and Government Type Definitions (“GASB 54”), the effect of which was to reclassify and restate the District’s Special Reserve Fund for OPEB (Fund 20) within the General Fund. However, the District's internal reporting, including the fiscal year 2019-20 estimated results and the District 2020-21 Budget, does not reflect the implementation of GASB 54. Figures may not total due to rounding. Revenues The District categorizes its General Fund revenues into four primary sources: LCFF, federal revenues, other State revenues and other local revenues. Local Control Funding Formula (LCFF). For nearly half a century, State school districts operated under general purpose revenue limit funding based on a district’s average daily student attendance, much of which was restricted by category as to how each dollar could be spent. Revenue limit funding was calculated by multiplying a school district’s ADA (using the

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greater of the current or prior year P-2 ADA) by the school district’s revenue limit funding per ADA, with certain adjustments. In landmark legislation effective fiscal year 2013-14, the State introduced a new school district funding formula, the local control funding formula or LCFF. LCFF consolidated most categorical programs in order to give school districts more control over how to spend their revenues. At full implementation of LCFF, school districts will receive a uniform base grant per student based on grade span, a supplemental grant based on an unduplicated count of the targeted disadvantaged students (“unduplicated students”) in the school district, and an additional concentration grant based on the number of unduplicated students in the school district above 55 percent, with qualifying schools receiving an additional necessary small school allowance. In fiscal year 2018-19, approximately 68.38 percent of the District’s students were unduplicated students. The base, supplemental, and concentration grant amounts per student were set in fiscal year 2012-13 and are subject to cost-of-living adjustments thereafter. School districts that would otherwise receive less funding at full implementation of LCFF than they did under the revenue-limit system are also guaranteed an additional Economic Recovery Target (“ERT”) grant to restore funding to at or above their pre-recession funding, adjusted for inflation. The ERT add-on is paid incrementally over the LCFF implementation period. In fiscal year 2018-19, the District’s LCFF funding at full implementation based on P-2 ADA was calculated to be $271,417,483, comprised of $222,727,085 in base grant funding, $30,460,156 in supplemental grant funding, $14,900,442 in concentration grant funding and $3,329,800 in add-on funding. LCFF was originally scheduled to be phased in over eight years through fiscal year 2020-21. To calculate LCFF funding during the phase-in period, school districts calculated their “funding gap,” the difference between LCFF funding calculated at full implementation and their “funding floor,” an amount based on fiscal year 2012-13 funding levels under the revenue limit system adjusted for prior LCFF phase-in adjustments. School districts received their funding floor plus a percentage of their funding gap as specified in the State budget. In fiscal year 2018-19, the State funded 100 percent of the remaining gap. See “FUNDING OF PUBLIC EDUCATION IN THE STATE” herein for more information about LCFF. Set forth in the following table are the District’s funded ADA by grade span and the percentage of unduplicated student enrollment for fiscal years 2013-14 through 2018-19, unaudited data for fiscal year 2019-20 and budgeted data for fiscal year 2020-21.

ADA and Unduplicated Student Enrollment Percentage1


Fiscal Year

P-2 ADA Grades TK-3

P-2 ADA Grades 4-6

P-2 ADA Grades 7-8

P-2 ADA Grades 9-12

Total P-2 ADA

Unduplicated Student Enrollment

Percentage2

2013-14 8,454.87 6,166.31 4,032.36 7,269.55 25,923.09 67.68% 2014-15 8,427.74 6,361.17 4,001.85 7,280.56 26,071.32 67.23 2015-16 8,510.62 6,466.12 3,998.08 7,376.71 26,351.53 66.94 2016-17 8,538.19 6,468.27 4,157.84 7,452.05 26,616.35 66.79 2017-18 8,434.61 6,266.42 4,302.27 7,574.88 26,578.18 67.43 2018-19 8,408.86 6,232.58 4,289.30 7,859.95 26,790.69 68.38 2019-203 8,420.09 6,255.22 4,274.91 8,095.88 27,046.10 68.86 2020-214 8,420.09 6,255.22 4,274.91 8,095.88 27,046.10 68.85

1Charter school ADA and enrollment not included. 2For purposes of calculating supplemental and concentration grants, a school district’s fiscal year 2013-14 percentage of unduplicated students is determined solely as the percentage of its fiscal year 2013-14 total enrollment. For fiscal year 2014-15, the percentage of unduplicated students is based on the two-year average of unduplicated student enrollment in fiscal years 2013-14 and 2014-15. Beginning in fiscal year 2015-16, a school district’s percentage of unduplicated student enrollment is based on a rolling average of such district’s unduplicated student enrollment for the then-current fiscal year and the two immediately preceding fiscal years. 3Unaudited. 4District 2020-21 Budget.

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Set forth in the following table is the District’s actual LCFF funding per ADA for fiscal years 2013-14 through 2018-19, estimated LCFF funding per ADA for fiscal year 2019-20 and budgeted LCFF funding per ADA for fiscal year 2020-21.

LCFF Funding per ADA1


Fiscal Year Funded ADA2

Average LCFF Funding per ADA3

Average LCFF Funding per ADA at Full Implementation3

2013-14 25,923.09 $6,638.70 $9,400.28 2014-15 26,071.32 7,482.38 9,448.63 2015-16 26,351.53 8,552.50 9,527.61 2016-17 26,616.35 9,089.83 9,517.68 2017-18 26,578.18 9,356.47 9,708.63 2018-19 26,790.69 10,131.04 10,131.04 2019-204 27,046.10 10,494.99 10,494.99 2020-215 27,046.10 9,660.48 9,660.48

1Charter school ADA and enrollment not included. 2Funded ADA is the greater of current year P-2 ADA and prior year P-2 ADA. 3Represents average LCFF funding per ADA across grade spans. 4Estimated. 5District 2020-21 Budget. Funding of the District’s LCFF is accomplished by a mix of a) local taxes (composed predominantly of property taxes, and including miscellaneous taxes and certain community redevelopment funds, if any) and b) State apportionments. The majority of the District’s LCFF funding comes from State apportionments. LCFF revenues were 80.2 percent of General Fund revenues in fiscal year 2017-18, were 76.4 percent of General Fund revenues in fiscal year 2018-19, are estimated to be 82.3 percent of General Fund revenues in fiscal year 2019-20 and are budgeted to be 79.6 percent of General Fund revenues in fiscal year 2020-21. Federal Revenues. The federal government provides funding for several District programs. These federal revenues, most of which historically have been restricted, were 5.9 percent of General Fund revenues in fiscal year 2017-18, were 6.1 percent of General Fund revenues in fiscal year 2018-19, are estimated to be 7.1 percent of General Fund revenues in fiscal year 2019-20 and are budgeted to be 8.2 percent of General Fund revenues in fiscal year 2020-21. Included in fiscal year 2020-21 federal revenues are approximately $8.4 million of CARES Act ESSER funds. However, additional funds expected to be allocated to the District in fiscal year 2020-21 from CARES Act moneys received by the State have not been included in the District 2020-21 Budget. Other State Revenues. In addition to apportionment revenues, the State provides funding to the District for categorical programs. These other State revenues were 8.8 percent of General Fund revenues in fiscal year 2017-18, were 11.9 percent of General Fund revenues in fiscal year 2018-19, are estimated to be 6.3 percent of General Fund revenues in fiscal year 2019-20 and are budgeted to be 8.7 percent of General Fund revenues in fiscal year 2020-21. Included in other State revenues are proceeds received from the State from the State lottery and pass-through payments from the dissolution of redevelopment agencies. Other Local Revenues. Revenues from other local sources were 5.1 percent of General Fund revenues in fiscal year 2017-18, were 5.6 percent of General Fund revenues in fiscal year 2018-19, are estimated to be 4.3 percent of General Fund revenues in fiscal year 2019-20 and are budgeted to be 3.5 percent of General Fund revenues in fiscal year 2020-21. Expenditures The largest components of a school district’s general fund expenditures are certificated and classified salaries and employee benefits. Changes in salary and benefit expenditures from year to year are generally based on changes in staffing levels,

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negotiated salary increases, and the overall cost of employee benefits. Even with no negotiated salary increases or changes in staffing levels, normal “step and column” advancements on the salary scale result in increased salary expenditures. Employee salaries and benefits were 80.2 percent of General Fund expenditures in fiscal year 2017-18, were 80.7 percent of General Fund expenditures in fiscal year 2018-19, are estimated to be 78.2 percent of General Fund expenditures in fiscal year 2019-20 and are budgeted to be 89.2 percent of General Fund expenditures in fiscal year 2020-21. Short-Term Borrowings The District has no short-term debt outstanding. The District has in the past issued short-term tax and revenue anticipation notes. Proceeds from the issuance of notes by the District have been used to reduce inter-fund dependency and to provide the District with greater overall efficiency in the management of its funds. The District has not defaulted on the payment of principal of or interest on any of its short-term borrowings in the past 20 years. Capitalized Lease Obligations The District has made use of various capital lease arrangements under agreements that provide for title of items and equipment being leased to pass to the District upon expiration of the lease period. As of June 30, 2019, the District had $1,571,208 in capital lease arrangements outstanding. In June 2015, the District issued the Visalia Unified School District (Tulare County, California) 2015 Certificates of Participation (the “2015 Certificates”) in the aggregate principal amount of $18,435,000. In May 2018, the District issued the Visalia Unified School District (Tulare County, California) 2018 Certificates of Participation (the “2018 Certificates”) in the aggregate principal amount of $59,780,000. The following table summarizes the District’s outstanding certificates of participation as of May 31, 2020.

Outstanding Certificates of Participation Visalia Unified School District

Issue Final Maturity Principal

Amount Issued Principal Outstanding as of May 31, 2020

Debt Service in Fiscal Year 2019-20

2015 Certificates September 1, 2038 $18,435,000 $15,680,000 $1,206,463 2018 Certificates May 1, 2048 59,780,000 57,510,000 3,346,300 Total $73,190,000 $4,552,763

Long-Term Borrowings On November 6, 2012 (the “2012 Election”), more than 55 percent of voters in the District voting on the proposition approved the issuance by the District of not-to-exceed $60.1 million of general obligation bonds to improve school facilities. On April 25, 2013, the District issued the Visalia Unified School District (Tulare County, California) General Obligation Bonds, Election of 2012, Series 2013 (the “2013 Bonds”) in the aggregate principal amount of $33,999,971. On June 18, 2015, the District issued the Visalia Unified School District (Tulare County, California) General Obligation Bonds, Election of 2012, Series 2015 (the “2015 Bonds”) in the aggregate principal amount of $26,100,000. There is less than $30 remaining authorization from the 2012 Election.

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The following table summarizes the District’s outstanding long-term indebtedness as of May 31, 2020.

Outstanding General Obligation Bonds Visalia Unified School District

Authorization

Issue

Final Maturity

Principal Amount Issued

Principal Outstanding as of May 31, 20201

Debt Service in Fiscal Year 2019-20

2012 Election 2013 Bonds August 1, 2043 $33,999,971 $30,489,971 $1,003,138 2012 Election 2015 Bonds August 1, 2040 26,100,000 22,645,000 1,709,050 Total $53,134,971 $2,712,188 1Excludes accreted value of capital appreciation bonds. The District has not defaulted on the payment of principal of or interest on any of its long-term indebtedness in the past 20 years. All long-term bonded indebtedness of the District as of June 30, 2019, is set forth in “APPENDIX A” attached hereto.

CONSTITUTIONAL AND STATUTORY PROVISIONS AFFECTING DISTRICT REVENUES AND EXPENDITURES Background From the Separation of Sources Act (1910) until Proposition 13 (1978), local governments had control over property tax rates and revenues within their jurisdiction. Voter approval was not required for most taxes, charges or fees imposed by local governments. Each school district in the State raised revenue by taxing local property owners according to a tax rate established by its governing board, subject to voter approval, and received some supplemental funds from the State. The State’s role in providing for public education and education facilities was limited during this time. Local school districts relied largely on general obligation bonds as the primary source of funding for school facilities. The passage of Proposition 13 brought this local property tax system to an end, fundamentally changing local government finance. Local government entities are no longer authorized to levy a general tax rate. Instead, they share in the revenues generated by Proposition 13’s countywide tax rate. In the year following the passage of Proposition 13, local property tax revenue across the State fell approximately 60 percent. In order for school districts to continue operating, the State had to assume primary responsibility for public school funding, replacing the lost property tax revenue with moneys from the State general fund. As a result of Proposition 13, control over revenues shifted away from local school districts to the State government. Proposition 13 also eliminated the ability of school districts to issue bonds; for a decade, the State provided some of the cost of school facilities projects until the passage of Proposition 46 (1986) restored the ability of school districts to issue such bonds. Article XIIIA of the State Constitution Article XIIIA, added to the State Constitution by Proposition 13 and amended over time, limits the ad valorem property tax rate that can be levied on real property to one percent of its “full cash value” except to pay debt service, discussed below. “Full cash value” is defined as the property’s assessed value as of the fiscal year 1975-76 tax bill, annually increased by the lesser of either two percent or the rate of inflation. Subsequently, the property is reappraised for tax purposes upon a change in ownership or new construction. Several types of changes in ownership and construction have been exempted from the reassessment requirement by amendment, including improvements for seismic retrofit, solar energy, fire prevention, disability access, certain purchases of replacement dwellings for persons over age 55 and by property owners whose original property is destroyed in a declared disaster, and certain transfers of property between family members. In most years, the market value of a property increases at a rate greater than the maximum two percent increase a county is allowed to calculate. As amended by Proposition 8 (1978), Article XIIIA allows for a county to temporarily reduce the assessed value to current market value when the market value of the property falls below the property’s adjusted acquisition value due to an economic recession, natural disaster or other cause of damage. In years in which reduced reassessments are

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widespread, property tax revenue available to local governments such as school districts is reduced. Pursuant to interpretation of the Revenue and Taxation Code and upheld by State courts, once the market has rebounded or the property has been repaired to substantially its original condition, a county may increase the assessed value of the property at a rate greater than two percent annually until it has reached the property’s pre-decline assessed value. As a result of these laws, real property that has been owned by the same taxpayer for many years can have an assessed value that is much lower than the market value of the property and of similar properties more recently sold. Likewise, changes in ownership of property and reassessment of such property to market value commonly lead to increases in aggregate assessed value even when the rate of inflation or consumer price index would not permit the full two percent increase on any property that has not changed ownership. Any increase or decrease in assessed valuation is allocated among the various jurisdictions. The one percent tax is levied and collected by each county, and the revenue is apportioned by the county to each local government agency in the taxing area roughly in proportion to the relative shares of taxes as levied prior to 1979. Local government agencies, including school districts, may not directly levy any ad valorem property tax, unless the tax is levied to pay debt service (interest and redemption charges) on a local government’s indebtedness approved by voters prior to July 1, 1978, or, thereafter, as amended by Proposition 46 (1986), bonded indebtedness for the acquisition or improvement of real property approved by a two-thirds majority. In addition, Proposition 39 (2000) added a provision allowing for a lowered voter approval rate specifically for bonds to fund school facilities projects. A school district or community college district may levy ad valorem property taxes in excess of one percent with 55 percent voter approval if the bonds will be used for the construction, reconstruction, rehabilitation or replacement of school facilities or the acquisition or lease of real property for school facilities. The measure must include the specific list of projects to be funded and certification that the school district’s governing board has evaluated safety, class size reduction, and information technology needs in developing the list, and must conduct annual, independent financial and performance audits until all bond funds have been spent to ensure that the bond funds have been used only for the projects listed in the measure. Pursuant to legislation, the projected tax rate per $100,000 of taxable property value levied as the result of any single election may be no more than $60 in a unified school district, $30 in a high school or elementary school district, or $25 in a community college district. The 2018 Election was conducted pursuant to Proposition 39. Article XIIIB of the State Constitution Article XIIIB, added to the State Constitution by Proposition 4 (1979), amended by Proposition 111 (1990), limits the amount of certain funds, including tax revenues, that may be annually appropriated by the State and local governments, including school districts, to the amount appropriated the prior year, adjusted to reflect the rate of economic growth by measuring the change in per capita personal income and population. Certain payments are exempt from the appropriations limit calculation, including debt service payments; certain benefit payments, mandated expenses, State payments to school districts and community college districts, increases in revenues gained from fuel, vehicle and tobacco taxes, emergency appropriations; and qualified capital outlay projects (projects involving fixed assets such as land or construction that have an expected life of more than 10 years and a value greater than $100,000). Tax revenues in excess of the appropriation limit are shared between increased education funding and taxpayer rebates. Calculated over two years, half of any excess is transferred to K-14 school districts and half is returned to taxpayers through a revision of tax rates within two fiscal years. Any such excess revenues transferred to K-14 school districts are not counted as part of the school districts’ base expenditures for calculating their entitlement for State aid in the next year, nor is the State’s appropriations limit increased by this amount. If a K-14 school district’s revenues exceed its appropriations limit, the school district may increase its appropriations limit to equal its spending by borrowing from the State’s appropriations limit. Articles XIIIC and XIIID of the State Constitution Articles XIIIC and XIIID, added to the State Constitution by Proposition 218 (1996) and amended over time, limit the ability of local governments, including school districts, to levy and collect non-ad valorem property taxes, assessments, fees and charges. The law establishes that a tax must be either a “general” tax, requiring the approval of a simple majority of voters, the proceeds of which can only be used for general government purposes, or a “special” tax, requiring the approval of two-thirds of voters, the proceeds of which are used for a specific purpose, or if the tax is levied by a special-purpose government agency, including a school district. Any tax levied on property, other than the ad valorem property tax governed by Article XIIIA, is a special tax, requiring the approval of two-thirds of voters. Special-purpose government agencies, such as a school district, cannot levy general taxes.

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Article XIIIC also provides that the initiative power shall not be limited in matters of reducing or repealing local taxes, assessments, fees and charges. A portion of the District’s revenues are received annually from property taxes. The State Constitution and the laws of the State impose a mandatory, statutory duty on the County Treasurer to levy a property tax sufficient to pay debt service on the Bonds coming due in each year. There is no court case which directly addresses whether the initiative power may be used to reduce or repeal the ad valorem property taxes pledged to repay general obligation bonds. In the case of Bighorn-Desert View Water Agency v. Virjil (Kelley), the California Supreme Court held that water service charges may be reduced or repealed through a local voter initiative subject to Article XIIIC. The Supreme Court did state that it was not holding that the initiative power is free of all limitations. Such initiative power could be subject to the limitations imposed on the impairment of contracts under the contract clause of the United States Constitution. Legislation adopted in 1997 provides that Article XIIIC shall not be construed to mean that any owner or beneficial owner of a municipal security assumes the risk of or consents to any initiative measure that would constitute an impairment of contractual rights under the contracts clause of the United States Constitution. The initiative power can be used to reduce or repeal most local taxes, assessments, fees and charges. Article XIIID deals with assessments and property-related fees and charges and expressly cautions that its provisions shall not be construed to affect existing laws relating to the imposition of fees or charges as a condition of property development; however it is not clear whether the initiative power is available to repeal or reduce developer and mitigation fees imposed by the District. The District has no power to impose taxes except those property taxes associated with a general obligation bond election, following approval by 55 percent or two-thirds of the District’s voters, depending upon the legal authority for the issuance of such bonds. As amended by Proposition 26 (2010), the law defines any levy, charge, or exaction of any kind imposed by a local government as a tax requiring voter approval. The following exceptions do not require voter approval: a reasonable charge for a specific benefit, privilege, product or service that is received only by the payor of the charge; a reasonable charge for regulatory costs of issuing a license or permit, performing an inspection or audit, or enforcing an order; a charge for use, rental, or purchase of government property; a charge, fine or penalty for violation of law; and assessments and property-related fees imposed as a condition of property development. Although such fees and charges levied by one taxing jurisdiction do not directly impact the amount of revenue available to another taxing jurisdiction from ad valorem property taxes, if the ability to impose the fee or charge is restricted, it could indirectly impact such revenues. Minimum Guarantee of State Funding for Education Proposition 98 (1988), added Article XVI to the State Constitution, requiring that “from all State revenues there shall first be set apart the moneys to be applied by the State for support of the public school system and higher education.” Known as the “minimum guarantee,” funding for K-14 school districts, made up of a combination of State general fund income tax revenues and local property tax revenues, must be the greater of either the same percentage of State general fund revenues as was appropriated in fiscal year 1986-87, or the amount actually appropriated to such districts from the State general fund in the previous fiscal year, adjusted for increases in enrollment and changes in the cost of living. The minimum guarantee allocated each year, determined by a set of tests, is approximately 40 percent or more of State general fund revenues. The amount of the minimum guarantee is not finalized until the final economic analysis is completed for a fiscal year; if the revisions result in a higher minimum guarantee than was budgeted, the State makes a one-time “settle-up” payment and uses the increased minimum to calculate the subsequent year’s funding, as described below. If the revised minimum guarantee is lower than budgeted, the State can use the higher level or make mid-year adjustments to reduce funding. “Test 1” (share of the State general fund) allocates approximately 41 percent of the State general fund revenue to K-14 school districts. Test 1, in which the amount of the minimum guarantee is based on the share of the State general fund revenue spent on K-14 education funding in fiscal year 1986-87, only applies if Test 2 or Test 3 (described below) does not result in additional funding for K-14 school districts. Test 1 has been used five times in the last 31 years, including fiscal years 2014-15 and 2019-20. “Test 2” (change in per capita personal income) provides that K-14 school districts receive the same amount of funding received in the prior year, adjusted for year-over-year statewide changes in K-12 attendance and per capita personal income. Test 2 is used if it results in more funding for K-14 school districts than Test 1 (unless Test 3 applies instead). Test 2 has been used in 15 of the past 31 years, including fiscal years 2017-18 and 2018-19.

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“Test 3” (change in general fund revenue) provides that K-14 school districts receive the same amount of funding received in the prior year, adjusted for year-over-year statewide changes in K-12 attendance and general fund revenue; this calculation is only used if the percentage change in per capita State general fund revenue is less than the change in per capita personal income. Test 3 has been used in nine of the past 31 years, including fiscal years 2015-16 and 2016-17. In years of economic hardship, the State Legislature can suspend the minimum guarantee for a year by a two-thirds vote, which also triggers the maintenance factor obligation, to be restored in later years. Such suspension has only occurred twice, in fiscal years 2004-05 and 2010-11. The State creates a maintenance factor obligation when Test 3 is operative or when the minimum guarantee is suspended. In any year in which Test 3 is used, the difference between the actual amount of funding provided and the amount that would have been appropriated, under the larger amount of either Test 1 or Test 2, is considered a “maintenance factor” credit to K-14 school districts, to be restored in future years when State revenue growth rebounds to exceed personal income. The State constitution requires the maintenance factor be paid off in annual amounts determined by formula, with stronger revenue growth generally requiring larger payments. The State Legislature has the authority to spend more than the minimum guarantee, although any increase creates a higher minimum floor for the following year; this has occurred from time to time. At times, the State also has had outstanding one-time Proposition 98 obligations known as “settle-up” obligations. A settle-up obligation is created when the minimum guarantee increases midyear and the State does not make an additional payment within that fiscal year to meet the higher guarantee. The increased amount is used as the base for the following year’s minimum guarantee. Settle-up funds can be used for any educational purpose, including paying off other state one-time obligations, such as deferrals and mandates. Community Redevelopment and Revitalization Beginning with the Community Redevelopment Act (1945) under Article XVI of the State Constitution, amended over time, until the termination and dissolution of the program in 2011, a local government could improve an economically depressed area by creating a redevelopment agency (an “RDA”) to pay for development projects with the future increase in property tax revenue, or “tax increment,” attributable to the growth in assessed value of taxable property within the project area when the project was complete. However, the allocation of the tax increment to the local RDA caused a reduction in the one percent countywide property tax levy for other local taxing agencies, including school districts, although ad valorem property taxes in excess of the one percent property tax levy collected for payment of debt service on school district bonds were not affected. Although a school district could negotiate with the RDA for “pass-through” payments of local tax revenues, because the State was replacing the school district’s lost tax revenue, there was little incentive for most school districts to negotiate for greater amounts of pass-through from the RDAs. The State’s share of reimbursements to such school districts soared into the hundreds of millions of dollars per year. Facing economic crisis, Assembly Bill, First Extended Session 26 (“AB1X 26”) (2011), upheld by the State Supreme Court in California Redevelopment Association v. Matosantos (2011), was enacted to dissolve the more than 400 RDAs in the State to preserve funding for core public services at the local level. Successor agencies were established to facilitate the management of projects underway, making payments on enforceable obligations, and disposing of assets and properties. Senate Bill 107 (2015) streamlined the dissolution process and expanded the types of loans for which cities and counties can seek reimbursement. Some school districts receive pass-through payments during the dissolution process. See “DISTRICT FINANCIAL INFORMATION—Revenues” herein. Assembly Bill 2 (“AB2”) (2015), the result of several legislative efforts to replace the redevelopment law in order to provide local government options for sustainable community economic development, is a limited version of the former law, targeting only the State’s most impoverished areas. AB2 allows a local government to create a community revitalization investment area (“CRIA”) if several conditions are met, including measures of unemployment, crime, and dilapidated infrastructure and residential structures, which are required to insure that the CRIA process is actually used for the intended purpose of alleviating blight. Significantly, school districts are prohibited from participating in the CRIA; because schools may not contribute their share of the tax increment to the project area, the funding impact to schools and the State is avoided. Assembly Bill 2492 (2016) was enacted that clarified implementation issues of AB2.

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Limits on State Authority Over Local Tax Revenues State and local governments’ funding and responsibilities are interrelated. Both levels of government share revenues raised by certain taxes such as sales and fuel taxes, and both also share in the costs for some programs such as health and social services. Although the State does not receive local property tax revenue, it has had authority over the distribution of these revenues among local agencies and school districts. Under Article XIIIA, the State had the authority to permanently shift property taxes among local governments. At times, the State fulfilled some portion of the Proposition 98 minimum guarantee by shifting some of the property tax revenues share belonging to cities, counties, other special districts and redevelopment agencies to K-14 school districts through an Educational Revenue Augmentation Fund (“ERAF”) established in each county. Proposition 1A (2004) amended Articles XI and XIII of the State Constitution to require two-thirds approval of the State Legislature to shift property tax revenues allocation between local governments, preventing the State from reducing the property tax share allocated to cities, counties, and special districts. However, the State could still transfer property tax revenues to schools in the case of severe fiscal hardship and two-thirds approval of the State Legislature. Proposition 22 (2010) amended Articles XIII and XIX of the State Constitution to further restrict the State’s control over local property taxes in order to stabilize local government revenue sources. Even during times of severe fiscal hardship, the State could not take revenue derived from locally imposed taxes, such as parcel taxes, hotel taxes, utility taxes, and sales taxes, for State purposes, nor could the State delay distribution of tax revenues to local governments, redirect redevelopment agency property tax revenue to other local governments such as school districts, or shift money to the school districts under an ERAF. As a result, the State would have to take other actions to balance its budget in some years, such as reducing State spending or increasing State taxes. Proposition 22’s restriction of the State’s ability to shift local funds made K-14 school districts more directly dependent on the State general fund for Proposition 98 funding. Temporary State Tax Increases From 2008 to 2012, the State eliminated more than $56 billion from State and local funding for local services including education, police, fire, and health care. Proposition 30 (2012) allows the State to levy a temporary sales tax (lasting four years) and income tax on high-income earners (lasting seven years), the revenues of which are dedicated to increased education funding and to balance the State budget. Existing law requires that in years in which the State’s general fund revenues grow by a large amount, funding for education must also be increased by a large amount. The tax revenues allocated to education as part of the minimum guarantee are deposited into the Education Protection Account (“EPA”), recalculated and distributed quarterly to K-14 school districts (89 percent to K-12 school districts and 11 percent to community college districts) as a continuing appropriation not subject to budget adoption. The funds are distributed in the same manner as existing unrestricted per-student funding. The Proposition 30 tax revenue is included in the Proposition 98 calculation, raising the guarantee by billions each year. The remaining Proposition 30 tax revenues will be used to balance the budget. Proposition 55 (2016) extends the income tax increase on high-income taxpayers through the year 2030-31. Approximately half of the revenue raised by this measure is allocated to K-14 school districts. The measure also directs half of any excess revenues, up to a maximum of $2 billion, for additional funding for Medi-Cal, if revenues exceed the constitutionally required education spending and the costs of government programs in place as of January 1, 2016. A portion would also be saved in reserves and spent on debt payments. Any remaining revenues would be available for any State purpose. Enacted Budget Required for Disbursement of State Funds In years in which the State Legislature has not enacted a budget by the required deadline, the fiscal year begins without an enacted budget, and the State has, in some cases, issued registered warrants or IOUs, to pay certain State employees’ wages and State debts. In 1988, during such a budgetary impasse, a taxpayers’ association argued that such warrants were not authorized without an enacted budget. In the case, known as Jarvis v. Connell, the State Court of Appeal held that without an enacted budget, State funds may not be disbursed unless the payment is authorized by the State Constitution, as a continuing appropriation, or by federal mandate. This could affect school district budgets to the extent that, if there is neither an enacted budget nor emergency appropriation, State payments owed to school districts could be delayed unless they are required as a continuing appropriation or federal mandate.

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State and School District Budgetary Reserves Proposition 58 (2004) amended Article IV of the State Constitution to require the State to enact a balanced budget, in which estimated revenues would meet or exceed estimated expenditures in each year, and that mid-year adjustments be made if the budget fell out of balance. The law established the Budget Stabilization Account (the “BSA”) in the State’s general fund, which required a deposit of three percent of the State general fund each year. Proposition 2 (2014) addressed the need for long-term financial stability in the State in the face of economic volatility by dedicating funds to pay down the State’s debt, changing the State’s reserve policies, and creating a separate budget reserve for K-14 school districts called the Public School System Stabilization Account (the “PSSSA”). The law reduced legislative discretion over the timetable for the repayment of State debts and required that 1.5 percent of the State general fund be deposited into the BSA annually, plus an additional amount when the State experiences spikes in capital gains tax revenue in excess of eight percent of State general fund revenues. The PSSSA, also funded with capital gains spikes, is drawn upon when the Proposition 98 minimum guarantee exceeds available State general fund and property tax revenues. Through 2030, half of the funds deposited each year into the BSA must be used to pay fiscal obligations such as budget loans and unfunded State level pension plans. Funds may be withdrawn from the BSA only for a disaster-related emergency or a fiscal emergency (which occurs if estimated resources in the current or upcoming fiscal year are insufficient to keep spending at the level of the prior three budgets adjusted for inflation and population). In the case of a recession, only half of the funds can be withdrawn. As a result, a large amount of incremental gains in the State’s general fund revenues are allocated to building reserves and repaying debt. The State has a constitutional obligation to ensure that school districts continue to operate even in times of financial difficulty so that the education of students in the State is not disrupted. The State requires school districts to maintain a minimum reserve in their general fund’s reserve for economic uncertainties to help school districts manage cash flow, address unexpected costs, save for large purchases, reduce costs of borrowing money, and mitigate the volatility in funding produced by the reliance on tax revenue funding sources. The minimum reserve amount required depends on the size of the school district’s enrollment. Smaller school districts are required to keep a higher percentage of reserves because they are more easily overwhelmed by unexpected costs, such as a single major facility repair, which could deplete most of its reserves in a single year. School districts with enrollment of 300 or fewer students, which represent 25 percent of school districts in the State, must keep a minimum reserve of five percent of expenditures. School districts with enrollment of 301 to 1,000 students, which represent 17 percent of school districts in the State, must keep a minimum reserve of four percent. School districts with enrollment of 1,001 to 30,000 students, which represent 55 percent of school districts in the State, must keep a minimum reserve of three percent. School districts with enrollment of 30,001 to 400,000 students, which represent three percent of school districts in the State, must keep a minimum reserve of two percent. The one school district in the State with an enrollment of 400,001 or more students must keep a minimum reserve of one percent. Many school districts attempt to keep their reserve levels higher than State minimum requirements. Senate Bill 858 (2014), enacted as trailing legislation to the fiscal year 2014-15 State budget, required K-12 school districts, in the event of a deposit by the State to the PSSSA, to reduce total assigned and unassigned reserves in the following year to no more than twice its minimum reserve for economic uncertainties, ranging from one to five percent of expenditures depending on the size of the school district. Senate Bill 751 (2018), signed into law on October 11, 2017 and effective January 1, 2018, makes certain changes to the cap on school district reserves, increasing both the State PSSSA deposit amount required to trigger the reserve cap (to three percent of State general fund revenues appropriated for K-12 school districts), and increasing the cap on individual school district reserves (to 10 percent of combined assigned and unassigned ending general fund balances). In addition, basic aid school districts and small school districts with fewer than 2,501 students are exempted from the cap. County education officials can exempt a school district from the cap if the school district demonstrates extraordinary fiscal circumstances, including undertaking multi-year infrastructure or technology projects. A smaller reserve could affect the school district’s financial condition in the event of an economic downturn. The District cannot predict when a deposit to the PSSSA might occur or whether future legislation will be enacted that changes this requirement. School Facilities Funding The Leroy F. Greene School Facilities Act (1998) established the State Facilities Program (“SFP”) to allocate funding grants based on proposals submitted by school districts for the new construction of or the modernization of existing school facilities, although the program has evolved to allow funding for other types of school facility needs including facility hardship, seismic mitigation, charter school facilities, relief of overcrowding, career technical education facilities, incentives for energy efficiency and high-performance architectural attributes, and joint-use programs with other government entities.

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Funding for SFP grants comes from statewide general obligation bonds approved by the voters in the State. The State retires these bonds by making annual debt service payments. In fiscal year 2016-17, the State paid $2.4 billion in debt service on previously issued K-12 facilities bonds and $300 million in debt service on community college facilities bonds. Proposition 1A (1998) provided $9.2 billion ($6.7 billion for K-12 facilities), Proposition 47 (2002) provided $13.2 billion ($11.4 billion for K-12 facilities), Proposition 55 (2004) provided $12.3 billion ($10 billion for K-12 facilities), Proposition 1D (2006) provided $10.4 billion ($7.3 billion for K-12 facilities), and Proposition 51 (2016), the first initiative facilities bond measure, provides $9 billion ($6 billion for K-12 facilities). Proposition 51 amends the Education Code, prescribing the fiscal allocation and purpose of the $9 billion bond and establishing the 2016 State School Facilities Fund and the 2016 California Community College Capital Outlay Bond Fund in the State Treasury. Of the total amount, $6 billion is allocated to K-12 facilities (half for new construction and half for modernization), $500 million for charter schools, $500 million for career technical education programs, and $2 billion to community colleges. In most cases, K-12 school and community college districts that receive funding for approved projects must match the funding with local funding according to the type of project. Projects for the purchase of land and new construction are matched evenly. Modernization projects require a match of 40 percent local funding to 60 percent State funding. If no local funding is available, the school district can apply for additional grant funding. Community college projects do not have a specified contribution model and are determined individually. K-12 school and community college districts may sell local general obligation bonds to cover the school district’s share of the cost of facility projects. K-12 school districts may also raise funds for facilities by charging fees on new development (community college districts may not). Both K-12 school and community college districts may also raise funds by parcel taxes and other methods used less frequently. Impact of Future Legislation Laws affecting school district funding and the power of State and local governments to raise and spend revenue have been subject to many changes as voters and lawmakers react to economic and political cycles. The complex patchwork of the many different provisions at times results in uncertainty regarding their operation or interpretation. Many of the laws discussed above were enacted through the State’s initiative process. Initiative constitutional amendments may be changed only by another statewide initiative. Legislative constitutional provisions may be changed by a majority vote of both houses of the State Legislature and approval by the Governor, if the change furthers the purposes of the provision. The District cannot predict whether or when the voters in the State or the State Legislature will approve further legislation that could restrict the District’s sources of revenue or its ability to spend that revenue, or require the District to appropriate additional revenue.

