NEW ISSUE-FULL BOOK-ENTRY INSURED RATING: S&P: "AA" UNDERLYING RATING: S&P: "A"

(See "MISCELLANEOUS - Rating" herein)

In the opinion of Bowie, Arneson, Wiles & Giannone, Newport Beach, California ("Bond Counsel"), subject, however, to certain qualifications described herein, and based upon an analysis of existing laws, regulations, rulings and court decisions, and assuming, among other matters, the accuracy of certain representations and compliance with certain covenants, interest on the Bonds is excluded from gross income for federal income tax purposes under Section 103 of the Internal Revenue Code of 1986, as amended. In the farther opinion of Bond Counsel, interest on the Bonds is not an item of tax preference for purposes of the federal alternative minimum taxes imposed on individuals and corporations; however Bond Counsel observes that such interest is included as an aqjustment in the calculation of federal corporate alternative minimum taxable income and may therefore affect a corporation's alternative minimum tax liabilities. In the farther opinion of Bond Counsel, interest on the Bonds is exempt from State of California personal income taxation. Bond Counsel expresses no opinion regarding or concerning any other tax consequences related to the ownership or disposition of the accrual or receipt of interest on the Bonds. See "TAX lvfATTERS - Opinion of Bond Counsel" herein.

Dated: Date of Delivery

$25,500,000 BANNING UNIF1ED SCHOOL DISTRICT

(Riverside County, California) General Obligation Bonds, 2016 Election, Series A

Due: August 1, as shown on the inside front cover page

This cover page contains certain information for quick reference only. It is not a summary of this issue. Investors must read the entire Official Statement to obtain information essential to the making of an infonned investment decision. Capitalized terms used but not otherwise defined on this cover page shall have the meanings assigned to such terms herein.

The Banning Unified School District (Riverside County, California) General Obligation Bonds, 2016 Election, Series A (the "Bonds") were authorized at an election of the registered voters of the Banning Unified School District (the "District'') held on November 8, 2016 (the "2016 Authorization"), at which more than fifty-five percent of the persons voting on the proposition voted to authorize the issuance and sale of not to exceed $25,500,000 principal amount of general obligation bonds of the District. The Bonds are being issued by the County of Riverside on behalf of the District for the purposes of (a) raising money for acquiring and constructing the projects, facilities and equipment set forth in the 2016 Authorization, (b) fi.mding interest on the Bonds, and (c) to pay all necessary legal, financial, printing, insurance and other contingent costs in connection with the issuance, sale and delivery of the Bonds.

The Bonds are general obligations of the District payable solely from ad valorem property taxes. The Board of Supervisors of Riverside County is empowered and obligated to annually levy ad valorem taxes, without limitation as to rate or amount, upon all property within the District subject to taxation thereby (except certain personal property which is taxable at limited rates), for the payment of principal of and interest on the Bonds when due.

The Bonds will be issued in book-entry form only, and will be initially issued and registered in the name of Cede & Co. as nominee for The Depository Trust Company, New York, New York (collectively referred to herein as "DTC''). Purchasers of the Bonds (the "Beneficial Owners'') will not receive physical certificates representing their interest in the Bonds. The Bonds will be dated as of their date of initial delivery (the "Date of Delivery'') and will be issued as current interest bonds, such that interest thereon will accrue from the Date of Delivery and be payable semiannually on February 1 and August 1 of each year, commencing February 1, 2018. The Bonds are issuable in denominations of $5,000 principal amount or any integral multiple thereof.

Payments of principal of and interest on the Bonds will be made by Zions Bank, a division of ZB, National Association as the paying agent, bond registrar and transfer agent for the Bonds (the "Paying Agent''), to DTC for subsequent disbursement to DTC Participants (as defined herein) who will remit such payments to the Beneficial Owners of the Bonds. See "THE BONDS - Book-Entry Only System" herein.

The scheduled payment of principal of and interest on the Bonds when due will be guaranteed under an insurance policy to be issued concmrently with the delivery of the Bonds by ASSURED GUARANTY MUNICIPAL CORP. See "THE BONDS - Bond lnsmance" herein and "APPENDIX F - SPECIMEN MUNICIPAL BOND INSURANCE POLICY" attached hereto.

The Bonds are subject to optional and mandatory sinking fund redemption as further described herein.

Maturity Schedule (see inside front cover page)

The Bonds will be offered when, as and if issued and received by the Underwriter, subject to the approval of legality by Bowie, Arneson, Wiles & Giannone, Newport Beach, California, Bond Counsel. Certain legal matters will be passed upon by Stradling Yocca Carlson & Rauth, a Professional Corporation, San Francisco, California, Disclosure Counsel. Certain matters will be passed upon for the Underwriter by Dannis Woliver Kelley, Long Beach, California. The Bonds, in book-entry form, will be available through the facilities of The Depository Trust Company in New York, New York, on or about April 5, 2017.

Dated: March 22, 2017.

(l)

(2)

Maturity (August l)

2018 2019 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037

MATURITY SCHEDULE

BasecusIp 111 : 066617

$25,500,CXXJ BANNING UNIFIED SCHOOL DISTRICT

(Riverside County, California) General Obligation Bonds, 2016 Election, Series A

$10,475,000Serial Bonds

Principal Interest Amount Rate Yield

$965,000 2.000% l.040% 460,000 3.000 l.250

80,000 4.000 l.700 120,000 4.000 l.930 165,000 4.000 2.140 205,000 4.000 2.320 255,000 5.000 2.470 305,000 5.000 2.590 365,000 5.000 2.700 425,000 4.000 2.94d2) 485,000 3.000 3.230 545,000 3.125 3.340 610,000 5.000 3.l9d2) 685,000 5.000 3.27d2) 770,000 5.000 3.34d2) 860,000 5.000 3.4002) 955,000 5.000 3.45d2)

1,055,000 5.000 3.49d2) l, 165,000 3.625 3.890

CUSIP"'

JUG JV4 JW2 JX0 JY8 JZS KA8 KB6 KC4 KD2 KEO KF7 KGS KH3 KJ9 KK6 KL4 KM2 KN0

$7,665,000-5.250% Term Bonds due August l, 2042 -Yield 1500% "': CUSI P"': K PS

$7,360,000-4.000% Term Bonds due August l, 2046-Yield 4.030%; CUSI P"': KQ3

CUSI P is a registered traderrarkof the American Bankers Association. CUSIP data herein is provided by CUSIP Global Services ("CGS"), managed by S&P Capital IQ on behalf of The American Bankers Association. This data is not intended to create a database and does not serve in any way as a substitute for the CGS database. CUSIP numbers have been as~gned by an independent company not affiliated with the Distric~ the Financial Advisor or the Underwriter and are included solely for the convenience of the registered o.vners of the applicable Bonds. None of the Distric~ the Financial Advisor or the Underwriter is responsible for the selection or uses of these CUSIP nurrtiers, and no representation is trade as to their correctrless on the applicable Bonds or as included herein. The CUSIP nurrtier for a specific maturity is subject to being changed after the execution and delivery of the Bonds as a result of various subsequent actions including, but not lirrited to, a refunding in whole or in part or as a result of the prcx:urerrent of secondruy rrarket ix>rtfolio insurance or other sirrilar enhancerrent by investors that is applicable to all or a portion of certain rm.turities of the Bonds. Yieldtocall at par on August l, 2027.

This Official Statement does not constitute an offering of any security otherthan the original offering of the Bonds of the District No dealer, broker, salesperson or other person has been authorized by the District to give any information or to make any representations other than as contained in this Official Statement, and if given or made, such other information or representation not so authorized should not be relied upon as having been given or authorized by the District.

The issuance and sale of the Bonds have not been registered under the Securities Act of 1933 or the Securities Exchange Act of 1934, both as amended, in reliance upon exemptions prCNided thereunder by Sections 3(a)2 and 3(a)12, respectively. This Official Statement does not constitute an offer to sell or a solicitation of an offer to buy in any state in which such offer or solicitation is not authorized or in which the person making such offer or solicitation is not qualified to do so or to any person to whom it is unlawful to make such offer or solicitation.

The information set forth herein, other than that prCNided by the District, has been obtained from sources which are believed to be reliable, but is not guaranteed as to accuracy or completeness, and is not to be construed as a representation by the District. The information and expressions of opinions herein are subject to change without notice and neither delivery of this Official Statement nor any sale made hereunder shall, under any circumstances, create any implication that there has been no change in the affairs of the District since the date hereof. This Official Statement is subrritted in connection with the sale of the Bonds referred to herein and may not be reproduced or used, in whole or in part, for any other purpose.

When used in this Official Statement and in any continuing disclosure by the District in any press release and in any oral statement made with the apprCNal of an authorized officer of the District or any other entity described or referenced in this Official Statement, the words or phrases "will likely result," "are expected to," "will continue," "is anticipated," "estirrate," "project," "forecast," "expect," "intend" and sinilar expressions identify "forward looking statements'' within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements are subject to risks and uncertainties that could cause actual results to differ materially from those contemplated in such forward-looking statements. Any forecast is subject to such uncertainties. Inevitably, some assumptions used to develop the forecasts will not be realized and unanticipated events and circumstances may occur. Therefore, there are Ii kely to be differences between forecasts and actual results, and those differences may be material.

The Underwriter has prCNided the follcwing sentence for inclusion in this Official Statement "The Underwriter has revie.ved the information in this Official Statement in accordance with, and as part of, its responsibilities to investors under the federal securities laws as applied to the facts and circumstances of this transaction, but the Underwriter does not guarantee the accuracy or completeness of such information."

IN CONNECTION WITH THIS OFFERING, THE UNDERWRITER MAY OVER ALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE BONDS 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 AND DEALER BANKS AND BANKS ACTING AS AGENT AT PRICES LOWER THAN THE PUBLIC OFFERING PRICES STATED ON THE INSIDE COVER PAGE HEREOF AND SAID PUBLIC OFFERING PRICES MAY BE CHANGED FROM TIME TO TIME BY THE UNDERWRITER.

The District maintains a website. Hcwever, the information presented on the District's website is not incorporated into this Official Statement by any reference, and should not be relied upon in making investment decisions with respect to the Bonds.

Assured Guaranty Municipal Corp. ("AGM") makes no representation regarding the Bonds or the advisability of investing in the Bonds. In addition, AGM has not independently verified, makes no representation regarding, and does not accept any responsibility for the accuracy or completeness of this Official Statement or any information or disclosure contained herein, or orritted herefrom, other than with respect to the accuracy of the information regardingAGM supplied by AGM and presented under the heading "THE BONDS -Bond Insurance'' herein and in "APPENDIX F - SPECIMEN MUNICIPAL BOND INSURANCE POLICY" attached hereto.

BANNING UNIFIED SCHOOL DISTRICT

Board of Trustees

Alfredo Andrade, President Kerri Mariner, Clerk

Martha B ederi o, M errber Alex Cassadas, Merrber

J an Spann, Merrber

District Administration

RobertT. Guillen, Superintendent Catherine Bagnara, Director of Fiscal Seivices Christina Hoff, Supervisor of Fiscal Seivices

PROFESSIONAL SERVICES

Bond Counsel

BCM/ie, Arneson, Wiles & Giannone Ne\\,1]0rt Beach, California

Disclosure Counsel

Stradling Y occa Carl son & Rauth, a Professional Corporation San Francisco, California

Financial Advisor

Dale Scott & Company Inc. San Francisco, California

PAYING AGENT

Zions Bank, a division of ZB, National Association Los Angeles, California

TABLE OF CONTENTS

INTRODUCTION ....................................................................................................................................................... 1

GENERAL ................................................................................................................................................................... 1 PURPOSES OF THE BONDS ........................................................................................................................................... 1

AUTHORITY FOR ISSUANCE OF THE BONDS ................................................................................................................ 2

SOURCES OF PAYMENT FOR THE BONDS .................................................................................................................... 2

DESCRIPTION OF THE BONDS ...................................................................................................................................... 2

TAX MATTERS ........................................................................................................................................................... 3

OFFERING AND DELIVERY OF THE BONDS .................................................................................................................. 3 BOND OWNER'S RISKS ............................................................................................................................................... 3

CONTINUING DISCLOSURE ......................................................................................................................................... 3

PROFESSIONALS INVOLVED IN THE OFFERING ............................................................................................................ 4

FORWARD LOOKING STATEMENTS ............................................................................................................................. 4

OTHER INFORMATION ................................................................................................................................................ 4

THE BONDS ................................................................................................................................................................ 5

AUTHORITY FOR ISSUANCE ........................................................................................................................................ 5 SECURITY AND SOURCES OF PAYMENT ...................................................................................................................... 5

GENERAL PROVISIONS ............................................................................................................................................... 6

BOND INSURANCE ...................................................................................................................................................... 7 ANNUAL DEBTSERVICE ........................................................................................................................................... 10

APPLICATION AND INVESTMENT OF BOND PROCEEDS .............................................................................................. 10

REDEMPTION ............................................................................................................................................................ 11

BOOK-ENTRY ONLY SYSTEM ................................................................................................................................... 15 DISCONTINUATION OF BOOK-ENTRY ONLY SYSTEM; REGISTRATION,

PAYMENT AND TRANSFER OF BONDS .................................................................................................................... 17 DEFEASANCE ........................................................................................................................................................... 17

ESTIMATED SOURCES AND USES OF FUNDS ................................................................................................ 18

TAX BASE FOR REPAYMENT OF BONDS ........................................................................................................ 19

ADVALOREM PROPERTY TAXATION ......................................................................................................................... 19

ASSESSED VALUATIONS ........................................................................................................................................... 20 APPEALS AND ADJUSTMENTS OF ASSESSED VALUATIONS ....................................................................................... 21

ASSESSED VALUATION OF SINGLE FAMILY HOMES ................................................................................................. 22

ASSESSED VALUATION AND PARCELS BY LAND USE ............................................................................................... 23 ASSESSED VALUATION BY JURISDICTION ................................................................................................................. 23

TAX LEVIES, COLLECTIONS AND DELINQUENCIES ................................................................................................... 24 ALTERNATIVE METHOD OF TAX APPORTIONMENT-"TEETER PLAN" ...................................................................... 24

TAX RATES .............................................................................................................................................................. 25

PRINCIPAL TAXPAYERS ............................................................................................................................................ 26

STATEMENT OF DIRECT AND OVERLAPPING DEBT ................................................................................................... 26

CONSTITUTIONAL AND STATUTORY PROVISIONS AFFECTING DISTRICT REVENUES AND APPROPRIATIONS ............................................................................................. 28

ARTICLE XII IA OF THE CALIFORNIA CONSTITUTION ............................................................................................... 28

LEGISLATION IMPLEMENTING ARTICLE XII IA ......................................................................................................... 29

UNITARY PROPERTY ................................................................................................................................................ 29

ARTICLE XII IB OF THE CALIFORNIA CONSTITUTION ............................................................................................... 29

ARTICLE XII IC AND ARTICLE X IIID OF THE CALIFORNIA CONSTITUTION .............................................................. 30

PROPOSITION 26 ....................................................................................................................................................... 31

PROPOSITIONS 98AND 111 ....................................................................................................................................... 31

PROPOSITION 39 ....................................................................................................................................................... 33

PROPOSITION lA AND PROPOSITION 22 .................................................................................................................... 34

JARVIS VS. CONNELL .................................................................................................................................................. 34

PROPOSITIONS 30AND 55 ......................................................................................................................................... 35

TABLE OF CONTENTS (cont'd)

PROPOSITION 2 ......................................................................................................................................................... 35

PROPOSITION 51 ....................................................................................................................................................... 37

FUTURE INITIATIVES ................................................................................................................................................ 38

DISTRICT FINANCIAL INFORMATION ............................................................................................................ 38

STATE FUNDING OF EDUCATION .............................................................................................................................. 38

OTHER REVENUE SOURCES ...................................................................................................................................... 43

STATE DISSOLUTION OF REDEVELOPMENT AGENCIES ............................................................................................. 43

BUDGET PROCESS .................................................................................................................................................... 45

ACCOUNTING PRACTICES ......................................................................................................................................... 48

COMPARATIVE FINANCIAL STATEMENTS ................................................................................................................. 48

STATE BUDGET MEASURES ...................................................................................................................................... 50

BANNING UNIFIEDSCHOOL DISTRICT .......................................................................................................... 54

INTRODUCTION ........................................................................................................................................................ 54

ADMINISTRATION ..................................................................................................................................................... 55

ENROLLMENT AND ADA .......................................................................................................................................... 56 LABOR RELATIONS .................................................................................................................................................. 56

DISTRICT RETIREMENT SYSTEMS ............................................................................................................................. 57

OTHER POST-EMPLOYMENT BENEFITS ..................................................................................................................... 63

PARTICIPATION INJOINT POWERS AUTHORITIES ...................................................................................................... 64 DISTRICT DEBT STRUCTURE .................................................................................................................................... 65

TAX MATTERS ........................................................................................................................................................ 67

OPINION OF BOND COUNSEL .................................................................................................................................... 67

ORIGINAL ISSUE DISCOUNT; PREMIUM BONDS ........................................................................................................ 68

IMPACT OF LEGISLATIVE PROPOSALS, CLARIFICATIONS OF THE CODE AND COURT DECISIONS ON TAX EXEMPTION ................................................................................................................ 68

INTERNAL REVENUE SERVICE AUDIT OF TAX -EXEMPT BOND ISSUES ...................................................................... 69

INFORMATION REPORTING AND BACKUPWITHHOLDING ......................................................................................... 69

LEGAL MATTERS .................................................................................................................................................. 69

LEGALITY FOR INVESTMENT IN CALIFORNIA ........................................................................................................... 69

EXPANDED REPORTING REQUIREMENTS .................................................................................................................. 70 CONTINUING DISCLOSURE ....................................................................................................................................... 70

No LITIGATION ........................................................................................................................................................ 71

FINANCIAL STATEMENTS ......................................................................................................................................... 72

LEGAL OPINION ....................................................................................................................................................... 72

MISCELLANEOUS .................................................................................................................................................. 72

RATING .................................................................................................................................................................... 72

UNDERWRITING ....................................................................................................................................................... 73 ADDITIONAL INFORMATION ..................................................................................................................................... 74

APPENDIX A: FORM OF OPINION OF BOND COUNSEL ........................................................................................... A-1

APPENDIX B: 2015-16AUDITED FINANCIAL STATEMENTS OF THE DISTRICT ...................................................... B-1

APPENDIX C: FORM OF CONTINUING DISCLOSURE CERTIFICATE ........................................................................ C-1

APPENDIX D: ECONOMIC AND DEMOGRAPHIC INFORMATION FOR THE CITY OF BANNING AND RIVERSIDE COUNTY ....................................................................................... D-1

APPENDIX E: RIVERSIDE COUNTY INVESTMENT POOL ....................................................................................... E-1

APPENDIX F: SPECIMEN MUNICIPAL BOND INSURANCE POLICY ......................................................................... F-1

ii

$2S,SOO,OOO BANNING UNIFIED SCHOOL DISTRICT

(Riverside County, California) General Obligation Bonds, 2016 Election, Series A

INTRODUCTION

This Official Statement, which includes the cover i:age, inside front cover page and appendices hereto, provides inforrration in connection with the sale of the Banning Unified School District (Riverside County, California) General Obligation Bonds, 2016Election, Series A (the"Bonds'').

This Introduction is not a surnrrary of this Official Statement. It is only a brief description of and guide to, and is qualified Or, more corrplete and detailed inforrration contained in the entire Official Statement, including the ewer i:age, inside front cover i:age and appendices hereto, and the documents surnrrari:zed or described herein. A full review should be rrade of the entire Official Statement. The offering of the Bonds to potential investors is rrade only 0y means of the entire Official Statement.

General

The Banning Unified School District (the "District'') was established in 1877, and ewers approxirrately 303 square miles in the communities of Cabazon, Whitewater, Poppet Flats and the Morongo Indian Reservation as well as the City of Banning. The District is located in the western portion of Riverside County (the "County"), approxirrately 80 nil es east of Los Angeles and 34 nil es east of the City of Riverside. The District currently operates five elementary schools (transitional kindergarten through grade 5), one middle school (grades 6--S), one comprehensive high school (grades 9-12), one continuation high school, a K-12 Independent Study School, and one adult education program For fiscal year 2016-17, the District's average daily attendance ("ADA") is 4,2S2 students, and taxable property within the District has a fiscal year 2016-17 assessed valuation of $2,707,197,363.

The District is gwerned 0y a five--rrember Board of Trustees (the "Board'), each member of which is elected to a four-year term 0y voters within their respective trustee area. Elections for positions to the Board are held every two years, alternating between two and three available positions. The management and policies of the District are adninistered 0y a Superintendent appointed 0y the Board who is responsible for day-to-day District operations as well as the supervision of the District's other personnel. Robert Gui 11 en is currently the District Superintendent.

For more inforrration regarding the District generally, see "DISTRICT FINANCIAL INFORMATION" and "BANNING UNIFIED SCHOOL DISTRICT" herein, and for more inforrration regarding the District's assessed valuation, see "TAX BASE FOR REPAYMENT OF BONDS" herein.

Purposes of the Bonds

The Bonds are being issued 0y the District forthe purposes of (a) raising money for acquiring and constructing the prqjects, faci Ii ties and equi prnent set forth in the 2016 Authorization (defined herein), (b) funding interest on the Bonds and (c) to l'.0-Y all necessary legal, financial, printing, insurance and other contingent costs in connection with the issuance, sale and delivery of the Bonds. See "THE BONDS -Application and Investment of Bond Proceeds" and "ESTIMATED SOURCES AND USES OF FUNDS" herein.

Authority for Issuance of the Bonds

The Bonds are issued b,t the County in the narre of the District pursuant to certain prwisions of the Gwemrrent Code of the State of California (the "Govemrrent Code'') and applicable provisions of the Education Code of the State of California (the" Education Code") and pursuant to resolutions adopted b,t the County Board of Supervisors of Riverside County (the "County Board') and the Board. See ''THE BONDS -Authority for Issuance" herein.

Sources of Payment for the Bonds

The Bonds are general obligations of the District payable solely from ad valorem property taxes. The Board of Supervisors of the County is errpcwered and obligated to levy such ad valorem taxes, without limitation as to rate or arnount, upon all property within the District sul::iject to taxation thereb,t (except certain personal property which is taxable at linited rates), for the payrrent of principal of and interest on the Bonds when due. See ''THE BONDS -Security and Sources of Payrrent" and "TAX BASE FOR REPAYMENT OF BONDS" herein.

Description of the Bonds

Farm and Registration. The Bonds will be issued in fully registered form only, without coupons. The Bonds will be initially registered in the narre of Cede & Co., as noninee of The Depository Trust Corrpany, NewY ork, New Yark (the" DTC"), who will act as securities depository for the Bonds. See "THE BONDS -General Prwisions" and "THE BONDS -Book-Entry Only System' herein. Purchasers of the Bonds (the "Beneficial owners") will not receive physical certificates representing their interests in the Bands purchased, but wi 11 instead receive credit balances on the books of their respective nominees. In the event that the book-entry only system described belo.v is no longer used with respect to the Bonds, the Bonds will be registered in accordance with the Resolution (as defined herein). See ''THE BONDS -Discontinuation of Book-Entry Only System; Registration, Payrrent and Transfer of Bonds" herein.

So long as Cede & Co. is the registered o.vner of the Bonds, as nominee of DTC, references herein to the" Owners," "Bondo.vners" or "Holders" of the Bonds (other than under the caption "TAX MATTERS" and in APPENDIX A) will mean Cede& Co. and will not mean the Beneficial Owners of the Bands.

Denominations. Individual purchases of interests in the Bonds will be available to purchasers of the Bonds in the denominations of $5,000 principal arnount, or any integral multiple thereof.

Redemption. The Bonds are sul::iject to optional redemption and mandatory sinking fund redemption prior to their stated maturity dates as further described herein. See ''THE BONDS -Redemption" herein.

Payrrents. The Bonds will be dated as of the date of their initial delivery (the "Date of Delivery"). Interest on the Bonds accrues from the Date of Delivery, and is payable semiannually on each February 1 and August 1, comrrencing February 1, 2018 (each, a "Bond Payrrent Date''). Principal of the B ands is payable on August 1, in the amounts and years as sho.vn on the i nsi de front ewer page hereof. Payrrents of the principal of and interest on the Bonds will be rnade b,t Zions Bank, a division of ZB, National Association, as the paying agent, registrar and transfer agent for the Bonds (the "Paying Agent"), to DTC for subsequent disburserrent through DTC Participants (as defined herein) to the B enefi ci al owners of the Bands.

2

Insurance. Concurrently with the delivery of the Bonds, Assured Guaranty Municipc1.I Corp. ("ACM") will issue a rnunicipc1.I bond insurance policy for the Bonds (the "Policy"), which Policy guarantees the scheduled pc1.yment of pri nci pc1.I of and interest on the Bands when due. See ''THE BONDS -Bond Insurance" herein and "APPENDIX F -SPECIMEN MUNICIPAL BOND INSURANCE POL I CY " attached hereto.

Tax Matters

In the opinion of Bo.vie, Arneson, Wiles & Giannone, Newport Beach, California, Bond Counsel, sul::iject, ho.vever, to certain qualifications described herein, and based upon an analysis of existing laws, regulations, rulings and court decisions, and assuming, arnong other rratters, the accuracy of certain representations and cornpl iance with certain cwenants, interest on the Bands is excluded frorn gross income for federal income tax purposes under Section 103 of the Internal Revenue Code of 1986, as amended (the "Code"). In the further opinion of Bond Counsel interest on the Bonds is not an itern of tax preference for purposes of the federal alternative rninirnurn taxes imposed on individuals and corporations; ho.vever Bond Counsel observes that such interest is included as an aqjustment in the calculation of federal corporate alternative ninirnurn taxable income and rray therefore affect a corporation's alternative ninirnurntax liabilities. In the further opinion of Bond Counsel, interest on the Bonds is exerrpt frorn State of California personal income taxation. Bond Counsel expresses no opinion regarding or concerni ng any other tax consequences related to the o.vnershi p or di sposi ti on of the accrual or receipt of interest on the Bonds. See "TAX MATTERS -Opinion of Bond Counsel" herein.

Offering and Delivery of the Bands

The Bonds are offered when, as and if issued, sul::iject to apprwal as to their legality b,t Bond Counsel. It is anticipated that the Bonds in book-entry forrn will be available for delivery through the facilities of DTC in NewY ork, NewY ork, on or about April 5, 2017.

Bond Owner's Risks

The Bonds are general obligations of the District payable solely frorn ad valorern property taxes which rray be levied on all taxable property in the District, without linitation as to rate or arnount (except with respect to certai n personal property which is taxable at Ii ni ted rates). For rnore cornpl ete inforrration regarding the District's financial condition and taxation of property within the District, see "TAX BASE FOR REPAYMENT OF BONDS," "DISTRICT FINANCIAL INFORMATION" and "BANNING UNIFIED SCHOOL DISTRICT" herein.

Continuing Disclosure

The District has covenanted that it will comply with and carry out the prwisions of that certain Continuing Disclosure Certificate relating to the Bonds. Pursuant thereto, the District will cwenant for the benefit of the OWners and Beneficial owners of the Bonds to rrake available certain financial inforrration and operating data relating to the District and to prwide notices of the occurrence of certain listed events, in compliance with Securities and Exchange Cornnission Rule 15c2-12(b)(5) (the" Rule''). The specific nature of the inforrration to be rrade available and of the notices of listed events is summarized belo.v under "LEGAL MATTERS -Continuing Disclosure" herein and "APPENDIX C -FORM OF CONTINUING DISCLOSURE CERTIFICATE" attached hereto.

3

Professionals Involved in the Offering

Bo.vie, Arneson, W i I es & Ci annone, Newport Beach, California, is acting as Bond Counsel to the District with respect to the Bonds. Certain legal matters will be passed upon 0y Stradling Y occa Carlson & Rauth, a Professional Corporation, San Francisco, California, as Disclosure Counsel. Dale Scott & Corrpany Inc., San Francisco, California is acting as Financial Acwisor to the District with respect to the Bonds. Bo.vie, Arneson, Wiles & Giannone, Stradling Y occa Carlson & Rauth, a Professional Corporation and Dale Scott & Corrp3.ny Inc. will receive compensation from the District contingent upon the sale and delivery of the Bonds.

Forward Looking Statements

Certain statements included or incorporated 0y reference in this Official Statement constitute "forward-looking statements" within the meaning of the United States Private Securities Litigation Reform Act of 1995, Section 21 E of the United States Securities Exchange Act of 1934, as amended, and Section 27A of the United States Securities Act of 1933, as amended. Such statements are generally identifiable 0y the terninology used such as" plan," "intend," "expect," "estimate," "prqject," "budget" or other sinilar words. Such forward-looking statements include, but are not linited to, certain statements contained in the information regarding the District herein.

THE ACHIEVEMENTS OF CERTAIN RESULTS OR OTHER EXPECTATIONS CONTAINED IN SUCH FORWARD-LOOKING STATEMENTS INVOLVE 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 THE FORWARD-LOOKING STATEMENTS SET FORTH IN THIS OFFICIAL STATEMENT.

Other Information

This Official Statement speaks only as of its date, and the information contained herein is sul::iject to change. Copies of documents referred to herein and information concerning the Bonds are available from the Banning Unified School District, 161 West Williams Street, Banning, California 92220, telephone: (951) 922-2706. The District may irrpose a charge for copying, mailing and handling.

No dealer, broker, salesperson or other person has been authorized 0y the District to give any information or to make any representations other than as contained herein and, if given or made, such other information or representations must not be relied upon as having been authorized 0y the District. This Official Statement does not constitute an offer to sell or the solicitation of an offer to buy nor shall there be any sale of the Bonds 0y a person in any jurisdiction in which it is unlawful for such person to make such an offer, solicitation or sale.

This Official Statement is not to be construed as a contract with the purchasers of the Bonds. Statements contained in this Official Statement which involve estimates, forecasts or matters of opinion, whether or not expressly so described herein, are intended solely as such and are not to be construed as representations of fact. The summaries and references to documents, statutes and constitutional prwisions referred to herein do not purport to be comprehensive or definitive, and are qualified in their entireties 0y reference to each such documents, statutes and constitutional prwisions.

4

The inforrration set forth herein, other than that prwided 0y the District, has been obtained from official sources which are believed to be reliable but it is not guaranteed as to accuracy or completeness, and is not to be construed as a representation 0y the District. The inforrration and expressions of opinions herein are sul::iject to change without notice and neither delivery of this Official Statement nor any sale rrade hereunder shall, under any circumstances, create any implication that there has been no change in the affairs of the District since the date hereof. This Official Statement is subnined in connection with the sale of the Bands referred to herei n and rray not be reproduced or used, in whole or i n part, for any other purpose.

Capitalized terms used but not otherwise defined herein shall have the meanings assigned to such terms i n the R esol uti on (defined bel cw) .

THE BONDS

Authority for Issuance

The Bonds are being issued pursuant to the prwisions of Article 4.5 of Chapter 3 of Part 1 of Division 2 of Title 5 of the Government Code, certain prwisions of the Education Code, Article XI I IA of the State Constitution and pursuant to resolutions adopted 0y the County Board on March 7, 2017 (the "Resolution") and the Board on February 16, 2017.

The District received authorization at an election held on Nwember 8, 2016, 0y the requisite 55% or more of the votes cast 0y eligible voters of the District to issue not to exceed $25,500,000 aggregate principal amount of general obligation bonds (the" 2016 Authorization"). The Bonds are the first series of bonds issued under the 2016 Authorization, and, follo.ving the issuance thereof, none of the 2016 A uthori zati on wi 11 rerrai n uni ssued.

Security and Sources of Payment

The Bonds are general obligations of the District payable solely from ad valorem property taxes. The Board of Supervisors of the County is empo.vered and obligated to annually levy ad valorem property taxes upon all property sul::iject to taxation 0y the District, without linitation as to rate or amount (except certain personal property which is taxable at linited rates), for the payment of principal of and interest on the Bonds when due. The levy rray include allo.vance for an annual reserve, established for the purpose of avoiding fluctuating tax levies. The County, ho.vever, is not obligated to establish such a reserve, and the District can rrake no representation that such reserve will be established 0y the County or that such a reserve, if previously established 0y the County, will be maintained in the future.

Such taxes will be levied annually in addition to all other taxes during the period that the Bonds are outstanding i n an amount sufficient to pay the pri nci pal of and i nterest on the B ands when due. Such taxes, when collected, will be placed 0y the County in the Debt Service Fund (as defined herein), which is required to be segregated and maintained 0y the County and which is designated for the payment of the Bonds, and interest thereon when due, and for no other purpose. Pursuant to the Resolution, the District has pledged funds on deposit in the Debt Service Fund to the payment of the Bonds. Although the County is obligated to levy ad valorem property taxes for the payment of the Bonds as described abOJe, and will rraintain the Debt Service Fund, none of the Bonds are a debt of the County.

Pursuant to Section 53515 of the Gwernment Code, the Bonds will be secured 0y a statutory lien on al I revenues received pursuant to the I evy and col I ecti on of ad val orem property taxes for the payment thereof. The lien automatically attaches, without further action or authorization 0y the Board, and is valid and binding from the ti me the Bands are executed and delivered. The revenues received pursuant to the

5

levy and collection of the ad valorem proi:erty tax will be immediately sul::iject to the lien, and such lien will be enforceable against the District, its successor, transferees and creditors, and all other pm:ies asserting rights therein, irrespective of whether such pm:ies have notice of the lien and without the need for physical delivery, recordation, filing or further act.

The moneys in the Debt Service Fund, to the extent necessary to pay the principal of and interest on the Bonds as the same becorre due and payable, will be transferred to the Paying Agent. The Paying Agent will in turn remit the funds to DTC for remittance of such principc1.I and interest to its Participc1.nts for subsequent di sburserrent to the B enefi ci al ONners of the Bands.

The amount of the annual ad val orem property taxes I evi ed b,t the County to repay the Bands wi 11 be deternined b,t the relationship between the assessed valuation of taxable property in the District and the amount of debt service due on the Bonds in any year. Fluctuations in the annual debt service on the Bonds and the assessed value of taxable property in the District may cause the annual tax rate to fluctuate. E cononi c and other factors beyond the District's control, such as general market decline in I and values, disruption in financial markets that may reduce the availability of financing for purchasers of property, reclassification of property to a class exempt from taxation, whether b,t o.vnership or use (such as exemptions for property o.vned b,t the State and local agencies and property used for qualified education, hospital, charitable or religious purposes), or the complete or pc1.rti al destruction of the taxable proi:erty caused b,t a natural or man made disaster, such as earthquake, flood, fi re, drought or taxi c contani nation, could cause a reduction in the assessed value of taxable property within the District and necessitate a corresponding increase in the annual tax rate. For further information regarding the District's assessed valuation, tax rates, werlapping debt, and other matters concerning taxation, see "CONSTITUTIONAL AND STATUTORY PROVISIONS AFFECTING DISTRICT REVENUES AND APPROPRIATIONS -Article XIIIA of the California Constitution" and "TAX BASE FOR REPAYMENT OF BONDS -AssessedValuations" herein.

General Prwisions

The Bonds will be issued in book-€ntry form only, and will be initially issued and registered in the narre of Cede& Co. as noninee for DTC. See"- Book-Entry Only System' herein. Beneficial ONners will not receive certificates representing their interest in the Bonds. The Bonds will be dated as of the Date of Delivery.

Interest on the Bands accrues from the Date of Delivery and is payable seni annually on each Band Payrrent Date, commencing February 1, 2018. Interest on the Bands wi 11 be computed on the basis of a 36o-clay year of twelve, 3o-clay months. Each Bond will bear interest from the Bond Payrrent Date next preceding the date of authentication thereof uni ess it is authenticated as of a day duri ng the i:eri od from the 16th day of the month next preceding any Band Payrrent Date to that Band Payrrent Date, inclusive, in which event it will bear interest from such Bond Payrrent Date, or unless it is authenticated on or beforeJ anuary 15, 2018, in which event it will bear interest from the Date of Delivery. The Bonds are issuable in denominations of $5,000 principc1.I amount or any integral multiple thereof, and mature on August 1, in the years and amounts set forth ai the inside ewer pc1.ge hereof.

Payrrent. The principc1.I of the Bonds will be pc1.yable in lawful money of the United States of Arrerica to the registered ONner thereof, upon the surrender thereof at the principc1.I office of the Paying Agent. The interest on the Bonds will be pc1.yable in lawful money to the i:erson whose narre api:ears on the bond registration books of the Paying Agent as the registered ONner thereof as of the close of business on the 15th day of the month preceding any Bond Payrrent Date (a "Record Date"), whether or not such day is a business day, such interest to be paid b,t check mailed on such Bond Payrrent Date to such registered ONner at such registered ONner's address as it api:ears on such registration books or at

6

such address as the registered ONner rray have filed with the Paying Agent forthat purpose on or before such Record Date. The interest payrrents on the Bonds will be rrade in imrrediately available funds (e.g., b,t wire transfer) to any registered ONner of at least $1,000,000 of such outstanding Bonds who shall have requested i n wri ti ng such rrethod of payrrent of interest on such Bands prior to the close of business on the Record Date i mrrediately preceding any Band Payrrent Date.

Bond Insurance

Bond Insurance Policy. Concurrently with the issuance of the Bonds, ACM will issue the Policy. The Policy guarantees the scheduled payrrent of principai of and interest on the Bonds when due as set forth in the form of the Policy included as APPENDIX F to this Official Staterrent.

The Policy is not cwered b,t any insurance security or guaranty fund established under New York, California, Connecticut or Florida insurance law.

Considerations Regarding Bond Insurance. In the event of a default in the payrrent of principai of or interest on the i nsured portion of such Bands, when al I or sorre becomes due, any ONner of such insured Bonds may have a claim underthe Policy secured in connection with the Bonds. The Policy rray not insure agai nst rederrpti on preni um, if any, with respect to the B ands.

I n the event that AG M is unable to rrake payrrents of pri nci pai of or interest on the B ands, as such payrrents become due under any applicable Policy, such Bonds will be payable solely as otherwise descri bed herei n. I n the event that AG M becomes obi i gated to malke payrrents with respect to the Bands, no assurance can be given that such event would not acwersely affect the rrarket price of such Bonds or the rrarketabllity or liqJidity of such Bonds.

As a result of obtaining the Policy, the long-term ratings on the Bonds will be dependent in part on the financial strength of ACM and its claim paying ability. Such Bond Insurer's financial strength and claims paying ability are predicated upon a number of factors which could change wer tirre. No assurance is given that the long-term ratings of ACM and of the ratings on the Bonds insured b,t ACM will not be sul::iject to do.vngrade, and such event could acwersely affect the market price of the Bonds, or the rrarketabllity or liquidity for such Bonds.

Neither the District or Underwriter have rrade independent investigations into the claims paying abi Ii ty of AG M and no assurance or representation regardi ng the fi nanci al strength or prqj ected fi nanci al strength of ACM is given. Thus, when making an investrrent decision, potential investors should carefully consider the ability of the District to pay principal and interest on the Bonds, and the claims paying ability of ACM, particularly werthe life of the investrrent.

Assured Guaranty Municipal Corp. ACM is a Ne.v York doniciled financial guaranty insurance company and an indirect subsidiary of Assured Guaranty Ltd. ("AGL"), a Bermuda-based holding company whose shares are publicly traded and are listed on the NewY ark Stock Exchange under the syrrbol "AGO". AGL, through its operating subsidiaries, prwides credit enhancerrent products to the U.S. and global public finance, infrastructure and structured finance rrarkets. Neither AGL nor any of its shareholders or affi I i ates, other than AG M , is obi i gated to pay any debts of AG M or any cl ai ms under any i nsurance policy issued b,t AG M .

AGM's financial strength is rated "AA" (stalble outlook) b,t S&P Glolbal Ratings, a business unit of Standard & Poor's Financial Services LLC ("S&P"), "AA-+'' (stable outlook) b,t Kroll Bond Rating Agency, Inc. ("KBRA") and "A2'' (stable outlook) b,t Moody's Investors Service, Inc. ("Moody's"). Each rating of ACM should be evaluated independently. An explanation of the significance of the above

7

ratings rray be obtained from the applicable rating agency. The above ratings are not recomrrendations to buy, sell or hold any security, and such ratings are sul::iject to revision or withdriM'al at any tirre b,t the rating agencies, including withdrawal initiated at the request of ACM in its sole discretion. In addition, the rati ng agencies rray at any ti rre change AG M 's I ong-term rati ng out I oaks or pl ace such rati ngs on a watch Ii st for possi bl e dcwngrade i n the near term Any do.vnward revision or withdrawal of any of the above ratings, the assignrrent of a negative outlook to such ratings or the placerrent of such ratings on a negative watch list rray have an adJerse effect on the rrarket price of any security guaranteed b,t ACM. ACM only guarantees scheduled principal and scheduled interest payrrents payable b,t the issuer of bonds insured b,t ACM on the date(s) when such amounts were initially scheduled to becorre due and payable (sul::iject to and in accordance with the terms of the relevant insurance policy), and does not guarantee the rrarket price or liquidity of the securities it insures, nor does it guarantee that the ratings on such securities wi 11 not be revised or with drawn.

Current Financial Strength Ratings.

OnJ uly 27, 2016, S&P issued a credit rating report in which it affirmed ACM 's financial strength rating of "AA" (stable outlook). ACM can give no assurance as to any further ratings action that S&P rray take.

On August 8, 2016, Moody's published a credit opinion affirning its existing insurance financial strength rating of "A2'' (stable outlook) on ACM. ACM can give no assurance as to any further ratings action that Moody's rray take.

On December 14, 2016, KBRA issued a financial guaranty surveillance report in which it affirrred AGM's insurance financial strength rating of "AA-+'' (stable outlook). ACM can give no assurance as to any further ratings action that KBRA rray take.

For more i nforrrati on regardi ng AG M 's financial strength rati ngs and the risks rel ati ng thereto, see AGL'sAnnual Report on Form 10-K for the fiscal year ended December 31, 2016.

Capitalization of ACM.

At December 31, 2016, AGM's policyholders' surplus and contingency reserve were approximately $3,557 nillion and its net unearned prenium reserve was approxirrately $1,328 nil lion. Such amounts represent the corrbi ned surplus, contingency reserve and net unearned preni um reserve of ACM, AGM's wholly o.vned subsidiary Assured Guaranty (Europe) Ltd. and 60.7% of AGM's indirect subsidiary Municipal Assurance Corp.; each amount of surplus, contingency reserve and net unearned preni um reserve for each company was deterni ned in accordance with statutory accounting pri nci pies.

Incorporation of Certain Docurrents W Reference.

Portions of the follo.ving docurrent filed b,t AGL with the Securities and Exchange Commission (the "SEC") that relate to ACM are incorporated b,t reference into this Official Staterrent and shall be deemed to be a part hereof: the Annual Report on Form 10-K forthe fiscal year ended December 31, 2016 (filed b,t AGL with the SEC on February 24, 2017).

A 11 consol i dated fi nanci al staterrents of AG M and al I other i nforrrati on relating to AG M included in, or as exhibits to, docurrents filed b,t AGL with the SEC pursuant to Section 13(a) or 1 S(d) of the Securities Exchange Act of 1934, as arrended, excluding Current Reports or portions thereof "furnished' under Item 2.02 or Item 7.01 of Form 8-K, after the filing of the last docurrent referred to above and before the terni nation of the offeri ng of the B ands shal I be deerred i ncorporated b,t reference

8

into this Official Statement and to be a i:art hereof from the respective dates of filing such documents. Copies of materials incorporated 0y reference are available wer the internet at the SEC's website at http:/MM,w.sec.gcw, at AGL's website at http:/,www.assuredguaranty.corn or will be prwided upon request to Assured Guaranty Municipal Corp.: 1633 B road.vay, New York, New York 10019, Attention: Comrnuni cations Dei:artment (telephone ( 212) 97 4-01 00). Except for the i nformati on referred to abcwe, no information available on or through AGL's website shall be deemed to be i:art of or incorporated in this Official Statement.

Any information regarding ACM included herein under the caption "BOND INSURANCE -Assured Guaranty Muni ci i:al Corp." or included in a document incorporated 0y reference herein (collectively, the "ACM Information") shall be modified or superseded to the extent that any subsequently included ACM Information (either directly or through incorporation 0y reference) modifies or supersedes such previously included ACM Information. Any ACM Information so modified or superseded shall not constitute a i:art of this Official Statement, except as so modified or superseded.

M i scel I aneous Matters.

AG M makes no representation regardi ng the Bands or the ad.ii sabl Ii ty of investing i n the Bands. In addition, ACM has not independently verified, makes no representation regarding, and does not accept any responsibility for the accuracy or corrpleteness of this Official Statement or any information or di sci osure contai ned herei n, or oni tted herefrom, other than with respect to the accuracy of the information regarding ACM supplied 0y ACM and presented under the heading ''THE BONDS -Bond Insurance'' herein.

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Annual Debt Service

The follo.ving table displays the annual debt service requirements of the District for the Bonds ( assumi ng no opti anal redemptions):

Year Ending (August 1)

2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 2039 2040 2041 2042 2043 2044 2045 2046

Annual Principal Payment $965,000 460,000

80,000 120,000 165,000 205,000 255,000 305,000 365,000 425,000 485,000 545,000 610,000 685,000 770,000 860,000 955,000

1,055,000 l, 165,000 1,265,000 1,390,000 1,525,000 1,665,000 1,820,000 1,980,000 2,125,000 2,285,000

970,000 $25,500,000

Annual Interest Payment111

$1,502,738.61 l, 117,225.00 l, 103,425.00 l, 103,425.00 l, 100,225.00 1,095,425.00 1,088,825.00 1,080,625.00 1,067,875.00 1,052,625.00 1,034,375.00 1,017,375.00 1,002,825.00

985,793.76 955,293.76 921,043.76 882,543.76 839,543.76 791,793.76 739,043.76 696,812.50 630,400.00 557,425.00 477,362.50 389,950.00 294,400.00 215,200.00 130,200.00 38,800.00

$23,912,594.93

Total Annual Debt Service Payment

$2,467,738.61 1,577,225.00 l, 103,425.00 l, 183,425.00 1,220,225.00 1,260,425.00 1,293,825.00 1,335,625.00 1,372,875.00 1,417,625.00 1,459,375.00 1,502,375.00 1,547,825.00 l, 595, 793. 76 1,640,293.76 1,691,043.76 1,742,543.76 1,794,543.76 1,846,793.76 1,904,043.76 1,961,812.50 2,020,400.00 2,082,425.00 2,142,362.50 2,209,950.00 2,274,400.00 2,340,200.00 2,415,200.00 1,008,800.00

$49,412,594.93

'" Interest payrrents on the Bonds will be rmde serriannually on February l and August l of each year, comrrencing February l, 201&

See "BANNING UNIFIED SCHOOL DISTRICT -District Debt Structure -General Obligation Bonds" herein for a full table of the annual debt service requirements for the District's outstanding general obi i gati on bonded debt.

Application and Investment of Bond Proceeds

The Bonds are being issued 0y the District forthe purposes of (a) raising money for acquiring and constructing the prqjects, facilities and equipment set forth in the 2016Authorization, (b) funding interest on the Bands and ( c) to pay al I necessary I egal, financial , printing, i nsurance and other conti ngent costs i n connection with the issuance, sale and delivery of the Bonds.

Building Fund. The net proceeds of the sale of the Bonds will be deposited into the fund held b,t the County and designated as the "Banning Unified School District General Obligation Bonds, 2016 Election, Series A Building Fund' (the "Building Fund') and will be applied only for the purposes approved b,t the voters of the District pursuant to the 2016 Authorization. Any interest earnings on

10

rroneys held in the Building Fund will be retained therein. The County will have no responsibility for assuri ng the proper use of the proceeds of the B ands.

Debt Service Fund. Any prenium or accrued interest received b,t the District from the sale of the Bonds will be kept separate and apart in the fund designated as the "Banning Unified School District General Obligation Bonds, 2016 Election, Series A Debt Service Fund' (the "Debt Service Fund'), which fund is held b,t the County for the payment of principal of and interest on the Bands, and for no other purpose. Any interest earnings on rroneys held in the Debt Service Fund will be retained therein. Any excess proceeds of the Bands not needed for authorized purposes for which the Bands are being issued will be transferred to the Debt Service Fund and applied to the payment of the principal of and interest on the Bonds. Pursuant to the Resolution, the District has pledged monies on deposit in the Debt Service Fund to the payment of the Bands. If, after payment in ful I of the Bands, there remain excess proceeds, any such excess amounts will be transferred to the general fund of the District.

Investment of Proceeds. Moneys in the Building Fund and the Debt Service Fund are expected to be invested through the County's pooled investment fund. See "APPENDIX E - RIVERSIDE COUNTY TREASURY POOL" attached hereto.

Redemption

Optional Redemption. The Bonds maturing on or before August 1, 2027 are not sul::iject to redemption prior to their respective maturity dates. The Bonds maturing on or after August 1, 2028 may be redeemed prior to their respective stated maturity dates at the option of the District, from any source of available funds, as a whole or in part, on any date on or after August 1, 2027, at a redemption price of par, pl us accrued i nterest to the date of redemption.

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Mandatory Sinking Fund Redemption. The term bonds maturing on August 1, 2042 (the" 2042 Term Bonds") and August 1, 2046 (the" 2046Term Bonds," and, together with the 2042 Term Bonds, the "Term Bonds"), are sul::iject to redemption prior to maturity from mandatory sinking fund payments on August 1 of each year, on and after August 1, 2038, at a rederrption price equal to the princi1E amount thereof, together with accrued interest to the date fixed for redemption, without preni um. The pri nci IE amounts represented 0y such Term B ands to be so redeemed, the dates therefor and the fi nal pri nci IE payment date are as indicated in the fol Io.vi ng tables:

(l) Maturity.

-------------------------------(1) Maturity.

2042Term Bonds Redemption Date

(August 1)

2038 2039 2040 2041 204f 11

Principal Amount to be Redeemed

$1,265,000 1,390,000 1,525,000 1,665,000 1,820,000

2046Term Bonds Redemption Date Principal Amount to

(August 1) be Redeemed

2043 2044 2045 2046 11

$1,980,000 2,125,000 2,285,000

970,000

I n the event that a portion of the 2042 Term Bands or 2046 Term Bands is opti anal ly redeemed prior to maturity, the remaining mandatory sinking fund payments sho.vn abcwe shall be reduced proportionately, or as otherwise directed 0y the District, in integral multiples of $5,000 of princi1E amount, in respect of the portion of such Term Bands opti anal ly redeemed.

Selection of Bonds for Redemption. Whenever prwision is made for the optional redemption of Bonds and less than all outstanding Bonds are to be redeemed, the Paying Agent, upon written instruction from the District, will select the Bonds for rederrption as directed 0y the District and if not so directed, in inverse order of maturity. Within a maturity, the Paying Agent will select Bonds for rederrption as directed 0y the District, and if not so directed, 0y lot. Redemption 0y lot will be in such manner as the Paying Agent will deternine; prwided, ho.ve.1er, that the portion of any Bond to be redeemed in part shall be in the princi1E amount of $5,000 or any integral multiple thereof.

Notice of Redemption. When optional redemption is authorized or required pursuant to the Resolution, upon written instruction from the District, the Paying Agent will give notice (a "Redemption Notice") of the redemption of the Bonds. Each Rederrption Notice will specify that the Bonds or a designated portion thereof are to be redeemed; if I ess than al I of the then outstandi ng Bands are to be called for redemption, shall designate the numbers (or state that all Bonds between two stated numbers both inclusive have been called for redemption) and CUSIP numbers, if any, of the Bonds to be redeemed; the date of notice and the date of rederrpti on; the pl ace or pl aces where the redemption wi 11 be made; and descriptive information regarding the Bonds and the specific Bonds to be redeemed, including the dated date, interest rate and stated maturity date of each. Such notice shall further state that on the

12

specified date there shall becorre due and i:ayable upon each Bond to be redeerred, the portion of the Pri nci i:al A nu.mt of such Bond to be redeerred, together with i nterest accrued, to the date of rederrpti on, and rederrpti on preni um( s), if any, and that from and after such date i nterest with respect thereto shal I cease to accrue, as appl i cable.

The Paying Agent will take the follo.ving actions with respect to each such Redemption Notice at least 20 but not more than 45 days prior to the redemption date, such Rederrption Notice will be given to (a) the registered ONners of Bonds, to a Securities Depository, and a national Information Service 0y first class mail; (b) the District, the County, and the respective ONners of any registered Bonds designated for redemption b,t first cl ass mai I, postage prei:ai d, at their addresses appearing on the bond register.

"Informational Services'' rreans the Municii:al Securities Rulemaking Board, through its Electronic Municii:al Market Access (EMMA) system, and, in accordance with then current guidelines of the Securities and Exchange Comnission, such other addresses and;br such other services prwiding information with respect to called bonds as the District may designate in a written request of the District delivered to the Paying Agent.

"Securities Depositories'' rreans the fol lo.vi ng: The Depository Trust Corrpany, with Cede & Co. as its noninee, and in accordance with then current guidelines of the Securities and Exchange Cornnission, such other addresses and;br such other securities depositories as the District may designate in a written request of the District delivered to the Paying Agent.

A certificate of the Paying Agent or the District that a Redemption Notice has been given as provided in the Resolution will be conclusive as against all i:arties. Neither failure to receive or send any Redemption Notice nor any defect in any such Redemption Notice so given will affect the sufficiency of the proceedings for the rederrpti on of the affected Bands. Each check issued or transfer of funds made 0y the Paying Agent for the purpose of redeening Bonds shall bear or include the CUSIP nuniber identifying, b,t issue and maturity, the Bonds being redeemed with the proceeds of such check or other transfer.

Contingent Redemption; Rescission of Redemption. Any Redemption Notice may specify that redemption of the Bands designated for rederrpti on on the specified date wi 11 be sul::ij ect to the receipt b,t the District of monies sufficient to cause such rederrption (and will specify the proposed source of such monies), and the District, the County and the Paying Agent will have no liability to the ONners of any Bonds, or any other i:attv, as a result of the District's failure to redeem the Bonds designated for redemption as a result of insufficient monies therefor.

Additionally, the District may rescind any optional redemption of the Bonds, and notice thereof, for any reason on any date prior to the date fixed for such rederrpti on b,t causi ng written notice of the rescission to be given to the ONners of the Bonds so called for redemption. Notice of rescission of redemption shall be given in the sarre manner in which notice of redemption was originally given. The actual receipt b,t the ONner of any Bond of notice of such rescission shall not be a condition precedent to rescission, and fai I ure to receive such notice or any defect in such notice shal I not affect the validity of the rescission.

Neither the District nor the County will have any liability to the ONners of any Bonds, or any other plrty, as a result of the District's decision to rescind redemption of any Bonds pursuant to the provisions of this subsection.

13

Payment of Redeemed Bonds. When a Rederrption Notice has been given substantially as described above, and, when the amount necessary for the rederrpti on of the Bands cal I ed for rederrpti on ( principal, interest, and premium, if any) is irrevocably set aside for that purpose in the Debt Service Fund, as described in "-Defeasance," the Bonds designated for redemption in such notice will become due and payable on the date fixed for rederrption thereof and upon presentation and surrender of said Bonds at the place specified in the Redemption Notice, said Bonds will be redeemed and paid at the rederrption price out of such fund. All unpaid interest payable at or prior to the redemption date will continue to be payable to the respective ONners, but without interest thereon.

Partial Redemption of Bonds. Upon the surrender of any Bond redeemed in part only, the Paying Agent will execute and delivertothe ONnerthereof a new Bond or Bonds of like series, tenor and maturity and of authorized denoninations equal in principal amount to the unredeemed portion of the Bond surrendered ( the ''Trans fer A mount''). Such partial redemption is val id upon payment of the amount required to be paid to such ONner, and the District will be released and discharged thereupon from all liability to the extent of such payment.

Effect of Notice of Redemption. Notice having been given as described above, and the moneys for the rederrpti on (incl udi ng the interest accrued to the applicable date of rederrpti on) having been set aside as described in "-Defeasance'' herein, the Bonds to be redeemed shall become due and payable on such date of rederrpti on.

If on such redemption date, moneys for the rederrpti on of al I the Bands to be redeemed, together with interest accrued to such rederrption date, shall be held in trust, so as to be available therefor on such rederrption date, and if a Redemption Notice thereof shall have been given as described above, then from and after such rederrpti on date, i nterest on the Bands to be redeemed wi 11 cease to accrue and become payable. All money held forthe redemption of Bonds shall be held in trust for the account of the ONners of the Bands to be so redeemed.

Bonds No Longer Outstanding. When any Bonds (or portions thereof), which have been duly called for rederrption prior to maturity pursuant to the Resolution, or with respect to which irrevocable instructions to cal I for rederrpti on prior to maturity at the earliest rederrpti on date have been given to the Paying Agent, in form satisfactory to it, and sufficient moneys shall be held irrevocably in trust for the payment of the rederrpti on price of such Bands or portions thereof and accrued interest thereon to the date fixed for rederrpti on, then such B ands wi 11 no I anger be deemed outstandi ng and shal I be surrendered to the Paying A gent for cancel I ati on.

14

Book--E ntry Only System

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 neither the District nor the Underwiter take any responsibility for the accuracy or corrpleteness thereof. The District and the Underwiter cannot and do not give any assurances that DTC, DTC Direct Participmts or Indirect Participmts (as defined herein) will distribute to the Beneficial CMners (a) i:ayrrents of princii:al of, or interest or preniurn if any, on the Bonds, (b) certificates representing OM1ership interest in or other confirmation or OM1ership interest in the Bonds, or (c) rederrption or other notices sent to DTC or Cede & Co., its noninee, as the registered CMner of the Bonds, or that they will so do on a tirrely basis or that DTC, Direct Participants or Indirect Particii:ants will act in the manner described in this Official Staterrent. The current" Rules" applicable to DTC are on file with the Securities and Exchange Comnission and the current" Procedures" of DTC to be follcwed in dealing with Particii:ants are on file with DTC.

The Depository Trust Comi:any, New York, New York, will act as securities depository for the Bonds. The Bonds will be issued as fully,egistered securities registered in the narre of Cede & Co. (DTC's i:artnership nominee) or such other narre as rray be requested by an authorized representative of DTC. One fully,egistered Bond certificate will be issued for each maturity of the Bonds, each in the aggregate principal amount of such maturity, and will be depositedv1,ith DTC.

DTC, the world's largest securities depository, is a linited-purpose trust company organized under the New York Banking Law, a "banking organization" within the meaning of the New York Banking Law, a rrember of the Federal Reserve System a "clearing corporation" within the rreaning of the New Yark Uniform Comrrercial Code, and a "clearing agency" registered pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934. DTC holds and prcwicles asset servicing for ewer 3.6 nil lion issues of U.S. and non-U.S. equity issues, corporate and m.micipal debt issues, and money market i nstrurrents (from over 100 countries) that DTC' s i:arti ci i:ants ("Direct Parti ci i:ants") deposit with DTC. DTC also facilitates the post-trade settlerrent among Direct Participants of sales and other securities transactions in deposited securities, through electronic computerized book-entry transfers and pledges between Direct Particii:ants' accounts. This eliminates the need for physical mcwerrent of securities certificates. Direct Participants include both U.S. and non-U.S. securities brokers and dealers, banks, trust comi:anies, clearing corporations, and certain other organizations. DTC is a wholly-ONned subsidiary of The Depository Trust & Clearing Corporation ("DTCC"). DTCC is the holding corrpany for DTC, National Securities Clearing Corporation and Fixed Income Clearing Corporation, all of which are registered clearing agencies. DTCC is cwned 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 Particii:ants," and together with the Direct Participants, the "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 Comnission. More information about DTC can be found at www.dtcc.com.

Purchases of Bonds under the DTC system must be made by or through Direct Particii:ants, which will receive a credit for the Bonds on DTC's records. The o.ivnership interest of each Beneficial owner is in turn to be recorded on the Direct and Indirect Participants' records. Beneficial owners will not receive written confi rmati on from DT C of thei r purchase. B enefi ci al CMners are, hcwever, expected to receive wri uen confi rmati ans providing detai Is of the transaction, as wel I as periodic staterrents of their holdings, from the Direct or Indirect Particii:ant through which the Beneficial owner entered into the transaction. Transfers of OM1ershi p i nterests in the Bands are to be accompl i shed by entries made on the boolks of Direct and Indirect Particii:ants acting on behalf of Beneficial owners. Beneficial owners will

15

not receive certificates representing their o.vnership interests in the Bonds, except in the event that use of the book-entry system for the B ands is di sconti nued.