FUNDING OF PUBLIC EDUCATION IN THE STATE Sources of Revenue for Public Education There are four general sources of funding for K-12 public education in the State: the federal government, local property taxes, other local funding sources and State funding, the principal source of funding for most school districts. Proposition 13 eliminated the possibility of raising additional ad valorem property taxes above one percent for general-purpose school support, and the courts have declared that school districts may not charge fees for school-related activities, unless the charge is specifically authorized by law for a particular program or activity. See “CONSTITUTIONAL AND STATUTORY PROVISIONS AFFECTING DISTRICT REVENUES AND EXPENDITURES” herein. State Funding. Many school districts in the State receive the majority of their funds from the State. According to the State Legislative Analyst’s Office (the “LAO”), State funding accounted for approximately 62 percent of the State’s K-12 public education funding in fiscal year 2016-17 and approximately 61 percent in fiscal year 2017-18, and is budgeted to account for approximately 61 percent of funding in fiscal year 2018-19. There are three sources of State funds for K-12 public education: the Proposition 98 minimum guarantee, comprised of a combination of State general fund revenues and local property tax revenues, representing the majority (80 percent in fiscal year 2018-19) of State funding; additional State funds for targeted programs such as facilities and remaining categorical programs such as special education, nutrition, afterschool programs, and home-to-school transportation; and State lottery funds, a portion of which may only be used for instructional purposes. The

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Proposition 98 guaranteed minimum amount is set forth each year in the State budget. See “—The 2019-20 State Budget” herein. More than 60 percent of the State’s general fund revenue comes from personal income taxes, with capital gains taxes representing more than 10 percent of the State’s general fund revenue, so a downturn in the stock market may significantly impact the State’s general fund. Because funding for education in the State depends on the amount of money available in the State general fund, the linkage can result in significant volatility in education funding. For instance, during the recent recession in fiscal year 2011-12, State general fund revenues available for education funding were approximately eight percent less than the amount available four years prior. Provisions added to the State Constitution and statutes in 2013 and 2014 attempt to provide funding stability to public education by capturing spikes in capital gains revenue to use for paying down debts and obligations and to create reserves. See “CONSTITUTIONAL AND STATUTORY PROVISIONS AFFECTING DISTRICT REVENUES AND EXPENDITURES” herein. The State Revenue Limit was instituted in fiscal year 1973-74 to provide a mechanism to calculate the total amount of general-purpose revenue a school district, community college district or county office of education is entitled to receive from combined State and local sources per average daily attendance, known as its “revenue limit,” and the funding from this calculation formed the bulk of school districts’ income, and was annually increased to adjust for changes in the cost of living. The revenue limit for each school district or county office of education was funded first by the property tax revenue available to that entity, with the remaining balance filled by State funds. “Community-funded” districts whose local property tax revenues exceeded their calculated revenue limit did not receive State revenue limit funding, although such districts did receive the constitutionally required minimum funding, or “basic aid” per pupil, and categorical State and federal aid that was restricted to specific programs and purposes. In landmark legislation, the fiscal year 2013-14 State budget replaced revenue limit funding with the LCFF. The LCFF transfers control over spending decisions to local authorities, requiring community input about those spending decisions along with increased transparency and accountability for the outcomes of those decisions. The general-purpose funds for school districts are now funneled through LCFF, and funds received through categorical programs are greatly reduced. As under the revenue limit system, the amount a school district is entitled to receive for general-purpose LCFF funds is financed through the local property tax revenue available to the school district, with the remaining balance funded by the State. Most public education funding from the State is provided through the LCFF, including approximately 80 percent of Proposition 98 funding for K-12 public education. As under the revenue limit system, school districts continue to receive funds based on the greater of prior year or current year ADA figures. Under LCFF, school districts across the State receive the same base grants for each grade span, based on ADA. In fiscal year 2018-19, the adjusted base grants are $8,235 for kindergarten through third grade, $7,571 for fourth through sixth grade, $7,796 for seventh through eighth grade, and $9,269 for ninth through twelfth grade. These figures include increases for class size reduction for kindergarten through third grade and career technical education for ninth through twelfth grade. School districts receive a supplemental grant of 20 percent of the base grant for each student in the school district who is low-income, English-learner, or foster youth. Enrollment counts are “unduplicated,” such that students may not be counted as both English-learner and low-income (foster youth automatically meet the eligibility requirements for free or reduced-price meals, and are therefore not discussed separately). School districts with more than 55 percent enrollment of unduplicated students receive a concentration grant, an additional 50 percent of the base grant for each unduplicated student above the threshold, intended to address the additional academic challenges faced by such students when their peers are similarly disadvantaged. The supplemental and concentration grants are allocated so that as a school district’s proportion of unduplicated students increases, so does its total funding allocation. A school district in which 100 percent of enrollment is unduplicated students will receive 42.5 percent more total funding than a school district with no unduplicated students. The supplemental and concentration grant amounts are based on the unduplicated count of pupils divided by the total enrollment in the school district, based on the fall P-1 certified enrollment report. School districts have broad discretion to decide how to spend the base grant. The supplemental and concentration grants must be used to increase or improve services to the population they are intended to serve, although some services may be provided district- or site-wide. The implementation of LCFF began in fiscal year 2013-14, with full implementation planned by fiscal year 2020-21, but completed ahead of schedule in fiscal year 2018-19. Until full implementation has occurred, the difference between the actual amount districts receive in a year and the target amount they will receive as of full implementation is referred to as the “funding gap.” The funding gap is determined by the difference between the “funding floor,” or amount of funding a school district received the prior year, and the target amount of funding the school district will receive at full implementation. The funding floor consists of the deficited revenue limit for fiscal year 2012-13 divided by ADA multiplied by current year ADA,

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plus the sum of any categorical funding. Sufficient funding was available to fund 12 percent of the funding gap in fiscal year 2013-14, 33 percent of the remaining gap in fiscal year 2014-15, 53 percent of the remaining gap in fiscal year 2015-16, 57 percent of the remaining gap in fiscal year 2016-17, 43 percent of the remaining gap in fiscal year 2017-18, and 100 percent of the remaining gap in fiscal year 2018-19, bringing LCFF to full implementation in the sixth year of its implementation. Under the “hold harmless” provision, no school district will receive less State aid than it received in fiscal year 2012-13. Most districts will receive more funding at full implementation of LCFF than they did previously under the revenue-limit system. For some school districts, their per-pupil undeficited fiscal year 2012-13 funding was higher than their LCFF entitlement at full implementation. Such districts will have their undeficited funding level restored through a supplemental ERT add-on payment. School districts that are eligible for ERT funding will receive the difference between their LCFF target and their LEA’s fiscal year 2012-13 undeficited funding, adjusted for cost-of-living increases. Community-funded districts continue to receive at least the amount of State funding they received in fiscal year 2012-13. Although community-funded districts do not receive LCFF funding grants, they must comply with the regulations and accountability requirements of LCFF. Community-funded districts also continue to receive the constitutionally guaranteed $120 per-pupil minimum as well the $200 per-pupil minimum from the EPA pursuant to Proposition 30 as additional revenue. The District is not a community-funded district. The State funds school districts in monthly installments based on calculations made in a series of three apportionments throughout the fiscal year. Each apportionment includes funding for the LCFF and for other State programs. The amount of each apportionment is based on calculations made by each school district and reviewed by its county office of education. The Advance Principal Apportionment (“Advance Apportionment”), certified by July 20, sets forth the amount the school district will receive for the year, paid in a series of installments from August through January. The First Principal Apportionment (“P-1 Apportionment”), certified by February 20, set forth a new calculation based on the school district’s first period ADA determined as of December, for installments that will be paid to the school district from February through June. The Second Principal Apportionment (“P-2 Apportionment”), certified July 2, based on second period ADA determined as of April, recalculates the amount of the final installment for the fiscal year paid to the school district in July. At the close of the fourth quarter, a final annual recalculation (“Annual Apportionment”) provides an updated estimate of the prior year’s adjustment. In addition, school districts receive a quarterly allocation of the tax revenue deposited in the EPA from the temporary tax increases associated with Proposition 30 and extended under Proposition 55. The funds in the EPA are allocated between K-12 school districts and community college districts by 89 percent and 11 percent, respectively, and entitlements are calculated based on the adjusted LCFF entitlement of the district. The EPA funds received by an LCFF-funded school district count towards the district’s LCFF funding entitlement; community-funded districts also receive the $200 per-pupil EPA funding. See “CONSTITUTIONAL AND STATUTORY PROVISIONS AFFECTING DISTRICT REVENUES AND EXPENDITURES” herein. The LCFF requires each school district to demonstrate that its spending decisions are producing the desired results of increased student performance as stated in each school district’s own LCAP. Each school district must create its own annually updated LCAP with input from teachers, parents and the community, including the parents or guardians of unduplicated students. School districts must review and share the results to determine whether spending achieved the goals stated in the LCAP, for each school site and for the school district as a whole. All school districts must use the State’s LCAP template beginning fiscal year 2014-15. The LCAP must include a description of the annual goals to be achieved for each student group for each State priority, including the content standards adopted by the State Board of Education. The LCAP of each school district is overseen and approved by the county superintendent. Charter schools must comply with LCFF and receive mostly the same funds as public schools, although calculation of targeted disadvantaged students differs somewhat to prevent abuse of the system. There are also differences in the process of LCAP adoption and assessment. In the case of a charter school that fails to perform according to its LCAP, the State is not required to provide the same support that a public school district or county office of education receives, and its charter can be revoked. Federal Funding. According to the LAO, federal revenue accounted for approximately nine percent of the State’s K-12 public education funding in fiscal years 2016-17 and 2017-18, and is budgeted to account for approximately nine percent of funding in fiscal year 2018-19. Most of these funds are designated for particular purposes. There are no unfunded federal education mandates; each is conditioned on a state’s voluntary decision to accept federal program funds. The primary source of federal supplemental education funding is the Elementary and Secondary Education Act (“ESEA”) (1965), enacted to address inequality in education. The previous authorization of ESEA, the No Child Left Behind Act (“NCLB”) (2001), expanded the federal government’s role and increased testing requirements to measure improvement. Most recently reauthorized under the

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Every Student Succeeds Act (“ESSA”) (2015), responsibility for school improvement has been shifted to the states. ESSA provides funding through six programs: Title I grants, tied to student assessment, to assist economically disadvantaged children; Title II grants for professional development; Title III grants for ancillary student services; Title IV grants for research and training; Title V grants for state departments; and Title VI grants for special education. Another significant source of federal funding for school districts is the Education for All Handicapped Children Act (“EHA”) (1975), enacted to support special education and related services, reauthorized by the Individuals with Disabilities Education Act (“IDEA”) (1990). The largest of the law’s three sections, Part B, authorizes grants to states and local school districts to offset special education costs. As of fiscal year 2017, IDEA federal funding covered 14.6 percent of the estimated excess cost of educating students with disabilities; the shortfall is assumed by states and local school districts. Local Property Tax Revenue. According to the LAO, local property taxes revenue accounted for approximately 24 percent of the State’s K-12 public education funding in fiscal year 2016-17 and approximately 25 percent of funding in fiscal year 2017-18, and is budgeted to account for approximately 25 percent of funding in fiscal year 2018-19. Property taxes are constitutionally limited to one percent of the property’s value, except to repay voter-approved debt. Other Local Funds. According to the LAO, local miscellaneous revenue accounted for approximately five percent of the State’s K-12 public education funding in fiscal years 2016-17 and 2017-18, and is budgeted to account for approximately five percent of funding in fiscal year 2018-19. There are several types of revenue a school district may receive from other local sources, including developer fees, parcel taxes, property lease revenues, and private donations. A school district may levy developer fees on new residential or commercial development within the school district’s boundaries to finance the construction or renovation of school facilities. A school district may, with two-thirds approval from local voters, levy special taxes on parcels to fund specific programs within the school district. A school district may lease or sell its unused sites or facilities as another source of revenue. A school district may also seek contributions, sometimes channeled through private foundations established to solicit donations from local families and businesses. The State Budget Process Under the State Constitution, money may be drawn from the California Centralized Treasury System (the “State Treasury”) only by an appropriation authorized by law. The primary source of annual appropriations authorizations is the budget act approved by the State Legislature and signed by the Governor (the “Budget Act”), which can provide for projected expenditures only to the amount of projected revenues and balances available from prior fiscal years. The annual budget cycle begins when the Governor releases a proposed budget in January for the next fiscal year, which starts each July 1 and ends June 30. The Governor releases a revised budget in May based on new projections regarding State revenues and feedback from the State Legislature and other constituents. The State Constitution requires that the State Legislature pass the Budget Act by June 15 by majority approval from both Houses. The Governor may reduce or eliminate specific line items in the Budget Act or any other appropriations bill without vetoing the entire bill. Such individual line-item vetoes are subject to override by a two-thirds majority vote of each House of the State Legislature. Appropriations may also be included in legislation other than the Budget Act. Bills containing appropriations (including for K-14 education) must be approved by a majority vote in each House of the State Legislature, unless such appropriations require tax increases, in which case they must be approved by a two-thirds vote of each House of the State Legislature, and be signed by the Governor. The State Constitution or a State statute may also provide for continuing appropriations that are available without regard to fiscal year. Funds necessary to meet an appropriation need not be in the State Treasury at the time such appropriation is enacted; revenues may be appropriated in anticipation of their receipt. The 2019-20 State Budget On June 27, 2019, the Governor signed into law the 2019-20 State Budget. Under the 2019-20 State Budget, State general fund revenues and transfers total $143.8 billion, an increase of $5.8 billion (4.2 percent) from revised fiscal year 2018-19 estimates. The State’s largest three sources of general fund tax revenue – personal income taxes, sales and use taxes, and corporate taxes – are projected to increase by 3.3 percent in fiscal year 2019-20 to $142.8 billion. State general fund expenditures in fiscal year 2019-20 are budgeted to be $147.8 billion, an increase of $5.1 billion (3.6 percent) from revised fiscal year 2018-19 levels. The spending plan includes $3.6 billion to pay down a portion of the State’s unfunded STRS and PERS liabilities, with an additional $2.3 billion to pay down a portion of local education agencies’ unfunded STRS and PERS liabilities.

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The 2019-20 State Budget allocates the majority of the projected $21.5 billion in discretionary resources to one-time spending and reserves, with $9.1 billion to reduce debts and liabilities (excluding an additional $2.2 billion in constitutionally mandated debt payments), $6.5 billion to one-time programmatic spending, $2.1 billion to optional reserves and $4 billion to new ongoing programmatic spending. The State budgets ending fiscal year 2019-20 with total available general fund reserves of $19.2 billion, including $1.4 billion in the Special Fund for Economic Uncertainties (SFEU) reserve, $16.5 billion in the Budget Stabilization Account, $900 million in the Safety Net Reserve and $377 million in the Public School System Stabilization Account (PSSSA) established under Proposition 2 (2014), the first time a deposit to the PSSSA would occur. The following table from the LAO identifies historical and budgeted State general fund revenues and expenditures under the 2019-20 State Budget.

State General Fund 2019-20 State Budget

2018-19 2019-20 Revised Enacted (Millions) (Millions)

Prior-year Fund Balance $11,419 $6,772 Revenues and Transfers 138,047 143,804 Expenditures 142,693 147,781 Ending Fund Balance $6,772 $2,796

Encumbrances 1,385 1,385 Special Fund for Economic Uncertainties 5,387 1,411

Reserves

Special Fund for Economic Uncertainties $5,387 $1,411 Budget Stabilization Account 14,358 16,516 Safety Net Reserve 900 900 Public School System Stabilization Account -- 377

Total Reserves $20,645 $19,204 Source: The State Legislative Analyst’s Office. Education Funding. The 2019-20 State Budget includes total K-12 education funding of $103.4 billion ($58.8 billion from the State general fund and $44.6 billion from other State funds). The 2019-20 State Budget funds the Proposition 98 minimum guarantee at $81.1 billion, an increase of $2.9 billion (3.7 percent) from revised fiscal year 2018-19 levels. The minimum guarantee for fiscal year 2018-19 is determined under Proposition 98’s Test 1 (see “CONSTITUTIONAL AND STATUTORY PROVISIONS AFFECTING DISTRICT REVENUES AND EXPENDITURES” herein). Of the $81.1 billion Proposition 98 spending budgeted for fiscal year 2019-20, $55.9 billion is from the State general fund and $25.2 billion is from local property tax revenue. Proposition 98 K-12 per-pupil expenditures are budgeted to be $11,993 in fiscal year 2019-20, an increase of $444 (3.8 percent) per pupil from revised fiscal year 2018-19 levels. The 2019-20 State Budget includes a constitutionally required deposit into the PSSSA of $377 million. The deposit does not initiate a cap on school district reserves because the balance in the PSSSA is not equal to or greater than 3 percent of the total K-12 share of the Proposition 98 guarantee. The 2019-20 State Budget also includes changes to the Proposition 98 certification process which, as a result, protect local education agencies from unanticipated revenue drops in past fiscal years. The 2019-20 State Budget includes a $3.15 billion non-Proposition 98 general fund payment on behalf of local education agencies to STRS and PERS. Of this amount, $2.3 billion will be used to reduce local education agencies’ long-term unfunded liability, while approximately $850 million will be used to cover a portion of local education agencies’ STRS and PERS payments in fiscal years 2019-20 and 2020-21. As a result, STRS contribution rates drop from 18.13 percent to 17.1 percent in fiscal year 2019-20 and from 19.1 percent to 18.4 percent in fiscal year 2020-21, while PERS contribution rates drop from 20.7 percent to 19.7 percent in fiscal year 2019-20 and from 23.6 percent to 22.9 percent in fiscal year 2020-21. Additional significant adjustments regarding K-12 education funding contained in the 2019-20 State Budget include:

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LCFF: $1.9 billion in new funding for LCFF, reflecting a 3.26 percent COLA. Proposition 98 Settle-Up: $686.6 million to pay the balance of past year Proposition 98 funding owed through fiscal year 2017-18. Special Education: $645.3 million in ongoing Proposition 98 funding for special education, an increase of 19.3 percent from the prior year, including $152.6 million to provide special education local plan areas (SELPAs) with at least the statewide target rate for base special education funding and $492.7 million for special education allocated based on the number of children ages three to five with exceptional needs that the school district is serving. Full-Day Kindergarten: $300 million in one-time non-Proposition 98 funding to construct new and retrofit existing facilities to support full-day kindergarten programs. After-School Programs: $50 million in ongoing Proposition 98 funding to provide an increase of approximately 8.3 percent to the per-pupil daily rate for After School Education and Safety Program (ASES) resulting primarily from the recent increase in the minimum wage. Retaining and Supporting Educators: $89.8 million in one-time non-Proposition 98 funding to recruit teachers in hard-to-hire subject areas as well as at school sites that currently have the highest rates of non-credentialed or waiver teachers. Additionally, the 2019-20 State Budget includes $43.8 million in one-time Proposition 98 funding to provide training and resources for classroom educators, including teachers and paraprofessionals. The 2019-20 State Budget also includes $13.8 million ongoing federal funds to establish the 21st Century California Leadership Academy to provide learning opportunities to K-12 administrators to improve their ability to successfully support California’s diverse student population. Classified School Employees Summer Assistance Program: An increase of $36 million in one-time Proposition 98 funding to provide an additional year of funding for the Classified School Employees Summer Assistance Program (which provides a State match for classified employee savings used to provide income during summer months). Proposition 51 School Facilities Bond Funds: $1.5 billion in Proposition 51 bond funds, an increase of $906 million from the prior year, to support school construction projects.

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The following table from the LAO identifies historical and budgeted Proposition 98 funding under the 2019-20 State Budget.

Proposition 98 Funding 2019-20 State Budget

2017-18 2018-19 2019-20 Final Revised Enacted (Millions) (Millions) (Millions)

Funding By Segment K-12 Education1 $66,839 $68,973 $71,243 Community Colleges 8,737 9,173 9,437

Proposition 98 Reserve Deposit2 -- -- 377 Total $75,576 $78,146 $81,056 Funding By Source

General Fund $52,951 $54,445 $55,891 Local Property Tax Revenue 22,625 23,701 25,166

Total $75,576 $78,146 $81,056

1Includes funding for instruction provided directly by State agencies and the portion of State preschool funded through Proposition 98. 2Consists entirely of general fund. Figures may not total due to rounding. Source: The State Legislative Analyst’s Office. The Proposed 2020-21 State Budget On January 10, 2020, the Governor released the proposed State budget for fiscal year 2020-21 (the “Proposed 2020-21 State Budget”). The Proposed 2020-21 State Budget set out revised estimated prior year State general fund revenues (including transfers) of $139.4 billion for fiscal year 2018-19 and $146.5 billion for fiscal year 2019-20, and projected State general fund revenues of $151.6 billion for fiscal year 2020-21. The proposal set out revised estimated State general fund expenditures of $141.9 billion for fiscal year 2018-19 and $149.7 billion for fiscal year 2019-20, and projected State general fund expenditures of $153.1 billion for fiscal year 2020-21. The Proposed 2020-21 State Budget set forth revised projected total ending reserves for fiscal year 2019-20 of $20.0 billion, including $16.0 billion in the Budget Stabilization Account (BSA) and $900 million in the Safety Net Reserve for CalWORKs. For fiscal year 2020-21, the Proposed 2020-21 State Budget projected total ending reserves of $20.5 billion, an increase of $1.7 billion from the 2019-20 State Budget estimated reserve level. This included a $2.0 billion deposit to the BSA for fiscal year 2020-21 for an ending balance of $18.0 billion. The Proposed 2020-21 State Budget also projected an ending balance of $1.6 billion in the Special Fund for Economic Uncertainties (SFEU) reserve and $900 million in the Safety Net Reserve for CalWORKs.

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The following table sets forth a summary of the State’s general fund budget for fiscal years 2018-19, 2019-20 and 2020-21 under the Proposed 2020-21 State Budget.

State General Fund Proposed 2020-21 State Budget

2018-19 2019-20 2020-21 Revised Revised Proposed (Millions) (Millions) (Millions)

Prior-year Fund Balance $10,979 $8,497 $5,234 Revenues and Transfers 139,379 146,486 151,635 Expenditures 141,861 149,749 153,083 Ending Fund Balance $8,497 $5,234 $3,785 Encumbrances 2,145 2,145 2,145 SFEU Balance 6,352 3,089 1,640 Reserves

Budget Stabilization Account $13,968 $16,018 $17,977 Special Fund for Economic Uncertainties 6,352 3,089 1,640 Safety Net Reserve 900 900 900 Total Reserves $21,220 20,007 20,517

Totals may not foot due to rounding. Source: The State Legislative Analyst’s Office. Education Funding. The Proposition 98 minimum guarantee for K-14 education funding in the State is met each year through a combination of State general fund and local property tax revenue. Each budget cycle, the Proposition 98 minimum guarantee estimates for the prior, current and upcoming year are revised. In the Proposed 2020-21 State Budget, the fiscal year 2018-19 minimum guarantee increased by $301.5 million due to increased property tax and general fund personal income tax revenue estimates for a total revised minimum guarantee of $78.4 billion. The fiscal year 2019-20 minimum guarantee increased by $517.0 million, due to increased projected State general fund tax revenues, for a total estimated minimum guarantee of $81.6 billion. The fiscal year 2020-21 minimum guarantee was estimated at $84 billion, an increase of $2.6 billion (3 percent) from the 2019-20 State Budget funding level, due to higher projected property tax and general fund tax revenues. When combined with more than $819 million in settle-up payments for prior fiscal years, the Proposed 2020-21 State Budget represented an increased investment of $3.8 billion in K-14 education. In addition, the Proposed 2020-21 State Budget contained a payment of $3.15 billion from non-Proposition 98 general funds on behalf of STRS and the PERS Schools Pool to buy down fiscal years 2019-20 and 2020-21 employer contribution rates and unfunded liabilities.

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The following table from the LAO identifies historical and budgeted Proposition 98 funding under the Proposed 2020-21 State Budget.

Proposition 98 Funding Proposed 2020-21 State Budget

2018-19 2019-20 2020-21 Revised Revised Proposed (Millions) (Millions) (Millions)

Funding By Segment K-12 Education1 $69,253 $71,572 $74,279 Community Colleges 9,195 9,477 9,807

Proposition 98 Reserve Deposit2 -- 524 (38) Total $78,488 $81,573 $84,048 Funding By Source


Total $78,488 $81,573 $84,048

Figures may not total due to rounding. Source: The State Legislative Analyst’s Office. The Proposed 2020-21 State Budget included the following proposed adjustments to K-12 education: LCFF: An increase of $1.2 billion in Proposition 98 general funds to support a 2.29 percent COLA, bringing total LCFF funding to $64.2 billion. Categorical Programs: An increase of $122.4 million to support a 2.29 percent COLA for categorical programs not covered by LCFF, which include special education, school nutrition, certain foster youth programs, mandates block grants, correctional adult education, and certain Native American programs. ADA Adjustments: A decrease in Proposition 98 State general fund spending of $268.5 million in fiscal year 2019-20 and $175.1 million in fiscal year 2020-21 due to projected declines in ADA. Local Property Tax Adjustments: An increase of $7.3 million in Proposition 98 general fund spending to LEAs for fiscal year 2019-20 and a decrease of $1.1 billion in fiscal year 2020-21 to offset the changes in projected local property tax revenue. Special Education: The Proposed 2020-21 State Budget introduced a three-phase process laid out over several years to improve fiscal accountability, delivery of services and student outcomes in special education in the State, including the creation of a new base funding formula that uses a three-year rolling average of ADA allocated to SELPAs. The proposal included a 15 percent increase in Proposition 98 general fund contributions over the amount in the 2019-20 State Budget and included an increase of $500,000 in one-time Proposition 98 general funds to study SELPA accountability; an increase of $600,000 one-time Proposition 98 general funds to study accountability of student outcomes; an increase of $4 million in one-time Proposition 98 general funds for dyslexia research and training; and $250 million in ongoing Proposition 98 general funds for preschoolers with exceptional needs preschoolers. Prop 51 Bond: $1.5 billion for school construction projects and $75 million to expand special education preschool facilities. The May Revision to the Proposed 2020-21 State Budget On May 14, 2020, the Governor released the May Revision to the Proposed 2020-21 State Budget (the “2020-21 May Revision”). Reflecting the massive impact to the State’s economy that the rapid onset of the COVID-19 pandemic has had since the release of the Proposed 2020-21 State Budget, the State’s three largest sources of revenue are projected to decline by

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$41.2 billion compared to the projections in the Proposed 2020-21 State Budget. Combined with increased costs associated with the COVID-19 outbreak, the State is facing a projected budget deficit of more than $54.3 billion before the changes proposed in the 2020-21 May Revision, with an out-year annual structural deficit of approximately $45 billion. To address this projected deficit, the Governor proposes the following budget solutions in the 2020-21 May Revision which, in total, would balance the State budget: Baseline Adjustments. There are two baseline adjustments included in the 2020-21 May Revision that do not require changes to current law to implement. First, the approval of a temporary 6.2 percent increase in the federal government’s share in the cost of state Medicaid programs until the end of the COVID-19 national public health emergency is estimated to generate savings of $5.5 billion for the State, of which $4.3 billion is identified as a budget solution in the 2020-21 May Revision. Second, the 2020-21 May Revision withdraws or modifies most of the new spending proposals included in the Proposed 2020-21 State Budget, with estimated savings of approximately $2.1 billion, including roughly $900 million in ongoing savings. Reserves. The 2020-21 May Revision proposes to withdraw in fiscal year 2020-21 approximately one-half of the projected $17.1 billion in available reserves across both the BSA and the Safety Net Reserve, resulting in a fiscal year 2020-21 ending reserve balance of $10.7 billion. The Governor proposes a multiyear plan to use the remaining BSA and Safety Net Reserve balances over three years—using approximately $6 billion in fiscal year 2021-22 and $3 billion in fiscal year 2022-23. Increased Revenues. The 2020-21 May Revision includes two actions that the Governor estimates would increase tax revenues by $4.4 billion in fiscal year 2020-21. First, corporations that have net income over $1 million would not be allowed to use net operating loss deductions to reduce their taxes in 2020, 2021, or 2022. Second, businesses would not be able to claim more than $5 million in tax credits per year in 2020, 2021, and 2022. Adjusted K-14 Education Spending. The 2020-21 May Revision would reduce education spending to the Proposition 98 minimum guarantee resulting in General Fund savings of $16.5 billion. Local property tax revenues also drop by roughly $1 billion, resulting in a total Proposition 98 decrease of $17.5 billion. Spending Reductions. The 2020-21 May Revision proposes 10 percent flat reductions in certain areas of the State budget, providing $4.9 billion in savings. In addition, the Governor proposes targeted reductions in certain program areas, providing $5.6 billion in savings. Cost Shifts. The 2020-21 May Revision proposes $3.3 billion in savings associated with loans and transfers from special funds to the State general fund, $1.7 billion in savings from shifted pension costs, and $800 million in savings by converting capital outlay to lease revenue bonds. Federal CARES Act Funding. The State is eligible to receive $9.5 billion in federal Coronavirus Relief Funds (“CRF”) provided under the CARES Act. The 2020-21 May Revision assumes the State can use $3.8 billion of the total CRF funding to offset underlying State costs. The Governor proposes to remit $4 billion of the remaining CRF funds to local education agencies to protect public health and safety, $1.3 billion to counties for public health, and $450 million to cities for public safety and to support homeless individuals. Spending Triggers. The 2020-21 May Revision proposes to make nearly $15 billion of the one-time and ongoing spending reductions subject to federal “trigger” language. Under the trigger language, if the federal government passes legislation that provides additional funding to the State, the State would have authority to temporarily restore some or all of the programs that were reduced. The 2020-21 May Revision projects total fiscal year 2019-20 State general fund revenues and transfers of $136.8 billion and expenditures of $146.5 billion. The State is projected to end fiscal year 2019-20 with total available State general fund reserves of $17.1 billion, including $16.2 billion in the BSA and $900 million in the Safety Net Reserve. For fiscal year 2020-21, the 2020-21 May Revision projects total State general fund revenues and transfers of $137.4 billion and authorizes expenditures of $133.9 billion. The State is projected to end fiscal year 2020-21 with total available State general fund reserves of $10.8 billion including $1.9 billion in the traditional general fund reserve, $8.4 billion in the BSA, and $450 million in the Safety Net Reserve.

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The following table sets forth a summary of the State’s general fund budget for fiscal years 2019-20 and 2020-21 under the 2020-21 May Revision.

State General Fund 2020-21 May Revision to the Proposed 2020-21 State Budget

2019-20 2020-21 Revised Proposed (Millions) (Millions)

Prior-year Fund Balance $11,280 $1,619 Revenues and Transfers 136,837 137,417 Expenditures 146,497 133,902 Ending Fund Balance $1,619 $5,135 Encumbrances 3,175 3,175 SFEU Balance ($1,556) $1,960 Reserves

Budget Stabilization Account $16,156 $8,350 Special Fund for Economic Uncertainties __

1 1,960 Safety Net Reserve 900 450 Total Reserves $17,056 $10,760

Totals may not foot due to rounding. 1Negative fund balance excluded from total reserves balance. Source: The State Legislative Analyst’s Office. Education Funding. The COVID-19 pandemic has already had a massive impact on public education in the State. Since the beginning of the pandemic in early March 2020, local educational agencies ended classroom instruction and shifted to distance learning for the rest of the school year. The State Legislature provided $100 million for cleaning and protective equipment, held local education agencies harmless for loss of ADA, waived instructional time requirements, and extended timelines for assessments (SB 117). Additional extensions for timelines and provisions for increased programmatic flexibility were granted by executive order. The unprecedented loss of classroom instruction has disproportionately impacted low-income students and students with disabilities. The Governor’s priorities for education in light of the pandemic as reflected in the 2020-21 May Revision include equity for vulnerable students, stability for core instructional programs, learning loss mitigation, and support for schools. Primarily as a result of the projected reduction in State revenues resulting from the COVID-19 outbreak, the 2020-21 May Revision estimates that the Proposition 98 minimum guarantee will decline by approximately $17.5 billion from the levels in the Proposed 2020-21 State Budget. This decline in funding is approximately 23 percent of the 2019-20 State Budget Proposition 98 funding level.

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The following table from the LAO identifies the drivers of the reduction in the Proposition 98 minimum guarantee from the Proposed 2020-21 State Budget to the 2020-21 May Revision.

Proposition 98 Funding 2020-21 May Revision Compared to the Proposed 2020-21 State Budget

2018-19 2019-20 2020-21 (Millions) (Millions) (Millions)

Proposed 2020-21 State Budget General Fund $54,505 $56,405 $57,573 Local Property Tax Revenue 23,942 25,168 26,475

Total $78,488 $81,573 $84,048 2020-21 May Revision


Total $78,740 $77,374 $70,490 Change

General Fund $240 ($4,053) ($12,702) Local Property Tax Revenue 52 (146) (857)

Total $292 ($4,199) ($13,559) Figures may not total due to rounding. Source: The State Legislative Analyst’s Office. To bring State spending down to the Proposition 98 minimum guarantee, the 2020-21 May Revision includes $6 billion in reductions to existing K-12 education programs (subject to the trigger reductions) and $5.3 billion in payment deferrals. The proposed programmatic reductions are mitigated by $5.8 billion in one-time federal funding for schools in fiscal year 2020-21. When accounting for these additional measures, K-12 funding is approximately flat on a year-over-year basis, with federal funds and payment deferrals offsetting the reduction in Proposition 98 funding. (If the reductions are triggered off, overall funding would increase on a year-over-year basis.) The 2020-21 May Revision includes total funding of $99.7 billion ($47.7 billion from the State general fund and $52 billion from other State funds) for all K-12 education programs. Significant features of the 2020-21 May Revision for K-12 education include the following: • Withdrawal of New Funding Proposals from the Proposed 2020-21 State Budget. The 2020-21 May Revision withdraws

approximately $1.8 billion in funding increases and programmatic expansions included in the Proposed 2020-21 State Budget, including but not limited to educator workforce grants, opportunity grants, community schools grants, special education preschool grants and workforce development grants. Additionally, the 2020-21 May Revision suspends the statutory COLA of 2.31 percent in fiscal year 2020-21 for all eligible programs.

• LCFF Funding Reductions. Absent additional federal funds, LCFF requires a 10 percent ($6.5 billion) reduction in

funding (including the elimination of the 2.31 percent COLA). This reduction will be triggered off if the federal government provides sufficient funding to backfill this cut. The 2020-21 May Revision also proposes apportionment deferrals to align Proposition 98 expenditures and resources with the need of local educational agencies to maintain a level of fiscal stability. The 2020-21 May Revision proposes to defer $1.9 billion of LCFF apportionments from fiscal year 2019-20 to fiscal year 2020-21. An additional $3.4 billion is added to the fiscal year 2019-20 deferral in fiscal year 2020-21, for a total of $5.3 billion in LCFF deferrals scheduled for payment in fiscal year 2021-22. Local educational agencies can obtain exemptions from the apportionment deferrals if the deferrals create a documented hardship.

• New On-going Funding Obligation. The 2020-21 May Revision proposes to create a new multiyear payment obligation to

supplement the funding schools and community colleges receive under Proposition 98. The total obligation would be $13 billion—the Governor’s estimate of the additional funding schools and community colleges would have received if their Proposition 98 funding had continued to grow in fiscal years 2019-20 and 2020-21. The State would make annual payments toward this obligation beginning in fiscal year 2021-22. The payments would equal 1.5 percent of State general fund revenue and could be allocated for any school or community college program. The 2020-21 May Revision also

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proposes to recalibrate the Proposition 98 formulas so that a portion of these supplemental payments would increase school and community college funding on a permanent basis. Specifically, the State would increase the share of State general fund revenue required to be spent on schools and community colleges from 38 percent to 40 percent. The LAO estimates that this recalibration would make roughly the first $2.5 billion of the supplemental payments permanent.

• Revised STRS / PERS Funding. The 2019-20 State Budget included $850 million to buy down local educational agency

employer contribution rates for CalSTRS and CalPERS in fiscal years 2019-20 and 2020-21, as well as $2.3 billion towards funding the employer long-term unfunded liability. The 2020-21 May Revision proposes repurposing the $2.3 billion liability payment to supplant school and community college contributions to STRS and PERS for fiscal years 2020-21 and 2021-22. This reallocation would reduce the STRS employer rate from 18.41 percent to approximately 16.15 percent in fiscal year 2020-21 and from 18.2 percent to 16.02 percent in fiscal year 2021-22. The PERS Schools Pool employer contribution rate would be reduced from 22.67 percent to 20.7 percent in fiscal year 2020-21 and from 25 percent to 22.84 percent in fiscal year 2021-22.

• Learning Loss Mitigation. The 2020-21 May Revision proposes a one-time investment of $4.4 billion ($4 billion from the

federal CRF and $355 million from the federal Governor’s Emergency Education Relief Fund) to local educational agencies to mitigate learning loss related to school closures from COVID-19 through a formula based on the number of students with disabilities and unduplicated count. In addition, the State received $1.6 billion in federal Elementary and Secondary School Emergency Relief funds. Of this amount, 90 percent ($1.5 billion) will be allocated to local educational agencies in proportion to the amount of Title I-A funding they receive for COVID-19 related costs. The 2020-21 May Revision proposes to allocate the remaining $165 million to fund $100 million in grants to county offices of education to develop community school networks and coordinated supports for high needs students; $63.2 million for training and professional development for educators; and $1.5 million to the State Department of Education for COVID-19 costs.

• Special Education Adjustments. The 2020-21 May Revision sustains the Proposed 2020-21 State Budget proposal to

increase special education base rates, updated to $645 per pupil (reflecting the suspension of the 2.31 percent COLA), apportioned on a three-year rolling average of local educational agency ADA (allocated to SELPAs). This new base rate represents a 15 percent increase in the Proposition 98 State general fund contribution to the base formula funding over the amount provided in the 2019-20 State Budget.

• Categorical Programs Reductions. Absent additional federal funds, the 2020-21 May Revision proposes $352.9 million

in Proposition 98 reductions to a variety of K-12 categorical programs, including a $100 million reduction to afterschool education and safety, a $79.4 million reduction to the K-12 strong workforce program, and a $77.4 million reduction to the CTE incentive grant program. According to the Governor, these reductions would be funded if federal aid becomes available. An additional $10.9 million reduction in Proposition 98 funding for select categorical program results from updated estimates of statewide ADA.

• Local Property Tax Adjustments. The 2020-21 May Revision includes an increase of $84.5 million in Proposition 98

funding in fiscal year 2019-20 and $727 million in fiscal year 2020-21 for school districts, SELPAs, and county offices of education as a result of lower offsetting property tax revenues in both years.

• Full-Day Kindergarten Facilities. The 2020-21 May Revision includes a decrease of $300 million one-time non-

Proposition 98 funding for construction of new, or retrofit of existing, facilities for full-day kindergarten programs roughly the amount unexpended from the $400 million provided for this purpose in prior State budgets. The 2020-21 May Revision proposes sweeping these unexpended program funds to facilitate budgetary resiliency.

• Flexibilities for Local Education Agencies. The 2020-21 May Revision includes a variety of fiscal and programmatic

flexibilities for local education agencies, including the ability to exclude State pension payments on behalf of local educational agencies from the calculation of required contributions to routine restricted maintenance, an increase in internal inter-fund borrowing limits (subject to public hearing), and the authority to use proceeds from the sale of surplus property for one-time general fund purposes.

Future Budgets The proposed State budget released in January is revised in May, enabling the revision to accommodate changes necessitated by actual State personal income tax collections due in April, the largest source of revenue for the State, as well as updates to other revenues and expenditures. The final State budget is statutorily required to be adopted by June 15. However, since the

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deadline file and pay State personal income taxes for 2019 has been extended from April 15, 2020 to July 15, 2020 in response to the COVID-19 outbreak, the 2020-21 May Revision was prepared with increased uncertainty about fiscal year 2019-20 revenues, as will the adopted fiscal year 2020-21 State budget. Consequently, it is likely that the adopted State budget for fiscal year 2020-21 will be revised after July 15, 2020 based on actual State personal income tax collections. The District cannot predict what actions will be taken in the future by the State Legislature and the Governor to address changing State revenues and expenditures or the impact such actions will have on State revenues available in the current or future years for education. The State budget will be affected by national and State economic conditions and other factors over which the District will have no control. Certain actions could result in a significant shortfall of revenue and cash, and could impair the State’s ability to fund schools as budgeted. State budget shortfalls in future fiscal years could have an adverse financial impact on the District. For more information on the State budget, please refer to the State Department of Finance’s website at www.dof.ca.gov and to the LAO’s website at www.lao.ca.gov. The District takes no responsibility for the continued accuracy of these Internet addresses or for the accuracy, completeness or timeliness of the information presented therein, and such information is not incorporated herein by such reference.

LEGAL MATTERS Litigation There is no action, suit or proceeding known by the District to be pending or threatened restraining or enjoining the sale or delivery of the Bonds, or in any way contesting or affecting the validity thereof or any proceeding of the District taken with respect to the issuance or sale of the Bonds, or the pledge or application of moneys or security provided for the payment of the Bonds, or the authority of the County to levy property taxes to pay principal of and interest on the Bonds when due. The District may be or may become a party to lawsuits and claims which are unrelated to the Bonds or actions taken with respect to the Bonds and which have arisen in the normal course of operating the District. The District maintains certain insurance policies which provide coverage under certain circumstances and with respect to certain types of incidents. In the opinion of the District, there currently are no claims or actions pending which could have a material adverse effect on the financial position or operations of the District. The District cannot predict what types of claims may arise in the future. Legal Opinion The proceedings in connection with the authorization, sale, execution and delivery of the Bonds are subject to the approval as to their legality by Parker & Covert LLP as Bond Counsel. A form of the legal opinion is attached hereto as “APPENDIX C—FORM OF OPINION OF BOND COUNSEL.” Bond Counsel’s employment is limited to a review of the legal proceedings required for authorization of the Bonds and to rendering the aforementioned opinion. Bond Counsel has not been engaged by the District to undertake, and has not undertaken, any responsibility for the accuracy, completeness, or fairness of this Official Statement, and the opinion of Bond Counsel will not extend to any documents, agreements, representations, offering circulars, official statements or other material of any kind concerning the Bonds that are not referred to in the aforementioned opinion. The fees of Bond Counsel are contingent upon the issuance and delivery of the Bonds. Limitations on Remedies; Amounts Held in the County Pool The opinion of Bond Counsel with respect to the enforceability of the rights of the Registered Owners and Beneficial Owners is qualified by reference to bankruptcy, insolvency and other laws relating to or affecting creditor’s rights. Bankruptcy proceedings, if initiated, could subject the Registered Owners and Beneficial Owners to judicial discretion and interpretation of their rights in bankruptcy or otherwise, and consequently may entail risks of delay, limitation, or modification of their rights.