To facilitate subsequent transfers, all Bonds deposited b,t Direct Participants with DTC are registered in the name of DTC' s partnership noni nee, Cede & Co., or such other name as may be requested b,t an authorized representative of DTC. The deposit of Bonds with DTC and their registration in the name of Cede & Co. or such other DTC noninee do not effect any change in beneficial o.vnership. DTC has no kno.vledge of the actual Beneficial O.Vners 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 O.Vners. The Direct and Indirect Participants will remain responsible for keeping account of thei r holdings on behalf of their customers.

Conveyance of notices and other communications b,t DTC to Direct Participants, b,t Direct Participants to Indirect Participants, and b,t Direct Participants and Indirect Participants to Beneficial O.Vners wi 11 be governed b,t arrangements among them, sul::ij ect to any statutory or regulatory requi rements as may be i n effect from ti me to ti me. B enefi ci al O.Vners of Bands may wish to take certai n steps to augment the transnission to them of notices of significant events with respect to the Bonds, such as redempti ans, defaults, and proposed amendments to the R esol uti on. For example, B enefi ci al O.Vners of Bonds may wish to ascertain that the noninee holding the Bonds for their benefit has agreed to obtain and transnit notices to Beneficial O.Vners. In the alternative, Beneficial O.Vners may wish to prwide their names and addresses to the registrar and request that copies of notices be prwided 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 deternine b,t 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 noninee) will consent or vote with respect to Bonds unless authorized b,t 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 and distributions on the Bonds will be made to Cede & Co., or such other nominee as may be requested b,t 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 sho.vn on DTC's records. Payments b,t Participants to Beneficial O.Vners will be governed b,t 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, sul::iject to any statutory or regulatory requirements as may be in effect from time to time. Payment of redemption proceeds or distributions to Cede & Co. (or such other noninee as may be requested b,t an authorized representative of DTC) is the responsibility of the District or the Paying Agent, disbursement of such payments to Direct Participants will be the responsibility of DTC, and disbursement of such payments to the Beneficial O.Vners will be the responsibility of Direct and Indirect Participants.

For every transfer and exchange of Bands, O.Vners requesting such transfer or exchange may be charged a sum sufficient to ewer any tax, governmental charge or transfer fees that may be imposed in relation thereto, which charge may include transfer fees imposed b,t the Paying Agent, DTC or the DTC Participant in connection with such transfers or exchanges.

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DTC may discontinue prwiding its services as depository with respect to the Bonds at any tirre 0y giving reasonable notice to the District or the Paying Agent. Under such circumstances, in the event that a successor depository is not obtained, Bond certificates are required to be printed and delivered.

The 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 the ONners thereof.

Discontinuation of Book-£ ntry Only System; Registration, Payment and Transfer of Bonds

So long as any of the Bonds remain outstanding, the District will cause the Paying Agent to maintain at its principal office all books and records necessary for the registration, exchange and transfer of such Bonds, which shall at all tirres be open to inspection 0y the District, and, upon presentation for such purpose, the Paying Agent shall, under such reasonable regulations as it may prescribe, register, exchange or transfer or cause to be registered, exchanged or transferred, on said books, Bonds as prwided in the Resolution.

In the event that the book-entry only system as described herein is no longer used with respect to the Bonds, the follCMing prwisions will gwern the registration, transfer, and exchange of the Bonds.

The principal of the Bonds and any interest upon the rederrption thereof prior to maturity will be payable in lawful money of the United States of Arrerica upon presentation and surrender of the Bonds at the designated office of the Paying Agent. Interest on the Bonds will be paid 0y the Paying Agent 0y either (i) check or draft mailed to the person whose name appears on the registration books of the Paying Agent as the registered ONner, and to that person's address appearing on the registration books as of the close of business on the Record Date, or (ii) 0ywire to a bank and account number on file with the Paying Agent as of the Record Date.

Any Bond may be exchanged for Bonds of like series, tenor, maturity and Transfer Amount upon presentation and surrender at the designated office of the Paying Agent, together with a request for exchange signed 0y the ONner or 0y a person I egal ly errpo.vered to do so in a form satisfactory to the Paying Agent. A Bond may be transferred on the Bond Register only upon presentation and surrender of the Bond at the designated office of the Paying Agent together with an assignrrent executed 0y the ONner or 0y a person I egal ly empo.vered to do so in a form satisfactory to the Paying Agent. U pan exchange or transfer, the Paying Agent will complete, authenticate and deliver a new bond or bonds of like series and tenor, and of any authorized denomination or denominations requested 0y the OWner equal to the Transfer A mount of the Band surrendered and bearing interest at the same rate and maturing on the sarre date.

Neither the District nor the Paying Agent will be required to (a) issue or transfer any Bonds during a period beginning with the opening of business on the 16th day next preceding either any Bond Payrrent Date or any date of selection of Bonds to be redeerred and ending with the close of business on the Bond Payrrent Date or any day on which the applicable Redemption Notice is given or (b) transfer any Bands which have been selected or cal I ed for rederrpti on i n whole or in part.

Defeasance

All or any portion of the outstanding maturities of the Bonds may be def eased prior to maturity in the fol I CMi ng ways:

(a) Cash: 0y irrevocably depositing with a bank or trust company, in escro.v, an amount of cash which, together with amounts then on deposit in the Debt Service Fund, is

17

sufficient to pay al I such Bands outstandi ng (incl udi ng al I pri nci pl! thereof, i nterest thereon and rederrpti on preni urns, if any); or

(b) Defeasance Securities: b,t i rre.1ocably depositing with a bank or trust corrpany, in escro.v, noncallable Defeasance Securities, permitted under Section 149(d) of the Code, thereto together with cash, if required, in such amount as will, in the opinion of an independent certified public accountant, together with interest to accrue or accrete thereon and monies then on deposit in the Debt Service Fund, together with interest to accrue thereon, be fully sufficient to l'.0-Y and discharge al I such Bands ( i ncl udi ng al I pri nci i:al thereof, i nterest thereon and redemption preni urns, if any) at or before thei r maturity date.

then, notwithstanding that any Bonds shall not have been surrendered for i:avment, all obligations of the District with respect to al I such outstanding Bands shal I cease and terni nate, except only the obligation of the PayingAgentto pay or cause to be i:aid from funds deposited pursuant to i:aragraphs (a) or ( b) abcwe, to the ONners of the Bands not so surrendered and pli d al I sums due with respect thereto.

"Defeasance Securities" means direct and general obligations of the United States of America (including State and Local Gwernment Series), or obligations that are unconditionally guaranteed as to princii:al and interest b,t the United States of America, including (in the case of direct and general obligations of the United States of America) e.1idence of direct o.vnership cr proportionate interests in future interest or principll payments of such obligations. In the case of investments in such proportionate interests, such proportionate interests shall be linited to circumstances wherein (a) a bank or trust comi:any acts as custodian and holds the underlying Defeasance Obligations; (b) the o.vner of the investment is the real i:artv in interest and has the right to proceed directly and individually against the obligor of the underlying Defeasance Obligations; and (c) the underlying Defeasance Obligations are held in a special account, segregated from the custodian's general assets, and are not available to satisfy any claim of the custodian, any person claiming through the custodian, or any person to whom the custodian may be obligated; provided that such obligations are rated or assessed at the highest then-prevailing United States Treasury securities credit rating at the time of purchase.

ESTIMATED SOURCES AND USES OF FUNDS

The estimated sources and uses of funds with respect to the Bands are as fol Io.vs:

Sources of Funds Principal Arrount of Bonds Net Original Issue Prerrium

Total Sources

Uses of Funds Building Fund Debt Service Fund Costs of Issuance(') Underwriter's Discount

Total Uses

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

$25,500,CXXJ.OO 2,057,540.20

$27,557,540.20

$25,185,250.00 1,990,833.20

266,707.00 114,750.00

$27,557,540.20

(1) A portion of the proceeds of the Bonds will be used to pay costs of issuance thereof, including, but not lirrited to, legal fees, financial advisory fee~ printing cos~ rating agency fees, the costs and fees of the Paying Agent, municipal bond insurance prerri um, and other costs of i ssuanc::e of the Bonds.

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TAX BASE FOR REPAYMENT OF BONDS

The information in this section describes ad valorem property taxation, assessed valuation, and other rreasures of the tax base of the District. The Bonds are payable solely from ad valorem property taxes levied and collected b,t the County on taxable property in the District, which taxes are unlinited as to rate or amount. The District's general fund is not a source for the repayment of the Bonds.

Ad Valorem Property Taxation

District property taxes are assessed and collected b,t the County at the same time and on the same rolls as special district property taxes. Assessed valuations are the same for both the District and the County taxing purposes.

Taxes are levied for each fiscal year on taxable real and personal property which is located in the District as of the preceding January 1. For assessment and collection purposes, property is classified either as "secured' or" unsecured' and is listed accordingly on separate parts of the assessment roll. The "secured roll" is that part of the assessment roll containing State assessed public utilities property and real property having a tax lien which is sufficient, in the opinion of the assessor, to secure payment of the taxes. Unsecured property is assessed on the "unsecured roll." Unsecured property comprises all property not attached to I and, such as personal property or busi ness property. Boats and airplanes are examples of unsecured property. A supplemental roll is developed when property changes hands or new construction is completed. The County levies and collects all property taxes for property falling within the County's taxing boundaries.

The valuation of secured property is established as of January 1 and is subsequently enrol led in August. Property taxes on the secured roll are payable in two installments, due November 1 and February 1 of the calendar year. If unpaid, such taxes become delinquent on December 10 and April 10, respectively, and a HJ% penalty attaches to any delinquent installment plus any additional amount deternined b,t the Treasurer. After the second installment of taxes on the secured roll is delinquent, the tax collector shall collect a cost of $10 for preparing the delinquent tax records and giving notice of delinquency. Property on the secured roll with delinquent taxes is declared tax-defaulted onJ uly 1 of the calendar year. Such property may thereafter be redeemed, until the right of redemption is terninated, b,t payment of the delinquent taxes and the delinquency penalty, plus a $15 redemption fee and a redemption penalty of 1.5% per month to the time of redemption. If taxes are unpaid for a period of five years or more, the property is sul::iject to sale b,t the Treasurer.

Property taxes on the unsecured roll as of July 31 become delinquent if they are not paid b,t August 31 and are thereafter sul::iject to a delinquent penalty of 1036. Taxes added to the unsecured tax roll after July 31, if unpaid are delinquent and sul::iject to a penalty of 1036 on the last day of the month succeeding the month of enrol I ment. In the case of unsecured property taxes, an additi anal penalty of 1 . 5% per month begi ns to accrue when such taxes remain unpaid on the I ast day of the second month after the 1036 penalty attaches. The taxing authority has four ways of collecting unsecured personal property taxes: (1) a civil action against the assessee; (2) filing a certificate in the office of the County Clerk specifying certain facts i n order to obtain a j udgment Ii en on specific property of the assessee; ( 3) fi I i ng a certificate of delinquency for record in the County Recorder's office in order to obtain a lien on specified property of the assessee; and ( 4) seizure and sale of personal property, i mprwements or possessory interests belonging or assessed to the assessee. See al so " - Secured Tax Charges and Delinquencies" herein.

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State I.Ml exerrpts from taxation $7,000 of the full cash value of an o.vner--occupied d,velling, but this exerrption does not result in any loss of revenue to local agencies, since the State reirrburses local agencies for the value of the exemptions.

All property is assessed using full cash value as defined b,t Article XIIIA of the State Constitution. State law provides exerrptions from ad valorem property taxation for certain classes of property, such as churches, colleges, non-profit hospitals, and charitable institutions.

Assessed valuation gro.vth allo.ved under Article XI I IA (new construction, certain changes of o.vnership, 2% inflation) is allocated on the basis of "situs" among thejurisdictions that serve the tax rate area wi thi n which the gro.vth occurs. Local agencies and K -14 school districts ( as defi ned herei n) share the gro.vth of " base'' revenues from the tax rate area. Each year's gro.vth al I ocati on becomes part of each agency's al I ocati on i n the fol I ONi ng year.

Assessed Valuations

Property within the District has a total assessed valuation for fiscal year 2016-17 of $2,707,197,363. The follo.ving table sho.vs a 10-year history of assessed valuations in the District.

Fiscal Year Secured

2007-08 $2,433,273,123 2008-09 2,470,350,486 2009-10 2,235,098,090 2010-11 2,040,019,667 2011-12 1,964,971,198 2012-13 2,116,317,982 2013-14 2,079,267,831 2014-15 2,256,169,930 2015-16 2,380, 1 79, 719 2016-17 2,468,989,935

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

ASSESSED VALUATIONS Fiscal Years 2007-08 through 2016-17

Banning Unified School District

Utility Unsecured

$240,685 $372,915, 118 240,685 391,395,969 240,685 378,279,523 240,685 382,977,320 240,685 349,995,290 113,378 294,801,724 113,378 279,734,875 113,378 276,072,015 113,378 259,101,472 113,378 238,094,050

Source: California Municipal Statistics, Inc::.

Total

$2,806,428,926 2,861,987,140 2,613,618,298 2,423,237,672 2,315,207,173 2,411,233,084 2,359,116,084 2,532,355,323 2,639,394,569 2,707,197,363

% Change

2.036 (8.7) (7.3) (4.5) 4.1

(2.2) 7.5 4.2 2.6

Econonic and other factors beyond the District's control, such as a general market decline in real property values, disruption in financial markets that may reduce availability of financing for purchasers of property, reclassification of property to a class exempt from taxation, whether b,t o.vnership or use (such as exerrptions for property o.vned b,t the State and local agencies and property used for qualified education, hospital, charitable or religious purposes), or the complete or partial destruction of the taxable property caused b,t a natural or manmade disaster, such as earthquake, drought, flood, fire or toxic contamination, could cause a reduction in the assessed value of taxable property within the District. Any such reduction would result in a corresponding increase in the annual tax rate levied b,t the County to pay the debt service with respect to the Bonds. See ''THE BONDS - Security and Sources of Payment'' herein.

Drought. On January 17, 2014, the State Governor (the "Governor") declared a state-wide Drought State of Emergency. As of such date, the State faced water shortfalls due to the driest year in recorded State history; the State's rivers and reservoirs were belo.v their record lo.v levels, and manual and electronic readings recorded the water content of sno.vpack at the highest elevations in the State (chiefly in the Sierra Nevada mountain range) at about 2<J36 of normal average for the winter season. As

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i:art of his State of Emergency declaration, the Governor directed State officials to assist agricultural producers and communities that rray be econonically inµicted b,t dry conditions. FollCM!ing the Governor's declaration, the California State Water Resources Control Board (the "Water Board') issued a statewide notice of water shortages and potential future curtai I ment of water right diversions. On Apri I 1, 2015, the Gwernor issued an executive order rrandating certain temporary conservation measures, which were implemented b,t means of an emergency regulation adopted b,t the Water Board on May 5, 2015. The temporary conservation measures have been extended and amended b,t subsequent executive orders of the Gwernor and Water Board regulations. On May 9, 2016, the Gwernor issued an executive order ordering the Dei:artment of Water Resources, the Water Board and the California Public Utilities Comnission to update and extend temporary water restrictions through the end of January 2017, and to take actions to transition to perrranent, I ong-term i mprwements i n water use. Fol I CMli ng the G wernor' s executive order, on May 18, 2016, the Water Board adopted a localized "stress test" approach of water conservation, under which local urban water agencies are required to ensure a three-year supply of water assuming three years of drought con di ti ons. Agencies that prqj ect a water shortage at the end of the three-year period under the stress test are requi red to i mpl ement conservation measures through J anuary 2017 equal to the percentage of water shortage prqj ected. On February 8, 2017, the Water Board extended the exi sti ng restrictions for an addi ti anal 270 days.

The District cannot make any representation regarding the effects that the recent drought has had, or, if it should continue, rray have on the value of taxable property within the District, or to what extent the drought could cause disruptions to econoni c activity within the boundaries of the District.

Appeals and Adjustments of Assessed Valuations

Under State law, property o.vners rray apply for a reduction of their property tax assessment b,t filing a written application, in form prescribed b,t the State Board of Equalization, with the appropriate county board of equalization or assessment appeals board. I n most cases, the appeal is fi I ed because the applicant believes that present rrarket conditions (such as residential home prices) cause the property to be worth less than its current assessed value. Any reduction in the assessment ultirrately granted as a result of such appeal applies to the year for which application is rrade and during which the written application was fi I ed.

A second type of assessment appeal i nvolves a chal I enge to the base year val ue of an assessed property. Appeals fcr 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 deterni ned b,t the cornpl eti on date of new construction or the date of change of o.vnershi p. Any base year appeal must be rrade within four years of the change of o.vnershi p or new construction date.

In addition to the abcwe--descri bed taxi:aver appeals, county assessors rray independently reduce assessed valuations based on changes in the market value of property, or for other factors such as the complete or i:arti al destruction of taxable property caused b,t natural or rran--made disasters such as earthquakes, floods, fire, drought or toxic contamination pursuant to relevant provisions of the State Constitution.

W hether resul ti ng from taxi:ayer appeals or county assessor reductions, aqj ustments to assessed value are sul::iject to yearly reappraisals b,t the county assessor and may be aqjusted back to their original val ues when real estate rrarket conditions i mprwe. Once property has regal ned its prior assessed val ue, aqjusted for inflation, it once again is sul::iject to the annual inflationary gro.vth rate factor allo.ved under Article XIIIA. See also "CONSTITUTIONAL AND STATUTORY PROVISIONS AFFECTING DISTRICT REVENUES AND APPROPRIATIONS -Article XIIIA of the California Constitution" herein.

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The District ck:Jes not have inforrration regarding pending appeals of assessed valuation of property within the District. No assurance can be given that property tax appeals currently pending or in the future wi 11 not significantly reduce the assessed valuation of property within the District.

Assessed Valuation of Single Family Homes

The follo.ving table sho.vs a per--p3.rcel analysis of single fanily residences within the District, in terms of their fiscal year 2016-17 assessed valuation.

ASSESSED VALUATION OF SINGLE FAMILY HOMES Fiscal Year 2016-17

Banning Unified School District

No.of 2016-17 Average Median Parcels Assessed Valuation Assessed Valuation Assessed Valuation

Single Farrily Residential 9,486 $1,509,035,839 $159,080 $151,792

2016-17 No.of % of Cumulative Total % of Cumulative Assessed Valuation Parcel sen Total % ofTotal Valuation Total % ofTotal

$0-$24,999 198 2.081% 2.081% $3,710,055 0.246% Q246% 25,000-49,999 636 6.705 &792 24,438,839 l.620 l.865 50,000-74,999 984 10.373 19.165 61,960,457 4.106 5.971 75,000-99,999 1,024 10.795 29.960 89,377,544 5.923 l l.894

100,000-124,999 926 9.762 39.722 103,910,659 6.886 1&780 125,000-149,999 904 9.530 49.252 124,347,626 8.240 27.020 l 50,000-174,999 1,059 l l.164 6Q415 172,475,200 l l.429 3&450 175,000-199,999 965 10.173 7Q588 180,975,989 l l.993 5Q443 200,000-224,999 734 7.7.38 7&326 155,551,941 10.308 6Q75l 225,000-249,999 742 7.&22 86.148 176,233,540 l l.679 72.429 250,000-274,999 362 3.816 89.964 94,326,592 6.251 78.680 275,000 - 299,999 368 3.879 93.844 104,934,105 6.954 85.634 300,000-324,999 146 l.539 95.383 45,570,229 3.020 88.653 325,000 - 349,999 148 l.560 96.943 49,920,829 3.308 91.962 350,000-374,999 165 l.739 98.682 59,556,436 3.947 95.908 375,000 - 399,999 35 0.369 99.051 13,451,086 0.891 96.800 400,000-424,999 23 0.242 99.294 9,427,364 0.625 97.424 425,000-449,999 17 0.179 99.473 7,488,272 0.496 97.921 450,000-474,999 12 0.127 99.599 5,572,054 0.369 98.290 475,000-499,999 10 0.105 99.705 4,930,114 Q327 98.617

500,000 and greater --2§ Q295 100000 20,876,908 ~ 100000 Total 9,486 100.0006 $1,509,035,839 100.0006

-------------------------------(l) I rrproved single farri ly residential parcel~ Excludes condom ni urns and parcels with rrulti pie farri ly units. Source: California Municipal Statistics, Inc::.

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Assessed Valuation and Parcels by Land Use

The follo.ving table sho.vs a per---p3.rcel analysis of the distribution of taxable property within the District b,t principll use, and the fiscal year 2016-17 assessed valuation of such parcels.

ASSESSED VALUATION AND PARCELS BY LAND USE Fiscal Year 2016-17

Banning Unified School District

2016-17 % of Non-Residential: Assessed Valuation111 Total

Agricultural ,Rural $21,743,001 0.8836 Comnercial~ ndustrial 654,514,845 26.51 Vacant Commercial~ ndustrial 38,490,234 1.56 G CNernmentf-,ocial ~ nstitutional 2,548,566 0.10 Vacant Other 29,894,984 1.21 M i scel laneous 3,072,097 0.12 Subtotal Non-Residential $750,263,727 30.39%

Residential: Single Farrily Residence $1,509,035,839 61.12% C ondorri ni um/f own house 68,157,077 2.76 Mobile Home 44,281,059 1.79 2+ Residential Units/Apartments 74,722,091 3.03 Vacant Residential 22,530.142 0.91 S ubtotal Residential $1,718,726,208 69.61%

Total $2,468,989,935 100.0036

-------------------------------(l) Local secured assessed valuation: excluding tax-exerrpt property. Source: California Municipal Statistics, Inc::.

Assessed Valuation by Jurisdiction

No. of % of Parcels Total

183 0.92% 819 4.11 422 2.12

75 0.38 4,177 20.97

198 0.99 5,874 29.49%

9,486 47.62% 625 3.14 153 0.77 280 1.41

3.501 17.58 14,045 70.51%

19,919 100.0036

The follo.ving table sho.vs the fiscal year 2016-17 assessed valuation of the District b,t jurisdiction.

I urisdiction:

City of Banning City of Desert Hot Springs City of Palm Springs Unincorporated Riverside County Total District

Total Riverside County

ASSESSED VALUATION BY JURISDICTION Fiscal Year 2016-17

Banning Unified School District

Assessed Valuation % of Assessed Valuation in District District of I urisdiction

$1,850,462,218 68.35% $2,000,874,049 1,096,937 0.04 $1,500,483,388 5,160,118 0.19 $11,442,832,198

850,478,090 31.42 $38,062,866,343 $2,707,197,363 l 00.00'/o

$2,707,197,363 l 00.00'/o $250,516,388,879

-------------------------------Source: California Municipal Statistics, Inc::.

23

% ofJ urisdiction in District

92.48"/o 0.07'/o 0.05% 2.23%

l.08%

Tax Levies, Collections and Delinquencies

The follCM!ing table sho.vs secured tax levies and delinquencies within the District, and armunts delinquent as of J une 30, for fi seal years 2006-07 through 201 5-16.

SUM MARY OF SECURED TAX CHARGES AND DELINQUENCIES Fiscal Years 2006--07 through 2015-16

Banning Unified School District

Secured Tax C harge111

Amount Delinquent I une 30

% Delinquent Fiscal Year

2006--07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16

$384,519.75 1,842,699.77 1,888,812.39 2, 181,294.84 1,729,335.12 1,961,088.85 2,841,811.48 2,283,290.83 2,422,916.52 2,514,365.37

(7l District's general obligation bard debt service le;y. Source: California Municipal Statistics, Irr:.

Alternative Method of Tax Apportionment -"Teeter Plan"

$33,193.52 176,839.15 162,833.88 138,974.02 88,846.69 95,074.19 76,562.20 66,640.51 65,382.78 64,470.55

I une 30

8.63% 9.60 8.62 6.37 5.14 4.85 2.69 2.92 2.70 2.56

The Board of Supervisors of the County has irrplemented the Alternative Method of Distribution of Tax Levies and Collections and of Tax Sale Proceeds (the ''Teeter Plan"), as provided for in Section 4701 et seq. of the State Revenue and Taxation Code. Under the Teeter Plan, the County apportions secured property taxes on an accrual basis when due (irrespective of actual collections) to its local political subdivisions, including the District, for which the County acts as the tax-levying or tax-collecting agency.

The Teeter Plan is applicable to all tax levies for which the County acts as the tax-levying or tax-collecting agency, or for which the County treasury is the legal depository of the tax collections. As adopted b,t the County, the Teeter Plan excludes Mello-Roos Community Facilities Districts and special assessment districts which prwide for accelerated judicial foreclosure of property for which assessments are deli nquent.

The advalorem property tax to be levied to pay the principal of and interest on the Bonds will be sul::iject to the Teeter Plan, beginning in the first year of such levy. The District will receive 10036 of the ad valorem property tax levied to pay the principal of and interest on the Bonds irrespective of actual delinquencies in the collection of the tax b,t the County.

The Teeter Plan is to remain in effect unless the Board of Supervisors of the County orders its discontinuance or unless, prior to the commencement of any fiscal year of the County (which commences on July 1), the Board of Supervisors receives a petition for its discontinuance joined in b,t a resolution adopted b,t at least two-thirds of the participating revenue districts in the County. In the event the Board of Supervisors is to order discontinuance of the Teeter Plan subsequent to its implementation, only those secured property taxes actually collected would be allocated to political subdivisions (including the District) for which the County acts as the tax-levying or tax-collecting agency.

24

Tax Rates

A representative tax rate area (a "TRA") located within the District is TRA 1--000. The table belo,v sho,vs the total ad valorem property tax rates, as a percentage of assessed valuation, levied b,t all taxing entities in this TRA during the five-year period from fiscal years 2012-13 through 2016-17.

SUM MARY OF AD VAL OREM TAX RATES (TRA 1-000) 111

Fiscal Years 2012-13 through 2016-17 Banning Unified School District

2012-13 2013-14 2014-15

General l. 00000'/o l.00000'/o l . 00000'/o Banning Unified School District .10207 .11284 .10956 MountSanJacintoCommunity College District San Gorgonio Pass Memorial Healthcare District . ll 572 .11896 .11296 San Gorgonio Pass Water Agency State Water Prqject .18500 .18500 .18500 -- -- --

Total l.4027g'/o l.41680'/o l.40752%

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

2015-16 2016-17

l .00000'/o l .00000'/o .10826 .10573 .01394 .Ol 320 .08143 .08357 .18500 .18500 --

l.38863% l.38750'/o

'" The fiscal year 2016-17 assessed valuation of TRA l-000 is $557,487,417, which is 2Q 59% of the District's total fiscal year 2016-l 7 assessed valuation.

Source: California Municipal Statistics, Inc::.

[REMAINDER OF PAGE LEFT BLANK]

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Principal Taxpayers

The follo.ving table lists the 20 largest local secured taxpayers in the District in terms of their fi seal year 2016-17 secured assessed valuations.

20 LARGEST LOCAL SECURED TAXPAYERS Fiscal Year 2016-17

Banning Unified School District

Property Owner Primary Land Use Assessed Valuation

1. ChelseaGCA Realty Partnership Outlet Stores $231.485.390 2. Nestle Waters North America Inc. Industrial 142,112,976 3. W ind Energy Partnership Pew er Generation 33,570,177 4. RRM Properties Commercial 23,149,462 5. MLD Banning Investments Commercial 20,108,223 6. Cabazon Co. Stores Commercial 13,225,214 7. Property Resources Corp. Commercial 10,972,750 8. Sun Lakes Investments Commercial 10,576,064 9. Mark Technologies Industrial 9,943,847

10. ABS CAOP Commercial 8,570,500 11. S errai n B rothers Partnership Mobile Home Park 7,936,757 12. OS I Partnership 1 Vacant 7,885,528 13. Lennar Homes of California Inc. Residential Development 7,785,017 14. K Mart Corp. Commercial 7,265,295 15. DJ L Properties Commercial 6,974,197 16. B anni e I nvestments Commercial 6,600,000 17. Thrifty Payless Inc. Commercial 6,445,363 18. Mallo,, Farrily Partners Vacant 6,382,167 19. David H. Butterfield Residential 6,006,633 20. Banning Storage Industrial 5,946,085

$572,941,645

-------------------------------'" The District has a fiscal year 2016-17 local secured assessed valuation of $2,468,989,935. Source: California Municipal Statistics, Inc::.

Statement of Direct and Overlapping Debt

% of Totai11

9.3836 5.76 1.36 0.94 0.81 0.54 0.44 0.43 0.40 0.35 0.32 0.32 0.32 0.29 0.28 0.27 0.26 0.26 0.24 0.24

23.21%

Set forth on the fol Io.vi ng page is a direct and werl appi ng debt report ( the " Debt Report'') prepared b,t California Municipal Statistics, Inc., effective as of February 27, 2017 for debt issued as of April 1, 2017. The Debt Report is included for general information purposes only. The District has not reviewed the Debt Report for completeness or accuracy and makes no representation in connection therewith.

The Debt Report generally includes long-term obligations sold in the public credit markets b,t public agencies whose boundaries werlap the boundaries of the District in whole or in part. Such long­term obi i gati ons generally are not payable from revenues of the District ( except as indicated) nor are they necessarily obligations secured b,t land within the District. In many cases long-term obligations issued b,t a public agency are payable only from the general fund or other revenues of such public agency.

The table shews the percentage of each werlapping entity's assessed value located within the boundaries of the District. The table also sho.vs the corresponding portion of the werlapping entity's existing debt payable from property taxes levied within the District. The total amount of debt for each overlappng entity is not given in the table.

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The first column in the table names each public agency which has outstanding debt as of the date of the report and whose territory werlaps the District in whole or in i:art. The second column sho.vs the percentage of each werlapping agency's assessed value located within the boundaries of the District. This percentage, multiplied b,t the total outstanding debt of each werlapping agency (which is not sho.vn in the table) produces the amount sho.vn in the third column, which is the apportionment of each overlapping agency's outstandi ng debt to taxable property in the District.

STATEMENT OF DIRECT AND OVERLAPPING DEBT Banning Unified School District

2016-17 Assessed Valuation: $2,707,197,363

DIRECT AND OVERLAPPING TAX AND ASSESSMENT DEBT:

Mt. SanJacintoComnunity College District Riverside County Flood Control District, Zone No. 4 Banning Unified School District San Gorgonio Merrorial Healthcare District City of Banning Assessment District No. 2004-1 TOTAL DIRECT AND OVERLAPPING TAX AND ASSESSMENT DEBT

OVER LAPPI NG GENERAL FUND DEBT: Riverside County General Fund Obligations Riverside County Pension Obligation Bonds City of Banning Certificates of Participation City of Desert Hot Springs General Fund Obligations City of Desert HotSpringsJ udgmentObligations City of Palm Springs General Fund Obligations City of Palm Springs Pension Obligation Bonds TOTAL GROSS OVERLAPPING GENERAL FUND DEBT

Less: Riverside County obligations supported 0y ra-enue funds TOTAL NET OVERLAPPING GENERAL FUND DEBT

OVERLAPPING TAX INCREMENT DEBT (Successor Agencies):

GROSS COMBINED TOTAL DEBT NETCOMBINEDTOTAL DEBT

Ratios to 2016-17 Assessed Valuation: Direct Debt ($39,727,590) ......................................................... 1.47% Total Direct and Overlapping Tax and Assessment Debt ......... 3.11% GrossCombinedTotal Debt ........................................... 5.4036 NetCombinedTotal Debt ........................................................... 5.4036

Ratios to Reda-elopment Incremental Valuation ($722,761,524): Total Overlapping Tax Increment Debt ...................................... 6.65%

'" ExcludestheBond~

% Applicable

3.362% 0.060

100.000 35.619

100.000

1.081% 1.081

92.483 0.073 0.073 0.045 0.045

Debt 4/1 /17

$2,149,999 11,238

39,727,590111

39,971,642 2,250,000

$84,110,469

$9,348,900 3,097,443 1,483,510

880 7,099

52,643 8 181

$13,998,656 60049

$13,938,607

$48,089,031

$146, 198, 1 56121

$146,138,107

c2J Excludes tax and revenue anticipation notes, enterprise revenue, rrortgage revenue and tax allocation bonds and non-bonded capital lease obligations.

Source: California Municipal Statistics, Inc::.

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CONSTITUTIONAL AND STATUTORY PROVISIONS AFFECTING DISTRICT REVENUES AND APPROPRIATIONS

The Bonds are payable solely from the proceeds of an ad valorem property tax required to be levied b,t the County on taxable property ½ithin the District in an amount sufficient for the payment thereof. See "THE BONDS -Security and Sources of Payment'' herein. Articles XI I IA, XI I I B, XI I IC and XI 11 D of the State Constitution, Propositions 98 and 111, and certain other prwisions of law discussed belo.v are included in this section to describe the potential effect of these Constitutional and statutory rreasures on the ability of the County to levy taxes on behalf of the District and to the District to spend tax proceeds for operating and other purposes, and it should not be inferred from the inclusion of such rraterials that these laws impose any linitation on the ability of the County to levy taxes for payrrent of the Bonds.

Article XI I IA of the California Constitution

ArticleXIIIA ("ArticleXIIIA") of the State Constitution limits the amount of ad valorem property taxes on real property to 1% of "full cash value" as deternined b,t the county assessor. ArticleX I I IA defines "full cash value'' to mean "the county assessor's valuation ofreal property as shewn on the 1975-76 bill under "full cash value," or thereafter, the appraised value of real property when purchased, newly constructed or a change in o.vnership has occurred after the 1975 assessment," sul::iject to exemptions in certain circumstances of property transfer or reconstruction. Deternined in this manner, the full cash value is also referred to as the" base year value." The "full cash value" is sul::iject to annual aqj ustment to reflect increases, not to exceed 2% for any year, or decreases in the consumer price index or comparable I ocal data, or to reflect reductions i n property val ue caused b,t darrage, destruction or other factors.

Article XI I IA has been amended to allo.v for temporary reductions of assessed value in instances where the fair rrarket value of real property falls belo.v the aqjusted base year value described abcwe. Proposition 8-apprwed b,t the voters in November of 1978-prwides for the enrollment of the lesser of the base year val ue or the rrarket val ue of real property, taki ng i nto account reductions i n val ue due to darrage, destruction, depreciation, obsolescence, remwal of property, or other factors causi ng a si ni I ar decline. In these instances, the rrarket value is required to be reviewed annually until the rrarket value exceeds the base year value, aqjusted for inflation. Reductions in assessed value could result in a corresponding increase in the annual tax rates levied b,t the County to pay debt service on the Bonds. See ''THE BONDS -Security and Sources of Payment" and "TAX BASE FOR REPAYMENT OF BONDS" herein.

ArticleX I I IA requires a vote of two-thirds or more of the qualified electorate of a city, county, special district or other public agency to impose special taxes, while totally precluding the imposition of any additional ad valorern sales or transaction tax on real property. ArticleX I I IA exempts from the 1% tax I i ni tati on any taxes abcwe that I eve I required to pay debt service ( a) on any i ndebtedness apprwed b,t the voters prior toJ uly 1, 1978, or (b) as the result of an amendment approved b,t State voters onJ une 3, 1986, on any bonded indebtedness apprwed b,t two-thi rds or more of the votes cast b,t the voters for the acquisition or i mprwement of real property on or after July 1, 1978, or ( c) bonded indebtedness incurred b,t a school district or community college district for the construction, reconstruction, rehabilitation or replacement of school facilities or the acquisition or lease of real property for school facilities, apprwed b,t 55% or more of the votes cast on the proposition, but only if certain accountability measures are included in the proposition. The tax for payment of the Bonds falls within the exception described in (c) of the immediately preceding sentence. In addition, ArticleX I I IA requires the apprwal of two-thirds or more of all members of the legislature of the State (the "State Legislature'') to change any State taxes for the purpose of i ncreasi ng tax revenues.

28

Legislation I mplementingArticleXI I IA

L egi sl ati on has been enacted and amended a number of ti mes si nee 1978 to i rrpl ement ArticleX I I IA. Under current law, local agencies are no longer pernined to levy directly any property tax (except to pay voter--apprwed indebtedness). The 1% property tax is automatically levied 0y the relevant county and distributed according to a formula among taxing agencies. The formula apportions the tax roughly in proportion to the relative shares of taxes levied prior to 1979.

I ncreases of assessed val uati on resul ti ng from reappraisals of property due to new construction or change in ewnership or from the annual aqjustment not to exceed 2% are allocated among the various jurisdictions in the "taxing area'' based upon their respective "situs." Any such allocation made to a local agency continues as part of its allocation in future years.

All taxable property value included in this Official Statement is shewn at 10036 of taxable value (unless noted differently) and all tax rates reflect the $1 per $100 of taxable value.

Both the United States Supreme Court and the State Supreme Court have upheld the general validity of ArticleXIIIA.

Unitary Property

Some amount of property tax revenue of the District is derived from utility property which is considered part of a utility system with components located in many taxingjurisdictions. Under the State Constitution, such property is assessed 0y the State Board of Equalization as part of a "going concern" rather than as individual pieces of real or personal property. Such State-assessed property is allocated to the counties 0y the State Board of Equalization, taxed at special county-wide rates, and the tax revenues distributed to taxing j uri sdi cti ons ( i ncl udi ng the District) ace or di ng to statutory for mu I ae generally based on the distribution of taxes in the prior year.

The State electric utility industry has experienced significant changes in its structure and in the way in which components of the industry are regulated and ewned. Sale of electric generation assets to largely unregulated, nonutility companies may affect hew those assets are assessed, and which local agencies are to receive the property taxes. The District is unable to predict the impact of these changes on its utility property tax revenues, or whether legislation may be proposed or adopted in response to industry restructuri ng, or whether any future Ii ti gati on may affect ewnershi p of uti Ii ty assets or the State's methods of assessing utility property and the allocation of assessed value to local taxing agencies, including the District. So long as the District is not a basic aid district, taxes lostthrough any reduction in assessed valuation wi 11 be compensated 0y the State as equalization aid under the State's school financing formula. See "DISTRICT FINANCIAL INFORMATION -State Funding of Education" herein.

ArticleX 111 B of the California Constitution

ArticleXIIIB ("ArticleXIIIB") of the State Constitution, as subsequently amended 0y Propositions 98 and 111, respectively, limits the annual appropriations of the State and of any city, county, school district, authority or other political subdivision of the State to the level of appropriations of the particular gwernmental entity for the prior fiscal year, as aqjusted for changes in the cost of living and in population and for transfers in the financial responsibility for prwiding services and for certain declared emergencies. As amended, ArticleX 111 B defines:

(a) "change in the cost of living'' with respect to school districts to mean the percentage change in State per capita i ncorne from the preceding year, and

29

(b) "change in population" with respect to a school district to rrean the percentage change in the ADA of the school district from the preceding fiscal year.

For fiscal years beginning on or after July 1, 1990, the appropriations Ii nit of each entity of governrrent shall be the appropriations Ii nit for the 1986-S7 fiscal year aqjusted for the changes rrade frorn that fi seal year pursuant to the provi si ans of Article X 111 B , as arrended.

The appropriations of an entity of local governrrent sul::iject to Article XIIIB limitations include the proceeds of taxes levied b,t or for that entity and the proceeds of certain state sul:wentions to that entity. " Proceeds of taxes" i ncl ude, but are not Ii ni ted to, al I tax revenues and the proceeds to the entity from (a) regulatory licenses, user charges and user fees (but only to the extent that these proceeds exceed the reasonable costs i n providing the regulation, product or service), and ( b) the i nvestrrent of tax revenues.

Appropriations sul::iject to linitation do not include (a) refunds of taxes, (b) appropriations for debt service such as the B ands, ( c) appropri ati ans requi red to comply with certain rrandates of the courts or the federal governrrent, (cl) appropriations of certain special districts, (e) appropriations for all qualified capital outlay prqjects as defined b,t the State Legislature, (f) appropriations derived from certai n fuel and vehicle taxes and ( g) appropri ati ans derived from certain taxes on tobacco products.

ArticleXIIIB includes a requirerrent that all revenues received b,t an entity of governrrent other than the State in a fiscal year and in the fiscal year irnrrecliately follo.ving it in excess of the arnount pernined to be appropriated during that fiscal year and the fiscal year irnrrediately follo.ving it shall be returned b,t a revision of tax rates or fee schedules within the next two subsequent fiscal years.

ArticleXIIIB also includes a requirerrent that 5036 of all revenues received b,t the State in a fiscal year and in the fiscal year irnrrediately follo.ving it in excess of the arnount perrnined to be appropriated during that fiscal year and the fiscal year irnrrediately follo.ving it shall be transferred and allocated to the State School Fund pursuantto Section 8.5 of Article XVI of the State Constitution. See" -Propositions 98 and 111" herein.

Article XI 11 C and ArticleX 111 D of the California Constitution

On Nwernber 5, 1996, the voters of the State apprwed Proposition 218, popularly kno.vn as the "Right to Vote on Taxes Act." Proposition 218 added to the State Constitution Articles XI I IC and X 111 D (respectively, "Article XI I IC" and "Article X 111 D"), which contain a nurnber of prwisions affecting the ability of local agencies, including school districts, to levy and collect both existing and future taxes, assessrrents, fees and charges.

According to the "Title and Surnrrary" of Proposition 218 prepared b,t the State Attorney General, Proposition 218 linits "the authority of local governrrents to irnpose taxes and property,elated assessrrents, fees and charges." Arnong other things, Article XI I IC establishes that every tax is either a " general tax'' ( i rnposed for general governrrental purposes) or a "special tax'' ( i rnposed for specific purposes), prohibits special purpose governrrent agencies such as school districts frorn levying general taxes, and prohi bi ts any I ocal agency frorn i rnposi ng, ext en di ng or i ncreasi ng any special tax beyond its rnaxirnurn authorized rate without a two-thirds vote; and also prwides that the initiative po.ver will not be Ii ni ted in rraners of reduci ng or repeal i ng I ocal taxes, assessrrents, fees and charges. Article X 111 C further provides that no tax rray be assessed on property other than ad val orern property taxes i rnposed in accordance with Articles X 111 and XI I IA of the State Constitution and special taxes apprwed b,t a two-thirds vote under Article XIIIA, Section4. Article XIIID deals with assessrrents and property,elated fees and charges, and explicitly prwides that nothing in ArticleX I I IC or X 111 D will be

30

construed to affect exi sti ng I aws relating to the i mposi ti on of fees or charges as a condition of property devel oprrent.

The District does not impose any taxes, assessrrents, or property,elated fees or charges which are sul::iject to the prwisions of Proposition 218. It does, hONever, receive a portion of the basic 1% ad valorem property tax levied and collected b,t the County pursuant to Article XI I IA of the State Constitution. The prwisions of Proposition 218 may have an indirect effect on the District, such as b,t liniting or reducing the revenues otherwise available to other local governrrents whose boundaries encorrµiss property located within the District thereb,t causing such local governrrents to reduce service levels and possibly acwersely affecting the value of property within the District.

P roposi ti on 26

On Nwember 2, 2010, voters in the State approved Proposition 26. Proposition 26 arrends Article XI I IC of the State Constitution to expand the definition of "tax'' to include" any levy, charge, or exaction of any kind imposed b,t a I ocal governrrent" except the fol Io.vi ng: ( 1) a charge imposed for a specific benefit conferred or privilege granted directly to the payor that is not prwided to those not charged, and which does not exceed the reasonable costs to the I ocal governrrent of conferring the benefit or granti ng the privi I ege; ( 2) a charge i mposed for a specific governrrent service or product prwi ded directly to the payor that is not provided to those not charged, and which does not exceed the reasonable costs to the local governrrent of prwiding the service or product; (3) a charge imposed for the reasonable regulatory costs to a local governrrent for issuing licenses and pernits, performing investigations, inspections, and audits, enforcing agricultural marketing orders, and the adninistrative enforcerrent and aqj udi cation thereof; ( 4) a charge imposed for entrance to or use of I ocal governrrent property, or the purchase, rental, or lease of local governrrent property; (5) a fine, penalty, or other monetary charge imposed b,t the j udi ci al branch of governrrent or a I ocal governrrent, as a result of a violation of I aw; (6) a charge imposed as a condition of property developrrent; and (7) assessrrents and property,elated fees imposed in accordance with the prwisions of Article X 111 D. Proposition 26 provides that the local governrrent bears the burden of prwing b,t a preponderance of the evidence that a levy, charge, or other exaction is not a tax, that the amount is no more than necessary to ewer the reasonable costs of the governrrental activity, and that the manner in which those costs are allocated to a payor bear a fair or reasonable relationshiptothe payor's burdens on, or benefits received from, the governrrental activity.

Propositions 98and 111

On November 8, 1988, voters of the State apprwed Proposition 98, a combined initiative constitutional arrendrrent and statute called the "Classroom Instructional lmprwerrent and Accountability Act" (the "Accountability Act''). Certain prwisions of the Accountability Act have, ho.vever, been modified b,t Proposition 111, discussed belo.v, the prwisions of which becarre effective onJ uly 1, 1990. The Accountability Act changed State funding of public education belo.v the university level and the operation of the State's appropriations Ii nit. The Accountability Act guarantees State funding for K-12 school districts and community college districts (hereinafter referred to collectively as "K-14 school districts") at a level equal to the greater of (a) the sarre percentage of the State general fund revenues as the percentage appropriated to such districts in the 1986-S7 fiscal year, and (b) the amount actually appropriated to such districts from the State general fund in the previous fiscal year, aqjusted for increases in enrollrrent and changes in the cost of living. The Accountability Act permits the State L egi sl ature to suspend this forrnul a for a one-year period.

The Accountability Act also changed ho.vtax revenues in excess of the State appropriations Ii nit are distributed. Any excess State tax revenues up to a specified amount are, instead of being returned to taxpayers, is transferred to K-14 school districts. Any such transfer to K-14 school districts is excluded

31

from the appropriations limit for K-14 school districts and the K-14 school district appropriations Ii nit for the next year is automatically increased 0y the amount of such transfer. These additional moneys enter the base funding calculation for K-14 school districts for subsequent years, creating further pressure on other portions of the State budget, i:articularly if revenues decline in a year follo.ving an ArticleXIIIB surplus. The rrnximum amount of excess tax revenues which can be transferred to K-14 school districts is 4% of the ninimum State spending for education mandated 0y the Accountability Act.

Since the Accountability Act is unclear in some details, there can be no assurances that the State Legislature or a court might not interpret the Accountability Act to require a different percentage of State general fund revenues to be allocated to K-14 school districts, or to apply the relevant percentage to the State's budgets in a different way than is proposed in the State budget.

On June 5, 1990, the voters of the State apprwed Proposition 111 (Senate Constitutional Amendment No. 1) called the ''Traffic Congestion Relief and Spending Linitation Act of 1990'' ("Proposition 111") which further modified ArticleXIIIB and Sections 8 and 8.5 of Article XVI of the State Constitution with respect to appropriations Ii ni tati ons and school funding priority and al I ocati on.

The most significant prwisions of Proposition 111 are summarized as folio.vs:

a Annual Adjustments to Spending Li nit. The annual aqj ustments to the Article X 111 B spending Ii nit were liberalized to be more closely linked to the rate of econonic gro.vth. Instead of being tied to the Consumer Price Index, the "change in the cost of I ivi ng'' is new measured 0y the change in State per capita personal income. The definition of "change in population" specifies that a portion of the State's spending Ii nit is to be aqj usted to reflect changes i n school attendance.

b. Treatment of Excess Tax Revenues. "Excess'' tax revenues with respect toArticleX 111 B are new determined based on a two-year cycle, so that the State can avoid having to return to taxi:ayers excess tax revenues in one year if its appropriations in the next fi seal year are under its Ii nit. In addition, the Proposition 98 prwision regarding excess tax revenues was modified. After any two-year period, if there are excess State tax revenues, 5036 of the excess are to be transferred to K -14 school districts with the balance returned to taxi:avers; under prior law, 10036 of excess State tax revenues went to K-14 school districts, but only up to a rrnximum of 4% of the ninimum funding level for such districts. Also, reversing prior law, any excess State tax revenues transferred to K-14 school districts are not built into K-14 school districts' base expenditures for calculating their entitlement for State aid in the next year, and the State's appropriations Ii nit is not to be i ncreased 0y this amount.

c. Exclusions from Spending Linit. Two exceptions were added to the calculation of appropriations which are sul::iject to the Article XIIIB spending linit. First, there are excluded all appropriations for "qualified capital outlay prqjects" as defined 0y the State Legislature. Second, there are excluded any increases in gasoline taxes abOJe the 1990 level (then nine cents per gallon), sales and use taxes on such increment in gasoline taxes, and increases in receipts from vehicle weight fees abOJe the levels in effect onJ anuary 1, 1990. These latter prwisions were necessary to make effective the transportation funding i:ackage apprwed 0y the State Legislature and the Gwernor, which was expected to raise over $15 billion in additional taxes from 1990 through 2000 to fund transportation programs.

32

d. Recalculation of Appropriations Linit. The ArticleXIIIB appropriations limit for each unit of government, including the State, is to be recalculated beginning in fiscal year 1990-91. It is based on the actual Ii nit for fiscal year 1986-S7, aqj usted forward to 1990-91 as if Proposition 111 had been in effect.

e. School Funding Guarantee. There is a corrplex aqjustment in the formula enacted in Proposition 98which guarantees K-14 school districts a certain amount of State general fund revenues. Under prior law, K-14 school districts were guaranteed the greater of (1) 40.9% of State general fund revenues ("Test 1") or (2) the amount appropriated in the prior year aqjusted for changes in the cost of living (measured as in Article XIIIB b,t reference to per capita personal income) and enrollment ("Test 2"). Under Proposition 111, schools wil I receive the greater of ( 1) Test 1, (2) Test 2, or (3) a third test ("Test 3"), which will replace Test 2 in any year when grcwth in per capita State general fund revenues from the prior year is less than the annual grcwth in the State per capita personal income. Under Test 3, K-14 school districts will receive the amount appropriated in the prior year aqjusted for change in enrollment and per capita State general fund revenues, plus an additional small aqjustment factor. If Test 3 is used in any year, the difference between Test 3 and Test 2 will become a "credit" to schools which wi 11 be paid in future years when State general fund revenue grcwth exceeds personal income grcwth.

Proposition 39

On Nweniber 7, 2000, State voters approved an amendment (commonly kno.vn as Proposition 39) to the State Constitution. This amendment (1) allo.vs school facilities bond measures to be approved b,t 55% (rather than two-thirds) of the voters in local elections and permits property taxes to exceed the current 1% Ii nit in order to repay the bonds and (2) changes existing statutory law regarding charter school faci I ities. As adopted, the constituti anal amendments may be changed only with another statewide vote of the people. The statutory prwisions could be changed b,t a majority vote of both houses of the State Legislature and apprwal b,t the Governor, but only to further the purposes of the proposition. The local school jurisdictions affected b,t this proposition are K-12 school districts, including the District, community college districts, and county offices of education. As noted above, the State Constitution previously linited property taxes to 1% of the value of property. Prior to the approval of Proposition 39, property taxes could only exceed this Ii nit to pay for (1) any local government debts approved b,t the voters prior toJ uly 1, 1978 or (2) bonds to acquire cr improve real property that receive two-thirds voter approval after J uly 1, 1978.

The 55% vote requirement authorized b,t Proposition 39 applies only if the local bond measure presented to the voters includes: (1) a requirement that the bond funds can be used only for construction, rehabilitation, equipping of school facilities, or the acquisition or lease of real property for school facilities; (2) a specific list of school prqjects to be funded and certification that the school board has evaluated safety, class size reduction, and information technology needs in developing the list; and (3) a requirement that the school board conduct annual, independent financial and performance audits until all bond funds have been spentto ensure thatthe bond funds have been used only for the prqjects listed in the measure. Legislation apprwed in June 2000 placed certain limitations on local school bonds to be approved b,t 55% of the voters. These prwisions require that the tax rate prqjected to be levied as the result of any single election be no more than $60 (for a unified school district, such as the District), $30 (for a high school or elementary school district), or $25 (for a community college district) per $100,000 of taxable property value, when assessed valuation is prqjected to increase in accordance with Article XI I IA of the State Constitution. These requirements are not part of Proposition 39 and can be changed with a

33

majority vote of both houses of the State Legislature and approval 0y the Gwernor. See" -Article XI I IA of the California Constitution" herein.

Proposition lA and Proposition 22

On Nwerrber 2, 2004, State voters apprwed Proposition lA, which arnends the State Constitution to significantly reduce the State's authority over major local government revenue sources. Under Proposition lA, the State cannot (i) reduce local sales tax rates or alterthe method of allocating the revenue generated 0y such taxes, (ii) shift property taxes frorn local governments to schools or cornrnunity colleges, (iii) change ho.v property tax revenues are shared arnong local governments without two-third apprwal of both houses of the State Legislature or (iv) decrease Vehicle License Fee revenues without prwiding local governments with equal replacement funding. Proposition lA does allo.v the State to apprwe voluntary exchanges of local sales tax and property tax revenues arnong local governments within a county. Proposition lA also arnends the State Constitution to require the State to suspend certain State laws creating rrandates in any year that the State does not fully rei rrburse local governments for their costs to comply with the rrandates. This prwision does not apply to rrandates rel ati ng to schools or cornrnuni ty col I eges or to those rrandates rel ati ng to ernpl o.;ee rights.

Proposition 22, The Local Taxpayer, Public Safety, and Transportation Protection Act, apprwed b,t the voters of the State on Nwernber 2, 2010, prohibits the State frorn enacting ne.v laws that require redevelopment agencies to shift funds to schools or other agencies and elininates the State's authority to shift property taxes temporarily during a severe financial hardship of the State. In addition, Proposition 22 restricts the State's authority to use State fuel tax revenues to pay debt service on state transportation bonds, to borro.v or change the distribution of state fuel tax revenues, and to use vehicle license fee revenues to reirrburse local governments for state rrandated costs. Proposition 22 impacts resources in the State's general fund and transportation funds, the State's rnai n funding source for schools and cornrnunity colleges, as well as universities, prisons and health and social services programs. According to an analysis of Proposition 22 subnitted b,t the Legislative Analyst's Office (the" LAO") onJ uly 15, 2010, the expected reduction in resources available for the State to spend on these other programs as a consequence of the passage of Proposition 22 was prqjected to be approxirrately $1 billion in fiscal year 2010-11, with an estirrated irnmediate fiscal effect equal to approxirrately 1% of the State's total general fund spending. The longer-terrn effect of Proposition 22, according to the LAO analysis, was expected to be an increase in the State's general fund costs b,t approxirrately $1 billion annually for several decades. See also "DISTRICT FINANCIAL INFORMATION -State Dissolution of Redevelopment Agencies" herein.

J arvis vs. Connel I

On May 29, 2002, the State Court of Appeal for the Second District decided the case of Ho.vard Jarvis Taxpayers Association, et al. v. Kathleen Connell (as Controller of the State). The Court of Appeal held that either a final budget bill, an emergency appropriation, a self-executing authorization pursuant to state statutes (such as continuing appropriations) or the State Constitution or a federal rrandate is necessary for the State Controller to disburse funds. The foregoing requirement could apply to amounts budgeted 0y the District as being received frorn the State. To the extent the holding in such case would apply to State payments reflected in the District's budget, the requirement that there be either a final budget bill or an emergency appropriation rray result in the delay of such payments to the District if such required legislative action is delayed, unless the payments are self-executing authorizations or are sul::iject to a federal rrandate. On May 1, 2003, the State Supreme Court upheld the holding of the Court of Appeal, stating that the Controller is not authorized under State law to disburse funds prior to the enactment of a budget or other proper appropriation, but under federal law, the Controller is required, notwithstanding a budget impasse and the linitations imposed b,t State law, to timely pay those State

34

emplc:1/ees who are sul::iject to the ninimum wage and wertime compensation provisions of the federal Fair Labor Standards Act.

Propositions 30and 55

On Noverrber 6, 2012, voters of the State approved the Temporary Taxes to Fund Education, Guaranteed Local Public Safety Funding, Initiative Constitutional Amendment (also kno.vn as "Proposition 30''), which temporarily increased the State Sales and Use Tax and personal income tax rates on higher incomes. For personal income taxes imposed beginning in the taxable year commencing January 1, 2012 and ending December 31, 2018, Proposition 30 increases the marginal personal income tax rate b,t: (i) 1% for taxable income wer $250,000 but less than $300,001 for single filers (wer $500,000 but less than $600,001 for joint filers and over $340,000 but less than $408,001 for head--of­household filers), (ii) 2% for taxable income wer $300,000 but less than $500,001 for single filers (wer $600,000 but less than $1,000,001 for joint filers and wer $408,000 but less than $680,001 for head--of­household filers), and (iii) 3% for taxable income wer $500,000 for single filers (wer $1,000,000 for joint filers and wer $680,000 for head-of-household filers).

The California Children's Education and Health Care Protection Act of 2016 (also kno.vn as "Proposition 55") is a constitutional amendment apprwed b,t the voters of the State on Nwerrber 8, 2016. Proposition 55 extends the increases to personal income tax rates for high-income taxpayers that were apprwed as part of Proposition 30 through 2030. Proposition 55 did not extend the temporary State Sales and Use Tax rate increase enacted under Proposition 30, which expired as of January 1, 2017.

The revenues generated from the personal income tax increases will be included in the calculation of the Proposition 98 Minimum Funding Guarantee (defined herein) for school districts and community college districts. See "CONSTITUTIONAL AND STATUTORY PROVISIONS AFFECTING DISTRICT REVENUES AND APPROPRIATIONS - Propositions 98 and 111" herein. From an accounting perspective, the revenues generated from the personal income tax increases are being deposited into the State account created pursuant to Proposition 30 called the Education Protection Account (the "EPA"). Pursuantto Proposition 30, funds in the EPA will be allocated quarterly, with PE36 of such funds prwided to schools districts and 11% prwided to community college districts. The funds will be distributed to school districts and community college districts in the same manner as existing unrestricted per-5tudent funding, except that no school district will receive less than $200 per unit of ADA and no community college district will receive less than $100 per full time equivalent student. The giverning board of each school district and community college district is granted sole authority to deternine hew the moneys received from the EPA are spent, prwided that the appropriate gwerning board is required to make these spending determinations i n open session at a public meeti ng and such local gwerning board is prohibited from using any funds from the EPA for salaries or benefits of adninistrators or any other administrative costs.

Proposition 2

On Nwerrber 4, 2014, voters apprwed the Rainy Day Budget Stabilization Fund Act (also kno.vn as "Proposition 2"). Proposition 2 is a legislatively,eferred constitutional amendment which makes certain changes to State budgeting practices, including substantially revising the conditions under which transfers are made to and from the State's Budget Stabilization Account (the "BSA") established b,t the California Balanced B udget A ct of 2004 (also kno.vn as Proposition 58).

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Under Proposition 2, and beginning in fiscal year 2015-16 and each fiscal year thereafter, the State wi 11 generally be required to annually transfer to the BSA an amount equal to 1. 5% of esti rrated State general fund revenues (the "Annual BSA Transfer"). Supplemental transfers to the BSA (a "Supplemental BSA Transfer") are also required in any fiscal year in which the estirrated State general fund revenues that are allocable to capital gains taxes exceed 836 of the total estirrated general fund tax revenues. Such excess capital gains taxes-net of any portion thereof o.ved to K-14 school districts pursuant to Proposition 98-will be transferred to the BSA. Proposition 2 also increases the rrnximum size of the BSA to an amount equal to W36 of esti rrated State general fund revenues for any given fiscal year. In any fiscal year in which a required transfer to the BSA would result in an amount in excess of the 1036 threshold, Proposition 2 requires such excess to be expended on State infrastructure, including deferred rrai ntenance.

For the first 15-year period ending with the 2029-30 fiscal year, Proposition 2 provides that half of any required transfer to the BSA, either annual or supplemental, must be appropriated to reduce certain State liabilities, including rraking certain payments o.ved to K-14 school districts, repaying State i nterfund borro.vi ng, reimbursing I ocal governments for State rranclated services, and reducing or prefunding accrued liabilities associated with State-level pension and retirement benefits. Follo.ving the initial 15-year period, the Gwernor and the State Legislature are given discretion to apply up to half of any required transfer to the BSA to the reduction of such State liabilities. Any amount not applied to.vards such reduction must be transferred to the BSA or appl i ed to infrastructure, as descri bed abOJe.

Proposition 2 changes the conditions under which the Gwernor and the State Legislature rray draw upon or reduce transfers to the BSA. The Gwernor does not retain unilateral discretion to suspend transfers to the BSA, nor does the State Legislature retain discretion to transfer funds from the BSA for any reason, as previously provided 0y law. Rather, the Gwernor must declare a" budget emergency," defined as an emergency within the meaning of Article X 111 B of the State Constitution or a deternination that esti rrated resources are inadequate to fund State general fund expenditures, for the current or ensuing fiscal year, at a level equal to the highest level of State spending within the three immediately preceding fiscal years. Any such declaration must be follo.ved 0y a legislative bill prwiding for a reduction or transfer. Draws on the BSA are linited to the amount necessary to address the budget emergency, and no draw i n any fi seal year rray exceed 5036 of the funds on deposit in the BSA uni ess a budget emergency was declared in the preceding fiscal year.

Proposition 2 also requires the creation of the Public School System Stabilization Account (the "PSSSA") into which transfers will be rrade in any fiscal year in which a Supplemental BSA Transfer is required (as described abOJe). Such transfer will be equal to the portion of capital gains taxes above the 836 threshold that would otherwise be paid to K-14 school districts as part of the ninimum funding guarantee. A transfertothe PSSSA will only be made if certain additional conditions are met, as folio.vs: (i) the ninimum funding guarantee was not suspended in the immediately preceding fiscal year, (ii) the operative Proposition 98 formula for the fiscal year in which a PSSSA transfer night be rrade is "Test 1," (iii) no maintenance factor obligation is being created in the budgetary legislation for the fiscal year in which a PSSSA transfer night be rrade, (iv) all prior maintenance factor obligations have been fully repaid, and (v) the ninimum funding guarantee for the fiscal year in which a PSSSA transfer might be made is higher than the immediately preceding fiscal year, as aqjusted for ADA gro.vth and cost of living. Proposition 2 caps the size of the PSSSA at 1036 of the estirrated ninimum guarantee in any fiscal year, and any excess funds must be paid to K-14 school districts. Reductions to any required transfer to the PSSSA, or draws on the PSSSA, are sul::iject to the same budget emergency requirements described above. Ho.vever, Proposition 2 also rrandates draws on the PSSSA in any fiscal year in which the estirrated ninimum funding guarantee is less than the prior year's funding level, as aqjusted for ADA gro.vth and cost of I ivi ng.

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Proposition 51

The Kindergarten Through Comm.mity College Public Education Facilities Bond Act of 2016 (also kno.vn as" Proposition 51") is a voter initiative that was apprwed 0y voters on Nwerrber 8, 2016. Proposition 51 authorizes the sale and issuance of $9 bi 11 ion i n general obi i gati on bonds for the new construction and modernization of K-14 facilities. The District rnakes no guarantee that it will either pursue or qualify for Proposition 51 state facilities funding.

K-12 School Facilities. Proposition 51 includes $3 billion for the new construction of K-12 facilities and an additional $3 billion for the modernization of existing K-12 facilities. K-12 school districts will be required to pay for 5036 of the new construction costs and 4036 of the modernization costs with local revenues. If a school district lacks sufficient local funding, it rray apply for additional state grant funding, upto 10036 of the prqject costs. In addition, a total of $1 billion will be available for the modernization and new construction of charter school ($500 nillion) and technical education ($500 rni 11 ion) faci Ii ti es. General ly, 5036 of modernization and new construction prqj ect costs for charter school and technical education facilities rnust corre frorn local revenues. Ho.vever, schools that cannot ewer their local share for these two types of prqjects rray apply for State loans. State loans rnust be repaid wer a rrnxirnurn of 30years for charter school facilities and 15 years for career technical education facilities. For career technical education facilities, State grants are capped at $3 nil lion for a new facility and $1.5 million for a modernized facility. Charter schools rnust be deerned financially sound before prqject apprwal.

Community College Facilities. Proposition 51 includes $2 billion for community college district facility prqjects, including buying land, constructing new buildings, modernizing existing buildings, and purchasing equipment. In order to receive funding, community college districts rnust subnit prqject proposals to the Chancellor of the community college systern, who then decides which prqjects to subrnit to the Legislature and Gwernor based on a scoring systern that factors in the arnount of local funds contributed to the prqject. The Governor and Legislature will select arnong eligible prqjects as part of the annual state budget process.

The table belo.v shews the expected use of bond funds under Proposition 51:

PROPOSITION 51 Use of Bond Funds

(In M ii lions)

K-12 Public School Facilities New construction M oderni zati on Career technical education faci I iti es Charter school facilities Subtotal

Cornrnunity College Facilities Total

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$3,CXXJ 3,CXXJ

500 ----200 $7,CXXJ $2,CXXJ $9,CXXJ

Future Initiatives

Article XIIIA, Article XIIIB, Article XIIIC and Article XIIID of the State Constitution and Propositions 22, 26, 30, 39, and 98 were each adopted as rreasures that qualified for the ballot pursuantto the State's initiative process. From tirre to tirre other initiative rreasures could be adopted further affecting District revenues or the District's ability to expend revenues. The nature and irrp3.ct of these rreasures cannot be antici pelted 0y the District.

DISTRICT FINANCIAL INFORMATION

The inforrration in this section concerning the District's general fund finances is provided as supplerrentary inforrration only, and it should not be inferred from the inclusion of this inforrration in this Official Staterrent that the principal of or interest on the Bonds is payable from the general fund of the District. The Bonds are payable solely from the proceeds of an ad valorem property tax required to be levied 0y the County on taxable property ½ithin the District in an amount sufficient for the payrrent thereof. See" THE BONDS-Security and Sources of Payrrent'' herein.

State Funding of Education

School district revenues consist primarily of guaranteed State moneys, local property taxes and funds received from the State in the form of categorical aid under ongoing programs of local assistance. All State aid is sul::iject to the appropriation of funds in the State's annual budget.

Revenue Limit Funding. Previously, school districts operated under general purpose revenue Ii nits established 0y the State Departrrent of Education. In general, revenue linits were calculated for each school district 0y multiplying the ADA for such district 0y a base revenue Ii nit per unit of ADA. Revenue Ii nit calculations were sul::iject to aqjustrrent in accordance with a number of factors designed to prwide cost of living aqjustrrents ("COLAs") and to equalize revenues among school districts of the sarre type. Funding of a school district's revenue limit was prwided 0y a nix of local property taxes and State apportionrrents of basic and equalization aid. Since fiscal year 2013-14, school districts have been funded based on a uniform system of funding grants assigned to certain grade spans. See"- Local Control Funding Formula'' herein.

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The follo.ving table reflects the District's historical ADA and the revenue limit rates per unit of ADA for fiscal years 2007-08 through 2012-13.

Fiscal Year

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

AVERAGE DAILY ATTENDANCE AND REVENUE LIM IT Fiscal Years 2007-08 through 2012-13

Banning Unified School District

Base Average Daily Annual Change Revenue Attendance111 in ADA Limit Per ADA

4,692 1.3% $5,812 4,603 (1.9) 6,141 4,461 3.2 6,403 4,510 1.1 6,386 4,240 (6.4) 6,529 4,270 0.7 6,733

-------------------------------Note: All nurrbers are rounded to the nearest whole.

Funded Revenue

Limit Per ADA 121

N /,'\ $5,439 5,228 5,239 5,184 5,234

'" Reflects ADA as of the second principal reporting period ("P-2 ADA""), which ends on or before the last attendance rr<>nth prior to April 15 of each school year. An attendance rr<>nth is equal to each four-week period of instruction beginning with the first day of school for a particular school district

'" Deficit revenue lirrit funding, when pr<Nided for in State budgetary legislation, reduced the revenue lirrit allocations received by school districts by applying a deficit factor to the base revenue lirrit for the given fiscal year, and resulted from an insufficiency of appropriation funds in the State budget to provide for State aid owed to school districts. The State's practice of deficit revenue lirrit funding was rr<>st recen~y reinstated beginning in fiscal year 2008-09, and discontinued following the irrplerrentation of the LCFF (as defined herein).

Source: Banning Unified School District

Local Control Funding Formula. State Assembly Bill 97 (Stats. 2013, Chapter 47) ("AB 97'), enacted as i:art of the fi seal year 2013-14 State budget, established a new system for funding school districts, charter schools and county offices of education. Certain prwisions of AB 97were amended and clarified b,t Senate Bill 91 (Stats. 2013, Char,ter 49) ("SB 91").

The primary corrponent of AB 97, as amended b,t SB 91, was the implementation of the Local Control Funding Formula ("LCFF"), which replaced the revenue Ii nit funding system for deternining State apportionments, as well as the majority of State categorical program funding. State allocations are prwided on the basis of target base funding grants per unit of ADA (a" Base Grant") assigned to each of four grade si:ans. Each Base Grant is sul::iject to certain aqjustments and add-ons, as discussed belo.v. Full implementation of the LCFF is expected to occur wer a period of several fiscal years. Beginning in fiscal year 2013-14, an annual transition aqjustment is required to be calculated for each school district, equal to such district's proportionate share of appropriations included in the State budget to close the gap between the prior-year funding level and the target allocation follo.ving full implementation of the LCFF. In each year, school districts wi 11 have the same proportion of their respective funding gaps closed, with dollar amounts varying depending on the size of a district's funding gap.

The Base Grants per unit of ADA for each grade span are as folio.vs: (i) $6,845 for grades K-3; (ii) $6,947 for grades 4-6; (iii) $7,154 for grades 7-8; and (iv) $8,289 for grades 9-12. Beginning in fiscal year 2013-14, and in each subsequent year, the Base Grants are to be aqjusted for COLAs b,t applying the implicit price deflator for government goods and services. Follo.ving full implementation of the LCFF, the prwision of COLAs will be sul::iject to appropriation for such aqjustment in the annual State budget. The differences among Base Grants are Ii nked to differentials in state.vi de average revenue Ii mit rates b,t district type, and are intended to recognize the generally higher costs of education at higher grade levels. See "-State Budget Measures'' herein for information on the aqjusted Base Grants provided b,t current State budgetary legislation.

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The Base Grants for grades K-3 and 9-12 are sul::iject to aqjustments of 10.4% and 2.6%, respectively, to cover the costs of class size reduction in early grades and the prwision of careertechnical education in high schools. Follo.ving full implementation of the LCFF, and unless otherwise collectively bargained for, school districts serving students in grades K-3 must maintain an average class enrollment of 24 or fe.ver students in grades K-3 at each school site in order to continue receiving the aqjustment to the K -3 Base Grant. Such school districts must al so make progress to.vards this cl ass size reduction goal in proportion to the gro.vth i n their fun di ng wer the i mpl ementati on period. Addi ti anal add-ons are al so provided to school districts that received categorical block grant funding pursuant to the Targeted I nstructi anal I mprwement and Horne-to--5chool Transportation programs during fi seal year 2012-13.

School districts that serve students of limited English proficiency ("EL" students), students from lo.v income families who are eligible for free or reduced priced meals ("LI" students) and foster youth are eligible to receive additional funding grants. Enrollment counts are unduplicated, such that students may not be counted as both EL and LI (foster youth automatically meet the eligibility requirements for free or reduced priced meals, and are therefore not discussed separately herein). A supplemental grant add-on (each, a "Supplemental Grant") is authorized for school districts that serve EL;ll students, equal to 2036 of the applicalble Base Grant multiplied 0y such district's percentage of unduplicated EL;ll student enrollment. School districts whose EL;ll populations exceed 55% of their total enrollment are eligible for a concentration grant add-on (each, a "Concentration Grant'') equal to 5036 of the applicalble Base Grant multiplied 0y the percentage of such district's undupl i cated EL ;l I student enrol I ment in excess of the 55% threshold.

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The follo.ving table sho.vs a breakdo.vn of the District's ADA b,t grade spm, total enrollment, and the percentage of EL;LI student enrollment, for fiscal years 2012-13 through 2015-16 and a prqjected amount for fiscal year 2016-17.

ADA, ENROLLMENT AND EL/ll ENROLLMENT PERCENTAGE Fiscal Years 2012-13 through 2016-17

Banning Unified School District

Average Daily Attendance"' Enrollment % of

Fiscal Total Total EL ;LI Year K-3 4-6 7-S 9-12 ADA E nroll ment"' E nroll ment"'

2012-13 1,412 928 615 1,161 4,116 4,524 N/A 2013-14 1,478 933 624 1,167 4,202 4,480 87.6 2014-15 1,530 973 606 1,213 4,322 4,599 86.l 2015-16 1,494 986 580 1,214 4,274 4,460 88.8 2016-17'" 1,435 1,032 586 l, 119 4,252 4,521 86.9

'" Reflects P-2 ADA, which ends on or before the last attendance month prior to April 15 of each school year. An attendance month is equal to each four-week period of instruction beginning with the first day of school for a particular school district

'" For fiscal year 2012-l 3, reflects certified enrollment as of the October report subrritted to the California Basic Educational Data System ("CB EDS"). For fiscal years 2013-14 and later, reflects certified enrollment as of the fall census day (the first Wednesday in October), which is reported to the California Longitudinal Pupil Achievement Data System ("CAL PADS") in each school year and is used to calculate each school district's unduplicated EL;LI student enrollment Adjustments may be made to the certified EL;LI counts by the State Department of Education. For purposes of calculating Supplemental and Concentration Grants, a school district's fiscal year 2013-14 percentage of unduplicated EL;LI students is expressed solely as a percentage of its total fi seal year 2013-14 enrol I ment For fi seal year 2014-l 5, the percentage of undupl icated EL ;LI enrollment is based on the two-year average of EL;LI enrollment in fiscal years 2013-14 and 2014-15. Beginning in fiscal year 2015-16, a school district's percentage of unduplicated EL;LI students will be based on a rolling average of such district's EL;LI enrollment for the current fiscal year and the two immediately preceding fiscal year~

C3l Projected. Source: Banning Unified School District

For certain school districts that would have received greater funding I eve Is under the prior revenue limit system, the LCFF prwides for a permanent econonic recwery target ("ERT") add-on, equal to the difference between the revenue Ii nit allocations such districts would have received underthe prior system i n fi seal year 202o-;z 1, and the target LC FF al I ocati ons o.ved to such districts in the same year. To derive the prqjected funding levels, the LCFF assumes the discontinuance of deficit revenue Ii nit funding, irrplementation of a 1.94% COLA in fiscal years 2014-15 through 202o-;z1, and restoration of categorical funding to pre,ecession levels. The ERT add-on will be plid incrementally werthe LCFF implementation period. The District does not qualify for the ERT add-on.

The sum of a school district's aqjusted Base, Supplemental and Concentration Grants will be multiplied b,t such district's P-2 ADA for the current or prior year, whichever is greater (with certain aqjustments applicable to small school districts). This funding amount, together with any applicable ERT or categorical block grant add-Oils, will yield a district's total LCFF allocation. Generally, the amount of annual State apportionments received b,t a school district wi 11 amountto the difference between such total LCFF allocation and such district's share of applicable local property taxes. Most school districts receive a significant portion of their funding from such State apportionments. As a result, decreases in State revenues may significantly affect appropriations made b,t the State Legislature to school districts.

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Certai n school districts, knCM/11 as " basic aid' districts, have al I ocabl e I ocal property tax collections that equal or exceed such districts' total LCFF allocation, and result in the receipt of no State apportionrrent aid. Basic aid school districts receive only special categorical funding, which is deerred to satisfy the" basic aid" requirerrent of $120 per student per year guaranteed 0y Article IX, Section 6 of the State Constitution. The implication for basic aid districts is that the legislatively deternined allocations to schod districts, and other politically deternined factors, are less significant in determining their primary funding sources. Rather, property tax gro.vth and the I ocal econorrty' are the primary deterninants. The District does not currently qualify as a basic aid district.

Accou ntabi Ii ty. R egul ati ons adopted 0y the State Board of Education requi re that school districts increase or imprwe services for EL;ll students in proportion to the increase in funds apportioned to such districts on the basis of the number and concentration of such EL ;l I students, and detai I the conditions under which school districts can use supplerrental or concentration funding on a school-wide or district-wide basis.

School districts are also required to adopt local control and accountability plans ("LCAPs") disclosing annual goals for all students, as well as certain nurrerically significant student subgroups, to be achieved in eight areas of State priority identified 0y the LCFF. LCAPs may also specify additional local priorities. LCAPs must specify the actions to be taken to achieve each goal, including actions to correct identified deficiencies with regard to areas of State priority. LCAPs are required to be adopted e.,,ery three years, beginning in fiscal year 2014-15, and updated annually thereafter. The State Board of Education has de.lei oped and adopted a tempi ate L CAP for use 0y school districts.

Support and Intervention. AB 97, as arrended 0y SB 91, establishes a new system of support and intervention to assist school districts in rreeti ng the performance expectations outlined in their respective LCAPs. School districts must adopt their LCAPs (or annual updates thereto) in tandem with their annual operating budgets, and not later than five days thereafter subnit such LCAPs or updates to their respective county superintendents of schools. On or before August 15 of each year, a county superintendent may seek clarification regarding the contents of a district's LCAP (or annual update thereto), and the district is required to respond to such a request within 1 5 days. Within 1 5 days of receiving such a response, the county superintendent can subnit non-binding recomrrendations for arrendi ng the L CAP or annual update, and such recomrrendati ons must be considered 0y the respective school district at a public hearing within 15 days. A district's LCAP or annual update must be approved 0y the county superintendent 0y October 8 of each year if the superintendent deternines that (i) the LCAP or annual update adheres to the State template, and (ii) the district's budgeted expenditures are sufficient to i mpl errent the actions and strategies outl i ned i n the L CAP.

A school district is required to receive additional support if its respective LCAP or annual update thereto is not apprwed, if the district requests technical assistance from its applicable county superintendent, or if the district does not improve student achie.1errent across more than one State priority for one or more student subgroups. Such support can include a re.1iew of a district's strengths and weaknesses in the eight State priority areas, or the assignrrent of an academic expert to assist the district with i denti fyi ng and i mpl errenti ng programs designed to i mprwe outcomes. Assistance may be prwi ded 0y the California Collaborative for Educational Excellence, a state agency created 0y the LCFF and charged with assisting school districts with achie.1ing the goals set forth in their LCAPs. The State Board of Education has de.lei oped rubrics to assess school district performance and the need for support and i nterventi on.

42

The State Superintendent of Public Instruction (the "State Superintendent") is further authorized, with the apprwal of the State Board of Education, to intervene in the rranagement of persistently underperforming school districts. The State Superintendent rray intervene directly or assign an acadenic trustee to act on his or her behalf. In so ck:Jing, the State Superintendent is authorized to (i) modify a district's LCAP, (ii) impose budget revisions designed to irrprwe student outcomes, and (iii) stay or rescind actions of the local governing board that would prevent such district from irrprwing student outcomes; prwided, ho.vever, that the State Superintendent is not authorized to rescind an action required 0y a I ocal col I ective bargai ni ng agreement.

Other State Sources. In addition to State allocations deternined pursuant to the LCFF, the District receives other State revenues consisting prirrarily of restricted revenues designed to implement State mandated programs. B egi nni ng in fi seal year 2013-14, categorical spending restrictions associated with a majority of State mandated programs were eliminated, and funding for these programs was folded into the LCFF. Categorical funding for certain programs was excluded from the LCFF, and school districts wi 11 continue to receive restricted State revenues to fund these programs.

Other Revenue Sources

Federal and Local Sources. The federal government prwides funding for several of the District's programs, including special education programs, programs under the Every Student Succeeds A ct, and programs under the Education Consolidation and I rrprwement A ct. I n addition, school districts rray receive additional local revenues beyond local property tax collections, including, but not linited to interest i ncome, I ease and rentals, foundations, donations and sales of property.

State Dissolution of Redevelopment Agencies

On December 30, 2011, the State Supreme Court issued its decision in the case of California RedeveloprrentAssociationv. Matosantos ("Matosantos"), finding ABX 1 26, a trailer bill to the 2011-12 State budget, to be constitutional. As a result, all redevelopment agencies in the State ceased to exist as a rratter of law on February 1, 2012. The Court in Matosantos also found that ABX 1 27, a companion bill to ABX 1 26, violated the State Constitution, as amended 0y Proposition 22. See "CONSTITUTIONAL AND STATUTORY PROVISIONS AFFECTING DISTRICT REVENUES AND APPROPRIATIONS -Proposition lA and Proposition 22" herein. ABX 1 27 would have pernitted redevelopment agencies to con ti nue operations prwi ded thei r establishing cities or counties agreed to rrake specified payments to school districts and county offices of education, totaling $1.7 billion statewide.

ABXl 26 was modified 0y Assembly Bill No. 1484 (Charter 26, Statutes of 2011-12) ("AB 1484-''), which, together with ABxl 26, is referred to herein as the "Dissolution Act." The Dissolution A ct prwi des that al I rights, po.vers, duties and obi i gati ons of a redevel oprrent agency under the California Community Redevelopment Law that have not been repealed, restricted or revised pursuant to ABxl 26 will be vested in a successor agency, generally the county or city that authorized the creation of the redevelopment agency (each, a "Successor Agency"). All property tax revenues that would have been al I ocated to a redevel oprnent agency, I ess the correspondi ng county auditor-control I er' s cost to adni ni ster the allocation of property tax revenues, are no.v allocated to a corresponding Redevelopment Property Tax Trust Fund ("Trust Fund'), to be used for the payment of pass-through payments to local taxing entities, and thereafterto bonds of the former redevelopment agency and any " enforceable obi i gati ons" of the Successor Agency, as well as to pay certain administrative costs. The Dissolution Act defines "enforceable obligations" to include bonds, loans, legally required payments, judgments or settlements, legal binding and enforceable obligations, and certain other obligations.

43

A rrong the various types of enforceable obi i gati ons, the first priority for i:avment is tax al I ocati on bonds issued b,t the former redevelopment agency; second is revenue bonds, which rray have been issued b,t the host city, but only where the tax increment revenues were pledged for repayment and only where other pledged revenues are insufficient to make scheduled debt service payments; third is adninistrative costs of the Successor Agency, not to exceed $250,000 in any year, to the extent such costs have been approved in an adninistrative budget; then, fourth tax revenues in the Trust Fund in excess of such amounts, if any, wi 11 be al I ocated as residual di stri buti ons to I ocal taxing entities i n the same proportions as other tax revenues. Morewer, all unencumbered cash and other assets of former redevelopment agencies will also be allocated to local taxing entities in the same proportions as tax revenues. N otwi thstandi ng the foregoing portion of this paragraph, the order of payment is sul::ij ect to modification in the event a Successor Agency timely reports to the State Controller and the State Department of Finance that application of the foregoing will leave the Successor Agency with amounts insufficient to make scheduled payments on enforceable obligations. If the county auditor-controller verifies that the Successor Agency wi 11 have i nsuffi ci ent amounts to rrake scheduled payments on enforceable obligations, it shall report its findings to the State Controller. If the State Controller agrees there are insufficient funds to pay scheduled payments on enforceable obligations, the amount of such deficiency shal I be deducted from the amount remai ni ng to be di stri buted to taxi ng agencies, as described as the fourth distribution abOJe, then from amounts available to the Successor Agency to defray administrative costs. In addition, if a taxing agency entered into an agreement pursuant to Health and Safety Code Section 33401 for payments from a redevelopment agency under which the payments were to be subordinated to certain obligations of the redevelopment agency, such subordination provisions shal I continue to be given effect.

As noted above, the Dissolution Act expressly provides for continuation of pass-through payments to local taxing entities, including the District. Per statute, 10036 of contractual and statutory two percent pass-throughs, and 56.7% of statutory pass-throughs authorized under the Community Redevelopment Law Reform Act of 1993 (AB 1290, Charter 942, Statutes of 1993) ("AB 1290''), are restricted to educational facilities without offset against apportionments b,t the State. Only 43.3% of AB 1290 pass-throughs are offset against State aid so long as the District uses the rroneys received for land acquisition, facility construction, reconstruction, or remodeling, or deferred rraintenance as provided under the Education Code Section 42238(h).

ABX 1 26 states that in the future, pass-throughs shall be rrade in the amount "which would have been received had the redevelopment agency existed at thatti me," and that the County Audi tor-Control I er shal I " deterni ne the amount of property taxes that would have been al I ocated to each redevelopment agency had the redevelopment agency not been dissolved pursuant to the operation of ABX 1 26 using current assessed values and pursuant to statutory [ pass-through] formulas and contractual agreements with other taxing agencies."

Successor Agencies continue to operate unti I al I enforceable obi i gati ons have been satisfied and al I remai ni ng assets of the Successor Agency have been disposed of. AB 1484 prwi des that once the debt of the Successor Agency is paid off and rerraining assets have been disposed of, the Successor Agency shal I terni nate its existence and al I pass-through payment obi i gati ons shal I cease.

The District can make no representations as to the extent to which any apportionments from the State may be offset b,t the future receirt of residual distributions or from unencumbered cash and assets of former redevelopment agencies or any other surplus property tax revenues pursuant to the Di ssol uti on Act.

44

Budget Process

State Budgeting Requirements. The District is required 0y prwisions of the Education Code to rraintain a balanced budget each year, in which the sum of expenditures and the ending fund balance cannot exceed the sum of revenues and the carry-over fund balance from the previous year. The State Depc1.rtment of Education irrposes a uniform budgeting and accounting forrrat for school districts. The budget process for school districts was substantially amended 0y Assembly Bill 1200 ("AB 1200''), which became State law on October 14, 1991. Portions of AB 1200 are sumrrarized belo.v. Additional amendments to the budget process were rrade 0y Asserrbly Bi 11 2585, effective as of September 9, 2014, incl udi ng the el i mi nation of the dual budget cycle option for school districts. A 11 school districts must no.v be on a singe budget cycle.

School districts must adopt a budget on or before July 1 of each year. The budget must be subnined to the county superintendent within five days of adoption or 0y July 1, whichever occurs first. The county superi ntendent wi 11 examine the adopted budget for compl i ance with the standards and criteria adopted 0y the State Board of Education and identify technical corrections necessary to bring the budget into compliance, and will determine if the budget al lo.vs the district to meet its current obligations, if the budget is consistent with a financial pl an that wi 11 enable the district to meet its multi-year fi nanci al commitments, whether the budget includes the expenditures necessary to implement a LCAP, and whether the budget's ending fund balance exceeds the ninimum recommended reserve for econonic uncertainties.

On or before September 15, the county superintendent will approve, conditionally apprwe or di sapprwe the adopted budget for each school district. B udgets wi 11 be di sapprwed if they fai I the abOJe standards. The district board must be notified 0y September 15 of the county superintendent's recommendati ans for revision and reasons for the recommendati ans. The county superintendent rray assign a fi seal adJi sor or appoi nt a comni nee to exani ne and comment on the superi ntendent' s recommendations. The committee must report its findings no later than September 20. Any recommendati ans made 0y the county superintendent must be rrade avai I able 0y the district for public inspection. No later than October 22, the county superintendent must notify the State Superintendent of Public Instruction of all school districts whose budget rray be disapprwed.

A school district whose budget has been di sapprwed must revise and readopt its budget 0y September 8, reflecting changes in prqjected income and expense sinceJ uly 1, including responding to the county superintendent's recommendations. The county superintendent must determine if the budget conforms with the standards and criteria applicable to fi nal school district budgets and not I ater than November 8, must apprwe or disapprwe the revised budgets. If the budget is disapprwed, the county superintendent will call for the forrration of a budget review comninee pursuant to the Education Code Section 42127.1. No later than Nwember 8, the county superintendent must notify the State Superintendent of Public Instruction of all school districts whose budget has been disapprwed. Until a school district' s budget is apprwed, the school district wi 11 operate on the I esser of its proposed budget for the current fiscal year or the last budget adopted and reviewed forthe prior fiscal year.

45

Interim Financial Reporting. Underthe provisions of AB 1200, each school district is required to file interim certifications with the county office of education as to its ability to meet its financial obligations for the remainder of the then-current fiscal year and, based on current forecasts, for the subsequent two fiscal years. 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 wi 11 meet its fi nanci al obi i gati ans for the current fi seal year and subsequent two fi seal years. A negative certification is assigned to any school district that will be unable to meet its financial obligations for the remainder of the current fiscal year or the subsequent fiscal year. A qualified certification is assigned to any school district that may not meet its financial obligations for the current fiscal year or the two subsequent fi seal years.

Because of decreased revenues and increased costs, certain of the District's budgets and interim reports in recent years received negative treatment from the County. Specifically, the District's fiscal year 2011-12 adopted budget was disapproved b,t the County Superintendent of Schools. Additionally, the District's first interim report for fiscal year 2010-11 received a negative certification, and its second interim report for fi seal year 2010-11, first and second interim reports for fi seal years 2011-12 and 2012-13, and first interim report for fiscal year 2014-15 all received qualified certifications. The District's first and second interim reports for fiscal years 2013-14 and 2015-16, as well as its first interim report for fiscal year 2016-17, received positive certifications. The District self-qualified its second interim report for fiscal year 2016-17. Based on the District's fiscal year 2016-17 second interim financial report, the District currently prqjects that general fund expenditures will exceed restricted and unrestricted revenues b,t $220,964.54 in the 2017-18 fiscal year and $1,047,388.54 in the 2018-19 fiscal year due primarily to step i ncreases i n emplc:1/ee salary costs and ongoi ng i ncreasi ng rates for empl (1/ee pensi ans and reductions in the expected State funds of the funding gap under the LCFF.

Budgeting Trends. The table on the follCM!ing page summarizes the District's general fund adopted budgets for fiscal years 2013-14 through 2016-17, audited ending results for fiscal years 2013-14 through 2015-16, and prqj ected totals for fi seal year 2016-17.

46

REVENUES Revenue Li nit ;LCFF Sources(4

J

Federal Sources Other State Sources Other Local Sources

TOTAL REVENUES151

EXPENDITURES Certificated Salaries Classfied Salaries E ,rpl oyee Benefits Books& Supplies Services & Other Operating Expenses Capital Outlay OtherOutg:, Transfers of Direct Support I ndi rect Costs Prcqann;Fund Support Debt Service - Principal Debt Service - Interest:

TOTAL EXPENDITURES'"

OTHER Fl NANCI NG SOURCES;USES Other Sources - Proceeds from Capital Leases

TOTAL OTHER Fl NANCI NG SOURCES;USES

NET I NCR EASE (DECREASE) IN FUND BALANCE

Fund Balance,J uly l Fund Balance,J une 30

GENERAL FUND BUDGETING Fiscal Years 2013-14 through 2016-17

Banning Unified School District

Fiscal Year 2013-14'"

Adopted Budget Audited

$23,312,310 $29,200,517 3,456,070 5,911,703 l 505 677

34,185,760

16,128,966 4,992,244 6,658,899 1,987,199 5,009,067

100,000 (108,704)

34,767,671

(581,911)

3,286,442

$2 704 531

3,466,828 4,427,477 2,379,837

39,474,659

16,336,634 5,203,489 7,668,727 2,809,494 6,192,063

305,568 273,055

15,436 76 725

38,881,191

593,468

3,286,442

$3 879910

Fiscal Year 2014-l 911

Adopted Budget

$33,654,846 3,589,818 2,381,546 l 464 533

41,090,743

18,393,584 5,860,807 7,977,713 1,924,122 5,705,877

535,000 226,480

15,437

40,639,020

451,723

3 879910

$4331 633

Audited

$34,384,190 3,543,605 3,781,158 3 409291

45,118,244

18,487,213 6,298,970 7,251,650 2,749,457 6,641,263

472,938 788,617

15,436 59,788

42,765,332

2,352,912

3 879910

$6 232 822

Fiscal Year 2015-1821

Adopted Budget

$40,390,495 3,027,489 4,286,438 2,505,132

50,209,554

20,929,663 7,023,009 9,857,994 2,735,055 6,217,991

680,000 (8,125)

31 547 47,467,194

2,742,360

6,232,822

$8,975182

Audited

$40,572,817 3,572,136 5,487,172 3 597758

53,229,883

20,000,217 7,034,604 9,877,041 4,372,680 7,364,003 1,392,534

87,443

40,053 6,930

50,175,508

143 284 143,284

3,197,659

6,232,822

$9430481

Fig:al Year 2016-l ;,<>

Adopted Budget

$43,085,548 3,530,356 3,372,144 2,566,122

52,554,170

22,771,955 7,713,438

10,866,502 2,747,557 7,947,402

888,004 99,000

(S0,51(»

46,984

53,000,332

(446,162)

7216342

$6770180

Projected

$43,379,609 5,020,819 3,931,900 2,550,926

54,883,254

22,278,256 8,025,761

10,781,816 5,083,280 9,177,263 2,525,328

64,000 (80,51(»

45,833

1-121 57,902,177

(3,018,923)

8,313,487

$5 294 563

(7l --F~~t~-Di~tf"jct,;~dit~-fi;;-~~~-~~erre7ts in each fiscal year. Beginnirg ard erding furd l::alances inclu::le the District's Furd 17 (Special Resevefcr Othff than captal Outlay), µ.irsuant to GASB (defined hErein) Staterre7t No. 54.

(2l From the District's audited financial staterre7t in fiscal year 2015-16. On b::half piytTE11ts ci $1, 130,516 are included in the Au:lited revEnues ard experditures, but are not inclu:led in the bu:lge:ed amounts for such years. In ad:lition, twofurds currently defined as special revEnuefunds in the CaliforniaStateAccounting Manual do nct t11E'Et the GASB Statement No. 54 special revEnuefurd definition. Specifically, the Special Reseve Furd for OthEr Than cap tal Outlay P rtj ects ard the Special Reserve F und for Posterrpl a.;~nt B Enefi ts are nct substantially corrpose:l ci restricted or comnitted revEnue sources, addi ti anal revEnues and e-q::e1di tures pertai ni ng to these cther f urds are inclu:led in the Actual (GAAP Basis) revE11ues ard e-q::e1ditures, ho.,ve,;er, are nct included in the original and final GE11Eral Fund bu:lge:s.

(3l From the District's first intErirnfinarr:ial rerutfor fiscal year 2016-17, dated Decerrber 8, 2016.

(4l Prior to the Fiscal Year 2013-14 First I ntErirn Finarr:ial Rerut, this categay was coded as "RevEnue Linit." Frorn the Fiscal Year 2013-14 First Interim Finarr:ial Rer:ott through the Fiscal Year 2013-14 Secord lntErirn Financial

Rer:ott and the Fiscal Year 201 5-16 Acbr:ted B u:lget, this cate;py was coded as "LCFF ;RevEnue Li nit Sources." In the Fiscal Year 2014-15 Adq=ited Budge:, this cate;py was coded as "LCFF ." In the Fiscal Year 2016-17 First I ntErirn Financial Rerut, this category is coded as "LCCF t,ources."

(sJ On behalf paytTE11ts ci $943,994 ard $824,875 are inclu:led in theAu:lited revEnues ard e,q::e1ditures for fiscal years 2013-14 ard 2014-15, respectively, but are nct inclu:led in the l::u::lgeted amounts for sLK:h years. For fiscal years 2013-14 and 2014-1 5, due to the consolidation of the Adult Education F urd ard the Def Erred Maintenance F urd into the General Fund for rer:otti ng µ.iq::oses, additional revE11ues ard experditures pertaining to these cthEf funds are incl u:led in the Audited revEnues ard experditures, but are not incl u:led in the l::ud;Jeted am:l.lnts.

Source Banning Unified School District.

47

Accounting Practices

The accounting practices of the District conform to generally accepted accounting principles in accordance with policies and procedures of the California School Accounting Manual. This manual, according to Section 41010 of the Education Code, is to be follo.ved b,t all State school districts.

The District's expenditures are accrued at the end of the fiscal year to reflect the receipt of goods and services in that year. Revenues generally are recorded on a cash basis, except for items that are susceptible to accrual (measurable and/or avai I able to fi nance operations) . Current taxes are considered susceptible to accrual. Delinquent taxes not received afterthe fiscal year end are not recorded as revenue unti I received. Revenues from specific state and federally funded prqj ects are recognized when qualified expenditures have been incurred. State block grant apportionments are accrued to the extent that they are measurable and predictable. The State Department of Education sends the District updated information from ti me to ti me explaining the acceptalble accounting treatment of revenue and expenditure categories.

The District's accounting is organized on the basis of fund groups, with each group consisting of a separate set of self-balancing accounts containing assets, liabilities, fund balances, revenues and expenditures. The major fund classification is the general fund which accounts for all financial resources not requiring a special type of fund. The District's fiscal year begins onJ uly 1 and ends onJ une 30.

Comparative Financial Statements

Audited financial statements for the District for the fiscal year ended June 30, 2016 and prior fiscal years are on file with the District and available for public inspection at the Office of the Director of Fiscal Services, 161 West Williams Street, Banning, California 92220, telephone: (951) 922-2706. The audited financial statements for the year endedJ une 30, 2016 are attached hereto as APPENDIX B.

For fiscal years ended June 30, 2003, and later, the District implemented Gwernmental Accounting Standards Board ("GASB") Statements Nos. 34 and 35. Among the changes implemented under these revised accounting rules is a change in the financial reporting format. While historical total revenue and expenditures figures are comparably consistentto prior years, the breakdo.vn of revenues and expenditures folio.vs functional categories rather than ol::iject-oriented categories. The table on the follo.ving page reflects the District's audited general fund revenues, expenditures and fund balances from fi seal year 2011-12 through fi seal year 2015-16.

[REMAINDER OF PAGE LEFT BLANK]

48

AUDITED GENERAL FUND REVENUES, EXPENDITURES AND FUND BALANCE 111

Fiscal Years 2011-12 through 2015-16 Banning Unified School District

REVENUES Revenue Limit/lCFF Source,(21

Fffleral Revenues Other State Revenues Other Local Revenues

Total Revenues

EXPENDITURES Current lnstru:::tion lnstru:::tion-related a:::tivities

Supervision of instru:::tion lnstru:::tional library, mediaard techmlCXJY Sch:x:il site supervision

Pupil services: Home--to--sch:x:il transp::11tation FoOO services All other pupil services

Admi ni strati on Data processi tl'J All other administration

Plant services Facility acquisition ard constru:::tion Arr::illary services Community services Other outgo

Debt Service Principal Interest ard Other Total Expenditures

EXCESS OF REVENUES OVER (UNDER) EXPENDITURES

OTHER FINANCING SOURCESAUSES) Other Sources- proceeds from capital leases Total Other Fi nan:::itl'J Sources (Uses)

Excess of Revenues& Other Financing Sources Over (Under) Expenditures and Other Uses

Fund Balance,J uly l Fund Balance,J une 30

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

Fiscal Year 2011-12

$22,237,867 4,174,556 9,269,435 1,635,895

37,317,753

23,037,595

1,085,615 346,596

2,353,1Xi4

948,724

l ,875,7'Xl

529,ll'Xl 2,463,561 4,232,657

285,377 181,255 564,542

46,'Xl5 42,2SO

37,993,!Xil

(675,308)

(675,308)

3 594 677 $2,919,369

Fiscal Year 2012-13

$22,234,793 3,122,644 8,157,023 1,830,756

35,345,216

20,643,001

511,980 258,635

2,333,665

971,840

2,157,222

556,635 2,134,993 4,483,487

39,687 215,221 584,200

24,014 63,563

34,978,143

367,073

367,073

2,919,369 $3,286,442

Fiscal Year 2013-14

$29,200,517 3,466,828 4,427,477 2,379,837

39,474,659

23,856,954

562,897 300,185

2,183,572

1,055,512

2,394,054

483,610 1,883,466 4,745,612

283,543 126,996 518,764 393,925

2,128 'Xl,033

38,881,191

593,468

593,468

3,286,442 $3,879,910

Fiscal Year 2014-15

$34,384, l'Xl 3,543,605 3,781,158 3,409,291

45,118,244

25,974,826

768,034 324,602

2,277,245

1,099,323 7,324

2,915,'DO

601,298 2,580,289 4,866,015

491,079 144,454 'D<J,466 130,653

15,436 59,788

42,765,332

2,352,912

2,352,912

3879910 $6,232,822

Fiscal Year 2015-16

$40,572,817 3,572,136 5,487,172 3,597,758

53,229,883

29,860,258

635,686 3'Xl,608

2,571,557

1,707,572

3,216,498

726,746 3,320,299 5,785,652 1,127,622

l89,'Xl5 523,253

72,869

40,053 6,930

50,175,'DB

3,054,375

143 284 143,284

3,197,659

6,232,822 $9430481

(') For aLdited results for fiscal years 2013-14 throUJh 2015-16 1n obje:::t--orientffl format, please see "DISTRICT FINANCIAL INFORMATION -Budge: Process-BLdgetingTrerds" herein.

(21 Prior to the Fi seal Year 2013-14 First Interim Fi nan:::ial Report, this category was ccxled as" Revenue Limit." From the Fiscal Year 2013-14 First Interim Finan:::ial Rep::111 throUJh the Fiscal Year 2013-14 Secord lnteri m Finan:::ial Report ard the Fi seal Year 2015-l 6Adopted B Ldge::, this cateJory was ccxlffl as "LCFF /Revenue Limit Scurces." In the Fi seal Year 2014-1 SAdopted B Ldget, this category was ccxlffl as" LCFF ." In the Fiscal Year 2016-17 First Interim Finan::::ial Rep::irt, thi scateJory is ccxled as" LCCF iSources."

Source: Bannitl'J Unified Sch:x:il District.

49

State Budget Measures

The follOMng information concerning the State's budgets has been obtained from publicly available information which the District believes to be reliable; ho.vever, the District does not guarantee the accuracy or corrpleteness of this information and has not independently verified such information. Furthermore, it should not be inferred from the inclusion of this information herein that the principal of or interest on the Bonds is payable from the general fund of the District. The Bonds are payable solely from the proceeds of an ad valorem property tax required to be levied b,t the County on taxable property within the District in an amount sufficient for the paymentthereof.

2016-17 Budget. OnJ une 27, 2016, the Gwernor signed into the I.Ml the State budget for fiscal year 2016-17 (the "2016-17 Budget"). The follo.ving information is drawn from the Department of Finance's sumrrary of the 2016-17 Budget and the LA O's preliminary review of the 2016-17 Budget.

The 2016-17 Budget prqjects, for fiscal year 2015-16, total general fund revenues and transfers of $117 billion and total expenditures of $115.6 billion. The State is prqjectedto end the 2015-16 fiscal year with total available reserves of $7.3 billion, including $3.9 billion in the traditional general fund reserve and $3.4 billion in the State's Budget Stabilization Account (the "BSA") established b,t the California Balanced Budget Act of 2004 (also kno.vn as Proposition 58). For fiscal year 2016-17, the 2016-17 Budget prqjects a gro.vth in State general fund revenues driven primarily b,t total general fund revenues of $120.3 billion and authorizes expenditures of $122.5 billion. The State is prqjectedtoendthe 2016-17 fiscal year with total available reserves of $8.5 billion, including $1.8 billion in the traditional general fund reserve and $6. 7 bi 11 ion in the B SA.

As a result of higher general fund revenue estimates for fiscal years 2015-16 and 2016-17, and after accounting for expenditures controlled b,t constitutional funding requirements such as Proposition 2 and Proposition 98, the 2016-17 Budget allocates over $6 billion in discretionary funding for various purposes. These include (i) additional deposits of $2 billion to the BSA (reflected in the discussion abOJe) and $600 nillion to the State's discretionary budget reserve fund, (ii) approximately $2.9 billion in one-time funding for various purposes including infrastructure, affordable housing and public safety programs, and (iii) $700 million in on-going funding commitments for higher education (California State University and the University of California systems), corrections and rehabi I itation and State courts.

As required b,t Proposition 2, the 2016-17 Budget applies $1.3 billion to.vards the repayment of existing State liabilities, including loans from special funds, State and University of California pension and retiree health benefits and settle-up payments to K-14 school districts resulting from an underfunding of the Proposition 98 minimum funding guarantee in a prior fiscal year.

With respect to education funding, the 2016-17 Budget revises the Proposition 98 ninirnum funding guarantees for both fiscal years 2014-15 and 2015-16, as a result of increased revenue estimates. The 2016-17 Budget sets the Proposition 98 ni ni mum funding guarantee for fi seal year 2016-17 at $71.9 bi 11 ion, an i ncrease of $2. 8 bi 11 ion wer the revised I eve I from the prior fi seal year. W i th respect to K -1 2 education, the share of the ninirnum funding guarantee is $62.5 billion, including $44.5 billion from the State general fund and $18.1 billion from local property tax collections. Significant features with respect to K -12 education funding include the fol Io.vi ng:

• Local Control Funding Formula - $2.9 billion of Proposition 98 funding to continue the implementation of the LCFF. This reflects a 5.7% increase from the prior year, and is estimated to close the remaining funding implementation gap between the prior year and the LCFF target levels b,t approximately 54%. As a result, the 2016-17 Budget prqjects total LCFF implementation to be at 96% during fiscal year 2016-17.

50

• Discretionary Funding - $1.3 billion in additional one-time funding that local educational agencies may use for any purpose. Funding will be distributed based on ADA. While funding is intended to reduce the backlog of unpli d rei rnbursement claims for State--rrandated activities, the 2016-17 Budget estirrates that most local educational agencies do not have such unpc1.id claims, and that only $617 nil lion of the total funding will be used for this purpose.

• Maintenance Factor - The 2016-17 Budget assumes the creation of a new rrai ntenance factor of $746 nil lion in fiscal year 2016-17, created 0y the difference in gro.vth in per capita State general fund revenues and gro.vth in State per capita personal income.

• College Readiness -$200 million in one-time Proposition 98 funding to fund a block grant for school districts and charter schools serving high school students. Funds are intended to provide additional services that support access and successful transition to higher education. Allocation of the fundingwill be based on the number of students in grades 9 through 12 that are English-learners, lo.v--incorne or foster youth, with no district or charter school receiving less than $75,000. The 2016-17 Budget also prwides $15 nil lion in one-time Proposition 98 grant funding to support coordinated student outreach 0y I ocal educati anal agencies and community college districts aimed at increasing college prepc1.ration, access, and success.

• Career Technical Education (CTE) - The State Budget for fiscal year 2015-16 established the Career Technical Education Incentive Grant Program for I ocal education agencies to establish new or expc1.nd high-quality CTE programs, and prwided $400 nillion in fiscal year 2015-16 to fund the program The 2016-17 Budget prwi des $300 ni 11 ion in second-year funding for this program.

• Charter Schools -An increase of $20 nil lion in one-time Proposition 98 funding to support startup costs for new charter schools in 2016 and 2017. The funds are intended to offset the I oss of previously avai I able federal funding.

• Support System;-$20 nil lion in one-time Proposition 98fundingtoassist local educational agencies provide academic, behavioral, social and ernoti anal student support services.

• Truancy and Dropout Prevention - Proposition 47, approved 0y voters in Nwember 2014, reduces penalties for certain non-serious and non-violent property and drug offenses, and requires that a portion of State expenditure savings resulting from these reduced penalties 0y invested into K-12 truancy and dropout prevention. The 2016-17 Budget estirrates approximately $9.9 nil lion in state savings that will be available for this program. The 2016-17 Budget also includes an additional $18 nillion in one-time funding for the program, resulting in total funding of $27.9 nillion.

• Teacher Workforce Initiatives - The 2016-17 Budget funds se.,,eral initiatives designed to increase the suppiy of K-12 teachers, including (i) $20 nillion to encourage classified employees to complete their education and pursue teaching credentials, (ii) $10 million in non-Proposition 98 funding to expc1.nd the number of integrated programs that allo.v a participc1.nt to concurrently earn a bachelor's degree and a teaching credential, and (iii) $5 mi 11 ion to fund teacher recruitment activities.

• Drinking Water - $9.5 nil lion in one-time Proposition 98 funding to assist school districts that serve isolated or econonically disacwantaged areas imprwe access to safe drinking water.

51

For additional inforrration regarding the 2016-17 Budget, see the State Depll'trrent of Finance website at www.dof.ca.gov and the LAO's website at www.lao.ca.gov. Ho.vever, the inforrration presented on such websites is not incorporated herein b,t reference.

Gwernor's Proposed 2017-18 Budget. OnJ anuary 10, 2017, the Governor released his proposed State budget for fiscal year 2017-18 (the "Proposed Budget''). The follo.ving inforrration is drawn from the Depc1.rtrrent of Finance's sumrrary of the Proposed Budget and the LAO's wervie.v of the Proposed Budget.

Follo.ving several years of increases, the Gwernor reports that the three main sources of State revenues--i ncorne, sales and corporation taxes-are sho.vi ng weakness. Consequently, the Proposed Budget includes a revised revenue forecast for fi seal years 201 5-16 and 2016-17 that is $3.2 bi 11 ion I o.ver than was included in the current State budget. The Gwernor attributes the change in expectations to a plttern of shortfalls in monthly revenue collections and a gro.vth in lo.ver--incorne workers, which results in decreased revenues due to the State's progressive tax structure. .The Gwernor also identifies sorre increases in State general fund spending relative to the 2016-17 Budget, most significant among those being an increase in Medi-Cal costs of approxirrately $1.8 billion. As a result, absent corrective action, the Governor prqjects that the State would face a general fund deficit of approxirrately $1.6 billion in fiscal year 2017-18, as well as coITTP3-rable deficits in future years.

To close the prqjected deficit, the Proposed Budget includes $3.2 billion in rerredial budgetary rreasures designed to reduce State general fund spending in a variety of areas. Significantly, the Proposed Budget would lo.ver, b,t $1.7 billion, the existing Proposition 98 funding appropriations for fiscal years 2015-16 and 2016-17, which, as a result of the drop in State revenues, are prqjected to wer-appropriate the minimum funding guarantee. As a result, the Proposed Budget also shifts, on a one-tirre basis (i) $310 nillion of previously appropriated discretionary K-12 funding from the 2015-16 fiscal year to the 2016-17 fiscal year, and (ii) $859.1 million in LCFF pc1.yrrents from June 2017 to July 2017. These shifts would bring Proposition 98 spending in-Ii ne with the revised funding guarantees described belo.v. Other significant rerredial measures include elininating a $400 nil lion set aside for affordable housing and $300 nil lion in previously approved funding for the replacerrent and renovation of State office bui I dings.

Assuning the implerrentation of these measures, the Proposed Budget prqjects, for fiscal year 2016-17, total general fund revenues and transfers of $118.8 billion and total expenditures of $122.8 billion. The State is prqjected to end the 2016-17 fiscal year with total available reserves of $7.7 billion, including $980 nil lion in the traditional general fund reserve and $6.7 billion in the BSA. For fiscal year 2017-18, the Proposed Budget prqjects total general fund revenues of $124 billion and authorizes expenditures of $122.5 billion. The State is prqjected to end the 2017-18 fiscal year with total available reserves of $8.8 billion, including $980 million in the traditional general fund reserve and $7.9 billion in the BSA.

As a result of the revised State revenue estirrates discussed above, the Proposed Budget aqjusts the ninirnum funding guarantee for fiscal year 2015-16 to $68.7 billion, a decrease of $379 nil lion from the level set b,t the 2016-17 Budget. Sinilarly, for fiscal year 2016-17, the ninimum funding guarantee is revised at $71.4 billion, reflecting a decrease of $506 nil lion from the level set b,t the 2016-17 Budget. For fiscal year 2017-18, the Proposed Budget sets the ninirnum funding guarantee at $73.5 billion, including $51.4 billion from the State general fund, reflecting a year-to-year increase of $2.1 billion (or 3%). Fiscal year 2017-18 is prqjected to be ''Test 3" year, with the increase in the minimum guarantee driven prirrarily b,t an increase in per-capita State general fund revenues. Significant proposals with respect to K -12 education funding include the fol Io.vi ng:

52

• Local Control Funding Formula - $744 nillion in Proposition 98 funding to continue the implementation of the LCFF. This level of funding would support a 1.4836 COLA for aqjusted Base Grants in fiscal year 2017-18. The Proposed Budget prqjects to maintain total LCFF implementation at 96%. The Proposed Budget would also provide $2.4 nillion in Proposition 98 funding to support a COLA for LCFF funding levels for county offices of education.

• Maintenance Factor -As a result of the aqjustments to the Proposition 98 ninimum funding guarantee for fiscal years 2015-16 and 2016-17, as described abcwe, the State is no longer required to make a $379 million maintenance factor i:avment for fiscal year 2015-16 that was approved b,t the 2016-17 Budget, and the maintenance factor created for fi seal year 2016-17 gro.vs from $746 nil lion to $838 million. In addition, the funding levels set b,t the Proposed Budget would create a mw maintenance factor in fiscal year 2017-18 equal to $219 million, bringing the total outstanding State obligation to $1.6 billion.

• Discretionary Funding - An increase of $287 nillion in one-time funding that local educational agencies may use for any purpose. Similar to features included in prior State budgets, these funds would offset any applicable unpaid reimbursement claims for State--rrandated activities.

• Settle Up Payrrent - $601 nillion in one-time funding to support a "settle up'' payment related to an obi i gati on created i n fi seal year 2009-1 O when revenue esti mates understated the ni ni mum funding guarantee.

• Career Technical Education (CTE) - The State Budget for fiscal year 2015-16 established the Career Technical Education Incentive Grant Program for I ocal education agencies to establish new or expand high-quality CTE programs. The Proposed Budget would provide $200 nillion as the final installment of funding for this program

• ADA Aqjustrrents - The Proposed Budget's funding levels reflect the follo.ving aqjustments (i) an increase of $93 million in Proposition 98 funding to support a prqjected gro.vth in charter school ADA, (ii) a decrease of $4.9 nil lion in Proposition 98 funding as a result of a prqjected decrease in special education ADA, and (iii) a total decrease of $232 nil lion for fiscal years 2016-17 and 2017-18 as a result of continuing prqjected declines in ADA for school districts.

• Local PropertyTaxAqjustrrents -A decrease of $149.2 nillion in Proposition 98 funding in fiscal year 2016-17 for school districts and county office of education as a result of higher offsetting property tax revenues. The Proposed Budget would make a si ni I ar decrease of $922.7 nillion in fiscal year 2017-18.

• Categorical Program; -An increase of $58.1 million in Proposition 98 funding to support a 1.4836 COLA for categorical programs that remain outside of the LCFF.

• Proposition 39 - Passed b,t voters in Nwerrber 2012, Proposition 39 increases State corporate tax revenues and requires that, for a five-year period starting in fiscal year 2013-14, a portion of these additional revenues be allocated to local education agencies to imprwe energy efficiency and expand the use of alternative energy in public buildings. The Proposed B udget al I ocates $422. 9 mi 11 ion of such funds to support school district and charter school energy efficiency prqjects in fiscal year 2017-18.

• Proposition 56-Passed b,tvoters in Nwerrber 2016, Proposition 56 increases the per-pack State sales tax on cigarettes b,t $2, and requires that a portion of the revenue generated be used for school programs designed to prevent and reduce the use of tolbacco and nicotine

53

products. The Proposed Budget would allocate $29.9 nil lion of Proposition 56 revenues to support these programs.

For additional inforrration regarding the Proposed Budget, see the State Depll'trrent of Finance website at www.dof.ca.gov and the LAO's website at www.lao.ca.gov. HONever, the inforrration presented on such websites is not incorporated herein b,t reference.

Future Actions. The District cannot predict what actions will be taken in the future b,t the State Legislature and the Governor to address changing State revenues and expenditures. The District also cannot predict the irrp3.ct such actions will have on State revenues available in the current or future years for education. The State budget will be affected b,t national and State economic conditions and other factors werwhich the District will have no control. Certain actions or results could produce a significant shortfall of revenue and cash, and could consequently irrpair the State's ability to fund school districts. State budget shortfalls in future fiscal years rray also have an adJerse financial irnpact on the financial condition of the District. HONever, the obligation to levy ad valorern property taxes upon all taxable property within the District for the payrrent of principal of and interest on the Bonds would not be impaired.

BANNING UNIFIED SCHOOL DISTRICT

The inforrration in this section concerning the operations of the District and the District's finances are prOJided as supplerrentary inforrration only, and it should not be inferred frornthe inclusion of this inforrration in this Official Staterrent that the principal of and interest on the Bonds is payable frornthe general fund of the District. The Bonds are payable solely from the revenues generated b,t an ad valorern property tax required to be levied b,t the County on taxable property within the District for the payrrentthereof. See" THE BONDS -Security and Sources of Payrrent" herein.

Introduction

The Banning Unified School District was established in 1877, and covers approxirrately 303 square niles in the communities of Cabazon, Whitewater, Poppet Flats and the Morongo Indian Reservation as well as the City of Banning. The District is located in the western portion of the County, approxirrately 80 niles east of Los Angeles and 34 niles east of the City of Riverside. The District currently operates five elerrentary schools (transitional kindergarten through grade 5), one rniddle school (grades 6--S), one comprehensive high school (grades 9-12), one continuation high school, a K-12 Independent Study School, and one adult education program For fiscal year 2016-17, the District's ADA is 4,252 students, and taxabie property within the District has a fiscal year 2016-17 assessed valuation of $2,707,197,363.

Unless otherwise indicated, the follONing financial, statistical and demographic data has been prwi ded b,t the District. Addi ti anal i nforrrati on concerning the District and copies of subsequent audited financial reports of the District rray be obtained b,t contacting: Banning Unified School District, Attention: Director of Fiscal Services, 161 WestWilliarns Street, Banning, California 92220.

54

Admi ni strati on

The District is governed b,t a five---rrember Board of Trustees, each member of which is elected to a four-year term b,t voters within their respective trustee area Elections for positions to the Boord are held every two years, alternating between two and three available positions. Current members of the Boord, together with their offices and the dates their currentterms expire, are listed belON.

Name

Alfredo Andrade Kerri Mariner Martha Bederio AlexCassadas Jan Spann

BOARD OF TRUSTEES Banning Unified School District

Office

President Clerk

Merrlier Merrlier Merrlier

Current Term Expires

Decerrlier 2019 Decerrlier 2019 Decerrlier 201 7 Decerrlier 2019 Decerrlier 201 7

The Superintendent of the District is responsible for administering the affairs of the District in accordance with the policies of the Board. Currently, Robert Guillen is the District's Superintendent. B ri ef biographies of certai n key adni ni strators fol I ON.

Robert Guillen, Superintendent. Mr. Guillen began serving as the District Superintendent in June, 2013. He has spent wer 40 years in education, serving in a variety of capacities, including pri nci pc1.I , di rector of business, assistant superi ntendent of business, deputy superi ntendent and chief operati ans officer. Mr. Gui I len earned his undergraduate degree from the California State University, San Bernardino, and his M.A. from the University of California, Riverside.

Catherine B agnara, Di rector of Fi seal Services. Ms. B agnara began serving as the District's Supervisor of Fiscal Services in May, 2002, and was promoted to Director of Fiscal Services inJ anuary, 2015. Having worked at the District for wer 24 years, Ms. Bagnara has held many positions in the District's Fiscal Services depc1.rtment and previously served as the District's Supervisor of Centralized R egi strati on.

[REMAINDER OF PAGE LEFT BLANK]

55

Enrollment and ADA

The follo.ving table reflects the ADA and enrollment for the District for the last eight years, and prqj ected figures for fi seal years 2016-17 and 2017-18.

AVERAGE DAILY ATTENDANCE AND ENROLLMENT Fiscal Years 2008-09 through 2017-18

Fiscal Year

2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-1 ?131

2017-18131

1" Reflects P-2 ADA.

Banning Unified School District

Average Daily Attendance111

4,449 4,292 4,146 4,193 4,140 4,199 4,290 4,274 4,252 4,226

Enrollment121

4,832 4,710 4,595 4,503 4,524 4,480 4,599 4,460 4,521 4,495

1" Enrollrrent for years prior to fiscal 2013-14 is as of October CB EDS report Fiscal years 2013-14 through 2015-16 certified enrollrrent is as of the fall census day (the first Wednesday in October) reported to CALPADS. See also "DISTRICT FINANCIAL MATTERS -State Funding of Education -Local Control Funding Forrrula" herein.

C3l Projected. Source: Banning Unified School District

Labor Relations

The District currently employs 271 full-time certified employees and 136 full-time classified employees. In addition, the District employs 162 part-time faculty and staff. District employees, except management, confidential and some part-ti me employees, are represented 0y two bargai ni ng uni ts as noted on the fol Io.vi ng page:

LABOR RELATIONS Banning Unified School District

Labor Organization

Banning Teachers' Association

California School Errplo,,ees Association

Source: Banning Unified School District

56

Number of Emplo,,ees in Organization

252

287

Contract Expiration Date

J une 30, 201 7

J une 30, 201 7

District Retirement Systems

The inforrration set forth belo.v regarding the STRS and PERS program;, other than the inforrration provided b,t the District regarding its annual contributions thereto, has been obtained from publicly available sources wiich are believed to be reliable but are not guaranteed as to accuracy or completeness, and should not to be construed as a representation b,t either the District or the Underwiter.