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A number of appeals are currently pending before the United States Court of Appeals for the First Circuit involving issues relating to the treatment and scope of special revenues in the insolvency proceedings of Puerto Rico. The decisions in these appeals may or may not affect the treatment or scope of special revenues in bankruptcy cases. It is not possible to predict the outcomes or the effects of the outcomes in these appeals, and the District cannot predict if or how the ruling in the pending appeals may affect the treatment or scope of special revenues in bankruptcy cases. The County, on behalf of the District, is expected to be in possession of the annual ad valorem property taxes and certain funds to repay the Bonds and may invest these funds in the County Pool, as described under the caption “TULARE COUNTY TREASURY POOL” herein and in “APPENDIX D—TULARE COUNTY INVESTMENT POLICY” attached hereto. In the event the District or the County were to go into bankruptcy, a federal bankruptcy court might hold that the Registered Owners and Beneficial Owners are unsecured creditors with respect to any funds received by the District or by the County prior to the bankruptcy, which may include taxes that have been collected and deposited into the Tax Collection Fund, where such amounts are deposited into the County Pool, and such amounts may not be available for payment of the principal of and interest on the Bonds unless the Registered Owners and Beneficial Owners can “trace” those funds. There can be no assurance that the Registered Owners and Beneficial Owners could successfully so “trace” such taxes on deposit in the Tax Collection Fund where such amounts are invested in the County Pool. The Resolution and the Government Code require the County to annually levy ad valorem property taxes upon all property subject to taxation by the District, without limitation as to rate or amount (except as to certain personal property which is taxable at limited rates) for the payment of the principal of and interest on the Bonds. Tax Matters The following discussion of federal income tax matters written to support the promotion and marketing of the Bonds was not intended or written to be used, and cannot be used, by a taxpayer for the purpose of avoiding federal tax penalties that may be imposed. Each taxpayer should seek advice based on the taxpayer’s particular circumstances from an independent tax advisor. In the opinion of Parker & Covert LLP, Sacramento, California, Bond Counsel, based upon the analysis of existing statutes, regulations, ruling and court decisions, and assuming, among other things, the accuracy of certain representations and compliance with certain covenants, the interest on the Bonds is excludable from gross income for federal income tax purposes and is exempt from State of California personal income taxes. Bond Counsel is also of the opinion that interest on the Bonds is not an item of tax preference for purposes of the alternative minimum tax imposed on individuals. A complete copy of the proposed form of opinion of Bond Counsel is set forth in “APPENDIX C—FORM OF OPINION OF BOND COUNSEL” attached hereto. The amount, if any, by which the issue price of any maturity of the Bonds is less than the amount to be paid at maturity of such Bonds (excluding amounts stated to be interest and payable at least annually over the term of such Bonds) constitutes “original issue discount,” the accrual of which, to the extent properly allocable to each owner thereof, is treated as interest on the Bonds which is excluded from gross income for federal income tax purposes and which is exempt from State personal income taxes. For this purpose, the issue price of a particular maturity of the Bonds is the first price at which a substantial amount of such maturity of the Bonds is sold to the public (excluding bond houses, brokers, or similar persons, or organizations acting in the capacity of underwriters, placement agents, or wholesalers). The original issue discount with respect to any maturity of the Bonds accrues daily over the term to maturity of such Bonds on the basis of a constant interest rate compounded semiannually (with straight-line interpolations between compounding dates). The accruing original issue discount is added to the adjusted basis of such Bonds to determine taxable gain or loss upon disposition (including sale, redemption, or payment on maturity) of such Bonds. Owners of the Bonds should consult their own tax advisors with respect to the tax consequences of ownership of Bonds with original issue discount, including the treatment of purchasers who do not purchase such Bonds in the original offering to the public at the first price at which a substantial amount of such Bonds is sold to the public. Bonds purchased, whether at original issuance or otherwise, for an amount greater than their principal amount payable on their respective maturity dates (or, in some cases, at their earlier call date) (“Premium Bonds”) will be treated as having amortizable bond premium. No deduction is allowable for the amortizable premium in the case of bonds, like the Premium Bonds, the interest on which is excluded from gross income for federal income tax purposes. However, a purchaser’s basis in a Premium Bond, and under Treasury Regulations the amount of tax-exempt interest received, will be reduced by the amount of amortizable premium properly allocable to such purchaser. Owners of Premium Bonds should consult their own tax advisors with respect to the proper treatment of amortizable premium in their particular circumstances.

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The Internal Revenue Code of 1986, as amended, (the “Code”) imposes various restrictions, conditions, and requirements relating to the exclusion from gross income for federal income tax purposes of interest on obligations such as the Bonds. The District has covenanted to comply with certain restrictions designed to assure that interest on the Bonds will not be included in federal gross income. Failure to comply with these covenants may result in interest on the Bonds being included in federal gross income, possibly from the date of issuance of the Bonds. The opinion of Bond Counsel assumes compliance with these covenants. Bond Counsel has not undertaken to determine (or to inform any person) whether any actions taken (or not taken) or events occurring (or not occurring) after that date of issuance of the Bonds may adversely affect the tax status of interest on the Bonds. Prospective Owners are urged to consult their own tax advisors with respect to proposals to restructure the federal income tax. Certain requirements and procedures contained or referred to in the Resolution, the tax certificate to be entered into on the date of issuance of the Bonds (the “Tax Certificate”), and other relevant documents may be changed and certain actions (including, without limitation, defeasance of the Bonds) may be taken or omitted under the circumstances and subject to the terms and conditions set forth in such documents. Bond Counsel expresses no opinion as to any Bond or the interest thereon if any such change occurs or action is taken or omitted upon the advice or approval of bond counsel other than Parker & Covert LLP, Sacramento, California. Although Bond Counsel expects to render an opinion that interest on the Bonds is excludable from gross income for federal income tax purposes and exempt from State personal income taxes, the ownership or disposition of, or the accrual or receipt of interest on, the Bonds may otherwise affect a Beneficial Owner’s federal or state tax liability. The nature and extent of these other tax consequences will depend upon the particular tax status of the Beneficial Owner or the Beneficial Owner’s other items of income or deduction. Bond Counsel expresses no opinion regarding any such other tax consequences. In addition, no assurance can be given that any future legislation, including amendments to the Code, if enacted into law, or changes in interpretation of the Code, will not cause interest on the Bonds to be subject, directly or indirectly, to federal and/or state income taxation, or otherwise prevent Beneficial Owners of the Bonds from realizing the full current benefit of the tax status of such interest. Prospective purchasers of the Bonds should consult their own tax advisers regarding any pending or proposed federal and/or state tax legislation. Further, no assurance can be given that the introduction or enactment of any such future legislation, or any action of the Internal Revenue Service (“IRS”), including but not limited to regulation, ruling, or selection of the Bonds for audit examination, or the course or result of any IRS examination of the Bonds, or obligations that present similar tax issues, will not affect the market price or liquidity of the Bonds. 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 creditor’s 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. The IRS has initiated an expanded program for the auditing of tax-exempt bond issues, including both random and target 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). The complete text of the final opinion that Bond Counsel expects to deliver upon the issuance of the Bonds is set forth in “APPENDIX C—FORM OF OPINION OF BOND COUNSEL” attached hereto. Legality for Investment in California Under provisions of the California Financial Code, the Bonds are legal investments for commercial banks in the State to the extent that the Bonds, in the informed opinion of the investing bank, are prudent for the investment of funds of depositors, and under provisions of the Government Code, are eligible to secure deposits of public moneys in the State.

RATINGS S&P Global Ratings (“S&P”) has assigned a municipal bond rating of “AA-” to the Bonds, and Moody’s Investors Service, Inc. (“Moody’s”) has assigned a municipal bond rating of “Aa3” to the Bonds. Such ratings reflect only the views of S&P and Moody’s, and an explanation of the significance of each rating may be obtained from S&P and Moody’s, respectively. S&P

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and Moody’s may have obtained and considered information and material which has not been included in this Official Statement. Generally, rating agencies base their ratings on information and material so furnished and on investigations, studies and assumptions made by them. The ratings are not a recommendation to buy, sell or hold the Bonds. There is no assurance that any such rating will continue for any given period of time or that any such rating will not be revised downward or withdrawn entirely by the rating agency if, in the judgment of the rating agency, circumstances so warrant. The District has not undertaken any responsibility to assure the maintenance of the ratings or to oppose any such revision or withdrawal. Any such downward revision or withdrawal of any such rating may have an adverse effect on the market price of the Bonds.

MUNICIPAL ADVISOR Government Financial Strategies inc. has been employed by the District to perform municipal advisory services in relation to the sale and delivery of the Bonds. Government Financial Strategies inc., in its capacity as Municipal Advisor, has prepared this Official Statement. Government Financial Strategies inc. has not, however, independently verified nor confirmed all of the information contained within this Official Statement. Government Financial Strategies inc. will not participate in the underwriting of the Bonds. Fees charged by Government Financial Strategies inc. are not contingent upon the sale of the Bonds.

INDEPENDENT AUDITOR The financial statements of the District as of and for the year ended June 30, 2019, have been audited by Crowe LLP, Sacramento California. The audited financial statements of the District as of and for the year ended June 30, 2019, are set forth in “APPENDIX A—AUDITED FINANCIAL STATEMENTS OF THE DISTRICT FOR THE YEAR ENDED JUNE 30, 2019” attached hereto. The District has obtained permission from the Auditor to include the audited financial statements as an appendix to this Official Statement. The Auditor has not been engaged to perform and has not performed, since the date of its report attached hereto, any procedures on the financial statements addressed in that report. The Auditor also has not performed any procedures relating to this Official Statement.

UNDERWRITING AND INITIAL OFFERING PRICE Following a competitive sale process, the Bonds will be purchased by J.P. Morgan Securities LLC (the “Underwriter”) pursuant to a bond purchase agreement (the “Purchase Agreement”) by and between the District and the Underwriter at a price of $36,351,866.04 (equal to the principal amount of the Bonds of $35,170,000.00, plus a net original issue premium of $1,372,981.05, less an underwriting discount of $191,115.01). The Underwriter’s obligation to purchase the Bonds is subject to certain terms and conditions set forth in the Purchase Agreement. The Underwriter intends to offer the Bonds to the public at the initial offering prices and yields stated on the inside cover page hereof. The Underwriter may offer and sell the Bonds to certain dealers and others at prices lower than said public offering prices. The offering prices may be changed from time to time by the Underwriter.

CONTINUING DISCLOSURE The District will covenant for the benefit of the Underwriter, the Registered Owners and the Beneficial Owners of the Bonds to annually provide certain financial information and operating data relating to the District (the “Annual Report”) by not later than nine months after the end of the fiscal year, commencing with the report for fiscal year 2019-20 (which is due no later than March 31, 2021), and to provide notices of the occurrence of certain enumerated events. The Annual Report and notices of certain enumerated events will be filed by the District with the MSRB through EMMA. The specific nature of the information to be contained in the Annual Report and the notices is specified in “APPENDIX B—FORM OF CONTINUING DISCLOSURE CERTIFICATE” attached hereto. These covenants are being made in order to assist the Underwriter in complying with SEC Rule 15c2-12(b)(5) (the “Rule”).

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In the past five years, the District has not complied in all respects with its previous undertakings with regard to said Rule to provide annual reports and notices of significant events. The following annual reports were not filed in accordance with their requirements in the past five years: • The annual report for the Visalia Unified School District 2015 Certificates of Participation (Refunding and Capital

Projects) for fiscal year 2015-16 due April 15, 2017 was filed in a timely manner but with an incorrect version of the most recent interim financial report. The fiscal year 2016-17 second interim report satisfying the requirement was posted to EMMA on April 27, 2017. The notice of the failure to file the complete annual report was posted on EMMA on April 24, 2018.

As of the date of this Official Statement, the District believes that it has made all required filings in the past five years for currently outstanding issues in connection with prior undertakings under the Rule.

ADDITIONAL INFORMATION Additional information concerning the District, the Legal Documents or other matters concerning the sale and delivery of the Bonds may be obtained by contacting Visalia Unified School District, 5000 West Cypress Avenue, Visalia, California 93277, telephone (559) 730-7300, Attention: Assistant Superintendent, Administrative Services, or by contacting the Municipal Advisor, Government Financial Strategies inc., 1228 N Street, Suite 13, Sacramento, California 95814-5609, telephone (916) 444-5100. All of the preceding summaries of the Bonds, the Resolution, the Paying Agent Agreement and other documents are made subject to the provisions of such documents respectively, and do not purport to be complete statements of any or all of such provisions. Reference is hereby made to such documents on file with the District for further information in connection therewith. Further, this Official Statement does not constitute a contract with the purchasers of the Bonds, and any statements made in this Official Statement involving matters of opinion or of estimates, whether or not so expressly stated, are set forth as such and not as representations of fact, and no representation is made that any of the estimates will be realized. The execution and delivery of this Official Statement by the District has been duly authorized by the District Board. Visalia Unified School District By: /s/ Tamara Ravalín, Ed.D.

Tamara Ravalín, Ed.D. Superintendent

[THIS PAGE INTENTIONALLY LEFT BLANK]

APPENDIX A

AUDITED FINANCIAL STATEMENTS OF THE DISTRICT FOR THE YEAR ENDED JUNE 30, 2019

VISALIA UNIFIED SCHOOL DISTRICT

FINANCIAL STATEMENTS June 30, 2019


FINANCIAL STATEMENTS WITH SUPPLEMENTARY INFORMATION

For the Year Ended June 30, 2019 (Continued)

CONTENTS

INDEPENDENT AUDITOR'S REPORT......... .......................................... ........................................... ....... 1

MANAGEMENT'S DISCUSSION AND ANALYSIS......... ............................... ............................................ 4

BASIC FINANCIAL STATEMENTS:

GOVERNMENT-WIDE FINANCIAL STATEMENTS:

STATEMENT OF NET POSITION .................. .............. .......................... ........................................ . 17

STATEMENT OF ACTIVITIES ........................ ................................. ..................... .......................... . 18

FUND FINANCIAL STATEMENTS:

BALANCE SHEET- GOVERNMENTAL FUNDS ......................... .................................................... 19

RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET-TO THE STATEMENT OF NET POSITION ............................................. ................ ...................... ........... 20

STATEMENT OF REVENUES, EXPENDITURES AND CHANGE IN FUND BALANCES - GOVERNMENTAL FUNDS ................................... ..................... .......................... 21

RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES AND CHANGE IN FUND BALANCES - GOVERNMENTAL FUNDS -TO THE STATEMENT OF ACTIVITIES ................ ....................................................... ............. ................ 22

STATEMENT OF NET POSITION - PROPRIETARY FUND- SELF-INSURANCE FUND ........................................................................................... ............................. .................. 23

STATEMENT OF CHANGE IN NET POSITION - PROPRIETARY FUND-SELF-INSURANCE FUND ........................................................... .................. ................ ............ . 24

STATEMENT OF CASH FLOWS - PROPRIETARY FUND - SELF-INSURANCE FUND ............... 25

STATEMENT OF FIDUCIARY ASSETS AND LIABILITIES - AGENCY FUNDS ....................... ...... 26

NOTES TO FINANCIAL STATEMENTS .................................. ......................... ................................... 27



For the Year Ended June 30, 2019 (Continued)

CONTENTS

REQUIRED SUPPLEMENTARY INFORMATION:

GENERAL FUND BUDGETARY COMPARISON SCHEDULE. ............................. ................. .............. 58

SCHEDULE OF CHANGES IN THE DISTRICT'S NET OTHER POSTEMPLOYMENT BENEFITS (OPEB) LIABILITY ........................................................................................... ............. 59

SCHEDULE OF THE DISTRICT'S PROPORTIONATE SHARE OF THE NET PENSION LIABILITY ............................................................... ......................................................... 60

SCHEDULE OF THE DISTRICT'S CONTRIBUTIONS ......................................................................... 62

NOTE TO REQUIRED SUPPLEMENTARY INFORMATION .............................................................. . 64

SUPPLEMENTARY INFORMATION:

COMBINING BALANCE SHEET -ALL NON-MAJOR FUNDS ................................................. ............ 65

COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGE IN FUND BALANCES - ALL NON-MAJOR FUNDS ............................................................................. 66

COMBINING STATEMENT OF CHANGES IN ASSETS AND LIABILITIES -ALL AGENCY FUNDS .................................................................................... ................................. 67

ORGANIZATION ........................................ ........................................................................................... 69

SCHEDULE OF AVERAGE DAILY ATTENDANCE ................................................................. ............ 70

SCHEDULE OF INSTRUCTIONAL TIME. ................................................................................ ............ 72

SCHEDULE OF EXPENDITURE OF FEDERAL AWARDS ................................... ...................... ......... 73

RECONCILIATION OF UNAUDITED ACTUAL FINANCIAL REPORT WITH AUDITED FINANCIAL STATEMENTS ................................................................ .................... ........ 75

SCHEDULE OF FINANCIAL TRENDS AND ANALYSIS - UNAUDITED .............................................. 76

SCHEDULE OF CHARTER SCHOOLS .................................................................. .............................. 77

NOTES TO SUPPLEMENTARY INFORMATION ................................................................................. 78

INDEPENDENT AUDITOR'S REPORT ON COMPLIANCE WITH STATE LAWS AND REGULATIONS ..................................................................................................................................... 80



For the Year Ended June 30, 2019

CONTENTS

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 ......................................................... ................. ................. 83

INDEPENDENT AUDITOR'S REPORT ON COMPLIANCE FOR EACH MAJOR FEDERAL PROGRAM AND REPORT ON INTERNAL CONTROL OVER COMPLIANCE ....................................................................................................................................... 85

FINDINGS AND RECOMMENDATIONS:

SCHEDULE OF AUDIT FINDINGS AND QUESTIONED COSTS ........ ............ ........ .......... .................. 87

STATUS OF PRIOR YEAR FINDINGS AND RECOMMENDATIONS .......................... ........... ............. 91

Crowe

Board of Education Visalia Unified School District Visalia, California

INDEPENDENT AUDITOR'S REPORT

Report on the Financial Statements

Crowe LLP Independent Member Crowe Global

We have audited the accompanying financial statements of the governmental activities, each major fund, and the aggregate remaining fund information of Visalia Unified School District, as of and for the year ended June 30, 2019, and the related notes to the financial statements, which collectively comprise Visalia Unified School District's basic financial statements as listed in the table of contents.

Management's Responsibility for the Financial Statements

Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.

Auditor's Responsibility

Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions.

Opinions

In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, each major fund, and the aggregate remaining fund information of the Visalia Unified School District, as of June 30, 2019, and the respective changes in financial position and, where applicable, cash flows thereof for the year then ended in accordance with accounting principles generally accepted in the United States of America.

(Continued)

1.

Other Matters

Required Supplementary Information

Accounting principles generally accepted in the United States of America require that the Management's Discussion and Analysis on pages 4 to 16, the General Fund Budgetary Comparison Schedule, the Schedule of Changes In the District's Net Other Postemployment Benefits (OPES) Liability, the Schedule of the District's Proportionate Share of the Net Pension Liability, and the Schedule of the District's Contributions on pages 58 to 63 be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by Governmental Accounting Standards Board who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management's responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance.

Supplementary Information

Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise Visalia Unified School District's basic financial statements. The accompanying schedule of expenditures of federal awards as required by Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, and the other supplementary information listed in the table of contents are presented for purposes of additional analysis and are not a required part of the basic financial statements.

The schedule of expenditure of federal awards and other supplementary information as listed in the table of contents are the responsibility of management and were derived from and relate directly to the underlying accounting and other records used to prepare the basic financial statements. Such information, except for the Schedule of Financial Trends and Analysis, have been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the schedule of expenditure of federal awards and other supplementary information as listed in the table of contents, except for the Schedule of Financial Trends and Analysis, are fairly stated, in all material respects, in relation to the basic financial statements as a whole.

The Schedule of Financial Trends and Analysis has not been subjected to the auditing procedures applied in the audit of the basic financial statements, and accordingly, we do not express an opinion or provide any assurance on it.

(Continued)

2.

Other Reporting Required by Government Auditing Standards

In accordance with Government Auditing Standards, we have also issued our report dated December 12, 2019 on our consideration of Visalia Unified School District's internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering Visalia Unified School District's internal control over financial reporting and compliance.

Sacramento, California December 12, 2019

Crowe LLP

3.

VISALIA UNIFIED SCHOOL DISTRICT MANAGEMENT'S DISCUSSION AND ANALYSIS

YEAR ENDED JUNE 30, 2019

This section of Visalia Unified School District's (the District) annual financial report presents our discussion and analysis of the District's financial performance during the fiscal year that ended on June 30, 2019. Please read it in conjunction with the District's financial statements, which immediately follow this section.

OVERVIEW OF THE FINANCIAL STATEMENTS

The Financial Statements

The financial statements presented herein include all of the activities of the District using the integrated approach as prescribed by Governmental Accounting Standards Board (GASB) Statement Number 34. The 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:

District-Wide Statements

The District-Wide Financial Statements present the financial picture of the District from the economic resources measurement focus using the accrual basis of accounting, which is intended to be similar to those used by private sector companies. They provide both short-term and long-term information about the District's overall financial status. They present governmental activities and business-type activities separately, though our District does not have any business-type activities at this time. These statements include all assets of the District (including capital assets), as well as all liabilities (including long-term obligations). 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. Additionally, certain eliminations have occurred as prescribed by the statement in regard to interfund activity, payables, and receivables.

The District-wide statements report the District's net position and how it has changed. Net position, the difference between the District's assets and deferred outflows of resources less liabilities and deferred inflows of resources, is one way to measure the District's financial health or position.

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

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

In the District-wide financial statements, the District's activities are divided into two categories:

• Governmental activities - The District's basic services are included here, such as regular and special education, transportation, and administration. Property taxes and State formula aid (Local Control Funding Formula) finance most of these activities.

• Business-type activities - The District does not have any activities included here, as fees the District may charge to help it cover the costs of certain services it provides (such as specific Adult School classes) do not constitute major reportable activities.

Fund Financial Statements

The Fund Financial Statements include statements for each of the three categories of activities: governmental (basic services), proprietary (business-type activities), and fiduciary (assets held for others).

4.

They focus on individual parts of the District, reporting the District's operations in more detail than the District-wide statements which reports on the District as a whole.

Funds are accounting devices the District uses to keep track of specific sources of funding and spending on particular programs:

• Some funds are required by State law and by bond covenants. • The District establishes other funds to control and manage money for particular purposes (like

repaying its long-term obligations) or to show that it is properly using certain revenues (like federal grants).

The District has three kinds of funds:

• Governmental funds - These statements are prepared using the current financial resources measurement focus and modified accrual basis of accounting. They tell how basic services like regular and special education were financed in the short-term as well as what remains for future spending. 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 District-wide statements, we provide additional information at the bottom of the governmental funds statements that explain the relationship (or differences) between them.

• 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 using the economic resources measurement focus and the accrual basis of accounting. They offer short- and long-term financial information about the activities that the District operates like a business.

Our District does not utilize enterprise funds (one type of proprietary fund) at this time, which are the same as business-type activities. We do, however, use internal service funds (the other kind of proprietary fund) to report activities that provide supplies and services for the District's other programs and activities. The District currently has one internal service fund - the employee health and welfare insurance fund.

• Fiduciary funds - The District is the trustee, or fiduciary, for assets that belong to others, in this case, the student activities (agency) 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, which are the student bodies. All of the District's fiduciary activities are reported in a separate statement of fiduciary net position and a statement of changes in fiduciary net position, which only report a balance sheet and do not have a measurement focus. We exclude these activities from the District-wide financial statements because the District cannot use these assets to finance its operations.

The financial statements also include notes that explain some of the information of 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 on the next page shows how the various parts of this annual report are arranged and related to one another.

5.

Figure A-1 Organization of the District's Annual Financial Report

Management's Discussion and Analysis

I

District-Wide Financial Statements

l

SUMMARY

Basic Financial Statements

' Fund Financial Statements

• •

Required Supplementary Information

Notes to the Financial Statements

DETAIL

Reconciliation of the Fund Financial Statements to the Government-Wide Financial Statements is provided to explain the differences created by the integrated approach.

FINANCIAL HIGHLIGHTS OF THE PAST YEAR

• The 2018-19 fiscal year began with the full implementation to the target levels of the Local Control Funding Formula (LCFF). Fully funding the LCFF means the State has met its target to fund schools for cuts endured during the Great Recession. This target was met two years ahead of schedule and has restored schools to their pre-recession purchasing power or to 2007-2008 levels with inflation. Going forward, increased funding in the LCFF is based on the Cost of Living Adjustment or COLA, an inflationary measure to meet the ongoing increases in normal costs. Unfortunately, costs for pensions, minimum wage, special education and attracting and retaining employees are rising faster than the inflationary increases provided by COLA and fiscal challenges still remain.

• The State budget and economy continues the trend of steady growth and the District continues to restore programs and implement changes to improve achievement for all students. The following factors play a significant role in the economic recovery:

o Stable State and Local Unemployment Rates of 3.9% State, 8.0% Tulare County and 5.0% for Visalia, compared to 4.0% State, 8.3% Tulare County and 4.8% Visalia in the previous fiscal year.

o Capital gains and personal income tax continue to fuel growth in the California economy and State revenue.

o UCLA Anderson forecasts improves their outlook on the economy citing improved financial conditions, and a better housing and employment outlook. Growth is expected to be 1. 7%

6.

for 2020, upgraded from 1 % and 1.9% for 2021. The California economy will be slightly improved in 2020 with employment growth of 0.9% in 2020 and 1.3% in 2021. Personal income growth is forecast to be 1.9% in 2020 and 0.9% in 2021.

o Housing continues to grow with permits up 24% and housing valuation up 28% from prior year.

• The District continues to budget using conservative revenue estimates and maintains a reserve and fund balance that enables the District to maintain fiscal solvency. The District maintains a reserve for economic uncertainty of 12% at the close of the 2018-19 fiscal year or $47.0 million.

• The Districts overall financial condition improved with additional revenues from the LCFF funding formula . State revenues from the LCFF are up $99.3 million from FY 2013-14, with $45.3 million of those new revenues dedicated to improving services for our most needy students.

• Pension costs continue to limit the District's ability to restore and improve programs with $18.6 million in new pension costs since 2013-14, projected to grow to $26.2 million in new costs by 2020-21.

• Construction projects were completed at Goshen Elementary for modernization and began at Ivanhoe Elementary and Golden West High School for modernization and at Sequoia High School for a new campus and relocation.

• Construction was completed on Denton Elementary School and welcomed students in August 2019. Also, Creekside Community Day School opened in August 2019 at the former Elbow School campus.

• Overall, Governmental Fund revenues were $413.0 million for the audit year, as compared to $354.9 million in the prior year, up $58.1 million or 16.4% due to additional state funding from LCFF ($23.6 million) as well as Other State Revenues ($22.3 million) due to on-behalf payments for STRS and PERS from the State, and State funding and reimbursement for Capital Projects ($5.2 million).

• General Fund revenues for the current year exceeded basic expenditures by $23.8 million; $372.5 million in revenues compared to $348. 7 million in basic expenditures with salaries and benefits accounting for 80.72% of basic expenditures compared to 80.23% for the prior year.

• Housing growth in the City of Visalia has shown steady growth for the past 5 years; which correlates to the increase in the revenues from the Developer Fee Fund. The Developer Fee rate for 2018-19 was at the Level 1 rate at $3. 79 per square foot, up from the previous Level 1 rate of $3.48 per square foot in 2017-18. Revenues are up for the year at $5.3 million compared to $4.4 million in 2017-18 due to the higher Level 1 rate and increased housing starts.

• In November 2018, voters approved the $105 million Measure A General Obligation Bond for modernization and new construction projects. The measure passed with more than a 60% yes vote. The first series of bonds will be issued in the 2019-20 fiscal year for construction projects.

REPORTING THE DISTRICT AS A WHOLE

The Statement of Net Position and the Statement of Activities

The Statement of Net Position and the Statement of Activities report information about the District as a whole and about its activities. These statements include all assets and liabilities of the District using the accrual basis of accounting, which is similar to the accounting used by most private-sector companies. All of the current year's revenues and expenses are taken into account regardless of when cash is received or paid.

7.

These two statements report the District's net position and changes in it. Net position is the difference between assets plus deferred outflows of resources less liabilities and deferred inflows of resources, which is one way to measure the District's financial health, or financial position. Over time, increases or decreases in the District's net position are one indicator of whether its financial health is improving or deteriorating. Other factors to consider are changes in the District's property tax base and the condition of the District's facilities.

The relationship between revenues and expenses is the District's operating results. Since the governing board's responsibility is to provide services to our students and not to generate profit as commercial entities do, one must consider other factors when evaluating the overall health of the District. The quality of the education and the safety of our schools will likely be an important component in this evaluation.

In the Statement of Net Position and the Statement of Activities, we report only the District's governmental activities, as the District does not have any business-type activities. All of the District's services are reported in this category, and include the education of kindergarten through grade twelve students, adult education students, the operation of child development activities, and the ongoing effort to improve and maintain buildings and sites. Property taxes; state income taxes; user fees; interest income; federal, state, and local grants; as well as general obligation bonds finance these activities.

A more detailed analysis of the District's net position and changes in net position follows:

Table A-1 Net Position

(Amounts in millions)

Current and other assets Capital assets (less depreciation)

Total Assets

Current liabilities Long-term liabilities

Total Liabilities

Deferred Inflows/Outflows of Resources

Net position Net investment in capital assets Restricted Unrestricted

Total Net Position

$

$

Governmental Acti\lities

2019

241.3 $ 419.6

660.9

28.9 543.3

572.2

(92.4)

311.4 48.2

(178.6)

181.0 $

Dollar Change

2018 2019-2018

251.8 $ (10.5) 372.7 46.9

624.5 36.4

27.3 1.6 520.3 23.0

547.6 24.6

(86.5) (5.9)

301.9 9.5 37.1 11.1

(175.6) (3.0)

163.4 $ 17.6

Total Percentage

Change 2019-2018

-4.17% 12.58%

5.83%

5.86% 4.42%

4.49%

6.82%

3.15% 29.92%

1.71%

10.77%

Net position. The District's combined net position was $163.4 million for the fiscal year ended June 30, 2018, and $181.0 million for the fiscal year ended June 30, 2019, an increase of $17.6 million (Table A-1). This decrease in the District's financial position came from its governmental activities, and was due primarily to the increase in capital assets for Measure E Projects and due to accounting changes as it relates to Other Postemployment Benefits (OPEB).

8.

The results of this year's operations for the District as a whole are reported in the Statement of Activities that can be found in the Basic Financial Statements Section of this document. Table A-2 takes the information from the statement, rounds the numbers, and rearranges them slightly so the reader can see the District's total revenues for the year .

Table A-2 Statement of Activities

(Amounts in millions) Total Total Go\emmental Dollar Percentage

Acti"1ties Change Change 2019 2018 2019-2018 2019-2018

Revenues General re\enues:

Federal and State aid not restricted $ 251.8 $ 230.0 $ 21.8 9.48% Charges for services 6.3 6.2 0.1 1.61% Operating grants and contributions 92.6 68.1 24.5 35.98% Tax re\enues 49.6 45.3 4.3 9.49% Other local sources 15.4 5.3 10.1 190.57%

Total Revenues 415.7 354.9 60.8 17.13%

Expenses Instruction-related 289.7 243.3 46.4 19.07% Student support services 40.8 35.9 4.9 13.65% Administration 13.2 16.8 (3.6) -21.43% Maintenance and operations 33.8 33.4 0.4 1.20% Other 20.6 16.6 4.0 24.10%

Total Expenses 398.1 346.0 52.1 15.06%

Excess of Revenues over Expenses 17.6 8.9 8.7 97.75%

Change in Net Position $ 17.6 $ 8.9 $ 8.7 97.75%

Changes in net position. The District's total revenues increased from $354.9 million at June 30, 2018, to $415. 7 million at June 30, 2019, an increase of 17 .13 percent (Table A-2). As mentioned earlier, the increase in revenues was primarily due to the increase in revenues received from the State under the LCFF, Medi-Cal Administrative Activities (MAA) reimbursements, increased interest earnings, and transportation services.

The total cost of all programs and services increased 15.06 percent from $346.0 million at June 30, 2018, to $398.1 million at June 30, 2019. The majority of the District's expenses relate to instruction (72. 78 percent). The purely administrative activities of the District accounted for just 3.31 percent of total costs.

Overall, total revenues surpassed expenses, increasing net position $17.6 million , an increase of $8.7 million over last year's increase. With the cyclical challenges of the State's finances, the District will continue to work to strengthen our fiscal foundation for the years when budget reductions may be necessary and deficits may decrease the District's net position.

9.

REPORTING THE DISTRICT'S MOST SIGNIFICANT FUNDS

Fund Financial Statements

The fund financial statements provide detailed information about the most significant funds - not the District as a whole . Some funds are required to be established by State law and by bond covenants. However, management establishes many other funds to help it control and manage money for particular purposes or to show that it is meeting legal responsibilities for using certain ta><es, grants, and other money that it receives from the U.S. Department of Education.

Governmental Funds - Most of the District's basic services are reported in governmental funds, which focus on how money flows into and out of those funds and the balances left at year-end that are available for spending. These funds are reported using an accounting method called modified accrual accounting, which measures cash and all other financial assets that can readily be converted to cash. The governmental fund statements provide a detailed short-term view of the District's general government operations and the basic services it provides. Governmental fund information helps determine whether there are more or fewer financial resources that can be spent in the near future to finance the District's programs. The differences of results in the governmental fund financial statements to those in the government-wide financial statements are explained in a reconciliation following each governmental fund financial statement.

In Table A-3, the net cost of each of the District's seven largest functions is presented below. The net cost shows the financial burden that was placed on the District's taxpayers by each of these functions . Providing this information allows our citizens to consider the cost of each function in comparison to the benefits they believe are provided by that function.

Table A-3 Net Cost of Governmental Activities

(Amounts in millions)

Instruction Instruction-related acti\Aties

(supeNsion, library, and media) Other pupil seNces Food seNces Pupil transportation General administration Maintenance and operations

(plant seNces) Other

Totals

2019

$ 175.2

43.5 17.1

0.2 6.5

10.8 32.0

13.8

$ 299.1

$

Net Cost of SeNces

2018 $ Change

159.4 $

38.8 14.8

0.7 5.6

14.5

27.5 10.4

15.8

4.7 2.3

(0.5) 0.9

(3.7)

(27.5) 3.4

% Change

9.91%

12.11% 15.54%

-71.43% 16.07%

-25.52%

-100.00% 32.69%

$ 271. 7 _$'----_2_7._4 ____ 1 o_._08_0/c_o

Proprietary Funds - When the District charges users for the services it provides, whether to outside customers or to other departments within the District, these services are generally reported in proprietary funds. Proprietary funds are reported in the same way that all activities are reported in the Statement of Net Position and the Statement of Revenues, Expenses, and Changes in Fund Net Position. In fact, the District's enterprise funds are the same as the business-type activities we report in the government-wide statements but provide more detail and additional information, such as cash flows, for proprietary funds. We use internal service funds (the other component of proprietary funds) to report activities that provide supplies and services for the District's other programs and activities - such as the District's Self-Insurance Fund. The internal service funds are reported with governmental activities in the government-wide financial statements.

10.

THE DISTRICT AS TRUSTEE

Reporting the District's Fiduciary Responsibilities

The District is the trustee, or fiduciary, for funds held on behalf of others, like our funds for associated student body activities, scholarships, employee retiree benefits, and pensions. The District's fiduciary activities are reported in separate Statements of Fiduciary Net Position. We exclude these activities from the District's other financial statements because the District cannot use these assets to finance its operations. The District is responsible for ensuring that the assets reported in these funds are used for their intended purposes.

CAPITAL ASSET AND DEBT ADMINISTRATION

Capital Assets

At June 30, 2018, the total net capital assets totaled $372.7 million. At June 30, 2019, the total net capital assets totaled $419.6 million. This amount represents a net increase (including additions, deductions, and depreciation) of $46. 9 million, or 12.58 percent, from last year. The increase is related to the new construction of an elementary school and high school.

Table A-4 Capital Assets at Year-End (Net of depreciation)

(Amounts in millions) Total Total

Gowrnmental Dollar Percentage Activities Change Change

2019 2018 2019-2018 2019-2018

Land $ 18.3 $ 18.3 $ 0.00% Construction in progress 64.8 50.8 14.0 27.56% Buildings and improwments 325.6 292.7 32.9 11.24% Equipment 10.9 10.9 0.00%

Totals $ 419.6 $ 372.7 $ 46.9 12.58%

11.

Long-Term Obligations

At June 30, 2018, the District had $520.3 million in long-term obligations outstanding versus $543.2 million at June 30, 2019, an increase of $22.9 million or 4.40 percent. Direct debt decreased by $3.5 million in aggregate due to regular debt service payments. The Districts liabilities for retiree pensions and health insurance increased by $26.4 million which are attributed increases in the Districts Net Pension Liability as well as accounting changes as it relates to the Other Postemployment Benefits.

Table A-5 Outstanding Debt at Year-end

(Amounts in millions) Total Total

Go\emmental Dollar Percentage Activities Change Change

2019 2018 2019-2018 2019-2018

General obligation bonds $ 62.0 $ 63.2 $ (1.2) -1.90% Certificates of participation 74.9 76.5 (1.6) -2.09% Capitalized lease obligations 1.6 2.1 (0.5) -23.81% Loan payable 0.2 (0.2) 100.00% Other postemployment

benefits liability 91.0 88.4 2.6 2.94% Net Pension Liability 312.9 289.1 23.8 8.23% Compensated Absences 0.8 0.8 0.00%

Totals $ 543.2 $ 520.3 $ 22.9 4.40%

The District's general obligation bond rating continues to be stable (currently AA-). The State limits the amount of general obligation debt that Districts can issue per Education Code Section 15106 to 2.5 percent of the assessed value of all taxable property within the District's boundaries. The District's outstanding general obligation debt of $62.0 million is well below the statutorily-imposed limit of approximately $314.9 million.

Other obligations include compensated absences payable, postemployment benefits (not including health benefits), and other long-term obligations. We present more detailed information regarding our long-term liabilities in the Notes to the Financial Statements.

12.

STUDENT ENROLLMENT

The District continues to experience growth in enrollment in elementary grades; however, with the increase in popularity in charter schools within the District boundary that trend has stabilized. The District recognized a slight enrollment increase of 228 students to 29,107 in 2018-19, from a total of 28,879 in 2017-18. Additionally, the District's CBEDS to P2 ADA ratio remains above the State average at 95.32%.

Enrollment Comparison (Cal PADS)

29,500

29,000 29,107

--';28,879

28,500 28,557

28,186 28,000 27,974

>· 27,500 27,430

27,603 27,488

2~,035 27,267 27,000 27,082

26,500

26,000

25,500 08-09 09-10 10-11 11-12 12-13 13-14 14-15 15-16 16-17 17-18 18-19

13.

SIGNIFICANT ACCOMPLISHMENTS OF FISCAL YEAR 2018-2019 ARE NOTED BELOW:

The 2018-19 budget included COLA of 3.70% plus gap funding to bring the District to 100% of the LCFF funding target. Going forward, increased funding in the LCFF will be based on the Cost of Living Adjustment or COLA, an inflationary measure to meet the ongoing increases in normal costs. Unfortunately, costs for pensions, minimum wage, special education and attracting and retaining employees are rising faster than the inflationary increases provided by COLA.

The certificated and classified bargaining units reached an agreement with the District to provide a 3. 70% salary increase for the 2018-19 year. Negotiations also included reductions in class sizes as well as reclassifications for several classified positions.

California State Teachers Retirement System (STRS) and California Public Employees Retirement System (PERS) rates paid by the district in 2018-19 increased over the prior year. The STRS rates were implemented by the state to offset shortfalls in the retirement program. The percentage of salary contributed to STRS by the district on-behalf of its teachers rose from 14.43% in 2017-18 to 16.280% in 2018-19. School district STRS contribution rates are expected to climb annually until 2020-21. PERS retirement rates for classified staff also grew slightly in 2018-19 going from 15.531% in 2017-18 to 18.062% in 2018-19. PERS rates are expected to increase to until 2020-21.

The District has taken actions to mitigate these cost increases, opening a pension trust account with onetime funding in 2016-17. During 2018-19, the balance in the pension trust account grew from $6,535,200 in 2017-18 to $7,014,487 at the end of 2018-19. In addition, VUSD maintained a reserve for economic uncertainties at 12% for FY 2018-19.

Highlights of 2018-19

• LCFF Funding at 100% with COLA only • Began construction of Sequoia High School • Completed construction of Denton Elementary School • Began transition to new Business Information System - Tyler Munis • Increased achievement in State level Assessments • Participated in California Science Test (CAST) • 1,300 students participating in Career Technical Education (CTE) Academies • Goshen & Royal Oaks received classroom modernizations • Began consideration for updated instructional materials for Science • Preschool received an expansion to provide additional spots to preschool students and families • HVAC projects completed at Mt. Whitney & Redwood High Schools • Implemented our first Chromebook refresh of approximately 5000 devices • 14 of the 70 participants in the Classified Employee Teacher Credential Scholarship Program are now

classroom teachers • The Health & Wellness Clinic served 3,139 employees and dependents through 6,380 appointments • After School Programs served over 5,000 students • 95% compliance rate for immunizations • School Social \./\Jorkers provided over 9,140 student and family interventions • Saved approximately $8,411,053 from September 2013 - June 2019 in energy savings • Transportation transported 1,733,344 safely • Health services performed 133,990 student office visits • Finalized planning of Phase Ill of Prop 39 energy efficiency projects • Began Ivanhoe Elementary modernization • Served over 1,200,000 breakfasts, 3,200,000 lunches, and 28,000 after school snacks

14.

ECONOMIC FACTORS AND NEXT YEAR'S BUDGET AND RA TES

The 2019-20 State Budget is the first budget under the fully funded Local Control Funding Formula or LCFF. Fully funding the LCFF means the State has met its target to fund schools for cuts endured during the Great Recession. This target was met two years ahead of schedule and has restored schools to their prerecession purchasing power orto 2007-2008 levels. Going forward, increased funding in the LCFF is based on the Cost of Living Adjustment or COLA, an inflationary measure to meet the ongoing increases in normal costs. Unfortunately, costs for pensions, minimum wage, special education and attracting and retaining employees are rising faster than the inflationary increases provided by COLA. The figure below shows implementation funding and gap funding received since the LCFF was adopted and the flattening of revenue increases going forward.

California's economy continues its growth with additional income, sales, and corporation tax revenues. The passage of Proposition 30 in 2012 and the extension of the income tax portion of that measure in 2016 under Proposition 55, have generated much of the increases in revenues to expedite the implementation of the LCFF. However, the State is now in its longest economic recovery in modern history, and the Governor continues to caution spending increases in revenue to prepare for the coming downturn and deposit to reserves.

100%

90%

80%

70%

60% 50'/,

~I,

30%

20%

10%

00/,

12.02¾

LCFF Implementation

2011-19MayRtvilitn:fullLCFFimf,lemerUlion 11 , 100.00%

. 100I< cumulabve g,p "°'"" . . . . 92

.70',. 100.00% 100.~o/!.,-'

86.74% -"' .,,, ,,..,. ,,..,. ""87.50%

70.63~, .,,.-,,..,. ,,,, ,,..,. 75.003/o

,,,, , ' ·62.50% .,,-

,,,, .,,, ,,,. 50.00%

38.5~%,,,. .,,.---;7.50% . · ,,.,,✓

/ .,....,., 25.00%

12.50'/,

2013,14 2014-15 2015-16 201&-17 2017,18 2018-19 2019-20 2020-21

- Pn,jected Actual

As a refresher, the LCFF created base, supplemental, and concentration grants in place of most previously existing K-12 funding streams, thus eliminating revenue limits and approximately three-quarters of state categorical (restricted) programs. This streamlined funding results in more flexibility for school leaders, with the assistance of parents and other local stakeholders, to determine the local academic priorities and how the state funding will be used to improve student achievement so that they graduate from high school and are college and career ready.

Under the Governor's proposal, the LCFF will be increased based on the COLA of 3.26% for 2019-20. As mentioned above, cost increases associated with pensions, step and column and other areas are increasing by over 4%. Programs outside of the LCFF (Adult School, State Preschool and Child Nutrition) also receive increases in revenue based on the COLA

Highlights of the VUSD 2019-20 Budget include:

• Implementation of the Local Control and Accountability Plan using supplemental and concentration (targeted) funds to improve services across the District by expanding student opportunities for learning, after-school enrichment and behavior support and intervention.

• Continued planning of Measure E modernization projects and continued construction of Sequoia Continuation School, as well as funding for modernization and routine maintenance projects throughout the District.

• Maintenance of the District Reserve for Economic Uncertainty of 10.5%

The District continues to budget conservatively and the key assumptions in our revenue forecast are:

1. Regular Average Daily Attendance (ADA) from 2018-19 P-2 K-12 with zero projected growth for 2019-20 is budgeted at 27,727.07.

2. Cost of Living Adjustment (COLA) increase of 3.26% on all State programs.

15.

3. State Lottery is projected to be $204.00 per ADA, of which $53.00 is restricted to instructional materials, and $151.00 is unrestricted.

4. One-time dollars are not budgeted until received.

5. 18-19 one-time Mandated Cost not budgeted in 19-20 which is a 61 % reduction or $9 million to state revenue.

Expenditures are based on the following assumptions:

1. Step increases for certificated, management, and classified are budgeted in full at $3.4 million .

2. Health care costs per employee will be shared by the District and employee as negotiated. The annual cost of health care coverage will be $15,774 per certificated employee, $14,682 per management employee, and $14,299 per classified employee. The District will pay $13,925 per certificated employee, $13,887 per management employee and $14,299 per classified employee.

3. Routine Restricted Maintenance Account is funded at 3% of total General Fund expenditures.

4. Contributions to restricted programs to cover projected encroachment will be $43 million.

CONTACTING THE DISTRICT'S FINANCIAL MANAGEMENT

This financial report is designed to provide our citizens, taxpayers, students, and investors and creditors with a general overview of the District's finances and to show the District's accountability for the money it receives. If you have questions about this report or need any additional financial information, contact Robert Groeber, Assistant Superintendent, Administrative Services, at Visalia Unified School District, 5000 West Cypress Avenue, Visalia, California 93277, or e-mail at [email protected].

16.

BASIC FINANCIAL STATEMENTS

ASSETS

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

VISALIA UNIFIED SCHOOL DISTRICT STATEMENT OF NET POSITION

June 30, 2019

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

depreciation (Note 4)

Total assets

DEFERRED OUTFLOWS OF RESOURCES

Deferred outflows of resources - pensions (Notes 8 and 9) Deferred outflows of resources - OPES (Note 10)

Total deferred outflows

LIABILITIES

Accounts payable Claims liability (Note 5) Unearned revenue Long-term liabilities:

Due within one year (Note 6) Due after one year (Note 6)

Total liabilities

DEFERRED INFLOWS OF RESOURCES

Deferred inflows of resources - pensions (Notes 8 and 9) Deferred inflows of resources - OPES (Note 10)

Total deferred inflows

NET POSITION

Net investment in capital assets Restricted

Legally restricted programs Capital projects Debt service

Unrestricted

Total net position

See accompanying notes to financial statements.

Governmental Activities

$ 216,163,926 24,689,552

365,347 92,000

83,100,236

33615011375

660 1912A36

97,812,228 6A79 1165

10412911393

15,631,316 6,718,129 6,631,143

3,237,394 5401038 015

57212551997

11,662,000 2061642

1118681642

311,442,966

31,310,641 9,806,364 7,121,861

(17816021642)

$ 18110791190

17.

Governmental activities: Instruction Instruction-related services:

Supervision of instruction Instructional library, media and technology

School site administration Pupil services:

Home-to-school transportation Food services All other pupil services

General administration: Data processing All other general administration

Plant services Ancillary services Enterprise activities Other outgo Interest on long-term liabilities

Total governmental activities

VISALIA UNIFIED SCHOOL DISTRICT STATEMENT OF ACTIVITIES


PrQQram Revenues Operating

Charges Grants and For Contri-

Expenses Services butions

$ 233,653,420 $ 3,529,586 $ 49,732,979

16,837,978 29,757 7,681,375

3,384,463 261,783 35,853,614 4,714,731

6,743,685 200,109 13,523,158 840,115 12,459,370 20,518,049 46,821 3,354,503

5,972,848 180,286 7,216,635 48,931 2,182,068

33,815,898 743,181 1,064,709 10,018,330 4,647,472

63,088 2,567 4,202,578 1,105,675 1,028,453 613121271

§ 398 116 015 i 6 344 066 § 87 510 405

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 lnteragency revenues Miscellaneous

Total general revenues

Change in net position

Net position, July 1, 2018

Net position, June 30, 2019


Net (Expense) Revenue and

Change in Net Position

Capital Grants and

Contri- Governmental butions Activities

$ 5,155,362 $ (175,235,493)

(9,126,846)

(3,122,680) (31,138,883)

(6,543,576) (223,673)

(17,116,725)

(5,792,562) (4,985,636)

(32,008,008) (5,370,858)

(60,521) (2,068,450) (613121271)

§ 5 155 362 (299 106 182)

44,252,901 4,162,773 1,163,516

251,765,994 7,250,284 2,363,123 51793 048

3161751 639

17,645,457

163.433.733

§ 181.079.190

18.

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

VISALIA UNIFIED SCHOOL DISTRICT BALANCE SHEET

GOVERNMENTAL FUNDS June 30, 2019

General Fund

$113,694,510 13,794 44,028

7,014,487 20,680,838

3,358,803 92,000

206.464

i145.104.924

Special Reserve

for Capital Outlay Projects

Fund

$ 26,825,704

19,011,774

i 45.837.478

LIABILITIES AND FUND BALANCES

Liabilities: Accounts payable $ 9,122,080 $ 4,030,726 Unearned revenue 6,569,526 Due to other funds 19.014.222 190

Total liabilities 34.705.828 4.030.916

Fund balances: Nonspendable 342,492 Restricted 22,130,148 41,806,562 Assigned 43,409,459 Unassigned 44.516.997

Total fund balances 110 1399 1096 41.806.562

Total liabilities and fund balances i145.104.924 i 45.837.478

All Non-Major

Funds

$ 23,838,479 182,300

4,004,525 2,638

158.883

i 28.186.825

$ 657,849 61,617

1.358.641

2.078.107

158,883 25,949,835

26.108.718

i 28.186.825


Total Governmental

Funds

$164,358,693 196,094 44,028

7,014,487 24,685,363 22,373,215

92,000 365.347

i219.129.227

$ 13,810,655 6,631,143

20.373.053

40.814.851

501,375 89,886,545 43,409,459 44.516.997

178.314.376

i219.129.227

19.

VISALIA UNIFIED SCHOOL DISTRICT RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET

TO THE STATEMENT OF NET POSITION June 30, 2019

Total fund balances - Governmental Funds $ 178,314,376

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 $606,986,809 and the accumulated depreciation is $187,385,198 (Note 4).

Long-term liabilities are not due and payable in the current period and, therefore, are not reported as liabilities in the governmental funds. Long-term liabilities at June 30, 2019 consisted of (Note 6):

General Obligation Bonds Unamortized premiums Accreted Interest Certificates of Participation Capitalized lease obligations Net pension liability (Note 8 and 9) Other postemployment benefits (Note 1 0) Compensated absences

In the governmental funds, interest on long-term liabilities is not recognized until the period in which it matures and is paid. In the government-wide statement of activities, it is recognized in the period that it is incurred.

In government funds, deferred outflows and inflows of resources relating to pensions are not reported because they are applicable to future periods. In the statement of net position, deferred outflows and inflows of resources relating to pensions are reported (Note 8 and 9).

Deferred outflows of resources relating to pensions Deferred inflows of resources relating to pensions

Internal service funds are used to conduct certain activities for which costs are charged to other funds. Assets and liabilities are reported within the governmental activities in the Statement of Net Position.

In government funds, deferred outflows and inflows of resources relating to OPEB are not reported because they are applicable to future periods. In the statement of net position, deferred outflows and inflows of resources relating to OPEB are reported (Note 10).

Deferred outflows of resources relating to OPEB Deferred inflows of resources relating to OPEB

Total net position - governmental activities

$ (53,919,971) (4,543, 170) (3,537,425)

(74,950,000) (1,571,208)

(312,875,000) (91,005,465)

(873.170)

$ 97,812,228 (11,662,000)

$ 6,479,165 (206,642)


419,601,611

(543,275,409)

(1,820,661)

86,150,228

35,836,522

6,272.523

$ 181,079,190

20 .

VISALIA UNIFIED SCHOOL DISTRICT STATEMENT OF REVENUES, EXPENDITURES AND

CHANGE IN FUND BALANCES GOVERNMENTAL FUNDS


Special Reserve

for Capital All General Outlay Projects Non-Major

Fund Fund Funds

Revenues: Local Control Funding

Formula (LCFF): State apportionment $ 242,224,791 $ $ Local sources 42 4971019

Total LCFF 284 721 810

Federal sources 22,566,290 12,370,745 Other state sources 44,245,958 14,487,643 Other local sources 20 9491419 21168 079 1115211534

Total revenues 37214831477 2 1681079 3813791922

Expenditures: Current:

Certificated salaries 135,364,818 2,650,713 Classified salaries 46,381,965 6,137,242 Employee benefits 99,724,176 4,986,280 Books and supplies 22,349,096 217,504 5,504,034 Contract services and

operating expenditures 30,237,486 780,232 1,283,172 Other outgo 4,202,579

Capital outlay 8,763,146 51,397,225 1,095,693 Debt service:

Principal retirement 513,602 3,445,000 Interest 1 1561970 316531680

Total expenditures 348 693 838 5213941961 2817551814

Excess (deficiency) of revenues over (under) expenditures 2317891639 (50 2261882) 9 624 108

Other financing (uses) sources: Transfers in 2,847,847 19,011,774 1,263,412 Transfers out (2012741996) (190) (847 847)

Total other financing (uses) sources (171427 149) 1910111584 4151565

Change in fund balances 6,362,490 (31,215,298) 10,039,673

Fund balances, July 1, 2018 104 036 606 7310211860 1610691045

Fund balances, June 30, 2019 $ 110 399 096 $ 4118061562 $ 261108}18


Total Governmental

Funds

$ 242,224,791 4214971019

284 721 810

34,937,035 58,733,601 3416391032

41310311478

138,015 ,531 52,519,207

104,710,456 28,070,634

32,300,890 4,202,579

61,256,064

3,958,602 418101650

429 8441613

(1618131135)

23,123,033 (2111231033)

2 000 000

(14,813,135)

1931271511

$ 178 314 376

21.

VISALIA UNIFIED SCHOOL DISTRICT RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES AND

CHANGE IN FUND BALANCES - GOVERNMENTAL FUNDS -TO THE STATEMENT OF ACTIVITIES


Net change in fund balances - Total Governmental Funds

Amounts reported for governmental activities in the statement of activities are different because:

Acquisition of capital assets is an expenditure in the governmental funds, but increases capital assets in the statement of net position (Note 4).

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

Planned capital projects which were initially capitalized as work-in-process but ultimately not completed, are expensed.

Repayment of principal on long-term liabilities is an expenditure in governmental funds, but decreases long-term liabilities in the statement of net position (Note 6).

In governmental funds, debt issued at a premium is recognized as an other financing source. In the government-wide statements debt issued at a premium is amortized with interest expense over the life of the debt (Note 6).

Accreted interest is an expense that is not recorded in the governmental funds (Note 6).

In governmental funds, interest on long-term liabilities is recognized in the period that it becomes due. In the government-wide statement of activities, it is recognized in the period that it is incurred.

In government funds, OPEB costs are recognized when employer contributions are made. In the statement of activities, OPEB costs are recognized on the accrual basis.

In government funds, pension costs are recognized when employer contributions are made. In the statement of activities, pension costs are recognized on the accrual basis.

In the statement of activities, expenditures related to compensated absences are measured by the amounts earned during the year. In the governmental funds, expenditures are measured by the amount of financial resources used (Note 6).

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

Change in net position of governmental activities


$ (14,813,135)

64,167,435

(17,275,165)

(9,540)

3,958,602

165,655

(685,148)

(982,128)

(2,687,130)

(17,683,920)

(45,262)

3,535,193

$ 17,645,457

22.

ASSETS

Current assets:

VISALIA UNIFIED SCHOOL DISTRICT STATEMENT OF NET POSITION - PROPRIETARY FUND

SELF-INSURANCE FUND June 30, 2019

Cash and investments: Cash in County Treasury Cash with Fiscal Agent

Receivables

Total current assets

LIABILITIES

Current liabilities: Claims payable Due to other funds

Total liabilities

NET POSITION

Un restricted


$ 17,662,267 26,888,357

4 189

4415541813

6,718,129 210001162

8}181291

$ 3518361522

23.

Operating revenues: Self-insurance premiums Other state revenues Other local revenues

VISALIA UNIFIED SCHOOL DISTRICT STATEMENT OF CHANGE IN

NET POSITION - PROPRIETARY FUND SELF-INSURANCE FUND


Total operating revenues

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

Total operating expenses

Operating income

Non-operating income: Interest income

Income before transfers

Transfers to other funds

Change in net position

Total net position, July 1, 2018

Total net position, June 30, 2019


$ 45,253,640 33,986

7681541

4610561167

126,956 240,067 201,403

9,056 401190.377

4017671859

5,288,308

2461885

5,535,193

21000.000

3,535,193

3213011329

$ 35 836.522

24.

VISALIA UNIFIED SCHOOL DISTRICT STATEMENT OF CASH FLOWS- PROPRIETARY FUND

SELF-INSURANCE FUND For the Year Ended June 30, 2019

Cash flows from operating activities: Cash received from self-insurance premiums Cash paid for employee claims benefits Cash paid for salaries and related benefits Cash paid for other expenses

Net cash provided by operating activities

Cash flows provided by investing activities : Interest income received

Increase in cash and investments

Cash and investments, July 1, 2018

Cash and investments, June 30, 2019

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 Increase in:

Claims liability Due to other funds for operating activities

Total adjustments

Net cash provided by operating activities


$ 46,051,978 (40,002,710)

(568,426) (111871)

5a4681971

2461885

5,715,856

381834}68

$ 4415501624

$ 512881308

(4,189)

184,690 162

1801663

$ 5a4681971

25.

ASSETS

VISALIA UNIFIED SCHOOL DISTRICT STATEMENT OF FIDUCIARY ASSETS AND LIABILITIES

AGENCY FUNDS June 30, 2019

Cash in County Treasury Cash on hand and in banks (Note 2)

Total assets

LIABILITIES

Due to others Due to student groups

Total liabilities


Agency Funds

$ 22,926,446 1.193,354

$ 24, 119,800

22,327,759 1,792,041

$ 24,119,800

26.

VISALIA UNIFIED SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS

June 30, 2019

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Visalia Unified School District (the "District") accounts for its financial transactions in accordance with the policies and procedures of the California Department of Education's California School Accounting Manual. The accounting policies of the District conform to accounting principles generally accepted in the United States of America as prescribed by the Governmental Accounting Standards Board. The following is a summary of the more significant policies:

Reporting Entity: The Board of Education is the level of government which has governance responsibilities over all activities related to public school education in the District. The Board is not included in any other governmental "reporting entity" as defined by the Governmental Accounting Standards Board since Board members have decision-making authority, the power to designate management, the responsibility to significantly influence operations and primary accountability for fiscal matters.

The District receives funding from local, state and federal government sources and must comply with all of the requirements of these funding source entities.

The District and the Visalia Unified School District Financing Corporation (the "Corporation") have a financial and operational relationship which meets the reporting entity definition criteria of the Codification of Governmental Accounting and Financial Reporting Standards, Section 2100, for inclusion of the Corporation as a blended component unit of the District. Accordingly, the financial activities of the Corporation have been included in the basic financial statements of the District.

The following are those aspects of the relationship between the District and the Corporation which satisfy Codification of Governmental Accounting and Financial Reporting Standards, Section 2100, as amended:

A - Manifestation of Oversight

• The Corporation's Board of Directors were appointed by the District's Board of Education .

• The Corporation has no employees. The District's Superintendent and Assistant Superintendents function as agents of the Corporation. Neither receives additional compensation for work performed in this capacity .

• The District exercises significant influence over operations of the Corporation as it is anticipated that the District will be sole lessee of all facilities owned by the Corporation.

B - Accounting for Fiscal Matters

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

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

• It is anticipated that the District's lease payments will be the sole revenue source of the Corporation .

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

(Continued)

27.


June 30, 2019

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

C - Scope of Public Service and Financial Presentation

• The Corporation was created for the sole purpose of financially assisting the District.

• The Corporation is a nonprofit, public benefit corporation incorporated under the laws of the State of California and recorded by the Secretary of State. The Corporation was formed to provide financing assistance to the District for construction and acquisition of major capital facilities. Upon completion the District intends to occupy all Corporation facilities. When the Corporation's Certificates of Participation have been paid with state reimbursements and the District's developer fees, title of all Corporation property will pass to the District for no additional consideration .

• The Corporation's financial activity is included in the basic financial statements as the Capital Facilities and Debt Service Funds. Certificates of Participation issued by the Corporation are included in the government-wide financial statements.

Basis of Presentation - Financial Statements: The basic financial statements include a Management's Discussion and Analysis (MD & A) section providing an analysis of the District's overall financial position and results of operations, financial statements prepared using full accrual accounting for all of the District's activities, including infrastructure and a focus on the major funds.

Basis of Presentation - Government-Wide Financial Statements: The Statement of Net Position and the Statement of Activities displays information about the reporting government as a whole. Fiduciary funds are not included in the government-wide financial statements. Fiduciary funds are reported only in the Statement of Fiduciary Assets and Liabilities.

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.) NS0.118-.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. ,

A/location of indirect expenses: The District reports all direct expenses by function in the Statement of Activities. Direct expenses are those that are clearly identifiable with a function. Depreciation expense is specifically identified by function and is included in the direct expense of each function. Interest on general long-term liabilities is considered an indirect expense and is reported separately on the Statement of Activities.

Basis of Presentation - Fund Accounting: The accounts of the District are organized on the basis of funds, each of which is considered to be a separate accounting entity. The operations of each fund are accounted for with a separate set of self-balancing accounts that comprise its assets, liabilities, fund equity, revenues, and expenditures or expenses, as appropriate. District resources are allocated to and accounted for in individual funds based upon the purpose for which they are to be spent and the means by which spending activities are controlled.

(Continued)

28.


June 30, 2019

-- - -- ---- - - -- -- --- ------ ------


A - Major Funds

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.

Special Reserve for Capital Outlay Projects Fund - The Special Reserve for Capital Outlay Projects Fund is a capital projects fund used to account for the proceeds of specific revenue sources that are legally restricted to expenditures for capital outlay purposes.

B - Other Funds

Special Revenue Funds - Special Revenue Funds are used to account for the proceeds of specific revenue sources that are legally restricted to expenditures for specified purposes. This classification includes the Adult Education, Child Development and Cafeteria Funds.

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

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

Self-Insurance Fund- The Self-Insurance Fund is a proprietary fund used to account for the District's selfinsured health and welfare plan.

Agency Funds - Agency Funds are Fiduciary Funds which are used to account for assets of others, for which the District has an agency relationship with the activity of the fund. This classification consists of the Warrant/Pass-Through and the Associated Student Body (ASB) Funds.

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

Accrual: Governmental activities in the government-wide financial statements and the proprietary and fiduciary fund financial statements are presented on the accrual basis of accounting. Revenues are recognized when earned and expenses are recognized when incurred.

Modified Accrual: The governmental funds financial statements are presented on the modified accrual basis of accounting. Under the modified accrual basis of accounting, revenues are recorded when susceptible to accrual; i.e., both measurable and available. "Available" means collectible within the current period or within 60 days after year end. Expenditures are generally recognized under the modified accrual basis of accounting when the related liability is incurred. The exception to this general rule is that principal and interest on general obligation long-term liabilities, if any, is recognized when due.

(Continued)

29.


June 30, 2019


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. The District has determined that no allowance for doubtful accounts was necessary as of June 30, 2019.

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

Capital Assets: The District maintains a capitalization threshold of an original cost of $5,000 for equipment and $15,000 for buildings and improvements. When purchased, such assets are recorded at historical cost or estimated historical cost. Contributed assets are reported at acquisition value for the contributed asset. Additions, improvements and other capital outlay that significantly extend the useful life of an asset are capitalized. Other costs incurred for repairs and maintenance are expensed as incurred. Depreciation of capital assets is computed and recorded using the straight-line method. Estimated useful lives for the various classes of depreciable capital assets are as follows: buildings, 20 to 50 years; improvements, 5 to 50 years; equipment 2 to 15 years.

Compensated Absences: Compensated absences totaling $873,170 are recorded as a liability of the District. The liability is for the earned but unused benefits.

Accumulated Sick Leave: Sick leave benefits are not recognized as liabilities of the District. The District's policy is to record sick leave as a operating expenditure or expense in the period taken since such benefits do not vest nor is payment probable; however, unused sick leave is added to the creditable service period for calculation of retirement benefits for certain STRP and PERF B employees, 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.

lnterfund Activity: lnterfund activity is reported as either loans, services provided, reimbursements or transfers. Loans are reported as interfund receivables and payables as appropriate and are subject to elimination upon consolidation. Services provided, deemed to be at market or near market rates, are treated as revenues and expenditures/expenses. Reimbursements are when one fund incurs a cost, charges the appropriate benefiting fund and reduces its related cost as a reimbursement. All other interfund transactions are treated as transfers. Transfers between governmental or proprietary funds are netted as part of the reconciliation to the government-wide financial statements.

Custodial Relationships: The Agency Funds represent the assets and liabilities of various student organizations within the District. As the funds are custodial in nature, no measurement of operating results is involved.

(Continued)

30.


June 30, 2019


Deferred Outflows/Inflows of Resources: In addition to assets, the Statement of Net Position includes a separate section for deferred outflows of resources. This separate financial statement element represents a consumption of net position that applies to a future periods, and as such will not be recognized as an outflow of resources (expense/expenditures) until then. The District has recognized deferred outflows of resources related to the recognition of the net pension and net OPEB liabilities, which are reported in the Statement of Net Position.

In addition to liabilities, the statement of net position reports a separate section for deferred inflows of resources. This separate financial statement element represents an acquisition of net position that applies to a future periods and as such, will not be recognized as an inflow of resources (revenue) until that time. The District has recognized deferred inflows of resources related to the recognition of the net pension and net OPEB liabilities, which are reported in the Statement of Net Position.

Pensions: For purposes of measuring the net pension liability, deferred outflows of resources and deferred inflows of resources related to pensions, and pension expense, information about the fiduciary net position of the State Teachers' Retirement Plan (STRP) and Public Employers Retirement Fund B (PERF B) and additions to/deductions from STRP's and PERF B's fiduciary net position have been determined on the same basis as they are reported by STRP and PERF B. For this purpose, benefit payments (including refunds of employee contributions) are recognized when due and payable in accordance with the benefit terms. Certain investments are reported at fair value. Investments are reported at fair value. The following is a summary of pension amounts in aggregate:

STRP PERF B Total

Deferred outflows of resources i 67 743.106 i 30 069.122 i 97 812.228 Deferred inflows of resources i 11.662.000 i i 11.662.000 Net pension liability i219.911.000 i 92.964.000 i312.81s.ooo Pension expense i 51.058 563 i 23.582 619 i 74.641 182

Net Position: Net position is displayed in three components:

1. Net Investment in Capital Assets: Consist of capital assets, net of accumulated depreciation, reduced by outstanding related debt and adjusted for unspent debt proceeds and deferred outflows/inflows resulting from refunding debt instruments.

2. 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 legally restricted programs represents the portion of net position restricted to specific program expenditures. The restriction for debt service represents the portion of net position which the District plans to expend on debt repayment. The restriction for capital projects represents the portion of net position restricted for capital projects. It is the District's policy to first spend restricted net position when allowable expenditures are incurred.

3. Unrestricted Net Position: All other net position that do not meet the definitions of "restricted" or "net investments in capital assets".

(Continued)

31.


June 30, 2019


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, granters, 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 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, 2019 there were 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. At June 30, 2019, the Board of Education has designated the Chief Financial Officer with the authority to assign fund balances.

E - Unassigned Fund Balance:

In the General Fund only, the unassigned fund balance classification reflects the residual balance that has not been assigned to other funds and that is not restricted, committed, or assigned to specific purposes.

In any fund other than the General Fund, a positive unassigned fund balance is never reported because amounts in any other fund are assumed to have been assigned, at least, to the purpose of that fund. However, deficits in any fund, including the General Fund that cannot be eliminated by reducing or eliminating amounts assigned to other purposes are reported as negative unassigned fund balance.

(Continued)

32.

------ --


June 30, 2019

NOTE 1 -SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Fund Balance Policy: The District has an expenditure policy relating to fund balances. For purposes of fund balance classifications, expenditures are to be spent from restricted fund balances first, followed in order by committed fund balances (if any), assigned fund balances and lastly unassigned fund balances.

While GASB Cod. Sec. 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, 2019, the District has not established a minimum fund balance policy nor has it established a stabilization arrangement.

Property Taxes: Secured property taxes are attached as an enforceable lien on property as of January 1. Taxes are due in two installments on or before November 15 and March 15. Unsecured property taxes are due in one installment on or before August 31. The County of Tulare bills and collects taxes for the District. Tax revenues are recognized by the District when received.

Encumbrances: Encumbrance accounting is used in all budgeted funds to reserve portions of applicable appropriations for which commitments have been made. Encumbrances are recorded for purchase orders, contracts, and other commitments when they are written. All encumbrances are liquidated as of June 30.

Eliminations and Reclassifications: In the process of aggregating data for the Statement of Net Position and the Statement of Activities, some amounts reported as interfund activity and balances in the funds were eliminated or reclassified. lnterfund receivables and payables were eliminated to minimize the "grossing up" effect on assets and liabilities within the governmental activities column.

Estimates: The preparation of basic financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenditures during the reporting period. Accordingly, actual results may differ from those estimates.

(Continued)

33.


June 30, 2019

NOTE 2 - CASH AND INVESTMENTS

Cash and investments at June 30, 2019 consisted of the following:

Governmental Proprietary Funds Fund

Pooled Funds: Cash in County Treasury $164,358,693 $ 17,662,267

Deposits: Cash on hand and in banks 196,094 Cash in revolving fund 44,028

Investments: Cash with Fiscal Agent 71014.487 2618881357

Total cash and investments i17116131302 i 4415501624

Fiduciary Activities

$ 22,926,446

1,193,354

i 2411191800

Pooled Funds: In accordance with Education Code Section 41001, the District maintains substantially all of its cash in the interest bearing Tulare County Treasurer's Pooled Investment Fund. The District is considered to be an involuntary participant in an external investment pool. The fair value of the District's investment in the pool is reported in the financial statements at amounts based upon the District's prorata share of the fair value provided by the County Treasurer for the entire portfolio (in relation to the amortized cost of that portfolio). The balance available for withdrawal is based on the accounting records maintained by the County Treasurer, which is recorded on the amortized cost basis.

In accordance with applicable state laws, the Tulare County Treasurer may invest in derivative securities. However, at June 30, 2019, the Tulare County Treasurer has represented that the Treasurer's 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, 2019, the carrying amount of the District's accounts was $1,433,476 and the bank balance was $1,127,624. The total uninsured bank balance at June 30, 2019 was $287,947.

Investments: The Cash with Fiscal Agent in the General Fund represents funds held for future pension costs. These amounts are held in a trust administered by the Public Agency Retirement Services ("PARS") and have been recorded on the amortized cost basis.

Cash with Fiscal Agent in the Governmental and Proprietary Funds represents cash segregated for the future payment of self-insurance benefits. These amounts are held by a third party custodian in the District's name, and are recorded on the amortized cost basis.

Interest Rate Risk: The District does not have a formal investment policy that limits cash and investment maturities as a means of managing its exposure to fair value losses arising from increasing interest rates. At June 30, 2019, 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, 2019, the District had no concentration of credit risk.

--------~-------- -- -- --------------~

(Continued)

34.


June 30, 2019

NOTE 3 - INTERFUND TRANSACTIONS

lnterfund Activity: Transactions between funds of the District are recorded as interfund transfers, except for the Self-Insurance Fund activity which is recorded as income and expenditures of the Self-Insurance Fund and the funds which incur payroll costs, respectively. The unpaid balances at year end, as a result of such transactions, are shown as due to and due from other funds.

lnterfund Receivables/Payables: Individual interfund receivable and payable balances at June 30, 2019 were as follows:

lnterfund lnterfund Fund Receivables Payables

Major Funds : General $ 3,358,803 $ 19,014,222 Special Reserve for Capital Outlay Projects 19,011,774 190

Non-Major Funds: Adult Education 63 292,801 Child Development 2,335 127,260 Cafeteria 50 938,580 Building 190

Internal Service Fund: Self-Insurance 210001162

Totals $ 2213731215 $ 2213731215

Transfers: Transfers consist of operating transfers from funds receiving revenue to funds through which the resources are to be expended.

Transfers for the 2018-2019 fiscal year were as follows:

Transfer from the General Fund to the Special Reserve for Capital Outlay Projects Fund to support construction costs.

Transfer from the Self-Insurance Fund to the General Fund for a contribution to offset the net OPEB liability.

Transfer from the General Fund to the Debt Service Fund for Certificate of Participation payment.

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

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

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

Transfer from the General Fund to the Cafeteria Fund to provide for operational support.

Transfer from the Special Reserve for Capital Outlay Projects Fund to the Building Fund for the correction of an entry.

(Continued)

$

$

19,011,774

2,000,000

1,163,163

522,251

224,093

101,503

100,059

190

231123.033

35.

NOTE 4 - CAPITAL ASSETS


June 30, 2019

A schedule of changes in capital assets for the year ended June 30, 2019 is shown below:

Balance July 1, 2018 Additions

Governmental Activities

Non-depreciable: Land $ 18,331,027 $ $ Work-in-process 50,799,252 50,789,298

Depreciable: Buildings and improvements 444,542,498 10,536,620 Furniture and equipment 35,595,876 2,841,517

Totals, at cost 549.268,653 64,167,435

Less accumulated depreciation: Buildings and improvements (151,873,956) (14,374,517) Furniture and equipment {24,675,816) (2,900,648)

Total accumulated depreciation {176,549,772) (17,275,165)

Capital assets, net i 372,718,881 i 46,892,270 i

Depreciation expense was charged to governmental activities as follows :

Instruction Instruction supervision and administration Instruction library, media, and technology School site administration Home-to-school transportation Food services All other pupil services Ancillary services All other general administration Data processing Plant services

Total depreciation expense

(Continued)

Transfers Balance and June 30,

Deductions 2019

$ 18,331,027 (36,819,341) 64,769,209

36,809,801 491,888,919 (6,439.739) 31,997,654

(6,449,279) 606,986,809

(166,248,473) 6,439,739 (21.136, 725)

6,439,739 (187,385,198)

{9,540) i 419,601,611

$ 11,324,797 742,378 161,445

1,759,643 315,587

4,534 1,015,713

219,757 442,870 199,716

1,088,725

i 17,275,165

36.


June 30, 2019

NOTE 5 - RISK MANAGEMENT/CLAIMS LIABILITY

The District's risk management activities for employee health benefits are recorded in the Self-Insurance Fund. District exposure to workers' compensation claims and property/liability are provided for through the purchase of insurance from a joint powers entity, Self-Insured Schools of California Ill (see Note 11 ).

The District records an estimated liability for health care. Health and welfare liabilities are based on estimates of the ultimate cost of reported claims including future claim adjustment expenses and an estimate for claims incurred but not reported based on historical experience . The Self-Insurance fund establishes a liability for both reported and unreported events, which includes estimates of both future payments of losses and related claim adjustment expenses . Coverage amounts over property and liability, $250,000,000 and $50,000,000 respectively, have remained unchanged. Settled claims resulting from these risks have not exceeded commercial insurance coverage in any of the past three fiscal years.

The liabilities for unpaid claims and claim adjustment expenses are as follows:

June 30, June 30, 2019 2018

Unpaid claim and claim adjustment expenses, beginning of year $ 6,533,440 $ 5,758,956

Total incurred claims and claim adjustment expenses 40,375,066 43,043,281

Total payments (4011901377) (4212681797)

Total unpaid claims and claim adjustment expenses at end of year $ 617181129 $ 615331440

(Continued)

37.


June 30, 2019

------------ -------

NOTE 6 - LONG-TERM LIABILITIES

General Obligation Bonds

A summary of General Obligation Bonds payable as of June 30, 2019 follows:

Current Interest Original Balance Year Current Year Balance

Series Rate Maturity Jul~ 1 2018 Issuance Matured June 30. 2019

Series 2013 4.00-5.35% 2044 $ 30,864,971 $ $ 290,000 $ 30,574,971 Series 2015 4.00-5.00% 2041 24,695.000 1,350,000 2313451000

$ 55 559,971 $ $ 1 640,000 $ 53 919,971

On April 25, 2013, the District issued Election of 2012, Series 2013 General Obligation Bonds totaling $33,999,971. The Bonds were comprised of $22,725,000 which were issued as Current Interest Bonds, and $11,274,971 which were issued as Capital Appreciation Bonds. The proceeds of the Bonds are being used to update and construct District facilities. The Bonds bear interest at rates ranging from 4.00% to 5.35% and mature through August 2043.

On June 18, 2015, the District issued Election of 2012, Series 2015 General Obligation Bonds, totaling $26,100,000. The proceeds of the Bonds are being used to fund the modernization of existing schools and construction of new facilities . The bonds bear interest at rates ranging from 4.00% to 5.00% and are scheduled to mature through August 2040.