STRS. All full-time certificated emplO{ees, as well as certain classified emplO{ees, are members of the State Teachers' Retirement System ("STRS"). STRS prwides retirement, disability and survivor benefits to plan members and beneficiaries under a defined benefit program (the "STRS Defined Benefit Program'). The STRS Defined Benefit Program is funded through a combination of investment earnings and statutorily set contributions from three sources: empl O{ees, empl O{ers, and the State. Benefit prwisions and contribution amounts are established b,t State statutes, as legislatively amended from time to time.

Prior to fiscal year 2014-15, and uni i ke typical defined benefit programs, none of the emplO(ee, emplO(er nor State contribution rates to the STRS Defined Benefit Program varied annually to rrake up funding shortfalls or assess credits for actuarial surpluses. In recent years, the combined emplO{er, emplO(ee and State contributions to the STRS Defined Benefit Program have not been sufficient to pay actuarially required amounts. As a result, and due to significant investment I asses, the unfunded actuarial liability of the STRS Defined Benefit Program has increased significantly in recent fiscal years. In September 2013, STRS prqjected 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, the State recently passed the I egi sl ati on descri bed bel o.v to i ncrease contri buti on rates.

Prior toJ uly 1, 2014, K -14 school districts were required b,t such statutes to contribute 8.25% of eligible salary expenditures, while participants contributed 836 of their respective salaries. On June 24, 2014, the Gwernor signed AB 1469 ("AB 1469'') into law as a part of the State's fiscal year 2014-15 budget. AB 1469 seeks to fully fund the unfunded actuarial obligation with respect to service credited to members of the STRS Defined Benefit Program beforeJ uly 1, 2014 (the "2014 Liability"), within 32 years, b,t increasing member, K-14 school district and State contributions to STRS. CommencingJ uly 1, 2014, the emplO(ee contribution rate increased over a three-year phase-in period in accordance with the fol I ONi ng schedule:

Effective Date

July 1, 2014 July 1, 2015 July 1, 2016

Source: AB 1469.

MEMBER CONTRIBUTION RATES STRS Defined Benefit Program

STRS Members Hired Prior to I anuary 1, 2013

8.15036 9.200

10.250

57

STRS Members Hired After I anuary 1, 2013

8.15036 8.560 9.205

Pursuant to AB 1469, K-14 school districts' contribution rate will increase wer a seven-year phase--i n period in accordance with the fol Io.vi ng schedule:

Source: AB 1469.

K-14SCHOOL DISTRICT CONTRIBUTION RATES STRS Defined Benefit Program

Effective Date

July 1, 2014 July 1, 2015 July 1, 2016 July 1, 2017 July 1, 2018 July 1, 2019 July 1, 2020

K-14 school districts

8.8836 10.73 12.58 14.43 16.28 18.13 19.10

Based upon the recommendation from its actuary, for fiscal year 202h22 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 b,t June 30, 2046; prwided that the rate cannot change in any fiscal year b,t more than 1% of creditabi e compensation upon which members' contributions to the STRS Defined Benefit Program are based; and prwided further that such contribution rate cannot exceed a rrnxirnum of 20.25%. 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 J uly 1, 2019) on the fiscal health of the STRS Defined Benefit Program and the unfunded actuarial obi igation with respect to service credited to members of that program beforeJ uly 1, 2014. The reports are also required to identify aqj ustments required in contribution rates for K -14 school districts and the State in order to el i ni nate the 2014 L iabi I ity.

The District's contributions to STRS were $1,378,705 in fiscal year 2011-12, $1,198,349 in fiscal year 2012-13, $1,305,458 in fiscal year 2013-14, $1,598,598 in fiscal year 2014-15, and $2,095,088 in fiscal year 2015-16. The District has prqjected a contribution of $2,696,604 to STRS in fiscal year 2016-17.

The State also contributes to STRS, currently in an amount equal to 6.32836 of teacher payrol I for fiscal year 2016-17. The State's contribution reflects a base contribution rate of 2.017%, and a supplemental contribution rate that wi 11 vary from year to year based on statutory criteria Based upon the recomrrendation from its actuary, for fiscal year 2017-18 and each fiscal year thereafter, the STRS Board is required, with certain linitations, to increase or decrease the State's contribution rates to reflect the contribution required to elininate the unfunded actuarial accrued liability attributed to 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% of the fiscal year cwered STRS member payroll to the Supplemental Benefit Protection Account (the "SBPA"), which was established b,t statute to provide supplemental payments to beneficiaries whose purchasing po.ver has fallen belo.v 85% of the purchasing po.ver of their initial al I o.vance.

58

PE RS. Classified errployees working four or rmre hours per day are rrerrbers of the Public Employees' Retirerrent System ("PERS"). PERS prwides retirerrent and disability benefits, annual COLA's, and death benefits to plan rrerrbers and beneficiaries. Benefit prwisions are established 0y the State statutes, as legislatively arrended from tirre to tirre. PERS operates a number of retirerrent plans including the Public Employees Retirerrent Fund ("PERF"). PERF is a rnultiple--errployer defined benefit retirerrent plan. In addition to the State, employer participants atJ une 30, 2014 included 1,580 public agencies and 1,513 K-14 school districts. PERS acts as the comrmn investrrent and administrative agent for the rrerrber agencies. The State and K-14 school districts (for "classified errployees," which generally consist of school employees other than teachers) are required 0y law to participate in PERF. Errployees participating in PERF generally become fully vested in their retirerrent benefits earned to date after five years of credited service. One of the plans operated 0y PERS is for K-14 school districts throughout the State (the" Schools Pool").

Contributions 0y errployers to the Schools Pool are based upon an actuarial rate deternined annually and contributions 0y plan rrembers vary based upon their date of hire. The District is currently required to contribute to PE RS at an actuarially determined rate, which is 11.847% of eligible salary expenditures for fiscal year 2015-16 and 13.88836 in fiscal year 2016-17. Participants enrolled in PERS prior to January 1, 2013 contribute 7% of their respective salaries, while participants enrolled after January 1, 2013 contribute at an actuarially deternined rate, which is 6% of their respective salaries for fiscal years 2015-16 and 2016-17. See "-California Public Errployees' Pension Reform Act of 2013" herein.

The District's contributions to PERS were $568,967 in fiscal year 2011-12, $576,733 in fiscal year 2012-13, $600,439 in fiscal year 2013-14, $825,074 in fiscal year 2014-15, and $891,066 in fiscal year 2015-16. The District has prqjected a contribution of $1,250,571 to PERS in fiscal year 2016-17.

For further information about the District's contributions to STRS and PERS, see "APPENDIX B -2015-16AUDITED FINANCIAL STATEMENTS OF THE DISTRICT -Note 14'' attached hereto.

State Pension Trusts. Each of STRS and PERS issues a separate comprehensive financial report that includes financial staterrents and required supplerrental information. Copies of such financial reports may be obtained from each of STRS and PERS as folio.vs: (i) STRS, P.O. Box 15275, Sacrarrento, California 95851-0275; (ii) PERS, P.O. Box 942703, Sacrarrento, California 94229-2703. Morewer, each of STRS and PERS maintains a website, as folio.vs: (i) STRS: www.calstrs.com; (ii) PERS: www.calpers.cagov. Ho.vever, the information presented in such financial reports or on such websites is not incorporated into this Official Staterrent 0y any reference.

59

Both STRS and PERS have substantial state.vide unfunded liabilities. The amount of these unfunded liabilities will vary depending on actuarial assurrptions, returns on investrrents, salary scales and pll'ticipc1.nt contributions. The follo.ving table sumnarizes information regarding the actuarially-deternined accrued liability for both STRS and PERS. Actuarial assessrrents are "forward-­I ooki ng'' i nforrrati on that reflect the j udgrrent of the fi duci ari es of the pension pl ans, and are based upon a variety of assurrptions, one or more of which rray not materialize or be changed in the future. Actuarial assessrrents wi 11 change with the future experience of the pension pl ans.

FUNDED STATUS STRS (Defined Benefit Progranl) and PERS

(Dollar Amounts in M illions) 111 Fiscal Years 2010-11 through 2014-15

Fiscal Accrued Year L iabilill'.

2010-ll $208,405 2011-12 215,189 2012-13 222,281 2013-14 231,213 2014-15 241,753

Fiscal Accrued Year L iabilill'.

2010-ll $58,358 20ll-l2 59,439 2012-13 61,487 2013-14 65,600 2014-15 73,325

'" Arrounts rmy not add due to rounding. '" Reflects rrarketvalue of assets.

STRS

Value of Trust Unfunded Assets L iabili)r, (MVA)'" (MV A)' ><

3>

$147,140 $68,365 143,118 80,354 157,176 74,374 179,749 61,807 180,633 72,626

PERS

Value of Trust Unfunded Assets Liability (MVA)'" (MVA)w

$45,901 $12,457 44,854 14,585 49,482 12,005 56,838 8,761 56,814 16,511

<3> Excludes assets allocated to the SB PA reserve. C4l Reflects actuarial value of assets.

Value of Trust Assets (AVA)(4'

$143,930 144,232 148,614 158,495 165,553

Value of Trust Assets (AVA)(4'

$51,547 53,791 56,250

_j'>)

_JS)

Unfunded Liabili~ (AVA) 4

'

$64,475 70,957 73,667 72,718 76,200

Unfunded Liabili~ (AVA) 4

'

$6,811 5,648 5,237

_j'>)

_J5)

'" Effective for the June 30, 2014 actuarial valuation, PERS no longer uses an actuarial value of assets. Source: PERS Schools Pool Actuarial Valuation; SlRS Defined Benefit ProgramActuarial Valuation.

The STRS Board has sole authority to deternine the actuarial assumptions and rrethods used for the valuation of the STRS Defined Benefit Program. The follo.ving are certain of the actuarial assumptions adopted b,t the STRS Board with respect to the STRS Defined Benefit Program Actuarial Valuation for fiscal year 2014-15: rreasurerrent of accruing costs b,t the "Entry Age Norrral Actuarial Cost Method," 7.5036 investrrent rate of return (net of investrrent and adninistrative expenses), 4.5036 interest on rrember accounts, 3.75% prqjectedwage gro.vth, and 3.0036 prqjected inflation. According to the STRS Defined Benefit Program Actuarial Valuation, as of June 30, 2015, the future revenue from contributions and appropriations for the STRS Defined Benefit Program was prqjected to be sufficient to finance its obligations. This finding reflects the scheduled contribution increases specified in AB 1469 and is based on the valuation assumptions and the valuation policy adopted b,t the STRS Board.

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In recent years, the PERS Board of Administration (the "PERS Board") has taken se.,,eral steps, as described belo.v, intended to reduce the amount of the unfunded accrued actuarial liability of its plans, including the Schools Pool.

On March 14, 2012, the PERS Board voted to lo.ver the PERS' rate of expected price inflation and its investment rate of return (net of administrative expenses) (the "PERS Discount Rate") from 7.7'JYo to 7.'JYo. On February 18, 2014, the PERS Board voted to keep the PERS Discount Rate unchanged at 7.5%. On November 17, 2015, the PERS Board apprwed a new funding risk nitigation policy to incrementally lo.ver the PERS Discount Rate b,t establishing a mechanism whereb,t such rate is reduced b,t a minimum of 0.0'JYo to a maximum of 0.2'JYo in years when investment returns outperform the existing PERS Discount Rate b,t at least four percentage points. On December 21, 2016, the PERS Board voted to lo.ver the PERS Discount Rate to 7.CJYo wer the next three years in accordance with the fol lo.ving schedule: 7.37'JYo in fiscal year 2017-18, 7.2'JYo in fiscal year 2018-19 and 7.0CJYo in fiscal year 2019--20. The new discount rate wi 11 go into effect J uly 1, 2017 for the State and J uly 1, 2018 for K -14 school districts and other public agencies. Lo.vering the PERS Discount Rate means emplO{ers that contract with PERS to adninister their pension plans will see increases in their normal costs and unfunded actuarial liabilities. Active members hired after January 1, 2013 underthe Reform Act (defined belo.v) will also see their contribution rates rise. The three-year reduction of the discount rate to 7.CJYo is expected to result in average empl O{er rate increases of approximately 1-3% of normal cost as a percent of payroll for most niscellaneous retirement plans and a 2-5% increase for most safety plans.

On April 17, 2013, the PERS Board apprwed new actuarial policies aimed at returning PERS to fully-funded status within 30 years. The policies include a rate smoothing method with a 30-year fixed amortization period for gains and losses, a five-year increase of public agency contribution rates, including the contribution rate at the onset of such amortization period, and a five year reduction of public agency contribution rates at the end of such amortization period. The new actuarial policies were first included in theJ une 30, 2014 actuarial valuation and were implemented with respect the State, K-14 school districts and all other public agencies in fiscal year 2015-16.

Also, on February 20, 2014, the PERS Board apprwed new demographic assurrptions reflecting (i) expected longer life spans of public agency emplO(ees and related increases in costs for the PERS system and (ii) trends of higher rates of retirement for certain public agency emplO{ee classes, including police officers and firefighters. The new actuarial assumptions will first be reflected in the Schools Pool in the J une 30, 201 5 actuarial valuation. The increase in Ii abi I ity due to the new assurrpti ons wi 11 be amortized over 20 years with i ncreases phased in wer five years, begi nni ng with the contri buti on requirement for fi seal year 2016-17. The new demographic assurrpti ons affect the State, K-14 school districts and al I other publ i c agencies.

The District can make no representations regarding the future program liabilities of STRS, or whether the District will be required to make additional contributions to STRS in the future abOJe those amounts required under AB 1469. The District can also prwide no assurances that the District's required contributions to PE RS wi 11 not increase in the future.

California Public EmplO(ees' Pension Reform Act of 2013. On September 12, 2012, the Governor signed into law the California Public EmplO(ees' Pension Reform Act of 2013 (the "Reform Act"), which makes changes to both STRS and PERS, most substantially affecting new emplO{ees hired after January 1, 2013 (the "Implementation Date"). For STRS participants hired afterthe Implementation Date, the Reform Act changes the normal retirement age b,t increasing the eligibility for the 2% age factor (the age factor is the percent of final compensation to which an emplO{ee is entitled for each year of service) from age 60 to 62 and increasing the el i gi bi I ity of the maxi mum age factor of 2.4% from age 63 to 65. Similarly, for non-safety PERS participants hired after the Implementation Date, the Reform Act

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changes the norrral retirement age b,t increasing the eligibility for the 2% age factor from age 55 to 62 and increases the eligibility requirement forthe rrnximum age factor of 2.5% to age 67. Among the other changes to PERS and STRS, the Reform Act also: (i) requires all ne.v participc1.nts enrdled in PERS and STRS after the lrrplementation Date to contribute at least 5036 of the total annual normal cost of their pension benefit each year as deternined b,t an actuary, (ii) requires STRS and PERS to determine the final compensation amount for emplO{ees based upon the highest annual compensation earnable averaged wer a consecutive 36--rmnth period as the basis for calculating retirement benefits for new participants enrolled after the Implementation Date (previously 12 months for STRS members who retire with 25 years of service), and (iii) caps "pensionabie compensation" for new pc1.rticipc1.nts enrolled after the Implementation Date at 10036 of the federal Social Security contribution (to be aqjusted annually based on changes to the Consumer Price Index for al I Urban Consumers) and benefit base for members pc1.rticipc1.ting in Social Security or 12036 for members not participating in social security (to be aqjusted annually based on changes to the Consumer Price Index for all Urban Consumers), while excluding previously allo.ved forms of compensation under the formula such as pc1.yments for unused vacation, annual leave, personal leave, sick leave, or compensatory time off.

GASB Statement Nos. 67 and 68. OnJ une 25, 2012, the GASB approved Statements Nos. 67 and 68 (the "Statements") with respect to pension accounting and financial reporting standards for state and local governments and pension plans. The new Statements, No. 67 and No. 68, replace GASB Statement No. 27 and most of Statements No. 25 and No. 50. The changes impact the accounting treatment of pension plans in which state and local governments participc1.te. Major changes include: (1) the inclusion of unfunded pension liabilities on the government's balance sheet (currently, such unfunded liabilities are typically included as notes to the government's financial statements); (2) more components of full pension costs being sho.vn as expenses regardless of actual contribution levels; (3) lo.ver actuarial discount rates being required to be used for underfunded plans in certain cases for purposes of the financial statements; (4) closed amortization periods for unfunded liabilities being required to be used for certain purposes of the financial statements; and (5) the difference between expected and actual investment returns being recognized wer a closed five-year smoothing period. In addition, according to GASB, Statement No. 68 means that, for pensions within the scope of the Statement, a cost-sharing emplO{er that does not have a special funding situation is required to recognize a net pension liability, deferred outflo.vs of resources, deferred inflo.vs of resources related to pensions and pension expense based on its proportionate share of the net pension I i abi Ii ty for benefits prwi ded through the pension pl an. Because the accounting standards do not require changes in funding policies, the full extent of the effect of the new standards on the District is not kno.vn at this time. The reporting requirements for pension plans took effect for the fiscal year beginningJ uly 1, 2013 and the reporting requirements for government emplO{ers, including the District, took effect for the fiscal year beginningJ uly 1, 2014.

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The District's proportionate shares of the net pension liabilities, pension expense, deferred outflo.v of resources and deferred inflo.v of resources for STRS and PERS, as of June 30, 2016, are as sho.vn i n the fol I ONi ng tabi e.

Deferred Outflcws Deferred I nflcws Pension Net Pension Related to Related to Pension

Plan Liability Pensions Pensions Ex(!ense

STRS $24,692,997 $4,040,665 $4,916,421 $1,732,494 PERS 7,828,815 2,942,537 2,190,249 719,534 Total $32,521,812 $6,983,202 $7,106,670 $2,452,028

Source: Banning Unified School District

For additional inforrration, see "APPENDIX B - 2015-16 AUDITED FINANCIAL STATEMENTS OF THE DISTRICT -Note 14'' attached hereto.

Other Post--EmplO(ment Benefits

Program Benefits. The District administers a single-€mplO(er defined benefit health care plan (the "Plan"). The Plan prwides medical, dental and life insurance benefits to eligible retirees and their spouses. Membership of the Pl an consists of 34 retirees and benefi ci ari es currently receivi ng benefits and 516 active plan members.

Funding Policy. The contribution requirements of Plan members and the District are established and rray be amended b,t the District, its bargaining units, and unrepresented groups. The District's contribution is currently based on a "pay-as-you-go'' basis to ewer the cost of benefits for current retirees. For fiscal year 2013-14, the District contributed $743,568 to the Plan, all of which was used for current preniums. For fiscal year 2014-15, the District contributed $648,757 to the Plan, all of which was used for current preniums. For fiscal year 2015-16, the District contributed $724,177 to the Plan, all of which was used for current premiums. The District has budgeted its contribution for fiscal year 2016-17 to be $338, 197.

Accrued Liability. The District has implemented GASB Statement #45, Accounting and Financial Reporting b,t EmplO{ers for PostemplO{rrent Benefit Plans Other Than Pension Plans, pursuant to which the District has comnissioned and received several actuarial studies of its accrued liability in connection with post-€mplO{ment benefits prwided b,t the Plan. The most recent of these studies concluded that the District's total unfunded actuarial accrued liability (the "AAL") for such benefits, as of the April 1, 2016 valuation date, was $7,592,620, and that the District's annual required contribution ("ARC") in respect of such benefits was $1,165,850. The ARC is the amount that would be necessary to fund of the value of future benefits earned b,t current emplO(ees during each fiscal year (the "Norrral Cost''), andtoamortizetheAAL in accordance with GASB Statements Nos. 43 and 45.

As of June 30, 2016, the District recognized a long-term balance sheet liability (the" Net OPEB Obligation") with respect to Plan benefits of $2,221,717, based on its contributions to.vards the actuarially--deternined ARC during fiscal year 2015-16, and as aqjusted for interest on the prior year's Net OPEB Obligation and any other aqjustments to the ARC. See "APPENDIX B -2015-16 AUDITED FINANCIAL STATEMENTS OF THE DISTRICT -Note CJ' attached hereto.

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Participation inJ oint Po.versAuthorities

The District is exposed to various risks of loss related to torts; theft of, darrage to, and destruction of assets; errors and omissions; injuries to employees and natural disasters.

The District is a rrerrber of the follo.ving four joint po.ver authorities (each a "J PA"): (1) the Riverside Schools' Insurance Authority ("RSIA") for property and liability insurance cwerage; (2) the Riverside County Ernployer;Ernployee Partnership ("REEP") to prwide employee health benefits; (3) the Riverside Schools Risk ManagerrentAuthority ("RSRMA"); and (4) the Protected Insurance Program for Schools ("PIPS"). The intent of PIPS is to achieve the benefit of a reduced prenium for the District b,t virtue of its grouping and representation with other participants in PIPS. The workers' compensation experience of the parti ci pati ng districts is calculated as one experience and a common preni um rate. Each participant pays its workers' compensation prenium based on its individual rate.

The District pays an annual premium to the applicable entity for its health, workers' compensation, and property liability cwerage. The relationships between the District and theJ PAs are such thatthey are not component units of the District for financial reporting purposes. These entities have budgeting and financial reporting requirerrents independent of rrerrber units and their financial staterrents are not presented in these financial staterrents; ho.vever, fund transactions between the entities and the District are included in these staterrents. Audited financial staterrents are generally available from the respective entities. The District has appointed one board rrerrber to the governing board of RSIA.

During the fi seal year ending J une 30, 2016, senl ed claims for property and Ii abi I ity insurance coverage through RSIA have not exceeded the comrrercial cwerage in any of the past three years. There has not been a significant reduction in cwerage from the prior year. During the year endedJ une 30, 2016, the District rrade payrrents of $262,546 to RSIA, $4,157,919 to REEP, and $828,893 to Pl PS. For the year endingJ une 30, 2017, the District has budgeted payrrents of $317,173 to RSIA, $4,734,975 to REEP, and$924,473toPIPS.

There are a number of claims pending against the District. In the opinion of the District, the related liability, if any, stemming from these claims will not rraterially affect the financial condition of the District. Senl eel claims have not exceeded avai I abi e insurance cwerages in the past three fi seal years. Based upon prior claims experience, the District believes that it has adequate insurance cwerage. See also"APPENDIX B -2015-16AUDITED FINANCIAL STATEMENTS OF THE DISTRICT - Note 16'' attached hereto.

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District Debt Structure

Long-Term Obligations. A schedule of changes in long-term debt for the fiscal year ended June 30, 2016, is sho.vn belo.v:

General obi i gati on bonds Prem um on issuance Capital leases Accumulated vacation OPEB Obligationl 11

Total

SCHEDULE OF LONG TERM DEBT 111

As of J une 30, 2016 Banning Unified School District

Balance I uly 1. 2015

$46,339, 796 3,123,530

133,860 616,930

1,805,164 $52,019,280

Additions and Adjustments

$29,831,306 5,513,238

143,284 35,583

809,922 $36,333,333

Deductions

$32,260,000 203,737 68,739

393,369 $32,925,845

Balance I une 30, 2016

$43,911,102 8,433,031

208,405 652,513

2,221,717 $55,426,768

1" Reflects the change in the District's Net OPEB Obligation, based on the District's contributions towards its actuarially­deterrrined ARC. See "BANNING UNIFI ED SCHOOL DISTRICT - Other Post-frrployrrent Benefits"" herein.

Source: Banning Unified School District

General Obligation Bonds. On Nwember 5, 2002, the voters of the District apprwed the issuance of $12,000,000 of general obligation bonds of the District (the" 2002 Authorization"), payable from ad valorem taxes levied on taxable property within the District. On April 1, 2003, the District caused the issuance of its General Obligation Bonds, 2002 Election, Series A (the "2002 Series A Bonds") in the aggregate principc1.I amount of $7,999,674.25. OnJ une 17, 2004, the District caused the issuance of its General Obligation Bonds, 2002 Election, Series B (the" 2002 Series B Bonds") in the aggregate principal amount of $4,000,037.50. On July 31, 2014, the District issued its 2014 General Obligation Refunding Bonds (the "2014 Refunding Bonds") in the aggregate principc1.I amount of $8,025,000 for the purpose of currently refunding a portion of the then-outstanding 2002 Series A Bonds and 2002 Seri es B Bands.

On November 7, 2006, the voters of the District apprwed the issuance of $63,000,000 of general obligation bonds of the District (the "2006 Authorization"), payable from ad valorem taxes levied on taxable property within the District. On March 15, 2007, the District caused the issuance of its General Obligation Bonds, 2006 Election, Series A (the" 2006 Series A Bonds'') in the aggregate principc1.I amount of $13,500,000. On August 1, 2008, the District caused the issuance of its General Obligation Bonds, 2006 Election, Series B (the "2006 Series B Bonds") in the aggregate principal amount of $23,999,287.50. OnJ une 30, 2016, the District issued its 2016 General Obi igation Refunding Bands (the "2016 Refunding Bonds") in the aggregate principc1.I amount of $29,400,000 for the purpose of advance refunding a portion of the then-outstanding 2006 Series A Bonds and 2006 Series B Bonds.

The 2016 Authorization was approved b,t voters at an election held on Nwember 8, 2016, at which the requisite 55% or more of the persons voting on the proposition voted to authorize the issuance and sale of not to exceed $25,500,000 principc1.I amount of general obligation bonds of the District. The Bonds represent the first series of bonds issued pursuant to the 2016 Authorization. Afterthe issuance of the Bonds, none of the 2016Authorization will rerrain unissued.

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ANNUAL DEBT SERVICE GENERAL OBLIGATIONBONDS('l

Banning Unified School District Period 2014 2016 Ending 2002 2002 2006 2006 Refunding Refunding Total Annual

~ Series A Bonds Series B Bonds Series A Bonds Series B Bonds Bonds Bonds The Bonds Debt Service

2017 $350,000.00 $236,250.00 $510,500.00 $498,512.50 $1,384,500.00 $2,979,762.50 2018 577,500.00 870,112.50 1,613,000.00 $2,467,738.61 5,528,351.11 2019 675,000.00 903,312.50 1,668,850.00 1,577,225.00 4,824,387.50 2020 750,000.00 928,312.50 1,704,050.00 1,103,425.00 4,485,787.50 2021 850,000.00 960,212.50 1,737,250.00 1,183,425.00 4,730,887.50 2022 950,000.00 990,212.50 1,788,750.00 1,220,225.00 4,949,187.50 2023 1,025,000.00 1,021,962.50 1,851,500.00 1,260,425.00 5,158,887.50 2024 1,150,000.00 1,050,212.50 1,889,750.00 1,293,825.00 5,383,787.50 2025 1,300,000.00 1,094,962.50 1,944,500.00 1,335,625.00 5,675,087.50 2026 $325,000.00 790,212.50 3,199,750.00 1,372,875.00 5,687,837.50 2027 350,000.00 831,162.50 3,360,250.00 1,417,625.00 5,959,037.50 2028 1,300,000.00 3,547,500.00 1,459,375.00 6,306,875.00 2029 3,714,500.00 1,502,375.00 5,216,875.00 2030 3,936,500.00 1,547,825.00 5,484,325.00 2031 4,180,000.00 1,595,793.76 5,775,793.76 2032 3,800,400.00 1,640,293.76 5,440,693.76 2033 3,900,000.00 1,691,043.76 5,591,043.76 2034 1,742,543.76 1,742,543.76 2035 1,794,543.76 1,794,543.76 2036 1,846,793.76 1,846,793.76 2037 1,904,043.76 1,904,043.76 2038 1,961,812.50 1,961,812.50 2039 2,020,400.00 2,020,400.00 2040 2,082,425.00 2,082,425.00 2041 2,142,362.50 2,142,362.50 2042 2,209,950.00 2,209,950.00 2043 2,274,400.00 2,274,400.00 2044 2,340,200.00 2,340,200.00 2045 2,415,200.00 2,415,200.00 2046 1,008,800.00 1,008,800.00 Total $350 000.00 $1975 000.00 $236 250.00 $7 788 000.00 $9 939 187.50 $45 221 050.00 $49 412 594.93 $114 922 082.43

Source: Banning Unified School District

Clean Renewable Energy Bonds, On February 21, 2017, the District received an allocation from the IRS for the issuance ofup to $7,960,000 in new clean renewable energy bonds. The District currently expects to execute and deliver a lease financing in fiscal year 2016-17 and designate all or a portion of such financing as a new clean renewable energy bond.

Capital Leases, The District has entered into agreements to lease various facilities and equipment. Such agreements are, in substance, purchases ( capital leases) and are reported as capital lease obligations. The District's liability on lease agreements with options to purchase is summarized below:

Source: Banning Unified School District.

Year Ending (June 30)

2017 2018 Total

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Lease Payment

$51,748 48 724

$100,472

TAX MATTERS

Opinion of Bond Counsel

In the opinion of Bo.vie, Arneson, Wiles & Giannone, Newport Beach, California, Bond Counsel, sul::iject, ho.ve.1er, to certain qualifications described herein, and based upon an analysis of existing I.M's, regulations, rulings and court decisions, and assuming, arnong other rratters, the accuracy of certain representations and cornpl i ance with certai n cwenants, i nterest on the B ands is excl uded frorn gross incorre for federal income tax purposes under Section 103 of the Code. In the further opinion of Bond Counsel interest on the Bonds is not an itern of tax preference for purposes of the federal alternative ninirnurn taxes imposed on individuals and corporations; ho.ve.1er Bond Counsel observes that such interest is included as an aqjustrrent in the calculation of federal corporate alternative ninirnurn taxable i ncorre and rray therefore affect a corporation's alternative ni ni rnurn tax I iabi I iti es.

The opinions of Bond Counsel set forth in the preceding paragraph are sul::iject to the condition that the District cornply with all requirerrents of the Code, that rnust be satisfied subsequent to the issuance of the Bonds in order that such interest be, or continue to be, excluded frorn gross income for federal incorre tax purposes. The District has cwenanted to comply with each such requirerrent. Failure to cornply with certain of such requirerrents rray cause the inclusion of such interest in gross income for federal income tax purposes to be retroactive to the elate of issuance of the Bands. Band Counsel has not undertaken to deterrni ne ( or to i nforrn any person) whether any acti ans taken ( or not taken) or events occurring ( or not occurri ng) after the elate of issuance of the Bands rray affect the tax status of interest on the Bonds.

In the further opinion of Band Counsel, interest on the Bands is exernpt frorn the State personal i ncorre taxation.

Although Bond Counsel has rendered an opinion that interest on the Bonds is excluded frorn gross income for federal income tax purposes, the accrual or receipt of interest on the Bands rray otherwise affect the recipient's federal or state tax liability. The nature and extent of these other tax consequences will depend upon the recipient's particular tax status and other iterns of income or deduction. Bond Counsel expresses no other opi ni on regardi ng or concerni ng any other tax consequences related to the o.vnership or disposition of the accrual or receipt of interest on the Bonds.

Certain requirerrents and procedures contained or referred to in the Resolution and other relevant docurrents rray be changed and certain actions rray be taken, under the circumstances and sul::iject to the terrns and conditions set forth in such docurrents, upon the acwice or with an apprwing opinion of nati anally recognized bond counsel. Bond Counsel expresses no opinion as to the effect on any Band or the interest thereon if any such change occurs or action is taken upon acwice or approval of bond counsel other than Band Counsel .

The opinion of Bo.vie, Arneson, Wiles & Giannone, Newport Beach, Bond Counsel to the District, apprwing the validity of the Bonds, in substantially the forrn appearing in APPENDIX A hereto, will besuppliedtotheoriginal purchasersoftheBondswithoutcost. SeeAPPENDIX A-"FORM OF OPINION OF BOND COUNSEL" for the proposed forrn of the opinion of Bond Counsel. A Copy' of the I egal opinion wi 11 be attached at the end of each Bond. The payrrent of fees of Band Counsel is contingent upon the closing of the Bonds transaction.

Bond Counsel's ernplO{rrent is limited to a review of the legal proceedings required for authorization of the Bonds and to rendering an opinion as to the validity of the Bonds and the exclusion frorn gross income for federal income tax purposes of interest on the Bands. Band Counsel has

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undertaken no responsibility for the accuracy, completeness or fairness of the Official Staterrent or other off eri ng rrateri al s relating to the Bands and expresses no opinion rel ati ng thereto.

Bond Counsel's engagerrent with respect to the Bonds ends with the issuance of the Bonds, and, unless sepc1.rately engaged, Bond Counsel is not obiigated to defend the District or the owners regarding the tax--exerrpt status of the Bonds in the event of an audit exanination b,t the IRS. Under current procedures, pc1.rties other than the District and its appointed counsel, including the owners, would have little, if any, right to participclte in such an IRS audit exanination process. Morecwer, because achieving judicial re.1iew in connection with an I RS audit exanination of tax--exerrpt bonds is difficult, obtaining an independent revie.v of IRS positions with which the District legitirrately disagrees rray not be practicable. Any action of the IRS, including but not linited to selection of the Bonds for audit, or the course or result of such audit, or an audit of Bonds presenting sinilar tax issues rray affect the rrarket price for, cr the rrarketability of, the Bonds, and rray cause the District or the owners to incur significant expense.

Original Issue Discount; Prerniurn Bonds

The initial public offering price of the Bonds rray be less than the arnount pc1.yablewith respect to such Bonds at rraturity. An arnount not less than the difference between the initial public offering price of a Bond and the arnount payable at the rraturity of such Bond constitutes original issue dscount. Original issue discount on a tax--exerrpt obligation, such as the Bonds, accrues on a compounded basis. The arnount of original issue discount that accrues to the o.vner of a Bond issued with original issue discount wi 11 be excl udabl e from such o.vner' s gross income and wi 11 i ncrease the o.vner' s aqj usted basis i n such Bond potentially affecting the arnount of gain or loss realized upon the o.vner's sale or other disposition of such Bond. The arnount of original issue discount that accrues in each year is not included as a tax preference for purposes of calculating alternative ninirnurn taxable incorre and rray therefore affect a taxpc1.yer's alternative ninirnurn tax liability. Consequently, taxpc1.yers o.vning the Bonds issued with original issue discount should be aware that the accrual of original issue discount in each year rray result in an alternative ninirnurn tax liability although the taxpayer has not received cash attributable to such original issue discount in such year.

Purchasers should consult their personal tax adJisors with respect to the deterni nation for federal income tax purposes of the arnount of original issue discount properly accruabl e with respect to the Bonds, other federal income tax consequences of o.vning tax--exerrpt obiigations with original issue discount and any state and I ocal consequences of o.vni ng the Bands.

The Bonds purchased, whether at original issuance or otherwise, for an arnount greater than their principc1.I arnount payable at rraturity (or, in sorre cases, attheir earlier call date) (" Preniurn Bonds") will be treated as having arnortizable bond premium No deduction is allo.vable for the arnortizable bond preni urn in the case of bonds, Ii ke the Preni urn Bands, the interest on which is excluded frorn gross incorre for federal income tax purposes. Ho.ve.1er a purchaser's basis in a Preniurn Bond, and under Treasury Regulations, the arnount of tax exerrpt interest received will be reduced b,t the arnount of arnortizable bond preniurn properly allocable to such purchaser. owners of Preniurn Bonds should consult their o.vn tax adJi sors with respect to the proper treatrrent of arnorti zabl e bond preni urn in thei r pc1.rti cul ar ci rcurnstances.

I rnpact of Legislative Proposals, Clarifications of the Code and Court Decisions on Tax Exemption

Future legislative proposals, if enacted into law, clarification of the Code or court decisions rray cause interest on the Bonds to be sul::iject, directly or indirectly, to federal incorre taxation or to be sul::iject to or exempted from state i ncorre taxation, or otherwise prevent B enefi ci al owners of the Bands from

68

realizing the full current benefit of the tax status of such interest. The introduction or enactrrent of any such future legislative proposals, clarification of the Code or court decisions may also affect the rrarket price for, or rrarketability of, the Bonds. In recent years, legislative changes were proposed in Congress, which, if enacted, would result in additional federal income tax being irrposed on certain o.vners oftax­exempt state or local obligations, such as the Bonds. Prospective purchasers of the Bonds should consult their o.vn tax adJisors regarding any pending or proposed federal or state tax legislation, regulations or litigation as to which Bond Counsel expresses no opinion. As discussed in this Official Staterrent under the caption" -Opinion of Bond Counsel," interest on the Bonds could become includable in gross incorre for purposes of federal income taxation retroactive to the date such Bands were issued as a result of future acts or onissions of the District in violation of its covenants in the Resolution. Should such an event of taxability occur, the Bonds are not sul::iject to special redemption or acceleration and will rerrain outstanding until rraturity or until redeemed under one of the other redemption provisions contained in the R esol uti on.

Internal Revenue Service Audit of Tax-Exempt Bond Issues

The I RS has initiated an expanded program for the auditing of tax-€Xempt bond issues, including both random and target audits. It is possible that the Bonds will be selected for audit 0y the IRS. It is also possible that the rrarket value of the Bonds night be affected as a result of such an audit of the Bonds (or 0y an audit of sinilar bonds or securities).

Information Reporting and Backup Withholding

lnforrration reporting requirerrents apply to interest (including original issue discount) paid on tax-€Xempt obligations, including the Bonds. In general, such requirerrents are satisfied if the interest recipient completes, and prwides the payor with, a Form W-9, "Request for Taxpayer Identification Number and Certification," or unless the recipient is one of a linited class of exempt recipients, including corporations. A reci pi ent not otherwise exempt from i nforrrati on reporti ng who fai Is to satisfy the inforrration reporting requirerrents will be sul::iject to" backup withholding," which rreans that the payor is requi red to deduct and withhold a tax from the i nterest payrrent, calculated in the rranner set forth i n the Code. For the foregoing purpose, a "payor" generally refers to the person or entity from whom a recipient receives its payrrents of interest or who collects such payrrents on behalf of the recipient.

If a bondholder purchasing Bands through a brokerage account has executed a Form W-9 in connection with the establishrrent of such account, as generally can be expected, no backup withholding should occur. In any event, backup withholding does not affect the excludability of the interest on the Bonds from gross income for federal incorre tax purposes. Any amounts withheld pursuant to backup wi thhol di ng would be al I o.ved as a refund or a credit agai nst the bondholder' s federal income tax once the required inforrration is furnished to the Internal Revenue Services. Bond Counsel prwides no opinion concerning such reporting or withholding with respect to the Bands.

LEGAL MATTERS

Legality for Investment in California

Under prwisions of the State Financial Code, the Bonds are legal investrrents for comrrercial banks in the State to the extent that the Bonds, in the inforrred opinion of the bank, are prudent for the investrrent of funds of depositors, and, under prwisions of the Gwernrrent Code, are eligible for security for deposits of public moneys in the State.

69

Expanded Reporting Requirements

On May 17, 2006, the President signed the Tax Increase Prevention and Reconciliation Act of 2005 ("TIPRA"). Under Section 6049 of the Internal Revenue Code of 1986, as amended 0y TIPRA, interest paid on tax-€Xempt obligations will be sul::iject to information reporting in a manner similar to interest paid on taxable obligations. The effective date for this provision is for interest paid after December 31, 2005, regardless of when the tax-€Xempt obligations were issued. The purpose of this change was to assist in relevant information gathering for the IRS relating to other applicable tax provisions. TIPRA provides that backup withholding may apply to such interest payments made after March 31, 2007 to any bondholder who fails to file an accurate Form W--9 or who meets certain other criteria The information reporting and backup withholding requirements of TIPRA do not affect the excludability of such interest from gross income for federal income tax purposes.

Continuing Disclosure

Current Undertaking. The District has covenanted for the benefit of owners and Beneficial owners of the Bands to prwi de certain fi nanci al i nformati on and operating data relating to the District (the "Annual Report") 0y not later than nine months follo.ving the end of the District's fiscal year (which currently endsJ une 30), commencing with the report for the 2016-17 Fiscal Year, and to provide notices of the occurrence of certain listed events. The Annual Report and notices of listed events will be filed 0y the District in accordance with the requirements of the Rule. The specific nature of the information to be contained in the Annual Report or the notices of listed events is included in "APPENDIX C -FORM OF CONTINUING DISCLOSURE CERTIFICATE. These covenants have been made in order to assist the Underwriter in complying with the Rule.

Prior Undertakings. Within the past five years, the District failed to timely file the Annual Reports required 0y its existing continuing disclosure undertakings for fiscal years 2010-11 through 2011-12, though such reports were ultimately filed on December 20, 2013. In addition, within the past five years the District has also failed to file certain notices of listed events as required 0y its prior continuing disclosure undertakings. In connection with the annual reports discussed abcwe, the District has never fi I ed a notice of fai I ure to prwi de annual financial information, on or before the date specified in its prior con ti nui ng di sci osure certificates.

The District has retained a dissenination agent to assist it in preparing and filing the annual reports and notices of listed events required under its existing continuing disclosure obligations, including the Bonds.

The District elected to participate in the Municipalities Continuing Disclosure Cooperation ("MCDC") initiative of the Securities and Exchange Comnission. The MCDC is a program allo.ving issuers and underwriters to voluntarily report issuances of municipal obligations where the official statement or other offeri ng document therefor may have made ni sstatements about comp! i ance with the issuer's or other obi i gated person' s conti nui ng di sci osure obi i gati ons. I n official statements di sseni nated in connection with the District's $2, 170,000Tax and Revenue Anticipation Notes, Series 201 hZOl 2, and $5,000,000 2011-2012 Tax and Revenue Anticipation Notes, Series B (collectively, the "TRANs Issuance"), the District made certain misstatements indicating that it was then in compliance with its past continuing disclosure undertakings. In light of these nisstatements, the District elected to self,eport under MCDC for statements made in the official statements for the TRANs Issuances.

70

No Litigation

No litigation is pendng or threatened concerning the validity of the Bonds, and a certificate to that effect will be furnished to purchasers atthe time of the original delivery of the Bonds. The District is not aware of any litigation pending or threatened questioning the political existence of the District or contesting the District's ability to receive ad valorem property taxes or to collect other revenues or contesting the County's ability on behalf of the District to issue and retire the Bonds.

There are certain lawsuits and claims pending against the District on matters unrelated to the Bonds. In the opinion of the District, the aggregate amount of the uninsured liabilities of the District under these lawsuits and claims, if deternined adJerse to the District, would not materially affect the finances of the District.

The County is currently involved in litigation brought 0y the Agua Caliente Band of Cahuilla Indians ("Agua Caliente") in federal court. The Agua Caliente request a declaration that the County's assessment, I evy, and col I ecti on of a possessory i nterest tax on I eased I and to non-tri bal members ("Possessory Interest") on tribal and U.S. trust lands (collectively, "Tribal Lands") violates federal law. The County denies the allegations of the complaint and is actively defending the action.

The Agua Caliente Tribal Lands do not fall within the boundaries of the District. Therefore, the disputed Possessory Interest taxes that are the sul::iject of the litigation are not included in the ad valorem property taxes levied to pay the debt service on the District's general obiigation bonds. Ho.vever, the County levies an ad valorem property tax for the payment of debt service on the District's general obiigation bonds against Possessory Interest on nine other parcels located on non-Agua Caliente Tribal Lands (the" Nine Parcels").

The Nine Parcels are not involved in the Agua Caliente litigation. The District makes no representation as to the outcome of the litigation and, if the Agua Caliente are successful, any actual or potential effects on the County's abi I ity to I evy ad val orem property taxes against Possessory Interest on the Nine Parcels in the future as eitherthe direct result of any ruling in the Aqua Caliente litigation or any subsequent similar I itigation that my ensue. For fiscal year 2016-17, the estimated total assessed value of the Possessory Interest on the Nine Parcels is approximately $64,000,000, which is approximately 2.6% of the District's total fiscal year 2016-17 assessed value. Any reduction in assessed value resulting from the potential exclusion of the Possessory Interest from the ad valorem property taxes levied to pay debt service on the District's general obiigation bonds could result in a corresponding increase in the annual tax rate levied to pay such general obligation bonds. Moreover, the County is empo.vered and obligated to annually levy ad valorem property taxes upon all property within the District sul::iject to taxation there0y, without linitation as to rate or amount (except for certain personal property that is taxable at linited rates), for the payment of principal and interest on the District's general obiigation bonds, including the Bonds, when due. See ''THE BONDS - Security and Sources of Payment'' herein.

Taxpayers have filed two different lawsuits in Superior Court seeking refunds for Possessory Interest taxes paid on Agua Caliente Tribal Lands. While taxpayers in the Nine Parcels are not currently involved in either lawsuit, it is possible that if the taxpayers' suits are successful, taxpayers in the Nine Parcels will also litigate sinilar claims or be entitled to sinilar relief. The County is defending these actions.

71

Financial Statements

The financial statements with supplemental infcrmation for the year ended June 30, 2016, the independent auditor's report of the District, and the related statements of activities and of cash flo.vs for the year then ended, and the report dated November 20, 2016, of Vavrinek, Trine, Day & Co., LLP (the "Auditor"), are included in this Official Statement as Appendix B. In connection with the inclusion of the financial statements and the report of the Auditor herein, the District did not request the Auditor to, and the Auditor has not undertaken to, update its report or to take any action intended or likely to elicit information concerning the accuracy, corrpleteness or fairness of the statements made in this Official Statement, and no opinion is expressed b,t the Auditor with respect to any event subsequent to the date of its report.

Legal Opinion

The validity of the Bonds and certain other legal matters with respect thereto are sul::iject to the apprwing opinion of Bo.vie, Arneson, Wiles & Giannone, Newport Beach, California, as Bond Counsel, relating to the Bonds. A COP{ of the proposed form of such legal opinion is attached to this Official Statement as APPENDIX A.

MISCELLANEOUS

Rating

The Bonds have been assigned a rating of "AA" (stable outlook) b,t S&P, based upon the issuance of the Policy b,t ACM at the time of delivery of the Bonds. The Bonds have also been assigned an underlying rating of "A" b,t S&P Global Ratings, a business unit of Standard and Poor's Financial Services LLC ("S&P"). The rating reflects only the views of the rating agency, and any explanation of the significance of such rating should be obtained from the rating agency at the follo.ving address: S&P, 55 Water Street, 45th Floor, New York, New York 10041. There is no assurance that the rating will be retained for any given period of time or that the same will not be revised do.vnward or withdrawn entirely b,t the rating agency if, in the judgment of the rating agency, circumstances so warrant. The District undertakes no responsibility to oppose any such revision or withdrawal. Any such do.vnward revision or withdrawal of the rati ng obtai ned may have an adverse effect on the market price of the Bands.

Generally, rating agencies base their ratings on information and materials furnished to them (which may include information and material from the District which is not included in this Official Statement) and on investigations, studies and assumptions b,t the rating agencies.

The District has cwenanted in a Continuing Disclosure Certificate to file on the Municipal Securities Rulemaking Board's Electronic Municipal Market Access website ("EMMA") notices of any rating changes on the Bonds. See "APPENDIX C - FORM OF CONTINUING DISCLOSURE CE RTI FI CA TE" attached hereto. Notwithstanding such cwenant, information relating to rating changes on the Bonds may be publicly available from the rating agency prior to such information being prwided to the District and prior to the date the District is obligated to file a notice of rating change on EMMA. Purchasers of the Bonds are directed to the rating agency and its website and official media outlets for the most current rating changes with respect to the Bonds after the initial issuance of the Bonds.

72

Underwriting

Purchase of Bonds. The Bonds are being purchased 0y RBC Capital Markets LLC (the "Underwriter"). The Underwriter has agreed to purchase the Bonds at a price of $27,442,790.20 (reflecting the initial pri nci pc1.I amount of the Bands of $25,500,000.00, pl us net original issue preni um of $2,057,540.20, and less the underwriting discount of $114,750.00). The purchase contract for the Bonds prwi des that the U nderwri ter wi 11 purchase al I of the B ands if any are purchased, the obi i gati on to make such purchase being sul::iject to certain terms and conditions set forth in said agreement, the apprwal of certain legal matters 0y counsel and certain other conditions.

The Underwriter may offer and sell Bonds to certain dealers and others at prices lo.verthan the offering prices stated ai the inside cover page hereof. The offering prices may be changed from time to ti me 0y the Underwriter.

Underwriter Disclosures. The Underwriter has prwided the follo.ving information for inclusion in this Official Statement.

The Underwriter and its respective affiliates are full-service financial institutions engaged in various activities that may include securities trading, commercial and investment banking, rnunicipc1.I acwisory, brokerage, and asset management. In the ordinary course of business, the Underwriter and its respective affiliates may actively trade debt and, if applicable, equity securities (or related derivative securities) and prwide financial instruments (which may include bank loans, credit support or interest rate swaps). The Underwriter and its respective affiliates may engage in transactions for their o.vn accounts involving the securities and instruments made the sul::iject of this securities offering or other offering of the District. The Underwriter and its respective affi Ii ates may make a market in credit default swaps with respect to rnunicipc1.I securities in the future. The Underwriter and its respective affiliates may al so communicate independent i nvestment recommendations, market col or or trading ideas and publ i sh i ndependent research vie.vs in respect of this securities offering or other offeri ngs of the District.

73

Additional Information

The purpose of this Official Staterrent is to supply information to prospective buyers of the Bands. Quotati ans from and summaries and expl anati ans of the B ands, the R esol uti on providing for issuance of the B ands, and the constituti anal prwi si ans, statutes and other docurrents referenced herein, do not purport to be complete, and reference is made to said docurrents, consti tuti anal provi si ans and statutes for ful I and complete staterrents of their prwi si ans.

Certain of the data contained herein has been taken or constructed from District records. Appropriate District officials, acting in their official capacities, have revie.ved this Official Staterrent and have determined that, as of the date hereof, the information contained herein is, to the best of their kno.vledge and belief, true and correct in all material respects and does not contain an untrue staterrent of a material fact or omit to state a material fact necessary i n order to make the staterrents made herei n, i n light of the circumstances under which they were made, not nisleading. This Official Staterrent has been apprwed b,t the District.

Any staterrents in this Official Staterrent involving matters of opinion, whether or not expressly so stated, are intended only as such and not as representations of fact. This Official Staterrent is not to be construed as a contract or agreerrent between the District and the purchasers or o.vners, beneficial or otherwise, of any of the Bands.

BANNING UNIFIED SCHOOL DISTRICT

By: -----~f=s/~R~olbe=rt~G=ui=ll=en~----­S uperi ntendent

74

APPENDIX A

PROPOSED FORM OF OPINION OF BOND COUNSEL

Upon delivery of the Series A Bonds, BCMie, Arneson, Wiles & Giannone, NeA,pOrt Beach, California, Bond Counsel to the Banning Unified School District, proposes to render their final apprwing opinion with respect to the Seri es A Bonds in substantially the fol I CMi ng form

B oard of Trustees of the Banning Unified School District 161 W.WilliamsStreet Banning, CA 92220

Re: $25,500,000 Banning Unified School District General Obligation Bonds, 2016 Election, Series A Final O inion

Ladies and Gentlemen:

We have acted as Bond Counsel for the Banning Unified School District ("District") in connection with the proceedings for the issuance and sale b,t the District of $25,500,000 principal amount of Banning Unified School District General Obligation Bonds, 2016 Election, Series A ("Bonds"). The Bonds are being issued pursuant to the Resolution of Issuance of the Board of Trustees of the District, adopted on February 16, 2017 (Resolution No. 16-17-14) (" District Resolution"), and a Resolution of the Board of Supervisors of the County of Riverside ("County"), adopted on March 7, 2017 (Resolution No. 2017-040) ("County Resolution" and collectively with the District Resolution, the "Bond Resolution"), and in accordance with the prwisions of the California Constitution, statutory authority set forth in Title 5, Division 2, Part 1, Chapter 3, Article 4.5 of the State of California Gwernment Code, commencing with Section 53506, and pursuant to California Education Code Sections 15264, 15266(b), and, as applicable, the prwisions of Title 1, Division 1, Part 10, Chapters 1 and 2 of the State of California Education Code, cornmencingwith Section 15100 and related California law.

As Bond Counsel, we have exanined copies certified to us as being true and complete copies of the proceedings in connection with the issuance of the Bonds. In this connection, we have also exanined such certificates of public officials and officers of the District, the County of Riverside and the purchaser of the Bonds, i ncl udi ng certificates as to factual n-aners, i ncl udi ng, but not Ii ni ted to the Tax Certificate, as we have deemed necessary to render this opi ni on.

A nenti on is cal I ed to the fact the we have not been requested to exarni ne, and have not exarni ned, any documents or inforn-ation relating to the District or the County other than the record of proceedings

A-1

herei nabcwe referred to, and no opi ni on is expressed as to any fi nanci al or other information, or the adequacy thereof, which has been, or rray be supplied to any purchaser of the Bands.

We have not been engaged or undertaken to review the accuracy, completeness or sufficiency of the Official Statement or other offering material relating to the Bonds (except to the extent, if any, stated in the Official Statement) and we express no opinion relating thereto (excepting only rratters set forth as our opnion in the Official Statement).

The opinions expressed herein are based on an analysis of existing laws, regulations, rulings and court decisions and ewer certain matters not directly addressed 0y such authorities. Such opinions rray be affected 0y actions taken or onitted or events occurring after the date hereof. We have not undertaken to deternine, or to inform any person, whether any such actions are taken or onitted or events do occur or any other rratters come to our attention after the date hereof. Accordingly, this opinion speaks only as of its date and is not intended to, and rray not, be relied upon in connection with any such actions, events cr rratters. Our engagement with respect to the Bonds has concluded with their execution and delivery, and we disclaim any obligation to update this letter. As to questions of fact rraterial to our opinions, we have relied upon the documents and rratters referred to abcwe, and we have not undertaken 0y independent investigation to verify the authenticity of signatures or the accuracy of the factual rratters represented, warranted or certified therein. Furthermore, we have assumed compliance with all cwenants contained in the Bond R esol uti on and in certain other documents, i ncl udi ng, without Ii ni tati on, covenants compl i ance with which is necessary to assure that future actions or events will not cause the interest on the Bonds to be included in gross income for federal income tax purposes retroactive to the date of original issuance of the Bonds.

The Bond R esol uti on and other related documents refer to certain requirements and procedures which rray be changed and certain actions which rray be taken, in circumstances and sul::iject to terms and conditions set forth in such documents, upon the ad.lice or with an apprwing opinion of nationally recognized bond counsel. No opi ni on is expressed herei n as to any Bond or the effect on i nterest thereon if any such change is rrade or action is taken upon the acwice or approval of counsel other than ourselves.

Based on the foregoing, we are of the follo.ving opinions:

1. The Bonds are valid and binding general obligations of the District.

2. All taxable property in the territory of the District is sul::iject to ad valorem taxation without linitation as to rate or amount (except as to certain classes of personal property which is taxable at limited rates) to pay the Bonds. The County is required 0y law to include in its annual tax I evy the principal and interest coning due on the Bands to the extent necessary funds are not provided from other sources.

3. Interest on the Bands is excluded from gross income for federal income tax purposes under Section 103 of the Internal Revenue Code of 1986, as amended, and is exempt from State of California personal income taxes. Interest on the Bonds is not an item of tax preference for purposes of the federal alternative minimum taxes imposed on

A-Z

individuals and corporations; although, it should be noted that, with respect to corporations, such i nterest wi 11 be i ncl uded as an aqj ustrrent in the cal cul ati on of alternative ninirnurn taxable incorre which rray affect the alternative rninirnurn tax liability of such corporations. We express no opinion regarding other tax consequences arising with respect to the Bonds.

It is understood that the rights of the holders of the Bonds and the enforceability thereof rray be sul::iject to bankruptcy, insolvency, reorganization, rnoratoriurn and other sinilar laws affecting creditors' rights and rerredies, to the appiication of equitable principles heretofore or hereafter enacted to the extent consti tuti anally applicable and thatthei r enforcerrent rray al so be sul::ij ect to exercise of j udi ci al di sere ti on in appropriate cases and to limitations on legal rerredies against school districts in the State of California

Very truly yours,

A--3

(This page intentionally left blank)

APPENDIX B

201S-16AUDITED FINANCIAL STATEMENTS OF THE DISTRICT

B-1

BANNING

UNIFIED SCHOOL DISTRICT

ANNUAL FINANCIAL REPORT

JUNE 30, 2016

BANNING UNIFIED SCHOOL DISTRICT

TABLE OF CONTENTS JUNE 30, 2016

FINANCIAL SECTION Independent Auditor's Report Management's Discussion and Analysis Basic Financial Statements

Government-Wide Financial Statements Statement of Net Position Statement of Activities

Fund Financial Statements Governmental Funds - Balance Sheet Reconciliation of the Governmental Funds Balance Sheet to the Statement of Net Position

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

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

Fiduciary Funds - Statement of Net Position Fiduciary Funds - Statement of Changes in Net Position

Notes to Financial Statements

REQUIRED SUPPLEMENTARY INFORMATION General Fund - Budgetary Comparison Schedule Cafeteria Fund - Budgetary Comparison Schedule Schedule of Other Postemployment Benefits (OPEB) Funding Progress Schedule of the District's Proportionate Share of the Net Pension Liability Schedule of District Contributions Note to Required Supplementary Information

SUPPLEMENTARY INFORMATION Schedule of Expenditures of Federal Awards Local Education Agency Organization Structure Schedule of Average Daily Attendance Schedule oflnstructional Time Reconciliation of Annual Financial and Budget Report With Audited Financial Statements Schedule of Financial Trends and Analysis Financial Statements - Non-Major Governmental Fund

Balance Sheet Statement of Revenues, Expenditures, and Changes in Fund Balances

Note to Supplementary Information

INDEPENDENT AUDITOR'S REPORTS Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance With GOJernrrent Auditing Standards

Report on Compliance for Each Major Program and on Internal Control Over Compliance Required by the Uniform Guidance

Report on State Compliance

2 5

14 15

16

17

18

19 21 22 23

63 64 65 66 67 68

70 72 73 74 75 76

77 78 79

82

84 86

BANNING UNIFIED SCHOOL DISTRICT

TABLE OF CONTENTS JUNE 30, 2016

SCHEDULE OF FINDINGSANDQUESTIONEDCOSTS Summary of Auditor's Results Financial Statement Findings Federal Awards Findings and Questioned Costs State Awards Findings and Questioned Costs Summary Schedule of Prior Audit Findings Management Letter

90 91 93 94 96 99

FINANCIAL SECTION

1

ftl Vavrinek, Trine, Day & Co., LLP Certified Public Accountants

Governing Board Banning Unified School District Banning, California

INDEPENDENT AUDITOR'S REPORT

Report on the Financial Statements

VALUE THE DIFFERENCE

We have audited the accompanying financial statements of the governmental activities, each major fund, and the aggregate remaining fund information of the Banning Unified School District (the District) as of and for the year ended June 30, 2016, and the related notes to the financial statements, which collectively comprise the 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; and the 2015-2016 Guide for Annual Audits of K-12 Local Education Agencies and State Corrpl i ance Reporting, issued by the California Education Audit Appeals Panel as regulations. 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 District'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 District'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 op1n1ons.

2

19340 Jesse Lane, Suite 260 Riverside, CA 92508 Tel: 951.367.3000 www.vtdcpa.com Fax: 951.367.301 0

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 Banning Unified School District, as of June 30, 2016, 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.

Other Matters

Required Suppl errentary I nforrration

Accounting principles generally accepted in the United States of America require that management's discussion and analysis on pages 5 through 13, budgetary comparison schedules on pages 63 and 64, schedule of other postemployment benefits funding progress on page 65, schedule of the District's proportionate share of the net pension liability on page 66, and the schedule of District contributions on page 67, be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Goverrnnental 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.

Other I nforrrati on

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

The accompanying supplementary information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the basic financial statements. Such information has 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 accompanying supplementary information is fairly stated, in all material respects, in relation to the basic financial statements as a whole.

The accompanying unaudited other information 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.

3

Other Reporting Reqnired by GOJernment Auditing Standards

In accordance with GOJernmentAuditing Standards, we have also issued our report dated November 30, 2016, on our consideration of the Banning 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 Banning Unified School District's internal control over financial reporting and compliance.

Riverside, California November 30, 2016

4

This section of Banning 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, 2016. 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 fmancial statements presented herein include all of the activities of the District and its component units using the integrated approach as prescribed by Governmental Accounting Standards Board (GASB) Statement No. 34.