A summary of the future maturities of the District's General Obligation Bonds follows:

Year Ended June 30. PrinciQal Interest Total

2020 $ 785,000 $ 1,929,313 $ 2,714,313 2021 1,595,000 1,896,938 3,491,938 2022 1,740,000 1,813,563 3,553,563 2023 1,890,000 1,724,938 3,614,938 2024 2,055,000 1,629,188 3,684,188

2025-2029 8,880,946 10,304,317 19,185,263 2030-2034 9,489,015 11,428,285 20,917,300 2035-2039 10,740,010 12,279,887 23,019,897 2040-2044 16}451000 210751500 1818201500

$ 53.9191971 $ 451081 929 $ 9910011900

(Continued)

38.


June 30, 2019

NOTE 6 - LONG-TERM LIABILITIES (Continued)

Certificates of Participation: In June 2015, the District issued Certificates of Participation (2015 COPs) in the amount of $18,435,000. The 2015 COPs bear interest at rates ranging from 3.0% to 5.0% and mature through September 1, 2038. Proceeds from the issuance of the 2015 COPs were used for the acquisition and improvement of District property and facilities and to refund on a current basis, the outstanding balance of the 2005 COPs and the remaining capitalized lease obligation for the Visalia Charter Independent School building.

In May 2018, the District issued Certificates of Participation (2018 COPs) in the amount of $59,780,000. The 2018 COPs bear interest at rates ranging from 3.0% to 5.0% and mature through May 1, 2048. Proceeds from the issuance of the 2018 COPs were used for the acquisition, construction, modernization, and installation of school facilities improvements.

Scheduled payments for the 2015 COPs are as follows:

Year Ending June 30,

2020 2021 2022 2023 2024

2025-2029 2030-2034 2035-2039

Total payments

Less amount representing interest

Net present value of minimum payments

Scheduled payments for the 2018 COPs are as follows:

Year Ending June 30,

2020 2021 2022 2023 2024

2025-2029 2030-2034 2035-2039 2040-2044 2045-2048

Total payments

Less amount representing interest

Net present value of minimum payments

(Continued)

$

I

$

I

COPs Pa~ments

1,206,463 1,252,063 1,291,288 1,338,413 1,386,163 6,656,916 5,251,750 4,082,500

22,465,556

(6.210,556)

16,255,000

COPs Pa~ments

3,346,300 3,342,050 3,345,050 3,344,800 3,343,700

16,713,500 16,722,350 16,721,850 16,715,238 13,377,600

96,972,438

(38,277 a438)

58,695,000

39.


June 30, 2019

NOTE 6 - LONG-TERM LIABILITIES (Continued)

Capitalized Lease Obligations: The District leases a building, print shop, and buses under agreements which provide either (a) for title to pass upon expiration of the lease period or (b) provide the District with a purchase agreement upon the expiration of the lease period. As of June 30, 2019, the historical cost of capital assets acquired in connection with the leases totaled $2,621,122 and the accumulated depreciation was $467,097.

Future yearly payments on the capitalized lease obligations are as follows:

Year Ending Lease June 30, Pa~ments

2020 $ 555,309 2021 401,628 2022 401,628 2023 2801511

Total payments 1,639,076

Less amount representing interest (671868)

Net present value of minimum lease payments $ 115711208

Schedule of Changes in Long-Term Liabilities: A schedule of changes in long-term liabilities for the year ended June 30, 2019 is shown below:

Amounts Balance, Balance Due Wiihin

Jul~ 11 2018 Additions Deductions June 30, 2019 One Year

Governmental activities: Debt:

General Obligation Bonds $ 55,559,971 $ $ 1,640,000 $ 53,919,971 $ 785,000 Unamortized premiums 4,708,825 165,655 4,543,170 167,908 Accreted interest 2,852,277 685,148 3,537,425 Certificates of Participation 76,545,000 1,595,000 74,950,000 1,760,000 Capitalized lease obligations 2,084,810 513,602 1,571,208 524,486 State school building loan 210,000 210,000

Other Long-Term Liabilities: Net pension

liability (Note 8 & 9) 289,130,000 23,745,000 312,875,000 Total OPEB Liability (Note 10) 88,434,806 2,570,659 91,005,465 Compensated absences 8271908 45,262 873,170

$ 520 353 597 $ 27 046 069 $ 4 124 257 $ 543,275 409 $ 3 237 394

Payments on the General Obligation Bonds are made from the Bond Interest and Redemption Fund. Payments on the Certificates of Participation are made from the Capital Facilities and Debt Service Funds. Payments on the capitalized lease obligations are made from the General Fund. Payments on the state school building loan are made from the Child Development Fund. Payments towards on the OPEB liability, net pension liability, and compensated absences are made from the fund for which the related employee worked.

(Continued)

40.

NOTE 7 - FUND BALANCES


June 30, 2019

Fund balances, by category, at June 30, 2019 consisted of the following :

Special Reserve

for Capital General Outlay Projects

Fund Fund

Nonspendable: Revolving cash fund $ 44,028 $ Prepaid expenditures 92,000 Stores inventory 206A64

Subtotal nonspendable 3421492

Restricted: Legally restricted programs 22,130,148 Capital projects 41,806,562 Debt service

Subtotal restricted 2211301148 4118061562

Assigned: Other postemployment benefits 21,011,107 Pension trust account 7,011,000 Local control and accountability carry-over 6,153,000

Capital projects 5,695,000 Local control and

accountability reserves 2,590,970 Site level donations 497,782 Charter schools 4501600

Subtotal assigned 43A09A59

Unassigned : Designated for economic

uncertainty 44,444,195 U ndesignated 721802

Subtotal unassigned 4415161997

Total fund balances i11013991096 i 4118061562

(Continued)

All Non-Major

Funds Total

$ $ 44,028 92,000

1581883 3651347

1581883 501 375

9,021,610 31,151,758 9,806,364 51,612,926 711211861 711211861

2519491835 8918861545

21,011,107 7,011,000

6,153,000 5,695,000

2,590,970 497,782 4501600

43A09A59

44,444,195 721802

4415161997

i 261108}18 i17813141376

41.


June 30, 2019

NOTE 8 - NET PENSION LIABILITY - STATE TEACHERS' RETIREMENT PLAN

General Information about the State Teachers' Retirement Plan

Plan Description: Teaching-certified employees of the District are provided with pensions through the State Teachers' Retirement Plan (STRP) - a cost-sharing multiple-employer defined benefit pension plan administered by the California State Teachers' Retirement System (CalSTRS). The Teachers' Retirement Law (California Education Code Section 22000 et seq.), as enacted and amended by the California Legislature, established this plan and CalSTRS as the administrator. The benefit terms of the plans may be amended through legislation. CalSTRS issues a publicly available financial report that can be obtained at http://www.calstrs.com.

Benefits Provided: The STRP Defined Benefit Program has two benefit formulas:

• CalSTRS 2% at 60: Members first hired on or before December 31, 2012, to perform service that could be creditable to CalSTRS .

• CalSTRS 2% at 62: Members first hired on or after January 1, 2013, to perform service that could be creditable to CalSTRS.

The Defined Benefit (DB) Program provides retirement benefits based on members' final compensation, age and years of service credit. In addition, the retirement program provides benefits to members upon disability and to survivors/beneficiaries upon the death of eligible members. There are several differences between the two benefit formulas which are noted below.

CalSTRS 2% at 60

CalSTRS 2% at 60 members are eligible for normal retirement at age 60, with a minimum of five years of credited service. The normal retirement benefit is equal to 2.0 percent of final compensation for each year of credited service. Early retirement options are available at age 55 with five years of credited service or as early as age 50 with 30 years of credited service. The age factor for retirements after age 60 increases with each quarter year of age to 2.4 percent at age 63 or older. Members who have 30 years or more of credited service receive an additional increase of up to 0.2 percent to the age factor, known as the career factor. The maximum benefit with the career factor is 2.4 percent of final compensation.

CalSTRS calculates retirement benefits based on a one-year final compensation for members who retired on or after January 1, 2001, with 25 or more years of credited service, or for classroom teachers with less than 25 years of credited service if the employer elected to pay the additional benefit cost prior to January 1, 2014. One-year final compensation means a member's highest average annual compensation earnable for 12 consecutive months calculated by taking the creditable compensation that a member could earn in a school year while employed on a fulltime basis, for a position in which the person worked. For members with less than 25 years of credited service, final compensation is the highest average annual compensation earnable for any three consecutive years of credited service.

(Continued)

42.


June 30, 2019

NOTE 8 - NET PENSION LIABILITY - STATE TEACHERS' RETIREMENT PLAN (Continued)

Ca/STRS 2% at 62

CalSTRS 2% at 62 members are eligible for normal retirement at age 62, with a minimum of five years of credited service. The normal retirement benefit is equal to 2.0 percent of final compensation for each year of credited service. An early retirement option is available at age 55. The age factor for retirement after age 62 increases with each quarter year of age to 2.4 percent at age 65 or older.

All CalSTRS 2% at 62 members have their final compensation based on their highest average annual compensation earnable for three consecutive years of credited service.

Contributions: Required member, employer and state contribution rates are set by the California Legislature and Governor and detailed in Teachers' Retirement Law. Contribution rates are expressed as a level percentage of payroll using the entry age normal actuarial cost method.

The employer contribution rates set in statute by the CalSTRS Funding Plan were not changed by the passage of SB 90. A summary of statutory contribution rates and other sources of contributions to the Defined Benefit Program are as follows:

Members - Under CalSTRS 2% at 60, the member contribution rate was 10.25 percent of applicable member earnings for fiscal year 2018-19. Under CalSTRS 2% at 62, members contribute 50 percent of the normal cost of their retirement plan, which resulted in a contribution rate of 10.205 percent of applicable member earnings for fiscal year 2018-19.

In general, member contributions cannot increase unless members are provided with some type of "comparable advantage" in exchange for such increases. Under previous law, the Legislature could reduce or eliminate the 2 percent annual increase to retirement benefits. As a result of AB 1469, effective July 1, 2014, the Legislature cannot reduce the 2 percent annual benefit adjustment for members who retire on or after January 1, 2014, and in exchange for this "comparable advantage," the member contribution rates have been increased by an amount that covers a portion of the cost of the 2 percent annual benefit adjustment.

According to current law, the contribution rate for CalSTRS 2% at 62 members is adjusted if the normal cost increases or decreases by more than 1 percent since the last time the member contribution rate was set. Based on the June 30, 2017, valuation adopted by the board in May 2018, the increase in normal cost was greater than 1 percent. Therefore, contribution rates for CalSTRS 2% at 62 members will increase by 1 percent effective July 1, 2018.

Employers - 16.28 percent of applicable member earnings.

Pursuant to AB 1469, employer contributions will increase from 8.25 percent to a total of 19.1 percent of applicable member earnings phased in over seven years starting in 2014. The legislation also gives the board limited authority to adjust employer contribution rates from July 1, 2021 through June 2046 in order to eliminate the remaining unfunded actuarial obligation related to service credited to members prior to July 1, 2014. The board cannot adjust the rate by more than 1 percent in a fiscal year, and the total contribution rate in addition to the 8.25 percent cannot exceed 12 percent.

In June 2019, California Senate Bill 90 (SB 90) was signed into law and appropriated approximately $2.2 billion in fiscal year 2018-19 from the state's General Fund as contributions to CalSTRS on behalf of employers. The bill requires portions of the contribution to supplant the amounts remitted by employers such that the amounts remitted will be 1.03 and 0.70 percentage points less than the statutorily required amounts due for fiscal years 2019-20 and 2020-21, respectively. The remaining portion of the contribution is allocated to reduce the employers' share of the unfunded actuarial obligation of the Defined Benefit Program.

(Continued)

43 .


June 30, 2019

NOTE 8-NET PENSION LIABILITY-STATE TEACHERS' RETIREMENT PLAN (Continued)

The CalSTRS employer contribution rate increases effective for fiscal year 2018-19 through fiscal year 2045-46 are summarized in the table below:

Effective Date Prior Rate Increase Total

July 01, 2018 8.25% 8.03% 16.28% July 01, 2019 8.25% 9.88% 18.13% July 01 , 2020 8.25% 10.85% 19.10%

July 01, 2021 to June 30, 2046 8.25% * * July 01, 2046 8.25% Increase from prior rate ceases in 2046-47

* The Teachers' Retirement Board (the "board") cannot adjust the employer rate by more than 1 percent in a fiscal year, and the increase to the contribution rate above the 8.25 percent base contribution rate cannot exceed 12 percent for a maximum of 20.25 percent.

The District contributed $21,978,106 to the plan for the fiscal year ended June 30, 2019.

State - 9.828 percent of the members' creditable earnings from the fiscal year ending in the prior calendar year.

Also as a result of AB 1469, the additional state appropriation required to fully fund the benefits in effect as of 1990 by 2046 is specific in subdivision (b) of Education Code Section 22955.1. The increased contributions end as of fiscal year 2045-2046. The CalSTRS state contribution rates effective for fiscal year 2018-19 and beyond are summarized in the table below:

AB 1469 Increase For Total State

Base 1990 Benefit SBMA Appropriation Effective Date Rate Structure Funding(1) to DB Program

July 01, 2018 2.017% 5.311%(2) 2.50% 9.828%

July 01, 2019 2.017% 5.311%(2) 2.50% 10.828%(3)

July 01, 2020

June 30, 2046 2.017% (4) 2.50% (4)

July 01, 2046

and thereafter 2.017% (5) 2.50% 4.517%(5)

(1) This rate does not include the $72 million reduction in accordance with Education Code Section 22954.

(2) In May 2018, the board of CalSTRS exercised its limited authority to increase the state contribution rate by 0.5 percent of the payroll effective July 1, 2017.

(3) This rate does not include the $2.2 billion supplemental state contribution on behalf of employers pursuant to SB 90.

(4) The CalSTRS board has limited authority to adjust state contribution rates annually through June 30, 2046 in order to eliminate the remaining unfunded actuarial obligation associated with the 1990 benefit structure. The board cannot increase the rate by more than 0.50 percent in a fiscal year, and if there is no unfunded actuarial obligation, the contribution rate imposed to pay for the 1990 benefit structure would be reduced to 0 percent.

(5) From July 1, 2046, and thereafter, the rates in effect prior to July 1, 2014, are reinstated, if necessary, to address any remaining 1990 unfunded actuarial obligation.

(Continued)

44.


June 30, 2019

NOTE 8-NET PENSION LIABILITY-STATE TEACHERS' RETIREMENT PLAN . .(Continued)

Pension Liabilities, Pension Expense, Deferred Outflows of Resources and Deferred Inflows of Resources Related to Pensions

At June 30, 2019, the District reported a liability for its proportionate share of the net pension liability that reflected a reduction for State pension support provided to the District. The amount recognized by the District as its proportionate share of the net pension liability, the related State support, and the total portion of the net pension liability that was associated with the District were as follows:

District's proportionate share of the net pension liability State's proportionate share of the net pension liability

associated with the District

Total

$ 219,911,000

125,910,000

$ 345,821,000

The net pension liability was measured as of June 30, 2018, and the total pension liability used to calculate the net pension liability was determined by an actuarial valuation as of June 30, 2017. The District's proportion of the net pension liability was based on the District's share of contributions to the pension plan relative to the contributions of all participating school Districts and the State. At June 30, 2018, the District's proportion was 0.239 percent, which was an increase of 0.010 percent from its proportion measured as of June 30, 2017.

For the year ended June 30, 2019, the District recognized pension expense of $51,058,563 and revenue of $22,789,075 for support provided by the State. At June 30, 2019, the District reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources:

Difference between expected and actual experience

Changes of assumptions

Net differences between projected and actual earnings on investments

Changes in proportion and differences between District contributions and proportionate share of contributions

Contributions made subsequent to measurement date

Total

Deferred Outflows of Resources

$ 682,000

34,164,000

10,919,000

21 978. 106

$ 67.743 106

Deferred Inflows of Resources

$ 3,194,000

8,468,000

$ 11,662.000

$21,978,106 reported as deferred outflows of resources related to pensions resulting from contributions subsequent to the measurement date will be recognized as a reduction of the net pension liability in the year ended June 30, 2020. Other amounts reported as deferred outflows of resources and deferred inflows of resources related to pensions will be recognized in pension expense as follows:

(Continued)

45.


June 30, 2019

NOTE 8- NET PENSION LIABILITY - STATE TEACHERS' RETIREMENT PLAN (Continued)

Years Ended June 30,

2020 2021 2022 2023 2024 2025

$ 10,120,967 $ 6,948,967 $ 1,178,467 $ 6,394,133 $ 8,283,133 $ 1,177,333

Differences between expected and actual experience and changes in proportion are amortized over a closed period equal to the average remaining service life of plan members, which is 7 years as of the June 30, 2018 measurement date. Deferred outflows and inflows related to differences between projected and actual earrings on plan investments are netted and amortized over a closed 5-year period.

Actuarial Methods and Assumptions: The total pension liability for the STRP was determined by applying update procedures to a financial reporting actuarial valuation as of June 30, 2017, and rolling forward the total pension liability to June 30, 2018. The financial reporting actuarial valuation as of June 30, 2017, used the following actuarial methods and assumptions, applied to all prior periods included in the measurement:

Valuation Date Experience Study Actuarial Cost Method Investment Rate of Return Consumer Price Inflation Wage Growth Post-retirement Benefit Increases

June 30, 2017 July 1, 2010 through June 30, 2015 Entry age normal 7.10% 2.75% 3.50% 2.00% simple for DB

Not applicable for DBS/CBB

CalSTRS uses a generational mortality assumption, which involves the use of a base mortality table and projection scales to reflect expected annual reductions in mortality rates at each age, resulting in increases in life expectancies each year into the future. The base mortality tables are CalSTRS custom tables derived to best fit the patterns of mortality among its members. The projection scale was set equal to 110 percent of the ultimate improvement factor from the Mortality Improvement Scale (MP-2016) table, issued by the Society of Actuaries.

(Continued)

46.


June 30, 2019

NOTE 8-NET PENSION LIABILITY-STATE TEACHERS' RETIREMENT PLAN (Continued)

The long-term expected rate of return on pension plan investments was determined using a buildingblock method in which best-estimate ranges of expected future real rates of return (expected returns, net of pension plan investment expense and inflation) are developed for each major asset class. The best estimate ranges were developed using capital market assumptions from CalSTRS general investment consultant as an input to the process. The actuarial investment rate of return assumption was adopted by the CalSTRS board in February 2017 in conjunction with the most recent experience study. For each future valuation, CalSTRS consulting actuary reviews the return assumption for reasonableness based on the most current capital market assumptions. Best estimates of 20-year geometric real rates of return and the assumed asset allocation for each major asset class used as input to develop the actuarial investment rate of return are summarized in the following table:

Asset Class

Global Equity Fixed Income Real Estate Private Equity Absolute Return/Risk

Mitigating Strategies Inflation Sensitive Cash / Liquidity

* 20-year geometric average

Assumed Asset Allocation

47% 12 13 13

9 4 2

Long-Term* Expected Real Rate of Return

6.30% 0.30 5.20 9.30

2.90 3.80

(1.00)

Discount Rate: The discount rate used to measure the total pension liability was 7 .10 percent. The projection of cash flows used to determine the discount rate assumed that contributions from plan members and employers will be made at statutory contribution rates in accordance with the rate increase per AB 1469. Projected inflows from investment earnings were calculated using the long-term assumed investment rate of return (7 .10 percent) and assuming that contributions, benefit payments, and administrative expense occur midyear. Based on those assumptions, the STRP's fiduciary net position was projected to be available to make all projected future benefit payments to current plan members. Therefore, the long-term assumed investment rate of return was applied to all periods of projected benefit payments to determine the total pension liability.

Sensitivity of the District's Proportionate Share of the Net Pension Liability to Changes in the Discount Rate: The following presents the District's proportionate share of the net pension liability calculated using the discount rate of 7 .10 percent, as well as what the District's proportionate share of the net pension liability would be if it were calculated using a discount rate that is 1-percentage-point lower (6.1 O percent) or 1-percentage-point higher (8.10 percent) than the current rate:

District's proportionate share of the net pension liability

1% Decrease (6.10%)

$322,144.000

Current Discount

Rate (7.10%)

$219,911.000

1% Increase (8.10%)

$135,150.000

Pension Plan Fiduciary Net Position: Detailed information about the pension plan's fiduciary net position is available in the separately issued CalSTRS financial report.

(Continued)

47 .


June 30, 2019

NOTE 9 - NET PENSION LIABILITY - PUBLIC EMPLOYER'S RETIREMENT FUND B

General Information about the Public Employer's Retirement Fund B

Plan Description: The schools cost-sharing multiple-employer defined benefit pension plan Public Employer's Retirement Fund B (PERF B) is administered by the California Public Employees' Retirement System (CalPERS). Plan membership consists of non-teaching and non-certified employees of public schools (K-12), community college districts, offices of education, charter and private schools (elective) in the State of California.

The Plan was established to provide retirement, death and disability benefits to non-teaching and noncertified employees in schools. The benefit provisions for Plan employees are established by statute. CalPERS issues a publicly available financial report that can be obtained at:

https://www.calpers.ca.gov/docs/forms-publications/cafr-2018.pdf

Benefits Provided: The benefits for the defined benefit plans are based on members' years of service, age, final compensation, and benefit formula. Benefits are provided for disability, death, and survivors of eligible members or beneficiaries. Members become fully vested in their retirement benefits earned to date after five years (10 years for State Second Tier members) of credited service.

Contributions: The benefits for the defined benefit pension plans are funded by contributions from members and employers, and earnings from investments. Member and employer contributions are a percentage of applicable member compensation. Member contribution rates are defined by law and depend on the respective employer's benefit formulas. Employer contribution rates are determined by periodic actuarial valuations or by state statute. Actuarial valuations are based on the benefit formulas and employee groups of each employer. Employer contributions, including lump sum contributions made when district's first join the PERF B, are credited with a market value adjustment in determining contribution rates.

The required contribution rates of most active plan members are based on a percentage of salary in excess of a base compensation amount ranging from zero dollars to $863 monthly.

Required contribution rates for active plan members and employers as a percentage of payroll for the year ended June 30, 2019 were as follows:

Members - The member contribution rate was 6.50 or 7.50 percent of applicable member earnings for fiscal year 2018-19.

Employers - The employer contribution rate was 18.062 percent of applicable member earnings.

The District contributed $9,035,122 to the plan for the fiscal year ended June 30, 2019.

Pension Liabilities, Pension Expense, Deferred Outflows of Resources and Deferred Inflows of Resources Related to Pensions

At June 30, 2019, the District reported a liability of $92,964,000 for its proportionate share of the net pension liability. The net pension liability. was measured as of June 30, 2018, and the total pension liability used to calculate the net pension liability was determined by an actuarial valuation as of June 30, 2017. The District's proportion of the net pension liability was based on the District's share of contributions to the pension plan relative to the contributions of all participating school Districts. At June 30, 2018, the District's proportion was 0.349 percent, which was an increase of 0.023 percent from its proportion measured as of June 30, 2017.

(Continued)

48.


June 30, 2019

NOTE 9 - NET PENSION LIABILITY - PUBLIC EMPLOYER'S RETIREMENT FUND B (Continued}

For the year ended June 30, 2019, the District recognized pension expense of $23,582,619 and revenue of $3,154,960 for support provided by the State.. At June 30, 2019, the District reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources:

Deferred Outflows Deferred Inflows of Resources of Resources

Difference between expected and actual experience $ 6,094,000 $

Changes of assumptions 9,282,000

Net differences between projected and actual earnings on investments 763,000

Changes in proportion and differences between District contributions and proportionate share of contributions 4,895,000

Contributions made subsequent to measurement date 910351122

Total $ 3010691122 $

$9,035,122 reported as deferred outflows of resources related to pensions resulting from contributions subsequent to the measurement date will be recognized as a reduction of the net pension liability in the year ended June 30, 2020. Other amounts reported as deferred outflows of resources and deferred inflows of resources related to pensions will be recognized in pension expense as follows:


2020 2021 2022 2023

$ 11,797,750 $ 8,817,750 $ 967,250 $ (548,750}

Differences between expected and actual experience, changes in assumptions, and changes in proportion are amortized over a closed period equal to the average remaining service life of plan members, which is 4 years as of the June 30, 2018 measurement date. Deferred outflows and inflows related to differences between projected and actual earnings on plan investments are netted and amortized over a closed 5-year period.

(Continued}

49 .


June 30, 2019

NOTE 9 - NET PENSION LIABILITY - PUBLIC EMPLOYER'S RETIREMENT FUND B (Continued)

Actuarial Methods and Assumptions: The total pension liability for the Plan was determined by applying update procedures to a financial reporting actuarial valuation as of June 30, 2017, and rolling forward the total pension liability to June 30, 2018. The financial reporting actuarial valuation as of June 30, 2017, used the following actuarial methods and assumptions, applied to all prior periods included in the measurement:

Valuation Date Experience Study Actuarial Cost Method Investment Rate of Return Consumer Price Inflation Wage Growth Post-retirement Benefit Increases

June 30, 2017 June 30, 1997 through June 30, 2015 Entry age normal 7.15% 2.50% Varies by entry age and service Contract COLA up to 2.00% until Purchasing

Power Protection Allowance Floor on Purchasing Power applies 2.50% thereafter

The mortality table used was developed based on CalPERS specific data. The table includes 20 years of mortality improvements using Society of Actuaries 90% of Scale MP 2016. For more details on this table, please refer to the 2017 experience study report.

All other actuarial assumptions used in the June 30, 2017 valuation were based on the results of an actuarial experience study for the period from 1997 to 2015, including updates to salary increase, mortality and retirement rates. Further details of the Experience Study can be found at CalPERS' website.

The table below reflects long-term expected real rate of return by asset class. The rate of return was calculated using the capital market assumptions applied to determine the discount rate and asset allocation.

Long-Term* Assumed Asset

Asset Class Allocation

Global Equity 50% Fixed Income 28 Inflation Assets Private Equity 8 Real Estate 13 Liquidity 1

* 10-year geometric average (1) An expected inflation rate of 2.00% used for this period (2) An expected inflation rate of 2.92% used for this period

------- --------

(Continued)

Expected Real Expected Real Rate of Return Rate of Return Years 1 - 10 {1} Years 11+ {2}

4.80% 5.98% 1.00 2.62 0.77 1.81 6.30 7.23 3.75 4.93

(0.92)

50.


June 30, 2019

NOTE 9 - NET PENSION LIABILITY - PUBLIC EMPLOYER'S RETIREMENT FUND B (Continued)

Discount Rate: The discount rate used to measure the total pension liability was 7 .15 percent. A projection of the expected benefit payments and contributions was performed to determine if assets would run out. The test revealed the assets would not run out. Therefore the long-term expected rate of return on pension plan investments was applied to all periods of projected benefit payments to determine the total pension liability for the Plan. The results of the crossover testing for the Plan are presented in. a detailed report that can be obtained at CalPERS' website.

The long-term expected rate of return on pension plan investments was determined using a buildingblock method in which best-estimate ranges of expected future real rates of return (expected returns, net of pension plan investment expense and inflation) are developed for each major asset class.

In determining the long-term expected rate of return, CalPERS took into account both short-term and long-term market return expectations as well as the expected cash flows of the Plan. Such cash flows were developed assuming that both members and employers will make their required contributions on time and as scheduled in all future years. Using historical returns of all the Plan's asset classes, expected compound (geometric) returns were calculated over the short-term (first 10 years) and the long-term (11-60 years) using a building-block approach. Using the expected nominal returns for both short-term and long-term, the present value of benefits was calculated. The expected rate of return was set by calculating the rounded single equivalent expected return that arrived at the same present value of benefits for cash flows as the one calculated using both short-term and long-term returns. The expected rate of return was then set equivalent to the single equivalent rate calculated above and adjusted to account for assumed administrative expenses.

Sensitivity of the District's Proportionate Share of the Net Pension Liability to Changes in the Discount Rate: The following presents the District's proportionate share of the net pension liability calculated using the discount rate of 7 .15 percent, as well as what the District's proportionate share of the net pension liability would be if it were calculated using a discount rate that is 1-percentage-point lower (6.15 percent) or 1-percentage-point higher (8.15 percent) than the current rate:

1% Current 1% Decrease Discount Increase (6.15%} Rate (7.15%} (8.15%}

District's proportionate share of the net pension liability $ 135.351.000 $ 92.964.000 $ 57.798.000

Pension Plan Fiduciary Net Position: Detailed information about the pension plan's fiduciary net position is available in the separately issued CalPERS financial report.

(Continued)

51.


June 30, 2019

NOTE 10 - OTHER POSTEMPLOYMENT BENEFITS

General Information about the Other Postemployment Benefits Plan (OPEB)

Plan Description: In addition to the pension benefits described in Notes 8 and 9, the District provides healthcare benefits to eligible employees who retire from the District, as part of a single-employer defined benefit postemployment health care plan (Plan). The Plan is administered by the District and allows employees who retire after having achieved retirement eligibility requirements to continue receiving medical insurance coverage. The District's Board of Education has the authority to establish or amend the benefit terms offered by the Plan. The District's Board of Education also retains the authority to establish the requirements for paying for the Plan's benefits as they come due. As of June 30, 2019 the District has accumulated assets in a qualified trust provided by Public Agency Retirement Services (PARS) for the purpose of paying the benefits related to the District's net OPEB liability. Assets contributed to the plan are included in the PARS trust financial statements. Copies of PARS independent financial statements may be obtained from the Public Agency Retirement Services - 4350 Von Karman Avenue, Newport Beach, CA 92660.

Benefits Provided: In accordance with contracts between the District and the respective employee groups, employees who retire on or after reaching age 55 with at least 15 years of service, are entitled to benefits through the Plan, up to age 65. Under the Plan, employees who retire from a full-time position receive District-paid medical benefits equal to the coverage provided to full-time active employees, excluding life insurance benefits. Employees who retire from the District having worked more than 50% but less than 75% of full-time are entitled to pro-rated benefits, which vary by employee group. Employees who retire from the District having worked less than 50% of full-time are not entitled to receive benefits under the Plan.

Certificated and Management Employees: Certificated and management employees who retire from the District having worked more than 50% but less than 75% of full-time, receive District contributions towards medical benefits equal to one-half of the coverage provided to employees who retire from a fulltime position. Required contribution amounts for certificated and management retirees is $1,260 and $792 per year, respectively. Retirees must contribute $756 per year for a covered spouse, in addition to $192 per covered dependent, up to a maximum of three dependents.

Classified Employees: Classified employees who retire from the District having worked at least 3 hours but less than 4 hours per day receive contributions towards medical benefits equal to 25 percent of the coverage provided to classified employees who retire from a full-time position. Classified employees working at least 4 hours but less than 5 hours per day receive contributions towards medical benefits equal to 50 percent of the coverage provided to classified employees who retire from a full-time position. Classified employees working at least 5 hours but less than 6 hours per day receive contributions towards medical benefits equal to 50 percent of the coverage provided to classified employees who retire from a full-time position.

The District's premium rates being charged to these retirees are lower than the expected cost for a retiree population under age 65. Thus, an implicit subsidy exists as a result of this difference between the actual cost and the true retiree cost.

Contributions: California Government Code specifies that the District's contribution requirements for covered employees are established and may be amended by the Governing Board. District and retiree contributions to the cost of healthcare vary depending on employee group in which the retiree worked and percentage of full-time employment of the individual. Contributions to the Plan from the District were $6,537,924 for the year ended June 30, 2019. Employees are not required to contribute to the OPEB plan.

- -------- ----------

(Continued)

52.


June 30, 2019

NOTE 10 -OTHER POSTEMPLOYMENT BENEFITS (Continued)

OPES Plan Investments: The discount rate of 5.00% was determined using the following asset allocation and assumed rate of return, adjusted for conservatism:

Asset Class

US Large Cap US Mid Cap Long-Term Corporate Bonds Long-Term Government Bonds Intermediate-Term Government Bonds

* Geometric average

Percentage of Portfolio

40% 20% 20% 15% 5%

Rate of Return*

7.8% 7.8% 5.3% 4.5% 4.5%

Rolling periods of time for all asset classes in combination we used to appropriately reflect correlation between asset classes. This means that the average returns for any asset class do not necessarily reflect the averages over time individually, but reflect the return for the asset class for the portfolio average. Additionally, the historic 30 year real rates of return for each asset class along with the assumed long-term inflation assumption was used to set the discount rate. The investment return was offset by assumed investment expenses of 25 basis points. It was further assumed that contributions to the plan would be sufficient to fully fund the obligation over a period not to exceed 30 years.

Employees Covered by Benefit Terms: The following is a table of plan participants included in the District's most recent actuarial valuation:

Inactive Plan members, covered spouses, or beneficiaries currently receiving benefits

Active employees

Net OPEB Liability

Number of Participants

351 2,423

2 774

The District's net OPES liability was measured as of June 30, 2018 based on an actuarial valuation as of June 30, 2017.

Actuarial Assumptions: The total OPES liability in the District's actuarial valuation was determined using the following actuarial assumptions, applied to all periods included in the measurement, unless otherwise specified:

Valuation Date

Actuarial Method

Discount Rate

June 30, 2017

Entry Age actuarial cost method, level percentage of payroll.

5.00%.

(Continued)

53.


June 30, 2019

NOTE 10 - OTHER POSTEMPLOYMENT BENEFITS (Continued)

Long-Term Investment Rate of Return

Mortality Rates

Health Care Increases

Turnover/Retirement Rates

Inflation Rate

Salary Increases

Coverage Elections

Medicare Coverage

Medical Claims

The long-term rate of return on investments was determined to be 5.00%. This was computed as PARS' expected long-term mean rate of return of 6.25% with an adjustment for conservatism.

Mortality rates are taken from the 2014 CalPERS OPES Assumptions Model (for classified employees) and from the 2016 valuation of CalSTRS (for certificated employees).

Medical insurance premiums are assumed to increase by 5.00% in fiscal 2019 onwards. Future retiree contributions are assumed to remain unchanged after 2018.

Termination and retirement rates were taken from the most recent experience studies for CalPERS (2014) and CalSTRS (2016).

2.75% per year

3.00% per year

100% of eligible employees are assumed to elect coverage upon retirement, and to remain covered under the District plans until age 65.

All current and future participating retirees and spouses will qualify for Medicare coverage and enroll in Parts A and B upon age 65.

Medical claims were estimated based on the true per person costs of coverage. The agespecific rates were developed to reproduce the same aggregate premiums that would be paid to the carriers for all current employee and retirees

Age Cost 40 $10,300 45 $12,904 50 $15,982 55 $19,060 60 $23,322 64 $23,322

Discount Rate: All future benefit payments were discounted using a discount rate of 5.00%. As the plan is funded by an irrevocable trust, and the plans' projected contributions and net position are expected to fully cover future benefit payments, the discount rate has been set to equal the long-term rate of return on plan investments. The long-term mean rate of return on plan investments of 6.25% has been adjusted to 5.00% for conservatism.

(Continued)

54.


June 30, 2019


Changes in the Net OPEB Liability

Increase (Decrease} Total OPEB Total Fiduciary Net OPEB

Liability Net Position Liability 00 ill (a} - (b}

Balance at July 1, 2018 $ 90}201532 $ 212851726 $ 8814341806

Changes for the year: Service cost 4,968,971 4,968,971 Interest 4,372,579 4,372,579 Employer contributions 6,537,924 (6,537,924) Net investment income 232,967 (232,967) Benefits paid to retirees 615371924 {615371924)

Net change 151879.474 2321967 215701659

Balance at June 30, 2019 $ 10616001006 $ 215181693 $ 9110051465

There were no changes between the measurement date and the year ended June 30, 2019 which had a significant effect on the District's total OPEB liability.

Fiduciary Net Position as a% of the total OPEB liability, at June 30, 2019: 2.4%

Sensitivity of the Net OPEB Liability to changes in the Discount Rate: The following presents the Net OPEB Liability of the District, as well as what the District's Net OPEB Liability would be if it were calculated using a discount rate that is one percentage-point lower or one percentage-point higher than the current discount rate:

Net OPEB liability

1% Decrease (4.00%}

Current Discount

Rate (5.00%}

1% Increase (6.00%)

$ 9911711810 $ 911005.465 $ 831673.034

Sensitivity of the Net OPEB Liability to changes in the Healthcare Cost Trend Rates: The following presents the Net OPEB Liability of the District, as well as what the District's Net OPEB Liability would be if it were calculated using healthcare cost trend rates that are one percentage-point lower or one percentage-point higher than the current healthcare cost trend rates:

Net OPEB liability

1% Decrease (4.00%}

$ 811384,911

(Continued)

Healthcare Cost Trend Rates Rate (5.00%}

1% Increase (6.00%}

$ 911005.465 $ 1021310239

55.


June 30, 2019


OPEB Expense, Deferred Outflows of Resources, and Deferred Inflows of Resources Related to OPEB

For the year ended June 30, 2019, the District recognized OPEB expense of $9,166,295. At June 30, 2019, the District reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources:

Net differences between projected and actual earnings on investments

Benefits paid subsequent to measurement date

Total

Deferred Outflows Deferred Inflows of Resources of Resources

$ $ 206,642

6,479,165

$ 6,479,165 $

$6,479,165 reported as deferred outflows of resources related to benefits paid subsequent to the measurement date will be recognized as a reduction of the total OPEB liability in the year ended June 30, 2020. Other amounts reported as deferred outflows of resources and deferred inflows of resources related to OPEB will be recognized in OPEB expense as follows:


2020 2021 2022 2023

$ $ $ $

(60,969) (60,969) (60,967) (23,737)

Deferred inflows related to differences between projected and actual earnings on plan investments are netted and amortized over a closed 5-year period.

NOTE 11 - JOINT POWERS AUTHORITIES

The District is a member of the Schools Association For Excess Risk (SAFER), Self-Insured Schools of California Ill (SISC Ill), Tulare County Schools Insurance Group (TCSIG), the Tulare County School's Self-Insurance Authority (TCSSIA), the Protected Insurance Program for Schools (PIPS), and Nor-Cal Relief (NCR) public entity risk polls. The District pays an annual premium to each entity for its excess health, worker's compensation, and property liability coverage. The relationship between the District and the pools is such that they are not component units of the District for financial reporting purposes. The District is also a member of the Visalia Civic Facilities Authority Joint Powers Authority (VCFJPA). No audited financial information is available for the VCFJPA as of June 30, 2019 however the financial activity of the JPA is not expected to be significant to the District. There have been no significant reductions in insurance coverage from coverage provided in the prior year.

(Continued)

56.


June 30, 2019

NOTE 11 - JOINT POWERS AUTHORITIES (Continued)

Condensed audited financial information for the District's JPAs at June 30, 2019 for SAFER, PIPS and NCR, June 30, 2018 (most recent information available) for TCSIG and TCSSIA, and September 30, 2018 (most recent information available) for SISC Ill are as follows:

SAFER SISCIII TCSIG TCSSIA PIPS NCR

Total assets $ 43,494,593 $ 642,346,557 $ 3,848,341 $ 1,792,323 $ 133,474,239 $ 90,903,300 Total liabilities $ 52,232,601 $ 197,341,183 $ 2,744,169 $ 708,855 $ 99,564,236 $ 73,773,663 Net position $ (8,738,008) $ 445,005,374 $ 1,104,172 $ 1,083,468 $ 33,910,003 $ 17,129,637 Total revenues $ 67,893,879 $2,314,300,371 $ 22,909,629 $ 3,154,760 $ 315,820,121 $ 62,352,151 Total expenses $ 77,777,714 $2,236,274,883 $ 23,009,274 $ 3,128,071 $ 306,044,422 $ 57,522,201 Change in net

position $ (9,883,835) $ 78,025,488 $ (99,645) $ 26,689 $ 9,775,699 $ 4,829,950

NOTE 12 - COMMITMENTS AND CONTINGENCIES

The District is subject to legal proceedings and claims which arise in the ordinary course of business. In the opinion of management, the amount of ultimate liability with respect to these actions will not materially affect the financial position or results of operations of the District.

The District has received federal and state funds for specific purposes that are subject to review and audit by the grantor agencies. Although such audits could result in expenditure disallowances under terms of the grants, it is management's opinion that any required reimbursements of future revenue offsets subsequently determined will not have a material effect on the District's financial position or results of operations.

Construction Commitments: As of June 30, 2019, the District has approximately $37.1 million in outstanding commitments on construction contracts.

57.

REQUIRED SUPPLEMENTARY INFORMATION

VISALIA UNIFIED SCHOOL DISTRICT GENERAL FUND

BUDGETARY COMPARISON SCHEDULE For the Year Ended June 30, 2019

Budget Variance Favorable

Original Final Actual {Unfavorable}

Revenues: Local Control Funding Formula (LCFF): State apportionment $ 242,549,927 $ 242,414,666 $ 242,224,791 $ (189,875) Local sources 371333 199 4214971019 42 497 019

Total LCFF 27918831126 284 911 685 28417211810 {189 875)

Federal sources 19,865,212 28,151,122 22,566,290 (5,584,832) Other state sources 25,250,763 29,655,644 44,245,958 14,590 ,314 Other local sources 1016261048 18 513 127 2019491419 2 4361292

Total revenues 335 625 149 3611231p8 372 483 477 11125\899

Expenditures : Current:

Certificated salaries 134,801,374 136,580,137 135,364,818 1,215,319 Classified salaries 46,075,149 47,465,250 46,381,965 1,083,285 Employee benefits 86,386,619 85,140,123 99,724,176 (14,584,053) Books and supplies 28,150,259 38,696,580 22,349,096 16,347,484 Contract services and operating

expenditures 20,955,876 33,229,097 30,237,486 2,991,611 Other outgo 2,990,517 3,262,731 4,202,579 (939,848)

Capital outlay 2,937,360 22,396,465 8,763,146 13,633,319 Debt service:

Principal retirement 513,603 513,602 513,602 Interest 41 708 1 I 1561970 11561970

Total expenditures 322 852 465 368440 955 348 693 838 19 747117

Excess (deficiency) of revenues over (under) expenditures 12 7721684 {7 209 377) 23 789 639 30 999 016

Other financing (uses) sources: Transfers in 887,885 850,008 2,847,847 1,997,839 Transfers out {31435 463) {712881628) {201274 996) {1219861368)

Total other financing (uses) sources {2 5471578) {6 4381620) {17 4271149) {1019881529)

Change in fund balance 10,225,106 (13,647,997) 6,362,490 20,010,487

Fund balance, July 1, 2018 10410361606 1041036 606 10410361606

Fund balance, June 30, 2019 i 114 2611712 i 9013881609 i 110 3991096 i 2010101487

See accompanying note to required supplementary information.

58.

VISALIA UNIFIED SCHOOL DISTRICT SCHEDULE OF CHANGES IN THE DISTRICT'S NET

OTHER POSTEMPLOYMENT BENEFITS (OPEB) LIABILITY For the Year Ended June 30, 2019

Last 10 Fiscal Years

2018

Total OPEB liability Service cost $ 4,824,244 Interest 4,279,826 Benefit payments (719601101)

Net change in total OPEB liability 1,143,969

Total OPEB liability, beginning of year 8915761563

Total OPEB liability, end of year (a) $ 90l20 I532

Plan fiduciary net position Contributions - employer $ 7,960,101 Net investment income 286,142 Benefit payments (719601101)

Net change in plan fiduciary net position 286,142

Plan fiduciary net position, beginning of year 119991584

Plan fiduciary net position, end of year (a) $ 212851726

Net OPEB liability, end of year $ 88A34 806

Covered employee payroll $ 169,247,768

Plan fiduciary net position as a percentage of covered-employee payroll 1.35%

Net OPEB liability as a percentage of covered-employee payroll 52.25%

2019

$ 4,968,971 4,372,579

(615371924)

2,803,626

90}201532

$ 9315241158

$ 6,537,924 232,967

(615371924)

232,967

212851726

$ 215181693

$ 91 005 465

$ 180,359,723

1.40%

50.46%

(a) This is a 10 year schedule, however the information in this schedule is not required to be presented retrospectively. The amounts presented for each fiscal year were determined as of the yearend that occurred one year prior. All years prior to 2018 are not available.

See accompanying note to required supplementary information.

59.

District's proportion of the net pension liability

VISALIA UNIFIED SCHOOL DISTRICT SCHEDULE OF THE DISTRICT'S PROPORTIONATE

SHARE OF THE NET PENSION LIABILITY For the Year Ended June 30, 2019

State Teachers' Retirement Plan Last 10 Fiscal Years

2015 2017

0.220% 0.225% 0.230%

2018

0.229% 0.239%

District's proportionate share of the net pension liability $128,708,000 $151,391,000 $185,666,000 $21 1,382,000 $219,911,000

State's proportionate share of the net pension liability associated with the District 77,720.000 80,069.000 105,706,000 125,053.000 125,910,000

Total net pension liability $206,428,000 $231,460,000 $291,372,000 $336.435,000 $345,821.000

District's covered payroll $ 98,100,000 $104,372,000 $114,403,000 $121 ,141,000 $127,370,000

District's proportionate share of the net pension liability as a percentage of its covered payroll 131.20% 145.05% 162.29% 174.49% 172.66%

Plan fiduciary net position as a percentage of the total pension liability 76.52% 74.02% 70.04% 69.46% 70.99%

The amounts presented for each fiscal year were determined as of the year-end that occurred one year prior.

All years prior to 2015 are not available.

(Continued)

60.

VISALIA UNIFIED SCHOOL DISTRICT SCHEDULE OF THE DISTRICT'S PROPORTIONATE

SHARE OF THE NET PENSION LIABILITY For the Year Ended June 30, 2019

Public Employer's Retirement Fund B Last 1 O Fiscal Years

2015 2016 2017

District's proportion of the net pension liability 0.285% 0.298% 0.312%

District's proportionate share of the net pension liability $ 32,390,000 $ 43,931 ,000 $ 61,677,000 $

District's covered payroll $ 29,950,000 $ 32,996,000 $ 37,465,000 $

District's proportionate share of the net pension liability as a percentage of its covered payroll 108.15% 133.14% 164.63%

Plan fiduciary net position as a percentage of the total pension liability 83.38% 79.43% 73.89%

2018 2019

0.326% 0.349%

77,748,000 $ 92,964,000

41,524,000 $ 45,988,000

187.24% 202.15%

71.87% 70.85%

The amounts presented for each fiscal year were determined as of the year-end that occurred one year prior.


See accompanying note to required supplementary information,

61.

Contractually required contribution

Contributions in relation to the contractually required contribution

VISALIA UNIFIED SCHOOL DISTRICT SCHEDULE OF THE DISTRICT'S CONTRIBUTIONS


State Teachers' Retirement Plan Last 1 0 Fiscal Years

2015 2016 2017

$ 9,268,239 $ 12,275,486 $ 15,239,531 $

(912681239) (1212751486) (1512391531)

Contribution deficiency (excess) i i ! i

2018 2019

18,379,491 $ 21,978,106

(181379A91) (2119781106)

i

District's covered payroll

Contributions as a percentage of covered payroll

$104,372,000 $114,403,000 $121,141,000 $127,370,000 $135,001,000

8.88% 10.73% 12.58% 14.43% 16.28%


(Continued)

62.

VISALIA UNIFIED SCHOOL DISTRICT SCHEDULE OF THE DISTRICT'S CONTRIBUTIONS


Public Employer's Retirement Fund B Last 1 0 Fiscal Years

2019

Contractually required contribution $ 3,883,945 $ 4,438,484 $ 5,767,704 $ 7,141,936 $ 9,035,122

Contributions in relation to the contractually required contribution (3,883,945) (4,438,484) (5,767,704) (7,141,936) (9,035,122)

Contribution deficiency (excess) $ $ $ $ =$====

District's covered payroll

Contributions as a

$ 32,996 ,000 $ 37,465,000 $ 41,524,000 $ 45,988,000

percentage of covered payroll 11.77% 11.85% 13.89% 15.53%


See accompanying note to required supplementary information,

50,023,000

18.06%

63.

VISALIA UNIFIED SCHOOL DISTRICT NOTE TO REQUIRED SUPPLEMENTARY INFORMATION


NOTE 1 - PURPOSE OF SCHEDULES

A - Budgetary Comparison Schedule

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

B - Schedule of Changes in Net Other Postemployment Benefits (OPEB} Liability

The Schedule of Changes in Net OPEB Liability is presented to illustrate the elements of the District's net OPEB liability. There is a requirement to show information for 10 years. However, until a full 10 year trend is compiled, governments should present information for those years for which information is available. The District has accumulated assets in a qualified trust for the purpose of paying the benefits related to the District's total OPEB Liability.

C - Schedule of the District's Proportionate Share of the Net Pension Liability

The Schedule of the District's Proportionate Share of the Net Pension Liability is presented to illustrate the elements of the District's net Pension liability. There is a requirement to show information for 10 years. However, until a full 10-year trend is compiled, governments should present information for those years for which information is available.

D - Schedule of the District's Contributions

The Schedule of the District's Contributions is presented to illustrate the District's required contributions relating to the pensions. There is a requirement to show information for 10 years. However, until a full 10-year trend is compiled, governments should present information for those years for which information is available.

E - Changes of Benefit Terms

There are no changes in benefit terms reported in the Required Supplementary Information.

F - Changes of Assumptions

The discount rate for Public Employer's Retirement Fund B (PERF B) was 7.65, 7.65, 7.65, 7.15 and 7.15 percent in the June 30, 2013, 2014, 2015, 2016 and 2017 actuarial reports, respectively.

The following are the assumptions for the State Teachers' Retirement Plan:

Assumption

Consumer price inflation Investment rate of return Wage growth

Measurement Period As of June 30, As of June 30, As of June 30, As of June 30,

2018 2017 2016 2015

2.75% 7.10% 3.50%

2.75% 7.10% 3.50%

3.00% 7.60% 3.75%

3.00% 7.60% 3.75%

64.

SUPPLEMENTARY INFORMATION

VISALIA UNIFIED SCHOOL DISTRICT COMBINING BALANCE SHEET

ALL NON-MAJOR FUNDS June 30, 2019

Child County Bond Adult Develop- Capital School Interest and Debt

Education ment Cafeteria Building Facilities Facilities Redemption Service Fund Fund_ Fund Fund Fund Fund Fund Fund Total

ASSETS

Cash in County Treasury $ 5,903,586 $ 377,204 $ 1,306,929 $ 46 $ 3,724,643 $ 5,404,210 $ 7,121,861 $ $ 23,838,479

Cash on hand and in banks 160,960 21,340 182,300

Receivables 675,802 598,834 1,940,844 789,045 4,004,525

Store inventory 158,883 158,883

Due from other funds 63 _2~ 50 190 2 638

Total assets $ 6?401411 $ 9781373 $ 31428 046 $ 236 $ 4 5131688 $ 51404 210 $ 71121 861 $ $ 28 1861825

LIABILITIES AND FUND BALANCES

Liabilities:

Accounts payable $ 154,945 $ 274,574 $ 116,560 $ $ 111,770 $ $ $ $ 657,849

Unearned revenue 61,617 61,617

Due to other funds 292,801 127,260 938,580 ______Ll58,641

Total liabilities 447 746 463 451 11055,140 111 770 2,078,107

Fund balances: Nonspendable 158,883 158,883 Restricted 6,292~ 5141922 2 214,023 236 4,401,918 5 404,210 7121,861 25,949,835

Total fund

balances 6,292,665 514 922 2,372,906 236 4,4011918 5,404,210 7,1211861 26,108,71_8

Total liabilities and fund balances $ 6 740 411 $ 978 373 $ 3 428 046 $ 236 $ 4 513,688 $ 5 404 210 $ 7 121 861 $ i 28 186 825

65.

Revenues:

VISALIA UNIFIED SCHOOL DISTRICT COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGE IN FUND BALANCES

ALL NON-MAJOR FUNDS For the Year Ended June 30, 2019

Child County Bond Adult Develop- Capital School Interest and Debt

Education ment Cafeteria Building Facilities Facilities Redemption Service Fund Fund Fund Fund Fund Fund Fund Fund Total

Federal sources $ 379,099 $ 239,534 $ 11,752,112 $ $ $ $ $ $ 12,370,745 Other state sources 5,775,831 2,428,653 1,127,797 5,155,362 14,487,643

Other local sources ~~9~ 13 834 944.839 236 5,285.390 42.359 4,264.983 _ - 11 521 534

Total revenues 7,124,823 2 682,021 13 824 748 236 5,285,390 511971721 4,264,983 _____ 38,379,922

Expenditures: Current:

Certificated salaries 2,461,499 189,214 2,650,713 Classified salaries 656,420 1,181,318 4,299,504 6,137,242 Employee benefits 1,664,375 487,099 2,834,806 4,986,280 Books and supplies 218,345 140,419 5,141,072 4,198 5,504,034 Contract services and operating expenditures 631,313 205,107 177,333 190 269,229 1,283,172

Capital outlay 42,789 150,464 902,440 1,095,693 Debt service:

Principal retirement 210,000 1,085,000 1,640,000 510,000 3,445,000 Interest _____ _____ _____ _____ 1,012.705 _____ 1,987,812 653,163 3,653,680

Total expenditures 5 674 741 2,413157 12 603,179 190 3,273 572 _____ 3,627 812 1.163 163 ~8 755 814

Excess (deficiency) of revenues over (under) expenditures 1,450.082 268,864 , 1,221,569 46 2,011 818 5,197,721 637171 (1,163.163) 9,624,108

Other financing (uses) sources: Transfers in 100,059 190 1,163,163 1,263,412 Transfers out {224 093) {101 503} {522,251} _____ _____ _____ _____ _____ {847 847}

Total other financing (uses) sources (224,093) (101,503) (422,192) 190 _____ _____ _____ 1,163.163 415 565

Net change in fund balances 1,225,989 167,361 799,377 236 2,011,818 5,197,721 637,171 10,039,673

Fund balances, July 1, 2018 5.066,676 347.561 1,573.529 _____ 2.390110D 206 489 6 484 69Q ___ 16 069 045

Fund balances, June 30, 2019 $ 6,292,665 $ 5141922 $ 2 372 906 $ 236 $ 4.401 918 $ 5,404.210 $ 7,121 861 $ $ 261108 718

66.

VISALIA UNIFIED SCHOOL DISTRICT COMBINING STATEMENT OF CHANGES IN ASSETS AND LIABILITIES

ALL AGENCY FUNDS For the Year Ended June 30, 2019

Balance July 1, 2018 Additions Deductions

Student Body Funds

Elementary Schools

Assets: Cash in County Treasury $ 247,099 $ 249,568 $ 218,412 $ Cash on hand and in banks

Total assets $ 247,099 $ 249,568 $ 218,412 $

Liabilities: Due to student groups $ 247,099 $ 249 568 $ 218,412 $

Middle Schools

Assets: Cash in County Treasury $ 265,588 $ 690,556 $ 659,552 $ Cash on hand and in banks

Total assets $ 265,588 L 690,556 $ 659,552 $

Liabilities: Due to student groups $ 265,588 $ 690,556 $ 659,552 $

High Schools

Assets: Cash in County Treasury $ 26,475 $ 23,042 $ 25,677 $ Cash on hand and in banks 1,022,961 3,266.861 3,096,468

Total assets $ 1,049,436 $ 3,289.903 $ 3.122, 145 $

Liabilities: Due to student groups $ 1,049,436 $ 3,289,903 $ 3,122,145 $

Total Student Bod~ Funds

Assets: Cash in County Treasury $ 539,162 $ 963,166 $ 903,641 $ Cash on hand and in banks 1,022,961 3,266,861 3,096.468

Total assets $ 1,562,123 $ 4,230,027 $ 4,000,109 $

Liabilities: Due to student groups $ 1,562,123 $ 4,230,027 $ 4,000,109 $

(Continued)

Balance June 30,

2019

278,255

278,255

278 255

296,592

296,592

296,592

23,840 1,193.354

1,217,194

1,217,194

598,687 1.193,354

1,792,041

1,792,041

67.

VISALIA UNIFIED SCHOOL DISTRICT COMBINING STATEMENT OF CHANGES IN ASSETS AND LIABILITIES

ALL AGENCY FUNDS For the Year Ended June 30, 2019

Balance July 1, 2018 Additions Deductions

Warrant/Pass-Through Fund

Assets: Cash in County Treasury $ 14,262,244 $ 622,053,105 $ 613,987,590 $ Cash on hand and in banks

Total assets i 1412621244 i 62210531105 i 61319871590 i

Liabilities: Due to other funds $ 1412621244 $ 6221053.105 $ 61319871590 $

TOTAL AGENCY FUNDS

Assets: Cash in County Treasury $ 14,801,406 $ 623,016,271 $ 614,891,231 $ Cash on hand and in banks 110221961 312661861 31096a468

Total assets $ 1518241367 i 62612831132 $ 61719871699 i

Liabilities: Due to other funds $ 14,262,244 $ 622,053,105 $ 613,987,590 $ Due to student groups 115621123 412301027 410001109

Total liabilities $ 151824 367 $ 62612831132 ! 61719871699 m

Balance June 30,

2019

22,327,759

2213271759

221327.759

22,926,446 111931354

2411191800

22,327,759 1}921041

2411191800

68.

VISALIA UNIFIED SCHOOL DISTRICT ORGANIZATION

June 30, 2019

- - - - -- -- - - ---- - -- - - -- --- -- - - -- - - -- -- -

Visalia Unified School District was organized in 1885 and consists of an area comprising approximately 177 square miles. The District operates 26 elementary schools, 5 middle schools, 4 high schools, an adult school, a continuation high school, and 4 charter schools . There were no changes in District boundaries during the year.

The Board of Education at June 30, 2019 was comprised of the following members:

Name

John L. Crabtree Juan R. Guerrero Niessen E. Foster William A Fulmer Walta S. Gamoian Joy M. Naylor Lucia D. Vazquez

GOVERNING BOARD

Office

President Clerk

Member Member Member Member Member

ADMINISTRATION

Todd Oto, Ed. D.1

Superintendent

Tamara RavaHn Ed. D.2

Assistant Superintendent, Human Resources Development

Robert Groeber Assistant Superintendent, Administrative Services

Vacant Assistant Superintendent, Instructional Services

Nathan Hernandez Chief Financial Officer

Term Expires

2022 2022 2020 2020 2022 2022 2020

1 Effective July 1, 2019 Tamara Ravalin Ed. D., replaced Todd Oto as the Interim Superintendent.

2 Effective July 1, 2019 Dedi Somavia replaced Ms. Ravalin as the Interim Assistant Superintendent, Human Resources Development.

69 .

DISTRICT

Certificate Number

Elementary:

VISALIA UNIFIED SCHOOL DISTRICT SCHEDULE OF AVERAGE DAILY ATTENDANCE


Second Second Period Period Report Report

{Original} {Audited)*

2678C043 A7F740A6

Transitional Kindergarten through Third 8,362 8,362 Fourth through Sixth 6,183 6,183 Seventh and Eighth 4,235 4,246 Special Education 6 6

Total Elementary 18}86 18 797

Secondary: Ninth through Twelfth 7,437 7,447 Continuation 241 241

Total Secondary 7678 7 688

District Totals 261464 26a485

Annual Report

E6701E4A

8,380 6,184 4,232

6

181802

7,365 236

7 601

26.403

* Reflects revisions made by the District subsequent to the submission of the original Second Period Report of Attendance, based on an internal review of records.

(Continued)

70.

VISALIA UNIFIED SCHOOL DISTRICT SCHEDULE OF AVERAGE DAILY ATTENDANCE


Second Period Report

CHARTER SCHOOL - CLASSROOM BASED

Visalia Technical Early College Certificate Number 28F765AA

Ninth through Twelfth 248

Global Learning Charter School Certificate Number C59313DC

Transitional Kindergarten through Third 205 Fourth through Sixth 161 Seventh and Eighth 32

Subtotal Visalia Global Learning Charter School 398

Total Charter School Classroom Based 646

CHARTER SCHOOL - NON-CLASSROOM BASED

Charter Home School Academy Certificate Number 6FEBF3EB

Transitional Kindergarten through Third 23 Fourth through Sixth 28 Seventh and Eighth 53

Subtotal Charter Home School 104

Visalia Charter Independent Study Certificate Number 15C2EB34

Ninth through Twelfth 513

Subtotal Visalia Charter Independent Study 513

Total Charter School Non-Classroom Based 617

Charter School Totals 1.263

See accompanying notes to supplementary information.

Annual Report

D5E03355

245

A29C1AF1

206 159 32

397

642

56B8A66E

22 30 56

108

D03A6F78

515

515

623

1.265

71.

Grade Level

DISTRICT

Kindergarten Grade 1 Grade 2 Grade 3 Grade 4 Grade 5 Grade 6 Grade 7 Grade 8 Grade 9 Grade 10 Grade 11 Grade 12

CHARTER SCHOOLS

Visalia Technical Earl~ College

Grade 9 Grade 10 Grade 11 Grade 12

VISALIA UNIFIED SCHOOL DISTRICT SCHEDULE OF INSTRUCTIONAL TIME


Statutory Minutes 2018-19

Number of Days

Require- Actual Traditional ment Minutes Calendar

36,000 50,500 180 50,400 51,375 180 50,400 51,375 180 50,400 51,375 180 54,000 57,612 180 54,000 57,612 180 54,000 57,612 180 54,000 58,652 180 54,000 58,652 180 64,800 65,365 180 64,800 65,365 180 64,800 65,365 180 64,800 65,365 180

64,800 65,190 180 64,800 65,190 180 64,800 65,190 180 64,800 65,rno 180

Visalia Global Learning Charter School

Kindergarten 36,000 52,220 180 Grade 1 50,400 52,220 180 Grade 2 50,400 52,220 180 Grade 3 50,400 52,220 180 Grade 4 54,000 59,370 180 Grade 5 54,000 59,370 180 Grade 6 54,000 59,370 180 Grade 7 54,000 59,370 180


Status

In Compliance In Compliance In Compliance In Compliance In Compliance In Compliance In Compliance In Compliance In Compliance In Compliance In Compliance In Compliance In Compliance

In Compliance In Compliance In Compliance in Compliance

In Compliance In Compliance In Compliance In Compliance In Compliance In Compliance In Compliance In Compliance

72.

Federal Catalog Number

VI SALIA UNIFIED SCHOOL DISTRICT SCHEDULE OF EXPENDITURE OF FEDERAL AWARDS


Pass-Through

Entity Federal Granter/Pass-Through Identifying

Granter/Program or Cluster Title Number

U.S. De12artment of Education - Passed through California De12artment of Education

Special Education Cluster: 84.027 Special Ed: IDEA Basic Local Assistance

Entitlement, Part B, Sec 611 13379 84.027 Special Ed: IDEA Private School

Local Assistance 10115 84.173A Special Ed: IDEA Preschool Local

Entitlement, Part B, Sec 611 (Age 3-5) 13839

Subtotal Special Education Cluster

Adult Education Programs: 84.002 Adult Education: Adult Secondary Education 13978

84.002A Adult Education: Adult Basic Education & ESL 14508 84.002 Adult Education: Institutionalized Adults 13971

84.002A Adult Education: English Literacy & Civics Education Local Grant 14109

Subtotal Adult Education Programs

Carl D. Perkins Programs: 84.048 Carl D. Perkins Career and Technical Education:

Secondary, Section 131 (Vocational Education) 14894 84.048 Carl D. Perkins Career and Technical Education:

Adult, Section 132 (Vocational Education) 14893

Subtotal Carl Perkins Programs

Title I Programs: 84.011 ESEA: Title I, Part C, Migrant Education 14326 84.011 ESEA: Title I, Part C, Migrant Education

Summer Program 10005

Subtotal Title I Programs

(Continued)

Federal Expend-

itures

$ 4,899,396

3,119

2131321

511151836

198,000 130,958

7,348

181221

3541527

283,537

241572

3081109

166,033

1021592

2681625

73.

VISALIA UNIFIED SCHOOL DISTRICT SCHEDULE OF EXPENDITURE OF FEDERAL AWARDS


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

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

Title Ill Programs: 84.365 ESEA: Title 111, English Learner Student Program 84.365 ESEA: Title Ill, Immigrant Student Program

Subtotal Title Ill Programs

84.010 ESEA: Title I, Part A, Basic Grants Low-Income and Neglected

84.367 ESEA: Title II, Part A Supporting Effective Instruction Local Grants

84.287 ESEA: Title IV, Part B, 21st Century Community Learning Centers Program

84.060 Indian Education 84.126A Rehabilitation Services: Vocational Rehabilitation Grants 84.424 ESEA: Title IV, Part A, Student Support and Academic

Enrichment Grants

Total U.S. Department of Education

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

Medicaid Cluster:

Pass-Through

Entity Identifying Number

14346 15146

14329

14341

14349 10011

*

15396

93.778

93.575

Medi-Cal Billing Option 10013 Child Care Development Fund (CCDF) Program Cluster:

CCDF Federal Child-Care, Center-Based 15136

Total U.S. Department of Health and Human Services

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

10.555 10.553 10.553

Child Nutrition Cluster: National School Lunch Program (NSLP) Basic Breakfast Especially Needy Breakfast

Subtotal Child Nutrition Cluster

Total U.S. Department of Agriculture

Total Federal Programs

* No pass-through identifying number was available for this program.

13390 13396 13526


$

Federal Expend-

itures

431,532 101480

4421012

11,987,316

2,002,539

1,405,000 168,825 106,134

5211306

2216801229

640,204

2391534

9,469,420 70,801

22111891

11)52,112

11 )52, 112

$ 3513121079

74 .

VISALIA UNIFIED SCHOOL DISTRICT RECONCILIATION OF UNAUDITED ACTUAL FINANCIAL REPORT

WITH AUDITED FINANCIAL STATEMENTS For the Year Ended June 30, 2019

There were no adjustments proposed to any funds of the District


75.

VISALIA UNIFIED SCHOOL DISTRICT SCHEDULE OF FINANCIAL TRENDS AND ANALYSIS

For the Year Ended June 30, 2019 (UNAUDITED)

General Fund

Revenues and other financing sources

Expenditures Other uses and transfers out

Total outgo

Change in fund balance

Ending fund balance

Available reserves

Designated for economic uncertainties

Undesignated fund balance

Available reserves as percentages of total outgo

All Funds

Total long-term liabilities

Average daily attendance at P-2, excluding Charter Schools

(Budget) 2020 2019 2017

$ 344,497.659 $ 375,331.324 $ 328,485,205 $ 310.518.909

333,859,413 3.004 676

336,864.089

348,693,838 20,274.996

368,968.834

313,798,585 7.193.800

320,992.385

291,034,959 4,228.300

295,263,259

$ 7,633.570 $ 6,362,490 $ 7,492.820 $ 15,255,650

$ 987,032.666 $ 979,399.096 $ 973,036.606 $ 965,543.786

$ 35,721,400 $ 44,516.997 $ 46,445.968 $ 45,053.777

$ 35,438,247 $ 44,444.195 $ 46,213.917 $ 44,440,410

$ 283.153 $ 72.802 $ 232.051 $ 613,367

10.6% 12.1% 14.5% 15.3%

$ 540,038,015 $ 543,275,409 $ 520,353.597 $ 344,539,495

26464 26,485 26,291 26,575

The General Fund fund balance has increased by $29,110,960 over the past three years. The fiscal year 2019-2020 budget projects an increase of $7,633,570. For a district this size, the State of California recommends available reserves of at least 3% of total General Fund expenditures, transfers out, and other uses. For the year ended June 30, 2019, the District has met this requirement.

The District has incurred operating surpluses in each of the past three years, and anticipates incurring an operating surplus during the fiscal year 2019-2020.

Total long-term liabilities have increased by $198,735,914 over the past two years, due primarily to the issuance of General Obligation Bonds and Certificates of Participation, as well as changes in the District's Net Pension Liability.

Average daily attendance has decreased by 90 over the past two years. The District anticipates a decrease of 21 ADA for the 2019-2020 fiscal year.

-- ------- --------


76.

VISALIA UNIFIED SCHOOL DISTRICT SCHEDULE OF CHARTER SCHOOLS


Charter Schools Chartered by District

1870 - Global Learning Charter School 0720 - Visalia Charter Independent Study 0250 - Charter Home School Academy 1128 - Visalia Technical Early College HS

Included in District Financial Statements, or

Separate Report

Included in District Financial Statements Included in District Financial Statements Included in District Financial Statements Included in District Financial Statements


77.

VISALIA UNIFIED SCHOOL DISTRICT NOTES TO SUPPLEMENTARY INFORMATION

June 30, 2019

NOTE 1 - PURPOSE OF SCHEDULES

A - Schedule of Average Daily Attendance

Average daily attendance is a measurement of the number of pupils attending classes of the District. The purpose of attendance accounting from a fiscal standpoint is to provide the basis on which apportionments of state funds are made to school districts. This schedule provides information regarding the attendance of students at various grade levels and in different programs.

B - Schedule of Instructional Time

The District has received incentive funding for increasing instructional time as provided by the Incentives for Longer Instructional Day. The District neither met nor exceeded its target funding. This schedule presents information on the amount of instructional time offered by the District, and whether the District complied with the provisions of Education Code Sections 46200 through 46206.

C - Schedule of Expenditure of Federal Awards

The Schedule of Expenditure of Federal Awards includes the federal award activity of Visalia Unified School District, and is presented on the accrual basis of accounting. The information in this schedule is presented in accordance with the requirements of Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance). Expenditures are recognized following the Uniform Guidance, wherein certain types of expenditures are not allowable or are limited as to reimbursement. The District has elected not to use the 10-percent de minimis indirect cost rate allowed in the Uniform Guidance.

The following schedule provides a reconciliation between revenues reported on the Statement of Revenues, Expenditures and Change in Fund Balances and the related expenditures reported on the Schedule of Expenditure of Federal Awards.

Description

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

Add: Medi-Cal Billing Option spent from prior year awards

Total Schedule of Expenditure of Federal Awards

CFDA Number Amount

$ 34,937,035

93.778 375,044

$ 35,312 079

D - Reconciliation of Unaudited Actual Financial Report with Audited Financial Statements

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

(Continued)

78.

VISALIA UNIFIED SCHOOL DISTRICT NOTES TO SUPPLEMENTARY INFORMATION

June 30, 2019

NOTE 1 - PURPOSE OF SCHEDULES (Continued)

E - Schedule of Financial Trends and Analysis - Unaudited

This schedule provides information on the District's financial condition over the past three years and its anticipated condition for the 2019-2020 fiscal year, as required by the State Controller's Office.

F - Schedule of Charter Schools

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

NOTE 2 - EARLY RETIREMENT INCENTIVE PROGRAM

Education Code Section 14502 required certain disclosure in the financial statements of districts which adopt Early Retirement Incentive Programs pursuant to Education Code Sections 22714 and 44929. For the fiscal year ended June 30, 2019, the District did not adopt such a program.

79.

Crowe Crowe LLP Independent Member Crowe Global

INDEPENDENT AUDITOR'S REPORT ON COMPLIANCE WITH STATE LAWS AND REGULATIONS


Report on Compliance with State Laws and Regulations

We have audited Visalia Unified School District's compliance with the types of compliance requirements described in the State of California's 2018-19 Guide for Annual Audits of K-12 Local Education Agencies and State Compliance Reporting (the "Audit Guide") applicable to the state laws and regulations listed below for the year ended June 30, 2019.

Description

Attendance Teacher Certification and Misassignments Kindergarten Continuance Independent Study Continuation Education Instructional Time Instructional Materials Ratio of Administrative Employees to Teachers Classroom Teacher Salaries Early Retirement Incentive Gann Limit Calculation School Accountability Report Card Juvenile Court Schools Middle or Early College High Schools K-3 Grade Span Adjustment Transportation Maintenance of Effort Apprenticeship: Related and Supplemental Instruction Comprehensive School Safety Plan District of Choice California Clean Energy Jobs Act After/Before School Education and Safety Program:

General requirements After school Before school

Proper Expenditure of Education Protection Account Funds Unduplicated Local Control Funding Formula Pupil Counts Local Control and Accountability Plan Independent Study - Course Based Attendance, for charter schools Mode of Instruction, for charter schools Nonclassroom-Based Instruction/Independent Study, for charter schools

Determination of Funding for Nonclassroom-Based Instruction, for charter schools

Annual Instructional Minutes - Classroom-Based, for charter schools

Charter School Facility Grant Program

(Continued)

Procedures Performed

Yes Yes Yes

No, see below Yes Yes Yes Yes Yes

No, see below Yes Yes

Ne, see below No, see below

Yes Yes

No, see below Yes

No, see below Yes

Yes Yes

No, see below Yes Yes Yes

No, see below Yes Yes

Yes

Yes

Yes No, see below

80.

We did not perform procedures related to Independent Study because the District did not generate any ADA for this program.

We did not perform any procedures related to the Early Retirement Incentive Program because the District did not offer an Early Retirement Incentive Program during the audit year.

We did not perform any procedures related to Juvenile Court Schools because the District did not operate this program.

We did not perform any procedures related to Middle or Early College High Schools because the District did not operate this program.

We did not perform any procedures related to Apprenticeship: Related and Supplemental Instruction, because the District did not generate any apprenticeship hours for this program.

We did not perform any procedures related to District of Choice, because the District was not classified as a District of Choice during the audit year.

We did not perform any procedures related to After School Education and Safety Program: Before School, because the District did not offer a Before School program in the current year.

We did not perform procedures related to Independent Study-Course Based because the District did not generate any ADA for this program.

We did not perform any procedures related to Charter School Facility Grant Program because the District did not operate this program.

Management's Responsibility

Management is responsible for compliance with the requirements of state laws and regulations, as listed above.

Auditor's Responsibility Our responsibility is to express an opinion on Visalia Unified School District's compliance with state laws and regulations as listed above based on our audit of the types of compliance requirements referred to above. We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States of America; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; and the 2018-19 Guide for Annual Audits of K-12 Local Education Agencies and State Compliance Reporting (Audit Guide). Those standards and the Audit Guide require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the compliance requirements referred to above that could have a material effect on Visalia Unified School District's compliance with the state laws and regulations listed above occurred. An audit includes examining, on a test basis, evidence about Visalia Unified School District's compliance with those requirements and performing such other procedures as we considered necessary in the circumstances.

We believe that our audit provides a reasonable basis for our opinion on compliance with state laws and regulations. However, our audit does not provide a legal determination of Visalia Unified School District's compliance.

Opinion with State Laws and Regulations

In our opinion, Visalia Unified School District complied, in all material respects, with the compliance requirements referred to above that are applicable to the state laws and regulations referred to above for the year ended June 30, 2019.

(Continued)

81 .

Purpose of this Report

The purpose of this report on compliance is solely to describe the scope of our testing of compliance and the results of that testing based on the requirements of the 2018-19 Guide for Annual Audits of K-12 Local Education Agencies and State Compliance Reporting. Accordingly, this report is not suitable for any other purpose.


Crowe LLP

82.

Crowe Crowe LLP Independent Member Crowe Global

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


We have audited, in accordance with the auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States, the financial statements of the governmental activities, each major fund, and the aggregate remaining fund information of Visalia Unified School District as of and for the year ended June 30, 2019, and the related notes to the financial statements, which collectively comprise Visalia Unified School District's basic financial statements, and have issued our report thereon dated December 12, 2019.

Internal Control Over Financial Reporting

In planning and performing our audit of the financial statements, we considered Visalia Unified School District's internal control over financial reporting (internal control) to determine the audit procedures that are appropriate in the circumstances for the purpose of expressing our opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of Visalia Unified School District's internal control. Accordingly, we do not express an opinion on the effectiveness of Visalia Unified School District's internal control.

A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of the entity's financial statements will not be prevented, or detected and corrected on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance.

Our consideration of internal control was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies. Given these limitations, during our audit we did not identify any deficiencies in internal control that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified.

(Continued)

83.

Compliance and Other Matters

As part of obtaining reasonable assurance about whether Visalia Unified School District's financial statements are free of material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards.

Purpose of this Report

The purpose of this report is solely to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the entity's internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the entity's internal control and compliance. Accordingly, this communication is not suitable for any other purpose.


Crowe LLP

84 .

Crowe

Board of Education

Crowe LLP Independe nt Member Crowe Global

INDEPENDENT AUDITOR'S REPORT ON COMPLIANCE FOR EACH MAJOR FEDERAL PROGRAM AND REPORT

ON INTERNAL CONTROL OVER COMPLIANCE

Visalia Unified School District Visalia, California

Report on Compliance for Each Major Federal Program

We have audited Visalia Unified School District's compliance with the types of compliance requirements described in the 0MB Compliance Supplement that could have a direct and material effect on each of Visalia Unified School District's major federal programs for the year ended June 30, 2019. Visalia Unified School District's major federal programs are identified in the summary of auditor's results section of the accompanying schedule of findings and questioned costs.

Management's Responsibility

Management is responsible for compliance with federal statues, regulations, and the terms and conditions of its federal awards applicable to its federal programs.

Auditor's Responsibility

Our responsibility is to express an opinion on compliance for each of Visalia Unified School District's major federal programs based on our audit of the types of compliance requirements referred to above. We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States of America; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; and the audit requirements of Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance). Those standards and the Uniform Guidance require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the types of compliance requirements referred to above that could have a direct and material effect on a major federal program occurred. An audit includes examining, on a test basis, evidence about Visalia Unified School District's compliance with those requirements and performing such other procedures as we considered necessary in the circumstances.

We believe that our audit provides a reasonable basis for our opinion on compliance for each major federal program. However, our audit does not provide a legal determination of Visalia Unified School District's compliance.

Opinion on Each Major Federal Program

In our opinion, Visalia Unified School District complied, in all material respects, with the types of compliance requirements referred to above that could have a direct and material effect on each of its major federal programs for the year ended June 30, 2019.

(Continued)

85.

Report on Internal Control Over Compliance

Management of Visalia Unified School District is responsible for establishing and maintaining effective internal control over compliance with the types of compliance requirements referred to above. In planning and performing our audit of compliance, we considered Visalia Unified School District's internal control over compliance with the types of requirements that could have a direct and material effect on each major federal program to determine the auditing procedures that are appropriate in the circumstances for the purpose of expressing an opinion on compliance for each major federal program and to test and report on internal control over compliance in accordance with Uniform Guidance, but not for the purpose of expressing an opinion on the effectiveness of internal control over compliance. Accordingly, we do not express an opinion on the effectiveness of Visalia Unified School District's internal control over compliance.