The GOJernrrent-Wi de Financial Staterrents present the fmancial picture of the District from the economic resources measurement focus using the accrual basis of accounting. These statements include all assets of the District (including capital assets), as well as all liabilities (including long-term obligations). Additionally, certain eliminations have occurred as prescribed by the statement in regards to interfund activity, payables, and receivables.

The Fund Financial Staterrents include statements for each of the two categories of activities: govermnental and fiduciary.

The GOJernrrental Activities are prepared using the current fmancial resources measurement focus and modified accrual basis of accounting.

The Fiduciary Activities are prepared using the economic resources measurement focus and the accrual basis of accounting.

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

The Primary unit of the govermnent is the Banning Unified School District.

Board of Education • Alfredo Andrade • Martha Bederio • Alex Cassadas • Kerri Mariner • Jan Spann

161 W Williams Street, Banning, CA 92220 • Ph (951) 922-0200 • FAX (951) 922-0227 • www.banning.kl2.ca.us

5

BANNING UNIFIED SCHOOL DISTRICT

MANAGEMENT'S DISCUSSION AND ANALYSIS JUNE 30, 2016

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.

These two statements report the District's net position and changes in them. Net position is the difference between assets and deferred outflows of resources, and 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 will serve as a useful indicator of whether the financial position of the District 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 separate the District activities as follows:

Governmental Activities - All of the District's services are reported in this category. This includes the education of transitional kindergarten through grade twelve students, adult education students, and the on-going effort to improve and maintain buildings and sites. Property taxes, State income taxes, user fees, interest income, Federal, State, and local grants, as well as general obligation bonds, finance these activities.

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 taxes, 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 goverrnnental 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 govermnental fund statements provide a detailed short-term view of the District's general government operations and the basic services it provides. Govermnental 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 govermnental fund financial statements to those in the goverrnnent-wide financial statements are explained in a reconciliation following each goverrnnental fund financial statement.

6

BANNING UNIFIED SCHOOL DISTRICT

MANAGEMENT'S DISCUSSION AND ANALYSIS JUNE 30, 2016

THE DISTRICT AS A TRUSTEE

Reporting the District's Fidnciary Responsibilities

The District is the trustee, or fiduciary, for funds held on behalf of others, including our funds for associated student body activities. The District's fiduciary activities are reported in the Staterrents 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.

FINANCIAL HIGHLIGHTS

• The District's overall financial status increased from the prior year as our District-wide net position was increased from $5.0 million to $8.0 million.

• Total governmental revenues were $59. 7 million. • The District's combined governmental fund balances increased by $3 .4 million, primarily due to

additional funding. • The total cost of basic programs was $56.6 million. Because a portion of these costs were paid for with

charges, fees, and inter-governmental aid, the net cost that required taxpayer funding was only $11.2 million.

• Average daily attendance (grades TK-12) increased by 95 over the past two years.

7

BANNING UNIFIED SCHOOL DISTRICT

MANAGEMENT'S DISCUSSION AND ANALYSIS JUNE 30, 2016

THE DISTRICT AS A WHOLE

Net Position

The District's net position was $8.0 million for the fiscal year ended June 30, 2016. Restricted net position are reported separately to show legal constraints from debt covenants and enabling legislation that limit the Governing Board's ability to use those net position for day-to-day operations. Our analysis below, in summary form, focuses on the net position (Table 1) and change in net position (Table 2) of the District's governmental activities.

ASSETS Current and other assets Capital assets

Total Assets Deferred Outflows of Resources

LIABILITIES Current liabilities Long-term obligations Aggregate net pension liability

Total Liabilities Deferred Inflows of Resources

NET POSITION Net investment in capital assets Restricted Unrestricted

Total Net Position

Table 1

8

Governmental Activities 2016

$ 17,940,399 78,693,880 96,634,279 10,014,834

3,547,083 55,426,768 32,521,812 91,495,663

7,106,670

31,599,568 6,583,366

(30,136,154) $ 8,046,780

2015

$ 13,653,258 79,439,780 93,093,038

2,423,672

3,274,141 52,019,280 27,654,965 82,948,386 7,599,065

33,388,276 5,576,148

(33,995,165) $ 4,969,259

BANNING UNIFIED SCHOOL DISTRICT

MANAGEMENT'S DISCUSSION AND ANALYSIS JUNE 30, 2016

Changes in Net Position

The results of this year's operations for the District as a whole are reported in the Staterrent of Activities on page 15. Table 2 takes the information from the Statement and rearranges them slightly so you can see our net increase or decrease for the year.

Revenues Pro gram revenues:

Charges for services Operating grants and contributions Capital grants and contributions

General revenues: State and Federal aid Property and other taxes Other general revenues

Total Revenues

Expenses Instruction-related Pupil services Administration Plant services Other

Total Expenses Change in Net Position

Governmental Activities

Table 2

Govermnental Activities 2016

$ 223,702 10,637,913

2

36,554,215 11,240,167

1,042,412 59,698,411

35,894,793 7,826,464 4,287,456 5,707,040 2,905,137

56,620,890 $ 3,077,521

2015

$ 165,049 11,256,891

28,253,780 10,850,643

1,502,873 52,029,236

32,887,435 6,482,656 3,320,916 4,915,729 3,336,732

50,943,468 $ 1,085,768

As reported in the Staterrent of Activities on page 15, the cost of all of our govermnental activities this year was $56.6 million compared to $50.9 million in the prior year, an increase of $5. 7 million or 11.2 percent. However, the amount that our taxpayers ultimately financed for these activities through local taxes was only $11.2 million because the cost was paid by those who benefited from the programs ($0.2 million) or by other govermnents and organizations who subsidized certain programs with grants and contributions $10.6 million). We paid for the remaining "public benefit" portion of our govermnental activities with $37.6 million in State funds and with other revenues like interest and general entitlements.

9

BANNING UNIFIED SCHOOL DISTRICT

MANAGEMENT'S DISCUSSION AND ANALYSIS JUNE 30, 2016

In Table 3, we have presented the net cost of each of the District's largest functions - instruction, instruction­related activities, other pupil services, administration, plant services, and other services. As discussed above, 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 3

Total Net Cost of Services

Instruction Instruction-related activities Other pupil services Administration Plant services Other

Total

THE DISTRICT'S FUNDS

2016 $ 26,785,772

2,843,517 4,580,512 3,840,932 5,526,976 2,181,564

$ 45,759,273

2015 $23,635,285

2,648,794 2,771,038 2,794,319 4,882,983 2,789,109

$39,521,528

As the District completed this year, our govermnental funds reported a combined fund balance of $14. 7 million, which is an increase of $3.4 million from last year (Table 4).

General Fund Adult Education Fund Cafeteria Fund Building Fund Capital Facilities Fund County School Facilities Fund Bond Interest and Redemption Fund

Total

The primary reason for this increase is:

Table 4

July 1, 2015 $ 6,232,822

2,206,921 54,628

449,647 436

2,284,398 $ 11,228,852

Balances and Activity Revenues Exeenditures

$53,373,167 $ 50,175,508 223,085 207,918

2,945,677 3,168,583 588 3,938

408,351 135,083 2

37,922,945 37,749,676 $94,873,815 $ 91,440,706

Additional funding received within the General Fund of approximately $8.3 million.

10

June 30, 2016 $ 9,430,481

15,167 1,984,015

51,278 722,915

438 2,457,667

$ 14,661,961

BANNING UNIFIED SCHOOL DISTRICT

MANAGEMENT'S DISCUSSION AND ANALYSIS JUNE 30, 2016

General Fnnd Bndgetary Highlights

Over the course of the year, the District revises its budget as it attempts to deal with unexpected changes in revenues and expenditures. The final amendment to the budget was adopted on August 25, 2016. (A schedule showing the District's original and fmal budget amounts compared with amounts actually paid and received is provided in our annual report on page 63.)

CAPITAL ASSET AND DEBT ADMINISTRATION

Capital Assets

At June 30, 2016, the District had $78. 7 million in a broad range of capital assets (net of depreciation), including land, buildings, furniture, and equipment. This amount represents a net decrease (including additions, deductions, and depreciation) of $0.7 million, or 1.0 percent, from last year (Table 5).

(Net of Accumulated Depreciation)

Land and construction in process Buildings and improvements/Site improvements Equipment

Total

Table 5

Governmental Activities 2016 2015

$ 5,127,234 $ 4,759,602 71,843,648 73,275,298

1,722,998 1,404,880 $ 78,693,880 $ 79,439,780

This year's additions of $1.5 million relate to modernization expenditures and on-going bond funded projects. We present more detailed information about our capital assets in Note 5 to the financial statements. Current year depreciation expense was $2.3 million.

Long-Term Obligations

At the end of this year, the District had $43.9 million in bonds outstanding, which is a decrease of $2.4 million from last year.

Table 6

General obligation bonds (financed with property taxes) Premium on issuance Capital leases Accumulated vacation Net OPEB obligation

Total

Governmental Activities 2016

$ 43,911,102 8,433,031

208,405 652,513

2,221,717 $ 55,426,768

2015 $46,339,796

3,123,530 133,860 616,930

1,805,164 $52,019,280

We present more detailed information regarding our long-term obligations in Note 9 of the financial statements.

11

BANNING UNIFIED SCHOOL DISTRICT

MANAGEMENT'S DISCUSSION AND ANALYSIS JUNE 30, 2016

Aggregate Net Pension Liability (NPL)

At year end, the District had a aggregate net pension liability of $3 2. 5 million as a result of the adoption of GASB Statement No. 68, Accounting and Financial Reporting for Pensions. The District, therefore, recorded its proportionate share of net pension liabilities for CalSTRS and CalPERS.

ECONOMIC FACTORS AND NEXT YEAR'S BUDGETS AND RATES

In developing the District budget for the 2016-2017 year, the governing board and District management used the following criteria:

When we went to budget for the 2015-2016 school year, we projected ADA of 4321.29 (flat with 2014-2015 ADA). We are actually funded at 4310.66, a loss of 10.63. When the multi-year projection was performed in the 2015-2016 budget adoption, we were using 4309.25 for 2016-2017. The budget reflected the prior year guarantee being used for 2016-2017 of 4244.83, a reduction of 64.42 FUNDED ADA. At an average $10,150.00 per ADA, this is a loss of $653,863.00 just in LCFF sources.

For the 2016-2017 budget year, we increased the funds received through the LCFF model by $2,570,870.00. When performing the minimum proportionality calculation required identifying the Base grant and the Supplemental and Concentration dollars, the increase is allocated $732,220.00 to Base and $1,838,650.00 to Supplemental and Concentration.

Even though we are funding on less ADA in 2016-2017, there was an approximate $751.00 per ADA increase with the application of the gap at 54.84 percent. There is no COLA applied to the 2016-2017 budget as directed through the information released in the May revise.

Federal revenues, both unrestricted and restricted, remain relatively flat from 2015-2016 to 2016-2017. In the 2015-2016 budget year, there were substantial carryovers from 2014-2015 that were a part of the fmal budget available for the 2015-2016 year. Many of those resources continue to have carryover which will be brought into the 2016-2017 budget at the conclusion of the audit report. Due to the nature of these funds, they do not appear as assigned fund balances, as these restricted funding sources cannot be recognized in the SACS software in the budget process. The carryover dollar amounts will appear in the "CAT" form of the Unaudited Actuals report when we close the books for 2015-2016.

State revenues are reduced substantially from 2015-2016 to 2016-2017 due to the decrease in the per student amount of funding for the One-Time Mandated Cost Reimbursements. The funding for 2015-2016 was $2,273,617.00. In 2016-2017, it is budgeted to be $914,640.00-a decrease of$1,358,977.00.

The District budgeted for class sizes of 24: 1 in grades Transitional Kindergarten through third. For grades fourth through twelfth, the ratio was 30: 1. Enrolhnent was projected at 4,442.

12

BANNING UNIFIED SCHOOL DISTRICT

MANAGEMENT'S DISCUSSION AND ANALYSIS JUNE 30, 2016

Employee negotiations had not been settled prior to the adoption of the budget. Subsequently, both groups reached agreements with percentages of increase applied to the salary schedules, as well as a flat $2,000.00 per cell on the BTA salary schedule and an increase to the health benefit cap of $11,000.00 per full-time equivalent. Although the budget did not reflect the impact of these negotiations, there were sufficient funds available in the unrestricted General Fund balance and monies that could be shifted in the Supplemental and Concentration funds to support the cost of the settlements.

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 the Superintendent at Banning Unified School District, 161 West Williams, Banning, California, 92220, or e-mail at rguillen@banning.k12.ca.us.

13

BANNING UNIFIED SCHOOL DISTRICT

STATEMENT OF NET POSITION JUNE 30, 2016

ASSETS Deposits and investments Receivables Stores inventories Capital assets:

Land and construction in process Other capital assets Less: Accumulated depreciation

Total Capital Assets Total Assets

DEFERRED OUTFLOWS OF RESOURCES Deferred charge on refunding Deferred outflows of resources related to pensions

Total Deferred Outflows of Resources

LIABILITIES Accounts payable Accrued interest payable Unearned revenue Long-term obligations:

Current portion of long-term obligations other than pensions Noncurrent portion of long-term obligations other than pensions

Total Long-Term Obligations Aggregate net pension liability

Total Liabilities

DEFERRED INFLOWS OF RESOURCES Deferred inflows of resources related to pensions

NET POSITION Net investment in capital assets Restricted for:

Debt service Capital projects Educational programs Other activities

Unrestricted Total Net Position

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

14

Governmental Activities

$ 14,495,987 3,421,210

23,202

5,127,234 102,062,318 (28,495,672) 78,693,880 96,634,279

3,031,632 6,983,202

10,014,834

3,030,800 268,645 247,638

1,778,213 53,648,555 55,426,768 32,521,812 91,495,663

7,106,670

31,599,568

2,189,022 685,941

1,741,130 1,967,273

(30,136,154) $ 8,046,780

BANNING UNIFIED SCHOOL DISTRICT

STATEMENT OF ACTIVITIES FOR THE YEAR ENDED JUNE 30, 2016

Net (Expenses) Revenues and

Changes in

Program Revenues Net Assets

Charges for Operating Capital

Services and Grants and Grants and Governmental

Functions/Programs Expenses Sales Contributions Contributions Activities

Governmental Activities:

Instruction $ 32,218,938 $ 44,012 $ 5,389,152 $ 2 $ (26,785,772)

Instruction-related activities:

Supervision of instruction 644,818 346,243 (298,575)

Instructional library, media, and technology 404,223 3,520 269,007 (131,696)

School site administration 2,626,814 14,203 199,365 (2,413,246)

Pupil services:

Home-to-school transportation 1,722,347 (1,722,347)

Food services 2,881,333 143,994 2,357,646 (379,693)

All other pupil services 3,222,784 744,312 (2,478,472)

Administration:

Data processing 738,665 (738,665)

All other administration 3,548,791 7,834 438,690 (3,102,267)

Plant services 5,707,040 10,139 169,925 (5,526,976)

Ancillary services 189,936 2,852 (187,084)

Community services 523,253 516,106 (7,147)

Interest on long-term obligations 2,119,079 (2,119,079)

Other outgo 72,869 204,615 131,746 Total Governmental Activities $ 56,620,890 $ 223,702 $ 10,637,913 $ 2 (45,759,273)

General revenues and subventions:

Property taxes, levied for general purposes 7,617,455

Property taxes, levied for debt service 3,003,999

Taxes levied for other specific purposes 618,713

Federal and State aid not restricted to specific purposes 36,554,215

Interest and investment earnings 36,310

Miscellaneous 1,006,102

Subtotal, General Revenues 48,836,794

Change in Net Position 3,077,521

Net Position - Beginning 4,969,259 Net Position - Ending $ 8,046,780

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

15

BANNING UNIFIED SCHOOL DISTRICT

GOVERNMENTAL FUNDS BALANCE SHEET JUNE 30, 2016

ASSETS Deposits and investments Receivables Due from other funds Stores inventories

Total Assets LIABILITIES AND FUND BALANCES

Liabilities: Accounts payable Due to other funds Unearned revenue

Total Liabilities Fund Balances:

Nonspendable Restricted Assigned Unassigned

Total Fund Balances Total Liabilities and Fund Balances

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

16

General Cafeteria Fnnd Fnnd

$ 10,129,868 $ 1,466,308 2,360,159 671,618

138,847 5,687 6,460 16,742

$ 12,635,334 $ 2,160,355

$ 2,922,252 $ 50,169 34,963 126,171

247,638 3,204,853 176,340

16,460 16,742 1,741,130 1,967,273 4,472,680 3,200,211 9,430,481 1,984,015

$ 12,635,334 $ 2,160,355

Bond Interest Non-Major Total and Redemption Governmental Governmental

Fnnd Fnnds Fnnds

$ 2,457,667 $ 442,144 $ 14,495,987 389,433 3,421,210

29,276 173,810 23,202

$ 2,457,667 $ 860,853 $ 18,114,209

$ $ 58,379 $ 3,030,800 12,676 173,810

247,638 71,055 3,452,248

33,202 2,457,667 789,798 6,955,868

4,472,680 3,200,211

2,457,667 789,798 14,661,961

$ 2,457,667 $ 860,853 $ 18,114,209

16

BANNING UNIFIED SCHOOL DISTRICT

RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET TO THE STATEMENT OF NET POSITION

JUNE 30, 2016

Total Fund Balance - Governmental Funds $ Amounts Reported for Governmental Activities in the Statement of Net Position is Different Because: Capital assets used in governmental activities are not financial resources and, therefore, are not reported as assets in governmental funds.

The cost of capital assets is $ 107,189,552 Accumulated depreciation is (28,495,672)

Net Capital Assets Deferred charges relating to issuance of debt of next fiscal year were recognized on modified accrual basis, but are not recognized on the accrual basis.

Expenditures relating to contributions made to pension plans were recognized on the modified accrual basis, but are not recognized on the accrual basis.

In governmental funds, unmatured interest on long-term obligations is recognized in the period when it is due. On the government-wide financial statements, unmatured interest on long-term obligations is recognized when it is incurred.

The net change in proportionate share of net pension liability as of the measurement date is not recognized as an expenditure under the modified accrual basis, but is recognized on the accrual basis over the expected average remaining service life of members receiving pension benefits.

The difference between projected and actual earnings on pension plan investments are not recognized on the modified accrual basis, but are recognized on the accrual basis as an adjustment to pension expense. The differences between expected and actual experience in the measurement of the total pension liability are not recognized on the modified accrual basis, but are recognized on the accrual basis over the expected average remaining service life of members receiving pension benefits. The changes of assumptions is not recognized as an expenditure under the modified accrual basis, but is recognized on the accrual basis over the expected average remaining service life of members receiving pension benefits.

Net pension liability is not due and payable in the current period, and is not reported as a liability in the funds.

Long-term obligations, including bonds payable, are not due and payable in the current period and, therefore, are not reported as liabilities in the funds.

Long-term obligations at year end consist of: General obligation bonds 41,744,103 Unamortized premium on issuance 8,433,031 Capital leases 208,405 Accumulated vacation 652,513 Net OPEB obligation 2,221,717

In addition, the District previously issued II capital appreciation" general obligation bonds. The cumulative capital accretion on the general obligation bonds is: 2,166,999

Total Long-I erm Obligations Total Net Position - Governmental Activities $

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

17

14,661,961

78,693,880

3,031,632

2,986,154

(268,645)

(382,454)

(2,280,946)

34,802

(481,024)

(32,521,812)

(55,426,768) 8,046,780

BANNING UNIFIED SCHOOL DISTRICT

GOVERNMENTAL FUNDS STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES

FOR THE YEAR ENDED JUNE 30, 2016

General Cafeteria Fnnd Fnnd

REVENUES Local Control Funding Formula $ 40,572,817 $ Federal sources 3,572,136 2,571,145 Other State sources 5,487,172 191,045 Other local sources 3,597,758 183,487

Total Revenues 53,229,883 2,945,677 EXPENDITURES Current

Instruction 29,860,258 Instruction-related activities:

Supervision of instruction 635,686 Instructional library, media, and technology 390,608 School site administration 2,571,557

Pupil services: Home-to-school transportation 1,707,572 Food services 2,859,026 All other pupil services 3,216,498

Administration: Data processing 726,746 All other administration 3,320,299 126,063

Plant services 5,785,652 183,494 Facility acquisition and construction 1,127,622 Ancillary services 189,905 Community services 523,253 Other outgo 72,869

Debt Service Principal 40,053 Interest and other 6,930

Total Expenditures 50,175,508 3,168,583 Excess (Deficiency) of Revenues Over Expenditures 3,054,375 (222,906) Other Financing Sources (Uses)

Other sources - proceeds from capital leases 143,284 Other sources - proceeds from sale of bonds Other uses

Net Financing Sources (Uses) 143,284 NET CHANGE IN FUND BALANCES 3,197,659 (222,906) Fund Balances - Beginning 6,232,822 2,206,921 Fund Balances - Ending $ 9,430,481 $ 1,984,015

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

18

Hond lnterest and Redemption

Fnnd

$

$

44,074 2,965,633 3,009,707

604,946 5,684,730 6,289,676

(3,279,969)

34,913,238 (31,460,000)

3,453,238 173,269

2,284,398 2,457,667

J',on-JVlaJor Governmental

Fnnds

lotal Governmental

Fnnds

$ 26,578 $ 40,599,395 6,143,281 5,855,703 7,218,914

$

133,412 472,036 632,026

144,956

11,614 48,700

2,648 (33,625) 136,334

28,686 7,626

346,939

285,087

285,087 504,711 789,798 $

59,817,293

30,005,214

635,686 402,222

2,620,257

1,707,572 2,859,026 3,216,498

726,746 3,449,010 5,935,521 1,263,956

189,905 523,253 72,869

673,685 5,699,286

59,980,706

(163,413)

143,284 34,913,238

(31,460,000) 3,596,522 3,433,109

11,228,852 14,661,961

18

BANNING UNIFIED SCHOOL DISTRICT

RECONCILIATION OF THE GOVERNMENTAL FUNDS STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES TO THE STATEMENT OF ACTIVITIES FOR THE YEAR ENDED JUNE 30, 2016

Total Net Change in Fnnd Balances - Governmental Fnnds Amonnts Reported for Governmental Activities in the Statement of Activities are Different Becanse:

Capital outlays to purchase or build capital assets are reported in governmental funds as expenditures; however, for govermuental activities, those costs are shown in the Statement of Net Position and allocated over their estimated useful lives as annual depreciation expenses in the Statement of Activities.

This is the amount by which depreciation exceeds capital outlay in the period. Capital outlay Depreciation expense

Net Expense Adjustment

In the Statement of Activities, certain operating expenses, such as accumulated vacation are measured by the amounts earned during the year. In the governmental funds, however, expenditures for these items are measured by the amount of financial resources used ( essentially, the amounts actually paid). Vacation used was less than the amounts earned by $35,583.

Proceeds received from issuance of debt is a revenue in the governmental funds, but it increases long-term obligations in the Statement of Net Position and does not affect the Statement of Activities:

Sale of general obligation refunding bonds Capital leases

Governmental funds report the effect of premiums, discounts, and issuance costs when the debt is first issued, whereas the amounts are deferred and amortized over the life of the debt in the Statement of Activities. This amount is the net effect of these related items:

Premium on issuance for general obligation refunding bonds Deferred amount on refunding

Combined adjustment .1.11 Ull,., Ul.all,.,llll,.,lll VJ_ r-1.1..U V lUl,.,1'.l, 1 ~1,.,1 '-../Ull,.,l .1. Vi'.'.lll,.,Hl_ptv J 1111,.,111 .1.Jl,.,111,.,lll '-../UHOaUVlli'.'.l

(OPEB) are measured by an actuarially determined Annual Required Contribution (ARC). In the govermuental funds, however, expenditures for these items are measured by the amount of financial resources used ( essentially, the amounts actually paid). This year, amounts contributed toward the Net OPEB obligation were more than the net annual OPEB costs by $416,553.

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

19

$ 1,531,750 (2,277,650)

(5,513,238) 3,031,632

$ 3,433,109

(745,900)

(35,583)

(29,400,000) (143,284)

(2,481,606)

(416,553)

BANNING UNIFIED SCHOOL DISTRICT

RECONCILIATION OF THE GOVERNMENTAL FUNDS STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES TO THE STATEMENT OF ACTIVITIES, Continued FOR THE YEAR ENDED JUNE 30, 2016

In the governmental funds, pension costs are based on employer contributions made to pension plans during the year. However, in the Statement of Activities, pension expense is the net effect of all changes in the deferred outflows, deferred inflows and net pension liability during the year.

Payment of principal on long-term obligations is an expenditure in the governmental funds, but it reduces long-term obligations in the Statement of Net Position and does not affect the Statement of Activities.

General obligation bonds Capital leases

Under the modified basis of accounting used in the governmental funds, expenditures are not recognized for transactions that are not normally paid with expendable available fmancial resources. In the Statement of Activities, however, which is presented on the accrual basis, expenses and liabilities are reported regardless of when fmancial resources are available. This adjustment combines the net changes of the following balances:

Amortization of debt premium

Interest on long-term obligations in the Statement of Activities differs from the amount reported in the governmental funds because interest is recorded as an expenditure in the funds when it is due, and thus requires the use of current fmancial resources. In the Statement of Activities, however, interest expense is recognized as the interest accrues, regardless of when it is due. The additional interest reported in the Statement of Activities is the result of two factors. First, accrued interest on the general obligation bonds, decreased by $581,090, and second, $431,306 of additional accumulated interest was accreted on the District's "capital appreciation" general obligation bonds.

Change in Net Position of Governmental Activities

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

20

$ 185,078

32,260,000 68,739

203,737

149,784 $ 3,077,521

BANNING UNIFIED SCHOOL DISTRICT

FIDUCIARY FUNDS STATEMENT OF NET POSITION JUNE 30, 2016

Trust Fund Agency Funds Warrant Associated

ASSETS Deposits and investments Receivab Jes

Total Assets

LIABILITIES Due to student groups Due to other agencies

Total Liabilities

NET ASSETS Reserved for scholarships

Scholarship Pass-Through Student Trust Fund Body Fund

$ 104,604 $ 5,083 $ 88,745 179

104,783 $ 5,083 $ 88,745

88,745 5,083

$ 5,083 $ 88,745

$ 104,783

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

21

Total Fiduciary

Funds

$ 198,432 179

198,611

88,745 5,083

93,828

$ 104,783

BANNING UNIFIED SCHOOL DISTRICT

FIDUCIARY FUNDS STATEMENT OF CHANGES IN NET POSITION FOR THE YEAR ENDED JUNE 30, 2016

ADDITIONS Private donations Interest

Total Additions

DEDUCTIONS Other expenditures

Change in Net Assets Net Position - Beginning Net Position - Ending

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

22

Scholarship Trust

$ 1,000 590

1,590

15,000

(13,410) 118,193

$ 104,783

BANNING UNIFIED SCHOOL DISTRICT

NOTES TO FINANCIAL STATEMENTS JUNE 30, 2016

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Financial Reporting Entity

The Banning Unified School District (the District) was established as a unified school district in 1877 under the laws of the State of California. The District operates under a locally elected five member Board form of government and provides educational services to grades K through 12 as mandated by the State and/or Federal agencies. The District operates five elementary schools, one middle school, one high school, one continuation education school, one adult education program, and an independent study program.

A reporting entity is comprised of the primary government that is included to ensure the financial statements are not misleading. The primary govermnent of the District consists of all funds, departments, boards, and agencies that are not legally separate from the District. For Banning Unified School District, this includes general operations, food service, and student related activities of the District.

Component Units

Component units are legally separate organizations for which the District is financially accountable. Component units may also include organizations that are fiscally dependent on the District, in that the District approves their budget, the issuance of their debt or the levying of their taxes. In addition, component units are other legally separate organizations for which the District is not financially accountable but the nature and significance of the organization's relationship with the District is such that exclusion would cause the District's financial statements to be misleading or incomplete. The District has no component units.

Basis of Presentation - Fund Accounting

The accounting system is organized and operated on a fund basis. A fund is defined as a fiscal and accounting entity with a self-balancing set of accounts, which are segregated for the purpose of carrying on specific activities or attaining certain objectives in accordance with special regulations, restrictions, or limitations. The District's funds are grouped into two broad fund categories: govermnental and fiduciary.

Governmental Funds Govermnental funds are those through which most govermnental functions typically are fmanced. Governmental fund reporting focuses on the sources, uses, and balances of current fmancial resources. Expendable assets are assigned to the various governmental funds according to the purposes for which they may or must be used. Current liabilities are assigned to the fund from which they will be paid. The difference between governmental fund assets and liabilities is reported as fund balance. The following are the District's major and non-major govermnental funds:

Major Governmental Funds

General Fund The General Fund is the chief operating fund for all districts. It is used to account for the ordinary operations of the District. All transactions except those accounted for in another fund are accounted for in this fund.

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BANNING UNIFIED SCHOOL DISTRICT

NOTES TO FINANCIAL STATEMENTS JUNE 30, 2016

Two funds currently defined, as special revenue funds in the California State Accounting Manual (CSAM), do not meet the GASB Statement No. 54 special revenue fund definition. Specifically, Fund 17, Special Reserve Fund for Other Than Capital Outlay Projects, and Fund 20, Special Reserve Fund for Postemployment Benefits, are not substantially composed of restricted or committed revenue sources. While these funds are authorized by statute and will remain open for internal reporting purposes, these funds function effectively as an extension of the General Fund and, accordingly, have been combined with the General Fund for presentation in these audited fmancial statements.

As a result, the General Fund reflects an increase in assets, fund balance, and revenues of $1,116,994, $1,116,994, and $1,994, and a decrease in expenditures of $1,115,000, respectively.

Cafeteria Fund The Cafeteria Fund is used to account separately for Federal, State, and local resources to operate the food service program (Education Code Sections 38090-38093) and is used only for those expenditures authorized by the governing board as necessary for the operation of the District's food service program (Education Code Sections 38091 and 38100).

Bond Interest and Redemption Fund The Bond Interest and Redemption Fund is used for the repayment of bonds issued for a district (Education Code Sections 15125-15262).

Non-Major Governmental Funds

Special Revenue Funds The Special Revenue funds are established to account for the proceeds from specific revenue sources ( other than trusts, major capital projects, or debt service) that are restricted or committed to the fmancing of particular activities and that compose a substantial portion of the inflows of the fund. Additional resources that are restricted, committed, or assigned to the purpose of the fund may also be reported in the fund.

Adult Education Fund The Adult Education Fund is used to account separately for Federal, State, and local revenues for adult education programs and is to be expended for adult education purposes only.

Child Development Fund The Child Development Fund is used to account separately for Federal, State, and local revenues to operate child development programs and is to be used only for expenditures for the operation of child development programs.

Capital Project Funds The Capital Project funds are used to account for financial resources that are restricted, committed, or assigned to the acquisition or construction of major capital facilities and other capital assets ( other than those financed by proprietary funds and trust funds).

Building Fund The Building Fund exists primarily to account separately for proceeds from the sale of Measure Land Measure R bonds (Education Code Section 15146) and may not be used for any purposes other than those for which the bonds were issued.

Capital Facilities Fund The Capital Facilities Fund is used primarily to account separately for monies received from fees levied on developers or other agencies as a condition of approving a development (Education Code Sections 17620-17626). Expenditures are restricted to the purposes specified in Governrrent Code Sections 65970-65981 or to the items specified in agreements with the developer (GOJernrrent Code Section 66006).

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BANNING UNIFIED SCHOOL DISTRICT

NOTES TO FINANCIAL STATEMENTS JUNE 30, 2016

Couuty School Facilities Fuud The County School Facilities Fund is established pursuant to Education Code Section 17070.43 to receive apportionments from the 1998 State School Facilities Fund (Proposition IA), the 2002 State School Facilities Fund (Proposition 47), or the 2004 State School Facilities Fund (Proposition 55), or the 2006 State Schools Facilities Fund (Proposition ID) authorized by the State Allocation Board for new school facility construction, modernization projects, and facility hardship grants, as provided in the Leroy F. Greene School Facilities Act of 1998 (Education Code Section 17070 et seq.).

Fiduciary Funds Fiduciary funds are used to account for assets held in trustee or agent capacity for others that cannot be used to support the District's own programs. The fiduciary fund category is split into four classifications: pension trust funds, investment trust funds, private-purpose trust funds, and agency funds. The key distinction between trust and agency funds is that trust funds are subject to a trust agreement that affects the degree of management involvement and the length of time that the resources are held.

Trust funds are used to account for the assets held by the District under a trust agreement for individuals, private organizations, or other governments and are therefore, not available to support the District's own programs. The District's trust fund accounts for scholarship activities. Agency funds are custodial in nature (assets equal liabilities) and do not involve measurement of results of operations. Such funds have no equity accounts since all assets are due to individuals or entities at some future time. The District's agency fund accounts for student body (ASB) and warrant pass-through activities.

Basis of Accounting - Measurement Focus

Government-Wide Financial Statements The government-wide financial statements are prepared using the economic resources measurement focus and the accrual basis of accounting. This differs from the manner in which governmental fund financial statements are prepared.

The government-wide Statement of Activities presents a comparison between expenses, both direct and indirect, and program revenues for each segment of the District and for each governmental program, and excludes fiduciary activity. Direct expenses are those that are specifically associated with a service, program, or department and are therefore, clearly identifiable to a particular function. The District does not allocate indirect expenses to functions in the Staterrent of Activities, except for depreciation. Program revenues include charges paid by the recipients of the goods or services offered by the programs and grants and contributions that are restricted to meeting the operational or capital requirements of a particular program. Revenues that are not classified as program revenues are presented as general revenues. The comparison of program revenues and expenses identifies the extent to which each program or business segment is self-financing or draws from the general revenues of the District. Eliminations have been made to minimize the double counting of internal activities.

Net position should be reported as restricted when constraints placed on net position are either externally imposed by creditors (such as through debt covenants), grantors, contributors, or laws or regulations of other governments or imposed by law through constitutional provisions or enabling legislation. The net position restricted for other activities result from special revenue funds and the restrictions on their use.

25

BANNING UNIFIED SCHOOL DISTRICT

NOTES TO FINANCIAL STATEMENTS JUNE 30, 2016

Fuud Fiuaucial Statemeuts Fuud fiuaucial statemeuts report detailed iuformatiou about the District. The focus of govermueutal aud proprietary fuud fiuaucial statemeuts is ou major fuuds rather thau reportiug fuuds by type. Each major fuud is preseuted iu a separate columu. Nou-major fuuds are aggregated aud preseuted iu a siugle columu.

Goverumeutal Fuuds All govermueutal fuuds are accouuted for usiug the flow of curreut fiuaucial resources measuremeut focus aud the modified accrual basis of accouutiug. With this measuremeut focus, ouly curreut assets aud curreut liabilities geuerally are iucluded ou the balauce sheet. The Statemeut of Reveuues, Expeuditures, aud Chauges iu Fuud Balauces reports ou the sources (reveuues aud other fiuauciug sources) aud uses ( expeuditures aud other fiuauciug uses) of curreut fiuaucial resources. This approach differs from the manner iu which the govermueutal activities of the governmeut-wide fiuaucial statemeuts are prepared. Govermueutal fuud fiuaucial statemeuts, therefore, iuclude recouciliatious with brief explauatious to better ideutify the relatiouship betweeu the governmeut-wide fiuaucial statemeuts, prepared usiug the ecouomic resources measuremeut focus aud the accrual basis of accouutiug, aud the governmeutal fuud fiuaucial statemeuts, prepared usiug the flow of curreut fiuaucial resources measuremeut focus aud the modified accrual basis of accouutiug.

Fiduciary Fuuds Fiduciary fuuds are accouuted for usiug the flow of ecouomic resources measuremeut focus aud the accrual basis of accouutiug. Fiduciary fuuds are excluded from the govermueut-wide fiuaucial statemeuts because they do uot represeut resources of the District.

Reveuues- Exchauge aud Nou-Exchauge Trausactious Revenue resultiug from exchange transactions, in which each party gives and receives esseutially equal value, is recorded on the accrual basis when the exchange takes place. On a modified accrual basis, revenue is recorded in the fiscal year in which the resources are measurable and become available. Available means that the resources will be collected within the current fiscal year or are expected to be collected soon enough thereafter, to be used to pay liabilities of the curreut fiscal year. Generally, available is defined as collectible withiu 45 or 60 days. However, to achieve comparability of reporting among California districts and so as not to distort normal revenue patterns, with specific respect to reimbursement grants and corrections to State-aid apportionmeuts, the California Department of Education has defiued available for districts as collectible within one year. The following reveuue sources are considered to be both measurable and available at fiscal year-end: State apportiomueuts, iuterest, certain grants, and other local sources.

Non-exchange transactions, in which the District receives value without directly giving equal value in return, iuclude property taxes, certaiu grants, eutitlemeuts, and donations. Reveuue from property taxes is recognized in the fiscal year in which the taxes are received. Reveuue from certain grants, eutitlements, and donations is recognized in the fiscal year iu which all eligibility requirements have beeu satisfied. Eligibility requirements iuclude tirue and purpose restrictions. On a modified accrual basis, revenue from non-exchange transactions must also be available before it can be recognized.

Uuearued Reveuue Unearned reveuue arises when potential revenue does not meet both the "measurable" and "available" criteria for recognition in the current period or when resources are received by the District prior to the iucurreuce of qualifyiug expenditures. In subsequeut periods, wheu both revenue recognition criteria are met, or wheu the District has a legal clairu to the resources, the liability for unearned reveuue is removed from the balance sheet and reveuue is recognized.

26

BANNING UNIFIED SCHOOL DISTRICT

NOTES TO FINANCIAL STATEMENTS JUNE 30, 2016

Certain grants received before the eligibility requirements are met are recorded as unearned revenue. On the governmental fund financial statements, receivables that will not be collected within the available period are also recorded as unearned revenue.

Expenses/Expenditures On the accrual basis of accounting, expenses are recognized at the time they are incurred. The measurement focus of governmental fund accounting is on decreases in net financial resources (expenditures) rather than expenses. Expenditures are generally recognized in the accounting period in which the related fund liability is incurred, if measurable, and typically paid within 90 days. Principal and interest on long­term obligations, which has not matured, are recognized when paid in the governmental funds as expenditures. Allocations of costs, such as depreciation and amortization, are not recognized in the governmental funds but are recognized in the entity-wide statements.

Investments

Investments held at June 30, 2016, with original maturities greater than one year are stated at fair value. Fair value is estimated based on quoted market prices at year-end. All investments not required to be reported at fair value are stated at cost or amortized cost. Fair values of investments in the Riverside County Treasury investment pool are determined by the program sponsor.

Stores Inventories

Inventories consist of expendable food and supplies held for consumption. Inventories are stated at cost, on the first-in, first-out basis. The costs of inventory items are recorded as expenditures in the governmental funds.

Capital Assets and Depreciation

The accounting and reporting treatment applied to the capital assets associated with a fund are determined by its measurement focus. Capital assets are long-lived assets of the District. The District maintains a capitalization threshold of $5,000. The District does not possess any infrastructure. Improvements are capitalized; the costs of normal maintenance and repairs that do not add to the value of the asset or materially extend an asset's life are not capitalized, but are expensed as incurred.

When purchased, such assets are recorded as expenditures in the governmental funds and capitalized in the government-wide Statement of Net Position. The valuation basis for capital assets is historical cost, or where historical cost is not available, estimated historical cost based on replacement cost. Donated capital assets are capitalized at estimated fair market value on the date donated.

Depreciation is computed using the straight-line method. Estimated useful lives of the various classes of depreciable capital assets are as follows: buildings, 20 to 50 years; improvements/infrastructure, 5 to 50 years; equipment, 2 to 15 years.

Interfund Balances

On fund financial statements, receivables and payables resulting from short-term interfund loans are classified as "interfund receivables/payables". These amounts are eliminated in the governmental and business-type activities columns of the Statement of Net Position, except for the net residual amounts due between governmental and business-type activities, which are presented as internal balances.

27

BANNING UNIFIED SCHOOL DISTRICT

NOTES TO FINANCIAL STATEMENTS JUNE 30, 2016

Compensated Absences

Compensated absences are accrued as a liability as the benefits are earned. The entire compensated absence liability is reported on the government-wide Statement of Net Position. For governmental funds, the current portion of unpaid compensated absences is recognized upon the occurrence of relevant events such as employee resignations and retirements that occur prior to year-end that have not yet been paid with expendable available financial resources. These amounts are reported in the fund from which the employees who have accumulated leave are paid.

Sick leave is accumulated without limit for each employee at the rate of one day for each month worked. Leave with pay is provided when employees are absent for health reasons; however, the employees do not gain a vested right to accumulated sick leave. Employees are never paid for any sick leave balance at termination of employment or any other time. Therefore, the value of accumulated sick leave is not recognized as a liability in the District's financial statements. However, credit for unused sick leave is applicable to all classified school members who retire after January 1, 1999. At retirement, each member will receive .004 year of service credit for each day of unused sick leave. Credit for unused sick leave is applicable to all certificated employees and is determined by dividing the number of unused sick days by the number of base service days required to complete the last school year, if employed full-time.

Accrued Liabilities and Long-Term Obligations

All payables, accrued liabilities, and long-term obligations are reported in the government-wide financial statements. In general, governmental fund payables and accrued liabilities that, once incurred, are paid in a timely manner and in full from current financial resources are reported as obligations of the governmental funds.

However, claims and judgments, compensated absences, special termination benefits, and contractually required pension contributions that will be paid from governmental funds are reported as a liability in the governmental fund financial statements only to the extent that they are due for payment during the current year. Bonds, capital leases, and other long-term obligations are recognized as liabilities in the governmental fund financial statements when due.

Debt Issuance Costs, Premiums, and Discounts

In the government-wide financial statements, long-term obligations are reported as liabilities in the applicable governmental activities Statement of Net Position. Debt premiums and discounts, as well as issuance costs related to prepaid insurance costs, are amortized over the life of the bonds using the straight-line method.

In governmental fund financial statements, bond premiums and discounts, as well as debt issuance costs, are recognized in the current period. The face amount of the debt is reported as other financing sources. Premiums received on debt issuance are also reported as other financing sources. Issuance costs, whether or not withheld from the actual debt proceeds, are reported as debt service expenditures.

28

BANNING UNIFIED SCHOOL DISTRICT

NOTES TO FINANCIAL STATEMENTS JUNE 30, 2016

Deferred Outflows/Inflows of Resources

In addition to assets, the Statement of Net Position also reports deferred outflows of resources. This separate fmancial statement element represents a consumption of net position that applies to a future period and so will not be recognized as an expense or expenditure until then. The District reports deferred outflows of resources for deferred charges on refunding of debt and for pension related items.

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 period and so will not be recognized as revenue until then. The District reports deferred inflows of resources for pension related items.

Pensions

For purposes of measuring the net pension liability and deferred outflows/inflows of resources related to pensions and pension expense, information about the fiduciary net position of the California State Teachers' Retirement System (CalSTRS) and the California Public Employees' Retirement System (Ca!PERS) plan for schools (the Plans) and additions to/deductions from the Plans' fiduciary net position have been determined on the same basis as they are reported by CalSTRS and Ca!PERS. For this purpose, benefit payments (including refunds of employee contributions) are recognized when due and payable in accordance with the benefit terms. Member contributions are recognized in the period in which they are earned. Investments are reported at fair value.

Fund Balances - Governmental Funds

As of June 30, 2016, fund balances of the governmental funds are classified as follows:

Nonspendable - amounts that cannot be spent either because they are in nonspendable form or because they are legally or contractually required to be maintained intact.

Restricted - amounts that can be spent only for specific purposes because of constitutional provisions or enabling legislation or because of constraints that are externally imposed by creditors, grantors, contributors, or the laws or regulations of other governments.

Committed - amounts that can be used only for specific purposes determined by a formal action of the governing board. The governing board is the highest level of decision-making authority for the District. Commitments may be established, modified, or rescinded only through resolutions or other action as approved by the governing board. The District currently does not have any committed funds.

Assigned - amounts that do not meet the criteria to be classified as restricted or committed but that are intended to be used for specific purposes. Under the District's adopted policy, only the governing board or chief business officer/assistant superintendent of business services may assign amounts for specific purposes.

Unassigned - all other spendable amounts.

29

BANNING UNIFIED SCHOOL DISTRICT

NOTES TO FINANCIAL STATEMENTS JUNE 30, 2016

Spending Order Policy

When an expenditure is incurred for purposes for which both restricted and unrestricted fund balance is available, the District considers restricted funds to have been spent first. When an expenditure is incurred for which committed, assigned, or unassigned fund balances are available, the District considers amounts to have been spent first out of committed funds, then assigned funds, and finally unassigned funds, as needed, unless the governing board has provided otherwise in its commitment or assignment actions.

Minimum Fund Balance Policy

The governing board adopted a minimum fund balance policy for the General Fund in order to protect the District against revenue shortfalls or unpredicted on-time expenditures. The policy requires a Reserve for Economic Uncertainties consisting of unassigned amounts equal to no less than three percent of General Fund expenditures and other fmancing uses. The policy intends for the District to maintain a minimum unassigned fund balance which includes a reserve for economic uncertainties equal to 4. 5 percent of General Fund expenditures and other fmancing uses.

If the unassigned fund balance falls below this level due to an emergency situation, unexpected expenditures, or revenue shortfalls, the Board shall develop a plan to recover the fund balance which may include dedicating new unrestricted revenues, reducing expenditures, and/or increasing revenues or pursuing other funding sources.

Net Position

Net position represents the difference between assets and liabilities. Net position invested in capital assets, net of related debt consists of capital assets, net of accumulated depreciation, reduced by the outstanding balances of any borrowings used for the acquisition, construction, or improvement of those assets. Net position is reported as restricted when there are limitations imposed on their use either through the enabling legislation adopted by the District or through external restrictions imposed by creditors, grantors, or laws or regulations of other governments. The District first applies restricted resources when an expense is incurred for purposes for which both restricted and unrestricted net position is available. The government-wide financial statements report $6,583,366 of restricted net position.

Estimates

The preparation of the financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results may differ from those estimates.

Budgetary Data

The budgetary process is prescribed by provisions of the California Education Code and requires the governing board to hold a public hearing and adopt an operating budget no later than July 1 of each year. The District governing board satisfied these requirements. The adopted budget is subject to amendment throughout the year to give consideration to unanticipated revenue and expenditures primarily resulting from events unknown at the time of budget adoption with the legal restriction that expenditures cannot exceed appropriations by major object account.

30

BANNING UNIFIED SCHOOL DISTRICT

NOTES TO FINANCIAL STATEMENTS JUNE 30, 2016

The amounts reported as the original budgeted amounts in the budgetary statements reflect the amounts when the original appropriations were adopted. The amounts reported as the final budgeted amounts in the budgetary statements reflect the amounts after all budget amendments have been accounted for. For budget purposes, on behalf payments have not been included as revenue and expenditures as required under generally accepted accounting principles.

Property Tax

Secured property taxes attach as an enforceable lien on property as of January 1. Taxes are payable in two instalhnents on November 1 and February 1 and become delinquent on December 10 and April 10, respectively. Unsecured property taxes are payable in one installment on or before August 31. The County of Riverside bills and collects the taxes on behalf of the District. Local property tax revenues are recorded when received.

Change in Accounting Principles

In February 2015, the GASB issued Statement No. 72, Fair Value Measurerrent and Application. This Statement addresses accounting and fmancial reporting issues related to fair value measurements. The definition of fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. This Statement provides guidance for determining a fair value measurement for financial reporting purposes. This Statement also provides guidance for applying fair value to certain investments and disclosures related to all fair value measurements.

The District has implemented the provisions of this Statement as of June 30, 2016.

In June 2015, the GASB issued Statement No. 73, Accounting and Financial Reporting for Pensions and Related Assets That Are Not ½ithi n the Scope of GASB Staterrent 68, and Arrendrrents to Certain PrOJisions of GASB Staterrents 67 and 68. The objective of this Statement is to improve the usefulness of information about pensions included in the general purpose external fmancial reports of State and local governments for making decisions and assessing accountability. This Statement results from a comprehensive review of the effectiveness of existing standards of accounting and financial reporting for all postemployment benefits with regard to providing decision­useful information, supporting assessments of accountability and inter-period equity, and creating additional transparency.

This Statement establishes requirements for defined benefit pensions that are not within the scope of Statement No. 68, Accounting and Financial Reporting for Pensions-an arrendrrent to GASB Staterrent No. 27, as well as for the assets accumulated for purposes of providing those pensions. In addition, it establishes requirements for defined contribution pensions that are not within the scope of GASB Statement No. 68. It also amends certain provisions of GASB Statement No. 67, Financial Reporting for Pension Plans-an arrendrrentto GASB Staterrent No. 25, and GASB Statement No. 68 for pension plans and pensions that are within their respective scopes.

The provisions in this Statement, effective as of June 30, 2016, include the provisions for assets accumulated for purposes of providing pensions through defined benefit plans and the amended provisions of GASB Statements No. 67 and No. 68. The District has implemented these provisions as of June 30, 2016. The provisions in this Statement related to defined benefit pensions that are not within the scope of GASB Statement No. 68 are effective for periods beginning after June 15, 2016.

31

BANNING UNIFIED SCHOOL DISTRICT

NOTES TO FINANCIAL STATEMENTS JUNE 30, 2016

In June 2015, the GASB issued Statement No. 76, The Hierarchy of Generally Accepted Accounting Principles for State and Local Governrrents. The objective of this Statement is to identify-in the context of the current governmental financial reporting environment-the hierarchy of generally accepted accounting principles (GAAP). The "GAAP hierarchy" consists of the sources of accounting principles used to prepare financial statements of State and local govermnental entities in conformity with GAAP and the framework for selecting those principles. This Statement reduces the GAAP hierarchy to two categories of authoritative GAAP and addresses the use of authoritative and non-authoritative literature in the event that the accounting treatment for a transaction or other event is not specified within a source of authoritative GAAP.

This Statement supersedes GASB Statement No. 55, The Hierarchy of Generally Accepted Accounting Pri nci pies for State and Local G overnrrents.

The District has implemented the provisions of this Statement as of June 30, 2016.

In December 2015, the GASB issued Statement No. 79, Certain External I nvestrrent Pools and Pool Participants. This Statement addresses accounting and financial reporting for certain external investment pools and pool participants. Specifically, it establishes criteria for an external investment pool to qualify for making the election to measure all of its investments at amortized cost for financial reporting purposes. An external investment pool qualifies for that reporting if it meets all of the applicable criteria established in this Statement. The specific criteria address (1) how the external investment pool transacts with participants; (2) requirements for portfolio maturity, quality, diversification, and liquidity; and (3) calculation and requirements of a shadow price. Significant noncompliance prevents the external investment pool from measuring all of its investments at amortized cost for financial reporting purposes. Professional judgment is required to determine if instances of noncompliance with the criteria established by this Statement during the reporting period, individually or in the aggregate, were significant.

If an external investment pool does not meet the criteria established by this Statement, that pool should apply the provisions in paragraph 16 of GASB Statement No. 31, Accounting and Financial Reporting for Certain I nvestrrents and for External I nvestrrent Pools, as amended. If an external investment pool meets the criteria in this Statement and measures all of its investments at amortized cost, the pool's participants also should measure their investments in that external investment pool at amortized cost for financial reporting purposes. If an external investment pool does not meet the criteria in this Statement, the pool's participants should measure their investments in that pool at fair value, as provided in paragraph 11 of GASB Statement No. 31, as amended.

This Statement establishes additional note disclosure requirements for qualifying external investment pools that measure all of their investments at amortized cost for fmancial reporting purposes and for governments that participate in those pools. Those disclosures, for both the qualifying external investment pools and their participants, include information about any limitations or restrictions on participant withdrawals.

The District has implemented the provisions of this Statement as of June 30, 2016.

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BANNING UNIFIED SCHOOL DISTRICT

NOTES TO FINANCIAL STATEMENTS JUNE 30, 2016

New Accouutiug Prououucemeuts

In June 2015, the GASB issued Statement No. 74, Financial Reporting for Posterrployrrent Benefit Plans Other Than Pension Plans. The objective of this Statement is to improve the usefulness of information about postemployment benefits other than pensions ( other postemployment benefits or OPEB) included in the general purpose external financial reports of State and local governmental OPEB plans for making decisions and assessing accountability. This Statement results from a comprehensive review of the effectiveness of existing standards of accounting and financial reporting for all postemployment benefits (pensions and OPEB) with regard to providing decision-useful information, supporting assessments of accountability and inter-period equity, and creating additional transparency.

This Statement replaces Statements No. 43, Financial Reporting for Posterrployrrent Benefit Plans Other Than Pension Plans, as amended, and No. 57, OPEB Measurerrents b{ Agent ErrplO{ers and Agent Multiple-ErrplO{er Plans. It also includes requirements for defined contribution OPEB plans that replace the requirements for those OPEB plans in Statement No. 25, Financial Reporting for Defined Benefit Pension Plans and Note Disclosures for Defined Contribution Plans, as amended, Statement No. 43, and Statement No. 50, Pension Disclosures.

The requirements of this Statement are effective for financial statements for periods beginning after June 15, 2016. Early implementation is encouraged.

In June 2015, the GASB issued Statement No. 75, Accounting and Financial Reporting for Posterrployrrent Benefits Other Than Pension. The primary objective of this Statement is to improve accounting and financial reporting by State and local govermnents for postemployment benefits other than pensions ( other postemployment benefits or OPEB). It also improves information provided by State and local govermnental employers about financial support for OPEB that is provided by other entities. This Statement results from a comprehensive review of the effectiveness of existing standards of accounting and financial reporting for all postemployment benefits (pensions and OPEB) with regard to providing decision-useful information, supporting assessments of accountability and inter-period equity, and creating additional transparency.

This Statement replaces the requirements of Statements No. 45, Accounting and Financial Reporting b{ ErrplO{ers for PosterrplO{rrent Benefits Other Than Pensions, as amended, and No. 57, OPEB Measurerrents b{ Agent ErrplO{ers and Agent Multiple-£rrplO{er Plans, for OPEB. Statement No. 74, Financial Reporting for Posterrployrrent Benefit Plans Other Than Pension Plans, establishes new accounting and financial reporting requirements for OPEB plans.

The requirements of this Statement are effective for financial statements for periods beginning after June 15, 2017. Early implementation is encouraged.

In August 2015, the GASB issued Statement No. 77, TaxAbaterrent Disclosures. This Statement requires governments that enter into tax abatement agreements to disclose the following information about the agreements:

• Brief descriptive information, such as the tax being abated, the authority under which tax abatements are provided, eligibility criteria, the mechanism by which taxes are abated, provisions for recapturing abated taxes, and the types of commitments made by tax abatement recipients

• The gross dollar amount of taxes abated during the period • Commitments made by a government, other than to abate taxes, as part of a tax abatement agreement

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BANNING UNIFIED SCHOOL DISTRICT

NOTES TO FINANCIAL STATEMENTS JUNE 30, 2016

The requirements of this Statement are effective for financial statements for periods beginning after December 15, 2015. Early implementation is encouraged.

In December 2015, the GASB issued Statement No. 78, Pensions PrOJided through Certain Multiple-£rrplO{er Defined Benefit Pension Plans. The objective of this Statement is to address a practice issue regarding the scope and applicability of GASB Statement No. 68, Accounting and Financial Reporting for Pensions-an arrendrrent to GASB Staterrent No. 27. This issue is associated with pensions provided through certain multiple-employer defined benefit pension plans and to State or local governmental employers whose employees are provided with such pensions.

Prior to the issuance of this Statement, the requirements ofGASB Statement No. 68 applied to the financial statements of all State and local governmental employers whose employees are provided with pensions through pension plans that are administered through trusts that meet the criteria in paragraph 4 of that Statement.

This Statement amends the scope and applicability of GASB Statement No. 68 to exclude pensions provided to employees of State or local governmental employers through a cost-sharing multiple-employer defined benefit pension plan that (1) is not a State or local governmental pension plan; (2) is used to provide defined benefit pensions both to employees of State or local governmental employers and to employees of employers that are not State or local governmental employers; and (3) has no predominant State or local governmental employer ( either individually or collectively with other State or local governmental employers that provide pensions through the pension plan). This Statement establishes requirements for recognition and measurement of pension expense, expenditures, and liabilities; note disclosures; and required supplementary information for pensions that have the characteristics described above.

The requirements of this Statement are effective for reporting periods beginning after December 15, 2015. Early implementation is encouraged.

In January 2016, the GASB issued Statement No. 80, Blending Requirerrents for Certain Corrponent Units-an arrendrrent to GASB Staterrent No. 14. The objective of this Statement is to improve financial reporting by clarifying the financial statement presentation requirements for certain component units. This Statement amends the blending requirements established in paragraph 53 ofGASB Statement No. 14, The Financial Reporting Entity. The additional criterion requires blending of a component unit incorporated as a not-for-profit corporation in which the primary government is the sole corporate member. The additional criterion does not apply to component units included in the financial reporting entity pursuant to the provisions of GASB Statement No. 39, Detemini ng Whether Certain Organizations Are Corrponent Units-an arrendrrentto GASB Staterrent No. 14.

The requirements of this Statement are effective for reporting periods beginning after June 15, 2016. Early implementation is encouraged.

In March 2016, the GASB issued Statement No. 81, Irrevocable Split-I nterestAgreerrents. The objective of this Statement is to improve accounting and financial reporting for irrevocable split-interest agreements by providing recognition and measurement guidance for situations in which a government is a beneficiary of the agreement.

34

BANNING UNIFIED SCHOOL DISTRICT

NOTES TO FINANCIAL STATEMENTS JUNE 30, 2016

This Statement requires that a government that receives resources pursuant to an irrevocable split-interest agreement recognize assets, liabilities, and deferred inflows of resources at the inception of the agreement. Furthermore, this Statement requires that a government recognize assets representing its beneficial interests in irrevocable split-interest agreements that are administered by a third party, if the government controls the present service capacity of the beneficial interests. This Statement requires that a government recognize revenue when the resources become applicable to the reporting period.

The requirements of this Statement are effective for financial statements for periods beginning after December 15, 2016, and should be applied retroactively. Early implementation is encouraged.

In March 2016, the GASB issued Statement No. 82, Pension Issues-an arrendrrent ofGASB Staterrents No. 67, No. 68, and No. 73. The objective of this Statement is to address certain issues that have been raised with respect to GASB Statement No. 67, Financial Reporting for Pension Plans-an arrendrrentto GASB Staterrent No. 25, GASB Statement No. 68, Accounting and Financial Reporting for Pensions-an arrendrrentto GASB Staterrent No. 27, and GASB Statement No. 73, Accounting and Financial Reporting for Pensions and Related Assets That Are Not ½ithin the Scope of GASB Staterrent 68, and Arrendrrents to Certain PrOJisions of GASB Staterrents 67 and 68. Specifically, this Statement addresses issues regarding (1) the presentation of payroll-related measures in required supplementary information; (2) the selection of assumptions and the treatment of deviations from the guidance in an Actuarial Standard of Practice for financial reporting purposes; and (3) the classification of payments made by employers to satisfy employee (plan member) contribution requirements.

The requirements of this Statement are effective for reporting periods beginning after June 15, 2016, except for the requirements of this Statement for the selection of assumptions in a circumstance in which an employer's pension liability is measured as of a date other than the employer's most recent fiscal year end. In that circumstance, the requirements for the selection of assumptions are effective for that employer in the first reporting period in which the measurement date of the pension liability is on or after June 15, 2017. Early implementation is encouraged.

NOTE 2 - DEPOSITS AND INVESTMENTS

Summary of Deposits and Investments

Deposits and investments as of June 30, 2016, are classified in the accompanying financial statements as follows:

Governmental activities Fiduciary funds

Total Deposits and Investments

35

$ 14,495,987 198,432

$ 14,694,419

BANNING UNIFIED SCHOOL DISTRICT

NOTES TO FINANCIAL STATEMENTS JUNE 30, 2016

Deposits and investments as of June 30, 2016, consist of the following:

Cash on hand and in banks Cash in revolving Investments

Total Deposits and Investments

Policies and Practices

$ 97,738 10,000

14,586,681 $ 14,694,419

The District is authorized under California Government Code to make direct investments in local agency bonds, notes, or warrants within the State; U.S. Treasury instruments; registered State warrants or treasury notes; securities of the U.S. Government, or its agencies; bankers acceptances; commercial paper; certificates of deposit placed with commercial banks and/or savings and loan companies; repurchase or reverse repurchase agreements; medium term corporate notes; shares of beneficial interest issued by diversified management companies, certificates of participation, obligations with first priority security; and collateralized mortgage obligations.

Investment in County Treasury - The District is considered to be an involuntary participant in an external investment pool as the District is required to deposit all receipts and collections of monies with their County Treasurer (Education Code Section 41001). The fair value of the District's investment in the pool is reported in the accounting financial statements at amounts based upon the District's pro-rata 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.

36

BANNING UNIFIED SCHOOL DISTRICT

NOTES TO FINANCIAL STATEMENTS JUNE 30, 2016

General Anthorizations

Limitations as they relate to interest rate risk, credit risk, and concentration of credit risk are indicated in the schedules below:

Maximum Maximum Maximum Authorized Remaining Percentage Investment

Investment Type Maturity of Portfolio in One Issuer Local Agency Bonds, Notes, Warrants 5 years None None Registered State Bonds, Notes, Warrants 5 years None None U.S. Treasury Obligations 5 years None None U.S. Agency Securities 5 years None None Banker's Acceptance 180 days 40% 30% Commercial Paper 270 days 25% 10% Negotiable Certificates of Deposit 5 years 30% None Repurchase Agreements 1 year None None Reverse Repurchase Agreements 92 days 20% of base None Medium-Term Corporate Notes 5 years 30% None Mutual Funds NIA 20% 10% Money Market Mutual Funds NIA 20% 10% Mortgage Pass-Through Securities 5 years 20% None County Pooled Investment Funds NIA None None Local Agency Investment Fund (LAIF) NIA None None Joint Powers Authority Pools NIA None None

Authorized Under Debt Agreements

Investments of debt proceeds held by bond trustees are governed by provisions of the debt agreements, rather than the general provisions of the California Government Code. These provisions allow for the acquisition of investment agreements with maturities ofup to 30 years.

Interest Rate Risk

Interest rate risk is the risk that changes in market interest rates will adversely affect the fair value of an investment. Generally, the longer the maturity of an investment the greater the sensitivity of its fair value to changes in market interest rates. The District does not have a formal investment policy that limits investment maturities as a means of managing its exposure to fair value losses arising from increasing interest rates.

37

BANNING UNIFIED SCHOOL DISTRICT

NOTES TO FINANCIAL STATEMENTS JUNE 30, 2016

Specific Identification

The District monitors the interest rate risk inherent in its portfolio by measuring the weighted average maturity of its portfolio. Information about the weighted average maturity of the District's portfolio is presented in the following schedule:

Investment Type Riverside County Investment Pool

Credit Risk

Fair Value

$ 14,608,561

Weighted Average Days to Maturity

420

Credit risk is the risk that an issuer of an investment will not fulfill its obligation to the holder of the investment. This is measured by the assignment of a rating by a nationally recognized statistical rating organization. The investments with the Riverside County Investment Pool have been rated AAA/Vl by Fitch Ratings.

Custodial Credit Risk - Deposits

This is the risk that in the event of a bank failure, the District's deposits may not be returned to it. The District does not have a policy for custodial credit risk for deposits. However, the California Government Code requires that a financial institution secure deposits made by State or local governmental units by pledging securities in an undivided collateral pool held by a depository regulated under State law (unless so waived by the governmental unit). The market value of the pledged securities in the collateral pool must equal at least 110 percent of the total amount deposited by the public agency. California law also allows financial institutions to secure public deposits by pledging first trust deed mortgage notes having a value of 150 percent of the secured public deposits and letters of credit issued by the Federal Home Loan Bank of San Francisco having a value of 105 percent of the secured deposits. As of June 30, 2016, the District had no balances exposed to custodial credit risk. All balances were fully insured.

NOTE 3 - FAIR VALUE MEASUREMENTS

The District categorizes the fair value measurements of its investments based on the hierarchy established by generally accepted accounting principles. The fair value hierarchy, which has three levels, is based on the valuation inputs used to measure an asset's fair value. The following provides a summary of the hierarchy used to measure fair value:

Level 1 - Quoted prices in active markets for identical assets that the District has the ability to access at the measurement date. Level 1 assets may include debt and equity securities that are traded in an active exchange market and that are highly liquid and are actively traded in over-the-counter markets.

38

BANNING UNIFIED SCHOOL DISTRICT

NOTES TO FINANCIAL STATEMENTS JUNE 30, 2016

Level 2 - Observable inputs, other than Level 1 prices, such as quoted prices for similar assets in active markets, quoted prices for identical or similar assets in markets that are not active, or other inputs that are observable, such as interest rates and curves observable at commonly quoted intervals, implied volatilities, and credit spreads. For financial reporting purposes, if an asset has a specified term, a Level 2 input is required to be observable for substantially the full term of the asset.

Level 3 - Unobservable inputs should be developed using the best information available under the circumstances, which might include the District's own data. The District should adjust that data if reasonably available information indicates that other market participants would use different data or certain circumstances specific to the District are not available to other market participants.

Uncategorized - Investments in the Riverside County Treasury Investment Pool are not measured using the input levels above because the District's transactions are based on a stable net asset value per share. All contributions and redemptions are transacted at $1.00 net asset value per share.

The District's fair value measurements are as follows at June 30, 2016:

Investment Type Riverside County Investment Pool

NOTE 4 - RECEIVABLES

Fair Value $14,608,561

Uncategorized $ 14,608,561

Receivables at June 30, 2016, consisted of intergovernmental grants, entitlements, interest, and other local sources. All receivables are considered collectible in full.

Non-Major Total

General Cafeteria Govermnental Govermnental Fiduciary

Fund Fund Funds Activities Fund

Federal Government

Categorical aid $ 381,268 $ 620,570 $ $ 1,001,838 $

State Government

Categorical aid 115,728 46,164 28,621 190,513

Lottery 494,384 494,384

SELP A Master Plan 587,875 587,875

Local Government

Interest 12,452 3,034 812 16,298 179

Other Local Sources 768,452 1,850 360,000 1,130,302 Total $ 2,360,159 $ 671,618 $ 389,433 $ 3,421,210 $ 179

39

BANNING UNIFIED SCHOOL DISTRICT

NOTES TO FINANCIAL STATEMENTS JUNE 30, 2016

NOTE 5 - CAPITAL ASSETS

Capital asset activity for the fiscal year ended June 30, 2016, was as follows:

Governmental Activities Capital Assets Not Being Depreciated

Land Construction in process

Total Capital Assets Not Being Depreciated

Capital Assets Being Depreciated Improvement of sites Buildings Equipment

Total Capital Assets Being Depreciated

Less Accumulated Depreciation Improvement of sites Buildings Equipment

Total Accumulated Depreciation

Governmental Activities Capital Assets, Net

Balance July 1, 2015

$ 1,799,596 2,960,006

4,759,602

3,053,972 92,052,198

5,878,930

100,985,100

2,859,815 18,971,057 4,474,050

26,304,922 $ 79,439,780

Additions

$ 50,801 316,831

367,632

106,589 334,246 723,283

1,164,118

28,662 1,843,823

405,165

2,277,650

$

Balance Deductions June 30, 2016

$ 1,850,397 3,276,837

5,127,234

3,160,561 92,386,444

86,900 6,515,313

86,900 102,062,318

2,888,477 20,814,880

86,900 4,792,315

86,900 $ (745,900) $

28,495,672 $ 78,693,880

=====

Depreciation expense was charged as a direct expense to governmental functions as follows:

Governmental Activities Instruction Supervision of instruction Home-to-school transportation Food services Data processing All other administration Plant services

Total Depreciation Expenses All Activities

40

$ 2,166,403 6,621 7,919

12,717 10,236 55,246 18,508

$ 2,277,650

BANNING UNIFIED SCHOOL DISTRICT

NOTES TO FINANCIAL STATEMENTS JUNE 30, 2016

NOTE 6 - INTERFUND TRANSACTIONS

Interfund Receivables/Payables (Dne To/Dne From)

Interfund receivable and payable balances arise from interfund transactions and are recorded by all funds affected in the period in which transactions are executed. Interfund receivable and payable balances at June 30, 2016, between major funds are as follows:

Due From

Non-Major

General Cafeteria Govermnental

Due To Fund Fund Funds Total

General Fund $ $ 126,171 $ 12,676 $ 138,847

Cafeteria Fund 5,687 5,687 Non-Major Governmental Funds 29,276 29,276

Total $ 34,963 $ 126,171 $ 12,676 $ 173,810

A balance of $126,063 is due to the General Fund from the Cafeteria Fund for indirect costs.

The remaining balance resulted from the time lag between the date that ( 1) interfund goods and services are provided or reimbursable expenditures occur, (2) transactions are recorded in the accounting system, and (3) payments between funds are made.

NOTE7-ACCOUNTSPAYABLE

Accounts payable at June 30, 2016, consisted of the following:

Non-Major Total

General Cafeteria Governmental Govermnental

Fund Fund Funds Activities

Vendor payables $ 2,099,743 $ 39,901 $ 26,382 $ 2,166,026

LCFF apportiomnent 432,297 432,297

Salaries and benefits 187,067 10,268 197,335

Construction 203,145 31,997 235,142 Total $ 2,922,252 $ 50,169 $ 58,379 $ 3,030,800

41

BANNING UNIFIED SCHOOL DISTRICT

NOTES TO FINANCIAL STATEMENTS JUNE 30, 2016

NOTE 8 - UNEARNED REVENUE

Unearned revenue at June 30, 2016, consisted of the following:

Federal financial assistance

State categorical aid Total

NOTE 9 - LONG-TERM OBLIGATIONS

Summary

The changes in the District's long-term obligations during the year consisted of the following:

Balance Balance July 1, 2015 Additions Deductions June 30, 2016

General obligation bonds $ 46,339,796 $29,831,306 $32,260,000 $ 43,911,102 Premium on issuance 3,123,530 5,513,238 203,737 8,433,031 Capital leases 133,860 143,284 68,739 208,405 Accumulated vacation 616,930 35,583 652,513 Net OPEB obligation 1,805,164 809,922 393,369 2,221,717

$ 52,019,280 $36,333,333 $32,925,845 $ 55,426,768

General

Fund

$ 101,409

146,229 $ 247,638

Due in One Year

$ 1,705,000

73,213

$ 1,778,213

General Obligation Bonds are paid from the Bond Interest and Redemption Fund from tax revenues collected from the property owners within the boundaries of the District. Capital leases payments come from the unrestricted resources of the General Fund and the Capital Facilities Fund. The Accumulated Vacation liability and Net OPEB obligation are liquidated in the fund which the employee who earned the benefit is paid from.

42

BANNING UNIFIED SCHOOL DISTRICT

NOTES TO FINANCIAL STATEMENTS JUNE 30, 2016

Bonded Debt

The outstanding general obligation bonded debt is as follows:

Bonds

Issue Maturity Interest Original Outstanding

Date Date Rate Issue July 1, 2015 Issued

3/13/03 8/1/17 2.00%-4.25% $ 7,999,674 $ 869,141 $

6/4/04 8/1/25 3.00%-5.00% 4,000,037 511,608

2/8/07 8/1/31 4.00%-5.00% 13,500,000 11,725,000

7/9/08 8/1/33 3.50%-5.25% 23,999,288 25,209,047

7/31/14 8/1/27 2.00%-5.00% 8,025,000 8,025,000

6/30/16 8/1/33 2.00%-5.00% 29,400,000 29,400,000

$46,339,796 $29,400,000

2002 Election, Series A and Series B

Bonds

Capital Outstanding

Appreciation Redeemed June 30, 2016

$ 58,536 $ 300,000 $ 627,677

55,242 566,850

11,300,000 425,000

317,528 20,510,000 5,016,575

150,000 7,875,000

29,400,000

$ 431,306 $32,260,000 $43,911,102

Bonds were authorized at an election of the registered voters of the District held on November 5, 2002, at which more than 55 percent of the voters authorized the issuance and sale of $12 million Measure L General Obligation bonds. The bonds are general obligations of the District. The County is obligated to levy ad valorern taxes upon all property within the District for the payment of interest and principal of the bonds. In March 2003, the District issued current interest and capital appreciation bonds, 2002 Series A, General Obligation Bonds, in the amount of $7,999,674. The bonds were issued to finance the acquisition, construction, and modernization of property and school facilities. In June 2004, the District issued current interest and capital appreciation bonds, 2002 Series A, General Obligation Bonds, in the amount of $4,000,037. The bonds were issued to finance the acquisition, construction, and modernization of property and school facilities.

2006 Election, Series A and Series B

Bonds were authorized at an election of the registered voters of the District held on November 7, 2006, at which more than 5 5 percent of the voters authorized the issuance and sale of $63 million Measure R General Obligation bonds. The bonds are general obligations of the District. The County is obligated to levy ad valorern taxes upon all property within the District for the payment of interest and principal of the bonds. In February 2007, the District issued current interest bonds, 2006 Series A, General Obligation Bonds, in the amount of $13,500,000. The bonds were issued to fmance the acquisition, construction, and modernization of property and school facilities. In July 2008, the District issued current interest and capital appreciation bonds, 2006 Series A, General Obligation Bonds, in the amount of $23,999,288. The bonds were issued to finance the acquisition, construction, and modernization of property and school facilities.

2014 General Obligation Refunding Bonds

In July 2014, the District issued $8,025,000 of the 2014 General Obligation Refunding Bonds. The bonds mature on August 1, 2027, with interest yields ranging from 2.00 to 5.00 percent. The proceeds from the sale of the bonds were used to refund a portion of the outstanding 2002 General Obligation Bonds, Series A, and B.

43

BANNING UNIFIED SCHOOL DISTRICT

NOTES TO FINANCIAL STATEMENTS JUNE 30, 2016

2016 General Obligation Refnnding Bonds

In June 2016, the District issued $29,400,000 of the 2016 General Obligation Refunding Bonds. The bonds mature on August 1, 2033, with interest yields ranging from 2.00 to 5.00 percent. The proceeds from the sale of the bonds were used to refund a portion of the outstanding 2006 General Obligation Bonds, Series A, and B. The refunding resulted in a cumulative cash flow saving of $7,271,483 over the life of the new debt and an economic gain of $5,703,259 based on the difference between the present value of the existing debt service requirements and the new debt service requirements discounted at 2.3 5 percent.

Debt Service Requirements to Maturity

The bonds mature through 2034 as follows:

Principal

(Including Accreted Interest to Accreted

Fiscal Year Interest to Date) Maturity Interest Total

2017 $ 1,695,679 $ 1,181,576 $ 1,220,000 $ 4,097,255

2018 1,241,998 1,718,190 760,000 $ 3,720,188

2019 1,400,000 2,162,951 855,000 4,417,951

2020 1,469,312 1,579,763 1,045,000 4,094,075

2021 1,580,774 1,542,413 1,170,000 4,293,187

2022-2026 10,016,489 6,795,563 8,425,000 25,237,052

2027-2031 15,506,850 5,488,044 13,961,850 34,956,744

2032-2034 11,000,000 660,400 11,000,000 22,660,400 Total $ 43,911,102 $ 21,128,900 $ 38,436,850 $103,476,852

Accumulated Unpaid Employee Vacation

The long-term portion of accumulated unpaid employee vacation for the District at June 30, 2016, amounted to $652,513.

Net Other Postem ployment Benefits (OPEB) Obligation

The District's annual required contribution for the year ended June 30, 2016, was $724,177, and contributions made by the District during the year were $325,065. Interest on the net OPEB obligation and adjustments to the annual required contribution were $85,745 and $(68,304), respectively, which resulted in an increase to the net OPEB obligation of $416,553. As of June 30, 2016, the net OPEB obligation was $2,221,717. See Note 12 for additional information regarding the net OPEB obligation and the postemployment benefits plan.

44

BANNING UNIFIED SCHOOL DISTRICT

NOTES TO FINANCIAL STATEMENTS JUNE 30, 2016

Capital Leases

The District has entered into agreements to lease various facilities and equipment. Such agreements are, in substance, purchases ( capital leases) and are reported as capital lease obligations. The District's liability on lease agreements with options to purchase is summarized below:

Balance, July 1, 2015 Additions Payments Balance, June 30, 2016

The capital leases have minimum lease payments as follows:

Year Ending June 30,

2017 2018 2019

2020 Total

Less: Amount Representing Interest Present Value of Minimum Lease Payments

$

$

School Buses Relocatables

46,308 $ 105,912 157,731 46,983 36,312

157,056 $ 69,600

Leased equipment under capital leases in capital assets at June 30, 2016, includes the following:

Equipment Less: Accumulated depreciation

Total

$

$

Total 152,220 157,731 83,295

226,656

Lease Payment

$ 83,294 80,270 31,546

31,546 226,656

18,251 $ 208,405

$ 560,546 (209,801)

$ 350,745

Amortization of leased buildings and equipment under capital assets is included with depreciation expense.

45

BANNING UNIFIED SCHOOL DISTRICT

NOTES TO FINANCIAL STATEMENTS JUNE 30, 2016

NOTE 10 - FUND BALANCES

Fund balances are composed of the following elements:

Bond Interest Non-Major

General Cafeteria and Redemption Governmental

Fund Fund Fund Funds Total

Nonspendable

Revolving cash $ 10,000 $ $ $ $ 10,000

Stores inventories 6,460 16,742 23,202

Total Nonspendable 16,460 16,742 33,202

Restricted

Legally restricted programs 1,741,130 1,967,273 15,167 3,723,570

Capital projects 774,631 774,631

Debt services 2,457,667 2,457,667

Total Restricted 1,741,130 1,967,273 2,457,667 789,798 6,955,868

Assigned

Worker's compensation safety credits 2,472 2,472

1Aandated cost reimbursements 713,449 713,449

Special projects direct transfer 6,660 6,660

J'v1AA reimbursements 176,793 176,793

Donations 11,404 11,404

Supplemental and concentration 2,444,907 2,444,907

Future employee fixed costs increase 616,904 616,904

OPEB actuarial obligation 500,091 500,091

Total Assigned 4,472,680 4,472,680

Unassigned

Reserve for economic uncertainties 2,251,451 2,251,451

Remaining unassigned 948,760 948,760

Total Unassigned 3,200,211 3,200,211

Total $ 9,430,481 $ 1,984,015 $ 2,457,667 $ 789,798 $ 14,661,961

46

BANNING UNIFIED SCHOOL DISTRICT

NOTES TO FINANCIAL STATEMENTS JUNE 30, 2016

NOTE 11 - EXPENDITURES (BUDGET VERSUS ACTUAL)

At June 30, 2016, the District's General Fund and Cafeteria Fund exceeded the budgeted amount in total as follows:

Funds General Fund

Cafeteria Fund

Expenditures and Other Uses Budget Actual Excess

$ 49,685,744

$ 2,728,666

$ 50,175,508

$ 3,168,583

$ 489,764

$ 439,917

NOTE 12 - POSTEMPLOYMENT HEALTH CARE PLAN AND OTHER POSTEMPLOYMENT BENEFITS (OPEB) OBLIGATION

Plan Description

The Postemployment Benefits Plan (the Plan) is a single-employer defined benefit health care plan administered by the Banning Unified School District. The Plan provides medical and dental insurance benefits to eligible retirees and their spouses. Membership of the Plan consists of 37 retirees and beneficiaries currently receiving benefits and 505 active plan members as of the most recent actuarial study.

Contribution Information

The contribution requirements of plan members and the District are established and may be amended by the District and the Teachers Association (CEA), the local California Service Employees Association (CSEA), and unrepresented groups. The required contribution is based on projected pay-as-you-go financing requirements. For fiscal year 2015-2016, the District contributed $325,065 to the Plan, all of which was used for current premiums.

47

BANNING UNIFIED SCHOOL DISTRICT

NOTES TO FINANCIAL STATEMENTS JUNE 30, 2016

Annnal OPEB Cost and Net OPEB Obligation

The District's annual OPEB cost (expense) is calculated based on the annual required contribution of the employer (ARC), an amount actuarially determined in accordance with the parameters ofGASB Statement No. 45. The ARC represents a level of funding that, if paid on an ongoing basis, is projected to cover normal cost each year and amortize any unfunded actuarial accrued liabilities (U AAL) ( or funding excess) over a period not to exceed thirty years. The following table shows the components of the District's annual OPEB cost for the year, the amount actually contributed to the Plan, and changes in the District's net OPEB obligation to the Plan:

Annual required contribution Interest on net OPEB obligation Adjustment to annual required contribution Annual OPEB cost (expense) Contributions made Decrease in net OPEB obligation Net OPEB obligation, beginning of year Net OPEB obligation, end of year

Trend Information

$ 724,177 85,745

(68,304) 741,618

(325,065) 416,553

1,805,164 $ 2,221,717

Trend information for annual OPEB cost, the percentage of annual OPEB cost contributed to the Plan, and the net OPEB obligation is as follows:

Year Ended June 30,

2014 2015 2016

Funded Status and Funding Progress

$

Annual OPEB Cost 740,757 740,730 741,618

Actual Employer

Contribution $ 743,568

648,757 325,065

Percentage Contributed

100% 88% 44%

A schedule of funding progress as of the most recent actuarial valuation is as follow:

Actuarial

Accrued

Liability Unfunded Actuarial Actuarial (AAL)- AAL Funded Valuation Value of Entry Age (UAAL) Ratio Covered

Date Assets (a) Normal (b) (b - a) (a/ b) Payroll (c) April I, 2014 $ $ 5,191,319 $ 5,191,319 0% $ 25,017,192

48

NetOPEB Obligation

$ 1,713,191 1,805,164 2,221,717

UAAL as a Percentage of

Covered Payroll ([b-a]/c)

21%

BANNING UNIFIED SCHOOL DISTRICT

NOTES TO FINANCIAL STATEMENTS JUNE 30, 2016

Actuarial valuations of an ongoing plan involve estimates of the value of reported amounts and assumptions about the probability of occurrence of events far into the future. Examples include assumptions about future employment, investment returns, mortality, and the health care cost trend. Amounts determined regarding the funded status of the Plan and the annual required contributions of the employer are subject to continual revision as actual results are compared with past expectations and new estimates are made about the future. The Schedule of Funding Progress, presented as required supplementary information following the notes to the fmancial statements, presents multiyear trend information about whether the actuarial value of plan assets is increasing or decreasing over time relative to the actuarial accrued liabilities for benefits.

Actuarial Methods and Assumptions

Projections of benefits for financial reporting purposes are based on the substantive plan (the plan as understood by the employer and the plan members) and include the types of benefits provided at the time of each valuation and the historical pattern of sharing of benefit costs between the employer and plan members to that point. The actuarial methods and assumptions used include techniques that are designed to reduce the effects of short-term volatility in actuarial accrued liabilities and the actuarial value of assets, consistent with the long-term perspective of the calculations.

In the April 1, 2014, actuarial valuation, the entry age normal method was used. The actuarial assumptions included a 4. 75 percent investment rate of return (net of administrative expenses), based on the Plan being funded in an irrevocable employee benefit trust invested in a combined equity and fixed income portfolio. Health care cost trend rates were estimated at an ultimate rate of four percent. The U AAL is being amortized using the level percentage payroll method. The remaining amortization period at June 30, 2016, was 23 years. The actuarial value of assets was not determined in this actuarial valuation.

NOTE 13 - RISK MANAGEMENT

The District is exposed to various risks of loss related to torts; theft, damage and destruction of assets; errors and omissions; injuries to employees; life and health of employees; and natural disasters.

Property and Liability

The District is exposed to various risks of loss related to torts; theft of, damage to, and destruction of assets; errors and omissions; injuries to employees and natural disasters. During fiscal year ending June 30, 2016, the District contracted with Riverside Schools' Insurance Authority (RSIA) for property and liability insurance coverage. Settled claims have not exceeded this commercial coverage in any of the past three years. There has not been a significant reduction in coverage from the prior year.

Workers' Compensation

For fiscal year 2016, the District participated in the Protected Insurance Program for Schools (PIPS). The intent of the PIPS is to achieve the benefit of a reduced premium for the District by virtue of its grouping and representation with other participants in the PIPS. The workers' compensation experience of the participating districts is calculated as one experience and a common premium rate. Each participant pays its workers' compensation premium based on its individual rate.

49

BANNING UNIFIED SCHOOL DISTRICT

NOTES TO FINANCIAL STATEMENTS JUNE 30, 2016

Employee Medical Benefits

The District has contracted with the Riverside County Employer/Employee Partnership (REEP) to provide employee health benefits.

NOTE 14 - EMPLOYEE RETIREMENT SYSTEMS

Qualified employees are covered under multiple-employer defined benefit pension plans maintained by agencies of the State of California. Academic employees are members ofCalSTRS and classified employees are members ofCalPERS.

For the fiscal year ended June 30, 2016, the District reported net pension liabilities, deferred outflows of resources, deferred inflows of resources, and pension expense for each of the above plans as follows:

Collective Collective

Net Pension Deferred Outflows

Pension Plan Liability of Resources

CalSTRS $ 24,692,997 $ 4,040,665

CalPERS 7,828,815 2,942,537 Total $ 32,521,812 $ 6,983,202

The details of each plan are as follows:

California State Teachers' Retirement System (CalSTRS)

Plan Description

Collective Collective

Deferred Inflows Pension

of Resources Expense

$ 4,916,421 $ 1,732,494

2,190,249 719,534 $ 7,106,670 $ 2,452,028

The District contributes to the State Teachers' Retirement Plan (STRP) administered by CalSTRS. STRP is a cost-sharing multiple-employer public employee retirement system defined benefit pension plan. Benefit provisions are established by State statutes, as legislatively amended, within the State Teachers' Retirement Law.

A full description of the pension plan regarding benefit provisions, assumptions (for funding, but not accounting purposes), and membership information is listed in the June 30, 2014, annual actuarial valuation report, Defined Benefit Program Actuarial Valuation. This report and CalSTRS audited financial information are publically available reports that can be found on the CalSTRS website under Publications at: http://www.calstrs.com/member-pub Ii cations.

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BANNING UNIFIED SCHOOL DISTRICT

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Benefits Provided

The STRP provides retirement, disability, and survivor benefits to beneficiaries. Benefits are based on members' fmal 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.

The STRP is comprised of four programs: Defmed Benefit Program, Defined Benefit Supplement Program, Cash Balance Benefit Program, and Replacement Benefits Program. The STRP holds assets for the exclusive purpose of providing benefits to members and beneficiaries of these programs. CalSTRS also uses plan assets to defray reasonable expenses of administering the STRP. Although CalSTRS is the administrator of the STRP, the State is the sponsor of the STRP and obligor of the trust. In addition, the State is both an employer and nonemployer contributing entity to the STRP.

The District contributes exclusively to the STRP Defmed Benefit Program, thus disclosures are not included for the other plans.

The STRP provisions and benefits in effect at June 30, 2016, are summarized as follows:

Hire date Benefit formula

Benefit vesting schedule

Benefit payments

Retirement age

Monthly benefits as a percentage of eligible compensation

Required employee contribution rate

Required employer contribution rate

Required State contribution rate

Contributions

STRP Defined Benefit Program

On or before December 31, 2012

2%at60

5 years of service Monthly for life

60 2.0%- 2.4%

9.20%

10.73%

7.12589%

On or after January 1, 2013

2%at62

5 years of service Monthly for life

62 2.0%-2.4%

8.56%

10.73%

7.12589%

Required member, District, and State of California contribution rates are set by the California Legislature and Governor and detailed in Teachers' Retirement Law. The contribution rates are expressed as a level percentage of payroll using the entry age normal actuarial method. In accordance with AB 1469, employer contributions into the CalSTRS will be increasing to a total of 19.1 percent of applicable member earnings phased over a seven-year period. The contribution rates for each plan for the year ended June 30, 2016, are presented above, and the District's total contributions were $2,095,088.

51

BANNING UNIFIED SCHOOL DISTRICT

NOTES TO FINANCIAL STATEMENTS JUNE 30, 2016

Pension Liabilities, Pension Expense, and Deferred Ontflows ofResonrces and Deferred Inflows of Resonrces Related to Pensions

At June 30, 2016, the District reported a liability for its proportionate share of the net pension liability that reflected a reduction for State pension support provided to the District. The amount recognized by the District as its proportionate share of the net pension liability, the related State support, and the total portion of the net pension liability that was associated with the District were as follows:

Total Net Pension Liability, Including State Share:

District's proportionate share of net pension liability

State's proportionate share of the net pension liability associated with the District Total

$ 24,692,997

13,059,873 $ 37,752,870

The net pension liability was measured as of June 30, 2015. The District's proportion of the net pension liability was based on a projection of the District's long-term share of contributions to the pension plan relative to the projected contributions of all participating college districts and the State, actuarially determined. The District's proportionate share for the measurement periods of June 30, 2015 and June 30, 2014, was 0.0367 percent and 0.0376 percent, respectively, resulting in a net decrease in the proportionate share of 0.0009 percent.

For the year ended June 30, 2016, the District recognized pension expense of $1,723,494. In addition, the District recognized pension expense and revenue of $1,011,634 for support provided by the State. At June 30, 2016, the District reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources:

Pension contributions subsequent to measurement date

Net change in proportionate share of net pension liability Differences between projected and actual earnings on pension plan investments

Differences between expected and actual experience in the measurement of the total pension liability

Total

52

$

$

Deferred

Outflows of

Resources

2,095,088

1,945,577

4,040,665

Deferred

Inflows of

Resources

$

545,338

3,958,457

412,626 $ 4,916,421

BANNING UNIFIED SCHOOL DISTRICT

NOTES TO FINANCIAL STATEMENTS JUNE 30, 2016

The deferred outflow of resources related to pensions resulting from District contributions subsequent to the measurement date will be recognized as a reduction of the net pension liability in the subsequent fiscal year.

The deferred outflows/(inflows) of resources related to the difference between projected and actual earning on pension plan investments will be amortized over a closed five-year period and will be recognized in pension expense as follows:

Deferred

Year Ended Outflows/(Inflows)

June 30, of Resources

2017 $ (833,092)

2018 (833,092)

2019 (833,092)

2020 486,396 Total $ (2,012,880)

The deferred inflows of resources related to the net change in proportionate share of net pension liability and differences between expected and actual experience in the measurement of the total pension liability will be amortized over the Expected Average Remaining Service Life (EARSL) of all members that are provided benefits ( active, inactive, and retirees) as of the beginning of the measurement period. The EARSL for the 2014-2015 measurement period is seven years and will be recognized in pension expense as follows:

Deferred

Year Ended Outflows/(Inflows)

June 30, of Resources

2017 $ (159,661)

2018 (159,661)

2019 (159,661)

2020 (159,661)

2021 (159,661)

Thereafter (159,659) Total $ (957,964)

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BANNING UNIFIED SCHOOL DISTRICT

NOTES TO FINANCIAL STATEMENTS JUNE 30, 2016

Actuarial Methods and Assumptions

Total pension liability for STRP was determined by applying update procedures to a financial reporting actuarial valuation as of June 30, 2014, and rolling forward the total pension liability to June 30, 2015. The financial reporting actuarial valuation as of June 30, 2014, used the following methods and assumptions, applied to all prior periods included in the measurement:

Valuation date Measurement date Experience study Actuarial cost method Discount rate Investment rate of return Consumer price inflation Wage growth

June 30, 2014 June 30, 2015 July 1, 2006 through June 30, 2010 Entry age normal 7.60% 7.60% 3.00% 3.75%

CalSTRS uses custom mortality tables to best fit the patterns of mortality among its members. These custom tables are based on RP2000 series tables adjusted to fit CalSTRS experience.

The long-term expected rate of return on pension plan investments was determined using a building-block 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. Based on the model for CalSTRS consulting actuary's investment practice, a best estimate range was determined by assuming the portfolio is re-balanced annually and that the annual returns are lognormally distributed and independent from year to year to develop expected percentiles for the long-term distribution of annualized returns. The assumed asset allocation is based on the Teachers' Retirement Board of the California State Teachers' Retirement System (board) policy for target asset allocation in effect on February 2, 2012, the date the current experience study was approved by the board. Best estimates of 10-year geometric real rates of return and the assumed asset allocation for each major asset class used as input to develop the actuarial investment rate of return are summarized in the following table:

Long-Term

Assumed Asset Expected Real

Asset Class Allocation Rate of Return

Global equity 47% 4.50%

Private equity 12% 6.20%

Real estate 15% 4.35% Inflation sensitive 5% 3.20%

Fixed income 20% 0.20%

Cash/liquidity 1% 0.00%

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BANNING UNIFIED SCHOOL DISTRICT

NOTES TO FINANCIAL STATEMENTS JUNE 30, 2016

Discouut Rate

The discount rate used to measure the total pension liability was 7.60 percent. The projection of cash flows used to determine the discount rate assumed the contributions from plan members and employers will be made at statutory contribution rates. Projected inflows from investment earnings were calculated using the long-term assumed investment rate of return (7.60 percent) and assuming that contributions, benefit payments, and administrative expense occurred midyear. Based on these 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 total pension liability.

The following presents the District's proportionate share of the net pension liability calculated using the current discount rate, as well as what the net pension liability would be if it were calculated using a discount rate that is one percent lower or higher than the current rate:

Discount Rate

1% decrease (6.60%)

Current discount rate (7.60%)

1% increase (8.60%)

California Public Employees' Retirement System (CalPERS)

Plan Description

Net Pension

Liability

$ 37,284,504

24,692,997

14,228,439

Qualified employees are eligible to participate in the School Employer Pool (SEP) under CalPERS, a cost-sharing multiple-employer public employee retirement system defined benefit pension plan administered by CalPERS. Benefit provisions are established by State statutes, as legislatively amended, within the Public Employees' Retirement Law.

A full description of the pension plan regarding benefit provisions, assumptions (for funding, but not accounting purposes), and membership information is listed in the June 30, 2014, annual actuarial valuation report, Schools Pool Actuarial Valuation, 2014. This report and CalPERS audited financial information are publically available reports that can be found on the Ca!PERS website under Forms and Publications at: https :/ /www.calpers.ca.gov/page/forms-publications.

55

BANNING UNIFIED SCHOOL DISTRICT

NOTES TO FINANCIAL STATEMENTS JUNE 30, 2016

Benefits Provided

CalPERS provides service retirement and disability benefits, annual cost ofliving adjustments, and death benefits to plan members who must be public employees 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 50 with statutorily reduced benefits. Members hired on or after January 1, 2013, with five years of total service are eligible to retire at age 52 with statutorily reduced benefits. All members are eligible for non-duty disability benefits after five years of service. The Basic Death Benefit is paid to any member's beneficiary if the member dies while actively employed. An employee's eligible survivor may receive the 1957 Survivor Benefit if the member dies while actively employed, is at least age 50 (or age 52 for members hired on or after January 1, 2013), and has at least five years of credited service. The cost of living adjustments for each plan are applied as specified by the Public Employees' Retirement Law.

The Ca!PERS provisions and benefits in effect at June 30, 2016, are summarized as follows:

Hire date

Benefit formula

Benefit vesting schedule

Benefit payments

Retirement age

Monthly benefits as a percentage of eligible compensation

Required employee contribution rate

Required employer contribution rate

Contributions

School Employer Pool (Ca!PERS)

On or before December 31, 2012

2% at 55

5 years of service

Monthly for life

55

1.1%-2.5%

7.000%

11.847%

On or after January 1, 2013

2% at 62

5 years of service

Monthly for life

62

1.0%-2.5%

6.000%

11.847%

Section 20814(c) of the California Public Employees' Retirement Law requires that the employer contribution rates for all public employers be determined on an annual basis by the actuary and shall be effective on July 1 following notice of a change in the rate. Total plan contributions are calculated through the Ca!PERS annual actuarial valuation process. The actuarially determined rate is the estimated amount necessary to finance the costs of benefits earned by employees during the year, with an additional amount to finance any unfunded accrued liability. The District is required to contribute the difference between the actuarially determined rate and the contribution rate of employees. The contribution rates are expressed as a percentage of annual payroll. The contribution rates for each plan for the year ended June 30, 2016, are presented above, and the total District contributions were $891,066.

56

BANNING UNIFIED SCHOOL DISTRICT

NOTES TO FINANCIAL STATEMENTS JUNE 30, 2016

Pension Liabilities, Pension Expense, and Deferred Ontflows ofResonrces and Deferred Inflows of Resonrces Related to Pensions

As of June 30, 2016, the District reported net pension liabilities for its proportionate share of the CalPERS net pension liability totaling $7,828,815. The net pension liability was measured as of June 30, 2015. The District's proportion of the net pension liability was based on a projection of the District's long-term share of contributions to the pension plan relative to the projected contributions of all participating school districts, actuarially determined. The District's proportionate share for the measurement periods of June 30, 2015 and June 30, 2014, was 0.0531 percent and 0.0503 percent, respectively, resulting in a net increase in the proportionate share of 0.0028 percent.

For the year ended June 30, 2016, the District recognized pension expense of $719,534. At June 30, 2016, the District reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources:

Pension contributions subsequent to measurement date

Net change in proportionate share of net pension liability Difference between projected and actual earnings on pension plan investments

Differences between expected and actual experience in the measurement of the total pension liability

Changes of assumptions

Total

$

$

Deferred

Outflows of

Resources

891,066

318,244

1,285,799

447,428

2,942,537

$

$

Deferred

Inflows of

Resources

155,360

1,553,865

481,024 2,190,249

The deferred outflows of resources related to pensions resulting from District contributions subsequent to the measurement date will be recognized as a reduction of the net pension liability in the subsequent fiscal year. The deferred outflows/(inflows) ofresources related to the difference between projected and actual earnings on pension plan investments will be amortized over a closed five-year period and will be recognized in pension expense as follows:

Deferred

Year Ended Outflows/(Inflows)

June 30, of Resources

2017 $ (196,505)

2018 (196,505)

2019 (196,505)

2020 321,449 Total $ (268,066)

57

BANNING UNIFIED SCHOOL DISTRICT

NOTES TO FINANCIAL STATEMENTS JUNE 30, 2016

The deferred outflows of resources related to the net change in proportionate share of net pension liability, changes of assumptions, and differences between expected and actual experience in the measurement of the total pension liability will be amortized over the EARSL of all members that are provided benefits ( active, inactive, and retirees) as of the beginning of the measurement period. The EARSL for the 2014-2015 measurement period is 3.9 years and will be recognized in pension expense as follows:

Year Ended

June 30,

2017

2018

2019 Total

Actuarial Methods and Assumptions

Deferred

Outflows/(Inflows)

of Resources

$ 20,474

$

20,474

88,340 129,288

Total pension liability for the SEP was determined by applying update procedures to a financial reporting actuarial valuation as of June 30, 2014, and rolling forward the total pension liability to June 30, 2015. The fmancial reporting actuarial valuation as of June 30, 2014, used the following methods and assumptions, applied to all prior periods included in the measurement:

Valuation date Measurement date Experience study Actuarial cost method Discount rate Investment rate of return Consumer price inflation Wage growth

June 30, 2014 June 30, 2015 July 1, 1997 through June 30, 2011 Entry age normal 7.65% 7.65% 2.75% Varies by entry age and service

Mortality assumptions are based on mortality rates resulting from the most recent Ca!PERS experience study adopted by the CalPERS Board. For purposes of the post-retirement mortality rates, those revised rates include five years of projected ongoing mortality improvement using Scale AA published by the Society of Actuaries.

58

BANNING UNIFIED SCHOOL DISTRICT

NOTES TO FINANCIAL STATEMENTS JUNE 30, 2016

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 pension fund cash flows. Using historical returns of all the funds' asset classes, expected compound returns were calculated over the short-term (first ten years) and the long­term (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 for each fund. The expected rate of return was set by calculating the single equivalent expected return that arrived at the same present value of benefits for cash flows as the one calculated using both short-term and long-term returns. The expected rate of return was then set equivalent to the single equivalent rate calculated above and rounded down to the nearest one quarter of one percent. The target asset allocation and best estimates of arithmetic real rates of return for each major asset class are summarized in the following table:

Asset Class Global equity

Global fixed income

Private equity

Real estate

Inflation sensitive Infrastructure and Forestland Liquidity

Discount Rate

Assumed Asset

Allocation

51%

19%

10%

10%

6% 2% 2%

Long-Term Expected Real

Rate of Return

5.25%

0.99%

6.83%

4.50%

0.45% 4.50% -0.55%

The discount rate used to measure the total pension liability was 7.65 percent. The projection of cash flows used to determine the discount rate assumed the contributions from plan members and employers will be made at statutory contribution rates. Based on these assumptions, the School Employer Pool 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 total pension liability.

The following presents the District's proportionate share of the net pension liability calculated using the current discount rate, as well as what the net pension liability would be if it were calculated using a discount rate that is one percent lower or higher than the current rate:

Discount Rate

1% decrease (6.65%)

Current discount rate (7.65%)

1% increase (8.65%)

59

Net Pension

Liability

$ 12,742,048

7,828,815

3,743,133

BANNING UNIFIED SCHOOL DISTRICT

NOTES TO FINANCIAL STATEMENTS JUNE 30, 2016

On Behalf Payments

The State of California makes contributions to CalSTRS on behalf of the District. These payments consist of State General Fund contributions to CalSTRS in the amount of $1,130,516 (7.12589 percent of annual payroll). Contributions are no longer appropriated in the annual Budget Act for the legislatively mandated benefits to CalPERS. Therefore, there is no on behalf contribution rate for CalPERS. Under accounting principles generally accepted in the United States of America, these amounts are to be reported as revenues and expenditures. Accordingly, these amounts have been recorded in these financial statements. On behalf payments have been excluded from the calculation of available reserves, and have not been included in the budgeted amounts reported in the General Fund-Budgetary Corrp3.rison Schedule.

NOTE 15 - COMMITMENTS AND CONTINGENCIES

Grants

The District received financial assistance from Federal and State agencies in the form of grants. The disbursement of funds received under these programs generally requires compliance with terms and conditions specified in the grant agreements and are subject to audit by the grantor agencies. Any disallowed claims resulting from such audits could become a liability of the General Fund or other applicable funds. However, in the opinion of management, any such disallowed claims will not have a material adverse effect on the overall financial position of the District at June 30, 2016.

Litigation

The District is involved in various litigation arising from the normal course of business. In the opinion of management and legal counsel, the disposition of all litigation pending is not expected to have a material adverse effect on the overall financial position of the District at June 30, 2016.

NOTE 16 - PARTICIPATION IN JOINT POWERS AUTHORITIES

The District is a member of the Riverside Schools Insurance Authority (RSIA), the Riverside County Employer!Employee Partnership (REEP) for benefits, and the Riverside Schools Risk Management Authority (RSRMA) joint powers authorities (JPA). The District pays an annual premium to the applicable entity for its health, workers' compensation, and property liability coverage. The relationships between the District and the JP As are such that they are not component units of the District for financial reporting purposes.

These entities have budgeting and financial reporting requirements independent of member units and their financial statements are not presented in these financial statements; however, fund transactions between the entities and the District are included in these statements. Audited financial statements are generally available from the respective entities.

The District has appointed one board member to the governing board of Riverside Schools' Insurance Authority.

60

BANNING UNIFIED SCHOOL DISTRICT

NOTES TO FINANCIAL STATEMENTS JUNE 30, 2016

During the year ended June 30, 2016, the District made payments of $262,546 to Riverside Schools' Insurance Authority, $4,157,919 to Riverside County Employer!Employee Partnership, and $828,893 to Protected Insurance Program for Schools for insurance.

61

REQUIRED SUPPLEMENTARY INFORMATION

62

BANNING UNIFIED SCHOOL DISTRICT

GENERAL FUND BUDGETARY COMPARISON SCHEDULE FOR THE YEAR ENDED JUNE 30, 2016

Variances -

Positive (Negative)

Budgeted Amouuts Actual Fiual Origiual Fiual (GAAP Basis) to Actual

REVENUES Local Control Funding Formula $40,390,495 $40,454,571 $ 40,572,817 $ 118,246 Federal sources 3,027,489 4,029,012 3,572,136 (456,876) Other State sources 4,286,438 4,300,239 5,487,172 1,186,933 Other local sources 2,505,132 2,735,441 3,597,758 862,317

Total Revenues 1 50,209,554 51,519,263 53,229,883 1,710,620 EXPENDITURES Current

Certificated salaries 20,929,663 19,929,731 20,000,217 (70,486) Classified salaries 7,023,069 6,760,250 7,034,604 (274,354) Employee benefits 9,857,994 9,007,010 9,877,044 (870,034) Books and supplies 2,735,055 4,748,394 4,372,680 375,714 Services and operating expenditures 6,217,991 8,087,397 7,364,003 723,394 Capital outlay 680,000 1,139,026 1,392,534 (253,508) Other outgo (8,125) (33,048) 87,443 (120,491)

Debt service - principal 31,547 46,984 40,053 6,931 Debt service - interest 6,930 (6,930)

Total Expenditures 1 47,467,194 49,685,744 50,175,508 (489,764) Excess (Deficiency) of Revenues Over Expenditures 2,742,360 1,833,519 3,054,375 1,220,856

Other Financing Sources Other sources - proceeds from capital leases 143,284 143,284

Net Financing Sources (Uses) 143,284 143,284 NET CHANGE IN FUND BALANCES 2,742,360 1,833,519 3,197,659 1,364,140 Fund Balances - Beginning 6,232,822 6,232,822 6,232,822 Fund Balances - Ending $ 8,975,182 $ 8,066,341 $ 9,430,481 $ 1,364,140

On behalf payments of $1,130,516 are included in the actual State revenues and Benefits expenditures, but have not been included in the budgeted amounts. In addition, two funds currently defined, as special revenue funds in the California State Accounting Manual (CSAM) do not meet the GASE Statement No. 54 special revenue fund definition. Specifically, Fund 17, Special Reserve Fund for Other Than Capital Outlay Projects, and Fund 20, Special Reserve Fund for Posternployrnent Benefits, are not substantially composed of restricted or committed revenue sources, additional revenues and expenditures pertaining to these other funds are included in the Actual (GAAP Basis) revenues and expenditures, however, are not included in the original and final General Flllld budgets.

See accompanying note to required supplementary information.

63

BANNING UNIFIED SCHOOL DISTRICT

CAFETERIA FUND - BUDGETARY COMPARISON SCHEDULE FOR THE YEAR ENDED JUNE 30, 2016

Variances -

Positive (Negative)

Budgeted Amouuts Actual Fiual Origiual Fiual (GAAP Basis) to Actual

REVENUES Federal sources $ 2,025,000 $ 2,027,560 $ 2,571,145 $ 543,585 Other State sources 173,400 173,400 191,045 17,645 Other local sources 153,800 155,033 183,487 28,454

Total Reveuues 2,352,200 2,355,993 2,945,677 589,684 EXPENDITURES Current

Classified salaries 993,205 1,010,403 1,026,324 (15,921) Employee benefits 472,739 425,218 401,574 23,644 Books and supplies 1,003,220 1,074,967 1,532,747 (457,780) Services and operating expenditures 62,575 81,401 63,814 17,587 Other outgo 15,000 22,629 126,064 (103,435)

Capital outlay 114,325 114,048 18,060 95,988 Total Expenditures 2,661,064 2,728,666 3,168,583 (439,917)

NET CHANGE IN FUND BALANCES (308,864) (372,673) (222,906) 149,767 Fund Balance - Beginning 2,206,921 2,206,921 2,206,921 Fund Balance - Ending $ 1,898,057 $ 1,834,248 $ 1,984,015 $ 149,767

See accompanying note to required supplementary information.

64

BANNING UNIFIED SCHOOL DISTRICT

SCHEDULE OF OTHER POSTEMPLOYMENT BENEFITS (OPEB) FUNDING PROGRESS FOR THE YEAR ENDED JUNE 30, 2016

Actuarial Accrued Liability Unfunded UAALasa

Actuarial Actuarial (AAL)- AAL Funded Percentage of Valuation Value of Entry Age (UAAL) Ratio Covered Covered Payroll

Date Assets (a) Normal (b) (b - a) (a/ b) Payroll (c) ([b - a] / c) September 1, 2009 $ $ 7,234,302 $ 7,234,302 0% $ 21,700,200 33% September 1, 2011 6,246,449 6,246,449 0% 22,987,244 27%

April 1, 2014 5,191,319 5,191,319 0% 25,017,192 21%

See accompanying note to required supplementary information.

65

BANNING UNIFIED SCHOOL DISTRICT

SCHEDULE OF THE DISTRICT'S PROPORTIONATE SHARE OF THE NET PENSION LIABILITY FOR THE YEAR ENDED JUNE 30, 2016

CalSTRS

District's proportion of the net pension liability

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

Total

District's covered - employee payroll

District's proportionate share of the net pension liability as a percentage of its covered - employee payroll

Plan (CalSTRS) fiduciary net position as a percentage of the total pension liability

CalPERS

District's proportion of the net pension liability

District's proportionate share of the net pension liability

District's covered - employee payroll

District's proportionate share of the net pension liability as a percentage of its covered - employee payroll

Plan ( CalPERS) fiduciary net position as a percentage of the total pension liability

2016 2015

0.0367% 0.0376%

$ 24,692,997 $ 21,943,950

13,059,873 13,250,704

$ 37,752,870 $ 35,194,654

$ 18,002,230 $ 16,587,515

137.17% 132.29%

74% 77%

0.0531% 0.0503%

$ 7,828,814 $ 5,711,015

$ 7,009,379 $ 5,341,033

111.69% 106.93%

79% 83%

Note: In the future, as data become available, ten years of information will be presented.

See accompanying note to required supplementary information.

66

BANNING UNIFIED SCHOOL DISTRICT

SCHEDULE OF DISTRICT CONTRIBUTIONS FOR THE YEAR ENDED JUNE 30, 2016

CalSTRS

Contractually required contribution Contributions in relation to the contractually required contribution

Contribution deficiency (excess)

District's covered - employee payroll

Contributions as a percentage of covered - employee payroll

CalPERS

Contractually required contribution Contributions in relation to the contractually required contribution Contribution deficiency (excess)

District's covered - employee payroll

Contributions as a percentage of covered - employee payroll

2016

$ 2,095,088 2,095,088

$

$ 19,525,517

10.73%

$ 891,066 891,066

$

$ 7,521,448

11.85%

Note: In the future, as data become available, ten years of information will be presented.

See accompanying note to required supplementary information.

67

2015

$ 1,598,598 1,598,598

$

$ 18,002,230

8.88%

$ 825,074 825,074

$

$ 7,009,379

11.77%

BANNING UNIFIED SCHOOL DISTRICT

NOTE TO REQUIRED SUPPLEMENTARY INFORMATION JUNE 30, 2016

NOTE 1 - PURPOSE OF SCHEDULES

Budgetary Comparison Schedules

These schedules present information for the original and final budgets and actual results of operations, as well as the variances from the final budgets to actual results of operations.

Schedule of Other Postemployment Benefits (OPEB) Funding Progress

This schedule is intended to show trends about the funding progress of the District's actuarially determined liability for postemployment benefits other than pensions.

Schedule of the District's Proportionate Share of the Net Pension Liability

This schedule presents information on the District's proportionate share of the net pension liability (NPL ), the plans' fiduciary net positions and, when applicable, the State's proportionate share of the NPL associated with the District. In the future, as data becomes available, ten years of information will be presented.

Schedule of District Contributions

This schedule presents information on the District's required contribution, the amounts actually contributed, and any excess or deficiency related to the required contribution. In the future, as data becomes available, ten years of information will be presented.

Changes in Benefit Terms

There were no changes in benefit terms since the previous valuation for either CalSTRS or CalPERS.

Changes in Assumptions

The CalSTRS plan rate of investment return assumption was not changed from the previous valuation. The CalPERS plan rate of investment return assumption was changed from 7.50 percent to 7.65 percent since the previous valuation.

68

SUPPLEMENTARY INFORMATION

69

BANNING UNIFIED SCHOOL DISTRICT

SCHEDULE OF EXPENDITURES OF FEDERAL A WARDS FOR THE YEAR ENDED JUNE 30, 2016

Federal Grantor/Pass-Through

Grantor/Program

US DEPARTMENT OF EDUCATION

Passed through California Department of Education (CDE):

Indian Education - Grants to Local Educational Agencies

Carl D. Perkins Vocational and Technical Education Act of 1998 Secondary Education

No Child Left Behind Act (NCLB) Title I, Part A - Basic Grants Low Income and Neglected

Title II, Part A - Improving Teacher Quality Local Grants

Title II, Part A, Administrator Training Title III - Immigrant Education Program

Title III - Limited English Proficient (LEP) Student Program

Passed through Riverside County Special Education Local Plan Area:

Individuals With Disabilities Act (IDEA)

Special Education (IDEA) Cluster: Basic Local Assistance Entitlement, Part B, Section 611

Preschool Grants, PartB, Section 619 (Age 3-4-5)

Preschool Local Entitlement, Part B, Section 611 (Age 3-4-5)

Mental Health Services, Part B, Section 611

Preschool Staff Development, Part B, Section 619

Total Special Education (IDEA) Cluster

Total US. Department of Education

See accompanying note to supplementary information.

70

CFDA

Number

84 060A

84.048

84 010

84.367

84.367

84.365

84.365

84.027

84.173

84.027A

84.027A

84.173A

Pass-Through

Entity

Identifying

Number

10011

14894

14329

14341

14344

15146

14346

13379

13430

13682

14468

13431

Program

Expenditures

$ 69,569

46,789

1,706,403

501,037

2,925

1,720

92,185

706,935

10,193

24,756

37,579

110

779,573

3,200,201

BANNING UNIFIED SCHOOL DISTRICT

SCHEDULE OF EXPENDITURES OF FEDERAL A WARDS, Continued FOR THE YEAR ENDED JUNE 30, 2016

Pass-Through

Entity

Federal Grantor/Pass-Through CFDA Identifying

Grantor/Program Number Number

US DEPARTMENT OF AGRICULTURE

Forest Reserve Funds 10.665 10044

Passed through CDE:

Child Nutrition Cluster:

Basic School Breakfast Program 10.553 13390

Especially Needy Breakfast 10.553 13526

National School Lunch Program 10.555 13523

Meal Supplement 10.555 13396

Summer Food Service Program 10.559 13004

Food Distribution 10.555 13524

Total Child Nutrition Cluster

CACFP Claims - Centers and Family Day Care 10.558 13393

Total US. Department of Agriculture

US DEPARTMENT OF HEALTH AND HUMAN SERVICES

Passed through California Department of Health Services: Medicaid Cluster:

Medi-Cal Billing Option 93.778 10013 Medical Administrative Activities Program 93.778 10060

Total Medicaid Cluster Total US. Department of Health and Human Services

Total Federal Programs

See accompanying note to supplementary information.

71

Program

Expenditures

$ 33,184

29,877

502,362

1,679,192

57,390

92,363

159,403

2,520,587

50,558

2,604,329

135,953 189,950 325,903

325,903

$ 6,130,433

BANNING UNIFIED SCHOOL DISTRICT

LOCAL EDUCATION AGENCY ORGANIZATION STRUCTURE JUNE 30, 2016

ORGANIZATION

The Banning Unified School District was established as a unified school District in 1877 and consists of an area comprising approximately 303 square miles. The District operates five elementary schools, one middle school, one high school, one continuation education school, one adult education program, and an independent study program. There were no boundary changes during the year.

MEMBER

Alfredo Andrade

Jan Spann

Alex Cassadas

Kerri Mariner

Martha Bederio

Robert Guillen

Felicia Adkins

Barbara Wolford

Cathy Bagnara

Sandi Khodadadi

Christina Hoff

GOVERNING BOARD

OFFICE

President

Clerk

Member

Member

Member

ADMINISTRATION

Superintendent

Director of Educational Services

Director of Student Services

Director of Business Services

Coordinator of Human Resources

Supervisor of Fiscal Services

See accompanying note to supplementary information.

72

TERM EXPIRES

2019

2017

2019

2019

2017

BANNING UNIFIED SCHOOL DISTRICT

SCHEDULE OF AVERAGE DAILY ATTENDANCE FOR THE YEAR ENDED JUNE 30, 2016

Regular ADA

Transitional kindergarten through third

Fourth through sixth

Seventh and eighth

Ninth through twelfth

Total Regular ADA

Special Education, Nonpublic, Nonsectarian Schools

Transitional kindergarten through third

Fourth through sixth

Seventh and eighth

Ninth through twelfth

Total Special Education, Nonpublic, Nonsectarian Schools

Extended Year Special Education, Nonpublic, Nonsectarian Schools

Fourth through sixth

Ninth through twelfth

Total Extended Year Special Education, Nonpublic, Nonsectarian Schools

Total ADA

See accompanying note to supplementary information.

73

Final Report

Second Period

Report

1,452.79

984.22

578.88

1,212.39

4,228.28

0.43

0.34

2.30

3.00

6.07

0.25

0.35

0.60

4,234.95

Annual

Report

1,459.46

985.16

578.18

1,198.94

4,221.74

0.73

0.95

3.90

5.96

11.54

0.14

0.33

0.47

4,233.75

BANNING UNIFIED SCHOOL DISTRICT

SCHEDULE OF INSTRUCTIONAL TIME FOR THE YEAR ENDED JUNE 30, 2016

1986-87 2015-16

Minutes Actual

Grade Level Requirement Minutes

Kindergarten 36,000 52,960

Grades I - 3 50,400

Grade I 52,960

Grade 2 52,960

Grade 3 52,960

Grades 4 - 6 54,000

Grade 4 54,120

Grade 5 54,120

Grade 6 57,678

Grades 7 - 8 54,000

Grade 7 57,678

Grade 8 57,678

Grades9-12 64,800

Grade 9 65,195

Grade 10 65,195

Grade 11 65,195

Grade 12 65,195

See accompanying note to supplementary information.

74

Number of Days

Traditional Multitrack

Calendar Calendar Status

180 NIA Complied

180 NIA Complied

180 NIA Complied

180 NIA Complied

180 NIA Complied

180 NIA Complied

180 NIA Complied

180 NIA Complied

180 NIA Complied

180 NIA Complied

180 NIA Complied

180 NIA Complied

180 NIA Complied

BANNING UNIFIED SCHOOL DISTRICT

RECONCILIATION OF ANNUAL FINANCIAL AND BUDGET REPORT WITH AUDITED FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2016

Summarized below is the fund balance reconciliation between the Unaudited Actual Financial Report and the audited financial statements.

FUND BALANCE Balance, June 30, 2016, Unaudited Actuals

Increase in:

Accounts receivable Decrease in:

Accounts payable Balance, June 30, 2016, Audited Financial Statements

See accompanying note to supplementary information.

75

Capital Facilities

Fund

$ 325,415

360,000

37,500 $ 722,915

BANNING UNIFIED SCHOOL DISTRICT

SCHEDULE OF FINANCIAL TRENDS AND ANALYSIS FOR THE YEAR ENDED JUNE 30, 2016

(Budget)

20171

2016 2015 2014

GENERAL FUND4

Revenues $ 52,554,170 $ 53,227,889 $ 45,118,244 $ 39,388,785 Other sources 1,588

Total Revenues

and Other Sources 52,554,170 53,227,889 45,118,244 39,390,373

Expenditures 53,000,332 50,175,508 42,765,332 38,794,660 Other uses and transfers out 1,115,000

Total Expenditures

and Other Uses 53,000,332 51,290,508 42,765,332 38,794,660

INCREASE(DECREASE) IN FUND BALANCE $ (446,162) $ 1,937,381 $ 2,352,912 $ 595,713

ENDING FUND BALANCE $ 7,867,325 $ 8,313,487 $ 6,376,106 $ 4,023,194

AVAILABLE RESERVES 2 $ 3,598,954 $ 3,200,211 $ 2,447,021 $ 1,565,066

AVAILABLE RESERVES AS A

PERCENTAGE OF TOTAL OUTGO 3 6.79% 6.38% 5.83% 4.13%

LONG-TERM OBLIGATIONS NIA $55,426,768 $52,019,280 $52,181,831

K-12 AVERAGE DAILY ATTENDANCE AT P-2 4,222 4,235 4,303 4,140

The General Fund balance has increased by $4,290,293 over the past two years. The fiscal year 2016-2017 budget projects a decrease of $446,162 (5.37 percent). For a district this size, the State reconunends available reserves of at least three percent of total General Fund expenditures, transfers out, and other uses (total outgo).

The District has incurred operating surpluses in each of the past three years but anticipates incurring an operating deficit during the 2016-2017 fiscal year. Total long-term obligations have increased by $3,244,937 over the past two years.

Average daily attendance has increased by 95 over the past two years. Decline of 13 ADA is anticipated during fiscal year 2016-2017.

Budget 2017 is included for analytical purposes only and has not been subjected to audit. 2

Available reserves consist of all unassigned fimd balances including all ammmts reserved for economic uncertainties contained with the General Flllld.