A deficiency in internal control over compliance exists when the design or operation of a control over compliance does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, noncompliance with a type of compliance requirement of a federal program on a timely basis. A material weakness in internal control over compliance is a deficiency, or combination of deficiencies, in internal control over compliance, such that there is a reasonable possibility that material noncompliance with a type of compliance requirement of a federal program will not be prevented, or detected and corrected, on a timely basis. A significant deficiency in internal control over compliance is a deficiency, or a combination of deficiencies, in internal control over compliance with a type of compliance requirement of a federal program that is less severe than a material weakness in internal control over compliance, yet important enough to merit attention by those charged with governance.

Our consideration of internal control over compliance was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control over compliance that might be material weaknesses or significant deficiencies. We did not identify any deficiencies in internal control over compliance that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified.

The purpose of this report on internal control over compliance is solely to describe the scope of our testing of internal control over compliance and the results of that testing based on the requirements of the Uniform Guidance. Accordingly, this report is not suitable for any other purpose.


Crowe LLP

86.

FINDINGS AND RECOMMENDATIONS

VISALIA UNIFIED SC~OOL DISTRICT SCHEDULE OF AUDIT FINDINGS AND QUESTIONED COSTS

Year Ended June 30, 2019

SECTION I - SUMMARY OF AUDITOR'S RESULTS

FINANCIAL STATEMENTS

Type of auditor's report issued: Unmodified

Internal control over financial reporting: Material weakness(es) identified? Yes _x_ No Significant deficiency(ies) identified not considered to be material weakness(es)? Yes _X_ None reported

Noncompliance material to financial statements noted?

FEDERAL AWARDS

Internal control over major programs: Material weakness(es) identified?

Yes _X_No

Yes _X_ No Significant deficiency(ies) identified not considered to be material weakness(es)? Yes _X_ None reported

Type of auditors' report issued on compliance for major programs:

Any audit findings disclosed that are required to be reported in accordance with 2 CFR 200.516(a)?

Identification of major programs:

CFDA Number

Unmodified

Yes _x_ No

Name of Federal Program or Cluster

10.553, 10.555 Child Nutrition Cluster

Dollar threshold used to distinguish between Type A and Type B programs:

Auditee qualified as low-risk auditee?

STATE AWARDS

Type of auditors' report issued on compliance for state programs:

(Continued)

$ 1,059,362

_x __ Yes No

Unmodified

87.

VISALIA UNIFIED SCHOOL DISTRICT SCHEDULE OF AUDIT FINDINGS AND QUESTIONED COSTS


SECTION II - FINANCIAL STATEMENT FINDINGS

No matters were reported .

(Continued)

88.



SECTION Ill - FEDERAL AWARD FINDINGS AND QUESTIONED COSTS

No matters were reported.

(Continued)

89.



SECTION IV - STATE AWARD FINDINGS AND QUESTIONED COSTS


90.

STATUS OF PRIOR YEAR

FINDINGS AND RECOMMENDATIONS

VISALIA UNIFIED SCHOOL DISTRICT STATUS OF PRIOR YEAR FINDINGS AND RECOMMENDATIONS


Finding/Recommendation


Current Status District Explanation If Not Implemented

91.

APPENDIX B

FORM OF CONTINUING DISCLOSURE CERTIFICATE

B-1

APPENDIX B

FORM OF CONTINUING DISCLOSURE CERTIFICATE


(TULARE COUNTY, CALIFORNIA) GENERAL OBLIGATION BONDS ELECTION OF 2018, SERIES 2020

CONTINUING DISCLOSURE CERTIFICATE

[CLOSING DATE]

This Continuing Disclosure Certificate (this “Disclosure Certificate”) is executed and delivered by the Visalia Unified School District (the “District”) in connection with the issuance of Thirty-Five Million One Hundred Seventy Thousand Dollars ($35,170,000) aggregate principal amount of Visalia Unified School District (Tulare County, California) General Obligation Bonds, Election of 2018, Series 2020 (the “Bonds”). The Bonds are being issued pursuant to a paying agent agreement dated July 1, 2020 (the “Paying Agent Agreement”), between the District and The Bank of New York Mellon Trust Company, N.A. (the “Paying Agent”). The District covenants and agrees as follows:

Section 1. Purpose of the Disclosure Certificate. This Disclosure Certificate is being delivered by the District for the benefit of the holders and beneficial owners of the Bonds, and to assist the Participating Underwriters, as defined below, in complying with S.E.C. Rule 15c2-12(b)(5).

Section 2. Definitions. In addition to the definitions set forth in the Paying Agent Agreement, which apply to any capitalized term used in this Disclosure Certificate unless otherwise defined in this Section, the following capitalized terms shall have the following meanings:

Annual Report means any report provided by the District pursuant to, and as described in, Sections 3 (Provision of Annual Reports) and 4 (Content of Annual Reports) of this Disclosure Certificate.

Beneficial Owner means any person who (a) has or shares the power, directly or

indirectly, to make investment decisions concerning 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.

Bondholders means either the registered owners of the Bonds, or, if the Bonds are

registered in the name of The Depository Trust Company or another recognized depository, any Beneficial Owner or applicable participant in its depository system.

B-2

Dissemination Agent means the District, or any successor Dissemination Agent

designated in writing by the District, and which has filed with the District a written acceptance of such designation. The initial Dissemination Agent will be Government Financial Strategies inc.

EMMA or Electronic Municipal Market Access means the centralized online repository for documents filed with the MSRB, such as official statements and disclosure information relating to municipal bonds, notes and other securities as issued by state and local governments.

Financial Obligation means a (a) debt obligation; (b) derivative instrument entered into

in connection with, or pledged as security or a source of payment for, an existing or planned debt obligation; or (c) guarantee of (a) or (b). The term “Financial Obligation” does not include municipal securities as to which a final official statement has been provided to the MSRB consistent with the Rule.

Listed Events means any of the events listed in Section 5(a) (Reporting of Significant

Events – Significant Events) of this Disclosure Certificate. MSRB means the Municipal Securities Rulemaking Board, which has been designated by

the Securities and Exchange Commission as the sole repository of disclosure information for purposes of the Rule, or any other repository of disclosure information, which may be designated by the Securities and Exchange Commission as such for purposes of the Rule in the future.

Official Statement means the final Official Statement dated June 25, 2020, relating to the Bonds.

Opinion of Bond Counsel means a written opinion of a law firm or attorney experienced in matters relating to obligations the interest on which is excludable from gross income for federal income tax purposes.

Participating Underwriters means the original underwriters of the Bonds required to

comply with the Rule in connection with offering of the Bonds.

Repository means MSRB or any other repository of disclosure information that may be designated by the Securities and Exchange Commission as such for purposes of the Rule in the future.

Rule means Rule 15c2-12(b)(5) adopted by the Securities and Exchange Commission

under the Securities Exchange Act of 1934, as the same may be amended from time to time.

State means the State of California.

Section 3. Provision of Annual Reports.

a. Delivery of Annual Report to Repository. The District shall, or shall cause the Dissemination Agent to, not later than nine (9) months after the end of each fiscal year,

B-3

commencing with the report for the 2019-2020 Fiscal Year, due March 31, 2021, provide to the Repository an Annual Report that is consistent with the requirements of Section 4 (Content of Annual Reports) of this Disclosure Certificate. The Annual Report may be submitted as a single document or as a package of separate documents and may include by cross-reference other information as provided in Section 4 (Content of Annual Reports) of this Disclosure Certificate; provided that the audited financial statements of the District may be submitted separately from the balance of the Annual Report and later than the date required above for the filing of the Annual Report if they are not available by that date. If the District’s Fiscal Year changes, it shall give notice of such change in the same manner as for a Listed Event under Section 5(d).

If the District does not provide, or cause the Dissemination Agent to provide, an Annual Report by the date required above, the Dissemination Agent shall provide to the MSRB in a timely manner, in an electronic format as prescribed by the MSRB, a notice in substantially the form attached as Exhibit A.

b. The Dissemination Agent shall:

(1) determine each year prior to the Annual Report Date the then-applicable rules and electronic format prescribed by the MSRB for the filing of annual continuing disclosure reports; and

(2) if the Dissemination Agent is other than the District, file a report with the District certifying that the Annual Report has been provided pursuant to this Disclosure Certificate, and stating the date it was provided.

Section 4. Content of Annual Reports. The District’s Annual Report shall contain or include by reference the following:

a. Financial Statements. Audited financial statements prepared in accordance with the generally accepted accounting principles as promulgated to apply to governmental entities from time to time by the Governmental Accounting Standards Board. If the District’s audited financial statements are not available by the time the Annual Report is required to be filed pursuant to Section 3(a), the Annual Report shall contain unaudited financial statements in a format similar to the financial statements contained in the final Official Statement, and the audited financial statements shall be filed in the same manner as the Annual Report when they become available.

b. Material financial information and operating data with respect to the District of the type included in the Official Statement in the following categories (to the extent not included in the District’s audited financial statements):

(1) Average daily attendance of the District for the last completed fiscal year;

(2) Summary financial information on revenues, expenditures, and fund balances for the District’s general fund for the last completed fiscal year and summary financial information on any adopted budget for the current fiscal year;

B-4

(3) Current fiscal year assessed valuation of taxable properties in the District; and

(4) Current fiscal year assessed valuation of the top ten properties.

c. In addition to any of the information expressly required to be provided under paragraphs (a) and (b) of this Section, the District shall provide such further information, if any, as may be necessary to make the specifically required statements, in the light of the circumstances under which they are made, not misleading.

Any or all of the items listed above may be included by specific reference to other documents, including official statements of debt issues of the District or related public entities that have been submitted to the Repository 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 District shall clearly identify each such other document so included by reference.

Section 5. Reporting of Significant Events.

a. Significant Events. Pursuant to the provisions of this Section, the District shall give, or cause to be given, notice of the occurrence of any of the following events with respect to the Bonds:

(1) principal and interest payment delinquencies; (2) non-payment related defaults, if material; (3) unscheduled draws on debt service reserves reflecting financial

difficulties; (4) unscheduled draws on credit enhancements reflecting financial

difficulties; (5) substitution of credit or liquidity providers, or their failure to perform; (6) adverse tax opinions, the issuance by the Internal Revenue Service of

proposed or final determinations of taxability, Notices of Proposed Issue (IRS Form 5701-TEB) or other material notices or determinations with respect to the tax status of the Bonds, or other material events affecting the tax-exempt status of the Bonds;

(7) modifications to rights of Bondholders, if material; (8) Bond calls, if material; (9) tender offers; (10) defeasances; (11) release, substitution, or sale of property securing repayment of the Bonds,

if material; (12) rating changes; (13) bankruptcy, insolvency, receivership or similar event of the District; (14) the consummation of a merger, consolidation, or acquisition, or certain

asset sales, involving the District, or entry into or termination of a definitive agreement relating to the foregoing, if material;

B-5

(15) appointment of a successor or additional trustee or paying agent, or the change of name of the trustee or paying agent, if material;

(16) incurrence of a Financial Obligation of the District, if material, or agreement to covenant, events of default, remedies, priority rights, or other similar terms of a Financial Obligation of the District, any of which affect Bondholders, if material;

(17) default, event of acceleration, termination event, modification of terms, or other similar events under the terms of a Financial Obligation of the District, any of which reflect financial difficulties.

b. Determination of Materiality. Whenever the District obtains knowledge of one of the foregoing events notice of which must be given only if material, the District shall immediately determine if such event would be material under applicable federal securities laws.

c. Notice to Dissemination Agent. If the District has determined an occurrence of a Listed Event under applicable federal securities laws, the District shall promptly notify the Dissemination Agent (if other than the District) in writing. Such notice shall instruct the Dissemination Agent to report the occurrence pursuant to subsection (d) (Notice of Listed Events).

d. Notice of Listed Events. The District shall file, or cause the Dissemination Agent to file, with the Repository, in an electronic format prescribed by the MSRB, a notice of the occurrence of a Listed Event to provide notice of specified events in a timely manner not in excess of ten (10) business days after the event’s occurrence. Notwithstanding the foregoing, notice of Listed Events described in subsection (a)(8) (Bond calls) need not be given under this subsection any earlier than the notice (if any) given to Bondholders of affected Bonds pursuant to the Paying Agent Agreement.

Section 6. Identifying Information for Filings with MSRB. All documents provided to the MSRB under this Disclosure Certificate shall be filed in a readable PDF or other electronic format as prescribed by the MSRB and shall be accompanied by identifying information as prescribed by the MSRB.

Section 7. Termination of Reporting Obligation. The District’s obligations under this Disclosure Certificate shall terminate upon the legal defeasance, prior redemption, or payment in full of all of the Bonds. If such termination occurs prior to the final maturity of the Bonds, the District shall give notice of such termination in the same manner as for a Listed Event under Section 5(d) (Notice of Listed Events).

Section 8. Dissemination Agent. The District may, from time to time, appoint or engage a Dissemination Agent to assist it in carrying out its obligations under this Disclosure Certificate, and may discharge any such Dissemination Agent, with or without appointing a successor Dissemination Agent.

Section 9. Amendment; Waiver. Notwithstanding any other provision of this Disclosure Certificate, the District may amend this Disclosure Certificate, and any provision of this Disclosure Certificate may be waived, provided that the following conditions are satisfied:

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a. if the amendment or waiver relates to the provisions of Sections 3(a), 4 or 5(a), it may only be made in connection with a change in circumstances that arises from a change in legal requirements, change in law, or change in the identity, nature, or status of an obligated person with respect to the Bonds, or type of business conducted;

b. the undertakings herein, as proposed to be amended or waived, would, in the opinion of nationally recognized bond counsel, have complied with the requirements of the Rule at the time of the primary offering of the Bonds, after taking into account any amendments or interpretations of the Rule, as well as any change in circumstances; and

c. the proposed amendment or waiver either (i) is approved by holders of the Bonds in the manner provided in the Paying Agent Agreement for amendments to the Paying Agent Agreement with the consent of holders, or (ii) does not, in the opinion of the Paying Agent or nationally recognized bond counsel, materially impair the interests of the holders or beneficial owners of the Bonds.

If this Disclosure Certificate is amended or any provision of this Disclosure Certificate is waived, the District shall describe such amendment or waiver in the next following Annual Report and shall include, as applicable, a narrative explanation of the reason for the amendment or waiver and its impact on the type (or in the case of a change of accounting principles, on the presentation) of financial information or operating data being presented by the District. In addition, if the amendment relates to the accounting principles to be followed in preparing financial statements, (i) notice of such change shall be given in the same manner as for a Listed Event under Section 5(d) (Notice of Listed Events), and (ii) the Annual Report for the year in which the change is made should present a comparison (in narrative form and also, if feasible, in quantitative form) between the financial statements as prepared on the basis of the new accounting principles and those prepared on the basis of the former accounting principles.

Section 10. Additional Information. Nothing in this Disclosure Certificate shall be deemed to prevent the District from disseminating any other information, using the means of dissemination set forth in this Disclosure Certificate or any other means of communication, or including any other information in any Annual Report or notice of occurrence of a Listed Event, in addition to that which is required by this Disclosure Certificate. If the District chooses to include any information in any Annual Report or notice of occurrence of a Listed Event in addition to that which is specifically required by this Disclosure Certificate, the District shall have no obligation under this Disclosure Certificate to update such information or include it in any future Annual Report or notice of occurrence of a Listed Event.

Section 11. Default. If the District fails to comply with any provision of this Disclosure Certificate, any Bondholder of the Bonds may take such actions as may be necessary and appropriate, including seeking mandate or specific performance by court order, to cause the District to comply with its obligations under this Disclosure Certificate. A default under this Disclosure Certificate shall not be deemed an Event of Default under the Paying Agent Agreement, and the sole remedy under this Disclosure Certificate if the District fails to comply with this Disclosure Certificate shall be an action to compel performance.

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Section 12. Duties, Immunities and Liabilities of Dissemination Agent. The Dissemination Agent shall have only such duties as are specifically set forth in this Disclosure Certificate, and the District agrees to indemnify and save the Dissemination Agent, its officers, directors, employees and agents, harmless against any loss, expense and liabilities which it may incur arising out of or in the exercise or performance of its powers and duties hereunder, including the costs and expenses (including reasonable attorneys’ fees) of defending against any claim of liability, but excluding liabilities due to the Dissemination Agent’s negligence or willful misconduct. The Dissemination Agent shall have no duty or obligation to review any information provided to it hereunder and shall not be deemed to be acting in any fiduciary capacity for the District, the Bondholders, or any other party. The obligations of the District under this Section shall survive resignation or removal of the Dissemination Agent and payment of the Bonds.

Section 13. Beneficiaries. This Disclosure Certificate shall inure solely to the benefit of the District, the Paying Agent, the Dissemination Agent, the Participating Underwriters and holders and beneficial owners from time to time of the Bonds, and shall create no rights in any other person or entity.

IN WITNESS WHEREOF, the District has caused this Continuing Disclosure Certificate to be executed by its authorized officer as of the day and year first above written. VISALIA UNIFIED SCHOOL DISTRICT

By: ________________________________________

Chief Financial Officer

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EXHIBIT A

FORM OF NOTICE TO REPOSITORY OF FAILURE TO FILE ANNUAL REPORT

Name of District: Visalia Unified School District Name of Bonds: VISALIA UNIFIED SCHOOL DISTRICT (TULARE COUNTY, CALIFORNIA) GENERAL OBLIGATION BONDS

ELECTION OF 2018, SERIES 2020

Date of Delivery: [CLOSING DATE]

NOTICE IS HEREBY GIVEN that the Visalia Unified School District (the “District”) has not provided an Annual Report with respect to the above-named Bonds as required by a Continuing Disclosure Certificate executed [CLOSING DATE], with respect to the above-captioned bond issue. The District anticipates that the Annual Report will be filed by ___________. Dated: ____________________ VISALIA UNIFIED SCHOOL DISTRICT

[SAMPLE ONLY]

APPENDIX C

FORM OF OPINION OF BOND COUNSEL

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APPENDIX C

FORM OF OPINION OF BOND COUNSEL

[CLOSING DATE] Board of Education Visalia Unified School District 5000 West Cypress Avenue, Visalia, CA 93277 Re: $35,170,000

Visalia Unified School District (Tulare County, California) General Obligation Bonds Election of 2018, Series 2020 Final Opinion of Bond Counsel

Members of the Board of Education:

We have acted as bond counsel in connection with the issuance by the Visalia Unified School District (the “District”) of $35,170,000 principal amount of Visalia Unified School District (Tulare County, California) General Obligation Bonds, Election of 2018, Series 2020 (the “Bonds”). In such capacity, we have examined such law and such certified proceedings, certifications, and other documents as we have deemed necessary to render this opinion.

Regarding questions of fact material to our opinion, we have relied upon the certified

proceedings and other certifications of public officials and others furnished to us without undertaking to verify the same by independent investigation.

Based upon the foregoing, we are of the opinion that, under existing law: 1. The Bonds have been duly authorized and executed by the District and are valid

and binding general obligations of the District. 2. All taxable property in the territory of the District is subject to ad valorem

taxation without limitation regarding rate or amount (except certain personal property that is taxable at limited rates) to pay the Bonds. Tulare County is required by law to include in their annual tax levies the principal and interest coming due on the Bonds to the extent that necessary funds are not provided from other sources.

3. Interest on the Bonds is excludable from gross income for federal income tax purposes and is not an item of tax preference for purposes of the federal alternative minimum tax imposed on individuals. The opinion set forth in the preceding sentence is subject to the

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condition that the District comply with all requirements of the Internal Revenue Code of 1986, as amended, that must be satisfied subsequent to the issuance of the Bonds in order that the interest thereon be, and continue to be, excludable from gross income for federal income tax purposes. The District has covenanted to comply with all such requirements. Failure to comply with certain of such requirements may cause interest on the Bonds to be included in gross income for federal income tax purposes retroactively to the date of issuance of the Bonds.

4. Interest on the Bonds is exempt from State of California personal income taxation.

The rights of the owners of the Bonds and the enforceability thereof are limited by

bankruptcy, insolvency, reorganization, moratorium, and other similar laws affecting creditors’ rights generally, and by equitable principles, whether considered at law or in equity.

We express no opinion regarding the accuracy, adequacy, or completeness of the Official Statement or other offering material relating to the Bonds. Further, we express no opinion regarding tax consequences arising with respect to the Bonds other than as expressly set forth herein.

This opinion is given as of the date hereof, and we assume no obligation to revise or

supplement this opinion to reflect any facts or circumstances that may hereafter come to our attention or any changes in law that may hereafter occur. Very truly yours,

PARKER & COVERT LLP

APPENDIX D

TULARE COUNTY INVESTMENT POLICY

TULARE COUNTY

Annual Investment Policy of the Pooled Investment Fund

FISCAL YEAR 2019/2020

Cass Cook, CFIP Auditor-Controller / Treasurer-Tax Collector

http://www.tularecounty.ca.gov/treasurertaxcollector/index.cfm/treasurer/documents/

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PREFACE This policy has been researched, prepared, and written under the direction of the Auditor-Controller/Treasurer-Tax Collector and the Chief Deputy Treasurer-Tax Collector of the County of Tulare. Each issue addressed in this policy is considered to be of timely and significant importance to the administration of the investment portfolio. While some portions of this policy are a restatement of State law, it is viewed that these restatements are integral to the purpose and flow of this policy. The following statements are intended to ensure the achievement of the purpose, goals, and objectives of the investment strategy in an orderly, accurate manner. However, there is no guarantee that problems, errors or losses will not arise in the course of administering the investment of idle funds. Among the obstacles and deterrents that may affect the achievement of the goals and objectives of the portfolio include but are not limited to the following: unforeseen national or international events or crises, deviation of actual cash flow from forecasted cash flow, unexpected demands on cash flow, policies made with regard to investment in local depositories, errors in data or advice used to make decisions, as well as any other unforeseen aberrations or event that may have an effect on local, national or international financial markets, economies or politics, which in turn has a decided effect upon the portfolio. Keeping in mind the obstacles and deterrents in pursuing portfolio goals and objectives, this policy is designed to achieve a reasonable rate of return over an economic cycle, consistent with limited risk and prudent investment practices.

Approval Schedule ● County Treasury Oversight Committee

Approved – April 25, 2019

● Tulare County Board of Supervisors Approved – Pending

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Table of Contents 1.0 POLICY ........................................................................................................ 1

1.1 MAINTENANCE OF PUBLIC TRUST ............................................................................................. 1

1.2 PUBLIC INQUIRY ............................................................................................................................. 1

2.0 SCOPE .......................................................................................................... 1

3.0 PRUDENCE ................................................................................................... 2

4.0 LEGAL COMPLIANCE ................................................................................... 2

5.0 PRIMARY GOALS .......................................................................................... 2

6.0 DELEGATION OF AUTHORITY ...................................................................... 3

7.0 CONFLICT OF INTEREST ............................................................................. 3

8.0 BROKER/DEALER AND DEPOSITORY INSTITUTION RELATIONSHIPS ........ 4

8.1 APPROVED LIST OF BROKER/DEALER INSTITUTIONS .......................................................... 4

8.2 APPROVED LIST OF DEPOSITORY INSTITUTIONS .................................................................. 4

9.0 TERMS FOR FUNDS INVESTED WITH THE POOL ......................................... 5

9.1 FUNDS OF AGENCIES REQUIRED TO INVEST WITHIN THE POOL ....................................... 5

9.2 MONEY VOLUNTARILY INVESTED WITH THE POOL ............................................................. 6

9.3 INCOME APPORTIONMENT .......................................................................................................... 7

10.0 AUTHORIZED INVESTMENT INSTRUMENTS ............................................. 7

11.0 INELIGIBLE SECURITIES ......................................................................... 12

12.0 REVIEW AND ANALYSIS OF PROSPECTIVE INVESTMENTS .................... 12

13.0 COMPETITIVE BIDDING ........................................................................... 12

14.0 SAFEKEEPING .......................................................................................... 12

15.0 POOL INVESTMENT PARAMETERS .......................................................... 13

16.0 MAXIMUM MATURITIES ........................................................................... 14

17.0 INTERNAL CONTROLS ............................................................................ 14

18.0 PERFORMANCE MEASUREMENT ............................................................. 14

19.0 REPORTING .............................................................................................. 15

20.0 INVESTMENT POLICY ADOPTION ............................................................ 15

21.0 GLOSSARY OF INVESTMENT TERMS ...................................................... 16

22.0 CMTA Certification ................................................................................... 22

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1.0 POLICY

The purpose of the Investment Policy is to facilitate the accomplishment of the County Treasurer’s goals and objectives with regard to the investment of idle funds, to provide a framework to carry out the business of administering and investing the idle funds of the County Treasury, and to improve communications between everyone involved and interested in the process of investing and administering the idle funds of the County Treasury. 1.1 MAINTENANCE OF PUBLIC TRUST

The Treasurer has been entrusted with the safekeeping of public monies received from public sources. The County Treasurer shall exercise a high degree of professionalism while managing the investment portfolio, to ensure and sustain public confidence, remembering that both the investment instruments and the methods of transacting investment business are subject to public review and scrutiny. 1.2 PUBLIC INQUIRY The County Treasurer’s portfolio and related transactions are a matter of public record. All districts whose funds are deposited with the Treasurer or any member of the public may obtain a copy of the CAFR, the Treasury Annual Investment Policy, and monthly and quarterly reports including a complete listing of our holdings by visiting the County’s web site under the Treasurer department..

2.0 SCOPE The following investment policy governs the deposit, safekeeping, and investment of all funds under the control of the County Treasurer, as well as all related transactions and investment activities. It does not apply to bond funds or other assets belonging to the County of Tulare, or other affiliated public agency assets that reside outside of the County Treasury Pool. The County’s Comprehensive Annual Financial Report (CAFR) identifies the fund types incorporated in the County’s Investment Pool to include:

1. General Fund 2. Special Revenue Funds 3. Enterprise Funds 4. Internal Service Funds 5. Fiduciary Funds 6. Any new funds created by the Board of Supervisors

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3.0 PRUDENCE

The administration of idle funds of the Tulare County Treasurer, as a fiduciary trustee, shall be performed in accordance with the prudent investor standard as stated in California Government Code §27000.3, §53600.3 and §53646:

“When investing, reinvesting, purchasing, acquiring, exchanging, selling or managing public funds, the county treasurer shall act with care, skill, prudence, and diligence under the circumstances then prevailing, specifically including, but not limited to, the general economic conditions and the anticipated needs of the county and other depositors, that a prudent person acting in a like capacity and familiarity with those matters would use in the conduct of funds of a like character and with like aims, to safeguard the principal and maintain the liquidity needs of the county and other depositors.”

Prudence shall be applied in the context of portfolio management. Investment officers and their advisors acting in accordance with written procedures and exercising due diligence, shall be relieved of personal responsibility for individual security’s credit risk or market price changes; provided that deviations from expectation are reported to the Treasurer in a timely fashion and appropriate action is taken to control adverse developments.

4.0 LEGAL COMPLIANCE

All investments shall be made in accordance with the County Treasurer’s Investment Policy, California Government Code §27000 et. seq., and §53600 et. seq., and any forthcoming amendments or additions to the California Government Code in relation to the investment of local agency idle funds.

5.0 PRIMARY GOALS

The Treasurer’s primary goals for the investment of idle funds (the portfolio) are, in order of priority as per California Government Code §27000.5 and §53600.5:

1. Safety – Safety of capital shall mean the safeguarding of capital through the selection of investments and investing procedures to best protect against loss arising from default, fraud, or error. This objective will be obtained through diversification and investment in securities of high quality to minimize credit risk and loss of principal.

2. Liquidity – The investment portfolio shall remain sufficiently liquid to enable the Treasury Pool to meet the operating requirements of its participants which might be reasonably anticipated and shall always have the ability to convert sufficient securities in the portfolio to cash to meet contingency needs.

3. Yield – The investment portfolio shall be designed with the objective of attaining the highest rate of return, taking into consideration income preservation, current market conditions, the present phase of the market cycle, both present and future cash flow needs, and the other primary goals of Safety and Liquidity.

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6.0 DELEGATION OF AUTHORITY The authority to invest /reinvest is delegated for a one year period by the Board of Supervisors to the County Treasurer until revoked or the authority expires in accordance with California Government Code §27000.1, §53607. , §53601 §53635 and, the Tulare County Ordinance 1-03-2061, the County Treasurer shall be responsible for the investment of the County’s funds (including the purchase, sale, or exchange of securities), the monitoring and reviewing of all investments for consistency under this investment policy. The Treasurer shall have the responsibility to execute investment transactions on a day to day basis and shall establish a system of internal controls to regulate the investment activities. When circumstances warrant, the responsibility to execute investment transactions may be delegated to the Chief Deputy Treasurer/Tax Collector, Chief Accountant-Treasury and/or the Investment Officer. The County may engage the services of one or more external investment managers to assist in the management of the Investment portfolio in a manner consistent with the County’s objectives. Such external managers may be granted discretion to purchase and sell investment securities in accordance with this Investment Policy. Each external manager assigned any portion of the portfolio must individually comply with the investment parameters established by this policy. Such managers must be registered under the Investment Advisors Act of 1940. NO PERSON MAY ENGAGE IN AN INVESTMENT TRANSACTION EXCEPT AS PROVIDED UNDER THE LIMITS OF THIS POLICY AND THE PROCEDURES ESTABLISHED BY THE AUDITOR-CONTROLLER/TREASURER-TAX COLLECTOR.

7.0 CONFLICT OF INTEREST

The Auditor-Controller/Treasurer-Tax Collector, the Treasury Oversight Committee, and Treasury staff involved with the investment process shall not engage in any profession, trade, business or occupation which is incompatible or involves a conflict of interest with his/her duties; or which may reflect unfavorably on the County, the appointing authority, or on fellow employees. California Government Code §27133(d) requires limits to be set on the receipt of honoraria, gifts, and gratuities from advisors, brokers, dealers, bankers, or other persons with whom the County Treasury conducts business by any member of the County Treasury Oversight Committee and shall require the completion of an annual Statement of Economic Interests by each member to be filed with the member’s respective agency. This policy establishes a limit on the amount of honoraria, gifts and gratuities that a committee member may receive from a single source in a calendar year that is consistent with the Fair Political Practices Commission. This limit may be in addition to the limits set by a committee member’s own agency or by state law. As part of the Treasury Oversight Committee audit, annual compliance confirmation are sent to each committee member. Each member is requested to confirm they are or are not in compliance with Government Code §27132.1 and §27132.2 which states;

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Government Code §27132.1 a member may not be employed by an entity that has contributed to a re-election campaign of the local treasurer or a member of the legislative body of the local agency in the previous three years; Government Code §27132.2 a member may not directly or indirectly raise money for the county treasurer or a member of the board of supervisors while a member of the committee.

8.0 BROKER/DEALER AND DEPOSITORY INSTITUTION RELATIONSHIPS

8.1 APPROVED LIST OF BROKER/DEALER INSTITUTIONS

The County Treasurer shall approve and maintain a list of broker/dealers and direct issuers authorized to provide investment services to the County pursuant to California Government Code §53601.5. All investments must be made with institutions that have been approved by the County Treasurer prior to investing. The County’s external investment advisors may use their own list of approved broker/dealers and financial institutions for investment purposes. The advisor shall submit the list of approved broker/dealers to the County on a quarterly basis for review. The criteria for approval is described in a separate Investment Guidelines and Procedures Manual maintained by the Treasurer’s Office. 8.2 APPROVED LIST OF DEPOSITORY INSTITUTIONS

The County Treasurer shall approve and maintain a list of depository institutions authorized to purchase Certificates of Deposit and Time Deposits. This list will be reviewed on an annual basis by the County Treasurer. An institution must meet the following criteria to be considered by the County Treasurer for deposits described in section (L) of the AUTHORIZED INVESTMENT INSTRUMENTS section of this policy:

1) The institution must be located in California.

2) The institution must have current financial information, a signed contract and waiver on file with the agency.

3) The institution must maintain a net worth to asset ratio of at least 3% and have a positive earnings record.

4) The institution must be at least 3 years old.

5) For collateralized investments, the institution must have at least $100 million in assets and collateralize their TCD’s in accordance with §53651 and §53652 of the California Government Code.

6) The institution shall have received an overall rating of not less than “satisfactory” in its most recent Community Reinvestment Act evaluation.

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9.0 TERMS FOR FUNDS INVESTED WITH THE POOL

California Government Code §27133(h) and §27136requires the County Treasurer to define the limits and conditions under which local agencies having their money in the Investment Pool may deposit and withdraw their funds. The Government Codes confer upon the Treasurer the final authority as to how funds for which the Treasurer is held responsible for overseeing, are to be invested. The Treasurer must take into account the current financial condition of the sum total of the Pools’ agencies, the conditions of the market place, the cash flow projections as well as the potential for changes in the Pool’s cash needs. The Treasurer must protect the earnings of each individual local agency in the Pool, and also see that no decision will reward a particular agency or group of agencies within the Pool at the expense of another or others within the Pool. If the Treasurer determines that a request for a withdrawal of funds for a specific or outside investment is not, in the Treasurer’s opinion, in the best interest of a particular agency, or is overly detrimental to the Pool as a whole, the Treasurer must legally deny the request, or find a means of neutralizing the harm to all those affected.

9.1 FUNDS OF AGENCIES REQUIRED TO INVEST WITHIN THE POOL

Funds will be accepted at all times, in the manner prescribed, from those agencies where the County Treasurer is also the Treasurer for the local agency, or from any agencies that by statute must place their money in the County Investment Pool. Funds will earn interest based on the average daily balance apportioned on a quarterly basis. The Treasury Pool’s cash management plan provides for adequate liquidity to cover day-to-day operations of pool participants. The County Treasurer will honor all requests to withdraw funds for normal operations that are approved by the County Auditor at a one-dollar net asset value. To accommodate large withdrawals that exceed those normally associated with operations, the following written notification requirements must be followed to allow for adjustments to the liquidity position of the pool.

♦ Withdrawals of up to $ 5,000,000………………………24 hours ♦ Withdrawals of up to $10,000,000………………………48 hours ♦ Withdrawals of up to $10,000,001 and above ………...72 hours Should a legislative body of a local agency determine that certain funds will not be required by the local agency for a period of at least one year, the local agency may petition the County Treasurer to invest that portion of the local agency’s excess funds in a specific investment under the control of the County Treasurer. Such a petition should specifically state the nature of the funds the legislative body wishes to invest, and the reasons why the legislative body believes a specific investment is a preferable and viable alternative to the general Pools participation. Should the Treasurer determine that the request for a specific investment is valid and not overly counter-productive as to the Pool as a whole, the Treasurer will consult with the local agency’s legislative body, or its appointed representative, to suggest and determine exactly what investment(s) should be purchased to fulfill the needs of the local agency. The Treasurer will then purchase the specific investment(s) upon receipt of a written resolution issued by the legislative body of the local agency, requesting the specific investment. The resolution must acknowledge

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that the local agency’s legislative body takes full responsibility for the decision to purchase the specific investment(s), and that should conditions change requiring a sale prior to maturity of the specific investment(s), any loss that might be suffered as a result, will be solely that of the local agency, and that this loss shall not be shared by the Pool as a whole, nor by the County. Under language added to the California Government Code §27133(h) and §27136 in 1995, it is not permissible for local agency legislative bodies, required to have their funds within the Pool, to withdraw funds from the Pool in order to invest outside the County Pool in any manner, at any time without specific permission of the Treasurer. Any such investments shall be either terminated and all funds returned to the Pool, or the securities so purchased must be transferred to the custody of the County Treasurer immediately. Upon receipt of any such securities by the Treasurer, the Treasurer shall at the Treasurer’s option, place the investment in the Pool, terminate the investment at the current market value and credit the local agency with the proceeds, or place the security in the name of the local agency as a specific investment.

9.2 MONEY VOLUNTARILY INVESTED WITH THE POOL

Pursuant to Government Code §53684, the County Treasurer shall limit the amounts and set conditions under which money from local agencies, not required to have their funds in the investment Pool, may deposit and withdraw voluntarily invested funds. Funds from local agencies within the County, voluntarily wishing to participate in the Pool, will not be accepted under normal conditions unless the Treasurer is assured that these funds are in lieu of longer term investments. Such deposits are subject to withdrawal restrictions for a set minimal term as to be agreed to prior to the funds being accepted into the Pool, and may not be withdrawn at any time without a minimum of 30 days notice of “intent to withdraw”. Under normal conditions, voluntary money withdrawn from the Pool will be disbursed on a dollar for dollar basis, plus appropriate interest, but under adverse market conditions, when the Treasurer deems the withdrawal of voluntary funds would cause undue losses or significantly lower earnings for those local agencies remaining within the Pool, the Treasurer may require one or more of the following remedies:

1. Restrict the percentage of funds that may be withdrawn in any given month; 2. Restrict the rate at which the funds may be withdrawn; 3. Require the local agency withdrawing their funds to accept their funds based on

the current market value of the overall Pool.

These terms will be agreed to and contracts signed prior to any voluntary money being accepted into the County Investment Pool. Such terms may exceed minimum requirements set forth in the Government Codes. Specific investments are not normally permitted with voluntary funds, though on a cost recovery basis and under circumstances that dictate such activity, exceptions may be permitted.

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9.3 INCOME APPORTIONMENT

Pursuant to Government Code §27013 ansd §53684.b, the County Treasurer calculates and records all interest earned, received, and accrued for the Investment Pool on a daily basis. The apportionment of investment earnings to the various participants in the Investment Pool is done at the end of each calendar quarter. The apportioned amount is computed as follows:

Participating Share = (Fund's Avg. Daily Equity x Pool Total Income) of Pool Income Total Pool Average Daily Equity

10.0 AUTHORIZED INVESTMENT INSTRUMENTS

The following defines in detail the parameters of each approved investment type. Any instrument not expressly permitted is prohibited. Specific limitations are provided on the maximum allowable percentage per investment category and further limitations by issuer within each investment category. With the exception of insured and/or collateralized bank deposits, overnight repurchase agreements, U.S. Government securities, including its agencies and instrumentalities, and authorized pools, no more than 10% of the County’s aggregate investment portfolio may be invested in securities of a single issuer. Where there is a percentage limitation for a particular category of investment, that percentage is only applicable at the time of purchase. If at the end of any quarter, any percentage in any restricted security is higher than the maximum allowed by category at time of purchase, the Treasurer shall take action within 90 days, to adjust the portfolio holdings so that the percentages are brought within the percentage limits. A. Bonds issued by the County of Tulare, including bonds payable solely out of the

revenues from a revenue-producing property owned, controlled, or operated by the County of Tulare or by a department, board, agency, or authority of the County of Tulare.

B. United States Treasury bills, notes, bonds or certificates of indebtedness or those for

which faith and credit of the United States are pledged for principal and interest.

C. Registered treasury notes or bonds of any of the 49 United States in addition to the State of California, including bonds payable solely out of the revenues from a revenue-producing property owned, controlled, or operated by a state or by a department, board, agency, or authority of any of the other 49 United States, in addition to the State of California. No more than 30% of the total portfolio may be invested in a combination of securities authorized by this paragraph and paragraph D, below.