3 On behalf payments of $1,130,516, $824,875, and $943,994 have been excluded from the calculation of available reserves for the fiscal years ending June 30, 2016, 2015, and 2014, respectively.

4 General Flllld ammmts do not include activity related to the consolidation ofFlllld 17, Special Reserve Flllld for Other Than Capital Outlay Projects, and Fund 20, Special Reserve Fund for Posternployrnent Benefits, as required by GASE Statement No. 54.

See accompanying note to supplementary information.

76

BANNING UNIFIED SCHOOL DISTRICT

NON-MAJOR GOVERNMENTAL FUNDS BALANCE SHEET JUNE 30, 2016

Adult Child Educatiou Developmeut Buildiug

Fuud Fuud Fuud ASSETS

Deposits and investments $ (3,811) $ $ 51,190 Receivables 28,760 88 Due from other funds 26,578 2,698

Total Assets $ 51,527 $ 2,698 $ 51,278

LIABILITIES AND FUND BALANCES

Liabilities: Accounts payable $ 23,712 $ 2,670 $ Due to other funds 12,648 28

Total Liabilities 36,360 2,698 Fuud Balauces:

Restricted 15,167 51,278 Total Fuud Balauces 15,167 51,278 Total Liabilities aud Fuud Balauces $ 51,527 $ 2,698 $ 51,278

See accompanying note to supplementary information.

77

Capital Couuty School Total Nou-Major Facilities Facilities Goverumeutal

Fuud Fuud Fuuds

$ 394,328 $ 437 $ 442,144 360,584 1 389,433

29,276 $ 754,912 $ 438 $ 860,853

$ 31,997 $ $ 58,379 12,676

31,997 71,055

722,915 438 789,798 722,915 438 789,798

$ 754,912 $ 438 $ 860,853

77

BANNING UNIFIED SCHOOL DISTRICT

NON-MAJOR GOVERNMENTAL FUNDS STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES FOR THE YEAR ENDED JUNE 30, 2016

Adult Child Educatiou Developmeut Buildiug

Fuud Fuud Fuud REVENUES Local Control Funding Formula $ 26,578 $ $ Other State sources 133,412 Other local sources 63,095 588

Total Reveuues 223,085 588 EXPENDITURES Current

Instruction 144,956 Instruction-related activities:

Instructional library, media, and technology 11,614 School site administration 48,700

Administration: All other administration 2,648

Plant services Facility acquisition and construction 3,938

Debt Service Principal Interest and other

Total Expeuditures 207,918 3,938 NET CHANGE IN FUND BALANCES 15,167 (3,350) Fuud Balauce - Begiuuiug 54,628 Fuud Balauce - Eudiug $ 15,167 $ $ 51,278

See accompanying note to suppleruentary information.

78

Capital Couuty School Total Nou-Major Facilities Facilities Goverumeutal

Fuud Fuud Fuuds

$ $ $ 26,578 133,412

408,351 2 472,036 408,351 2 632,026

144,956

11,614 48,700

2,648 (33,625) (33,625) 132,396 136,334

28,686 28,686 7,626 7,626

135,083 346,939 273,268 2 285,087 449,647 436 504,711

$ 722,915 $ 438 $ 789,798

78

BANNING UNIFIED SCHOOL DISTRICT

NOTE TO SUPPLEMENTARY INFORMATION JUNE 30, 2016

NOTE 1 - PURPOSE OF SCHEDULES

Schedule of Expeuditures of Federal Awards

The accompanying Schedule of Expenditures of Federal Awards includes the Federal grant activity of the District and is presented on the modified 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), UniformAdninistrative Requi rerrents, Cost Principles, and Audit Requi rerrents for Federal Awards (Uniform Guidance). Therefore, some amounts presented in this schedule may differ from amounts presented in, or used in the preparation of, the fmancial statements. The District has not elected to use the ten percent de minimis cost rate as covered in Section 200.414 Indirect (F&A) costs of the Uniform Guidance.

Local Education Agency Organization Structure

This schedule provides information about the District's boundaries, schools operated, members of the governing board, and members of the administration.

Schedule of Average Daily Attendance (ADA)

Average daily attendance (ADA) is a measurement of the number of pupils attending classes of the District. The purpose of attendance accounting from a fiscal standpoint is to provide the basis on which apportiomnents 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.

Schedule oflnstructional 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.

Districts must maintain their instructional minutes at the 1986-87 requirements as required by Education Code Section 46201.

Reconciliation of Annual Financial and Budget Report With Audited Financial Statements

This schedule provides the information necessary to reconcile the fund balance of all funds reported on the Unaudited Actual Financial Report to the audited financial statements.

Schedule of Financial Trends and Analysis

This schedule discloses the District's financial trends by displaying past years' data along with current year budget information. These financial trend disclosures are used to evaluate the District's ability to continue as a going concern for a reasonable period of time.

79

BANNING UNIFIED SCHOOL DISTRICT

NOTE TO SUPPLEMENTARY INFORMATION JUNE 30, 2016

Non-Major Governmental Fnnd - Balance Sheet and Statement ofRevennes, Expenditnres, and Changes in Fnnd Balances

The Non-Major Governmental Fund Balance Sheet and Statement of Revenues, Expenditures, and Changes in Fund Balances is included to provide information regarding the individual fund that has been included in the Non­Major Governmental Funds colunm on the Governmental Funds Balance Sheet and Statement of Revenues, Expenditures, and Changes in Fund Balances.

80

INDEPENDENT AUDITOR'S REPORTS

81

ftl Vavrinek, Trine, Day & Co., LLP Certified Public Accountants

VALUE THE DIFFERENCE

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

Governing Board Banning Unified School District Banning, California

We have audited, in accordance with the auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in GOJernrrent Auditing Standards issued by the Comptroller General of the United States, the fmancial statements of the governmental activities, each major fund, and the aggregate remaining fund information of Banning Unified School District (the District) as of and for the year ended June 30, 2016, and the related notes to the financial statements, which collectively comprise Banning Unified School District's basic financial statements, and have issued our report thereon dated November 30, 2016.

Internal Control Over Financial Reporting

In planning and performing our audit of the financial statements, we considered Banning Unified School District's internal control over fmancial 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 Banning Unified School District's internal control. Accordingly, we do not express an opinion on the effectiveness of Banning 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 rraterial 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 District'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 and, therefore, material weaknesses or significant deficiencies may exist that were not identified. Given these limitations, during our audit, we did not identify any deficiencies in internal control that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified. We did identify certain deficiencies in internal control, described in the accompanying schedule of findings and questioned costs, that we consider to be significant deficiencies as item 2016-00 I.

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19340 Jesse Lane, Suite 260 Riverside, CA 92508 Tel: 951.367.3000 www.vtdcpa.com Fax: 951.367.301 0

Compliance and Other Matters

As part of obtaining reasonable assurance about whether Banning Unified School District's financial statements are free from 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 Governrrent Auditing Standards.

We noted certain matters that we reported to management of Banning Unified School District in a separate letter dated November 30, 2016.

Banning Unified School District's Response to Findings

Banning Unified School District's response to the findings identified in our audit are described in the accompanying schedule of findings and questioned costs. Banning Unified School District's response was not subjected to the auditing procedures applied in the audit of the financial statements and, accordingly, we express no opinion on it.

Purpose of This Report

The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the District's internal control or on compliance. This report is an integral part of an audit performed in accordance with GOJernrrent Auditing Standards in considering the District's internal control and compliance. Accordingly, this communication is not suitable for any other purpose.

Riverside, California November 30, 2016

83

ftl Vavrinek, Trine, Day & Co., LLP Certified Public Accountants

VALUE THE DIFFERENCE

INDEPENDENT AUDITOR'S REPORT ON COMPLIANCE FOR EACH MAJOR PROGRAM AND ON INTERNAL CONTROL

OVER COMPLIANCE REQillRED BY THE UNIFORM GillDANCE

Governing Board Banning Unified School District Banning, California

Report on Compliance for Each Major Federal Program

We have audited Banning Unified School District's (the District) compliance with the types of compliance requirements described in the OM B Corrpl i ance Supplement that could have a direct and material effect on each of Banning Unified School District's major Federal programs for the year ended June 30, 2016. Banning 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 the Federal statutes, 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 Banning 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 GOJernment Auditing Standards, issued by the Comptroller General of the United States; and the audit requirements of Title 2 U.S. Code ofF ederal Regulations Part 200, U niformAdni ni strative Requirements, Cost P ri nci pies, 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 Banning 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 Banning Unified School District's compliance.

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Opinion on Each Major Federal Program

In our opinion, Banning 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, 2016.

Report on Internal Control Over Compliance

Management of Banning 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 Banning Unified School District's internal control over compliance with the types of requirements that could have a direct and material effect on each major Federal program to determine the auditing procedures that are appropriate in the circumstances for the purpose of expressing an opinion on compliance for each major Federal program and to test and report on internal control over compliance in accordance with the Uniform Guidance, but not for the purpose of expressing an opinion on the effectiveness of internal control over compliance. Accordingly, we do not express an opinion on the effectiveness of Banning Unified School District's internal control over compliance.

A deficiency in internal control over corrpl iance 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 cornpl i ance 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 OJer corrpl iance 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.

Riverside, California November 30, 2016

85

ftl Vavrinek, Trine, Day & Co., LLP Certified Public Accountants

VALUE THE DIFFERENCE

INDEPENDENT AUDITOR'S REPORT ON STATE COMPLIANCE

Governing Board Banning Unified School District Banning, California

Report on State Compliance

We have audited Banning Unified School District's (the District) compliance with the types of compliance requirements as identified in the 2015-2016 Guide for Annual Audits of K-12 Local Education Agencies and State Corrpl i ance Reporting that could have a direct and material effect on each of the Banning Unified School District's State government programs as noted below for the year ended June 30, 2016.

Management's Responsibility

Management is responsible for compliance with the requirements of State laws, regulations, and the terms and conditions of its State awards applicable to its State programs.

Auditor's Responsibility

Our responsibility is to express an opinion on compliance of each of Banning Unified School District's State programs based on our audit of the types of compliance requirements referred to above. We conducted our audit 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 2015-2016 Guide for Annual Audits of K-12 Local Education Agencies and State Corrpl iance Reporting. These standards 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 the applicable govermnent programs noted below. An audit includes examining, on a test basis, evidence about Banning Unified School District's compliance with those requirements and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Our audit does not provide a legal determination of Banning Unified School District's compliance with those requirements.

Basis for Qualified Opinion on Classroom Teacher Salaries

As described in the accompanying schedule of findings and questioned costs, Banning Unified School District did not comply with requirements regarding Classroom Teacher Salaries as identified in finding 2016-002. Compliance with such requirements is necessary, in our opinion, for Banning Unified School District to comply with the requirements applicable to that program.

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19340 Jesse Lane, Suite 260 Riverside, CA 92508 Tel: 951.367.3000 www.vtdcpa.com Fax: 951.367.301 0

Qualified Opinion on Classroom Teacher Salaries

In our opinion, except for the noncompliance described in the Basis for Qualified Opinion paragraph, Banning Unified School District complied, in all material respects, with the types of compliance requirements referred to above for the year ended June 30, 2016.

Unmodified Opinion on Each of the Other Programs

In our opinion, Banning Unified School District complied, in all material respects, with the compliance requirements referred to above that are applicable to the goverrnnent programs noted below that were audited for the year ended June 30, 2016, except as described in the schedule of State awards findings and questioned costs section of the accompanying schedule of findings and questioned costs.

In connection with the audit referred to above, we selected and tested transactions and records to determine Banning Unified School District's compliance with the State laws and regulations applicable to the following items:

LOCAL EDUCATION AGENCIES OTHER THAN CHARTER SCHOOLS Attendance Teacher Certification and Misassigrnnents Kindergarten Continuance Independent Study Continuation Education Instructional Time Instructional Materials Ratios 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

SCHOOL DISTRICTS, COUNTY OFFICES OF EDUCATION, AND CHARTER SCHOOLS

Educator Effectiveness California Clean Energy Jobs Act After School Education and Safety Program:

General Requirements After School Before School

87

Procedures Performed

Yes Yes Yes Yes

Yes, see below Yes Yes Yes Yes

No, see below Yes Yes

No, see below No, see below

Yes Yes

Yes No, see below

Yes Yes

No, see below

Proper Expenditure of Education Protection Account Funds Unduplicated Local Control Funding Formula Pupil Counts Local Control Accountability Plan Independent Study - Course Based Inununizations

CHARTER SCHOOLS Attendance Mode oflnstruction Non Classroom-Based Instruction/Independent Study for Charter Schools Determination of Funding for Non Classroom-Based Instruction Annual Instruction Minutes Classroom-Based Charter School Facility Grant Program

Procedures Performed

Yes Yes Yes

No, see below Yes, see below

No, see below No, see below No, see below No, see below No, see below No, see below

The District does not offer a Work Experience Program; therefore, we did not perform procedures related to the Work Experience Program within the Continuation Education Attendance Program.

The District did not offer an Early Retirement Incentive Program during the current year; therefore, we did not perform procedures related to the Early Retirement Incentive Program.

The District does not have any Juvenile Court Schools; therefore, we did not perform any procedures related to Juvenile Court Schools.

The District does not have a Middle or Early College High School Program; therefore, we did not perform procedures related to the Middle or Early College High School Program.

The District did not have expenditures for California Clean Energy Jobs Act; therefore, we did not perform procedures related to the California Clean Energy Jobs Act program.

The District does not offer a Before School Education and Safety Program; therefore, we did not perform any procedures related to the Before School Education and Safety Program.

The District does not offer an Independent Study - Course Based Program; therefore, we did not perform procedures related to the Independent Study - Course Based Program.

The District did not have any schools listed on the inununization assessment reports; therefore, we did not perform any related procedures.

The District does not have any Charter Schools; therefore, we did not perform any procedures for Charter School Programs.

Riverside, California November 30, 2016

88

SCHEDULE OF FINDINGSANDQUESTIONED(OSTS

89

BANNING UNIFIED SCHOOL DISTRICT

SUMMARY OF AUDITOR'S RESULTS FOR THE YEAR ENDED JUNE 30, 2016

FINANCIAL STATEMENTS Type of auditor's report issued: Internal control over financial reporting:

Material weakness identified? Significant deficiency identified?

Noncompliance material to financial statements noted?

FEDERAL AWARDS Internal control over major Federal programs:

Material weakness identified? Significant deficiency identified?

Type of auditor's report issued on compliance for major Federal programs: Any audit findings disclosed that are required to be reported in accordance with Section 200.516(a) of the Uniform Guidance?

Identification of Federal major programs:

CFDA Numbers 10.553, 10.555, 10.559

Name of Federal Program or Cluster 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 auditor's report issued on compliance for State programs:

Umnodified for all State programs except for the following State program which was qualified:

Name of State Program Classroom Teacher Salaries

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Unmodified

No Yes No

No None reported

Unmodified

No

$ 750,000 Yes

Qualified

BANNING UNIFIED SCHOOL DISTRICT

FINANCIAL STATEMENT FINDINGS FOR THE YEAR ENDED JUNE 30, 2016

The following finding represents significant deficiencies, material weaknesses, and/ or instances of noncompliance related to the fmancial statements that are required to be reported in accordance with GOJernrrent Auditing Standards. The fmding has been coded as follows:

2016-001 30000

Five Digit Code

30000

AB 3627 Finding Type

Internal Control

Adult Education Fund Deficit Cash Balance

Criteria or Specific Requirements

The governing board of any school district that reported a negative unrestricted fund balance or a negative cash balance in the annual report required by Education Code Section 42127 or in the audited annual fmancial statements required by Section 41020 shall include with the budget submitted in accordance with Education Code Section 42127 and the certifications required by Education Code Section 35015 a statement that identifies the reasons for the negative unrestricted fund balance or negative cash balance and the steps that have been taken to ensure that the negative balance will not occur at the end of the current fiscal year.

Condition

At June 30, 2016, the District's Adult Education Fund had a negative cash balance of $3,811.

Questioned costs

There were no questioned costs associated with the condition found.

Context

The condition identified was determined through review and testing related to the District's General Fund deposits and investments.

Effect

The financial statement impact of this situation is that the Adult Education Fund could be at risk of not being able to meet its financial obligations and maintain current service levels without additional encroachment on the General Fund.

Cause

The cause is related to timing differences at year end and not enough funds coming from the General Fund to bring the cash balance positive as of year end.

91

BANNING UNIFIED SCHOOL DISTRICT

FINANCIAL STATEMENT FINDINGS FOR THE YEAR ENDED JUNE 30, 2016

Recommendation

As this appears to be related to timing differences with the temporary loan given to the Adult Education Fund by the General Fund, this should be monitored more closely to avoid the occurrence of a negative cash balance at year end.

Corrective Action Plan

Staff will ensure all cash balances are monitored on a daily basis prior to the fiscal year end and ensure sufficient cash is available for all warrant and payroll processing. Month end close processes will be implemented to prevent this from occurring in the future.

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BANNING UNIFIED SCHOOL DISTRICT

FEDERAL A WARDS FINDINGS AND QUESTIONED COSTS FOR THE YEAR ENDED JUNE 30, 2016

None reported.

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BANNING UNIFIED SCHOOL DISTRICT

STATE AWARDS FINDINGS AND QUESTIONED COSTS FOR THE YEAR ENDED JUNE 30, 2016

The following finding represents instances of noncompliance and/or questioned costs relating to State program laws and regulations. The fmding has been coded as follows:

2016-002 61000

Five Digit Code 61000

Classroom Teacher Salaries

Criteria or Specific Requirements

AB 3627 Finding Type Classroom Teacher Salaries

In accordance with the requirements of Education Code Section 41372, pursuant to the provisions of Education Code Section 41374, determine whether, after applicable audit adjustments, the District met the current expense of education percentage requirements for expenditure for payment of salaries of classroom teachers as set forth in Education Code Section 41372.

Condition

For the current year after applicable audit adjustments, the District did not meet the current expense of education percentage requirements for expenditure for payment of salaries of classroom teachers as set forth in Education Code Section 41372. For unified school districts, the minimum percentage required is 55 percent.

Questioned Costs

The District's current expense of education for the year audited after applicable audit adjustments was $44,176,495, and the dollar amount by which the District was deficient was $30,924.

Context

The condition identified was determined through analysis and testing of classroom teacher salaries, and the form CEA prepared by the District for the current year.

Effect

As a result of our testing, the District does not appear to be in compliance with current expense of education percentage requirements for expenditure for payment of salaries of classroom teachers as set forth in Education Code Section 41372.

Cause

It appears that the condition identified has materialized as a result of the District cuts that were made to instructional salaries and fixed costs as a result of the need to layoff a number of teachers to increase class sizes.

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BANNING UNIFIED SCHOOL DISTRICT

STATE AWARDS FINDINGS AND QUESTIONED COSTS FOR THE YEAR ENDED JUNE 30, 2016

Recommendation

The District should file the appropriate Application for Exerrption from the Required Expenditures for Cl assroorn Teachers' Salaries to the County Superintendent of Schools.

Corrective Action Plan

Banning Unified School District designates the full minimum proportionality calculation result for each fiscal year to the Supplemental and Concentration funding in Resource 0702. In the 2015-2016 year, this represented 19.9 percent of the total LCFF funding sources.

These monies are prioritized for expenditures through the Local Control Accountability Plan with of collaboration from the Board of Education, administration, certificated and classified staff, parents, and community.

The expenditures of these funds for the District were 69 percent for salaries and benefits and 31 percent for all other series of object codes.

The 31 percent for non-compensation related expenditures adopted in our plan increased considerably the monies the District has been in a position to spend in years prior to the LCFF funding methodology on items other than the total compensation packages for employees.

In addition, in the 2015-2016 budget year, three certificated positions (at an average cost of approximately $85,000) remained unfilled for the entire school year as we had difficulties finding individuals with the required credentials. The ability to have filled only one of these positions would have made the District in excess of the minimum.

There were also 12.564 FTEs that remained unfilled in the classified service for the entire school year. In many of these cases, substitutes were utilized at far less cost than the amount that was budgeted for the permanent positions. These were aides for the transitional and traditional kindergarten classes and special education aides.

The CEB report submitted with the 2016-2017 Adopted Budget indicates that the District generated a percentage of 57.27 percent, 2. 7 percent higher than the required minimum. In addition, with the negotiated settlement now reached with our bargaining units, this amount should increase commensurate with those adjustments.

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BANNING UNIFIED SCHOOL DISTRICT

SUMMARY SCHEDULE OF PRIOR AUDIT FINDINGS FOR THE YEAR ENDED JUNE 30, 2016

Except as specified in previous sections of this report, summarized below is the current status of all audit findings reported in the prior year's Schedule of Findings and Questioned Costs.

Financial Statement Findings

2015-001 30000 - Financial Accounting Controls - Segregation of Duties

Significant Deficiency

Criteria or Specific Requirements

Industry standards and best business practices related to accounting and internal control require that an entity adopt, implement, and monitor procedures that will allow for timely reporting of financial information to management and those charged with governance.

Condition

We identified the following deficiencies in internal controls over the District's segregation of duties functions:

• Nutrition services department has a single employee who creates purchase orders, creates vendors, and processes payments.

• Management has the ability to create and enter employee data, as well as approve the payroll to be processed.

Questioned Costs

There were no questioned costs associated with the condition found.

Context

The conditions identified were determined through analysis and testing of internal controls over the District processes.

Effect

A lack of proper segregation of duties increases the likelihood of misstatement due to error or fraud and decreases the likelihood of accurate financial reporting.

Cause

Reductions in the Fiscal Services staffing have impacted the ability to maintain adequate internal controls related to segregation of duties.

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BANNING UNIFIED SCHOOL DISTRICT

SUMMARY SCHEDULE OF PRIOR AUDIT FINDINGS FOR THE YEAR ENDED JUNE 30, 2016

Recommendation

Continued monitoring of these functions is essential to ensure the accuracy of transactions posted within the Nutrition Services Department and the Payroll Department. When available, the impact of staffing reductions should be reviewed and evaluated for potential reinstatement of the position(s).

Current Status

Implemented.

Federal Awards F i ndi ngs

None reported.

State Awards Findings

2015-002 40000 - After School Education and Safety Program - Attendance and Reporting -Documentation

Criteria or Specific Requirements

Compliance requirements, detailed in Education Code Section 8483. 7, mandate that schools maintain adequate source documents supporting the number of students served by the After School Program (the Program) as reported semi-annually to the California Department of Education (CDE).

Condition

There is inadequate documentation indicating actual student participation in the Program. Source documents used for recording attendance do not consistently agree with the records included in the total number of students served.

Questioned Costs

There were no questioned costs associated with the condition found.

Context

The condition identified was determined through analysis of attendance records from two of the sites that operate the Program. Manual sign out rosters were reviewed for each child's sign out time in order to determine daily participation. The auditor selected two schools for the second semi-annual reporting period dated July 1, 2014 to December 31, 2014. The auditor reviewed a sample of manual sign out rosters for the month of November 2014 and noted five exceptions in a sample size of 25 students.

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BANNING UNIFIED SCHOOL DISTRICT

SUMMARY SCHEDULE OF PRIOR AUDIT FINDINGS FOR THE YEAR ENDED JUNE 30, 2016

Effect

Conditions identified make the Program's ability to report an accurate number of students served to the State as required as identified in the State Audit Guide in the required semi-annual attendance reports difficult. Per Education Code Section 8483.7, the CDE may terminate a grant that does not comply with fiscal reporting, attendance reporting, or outcomes reporting requirements. The CDE may also withhold the grant allocation for a program if the prior year reporting is outstanding.

Cause

It appears that the condition identified has materialized as a result of the absence of properly maintaining the standardized attendance recording and reporting procedures by those responsible for administering the Program.

Recommendation

The District may want to consider revising procedures used to take attendance. Revised procedures should incorporate standardized procedures that are necessary to record and report attendance related to the Program that are accurate and consistent. The District should clearly communicate its expectation for attendance documentation to all program administrators in order to prevent future non-compliance issues.

Current Status

hnplemented.

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ftl Vavrinek, Trine, Day & Co., LLP Certified Public Accountants

Governing Board Banning Unified School District Banning, California

VALUE THE DIFFERENCE

In planning and performing our audit of the financial statements of the governmental activities of Banning Unified School District (the District) as of and for the year ended June 30, 2016, in accordance with auditing standards generally accepted in the United States of America, we considered the District's internal control over fmancial reporting (internal control) as a basis for designing 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 the District's internal control. Accordingly, we do not express an opinion on the effectiveness of the District's internal control.

Our consideration of internal control was for the limited purpose described in the preceding paragraph and was not designed to identify all deficiencies in internal control that may exist that were not identified.

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. We did not identify any deficiencies in internal control that we consider to be material weaknesses.

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. We consider the following deficiencies in the District's internal control to be control deficiencies:

CURRENT YEAR OBSERVATIONS

DISTRICT

Accrual of Vacation Leave Balances

Observation

The District has a policy related to the accrual of vacation leave which provides a maximum of 240 hours to be accrued and carried forward. Time that is accrued over this amount is to be approved in writing by the employee's supervisor. As of June 30, 2016, a total of 40 employees had accrued unused vacation leave over these 240 hours. We were unable to locate the written approvals for these overages.

Recommendation

A review of unused vacation leave balances should be performed by the departmental supervisors, and employees should be encouraged to take the time off that is intended for them. A plan for each employee to take the unused time off should be developed, and approved and monitored by the supervisor.

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19340 Jesse Lane, Suite 260 Riverside, CA 92508 Tel: 951.367.3000 www.vtdcpa.com Fax: 951.367.301 0

Governing Board Banning Unified School District

ASSOCIATED STUDENT BODY ACCOUNTS

Nicolet Middle School

Associated Student Body- Cash Disbursement Procedures

Observation

In review of disbursement checks, the auditor noted that the site was only having one of the two required authorization signatures on their checks.

Recommendation

Disbursement checks are required to have two authorization signatures. Of these two signatures, bookkeepers should not be signatories of the accounts because they are involved with so many other steps in the process that this would prevent a proper segregation of duties for internal controls. These signatures should also not include students.

Banning High School

Associated Student Body- Snack Bar inventory

Observation

The following deficiencies exist in the internal control structure of the snack bar operated at sporting events:

• Tally sheets are not being utilized in order to reconcile the items that were sold to the monies collected or inventory.

• Inadequate safeguarding of assets. • An inventory record is not maintained for merchandise sold or purchased.

Recommendation

We recommend that a quarterly physical inventory be taken and reconciled to snack bar sales to ensure all merchandise has been accounted for. The prior quarter's ending inventory plus quarterly purchases less quarterly sales should equal the current physical count. The snack bar account should document transactions regarding the sales and purchases of the snack bar. This would allow the profitability of the snack bar to be analyzed during the year. All items of the snack bar should be properly locked up in a secure location and accounted for at all times. It is also recommended that tally sheets be used and reconciled to student store sales and inventory in order to ensure all merchandise has also been accounted for.

100

Governing Board Banning Unified School District

Associated Student Body- Financial Statement

Observation

In reviewing the site's financial statements, it was discovered that the change fund was not being reported on the fmancial statements.

Recommendation

The site should make the correct changes to the financial statements to report the amount of cash being kept at the site. It is important to have the amount of cash on hand being kept at the site reported on the financial statements to ensure the accuracy and to account for the cash on hand.

Associated Student Body- Safeguarding of Assets

Observation

During our examination, it came to our attention that the ASB does not maintain complete and current procedures over the safeguarding of assets (i.e. snack bar inventory). In order to adequately safeguard assets and to comply with Federal and State requirements, the ASB should provide the following:

• Maintain detail records indicating asset description, acquisition date and costs, funding source, and location.

• Such assets should be periodically checked by physically counting it with differences reconciled and records adjusted to reflect shortages/overages.

• All inventory items should be marked so as identify them as property of the District and inventory items purchased with grant funds specifically marked as such.

Recommendation

We recommended that the ASB advisor review the procedures relating to the safeguarding of assets and implement appropriate modifications to ensure the safeguarding of assets in compliance with Federal and State requirements.

Associated Student Body- Approval of Disbursements

Observation

During the review over of disbursements, 3 out of the 13 tested were approved after the invoice date. Without disbursements being approved before ordering merchandise, club spending might deplete the group's account causing deficit spending. Also, approving merchandise before ordering allows for consideration to be made on whether the items are a prohibited expenditure.

101

Governing Board Banning Unified School District

Recommendation

To strengthen internal controls over the purchasing function, purchase requisitions and/or purchase orders should be prepared prior to purchasing or ordering merchandise. This will allow the ASB Bookkeeper to ensure sufficient funds are available for each purchase, and proper approval has been maintained to approve that the expense is appropriate.

Associated Student Body- Disbursements

Observation

The auditor noted 2 out of the 13 disbursements tested had no signatures on the invoice indicating all items were received before payment.

Recommendation

All invoices should be accompanied by a purchase order, where applicable, and signed receiving documentation. This reduces the risk of unauthorized spending, and items being paid for and not received.

Associated Student Body- Disbursements

Observation

During the review of disbursements auditor noted 2 out of the 13 pre-approval forms. Without the control document of a pre-approval form, club spending might deplete the group's account causing deficit spending and the documentation that the required three signatures pursuant to California Education Code Section 48933(5)(b) have been obtained prior to the disbursement being made.

Recommendation

We recommend the bookkeeper to implement proper internal controls to ensure approvals are provided before processing future ASB transactions. Thus, the Education Code states all ASB expenditures must be pre-approved accordingly.

Associated Student Body- Scholarships

Observation

The auditor noted scholarship checks were made out to students instead of an institution of higher learning.

Recommendation

In order to prevent cash awards, checks should be made out to the higher institution in which the child anticipates to attend.

102

Governing Board Banning Unified School District

Associated Student Body- Disbursements Backup

Observation

It was noted that 2 out of the 13 disbursements tested lacked supporting documentation for purchase

Recommendation

All invoices should be accompanied by a purchase order, where applicable, and signed receiving documentation. This reduces the risk of unauthorized spending, and items being paid for and not received. Purchase orders provide clubs with documentation of items requested that can then be checked to the receiving documentation for accuracy and completeness, giving the clubs better control over their spending and inventory.

We appreciate the assistance of office personnel at the District and the school sites during our audit. If additional information is needed to assist with the implementation of these recommendations or to provide training, please call us.

This communication is intended solely for the information and use of management, the Governing Board, and others within the District, and is not intended to be and should not be used by anyone other than these specified parties.

Riverside, California November 30, 2016

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APPENDIX C

FORM OF CONTINUING DISCLOSURE CERTI Fl CATE

This Conti nui ng Di sci osure Certificate ( the " Di sci osure Certificate'') is executed and del ivered b,t the Banning Unified School District (the "District") in connection with the issuance of $25,500,000 of the District's General Obligation Bonds, 2016 Election, Series A (the" Bonds"). The Bonds are being issued pursuant to resolutions adopted b,t the County Board of Supervisors of Riverside County on March 7, 2017 (the "Resolution") and the Board of Trustee of the District on February 16, 2017. The District cwenants and agrees as fol I o,vs:

SECTION 1. Purpose of the Disclosure Certificate. This Disclosure Certificate is being executed and delivered b,t the District for the benefit of the Holders and Beneficial owners of the Bonds and in order to assist the Participc1.ting Underwriter in corrplying with Securities and Exchange Cornnission Rule 15c2-12(b)(5).

SECTION 2. Definitions. In addition to the definitions set forth in the Resolution, which apply to any capitalized term used in this Disclosure Certificate unless otherwise defined in this Section, the follo,ving capitalized terms shall have the follo,ving meanings:

"Annual Report" shall mean any Annual Report prwided b,t the District pursuant to, and as described in, Sections 3 and 4 of this Disclosure Certificate.

"Beneficial owner" shall mean any person which (a) has the po,ver, directly or indirectly, to vote or consent with respect to, or to dispose of o,vnership of, any Bonds (including persons holding Bonds through noninees, depositories or other intermediaries), or (b) is treated as the o,vner of any Bonds for federal i ncorne tax purposes.

"Dissemination Agent" shall mean initially mean Dale Scott & Company Inc., or any successor Dissenination Agent designated in writing b,t the District (which may be the District) and which has filed with the District a written acceptance of such designation.

" Holders" shal I mean registered o,vners of the Bands.

"Listed Events" shall mean any of the events listed in Section S(a) or Section S(b) of this Disclosure Certificate.

"Official Statement" means that certain official statement, dated March 22, 2017, relating to the offering and sale of the Bands.

"Participating Underwriter" shall mean RBC Capital Markets LLC, as the original underwriter of the Bonds required to comply with the Rule in connection with the offering of the Bonds.

"Repository" shall mean, the Municipc1.I Securities Rulemaking Board, which can be found at http://emma.msrb.org/, or any other repository of disclosure information that may be designated b,t the Securities and Exchange Cornnission as such for purposes of the Rule in the future.

"Rule'' shall mean Rule 15c2-12(b)(5) adopted b,t the Securities and Exchange Comnission underthe Securities Exchange Act of 1934, as the same may be amended from time to time.

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"State" shal I mean the State of California.

SECTION 3. Provision of Annual Reports.

(a) The District shall, or shall cause the Dissenination Agent to, not later than nine months after the end of the District's fiscal year (presently endingJ une 30), comrrencing with the report for the 2016-17 fiscal year, prwide to the Repository an Annual Report which is consistent with the requirerrents of Section 4 of this Disclosure Certificate. The Annual Report rray be subnitted as a single docurrent or as separate docurrents comprising a i:ackage, and rray cross,eference other i nforrrati on as prwided in Section 4 of this Disclosure Certificate; prwided that the audited financial staterrents of the District rray be submitted separately from the balance of the Annual Report and later than the date required abcwe for the filing of the Annual Report if they are not available b,t that date. If the District's fiscal year changes, it shall give notice of such change in the same rranner as for a Listed Event under Section S(c).

( b) Not I ater than thirty ( 30) days ( nor more than sixty ( 60) days) prior to said date the Dissenination Agent shall give notice to the District that the Annual Report shall be required to be filed in accordance with the terms of this Disclosure Certificate. Not later than fifteen (15) Business Days prior to said date, the District shall provide the Annual Report in a forrrat suitable for reporting to the Repository to the Dissenination Agent (if other than the District). If the District is unable to prwide to the Repository an Annual Report b,t the date required in subsection (a), the District shall send a tirrely notice to the Repository in substantially the form attached as Exhibit A with a copy to the Dissenination Agent. The Dissenination Agent shall not be required to file a Notice to Repository of Failure to File an Annual Report.

(c) The Dissemination Agent shall file a report with the District stating it has filed the Annual Report in accordance with its obligations hereunder, stating the date it was provided to the Repository.

SECTION 4. Content and Form of Annual Reports. (a) The District's Annual Report shall contai n or include b,t reference the fol Io.vi ng:

1. The audited financial staterrents of the District for the prior fiscal year, prei:ared in accordance with generally accepted accounting principles as promulgated to apply to governrrental entities from tirre to tirre b,t the Gwernrrental Accounting Standards Board. If the District's audited financial staterrents are not available b,t the tirre the Annual Report is required to be filed pursuant to Section 3(a), the Annual Report shall contain unaudited financial staterrents in a forrrat sinilartothe financial staterrents contained in the final Official Staterrent, and the audited financial staterrents shall be filed in the sarre rranner as the Annual Report when they become avai I able.

2. Material financial inforrration and operating data with respect to the District of the type included in the Official Staterrent in the follo.ving categories (to the extent not included in the District's audited financial staterrents):

(a) State funding received b,t the District for the last completed fiscal year;

(b) average daily attendance of the District for the last completed fiscal year;

( c) outstanding District indebtedness;

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(cl) sumrrary financial information on revenues, expenditures and fund balances for the District's general fund reflecting adopted budget for the current fiscal year;

(e) assessed valuation of taxable property within the District for the current fiscal year; and

(f) secured tax levy collections and delinquencies within the District for the last corrpleted fiscal year, except to the extentthe Teeter Plan, as adopted 0y Ventura County, applies to both the 1% general purpose advalorem property tax levy and to the tax levy for general obligation bonds of the District.

Any or all of the items listed above rray be included 0y specific reference to other documents, including official statements of debt issues of the District or related public entities, which have been submitted to the Repository or the Securities and Exchange Comnission. If the document included 0y reference is a final official statement, it must be available from the Municipal Securities Rulerraking Board. The District shall clearly identify each such other document so included 0y reference.

(b) The Annual Report shall be filed in an electronic format, and accompanied 0y identifying information, prescribed 0y the Municipal Securities Rulerraking Board.

SECTION 5. Reporting of Significant Events.

(a) Pursuant to the provisions of this Section 5(a), the District shall give, or cause to be given, notice of the occurrence of any of the fol Io.vi ng events with respect to the Bands in a timely rranner not in excess of 1 O busi ness days after the occurrence of the event:

1 . pri nci pal and interest payment deli nquenci es.

2. tender offers.

3. optional, contingent or unscheduled Bond calls.

4. defeasances.

5. rating changes.

6. adverse tax opinions, the issuance 0y the Internal Revenue Service of proposed or final deterninations of taxability, or Notices of Proposed Issue (I RS Form 5701-TEB).

7. unscheduled draws on the debt service reserves reflecting financial difficulties.

8. unscheduled draws on credit enhancement reflecting financial difficulties.

9. substitution of the credit or liquidity providers or their failure to perform

10. bankruptcy, insolvency, receivership or si ni lar event (within the meaning of the Rule) of the District. For the purposes of the event identified in this Section 5(a)(9), the event is considered to occur when any of the follo.ving occur: the appointment of a receiver, fiscal agent or sinilar officer for the District in a proceeding under the U.S. Bankruptcy Code or in any other proceeding under state or federal I aw in which a court or governmental authority has assumed jurisdiction wer substantially all of the assets or business of the District, or if such jurisdiction has been assumed 0y I eavi ng the exi sti ng governmental body and officials or officers i n

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possession but sul::iject to the supervision and orders of a court or gcwernrrental authority, or the entry of an order confirming a plan of reorganization, arrangerrent or liquidation b,t a court or givernrrental authority having supervision or jurisdiction over substantially all of the assets or business of the District.

(b) Pursuant to the prwisions of this Section S(b), the District shall give, or cause to be given, notice of the occurrence of any of the follo.ving events with respect to the Bonds, if rraterial:

1. non--payrrent related defaults.

2. modi fi cati ans to rights of Bondholders.

3. unless described under Section S(a)(S) above, rraterial notices or deterninations with respect to the tax status of the Bands, or other material events affecting the tax status of the Bonds.

4. release, substitution or sale of property securing repayrrent of the Bonds.

5. the consummation of a rrerger, consolidation, or acquisition involving the District or the sale of all or substantially all of the assets of the District, other than in the ordinary course of business, the entry into a definitive agreerrent to undertake such an action or the termination of a definitive agreerrent rel ati ng to any such acti ans, otherthan pursuantto its terms.

6. appointrrent of a successor or additional trustee or paying agent with respect to the Bands or the change of narre of such a trustee or paying agent.

(c) Whenever the District obtains kno.vledge of the occurrence of a Listed Event under Section S(b) hereof, the District shall as soon as possible determine if such event would be rraterial under applicable federal securities laws.

(cl) If the District deternines that kno.vledge of the occurrence of a Listed Event under Section S(b) hereof would be rraterial under applicable federal securities laws, the District shall (i) file a notice of such occurrence with the Repository in a tirrely manner not in excess of 10 business days after the occurrence of the event or (ii) prwide notice of such reportable event to the Dissenination Agent in forrrat suitable for filing with the Repository in a tirrely manner not in excess of 10 business days after the occurrence of the event. The Dissenination Agent shall have no duty to independently prepare or file any report of Listed Events. The Dissenination Agent rray conclusively rely on the District's deternination of materiality pursuantto Section S(c).

SECTION 6. Termination of Reporting Obligation. The District's obligations under this Disclosure Certificate shall terninate upon the legal defeasance, prior redemption or payrrent in full of all of the Bonds. If such ternination occurs prior to the final rraturity of the Bonds, the District shall give notice of such ternination in the sarre manner as for a Listed Event under Section S(a) or Section S(b), as applicable.

SECTION 7. Dissenination Agent. The District rray, from tirre to tirre, appoint or engage a Dissenination Agent (or substitute Dissenination Agent) to assist it in carrying out its obligations under this Disclosure Certificate, and rray discharge any such Agent, with or without appointing a successor DisseninationAgent. The DisseninationAgent rray resign upon fifteen (15) dayswrinen notice to the District. Upon such resignation, the District shall act as its o.vn Dissenination Agent until it appoints a

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successcr. The Dissenination Agent shall not be responsible in any rranner forthe content of any notice or report prepared b,t the District pursuant to this Disclosure Certificate and shall not be resp:insible to verify the accuracy, corrpl eteness or rrateri al i ty of any conti nui ng di sci osure i nforrrati on prwi ded b,t the District. The District shall compensate the Dissemination Agent for its fees and expenses hereunder as agreed b,t the parties. Any entity succeeding to all or substantially all of the Dissenination Agent's corp:irate trust business shal I be the successor Disseni nation Agent without the execution or filing of any i:aper or further act.

SECTION 8. Amendment; Waiver. Notwithstanding any other prwision of this Disclosure Certificate, the District may amend this Disclosure Certificate, and any prwision of this Disclosure Certificate rray be waived, provided that the fol Io.vi ng conditions are satisfied:

(a) If the amendment or waiver relates to the prwisions of Sections 3(a), 4, S(a) or S(b), it rray only be rrade 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 Bands, or the type of business conducted;

(b) The undertaking, as amended or taking into account such waiver, would, in the opinion of nationally recognized bond counsel, have corrplied with the requirements of the Rule at the ti me of the ori gi nal issuance of the Bands, after taking i nto account any amendments or i nterpretati ans of the Rule, as wel I as any change in ci rcumstances;

(c) The amendment or waiver does not, in the opinion of nationally recognized bond counsel, rrateri al ly i mi:ai rthe i nterests of the Holders or B enefi ci al owners of the Bands; and

(cl) No duties of the Dissenination Agent hereunder shall be amended without its written consent thereto.

In the event of any amendment or waiver of a provision of this Disclosure Certificate, the District shall describe such amendment in the next Annual Report, and shall include, as applicable, a narrative explanation of the reason for the amendment or waiver and its i mi:act on the type ( or in the case of a change of accounting pri nci pl es, on the presentation) of fi nanci al i nforrrati on or operati ng data being presented b,t the District. In addition, if the amendment relates to the accounting principles to be follo.ved in prei:aring financial statements, (i) notice of such change shall be given in the same rranner as for a L i sted Event under Section 5( a), and (ii) the Annual R ep:irt for the year i n which the change is rrade should present a comi:arison (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 prei:ared on the basis of the former accounti ng pri nci pl es.

SECTION 9. Additional lnforrration. Nothing in this Disclosure Certificate shall be deemed to prevent the District from disseninating any other inforrration, using the means of dissenination set forth in this Disclosure Certificate or any other means of communication, or including any other inforrration in any Annual Rep:irt or notice of occurrence of a Listed Event, in addition to that which is required b,t this Disclosure Certificate. If the District chooses to include any inforrration in any Annual Report or notice of occurrence of a Listed Event in addition to that which is specifically required b,t this Disclosure Certificate, the District shall have no obligation under this Certificate to update such inforrration or incl ude it i n any future Annual Report or notice of occurrence of a Listed Event.

SECTION 10. Default. In the event of a failure of the District to comply with any prwision of this Disclosure Certificate any Holder or Beneficial owner of the Bonds rray take such actions as rray be necessary and appropriate, incl udi ng seeki ng rrandate or specific performance b,t court order, to cause the

C-5

District to corrply with its obligations under this Disclosure Certificate. A default under this Disclosure Certificate shall not be deerred an event of default under the Resolution, and the sole remedy under this Disclosure Certificate in the event of any fai I ure of the District to corrply with this Disclosure Certificate shall be an action to carpel perforrrance.

SECTION 11. Duties, Immunities and Liabilities of Dissemination Agent. The Dissemination Agent shall have only such duties as are specifically set forth in this Disclosure Certificate. The Dissenination Agent acts hereunder solely for the benefit of the District; this Disclosure Certificate shall confer no duties on the Dissenination Agent to the Participc1.ting Underwriter, the Holders and the Beneficial owners. The District agrees to indemnify and save the Dissemination Agent, its officers, directors, errployees and agents, harniess against any loss, expense and liabilities which it rray incur arising out of or in the exercise or perforrrance of its pcwers and duties hereunder, including the costs and expenses (including attorney's fees) of defending against any claim of liability, but excluding liabilities due to the Dissemination Agent's gross negligence or willful nisconduct. The obligations of the District under this Section shall survive resignation or remcwal of the Dissemination Agent and pc1.yrrent of the Bonds. The DisseninationAgent shall have no liability for the failure to report any event or any financial inforrration as to which the District has not prwided an inforrration report in format suitable for filing with the Repository. The Dissenination Agent shall not be required to monitor or enforce the District's duty to comply with its continuing disclosure requi rerrents hereunder.

SECTION 12. Beneficiaries. This Disclosure Certificate shall inure solely to the benefit of the District, the DisseninationAgent, the Participc1.ting Underwriter and Holders and Beneficial owners from tirre totirre of the Bonds, and shall create no rights in any other person or entity.

Dated: Apri I 5, 2017 BANNING UNIFIED SCHOOL DISTRICT

By:--------------Authorized Officer

C--6

EXHIBIT A

NOTICE TO REPOSITORY OF FAILURE TO FILE ANNUAL REPORT

Name of District: BANNING UNIFIED SCHOOL DISTRICT

Name of Bond Issue: General Obligation Bonds, 2016 Election, Series A

Date of Issuance: Apri I 5, 2017

NOTICE IS HEREBY GIVEN that the District has not prwided an Annual Report with respect to the above-named Bonds as required 0y the Continuing Disclosure Certificate relating to the Bonds. The District anticipates thattheAnnual Report will be filed 0y _____________ .

Dated: ______________________ _

BANNING UNIFIED SCHOOL DISTRICT

By_~[~=or~m~on~ly~;~n=o~s=iq~nat=ur~e~reg=u~ire=~~--

C-A-1

(This page intentionally left blank)

APPENDIX D

GENERAL ECONOMIC AND DEMOGRAPHIC INFORMATION FOR THE CITY OF BANNING AND RIVE RSI DE COUNTY

The follDMng inforrration regarding the City of Banning (the" City''), and Riverside County (the "County'') is included only for the purpose of supplying general inforrration regarding the local comnmity and econonv. The Bonds are not a debt of the City or of the County. This rraterial has been prepared b,t or excerpted from the sources as noted herein and has not been revi e.ved for accuracy b,t the District or Bond Counsel.

General

The City of Banning. Located in the San Gorgonio Pass, between Mt. San Gorgoniotothe north and Mt. San Jacinto to the South, the City was a stage coach stop as early as 1862, along the route to where gold was discwered. The City is still kno.vn as Stagecoach To.vn, U.SA. and hosts an annual Stagecoach Days Celebration. A general law city incorporated in 1913, the City has a Council-Manager form of government. One of the five City-wide elected council members is appointed rrayor b,t the Counci I each year. Counci I members serve staggered four-yearterms.

Riverside County. Incorporated in 1893, the County is the fourth largest county in the State of California (the "State''), encompassing approxirrately 7,295 square miles. It is currently the tenth most populous county in the United States. The County is located in the southern portion of the state and is bordered b,t San Bernardino County on the north, Los Angeles and Orange Counties on the west, the State of Arizona and the Colorado River on the east, and San Diego and Imperial Counties on the south. The County is a general law county governed b,t a County Board of Supervisors consisting of an elected supervisor from each of five districts. Each supervisor serves four-year terms and together they annually elect a Chairman amongst themselves. Experiencing a period of gro.vth and development, the County is one of the fastest--gro.vi ng counties in the State.

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D-1

Population

The follo.ving table sho.vs historical population figures for the City, the County and the State for the plSt ten years.

'" As of January l. '" As of April l.

POPULATION ESTIMATES 2007 through 2016

City of Banning, Riverside County and the State of California

City of Riverside State of Year 111 Banning County California

2007 28,634 2,049,902 36,399,676 2008 28,695 2,102,741 36,704,375 2009 29,144 2,140,626 36,966,713 201d'1 29,603 2,189,641 37,253,956 2011 29,818 2,212,874 37,536,835 2012 30,133 2,239,715 37,881,357 2013 30,332 2,266,549 38,239,207 2014 30,483 2,291,093 38,567,459 2015 30,659 2,317,924 38,907,642 2016 30,834 2,347,828 39,255,883

Source: 2010: U.S. DepartrrentofComrerce, Bureau of the Census, for April l. 2006-09, 201 l-16 (2000and 2010 DRU Benchrmrlq: California Departrrent of Finance for January l.

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D-2

Income

The follo.vingtable sumnarizes per capita personal income for the County, the State and the United States for the P35t ten years.

PER CAPITA PERSONAL INCOME 2ocx=; through 2015

Riverside County, State of California, and United States

Riverside State of Year County California United States

2CX:X, $31,574 $42,334 $38,144 2007 31,972 43,692 39,821 2008 31,932 44,162 41,082 2009 30,446 42,224 39,376 2010 30,380 43,315 40,277 2011 31,828 45,820 42,453 2012 32,263 48,312 44,267 2013 32,765 48,471 44,462 2014 33,867 50,988 46,414 2015 35,589 53,741 48,112

Note: Per capital personal inc:orre is the total personal inc:orre divided by the total rrid-year population estirmtes of the U.S. Bureau of the Censu~ Estirmtes for 2010 through 2015 reflect county population estirmtes available as of March 2016. All dollar estirmtes are in current dollars (not adjusted for inflation).

Source: U .5. Departrrent of Comrerce, Bureau of Econonic Analysis.

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D-3

Principal EmplO(ers

The follo.vingtables listthe principal emplO{ers located in the City and the County.

Employer Name

MorongoCasinoResort& Spa San Gorgonio Memorial Hospital Highland Springs Medical Center Wal-Mart B anni ng Beaver Medi cal Center Lo.ve' s Distribution Center City of Banning Desert Hills Premium Outlets Stater Brothers Market Home Depot

'" Nurrber of errployees not available.

PRINCIPAL EMPLOYERS 2016

City of Banning

Industry

Amusement and Recreation Services Services: Health Services: Health Retail Trade: General Merchandise Services: Health Wholesale Trade: Durable Goods PublicAdninistration Retail Trade: General Merchandise R etai I Trade: Food Stores Retail Trade: General Merchandise

Source: CityofBanning Charmer of Comrerce, "2016 Pass Area Business Directory& Visitors Guide.""

PRINCIPAL EMPLOYERS 2016

Riverside County

Employer Name

County of Riverside March Air Reserve Base University of California Riverside Ama2on Stater Brothers Market Kaiser Permanente Riverside Medical Center Corona-Norco Unified School District Desert Sands Unified School District Riverside Unified School District Pechanga Resort Casi no

Industry

Public Adninistration National Security Services: E ducati anal Retail Trade: General Merchandise Stores Retail Trade: Food Stores Services: Health Services: E ducati anal Services: E ducati anal Services: E ducati anal Amusement and Recreation Services

Number of E mployees111

Number of Employees

21,479 8,500 8,306 7,500 6,900 5,300 5,098 4,202 3,973 3,931

Source: "CorrprehensiveAnnual Financial Report'" ofRiver~de County, California for the fiscal year endedJ une 30, 2016.

D-4

Employment

The follo.ving table sumnarizes the labor force, errployment and unemployment figures for the years 2011 through 2015 for the City, the County, the State and the United States.

LABOR FORCE, EMPLOYMENT AND UNEMPLOYMENT ANNUAL AVERAGES 2011 through 201 s< 11

City of Banning, Riverside County, State of California, and United States

E m12I Qiment1' 1 U nem12I Qiment131 Unemployment

Year and Area Labor Force Rate(%)

2011

City of Banning 12,000 10,100 1,900 15.7% Riverside County 939,600 810,400 129,200 13.8 State of California 18,415,100 16,258,100 2,157,000 11.7 United States 153,617,000 139,869,000 13,747,000 8.9

2012 City of Banning 12,000 10,300 1,700 14.0)6 Riverside County 944,500 828,800 115,600 12.3 State of California 18,551,400 16,627,800 1,923,600 10.4 United States 154,975,000 142,469,000 12,506,000 8.1

2013 City of Banning 12,100 10,700 1,400 11.1% Riverside County 953,200 855,300 97,900 10.3 State of California 18,670,100 17,001,000 1,669,000 8.9 United States 155,389,000 143,929,000 11,460,000 7.4

2014 City of Banning 10,700 9,900 800 7.3% Riverside County 1,011,500 928,200 83,400 8.2 State of California 18,827,900 17,418,800 1,409,900 7.5 United States 155,922,000 146,305,000 9,617,000 6.2

2015 City of Banning 10,700 10,100 600 5.936 Riverside County 1,035,200 965,500 69,600 6.7 State of California 18,891,800 17,798,600 1,183,200 6.2 United States 157,130,000 148,834,000 8,296,000 5.3

Note: Data is not seasonally adjusted. en Annual averages, unless otherwise specified. (2) Includes persons involved in labor---rranagerrent trade disputes. (3) The unerrployrrent rate is corrputed from unrounded data; therefore, it rm.y differ from rates corrputed from rounded

figures in this table. Source: U .5. Departrrent of Labor - Bureau of Labor Statistics, California Errplc,yrrent Developrrent Departrrent March 2015 Benchrrnrk

D-5

Industry

The County is included in the Riverside-San Bernardino-Ontario Metropolitan Statistical Area (the "MSA"). The distribution of errplO{rrent in the MSA is presented in the follo.ving table for the calendar years 2011 through 2015. These figures are multi county-wide statistics and rray not necessarily accurately reflect emplO{rrenttrends in the County.

INDUSTRY EMPLOYMENT & LABOR FORCE ANNUAL AVERAGES 2011 through 2015

Riverside County (Riverside-San Bernardi no-Ontario M SA)

Catecpry 2011 2012 2013 2014

Total Farm 14,900 15,000 14,500 14,400 Total Nonfarm 1,154,500 1,185,200 1,233,300 1,289,300 Total Private 927,000 960,600 1,008,100 1,060,500 Goods Producing 145,200 150,500 158,600 170,200 Mining and Logging 1,000 1,200 1,200 1,300 Construction 59,100 62,600 70,000 77,600

Manufacturing 85,100 86,700 87,300 91,300 Durable Goods 55,800 56,900 57,300 60,200 Nondurable Goods 29,300 29,800 30,100 31,100

Service Prwi ding 1,009,300 1,034,700 1,074,700 1,119,100 Private Service Producing 781,800 810,100 849,600 890,300

Trade, Transportation and Utilities 275,600 287,600 299,700 314,900 W hol esal e Trade 49,200 52,200 56,400 58,900 Retail Trade 158,500 162,400 164,800 169,400 Transportation, Warehousing and 67,900 73,000 78,400 86,600

Utilities I nforrrati on 12,200 11,700 11,500 11,300 Financial Activities 39,500 40,200 41,300 42,300 Professi anal and Business Services 126,000 127,500 132,400 139,300 Educational and Health Services 165,400 173,600 187,600 194,800 Leisure and Hospitality 124,000 129,400 135,900 144,800 Other Services 39,100 40,100 41,100 43,000 Gwernrrent 227,500 224,600 225,200 22!l,800

Total, All Industries 1,169,400 1,200,200 1,247,800 1,303,700

Note: The "Total, All I ndustries"" data is not di rec~y corrparable to the errployrrent data found herein.

2015

15,100 1,347,400 1,114,000

182,100 1,300

85,200 95,600 62,800 32,800

1,165,200 931,900 332,500 61,700

173,500 97,300

11,300 43,200

144,400 205,000 151,500 44,000

233,400 1,362,400

Source: State of California, Errployrrent Developrrent Departrrent, Labor Market lnrorrmtion Divi~on, Los Angeles MSAAnnual Average Labor Force and Industry Errployrrent March 2015 Benchrmrk

D-6

Commercial Activity

Summaries of annual taxable sales for the City and the County from 2010 through 2014 are sho.vn in the fol Io.vi ng tables.

ANNUAL TAXABLE SALES 201 0 through 2014 11

City of Banning (Dollars in Thousands)

Retail Stores Retail Taxable

Year Permits Transactions

2010 340 $133,218 2011 323 143,230 2012 340 146,600 2013 332 154,595 2014 334 158,551

Note: In 2009, retail perrrits expanded to include perrrits for food services. '" Calendar year 2015 data is not yet available.

Total Permits

471 448 466 460 450

Source: "Taxable Sales in California (Sales & Use Tax),"" California State Board of Equali,..tion.

ANNUAL TAXABLE SALES 201 0 through 2014 11

Riverside County (Dollars in Thousands)

Retail Stores Retail Taxable

Year Permits Transactions

2010 32,534 $16,919,500 2011 33,398 18,576,285 2012 34,683 20,016,668 2013 33,391 21,306,774 2014 34,910 22,646,343

Note: In 2009, retail perrrits expanded to include perrrits for food services. '" Calendar year 2015 data is not yet available.

Total Permits

45,688 46,886 48,316 46,805 48,543

Source: "Ta,able Sales in California (Sales & Use Tax),"" California Board of Equali,..tion.

D-1

Total Taxable Transactions

$146,742 157,071 165,579 175,386 181,922

Total Taxable Transactions

$23,152,780 25,641,497 28,096,009 30,065,467 32,035,687

Construction Activity

The annual building pernit valuations and number of pernits for new dNelling units issued from 2011 through 2015 forthe City and the County are sho.vn in the follo.ving tables.

BUILDING PERMIT5ANDVALUATION5 2011 through 2015

City of Banning (Dollars in Thousands)

2011 2012 2013

Valuation Residential $980 $742 $935 N on--R esi denti al 1,823 953 3,106 Total $2,803 $1,695 $4,041

Units Single Fanily 0 0 2 Multiple Fanily 0 0 0 Total 0 0 2

Note: Totals rmy not add to sum due to rounding. Source: Construction Industry Research Board.

Valuation

BUILDING PERMITSANDVALUATIONS 2011 through 2015 Riverside County

(Dollars in Thousands)

2011 2012 2013

2014

$827 3,417

$4,244

2 0 2

2014

Residential $879,949 $1,079,405 $1,375,593 $1,621,751 N on--R esi denti al 559,409 657,595 873,977 814,990 Total $1,439,358 $1,737,000 $2,249,570 $2,436,741

Units Single Fanily 2,659 3,720 4,716 5,007 Multiple Fanily 1,061 909 1,427 1,931 Total 3,720 4,629 6,143 6,938

Note: Totals rmy not add to sum because of rounding. Source: Construction Industry Research Board.

D-8

2015

$689 2,741

$3,430

0 0 0

2015

$1,536,742 911,465

2,448,207

5,007 1,189 6,196

APPENDIX E

RIVERSIDE COUNTY TREASURY POOL

The follCMing inforrration concerning the Riverside County (the" County'') Treasury Pool (the "Treasury Pool") has been prwided b,t the Treasurer-Tax Collector of the County (the "Treasurer"), and has not been confirrred or verified b,tthe District, the Financial Advisor or the Underwriter. Neither the District, the Financial AdJisor nor the Underwriter has rrade an independent investigation of the investrrents in the Treasury Pool nor any assessrrent of the current County investrrent policy. The value of the various investrrents in the Treasury Pool will fluctuate on a daily basis as a result of a multitude of factors, including generally prevailing interest rates and other econonic conditions. Additionally, the Treasurer rray change the investrrent policy at any tirre. Therefore, there can be no assurance that the values of the various investrrents in the Treasury Pool will not vary significantly from the values described herein. Finally, neither the District, the Financial AdJisor nor the Underwriter rrakes any representation as to the accuracy or adequacy of such inforrration or as to the absence of rraterial adJerse changes in such inforrration subsequent to the date hereof, or that the inforrration contained is correct as of any tirre subsequent to its date. Further inforrration rray be obtained from the Treasurer at the fol I CMi ng website: http: / MM,W. Riversi de.org;ttc/. H cwever, the i nforrrati on presented on such website is not incorporated into this Official Staterrent b,t any reference.

E-1

County of Riverside January

Treasi,rer's Pooled Invest11ient Fi11id Capital Markets

Team

Don Kent

Treasurer-Tax Collector

Jon Christensen

Asst. Treasurer-Tax Collector

Giovane Pizano

Investment Manager

Isela Licea

Asst. Investment Manager

Inveslment Objectives

The primary objective of the

treasurer shall be to sa/Yguard

lite pri11cipat of the funds under

the

treasurer 1 s control, meet the

liq11idity tweds of the depositor,

and achieve a return ou the fuutls

under his or her control.