D. Bonds, notes or warrants of the State of California and any local agency within

California, including bonds payable solely out of the revenues from a revenue-producing property owned, controlled, or operated by the local agency or by a department, board, agency, or authority of the local agency. No more than 30% of the total portfolio may be invested in a combination of securities authorized by this paragraph and paragraph C, above.

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E. Federal agency or United States government - sponsored enterprise obligation,

participations, or other instruments, including those issued by or fully guaranteed as to principal and interest by federal agencies or United States government - sponsored enterprises, per California Government Code §53601. No more than 75% of the total portfolio may be invested in Agency Securities.

F. Bills of exchange or time drafts drawn on and accepted by a commercial bank,

otherwise known as Bankers Acceptances, the short-term paper of which is rated in the highest category by a nationally recognized rating service. Purchases of Bankers Acceptances may not exceed 180 days maturity or 40 percent of the total portfolio which may be invested pursuant to this section.

G. Commercial Paper. Commercial paper (excluding Rule 144A issues) of “prime”

quality of the highest ranking or of the highest letter and number rating as provided for by a nationally recognized statistical-rating organization. The entity that issues the commercial paper shall meet all of the following conditions in either paragraph (1) or paragraph (2):

(1) The entity meets the following criteria: (A) Is organized and operating in the United States as a general corporation. (B) Has total assets in excess of five hundred million dollars ($500,000,000). (C) Has debt other than commercial paper, if any, that is rated in a rating category of “A” or its equivalent or higher by a nationally recognized statistical-rating organization.

(2) The entity meets the following criteria: (A) Is organized within the United States as a special purpose corporation, trust, or limited liability company. (B) Has program wide credit enhancements including, but not limited to, over collateralization, letters of credit, or surety bond. (C) Has commercial paper that is rated “A-1” or higher, or the equivalent, by a nationally recognized statistical-rating organization.

Purchases of eligible commercial paper shall not exceed 270 days maturity nor represent more than 5 percent of the outstanding paper of an issuing corporation. Purchases of commercial paper may not exceed 40 percent of the County’s total portfolio. (California Government Code §53635)

H. Negotiable Certificates of Deposit (California Government Code §53601.(i)) issued

by a nationally or state-chartered bank or a savings association or federal association or a state or federal credit union or a federally-licensed or state-licensed branch of a foreign bank; provided that the senior debt obligations of the issuing institution are rated in a rating category of “A” or its equivalent or better by a nationally recognizing rating service. Purchases of negotiable certificates of deposit may not exceed 30 percent of the total portfolio which may be invested pursuant to this section. For the purpose of this section, negotiable certificates of deposit do not come within Article 2 of Chapter 4 of Part 1 of Division 2 of Title 5 of the Government code, except that the amount so invested shall be subject to the limitations of §53638.

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I. Authorized by California Government Code §53601 and/or §53635.

(1) Investment in Repurchase Agreements or Reverse Repurchase Agreements of any securities authorized by California Government Code §53601 & §53635.

(2) Investment in Repurchase Agreements may be made on any investment authorized in California Government Code §53601 and §53635 when the term of the agreement does not exceed one year. The market value of securities that underlay a repurchase agreement shall be valued at 102 percent or greater of the funds borrowed against those securities and the value shall be adjusted no less than quarterly. Since the market value of the underlying securities is subject to daily fluctuation, the investments in repurchase agreements shall be in compliance if the value of the underlying securities is brought back up to 102 percent no later than the next business day. No more than 50% of the total portfolio may be invested in overnight repurchase agreements.

(3) Reverse Repurchase Agreements may be utilized only when the following conditions are met: The security to be sold on Reverse Repurchase Agreement has been owned and fully paid for by the County of Tulare for a minimum of 30 days prior to sale, and the total of all Reverse Repurchase Agreements on investments owned by the local agency does not exceed 20 percent of the base portfolio, and the agreement does not exceed a term of 92 days, unless the agreement includes a written codicil guaranteeing a minimum earning or spread for the entire period between the sale of the security using a Reverse Repurchase Agreement and the final maturity date of the same security.

(4) A Reverse Repurchase Agreement may not be entered into as a means of financing or paying for the security sold on a Reverse Repurchase Agreement, but may only be entered into in order to supplement the yield on securities owned and previously paid for or to provide funds for the immediate payment of an obligation of Tulare County.

(5) Investments in Reverse Repurchase Agreements or similar investments in which the local agency sells securities prior to purchase, may only be made upon prior approval of the Board of Supervisors of the County of Tulare and are limited to no more than 20% of the total portfolio.

(6) (a) “Repurchase Agreement” means a purchase of securities by the agency pursuant to an agreement by which the counter party seller will repurchase the securities on or before a specified date and for a specified amount and the counter party will deliver the underlying securities to the agency’s pool by book entry, physical delivery, or by third party custodial agreement. The transfer of underlying securities to the counter party bank’s customer book-entry account may be used for book-entry delivery.

(b) “Securities”, for the purpose of repurchase, means securities of the same issuer, description, issue date, and maturity.

(c) “Reverse Repurchase Agreement” means a sale of securities by the County Treasury pursuant to an agreement by which the agency will repurchase the securities on or before a specified date, and includes other comparable agreements.

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(d) The base value of the County Treasury Pools portfolio shall be that dollar amount obtained by totaling all cash balances placed in the pools by all pool participants, excluding any amounts obtained through selling securities by way of Reverse Repurchase Agreements or other similar borrowing methods.

(e) The spread is the difference between the cost of funds obtained using the Reverse Repurchase agreement and the earnings obtained on the reinvestment of the funds.

J. Medium-Term Notes with a maximum of five years’ maturity issued by corporations organized and operating within the United States or by depository institutions licensed by the United States or any state and operating within the United States. Notes eligible for investment shall be rated in a rating category of “A” or its equivalent or better by a nationally recognized rating service. Purchases of Medium-Term Notes may not exceed 30 percent of the agency’s total portfolio which may be invested.

K. Shares of beneficial interest issued by diversified management companies that are

money market funds registered with the Securities and Exchange Commission under the Investment Company Act of 1940. To be eligible for investment these companies shall either:

(1) Attain the highest ranking or highest letter and numerical rating provided by not less than two nationally recognized statistical rating organizations.

(2) Have an investment advisor registered or exempt from registration with the Securities and Exchange Commission with not less than five years’ experience managing money market funds with assets under management in excess of five hundred million dollars ($500,000,000). The purchase price of shares of beneficial interest purchased, shall not include any commission that these companies may charge and shall not exceed 15 percent of the agency’s total portfolio which may be invested pursuant to §53635 of the California Government Code.

L. FDIC insured or collateralized savings accounts, market rate accounts,

certificates of deposits and other bank deposits in a state or national bank, savings association or federal association, a state or a federal credit union located in California. Any financial institution accepting County funds for deposit must comply with the requirements of Government Code §53630 et seq., including collateralization of deposits. The County may waive the collateralization requirements for any portion of the deposit that is covered by Federal Deposit Insurance. As provided by Government Code §53649, the County shall have a signed contract with each financial institution that has County funds on deposit.

M. Deposits at a commercial bank, savings bank, savings and loan association, or

credit union placed through a deposit placement service that comply with the requirements under Government Code §53601.8 and §53635.8. The full amount of the principal and the interest that may be accrued during the maximum term of each certificate of deposit shall at all times be insured by Federal Deposit Insurance.

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N. Local Agency Investment Fund (LAIF). The maximum balance that can be held in

the fund is the maximum amount permitted by State Treasury policy. O. Managed Investment Pool’s pursuant to California Government Code §53601(p)

for which shares of beneficial interest issued by a joint powers authority organized pursuant to California Government Code §6509.7 that invests in the securities and obligations authorized in subdivisions (a) to (q), inclusive. Each share shall represent an equal proportional interest in the underlying pool of securities owned by the joint powers authority. To be eligible under this section, the joint powers authority issuing the shares shall have retained an investment adviser that meets all of the following criteria:

(1) The adviser is registered or exempt from registration with the Securities and Exchange Commission.

(2) The adviser has not less than five years of experience investing in the securities and obligations authorized in subdivisions (a) to (q), inclusive.

(3) The adviser has assets under management in excess of five hundred million dollars ($500,000,000).

P. A mortgage passthrough security, collateralized mortgage obligation, mortgage-

backed or other pay-through bond, equipment lease-backed certificate, consumer receivable passthrough certificate, or consumer receivable-backed bond. Securities eligible for investment under this subdivision shall:

(1) Have a maximum remaining maturity of five years or less.

(2) Be rated in a rating category of "AA" or its equivalent or better by a nationally recognized statistical-rating organization.

(3) Purchase of securities authorized by this subdivision may not exceed an accumulative total of 20 percent of the total portfolio. Non-Federal Agency issuers under this subsection are further limited to 10% of the portfolio.

(4) Purchase of securities authorized by this section is limited to the portion of the portfolio managed by an Investment Advisor on behalf of the County Treasurer.

Q. United States dollar denominated senior unsecured unsubordinated obligations

issued or unconditionally guaranteed by the International Bank for Reconstruction and Development, International Finance Corporation, or Inter-American Development Bank, with a maximum remaining maturity of five years or less, and eligible for purchase and sale within the United States. Investments under this subdivision shall be rated in a rating category of “AA” or its equivalent or better by a nationally recognizing rating service and shall not exceed 30 percent of the total portfolio that may be invested pursuant to this section.

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11.0 INELIGIBLE SECURITIES

1. Securities Lending

2. Inverse floaters, range notes, or interest-only strips that are derived from a pool of mortgages.

3. A local agency shall not invest any funds in any security that could result in zero interest accrual if held to maturity. However, a local agency may hold prohibited investments purchased prior to January 1, 1996 until their maturity dates.

4. Financial futures and options.

12.0 REVIEW AND ANALYSIS OF PROSPECTIVE

INVESTMENTS The securities held by the Treasurer must be in compliance with Section 10 Authorized Investment Instruments at the time of purchase. Because some securities may not comply with Section 10 subsequent to the date of purchase, the Treasurer shall at least quarterly review the portfolio to identify those securities that do not comply. The Treasurer report to the Board of Supervisors and to its oversight committee, major and critical incidences of noncompliance identified through the review of the portfolio. Due to the complexity of the various investment instruments available and uncertainty of market conditions the Treasurer may seek professional advice in making investment decisions in order to optimize investment selections, subject to §1-03-2062 of the Tulare County Ordinance Code.

13.0 COMPETITIVE BIDDING

When executing a transaction, the County and its external investment advisors shall seek bids or offerings from at least three broker/dealers on the approved list.

14.0 SAFEKEEPING

As required by California Government Code §53601, §53608 and §53635 all investment instruments in a negotiable, bearer, registered, or non-registered format, shall be delivered to the County of Tulare’s custodial bank by using book entry or physical delivery. The “delivery vs. payment” purchase procedure shall be used. Securities will be held by a third party custodian designated by the Treasurer and evidenced by safekeeping receipts. No securities will be held by the broker/dealer from whom they were purchased.

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15.0 POOL INVESTMENT PARAMETERS

Allowable Instruments

County Maximum % of Portfolio

Code Maximum % of Portfolio

County Maximum Maturity

Code Maximum Maturity

County % per Issuer1

U.S. Treasury Obligations (§53601(b))

100

100

5 Years

5 Years

100

U.S. Agency Obligations or U.S. Government Sponsored Enterprises (§53601(f)) Supranational Obligations (§53601(q))

75

30

100

30

5 Years

5 Years

5 Years

5 Years

100

10

Medium Term Notes (Corporate) (§53601(k)) Mortgage and Asset Backed Securities ((§53601(o))

30

20

30

20

5 Years

5 Years

5 Years

5 Years

10

10

Bankers’ Acceptances (§53601(g))

40

40

180 Days

180 Days

10

Negotiable Certificates of Deposit (§53601(i))

30

30

5 Years

5 Years

10

Repurchase Agreement (§53601(j))

50

None

30 Days

1 Year

N/A

Reverse Repurchase Agreements (§53601(j))

20

20

92 Days

92 Days

10

Bank Time Deposits (§53630 et seq.) Bank Deposits – through deposit placement service (§53601.8) Money Market Accounts (§53630 et seq.)

30

30

50

None

30

None

3 Years

3 Years

N/A

None

None

None

25

25

25

Commercial Paper (§53601(h) and (§53635(a))

40

40

270 Days

270 days

10

Money Market Funds (§53601(l))

15

20

N/A

N/A

10

Obligations issued by a State or local agencies within California or any of the other 49 United States (§53601(d)(e))

30

100

5 Years

5 Years

10

Tulare County (§53601(a))

15

100

5 Years

5 Years

10

L.A.I.F. (§16429.1) Managed Investment Pool pursuant to GC §53601(p)

Maximum Allowed

50

Per State Treasury

Policy

None

N/A

N/A

N/A

N/A

N/A

N/A

1 With the exception of insured and/or collateralized bank deposits, overnight repurchase agreements, U.S.

Government securities, including its agencies and instrumentalities, and authorized pools, no more than 10% of the County’s aggregate investment portfolio may be invested in securities of a single issuer. Commercial paper is further limited to 5% of the outstanding paper of the issuing corporation.

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16.0 MAXIMUM MATURITIES

No investment shall be made in any security with a maturity greater than five years, unless it is approved by the Board of Supervisors no less than three months prior to investment. Some investments are restricted to terms less than five years. These maturity limitations are described in this policy. The term “maturity” in this Policy is defined as an instrument’s stated legal final redemption date. The dollar-weighted average maturity of the portfolio shall not exceed 3.5 years.

17.0 INTERNAL CONTROLS Pursuant California Government Code §27130 thru §27137, and the Tulare County Ordinance 1-05-1070 the Board of Supervisors, in consultation with the County Treasurer has created a County Treasury Oversight Committee to promote the public interest by involving depositors in the management of their funds and by enhancing the security and investment return of their funds through the establishment of criteria for the withdrawal of funds. The County of Tulare Treasury Oversight Committee shall annually review and monitor the Investment Policy and cause an annual audit to provide internal controls by assuring the Treasurer’s compliance with the Investment Policy. Nothing in this policy shall be construed to allow the County Treasury Oversight Committee to direct individual investment decisions, select individual investment advisors, brokers or dealers, or impinge on the day-to-day operations of the County Treasury. In compliance with §27132 of the California Government Code, the County Treasurer Oversight Committee shall consist of the following:

a) The County Auditor-Controller/Treasurer-Tax Collector b) A representative appointed by the Board of Supervisors or his/her designee c) The Superintendent of Schools or his designee d) A School District designee e) A Special District designee f ) Two members of the public with expertise, or academic background in public

finance.

18.0 PERFORMANCE MEASUREMENT

The investment portfolio will be managed in accordance with the parameters specified within this policy. The investment portfolio shall be designed with the objective of obtaining a rate of return throughout budgetary and economic cycles, commensurate with the investment risk constraints and the cash flow needs. The investment performance objective for the portfolio shall be to earn a total rate of return which is approximately equal to or greater than the return on a portfolio/index of securities with commensurate risk. These will include the Local Agency Investment Fund (LAIF) and the average two-year Treasury note. The investment performance measurement benchmarks for the Investment Managers/Advisors shall be stated on the quarterly report based on current contractual agreements. Additional indexes may be used and presented for comparison purposes only.

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19.0 REPORTING

The Treasurer provides a quarterly Investment Report to the Board of Supervisors, County Administrative Officer, the County Auditor, and the Oversight Committee, within thirty (30) days following the end of the quarter covered by the report. The quarterly investment report contains, but is not limited to, the following investment information:

A. The type of investment, name of issuer, date of maturity, par and dollar amount invested in all securities, investments, and monies;

B. A description of any funds, investments that are under the management of contracted parties;

C. The market value as of the date of the report, and the source of this valuation for any security within the Treasury or under management by contract;

D. The weighted average maturity of investments within the Treasury;

E. Purchase dates, book values, and current credit rating of issuers;

F. Yield to maturity;

G. Overall portfolio yield based on cost;

H. Statement that the portfolio is in compliance with the Investment Policy or the manner in which the portfolio is not in compliance;

I. A statement denoting the County’s ability to meet its expenditure requirements for the next six months, or an explanation as to why sufficient money shall not be available.

In addition to the Quarterly reports. The Treasury also provides a monthly summary Investment Report to the Board of Supervisors, County Administrative Officer, the County Auditor, and the Oversight Committee. The monthly investment reports contains, but is not limited to, the following investment information:

A. The type of investment, name of issuer, date of maturity, par and dollar amount invested in all securities, investments, and monies;

B. A description of any funds, investments that are under the management of contracted parties;

C. The market value as of the date of the report, and the source of this valuation for any security within the Treasury or under management by contract;

D. The weighted average maturity of investments within the Treasury;

E. Purchase dates, book values, and market values;

F. Yield to maturity;

G. Statement that the portfolio is in compliance with the Investment Policy or the manner in which the portfolio is not in compliance;

20.0 INVESTMENT POLICY ADOPTION

The Tulare County Treasurer’s Investment Policy Statement for the Pooled Investment Fund is presented annually to the Treasury Oversight Committee for review and to the County Board of Supervisors for approval as recommended by California Government Code §53646 and §27133 and shall remain in effect until the succeeding policy is adopted.

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21.0 GLOSSARY OF INVESTMENT TERMS AGENCIES. Shorthand market terminology for any obligation issued by a government-

sponsored entity (GSE), or a federally related institution. Most obligations of GSEs are not guaranteed by the full faith and credit of the US government. Examples are: FFCB. The Federal Farm Credit Bank System provides credit and liquidity in the

agricultural industry. FFCB issues discount notes and bonds. FHLB. The Federal Home Loan Bank provides credit and liquidity in the housing

market. FHLB issues discount notes and bonds. FHLMC. Like FHLB, the Federal Home Loan Mortgage Corporation provides credit

and liquidity in the housing market. FHLMC, also called “FreddieMac” issues discount notes, bonds and mortgage pass-through securities.

FNMA. Like FHLB and FreddieMac, the Federal National Mortgage Association was established to provide credit and liquidity in the housing market. FNMA, also known as “FannieMae,” issues discount notes, bonds and mortgage pass-through securities.

GNMA. The Government National Mortgage Association, known as “GinnieMae,” issues mortgage pass-through securities, which are guaranteed by the full faith and credit of the US Government.

PEFCO. The Private Export Funding Corporation assists exporters. Obligations of PEFCO are not guaranteed by the full faith and credit of the US government.

TVA. The Tennessee Valley Authority provides flood control and power and promotes development in portions of the Tennessee, Ohio, and Mississippi River valleys. TVA currently issues discount notes and bonds.

ASKED. The price at which a seller offers to sell a security. ASSET BACKED SECURITIES. Securities supported by pools of installment loans or leases

or by pools of revolving lines of credit. AVERAGE LIFE. In mortgage-related investments, including CMOs, the average time to

expected receipt of principal payments, weighted by the amount of principal expected.

BANKER’S ACCEPTANCE. A money market instrument created to facilitate international trade transactions. It is highly liquid and safe because the risk of the trade transaction is transferred to the bank which “accepts” the obligation to pay the investor.

BENCHMARK. A comparison security or portfolio. A performance benchmark is a partial market index, which reflects the mix of securities allowed under a specific investment policy.

BID. The price at which a buyer offers to buy a security. BROKER. A broker brings buyers and sellers together for a transaction for which the broker

receives a commission. A broker does not sell securities from his own position. CALLABLE. A callable security gives the issuer the option to call it from the investor prior

to its maturity. The main cause of a call is a decline in interest rates. If interest rates decline since an issuer issues securities, it will likely call its current securities and reissue them at a lower rate of interest. Callable securities have reinvestment risk as the investor may receive its principal back when interest rates are lower than when the investment was initially made.

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CERTIFICATE OF DEPOSIT (CD). A time deposit with a specific maturity evidenced by a certificate. Large denomination CDs may be marketable.

CERTIFICATE OF DEPOSIT ACCOUNT REGISTRY SYSTEM (CDARS). A private placement service that allows local agencies to purchase more than $250,000 in CDs from a single financial institution (must be a participating institution of CDARS) while still maintaining FDIC insurance coverage. CDARS is currently the only entity providing this service. CDARS facilitates the trading of deposits between the California institution and other participating institutions in amounts that are less than $250,000 each, so that FDIC coverage is maintained.

COLLATERAL. Securities or cash pledged by a borrower to secure repayment of a loan or repurchase agreement. Also, securities pledged by a financial institution to secure deposits of public monies.

COLLATERALIZED MORTGAGE OBLIGATIONS (CMO). Classes of bonds that redistribute the cash flows of mortgage securities (and whole loans) to create securities that have different levels of prepayment risk, as compared to the underlying mortgage securities.

COMMERCIAL PAPER. The short-term unsecured debt of corporations. COMPREHENSIVE ANNUAL FINANCIAL REPORT (CAFR). The official annual report of the

Tulare County Investment Pool. It includes five combined statements for each individual fund and account group prepared in conformity with GAAP. It also includes supporting schedules necessary to demonstrate compliance with finance-related legal and contractual provisions, extensive introductory material, and a detailed statistical sections.

COST YIELD. The annual income from an investment divided by the purchase cost. Because it does not give effect to premiums and discounts which may have been included in the purchase cost, it is an incomplete measure of return.

COUPON. The rate of return at which interest is paid on a bond. CREDIT RISK. The risk that principal and/or interest on an investment will not be paid in a

timely manner due to changes in the condition of the issuer. CURRENT YIELD. The annual income from an investment divided by the current market

value. Since the mathematical calculation relies on the current market value rather than the investor’s cost, current yield is unrelated to the actual return the investor will earn if the security is held to maturity.

DEALER. A dealer acts as a principal in security transactions, selling securities from and buying securities for his own position.

DEBENTURE. A bond secured only by the general credit of the issuer. DELIVERY VS. PAYMENT (DVP). A securities industry procedure whereby payment for a

security must be made at the time the security is delivered to the purchaser’s agent.

DERIVATIVE. Any security that has principal and/or interest payments which are subject to uncertainty (but not for reasons of default or credit risk) as to timing and/or amount, or any security which represents a component of another security which has been separated from other components (“Stripped” coupons and principal). A derivative is also defined as a financial instrument the value of which is totally or partially derived from the value of another instrument, interest rate, or index.

DISCOUNT. The difference between the par value of a bond and the cost of the bond, when the cost is below par. Some short-term securities, such as T-bills and banker’s acceptances, are known as discount securities. They sell at a discount from par, and return the par value to the investor at maturity without additional interest. Other

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securities, which have fixed coupons, trade at a discount when the coupon rate is lower than the current market rate for securities of that maturity and/or quality.

DIVERSIFICATION. Dividing investment funds among a variety of investments to avoid excessive exposure to any one source of risk.

DURATION. The weighted average time to maturity of a bond where the weights are the present values of the future cash flows. Duration measures the price sensitivity of a bond to changes in interest rates.

FEDERAL CREDIT AGENCIES. Agencies of the Federal government set up to supply credit to various classes of institutions and individuals, e.g., S&L’s, small business firms, students, farmers, farm cooperatives, and exporters.

FEDERAL DEPOSIT INSURANCE CORPORATION (FDIC). A federal agency that insures bank deposits, currently up to $250,000 per entity.

FEDERAL FUNDS RATE. The rate of interest charged by banks for short-term loans to other banks. The Federal Reserve Bank through open-market operations establishes it.

FEDERAL HOME LOAN BANKS (FHLB). Government sponsored wholesale banks (currently 12 regional banks), which lend funds and provide correspondent banking services to member commercial banks, thrift institutions, credit unions and insurance companies. The mission of the FHLBs is to liquefy the housing related assets of its members who must purchase stock in their district Bank.

FEDERAL NATIONAL MORTGAGE ASSOCIATION (FNMA). FNMA, like GNMA was chartered under the Federal National Mortgage Association Act in 1938. FNMA is a federal corporation working under the auspices of the Department of Housing and Urban Development (HUD). It is the largest single provider of residential mortgage funds in the United States. Fannie Mae, as the corporation is called, is a private stockholder-owned corporation. The corporation’s purchases include a variety of adjustable mortgages and second loans, in addition to fixed-rate mortgages. FNMA’s securities are also highly liquid and are widely accepted. FNMA assumes and guarantees that all security holders will receive timely payment of principal and interest.

FEDERAL OPEN MARKET COMMITTEE (FOMC). Consists of seven members of the Federal Reserve Board and five of the twelve Federal Reserve Bank Presidents. The President of the New York Federal Reserve Bank is a permanent member, while the other Presidents serve on a rotating basis. The Committee periodically meets to set Federal Reserve guidelines regarding purchases and sales of Government Securities in the open market as a means of influencing the volume of bank credit and money.

FEDERAL RESERVE SYSTEM. The central bank of the United States created by Congress and consisting of a seven member Board of Governors in Washington, D.C., 12 regional banks and about 5,700 commercial banks that are members of the system.

GOVERNMENT NATIONAL MORTGAGE ASSOCIATION (GNMA OR GINNIEMAE). Securities influencing the volume of bank credit guaranteed by GNMA and issued by mortgage bankers, commercial banks, savings and loan associations, and other institutions. Security holder is protected by full faith and credit of the U.S. Government. GinnieMae securities are backed by the FHA, VA or FHA mortgages. The term “pass-throughs” is often used to describe GinnieMaes.

LIQUIDITY. The speed and ease with which an asset can be converted to cash.

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LOCAL AGENCY INVESTMENT FUND (LAIF). A voluntary investment fund open to government entities and certain non-profit organizations in California that is managed by the State Treasurer’s Office.

LOCAL GOVERNMENT INVESTMENT POOL. Investment pools that range from the State Treasurer’s Office Local Agency Investment Fund (LAIF) to county pools, to Joint Powers Authorities (JPAs). These funds are not subject to the same SEC rules applicable to money market mutual funds.

MARKET RISK. The risk that the value of securities will fluctuate with changes in overall market conditions or interest rates.

MARKET VALUE. The price at which a security can be traded. MARKING TO MARKET. The process of posting current market values for securities in a

portfolio. MASTER REPURCHASE AGREEMENT. A written contract covering all future transactions

between the parties to repurchase—reverse repurchase agreements that establishes each party’s rights in the transactions. A master agreement will often specify, among other things, the right of the buyer-lender to liquidate the underlying securities in the event of default by the seller borrower.

MATURITY. The final date upon which the principal of a security becomes due and payable. MEDIUM TERM NOTES. Unsecured, investment-grade senior debt securities of major

corporations which are sold in relatively small amounts on either a continuous or an intermittent basis. MTNs are highly flexible debt instruments that can be structured to respond to market opportunities or to investor preferences.

MONEY MARKET. The market in which short-term debt instruments (T-bills, discount notes, commercial paper, and banker’s acceptances) are issued and traded.

MORTGAGE PASS-THROUGH SECURITIES. A securitized participation in the interest and principal cash flows from a specified pool of mortgages. Principal and interest payments made on the mortgages are passed through to the holder of the security.

MUNICIPAL SECURITIES. Securities issued by state and local agencies to finance capital and operating expenses.

MUTUAL FUND. An entity which pools the funds of investors and invests those funds in a set of securities which is specifically defined in the fund’s prospectus. Mutual funds can be invested in various types of domestic and/or international stocks, bonds, and money market instruments, as set forth in the individual fund’s prospectus. For most large, institutional investors, the costs associated with investing in mutual funds are higher than the investor can obtain through an individually managed portfolio.

NATIONALLY RECOGNIZED STATISTICAL RATING ORGANIZATION (NRSRO). A credit rating agency that the Securities and Exchange Commission in the United States uses for regulatory purposes. Credit rating agencies provide assessments of an investment's risk. The issuers of investments, especially debt securities, pay credit rating agencies to provide them with ratings. The three most prominent NRSROs are Fitch, S&P, and Moody's.

NEGOTIABLE CD. A short-term debt instrument that pays interest and is issued by a bank, savings or federal association, state or federal credit union, or state-licensed branch of a foreign bank. Negotiable CDs are traded in a secondary market and are payable upon order to the bearer or initial depositor (investor).

OFFER. The price asked by a seller of securities. (When you are buying securities, you ask for an offer.) See Asked and Bid.

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OPEN MARKET OPERATIONS. Purchases and sales of government and certain other securities in the open market by the New York Federal Reserve Bank as directed by the FOMC in order to influence the volume of money and credit in the economy. Purchases inject reserves into the bank system and stimulate growth of money and credit; sales have the opposite effect. Open market operations are the Federal Reserve’s most important and most flexible monetary policy tool.

PORTFOLIO. Collection of securities held by an investor. PREMIUM. The difference between the par value of a bond and the cost of the bond, when

the cost is above par. PRIMARY DEALER. A financial institution (1) that is a trading counterparty with the Federal

Reserve in its execution of market operations to carry out U.S. monetary policy, and (2) that participates for statistical reporting purposes in compiling data on activity in the U.S. Government securities market.

PRUDENT PERSON (PRUDENT INVESTOR) RULE. A standard of responsibility which applies to fiduciaries. In California, the rule is stated as “Investments shall be managed with the care, skill, prudence and diligence, under the circumstances then prevailing, that a prudent person, acting in a like capacity and familiar with such matters, would use in the conduct of an enterprise of like character and with like aims to accomplish similar purposes.”

QUALIFIED PUBLIC DEPOSITORIES. A financial institution which does not claim exemption from the payment of any sales or compensating use or ad valorem taxes under the laws of this state, which has segregated for the benefit of the commission eligible collateral having a value of not less than its maximum liability and which has been approved by the Public Deposit Protection Commission to hold public deposits.

RATE OF RETURN. The yield obtainable on a security based on its purchase price or its current market price. This may be the amortized yield to maturity on a bond the current income return.

REALIZED YIELD. The change in value of the portfolio due to interest received and interest earned and realized gains and losses. It does not give effect to changes in market value on securities, which have not been sold from the portfolio.

REPURCHASE AGREEMENT (REPO). Short-term purchases of securities with a simultaneous agreement to sell the securities back at a higher price. From the seller’s point of view, the same transaction is a reverse repurchase agreement.

REVERSE REPURCHASE AGREEMENT (REVERSE REPO). A reverse-repurchase agreement (reverse repo) involves an investor borrowing cash from a financial institution in exchange for securities. The investor agrees to repurchase the securities at a specified date for the same cash value plus an agreed upon interest rate. Although the transaction is similar to a repo, the purpose of entering into a reverse repo is quite different. While a repo is a straightforward investment of public funds, the reverse repo is a borrowing.

SAFEKEEPING. A service to bank customers whereby securities are held by the bank in the customer’s name.

SECONDARY MARKET. A market made for the purchase and sale of outstanding issues following the initial distribution.

SECURITIES & EXCHANGE COMMISSION (SEC). Agency created by Congress to protect investors in securities transactions by administering securities legislation.

SEC RULE 15(C)3-1: See Uniform Net Capital Rule. STRUCTURED NOTE. A complex, fixed income instrument, which pays interest, based on a

formula tied to other interest rates, commodities or indices. Examples include

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inverse floating rate notes which have coupons that increase when other interest rates are falling, and which fall when other interest rates are rising, and "dual index floaters," which pay interest based on the relationship between two other interest rates - for example, the yield on the ten-year Treasury note minus the Libor rate. Issuers of such notes lock in a reduced cost of borrowing by purchasing interest rate swap agreements.

SUPRANATIONAL. A Supranational is a multi-national organization whereby member states transcend national boundaries or interests to share in the decision making to promote economic development in the member countries.

TOTAL RATE OF RETURN. A measure of a portfolio’s performance over time. It is the internal rate of return, which equates the beginning value of the portfolio with the ending value; it includes interest earnings, realized and unrealized gains, and losses in the portfolio.

U.S. TREASURY OBLIGATIONS. Securities issued by the U.S. Treasury and backed by the full faith and credit of the United States. Treasuries are considered to have no credit risk, and are the benchmark for interest rates on all other securities in the US and overseas. The Treasury issues both discounted securities and fixed coupon notes and bonds.

TREASURY BILLS. All securities issued with initial maturities of one year or less are issued as discounted instruments, and are called Treasury bills. The Treasury currently issues three- and six-month T-bills at regular weekly auctions. It also issues “cash management” bills as needed to smooth out cash flows.

TREASURY NOTES. All securities issued with initial maturities of two to ten years are called Treasury notes, and pay interest semi-annually.

TREASURY BONDS. All securities issued with initial maturities greater than ten years are called Treasury bonds. Like Treasury notes, they pay interest semi-annually.

UNIFORM NET CAPITAL RULE. Securities and Exchange Commission requirement that member firms as well as nonmember broker-dealers in securities maintain a maximum ratio of indebtedness to liquid capital of 15 to 1; also called net capital rule and net capital ratio. Indebtedness covers all money owed to a firm, including margin loans and commitments to purchase securities, one reason new public issues are spread among members of underwriting syndicates. Liquid capital includes cash and assets easily converted into cash.

VOLATILITY. The rate at which security prices change with changes in general economic conditions or the general level of interest rates.

YIELD. The rate of annual income return on an investment, expressed as a percentage. (a) INCOME YIELD is obtained by dividing the current dollar income by the current market price for the security. (b) NET YIELD or YIELD TO MATURITY is the current income yield minus any premium above par or plus any discount from par in purchase price, with the adjustment spread over the period from the date of purchase to the date of maturity of the bond.

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APPENDIX E

DTC BOOK-ENTRY ONLY SYSTEM

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The following information concerning The Depository Trust Company, New York, New York (“DTC”) and DTC’s book-entry-only system has been provided by DTC for use in securities disclosure documents. The District takes no responsibility for the accuracy or completeness thereof. There can be no assurance that DTC will abide by its procedures or that such procedures will not be changed from time to time. The following description includes the procedures and record-keeping with respect to beneficial ownership interests in the Bonds payment of principal and interest, other payments with respect to the Bonds to Direct Participants or Beneficial Owners, confirmation and transfer of beneficial ownership interests in such Bonds, notices to beneficial owners and other related transactions by and between DTC, the Participants, and the Beneficial Owners. However, DTC, the Participants, and the Beneficial Owners should not rely on the following information with respect to such matters, but should instead confirm the same with DTC or the Direct Participants, as the case may be. The Depository Trust Company, New York, New York (“DTC”) will act as securities depository for the securities (in this Appendix, the “Bonds”). The Bonds will be issued as fully-registered securities registered in the name of Cede & Co. (DTC’s partnership nominee) or such other name as may be requested by an authorized representative of DTC. One fully-registered Bond will be issued for each maturity of the Bonds, in the aggregate principal amount of such maturity, and will be deposited with DTC. DTC, the world’s largest securities depository, is a limited-purpose trust company organized under the New York Banking Law, a “banking organization” within the meaning of the New York Banking Law, a member of the Federal Reserve System, a “clearing corporation” within the meaning of the New York Uniform Commercial Code, and a “clearing agency” registered pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934. DTC holds and provides asset servicing for over 3.5 million issues of U.S. and non-U.S. equity issues, corporate and municipal debt issues, and money market instruments (from over 100 countries) that DTC’s participants (“Direct Participants”) deposit with DTC. DTC also facilitates the post-trade settlement among Direct Participants of sales and other securities transactions in deposited securities, through electronic computerized book-entry transfers and pledges between Direct Participants’ accounts. This eliminates the need for physical movement of securities certificates. Direct Participants include both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations. DTC is a wholly-owned subsidiary of The Depository Trust & Clearing Corporation (“DTCC”). DTCC is the holding company for DTC, National Securities Clearing Corporation and Fixed Income Clearing Corporation, all of which are registered clearing agencies. DTCC is owned by the users of its regulated subsidiaries. Access to the DTC system is also available to others such as both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, and clearing corporations that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly (“Indirect Participants”). DTC has a Standard & Poor’s rating of AA+. The DTC Rules applicable to its Participants are on file with the Securities and Exchange Commission. More information about DTC can be found at www.dtcc.com. Purchases of the Bonds under the DTC system must be made by or through Direct Participants, which will receive a credit for the Bonds on DTC’s records. The ownership interest of each actual purchaser of each Bond (“Beneficial Owner”) is in turn to be recorded on the Direct and Indirect Participants’ records. Beneficial Owners will not receive written confirmation from DTC of their purchase. Beneficial Owners are, however, expected to receive written confirmations providing details of the transaction, as well as periodic statements of their holdings, from the Direct or Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers of ownership interests in the Bonds are to be accomplished by entries made on the books of Direct and Indirect Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive Bonds representing their ownership interests in the Bonds, except in the event that use of the book-entry system for the Bonds is discontinued. To facilitate subsequent transfers, all Bonds deposited by Direct Participants with DTC are registered in the name of DTC’s partnership nominee, Cede & Co., or such other name as may be requested by an authorized representative of DTC. The deposit of Bonds with DTC and their registration in the name of Cede & Co. or such other DTC nominee do not effect any change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the Bonds; DTC’s records reflect only the identity of the Direct Participants to whose accounts such Bonds are credited, which may or may not be the Beneficial Owners. The Direct and Indirect Participants will remain responsible for keeping account of their holdings on behalf of their customers. Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. Beneficial Owners of Bonds may wish to take certain steps to augment the transmission to them of notices of significant events with respect to the Bonds, such as redemptions, tenders, defaults, and proposed amendments to the Bond documents. For example, Beneficial

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Owners of Bonds may wish to ascertain that the nominee holding the Bonds for their benefit has agreed to obtain and transmit notices to Beneficial Owners. In the alternative, Beneficial Owners may wish to provide their names and addresses to the registrar and request that copies of notices be provided directly to them. Redemption notices shall be sent to DTC. If less than all of the Bonds within an issue are being redeemed, DTC’s practice is to determine by lot the amount of the interest of each Direct Participant in such issue to be redeemed. Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to the Bonds unless authorized by a Direct Participant in accordance with DTC’s MMI Procedures. Under its usual procedures, DTC mails an Omnibus Proxy to the District as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co.’s consenting or voting rights to those Direct Participants to whose accounts Bonds are credited on the record date (identified in a listing attached to the Omnibus Proxy). Redemption proceeds, distributions, and dividend payments on the Bonds will be made to Cede & Co., or such other nominee as may be requested by an authorized representative of DTC. DTC’s practice is to credit Direct Participants’ accounts upon DTC’s receipt of funds and corresponding detail information from the District or the Paying Agent, on payable date in accordance with their respective holdings shown on DTC’s records. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered in “street name,” and will be the responsibility of such Participant and not of DTC, the Paying Agent, or the District, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of redemption proceeds, distributions, and dividend payments to Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) is the responsibility of the District or Paying Agent, disbursement of such payments to Direct Participants will be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners will be the responsibility of Direct and Indirect Participants. DTC may discontinue providing its services as depository with respect to the Bonds at any time by giving reasonable notice to the District or the Paying Agent. Under such circumstances, in the event that a successor depository is not obtained, Bonds are required to be printed and delivered. The District may decide to discontinue use of the system of book-entry-only transfers through DTC (or a successor securities depository). In that event, Bond certificates will be printed and delivered to DTC. The information in this section concerning DTC and DTC’s book-entry system has been obtained from sources that the District believes to be reliable, but the District takes no responsibility for the accuracy thereof.

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