COUN1Y OF RIVERSIDE TREASURER'S POOLED INVES1MENT FUND IS CURRENTLY RATED: Aaa-bf BY MOODY'S INVESTOR'S SERVICE AND AAA/Vl BY FITCH RATINGS

January 6,807,339,004.02 6,820,287,408.45 (12,948,404.43) (0.19) 0.85 1.24 1.21

December 7,535,408,708.47 7,551,196,851.23 (15,788,142.76) (0.21) 0.78 1.15 1.12

November 6,033,009,890.44 6,046,622,157.21 (13,612,26627) (0.23) 0.77 1.29 1.26

October 5,928,768,948.80 5,927,146,578.70 1,622,370.10 0.03 0.73 1.23 1.21

September 5,916,650,304.83 5,911,244,395.48 5,405,90935 0.09 0.73 1.23 1.20

August 6,110,619,759.63 6,102,082,969.94 8,536,789.69 0.14 0.72 1.23 1.20

The Treasurer 1 s Pooled Investment Fund is comprised of the

County, Schools, Special Districts, and other Discretionary Depositors.

Current Market Data Economic Indicators

01/06/2017

01/06/2017

01/06/2017

01/27/2017

01/31/2017

01/06/2017

01/18/2017

01/18/2017

Stock Indices

S&P 500 Index

NASDAQ (NDX)

Commodities

Nymex Crude

Gold (USD/OZ)

Non-Farm Payrolls :M/M change: Counts the number of paid employees working part­

time or full-time in the natiods business and government establishments.

Employment Situation: Measures the number of unemployed as a percentage of the

labor force.

Durable Goods Orders - :M/M change: Reflects the new orders placed with domestic

manufacturers for immediate and future delivery of factory hard goods.

Real Gross Domestic Product - Q/Q change: The broadest measure of aggregate

economic activity and encompasses every sector of the economy. GDP is the country's

most comprehensive economic scorecard.

Consumer Confidence: Measures consumer attitudes on present economic conditions

and expectations of future conditions.

Factory Orders M/M change: Represents the dollar level of new orders for both durable

and nondurable goods.

Consumer Price Index - M/M change: The Consumer Price Index is a measure of the

average price level of a fixed basket of goods and services purchased by consumers.

CPI Ex Food and Energy - M/M change: CPI Ex Food and Energy excludes food and

energy.

Fed Funds Target Rate

$ 2,278.87 :l().(Jtl

$ 5,116.76 Stay at 0.50%-0.75% 70.0%

Increase to 1.00% 30.0%

Increase to 1.25 % 0.0%

Increase to 1.50% 0.0% $ 52.81 $ [0.91)

$ 1,210.65 $ 58.38 FOMC Meeting Schedule

01-Feb 0.5-0.75 %

US Treasury Curve (M/M) 15-Mar

COUNTY OF RIVERSIDE TREASURER-TAX COLLECTOR

175,000 156,000

4.7% 4.7%

-4.6% -4.5%

2.2% 1.9%

112.8 111.8

-2.3% -2.4%

0.3% 0.3%

0.2% 0.2%

51.4%

40.6%

8.0%

0.0%

Balanced

2

TIMMI

The Treasurer's Institutional Money Market Index (TIMMI) is compiled and reported by the Riverside County Treasurer's Capital

Markets division It is a composite index derived from four AAA rated prime institutional money market funds. Similar to the

Treasurer's Office, prime money market funds invest in a diversified portfolio of U.S. dollar denominated money market instruments

including U.S. Treasuries, government agencies, commercial paper, certificates of deposits, repurchase agreements, etc. TIMMI is

currently comprised of the four multi billion dollar funds listed below.

)&~ Rated Prime lm,titutional Money-Nfarlfot Funds

Fidelity Prime Institutional MMF

Federated Prime Obligations Fund

Wells Fargo Advantage Heritage

JP Morgan

1.00% -tt-PoolYield

0.80% 062~a:'~ 0.65%

0.60% 0.40% 0.42%

0.40%

0.20%

0.00% Jan-16 Mar-16

Cash Flows

02/2017

02/2017 810.00 1,200.00

CB/2017 1,200.00 1,080.00

04/2017 1,800.00 950.00

05/2017 850.00 1,110.00

06/2017 1,400.00 1,850.00

07/2017 1,256.11 1,450.00

08/2017 1,017.89 1,200.00

09/2017 1,004,10 1,110.00

10/2017 1,127.50 1,200.00

11/2017 1,165.00 1,050.00

12/2017 990.00 2,250.00

01/2018 1,050.00 1,710.00

0.65% 0.67%

0.42% 0.41%

May-16

(390.00)

120.00

850.00

(650.00)

(450.00)

(193.89)

(182.11)

(105.90)

(72.50)

115.00

(1,260.00)

(660.00)

0.69% 0.72%

0.42% 0.40%

Jul-16

235.89

130.00

111.89

182.11

105.90

72.50

1,111.00

660.00

FIPXX

POIXX

WFJXX

CJPXX

0.73%

0.39%

Sep-16

15411

120.00

970.00

320.00

115.00

Nov-16

I .

0.86%

0.48%

0.78%

0.89%

1,700.85

480.00

273.14

767.11

563.02

101.11

90.05

69.40

77.50

254A8

140.70

50.00

Jan-17

TOTALS 13,670.60 16Jqll.OO (2,879.40) 2,725.29 1,679.11 4,118.03 4)825.11

36.09% 60.49% 6&91 % ·• All values reported in nillions ($).

The Pooled Investment Fund cash flow requirements are based upon a 12 month historical cash flow model. Based upon projected

cash receipts and maturing investments, there are sufficient funds to meet future cash flow disbursements over the next 12 months.

COUNTY OF RIVERSIDE TREASURER-TAX COLLECTOR 3

Asset Allocation Assets (OOO's) Scheduled Par Scheduled Book Scheduled Market Mklf Sch Book Yield WAL (Yr) Mat(Yr)

MMKT 750,000.00 750,000.00 750,000.00 100.00% 0.53% .003 .003

CALTRUST FND 54,000.00 54,000.00 54,000.00 100.00% 0.91 % .003 .003

DDA/PASSBK 200,000.00 200,000.00 200,000.00 100.00% 0.62% .003 .003

LOCAL AGCY OBLIG 265.00 265.00 265.00 100.00% 1.28% 3.373 3.373

US TREAS BILLS 350,000.00 348,972.31 349,539.75 100.16% 0.49% .256 .256

US TREAS BONDS 375,000.00 374,877.15 375,050.70 100.05% 0.91 % .910 .910

FHLMC DISC NOTES 200,000.00 199,477.07 199,764.75 100.14% 0.47% .221 .221

FHLMC BONDS 1,062,150.00 1,062,122.03 1,050,972.74 98.95% 1.28% 1.981 3.297

FNMA DISC NOTES 25,000.00 24,876.25 24,962.50 100.35% 0.55% .277 .277

FNMA BONDS 310,000.00 309,968.55 306,048.33 98.74% 1.18% 2.668 3.188

FHLB DISC NOTES 576,000.00 573,691.65 574,984.84 100.23% 0.63% .315 .315

FHLBBONDS 554,319.72 554,228.15 552,121.58 99.62% 1.10% 1.432 2.494

FFCB DISC NOTES 225,000.00 223,903.25 224,693.05 100.35% 0.56% .245 .245

FFCB BONDS 558,910.00 559,011.25 558,370.46 99.89% 0.92% 1.675 2.062

FMAC DISC NOTES 75,000.00 74,731.58 74,843.25 100.15% 0.68% .377 .377

FARMER MAC 108,850.00 108,850.00 109,120.47 100.25% 0.86% 1.013 1.013

MUNI ZERO CPNS 51,850.00 51,780.77 51,817.91 100.07% 0.71 % .086 .086

MUNI BONDS 369,160.00 372,046.99 372,046.99 100.00% 0.97% 1.251 1.251

COMM PAPER 980,000.00 977,485.42 978,736.70 100.13% 0.78% .161 .161

Totals (OOO's): 6,825,504.72 6,820,287.41 6,807,339.00 99.81% 0.85% .900 1.247

1.,00-00

i

COUNTY OF RIVERSIDE TREASURER-TAX COLLECTOR 4

Maturity Distribution Scheduled Par (OOO's) 0-lMos 1-3Mos 3-12Mos

MMKT 750,000.00

CALTRUST FND 54,000.00

DDA/PASSBK 200,000.00

LOCAL AGCY OBLIG

US TREAS BILLS 50,000.00 50,000.00 250,000.00

US TREAS BONDS 80,000.00 185,000.00

FHLMC DISC NOTES 25,000.00 50,000.00 125,000.00

FHLMCBONDS 20,000.00 174,595.00

FNMA DISC NOTES 25,000.00

FNMABONDS

FHLB DISC NOTES 140,000.00 436,000.00

FHLBBONDS 50,000.00 151,100.00

FFCB DISC NOTES 85,000.00 140,000.00

FFCBBONDS 35,000.00 45,000.00 70,900.00

FMAC DISC NOTES 75,000.00

FARMER MAC 25,000.00 58,850.00

MUNI ZERO CPNS 26,850.00 25,000.00

MUNI BONDS 13,135.00 146,950.00

COMM PAPER 230,000.00 500,000.00 250,000.00

COUNTY OF RIVERSIDE TREASURER-TAX COLLECTOR

1-2Yr

60,000.00

110,850.00

22,500.00

68,219.72

80,000.00

157,370.00

2-3Yr >3Yr Totals (OOO's)

750,000.00

54,000.00

200,000.00

205.00 265.00

350,000.00

50,000.00 375,000.00

200,000.00

83,000.00 673,705.00 1,002,150.00

112,500.00

40,000.00

170,310.00

25,000.00

34,915.00

175,000.00

245,000.00

157,700.00

16,790.00

as trtus aau 0 ~ f¾r !JS Tll:EK~ -~ Par

25,000.00

310,000.00

576,000.00

554,319.72

225,000.00

558,910.00

75,000.00

108,850.00

51,850.00

369,160.00

980,000.00

Al!LN:t>WCNIOTll!S:-Siimli~!Pat - fttt.N:KN)S: ·~P¾t - F*l:MA otst11l0Tff•~hr - Fmu~·~IPaf

¥t!t.1!lffllS.Cfflfl't:S:·~ifl'u - M:lS~ ·~hr

FK:501:SC~ ,~f!lW --

5

Credit Quality

Moody (000'•)

Aaa

Aal

Aa2

Aa3

NR

Totals (OOO's):

S&P (000'•)

AAA

AA+

AA

AA-

NR

Toto.ls (OOO's):

Pm:

4,916,624.72

278,580.00

582,170.00

489,015.00

559,115.00

6,825,504.'72

MOODY'S

111111M1111>m aMJ>~ IIIILMt·4% affl-h .il#l-~

Par

670,655.00

4,674,549.72

407,170.00

514,015.00

559,115.00

6,825,504.'72

Book

4,912,561.19

279,051.13

580,876.90

488,951.61

558,846.58

6,820,28'7.41

Book

672,564.34

4,668,779.67

406,758.46

513,338.36

558,846.58

6,820,28'7.41

COUNTY OF RIVERSIDE TREASURER-TAX COLLECTOR

Market MKT/Book Yield

4,897,978.73 99.70% 0.88%

279,219.42 100.06% 0.80%

581,601.68 100.12% 0.75%

489,346.96 100.08% 0.92%

559,192.22 100.06% 0.72%

6,807,339.00 99.81% 0.85%

S&P

BOOK%

-W·1Mili •»·h -M+·nlllll!HM .... ..,

Market MKT/Jlook Yield

672,564.34 100.00% 0.53%

4,654,48'.x78 99.69% 0.92%

407,361.95 100.15% 0.81%

513,734.71 100.08% 0.87%

559,192.22 100.06% 0.72%

6,807,339.00 99.81% 0.85%

6

Mouth fuJ Porlfolio lfolJings

Miiliili1y Yield'fo PM B<><>li Mittkd Ma:rbl Uiiie,illud MruiifieJ Y-T" CUSIP D-p1ilitt Dit!, Coopon Miitiinty :V,Jii,- :Vill.ne l'rliie :V>thl,- ~ Dutatfon Miitiinty

FunJ: 1 POOL FUND

MMKT FRGXX

WFFXX

FIDELITY GOV 02/01/2017

WELLS FARGO GOV 02/01/2017

GOFXX CASH FGTXX

FEDERATED GOV 02/01/2017 BANK OF THE WEST 02/01/2017 GOLDMAN SACHS GOV 02/01/2017

CAL TRUST FND

CLTR CALTRUSTSHTTERM 02/01/2017

DDA/PASSBK

CASH UB MANAGED RATE 02/01/2017

LOCAL AGCY OBLIG

CAO US DIST COURTHOUSE 06/15/2020

US TREAS BILLS

912796JT7 U.S. TREASURY BILL 912796JT7 U.S. TREASURY BILL 912796KG3 U.S. TREASURY BILL 912796JPJJ U.S. TREASURY BILL 912796JT7 U.S. TREASURY BILL 912796KM0 U.S. TREASURY BILL 912796JT7 U.S. TREASURY BILL 912796LD9 U.S. TREASURY BILL 912796LF4 U.S. TREASURY BILL

US TREAS BONDS

912828TB6 U.S. TREASURY BOND 912828WH9 U.S. TREASURY BOND 912828B74 U.S. TREASURY BOND 9128281'89 U.S. TREASURY BOND 912828H94 U.S. TREASURY BOND 912828UJ7 U.S. TREASURY BOND 912828B74 U.S. TREASURY BOND

912828B74 U.S. TREASURY BOND 912828WL0 U.S. TREASURY BOND

05/25/2017 05/25/2017 02/09/2017 02/02/2017 05/25/2017 03/09/2017 05/25/2017 06/08/2017 06/29/2017

912828F62 U.S. TREASURY BOND 10/31/2019 912828B74 U.S. TREASURY BOND 02/15/2017 912828G20 U.S. TREASURY BOND 11/15/2017 912828G20 U.S. TREASURY BOND 11/15/2017 912828040 U.S. TREASURY BOND 11/30/2018

912828M72 U.S. TREASURY BOND 11/30/2017 912828UA6 U.S. TREASURY BOND 11/30/2017 912828UA6 U.S. TREASURY BOND 11/30/2017 9128281'89 U.S. TREASURY BOND 09/30/2017

FHLMC DISC NITTES

313397BZ3 FHLMC DISC NOTE 313397FU0 FHLMC DISC NOTE 313397FQ9 FHLMC DISC NOTE 313397DH1 FHLMC DISC NOTE 313397DH1 FHLMC DISC NOTE 313397FT3 FHLMC DISC NOTE

FHLMC BONDS

3134G7AE1 FHLMC 3YrNcl.5YrE 3134G66M0 FHLMC 3YrNc6MoE 3134G7V24 FHLMC 2YrNc6MoB 3134G72T7 FHLMC 3YrNc6MoB 3134G72T7 FHLMC 3YrNc6MoB 3134G73L3 FHLMC 2YrNc6MoE 3134G7377 FHLMC 5YrNc6MoB 3137EADX4 FHLMC 2Yr 3134G8LG2 FHLMC 13MoNc6MoE 3134G8LG2 FHLMC 13MoNc6MoE 3134G8L49 FHLMC l.5YrNc3Mob 3134G8KU2 FHLMC 5YrNc6MoB 3134G8L31 FHLMC 5YrNc6MoB 3134G8L64 FHLMC 2.5YrNc1YrE 3134G8QE2 FHLMC 3YrNc1YrE 3134G8QB8 FHLMC 3YrNc1YrE 3134G8TG4 FHLMC 3.5YrNc6MoE 3134G8V97 FHLMC 2.25YrNc6MoB 3134G8WC9 FHLMC l.5YrNc6MoB 3134G8WC9 FHLMC l.5YrNc6MoB 3134G8YS2 FHLMC l.5YrNc3MoB 3134G9JX6 FHLMC 5YrNc3MoB 3134G9JW8 FHLMC 5YrNc3MoB 3134G9NU7 FHLMC 5YrNc3MoB 3134G9PC5 FHLMC 3YrNc3MoB 3134G9UM7 FHLMC 5YrNc3MoB 3134G9VA2 FHLMC 5YrNc6MoB 3134G9UX3 FHLMC 5YrNc3MoB 3134G9UH8 FHLMC 3.5YrNc3MoB 3134G9XA0 FHLMC 5YrNc6MoB 3134G9B55 FHLMC 2YrNc6MoE 3134GSC70 FHLMC 2YrNc6MoE 3134G9M38 FHLMC l.25YrNc3MoB 3134G9Q75 FHLMC 3YrNc3MoB 3134G9Q67 FHLMC 2YrNc3MoB 3134G9S40 FHLMC 4YrNc6MoB 3134G9R66 FHLMC 5YrNc3MoB 3134G9S57 FHLMC 4YrNc6MoB 3134GgJ'23 FHLMC 5YrNc3MoB

3134G9U47 FHLMC 5YrNc3MoB 3134G95W3 FHLMC 5YrNc3MoB 3134G96A0 FHLMC 5YrNc3MoB 3134GABZ6 FHLMC 3.5YrNc1YrE 3134GAEB6 FHLMC 4.25YrNc3MoB 3134GAEG5 FHLMC 5YrNc6MoB

02/17/2017 05/19/2017 05/15/2017 03/21/2017 03/21/2017 05/18/2017

06/22/2018 06/22/2018 10/27/2017 10/29/2018 10/29/2018 11/16/2017 10/29/2020 12/15/2017 03/09/2017 03/09/2017 08/25/2017 02/26/2021 02/26/2021 08/24/2018 03/29/2019 03/29/2019 10/11/2019 06/29/2018 10/13/2017 10/13/2017 10/27/2017 06/09/2021 05/25/2021 06/16/2021 06/20/2019 06/30/2021 06/30/2021 06/30/2021 12/30/2019 07/13/2021 07/20/2018 07/20/2018 10/27/2017 07/26/2019 07/27/2018 07/27/2020 08/10/2021 08/10/2020 08/10/2021 08/25/2021 08/25/2021 08/25/2021 02/25/2020 12/08/2020 08/24/2021

.440

.430

.430

.770

.450

.910

·""' .620

1.278

.510

.440

.425

.405

.428

.405

.600

.620

.600

.750

.875

.625

.625 1.000

.875

.625

.625 1.500

1.500 .625 .875 .875

1.000

.875

.625

.625

.625

.480

.480

.490

.420

.420

.520

.473

1.200 1.250

.750 1.050 1.050

.750 1.125 1.000

.750

.750

.800 1.250 1.250 1.000 1.300 1.270 1.500 1.125

.850

.850

.825 1.600 1.500 1.500 1.000 1.500 1.300 1.500 1.000 1.250 1.000

.820

.700 1.250 1.050 1.150 1.250 1.150 1.250 1.500 1.500 1.375 1.250 1.250 1.250

A® .430

.430

.770

.450

.910

.9lll

.620

1.278

.512 A,C

.426

.406

.429

.406

.602

.612

.603

.932

.752

.596

.723

.920

.990

.695

·'" 1.370

1.470 .594

·'"' .855 1.115

.851

.868

.919

.792

"'' .482 .481 .491 .421 .421 .516

·'" 1.230 1.259

.750 1.050 1.050

.750 1.125 1.052

.750

.750

.800 1.250 1.250 1.000 1.300 1.270 1.500 1.125

.850

.850

.825 1.600 1.500 1.504 1.000 1.500 1.300 1.500 1.000 1.250 1.000

.820

.700 1.250 1.050 1.150 1.250 1.150 1.250 1.500 1.500 1.375 1.250 1.250 1.250

COUNTY OF RIVER{SIDE TREA5lJRER-TA>-: COLLECTOR

165,000,000.00

100,000,000.00

70,000,000.00 200,000,000.00 215,000,000.00

750.,000,000.00

54,000,000.00

200,000,000.00

200.,000,000.00

265,000.00

50,000,000.00 50,000,000.00 25,000,000.00 25,000,000.00 50,000,000.00 50,000,000.00 25,000,000.00 25,000,000.00 50,000,000.00

:!150.,000,000.00

5,000,000.00 25,000,000.00 20,000,000.00 10,000,000.00 10,000,000.00 25,000,000.00 25,000,000.00

25,000,000.00 25,000,000.00

25,000,000.00 10,000,000.00 25,000,000.00 25,000,000.00 25,000,000.00

20,000,000.00 25,000,000.00 25,000,000.00 25 000 000.00

:!175.,000,000.00

25,000,000.00 50,000,000.00 50,000,000.00 25,000,000.00 25,000,000.00 25,000,000.00

200.,000,000.00

15,000,000.00 25,000,000.00 10,000,000.00

5,000,000.00 10,000,000.00 15,000,000.00 15,000,000.00 20,000,000.00 10,000,000.00 10,000,000.00

5,000,000.00 10,000,000.00 10,000,000.00

5,000,000.00 9,000,000.00 4.000,000.00

15,000,000.00 5,850,000.00

15,000,000.00 10,000,000.00 25,000,000.00 15,000,000.00 20,000,000.00 15,000,000.00 15,000,000.00 15,000,000.00 15,000,000.00 10,000,000.00 15,000,000.00 15,000,000.00 25,000,000.00 10,000,000.00 10,000,000.00 10,000,000.00 10,000,000.00 15,000,000.00 15,000,000.00 15,000,000.00 10,000,000.00 15,000,000.00 10,000,000.00 15,000,000.00 10,000,000.00 20,000,000.00 20,000,000.00

165,000,000.00

100,000,000.00

70,000,000.00 200,000,000.00 215,000,000.00

54,000,000.00

200,000,000.00

200,000,000.00

265,000.00

49,761,291.67 49,828,277.78 24,954,843.75 24,958,937.50 49,859,116.67 49,912,250.00 24,925,833.33 24,922,839.58 49,848,915.28

4,971,875.00 25,077,148.44 20,008,593.75 9,981,250.00

10,017,968.75 24,936,523.44 24,978,515.63

24,964,843.75 25,110,351.56

25,028,320.31 10,003,125.00 25,006,835.94 25,004,882.81 24,943,359.38

20,004,687.50 24,940,429.69 24,929,687.50 24 968 750.00

:!174.,877,1.4&45

24,920,000.00 49,848,666.67 49,859,805.56 24,959,166.67 24,959,166.67 24,930,260.42

14,986,800.00 24,993,750.00 10,000,000.00

5,000,000.00 10,000,000.00 15,000,000.00 15,000,000.00 19,979,400.00 10,000,000.00 10,000,000.00

5,000,000.00 10,000,000.00 10,000,000.00

5,000,000.00 9,000,000.00 4,000,000.00

15,000,000.00 5,850,000.00

15,000,000.00 10,000,000.00 25,000,000.00 15,000,000.00 20,000,000.00 14,997,000.00 15,000,000.00 15,000,000.00 15,000,000.00 10,000,000.00 15,000,000.00 15,000,000.00 25,000,000.00 10,000,000.00 10,000,000.00 10,000,000.00 10,000,000.00 15,000,000.00 15,000,000.00 15,000,000.00 10,000,000.00 15,000,000.00 10,000,000.00 15,000,000.00 10,000,000.00 20,000,000.00 20,000,000.00

100.000000

100.000000

100.000000 100.000000 100.000000

100.000000

100.000000

100000000

100.000000

100000000

99.841000 99.841000 99.990000 99.999000 99.841000 99.953000 99.841000 99.817000 99.780000

100.054000 100.078000 100.008000

99.914000 100.094000

99.996000 100.008000

100.008000 100.410000

100.203000 100.008000 100.066000 100.066000

99.695000

100.059000 99.844000 99.844000 99.914000

1.000"520

99.982000 99.840000 99.846000 99.932000 99.932000 99.841000

99.821000 100.166000

99.998000 99.619000 99.619000

100.013000 99.413000

100.147000 100.033000 100.033000 100.000000

99.379000 99.048000 99.523000 99.962000 99.640000 99.516000 99.685000

100.020000 100.020000 100.019000

98.240000 98.093000 98.894000 99.702000 98.193000 98.205000 98.148000 99.495000 98.833000 99.295000 99.296000 99.942000 99.378000 99.837000 98.127000 98.034000 98.089000 98.078000 98.519000 97.544000 97.836000 98.406000 98.036000 98.330000

165,000,000.00

100,000,000.00

70,000,000.00 200,000,000.00 215,000,000.00

750.,000,000.00

54,000,000.00

200,000,000.00

200.,000,000.00

265,000.00

49,920,500.00 49,920,500.00 24,997,500.00 24,999,750.00 49,920,500.00 49,976,500.00 24,960,250.00 24,954,250.00 49,890,000.00

5,002,700.00 25,019,500.00 20,001,600.00

9,991,400.00 10,009,400.00 24,999,000.00 25,002,000.00

25,002,000.00 25,102,500.00

25,050,750.00 10,000,800.00 25,016,500.00 25,016,500.00 24.923,750.00

20,011,800.00 24.961,000.00 24.961,000.00 24,978 500.00

24,995,500.00 49,920,000.00 49,923,000.00 24,983,000.00 24,983,000.00 24,960,250.00

14,973,150.00 25,041,500.00

9,999,800.00 4,980,950.00 9,961,900.00

15,001,950.00 14.911,950.00 20,029,400.00 10,003,300.00 10,003,300.00

5,000,000.00 9,937,900.00 9,904,800.00 4,976,150.00 8,996,580.00 3,985,600.00

14.927,400.00 5,831,572.50

15,003,000.00 10,002,000.00 25,004,750.00 14.736,000.00 19,618,600.00 14,834,100.00 14,955,300.00 14.728,950.00 14.730,750.00

9,814,800.00 14.924,250.00 14.824,950.00 24.823,750.00

9,929,600.00 9,994,200.00 9,937,800.00 9,983,700.00

14.719,050.00 14.705,100.00 14.713,350.00

9,807,800.00 14.777,850.00

9,754,400.00 14,675,400.00

9,840,600.00 19,607,200.00 19,666,000.00

0.00

0.00

0.00 0.00 0.00

"" 0.00

MO

0.00

MO

0.00

MO

159,208.33 92,222.22 42,656.25 40,812.50 61,383.33 64,250.00 34,416.67 31,410.42 41,084.72

30,825.00 -57,648.44 -6,993.75 10,150.00 -8,568.75

62,476.56 23,484.37

37,156.25 -7,851.56

22,429.69 -2,325.00

9,664.06 11,617.19

-19,609.38

7,112.50 20,570.31 31,312.50 9 750.00

1.'1:!1,551.55

75,500.00 71,333.33 63,194.44 23,833.33 23,833.33 29,989.58

-13,650.00

47,750.00 -200.00

-19,050.00 -38,100.00

1,950.00 -88,050.00

50,000.00 3,300.00 3,300.00

0.00 -62,100.00 -95,200.00 -23,850.00 -3,420.00

-14,400.00 -72,600.00 -18,427.50

3,000.00 2,000.00 4,750.00

-264,000.00 -381,400.00 -162,900.00

-44,700.00 -271,050.00 -269,250.00 -185,200.00

-75,750.00 -175,050.00 -176,250.00

-70,400.00 -5,800.00

-62,200.00 -16,300.00

-280,950.00 -294,900.00 -286,650.00 -192,200.00 -222,150.00 -245,600.00 -324,600.00 -159,400.00 -392,800.00 -334,000.00

.003

.003

.003

.003

.003

.003

·"" .003

·"" 1.653

.311

.311

.025

.005

.311

.101

.310

·'"' .405

.409

.284

.041

.663 1.027

.993

.041

.041 2.281

2.675 .041 .783 .783

1.808

.828

.828

.828

.662

·"" .0% .294 .283 .134 .134 .291

1.374 1.374

.734 1.720 1.720

.787 3.646 .865 .101 .101 .562

3.935 3.935 1.541 2.115 2.116 2.620 1.395

.695

.695

.734 4.182 4.154 4.212 2.350 4.253 4.274 4.253 2.865 4.313 1.455 1.457

.735 2.440 1.473 3.410 4.360 3.426 4.360 4.370 4.370 4.386 2.983 3.743 4.399

.003

.003

.003

.003

.003

.003

.003

3.373

.312

.312

.025

.005

.312

.101

.312

.351

.408

.411

.285

.041

.663 1.041 1.000

.041

.041 2.329

2.748 .041 .789 .789

1.830

.830

.830

.830

.663 ,m

.047

.296

.285

.134

.134

.293

1.389 1.389

.737 1.742 1.742

.792 3.745

.871

.101

.101

.564 4.074 4.074 1.562 2.156 2.156 2.693 1.408

.699

.699

.737 4.356 4.315 4.375 2.384 4.414 4.414 4.414 2.912 4.449 1.466 1.466

.737 2.482 1.485 3.488 4.526 3.526 4.526 4.567 4.567 4.567 3.068 3.855 4.564

'

Mouth fuJ Porlfolio lfolJings

Miiliili1y Yield'fo PM B<><>li Mittkd Ma:rbl Uiiie,illud MruiifieJ Y-T" CUSIP D-p1ilitt Dit!, Coopon Miitiinty :V,Jii,- :Vill.ne l'rliie :V>thl,- ~ Dutatfon Miitiinty

3134GADP6 FHLMC 5YrNc3MoB 3134GAET7 FHLMC 5YrNc3MoB 3134GAKY9 FHLMC 5YrNc6MoB 3134GANB6 FHLMC 5YrNc6MoB 3134GAPM0 FHLMC 5YrNc3MoB 3134GAPM0 FHLMC 5YrNc3MoB 3134GAPA6 FHLMC 5YrNc3MoB 3134GAQV9 FHLMC 5YrNc6MoB 3134GAQV9 FHLMC 5YrNc6MoB 3134G9WU7 FHLMC l.5YrNc6MoB 3134G9WU7 FHLMC l.5YrNc6MoB 3134GARL0 FHLMC 5YrNc6MoB 3134GJ\SF2 FHLMC 5YrNc3MoB 3134GJ\SF2 FHLMC 5YrNc3MoB 3134GATA2 FHLMC 5YrNc3MoB 3134GATB0 FHLMC 5YrNc3MoB 3134GATA2 FHLMC 5YrNc3MoB 3134GAUA0 FHLMC 5YrNc3MoB 3134GAVF8 FHLMC 3.5YrNc1YrE 3134GAXZ2 FHLMC 4YrNc6moE 3134GAYK4 FHLMC 4YrNc1YrE 3134GAYF5 FHLMC 5YrNc3MoB 3134GAYG3 FHLMC 5YrNc3MoB 3134GAYR9 FHLMC 5YrNc3MoB 3134GAZP2 FHLMC 5YrNc3MoB 3134GAA53 FHLMC 5YrNc3MoB 3134GAA87 FHLMC 5YrNc3MoB 3134GAA87 FHLMC 5YrNc3MoB 3137EADJ5 FHLMC 71Vlo 3134GAK45 FHLMC 5YrNc3MoB 3134GAPS7 FHLMC 2YrNc1MoB 3134GAF41 FHLMC 5YrNc3MoB

FNMA DISC NITTES

313589FM0 FNMA DISC NOTE

FNMA BONDS

313EG2YT8 FNMA 5YrNc6MoB 313EG2ZB6 FNMA 4YrNC6MoB 313EG3BX2 FNMA 4YrNc6MoB 313EG3EH4 FNMA 4YrNc6MoB 313EG3EE1 FNMA 3YrN c6MoB 313EG3DV4 FNMA 5YrNc6MoB 313EG3PB5 FNMA 5YrN c6MoB 313EG3RL1 FNMA 3.5YrNc6MoB

313EG33Gl FNMA 4.25YrN c6MoB 313EG3TG0 FNMA 4YrNc6MoB

313EG3WC5 FNMA 4YrNc6MoE

313EG33Y2 FNMA 3.25YrN c6MoB 313EG3XE0 FNMA 2YrN c6MoE

313EG3XT7 FNMA 5YrNc6MoB 3135:30M26 FNMA 3YrNc6MoE 3135:30M26 FNMA 3YrN c6MoE 313EG3XS9 FNMA 2.5YrNc6MoE 313EG3ZW8 FNMA 5YrNc6MoB 313EG3A62 FNMA3YrNc1YrE 313EG3P25 FNMA 3.5YrNc1YrE 313EG3Y74 FNMA 4YrNc6MoB 3135:30R39 FNMA 3Yr 313EG4GU1 FNMA 3YrNc6MoB

FHLB DISC NITTES 313385BK1 FHLB DISC NOTE 313385BZ8 FHLB DISC NOTE 313385BX3 FHLB DISC NOTE 313385CD6 FHLB DISC NOTE 313385CD6 FHLB DISC NOTE 313385BH8 FHLB DISC NOTE 313385HM1 FHLB DISC NOTE 313385GX8 FHLB DISC NOTE 313385FQ4 FHLB DISC NOTE 313385PF7 FHLB DISC NOTE 313385HL3 FHLB DISC NOTE 313385GG5 FHLB DISC NOTE 313385GP5 FHLB DISC NOTE 313385GW0 FHLB DISC NOTE 313385GW0 FHLB DISC NOTE 313385GY6 FHLB DISC NOTE 313385GY6 FHLB DISC NOTE 313385GY6 FHLB DISC NOTE 313385KK1 FHLB DISC NOTE 313385HD1 FHLB DISC NOTE 313385HD1 FHLB DISC NOTE 313385HD1 FHLB DISC NOTE 313385HD1 FHLB DISC NOTE 313385HD1 FHLB DISC NOTE 313385HF6 FHLB DISC NOTE 313385HF6 FHLB DISC NOTE 313385HL3 FHLB DISC NOTE 313385HL3 FHLB DISC NOTE 313385HV1 FHLB DISC NOTE 313385HV1 FHLB DISC NOTE

FHLB BONDS

313383EP2 FHLB 5YrNc3MoB 3130A6V95 FHLB 2Yr 3130A1NN4 FHLB l.5Yr 3130A7H57 FHLB 2.5YrNc1YrE 3130A7PV1 FHLB 5Yr 3130A7PU3 FHLB 4Yr 3130A7TT2 FHLB 1YrNc3MoB 3130A7TT2 FHLB 1YrNc3MoB 3130A7TT2 FHLB 1YrNc3MoB 3130A8JR5 FHLB 1YrNc3MoB

09/13/2021 09/30/2021 09/30/2021 09/30/2021 10/25/2021 10/25/2021 10/27/2020 10/27/2021 10/27/2021 12/28/2017 12/28/2017 10/28/2021 10/27/2021 10/27/2021 10/27/2021 11/10/2021 10/27/2021 11/30/2021 05/08/2020 11/25/2020 11/30/2020 11/26/2021 12/09/2021 12/09/2021 12/14/2021 12/16/2021 12/30/2021 12/30/2021 07/28/2017 01/27/2022 10/24/2019 01/20/2022

05/12/2017

07/13/2020

07/27/2021 07/26/2019 07/26/2019 01/25/2019 07/27/2021 07/26/2019 07/26/2019 11/24/2020 10/24/2019 11/25/2019

02/03/2017 02/17/2017 02/15/2017 02/21/2017 02/21/2017 02/01/2017 06/29/2017 06/15/2017 05/15/2017 11/14/2017 06/28/2017 05/31/2017 06/07/2017 06/14/2017 06/14/2017 06/16/2017 06/16/2017 06/16/2017 08/14/2017 06/21/2017 06/21/2017 06/21/2017 06/21/2017 06/21/2017 06/23/2017 06/23/2017 06/28/2017 06/28/2017 07/07/2017 07/07/2017

06/20/2018 12/01/2017 05/24/2017 09/28/2018 04/05/2021 04/06/2020 04/28/2017 04/28/2017 04/28/2017 06/30/2017

1.500 1.500 1.450 1.350 1.375 1.375 1.250 1.400 1.400

.800

.800 1.250 1.500 1.500 1.400 1.550 1.400 1.500 1.200 1.370 1.440 1.550 1.500 1.650 1.850 1.750 1.900 1.900 1.000 2.200

.875 2.125 1"'1

.550

1.125 1.000 1.300 1.250 1.000 1.375 1.550 1.500

1.400 1.150

1.350

1.250 .800

1.250 1.000 1.000

.875 1.250 1.050 1.125 1.125 1.000 1.400 1.1.'15

.570

.560

.540

.570

.570

.520

.550

.550

.550

.810

.630

.629

.620

.670

.670

.660

.660

.660

.800

.660

.660

.660

.660

.660

.650

.650

.670

.670

.630

.630 . ,, 1.250 1.020

.875 1.100 1.375 1.200

.650

.650

.650

.650

1.500 1.500 1.450 1.350 1.375 1.375 1.250 1.400 1.400

.808

.817 1.250 1.500 1.500 1.400 1.550 1.400 1.500 1.200 1.370 1.440 1.550 1.500 1.650 1.850 1.750 1.900 1.900

.710 2.200

·'® 2.125

.553

1.125 1.000 1.300 1.250 1.000 1.375 1.550 1.500

1.400 1.150

1.350

1.250 .800

1.250 1.000 1.000

.900 1.250 1.050 1.125 1.125 1.091 1.400

57' .563 5,c 57' 57' .522 .553 .553 .552 .807 .632 .631 .627 .w,

·'" .662 .662 .662 .804 .662 .662 .662 .662 .662 .652 .652

·'" ·'" .632 .632 ....

1.250 1.020

.728 1.100 1.390 1.210

.650

.650

.650

.650

COUNTY OF RIVER{SIDE TREA5lJRER-TAA COLLECTOR

16,500,000.00 20,000,000.00 15,000,000.00 15,000,000.00 10,000,000.00

6,705,000.00 10,000,000.00 15,000,000.00 15,000,000.00 25,000,000.00 14,595,000.00 10,000,000.00 15,000,000.00 15,000,000.00 10,000,000.00 17,000,000.00 14.000,000.00

4,500,000.00 15,000,000.00 25,000,000.00 10,000,000.00 20,000,000.00 10,000,000.00 20,000,000.00 20,000,000.00 10,000,000.00 10,000,000.00 10,000,000.00 25,000,000.00 20,000,000.00 15,000,000.00 10 000 000.00

1..,1162,1511,000.00

25 000 000.00

15,000,000.00 10,000,000.00 15,000,000.00 10,000,000.00 20,000,000.00 15,000,000.00 15,000,000.00

5,000,000.00

15,000,000.00 20,000,000.00

10,000,000.00

7,500,000.00 15,000,000.00

15,000,000.00 10,000,000.00 10,000,000.00

7,500,000.00 20,000,000.00 15,000,000.00 25,000,000.00 15,000,000.00 10,000,000.00 10,000,000.00

:!110.,000,000.00

5,000,000.00 25,000,000.00 25,000,000.00 35,000,000.00 25,000,000.00 25,000,000.00 25,000,000.00 25,000,000.00 25,000,000.00 10,000,000.00 50,000,000.00 50,000,000.00 25,000,000.00 50,000,000.00

6,000,000.00 6,000,000.00 7,000,000.00 7,000,000.00

50,000,000.00 2,000,000.00 1,000,000.00 1,000,000.00 1,000,000.00

24.000,000.00 3,000,000.00 2,000,000.00

14.000,000.00 7,000,000.00

25,000,000.00 20 000 000.00

576.,000,000.00

3,719,720.08 10,000,000.00 25,000,000.00

5,000,000.00 5,000,000.00

10,000,000.00 25,000,000.00 15,000,000.00 10,000,000.00 50,000,000.00

16,500,000.00 20,000,000.00 15,000,000.00 15,000,000.00 10,000,000.00

6,705,000.00 10,000,000.00 15,000,000.00 15,000,000.00 24,997,500.00 14,592,081.00 10,000,000.00 15,000,000.00 15,000,000.00 10,000,000.00 17,000,000.00 14,000,000.00

4,500,000.00 15,000,000.00 25,000,000.00 10,000,000.00 20,000,000.00 10,000,000.00 20,000,000.00 20,000,000.00 10,000,000.00 10,000,000.00 10,000,000.00 25,046,750.00 20,000,000.00 14,973,750.00 10 000 000.00

24 876 250.00

15,000,000.00 10,000,000.00 15,000,000.00 10,000,000.00 20,000,000.00 15,000,000.00 15,000,000.00

5,000,000.00

15,000,000.00 20,000,000.00

10,000,000.00

7,500,000.00 15,000,000.00

15,000,000.00 10,000,000.00 10,000,000.00

7,495,350.00 20,000,000.00 15,000,000.00 25,000,000.00 15,000,000.00

9,973,200.00 10,000,000.00

4,976,487.50 24,882,555.56 24,889,750.00 34,833,750.00 24,883,625.00 24,919,833.33 24,860,972.22 24,868,611.11 24,928,958.33 9,919,111.11

49,814,500.00 49,841,002.78 24,921,006.94 49,830,638.89 5,979,676.67 5,979,980.00 6,976,643.33 6,976,643.33

49,735,555.56 1,993,326.67

996,663.33 996,663.33 996,663.33

23,919,920.00 2,990,141.67 1,993,427.78

13,952,578.89 6,976,289.44

24,920,375.00 19 936 300.00

573.,691,651.10

3,719,720.08 10,000,000.00 25,046,250.00 5,000,000.00 4,996,350.00 9,996,000.00

25,000,000.00 15,000,000.00 10,000,000.00 50,000,000.00

98.402000 98.888000 98.032000 97.768000 97.681000 97.681000 98.500000 97.288000 97.288000 99.935000 99.935000 99.020000 97.624000 97.624000 97.392000 97.847000 97.392000 98.318000 98.327000 98.508000 98.690000 97.798000 98.958000 99.630000 99.590000 99.552000 99.812000 99.812000

100.169000 99.982000 99.752000

100.000000

99.850000

99.532000 99.839000 99.501000 99.751000 99.972000 98.361000 98.574000 99.103000

98.251000 98.468000

97.630000

98.987000 99.303000

97.320000 98.423000 98.423000 98.912000 97.705000 98.618000 98.899000 97.686000 98.680000 99.505000

''"'""" 99.997389 99.979111 99.981722 99.973889 99.973889

100.000000 99.778000 99.799000 99.851222 99.412000 99.779500 99.828111 99.811000 99.800500 99.800500 99.797500 99.797500 99.797500 99.665889 99.790000 99.790000 99.790000 99.790000 99.790000 99.787000 99.787000 99.779500 99.779500 99.761667 99.761667

100.002000 100.099000 100.101000

99.749000 97.445000 98.516000 99.998000 99.998000 99.998000

100.002000

16,236,330.00 19,777,600.00 14.704,800.00 14,665,200.00

9,768,100.00 6,549,511.05 9,850,000.00

14,593,200.00 14,593,200.00 24,983,750.00 14,585,513.25

9,902,000.00 14,643,600.00 14,643,600.00

9,739,200.00 16,633,990.00 13,634,880.00

4.424,310.00 14.749,050.00 24.627,000.00

9,869,000.00 19,559,600.00

9,895,800.00 19,926,000.00 19,918,000.00

9,955,200.00 9,981,200.00 9,981,200.00

25,042,250.00 19,996,400.00 14.962,800.00 10 000 000.00

1..,1150,ffi,736.80

14.929,800.00 9,983,900.00

14.925,150.00 9,975,100.00

19,994,400.00 14.754,150.00 14.786,100.00

4,955,150.00

14.737,650.00 19,693,600.00

9,763,000.00

7,424,025.00 14,895,450.00

14,598,000.00 9,842,300.00 9,842,300.00 7,418,400.00

19,541,000.00 14.792,700.00 24.724,750.00 14,652,900.00

9,868,000.00 9,950,500.00

4,999,869.44 24,994,777.78 24,995,430.56 34,990,861.11 24,993,472.22 25,000,000.00 24.944,500.00 24,949,750.00 24.962,805.56

9,941,200.00 49,889,750.00 49,914,055.56 24,952,750.00 49,900,250.00

5,988,030.00 5,987,850.00 6,985,825.00 6,985,825.00

49,832,944.44 1,995,800.00

997,900.00 997,900.00 997,900.00

23,949,600.00 2,993,610.00 1,995,740.00

13,969,130.00 6,984,565.00

24,940,416.67 19 952 333.33

3,719,794.47 10,009,900.00 25,025,250.00

4,987,450.00 4,872,250.00 9,851,600.00

24,999,500.00 14,999,700.00

9,999,800.00 50,001,000.00

-263,670.00 -222,400.00 -295,200.00 -334,800.00 -231,900.00 -155,488.95 -150,000.00 -406,800.00 -406,800.00

-13,750.00 -6,567.75

-98,000.00 -356,400.00 -356,400.00 -260,800.00 -366,010.00 -365,120.00

-75,690.00 -250,950.00 -373,000.00 -131,000.00 -440,400.00 -104,200.00

-74,000.00 -82,000.00 -44,800.00 -18,800.00 -18,800.00 -4,500.00 -3,600.00

-10,950.00

0.00

86 250.00

-70,200.00 -16,100.00 -74,850.00 -24,900.00 -5,600.00

-245,850.00 -213,900.00

-44,850.00

-262,350.00 -306,400.00

-237,000.00

-75,975.00 -104,550.00

-402,000.00 -157,700.00 -157,700.00

-76,950.00 -459,000.00 -207,300.00 -275,250.00 -347,100.00 -105,200.00

-49,500.00

23,381.94 112,222.22 105,680.56 157,111.11 109,847.22

80,166.67 83,527.78 81,138.89 33,847.23 22,088.89 75,250.00 73,052.78 31,743.06 69,611.11 8,353.33 7,870.00 9,181.67 9,181.67

97,388.88 2,473.33 1,236.67 1,236.67 1,236.67

29,680.00 3,468.33 2,312.22

16,551.11 8,275.56

20,041.67 16 033.33

74.39 9,900.00

-21,000.00 -12,550.00

-124,100.00 -144,400.00

-500.00 -300.00 -200.00

1,000.00

4.419 4.469 w, 4.488 4.551 4.551 3.630 4.553 4.553 .903 .903

4.576 4.541 4.541 4.553 4.570 4.553 4.634 3.188 3.697 3.708 4.615 4.656 4.637 4.625

"" 4.666 4.666 .486

4.699 2.690 4.690

.2'15

3.948 3.039 3.019 3.080 2.126 4.015 4.187 2.799

3.503 3.338

3.358

2.604 1.477

4.351 2.449 2.449 1.961 4.351 2.447 2.445 3.716 2.679 2.746

.008 MC .041 .057 .057 .003 .406 .368 .283

·'"' .403 .326

·'"' .364 .364 .370 .370 .370 .530 .383 .383 .383 .383 .383 .389 .389 .402 .402 .427 .427 .312

1.368 .827 .308

1.633 4.029 3.100 .237 .237 .237 .409

4.619 4.666 4.666 4.666 4.734 4.734 3.740 4.740 4.740

.907

.907 4.742 4.740 4.740 4.740 4.778 4.740 4.833 3.268 3.819 3.833 4.822 4.858 4.858 4.871 4.877 4.915 4.915

.488 4.992 2.729 4.973

'"" .277

4.074 3.104 3.104 3.162 2.156 4.162 4.356 2.874

3.608 3.414

3.449

2.663 1.485

4.488 2.482 2.482 1.984 4.488 2.482 2.482 3.816 2.729 2.816

'·"" .008 .047 .041 .058 .058 .003 .408 .370 .285 .786 .405 .329 .348 .367 .367 .373 .373 .373 .534 .386 .386 .386 .386 .386 .392 .392 .405 .405 .430 .430

1.384 .833 .310

1.658 4.178 3.181

.238

.238

.238

.411

8

Mouth fuJ Porlfolio lfolJings

Miiliili1y Yield'fo PM B<><>li Mittkd Ma:rbl Uiiie,illud MruiifieJ Y-T" CUSIP D-p1ilitt Dit!, Coopon Miitiinty :V,Jii,- :Vill.ne l'rliie :V>thl,- ~ Dutatfon Miitiinty

3130A8NF6 FHLB 3Yr 3130A8PK3 FHLB 2Yr 3130A8PK3 FHLB 2Yr 3130A8PK3 FHLB 2Yr 3130A8NZ2 FHLB l.5Yr 3130A8NZ2 FHLB l.5Yr 3130A8WS8 FHLB 2YrNc1YrE 3130A8UH4 FHLB 3YrNc3MoB 3130A8Y72 FHLB 3Yr 3130A9AE1 FHLB 2Yr 3130A9DH1 FHLB 5YrNc3MoB 3130A9DA6 FHLB 5YrNc3MoB 3130A9FU0 FHLB 4Yr 3130A9FM8 FHLB 4Yr 3130A9FR7 FHLB 4Yr 3130A9FR7 FHLB 4Yr 3130AA2T4 FHLB 5YrNc6MoB 3130AA2T4 FHLB 5YrNc6MoB 3130AA5A2 FHLB 5YrNc1YrB 3130AA4U9 FHLB lYr 313381820 FHLB 5Yr 3130AACK2 FHLB 5YrNc3MoB 3130AADH8 FHLB 5YrNc3MoB 3130AAE20 FHLB 5YrNc3MoB 3130AAF78 FHLB 5YrNc6MoB 313379FW4 FHLB 6Mo 3130AAGD4 FHLB 5YrNc6MoB

FFCB DISC NITTES

313313CE6 FFCB DISC NOTE 313313BY3 FFCB DISC NOTE 313313B\79 FFCB DISC NOTE 313313BZ0 FFCB DISC NOTE 313313GH5 FFCB DISC NOTE 313313BW7 FFCB DISC NOTE 313313GH5 FFCB DISC NOTE 313313HM3 FFCB DISC NOTE 313313GB8 FFCB DISC NOTE 313313HB7 FFCB DISC NOTE 313313HV3 FFCB DISC NOTE

FFCB BONDS

3133EDXQ0 FFCB 5Yr 3133EDXQ0 FFCB 5Yr 3133EDXQ0 FFCB 5Yr 3133EEZR4 FFCB 2Yr 3133EEJ43 FFCB 2Yr 3133EE6A3 FFCB l.5Yr 3133EE6A3 FFCB l.5Yr 3133EE6A3 FFCB l.5Yr 3133EFHH3 FFCB 3YrNc3MoA 3133EFEM5 FFCB 2Yr 3133EEN 48 FFCB 2Yr 3133EFKR7 FFCB 1.5 Yr 3133EFLM7 FFCB l.5Yr 3133EFNK9 FFCB 2Yr 3133EFNK9 FFCB 2Yr 3133EFQJ9 FFCB 3Yr 3133EFE52 FFCB 3Yr 3133EFE52 FFCB 3Yr 3133EFM61 FFCB 2.5Yr 3133EFP84 FFCB 3 Yr 3133EFT56 FFCB 4Yr 3133EFV38 FFCB 3YrNcl Yr A 3133EF2Z9 FFCB 4Yr 3133EF5O5 FFCB4YrNc1YrA 3133EGCE3 FFCB 5Yr 3133EGCE3 FFCB 5Yr 3133EGLV5 FFCB 3Yr 3133EGNY7 FFCB 2.5YrN c3MoA 3133EGSA4 FFCB 4YrNcl Yr A 3133EGV1Vl4 FFCB l.25Yr 3133EGVK8 FFCB4YrNc1YrA 3133EGYM FFCBlMo 3133EGXX8 FFCB4YrNc1YrA 3133EGZS7 FFCB 3Yr 3133EGC94 FFCB 4YrNc3MoA 3133EGF67 FFCB 3Yr 3133EGF67 FFCB 3Yr 3133EGR49 FFCB4YrNc1YrA

FMAC DISC NITTES

31315LHF8 F AlV!CA DISC NOTE 31315LGX0 F AlV!CA DISC NOTE

FARMER MAC

31315P2K4 F AlV!CA 3Yr 3132X0CY5 F AlV!CA lYr 3132X0ED9 F AlV!CA 3Yr 3132X0EV9 F AlV!CA 3Yr 3132X0LX7 F AlV!CA lYr 3132X0MC2 F AlV!CA lYr

MUNI ZERO CPNS

91411SPG9 UC REGENTS 91411SQL7 UC REGENTS

MUNI BONDS

07/01/2020 08/07/2018 08/07/2018 08/07/2018 01/08/2018 01/08/2018 11/23/2018 08/15/2019 08/05/2019 10/01/2018 09/30/2021 09/30/2021 09/22/2020 09/22/2020 09/28/2020 09/28/2020 12/09/2021 12/09/2021 12/08/2021 11/17/2017 12/08/2017 12/30/2021 12/30/2021 12/30/2021 12/30/2021 06/09/2017 12/30/2021

02/22/2017 02/16/2017 02/13/2017 02/17/2017 06/01/2017 02/14/2017 06/01/2017 06/29/2017 05/26/2017 06/19/2017 07/07/2017

10/10/2019 10/10/2019 10/10/2019 04/21/2017 05/08/2017 02/06/2017 02/06/2017 02/06/2017 10/15/2018 09/25/2017 05/22/2017 04/21/2017 03/27/2017 02/09/2018 02/09/2018 11/23/2018 02/25/2019 02/25/2019 09/17/2018 04/04/2019 04/01/2020 03/29/2019 04/13/2020 04/27/2020 05/25/2021 05/25/2021 07/15/2019 01/28/2019 08/24/2020 12/22/2017 09/21/2020 10/11/2019 10/13/2020 10/24/2019 11/02/2020 11/14/2019 11/14/2019 12/07/2020

06/23/2017 06/15/2017

09/05/2017 02/23/2017 03/19/2019 07/26/2019 12/22/2017 12/27/2017

02/16/2017 03/20/2017

20772JL34 CONNECTICUTST 08/01/2018 93974DSZ2 WASHINGTONSTATE 08/01/2017 882723A33 TEXAS ST 10/01/2019 882723ZZ5 TEXAS ST 10/01/2017 677522HV9 OHIO ST ATE 05/01/2017

677522HW7 OHIO ST ATE 05/01/2018

1.123 .625 .625 .625 .650 .650

1.000 .875 .875 .875

1.350 1.350

.926

.926

.926

.926 1.600 1.600 1.700

.750

.750 2.000 2.050 2.000 2.050 1.000 2.000

.600

.560

.560

.500

.570

.460

.570

.570

.530

.600

.610

.833

.833

.833

.600

.650

.590

.590

.590 1.110

.900

.625

.500

.520

.846

.846

.896 1.041 1.041

.988

.972 1.006 1.250 1.012 1.420 1.041 1.041

.957 1.110 1.320

.700 1.350

.943 1.340

.955 1.380

.937

.937 1.770

.660

.690

1.120 .500

1.063 1.172

.786

.945

.680

.750

.714

2.250 .830

1.497 .723

1.250

1.250

1.123 .726 .726 .726 .618 .608

1.000

·"" ·'® .908

1.350 1.350

.926

.926

.926

.926 1.600 1.600 1.700 .an .910

2.000 2.050 2.000 2.050 .708

2.000 uoo

.603

.563

.563

.502 57' .461 57' 57' .533 .603 .613

.833

.833

·"" .600 .680 .590 .590 .635

1.110 .650 5V .533 .520

·""' ·""' .863 1.041 1.041

.988

.m 1.006 1.250 1.012 1.420 1.041 1.041

.957 1.110 1.320

.765 1.350

·'"' 1.340 .955

1.380 .937 .937

1.770

.662

.692

1.120 .500

1.063 1.172

.786

·'" ·""' .681 .751

.715

1.398 .830

1.497 .723 .741

·'®

COUNTY OF RIVER{SIDE TREA5lJRER-TAA COLLECTOR

25,000,000.00 5,000,000.00

25,000,000.00 10,000,000.00 15,000,000.00 10,000,000.00

9,500,000.00 25,000,000.00 15,000,000.00 10,000,000.00 15,000,000.00 15,000,000.00 10,000,000.00 15,000,000.00 10,000,000.00 15,000,000.00 10,000,000.00 10,000,000.00 15,000,000.00 25,000,000.00

6,100,000.00 20,000,000.00 20,000,000.00 15,000,000.00 15,000,000.00 10,000,000.00 20,000,000.00

10,000,000.00 25,000,000.00 25,000,000.00

5,000,000.00 15,000,000.00 20,000,000.00 25,000,000.00 25,000,000.00 25,000,000.00 25,000,000.00 25,000,000.00

15,000,000.00 25,000,000.00 10,000,000.00 10,000,000.00 15,000,000.00 10,000,000.00 10,000,000.00 15,000,000.00

5,000,000.00 25,250,000.00 15,650,000.00 25,000,000.00 10,000,000.00 15,000,000.00 20,000,000.00 10,000,000.00 15,000,000.00

5,000,000.00 5,000,000.00

25,000,000.00 25,000,000.00 10,310,000.00 50,000,000.00

7,700,000.00 10,000,000.00 10,000,000.00

5,000,000.00 25,000,000.00 10,000,000.00 15,000,000.00 10,000,000.00 15,000,000.00 15,000,000.00 15,000,000.00 10,000,000.00 15,000,000.00 15,000,000.00 10 000 000.00

558,910,000.00

25,000,000.00 50,000,000.00 75.,000,000.00

8,850,000.00 25,000,000.00 10,000,000.00 15,000,000.00 25,000,000.00 25 000 000.00

108.,8.511,000.00

26,850,000.00 25,000,000.00

25,000,000.00 12,885,000.00

5,000,000.00 7,500,000.00 9,215,000.00

9,535,000.00

25,000,000.00 4,989,600.00

24,948,000.00 9,979,200.00

15,007,200.00 10,006,200.00

9,500,000.00 25,000,000.00 14,971,200.00

9,993,200.00 15,000,000.00 15,000,000.00 10,000,000.00 15,000,000.00 10,000,000.00 15,000,000.00 10,000,000.00 10,000,000.00 15,000,000.00 24,971,000.00 6,090,086.65

20,000,000.00 20,000,000.00 15,000,000.00 15,000,000.00 10,014,141.00 20,000,000.00

554_,Z!8,1.4'1.7:!I

9,946,333.33 24,880,611.11 24,888,777.78 4,983,194.44

14,919,963.00 19,941,222.22 24,866,604.17 24,856,312.50 24,880,750.00 24,872,916.67 24,866,562.50

15,000,000.00 25,000,000.00 9,997,560.00

10,000,000.00 14,991,000.00 10,000,000.00 10,000,000.00 14,989,950.00

5,000,000.00 25,371,578.75 15,669,343.40 24,987,765.25 10,000,000.00 15,000,000.00 20,000,000.00 10,006,056.38 15,000,000.00

5,000,000.00 5,000,000.00

25,000,000.00 25,000,000.00 10,310,000.00 50,000,000.00 7,700,000.00

10,000,000.00 10,000,000.00

5,000,000.00 25,000,000.00 10,000,000.00 14,988,000.00 10,000,000.00 15,000,000.00 15,000,000.00 15,000,000.00 10,000,000.00 15,000,000.00 15,000,000.00 10 000 000.00

24,906,958.33 49,824,625.00 74,'1:!11,58.'t:!l:!I

8,850,000.00 25,000,000.00 10,000,000.00 15,000,000.00 25,000,000.00 25 000 000.00

26,809,933.83 24,970,833.33

25,613,250.00 12,885,000.00

5,000,000.00 7,500,000.00 9,268,354.85

9,597,549.60

100.655000 99.232000 99.232000 99.232000 99.799000 99.799000 99.323000 99.655000 98.660000 99.525000 98.134000 98.102000 99.857000 99.857000 99.856000 99.856000 98.155000 98.155000 99.284000

100.030000 99.932000 99.832000 99.671000 99.772000 99.202000

100.152000 99.978000

99.977000 99.983000 99.987000 99.982000 99.817000 99.986000 99.817000 99.774000 99.829000 99.789000 99.727000

99.973000 99.973000 99.973000

100.010000 99.996000

100.003000 100.003000 100.003000

99.469000 100.089000 100.027000

99.985000 100.012000 100.230000 100.230000 100.270000 100.554000 100.554000 100.441000 100.389000 100.296000

99.696000 100.331000

98.889000 99.990000 99.990000

100.340000 99.586000 98.209000 99.860000 98.412000

100.244000 97.664000

100.270000 97.491000

100.220000 100.220000

99.203000

99.783000 99.795000 99.791000

100.203000 100.008000 100.567000 100.767000 100.146000 100.169000

99.971667 99.902083

102.453000 100.000000 100.000000 100.000000 100.579000

100.656000

25,163,750.00 4,961,600.00

24,808,000.00 9,923,200.00

14,969,850.00 9,979,900.00 9,435,685.00

24.913,750.00 14.799,000.00

9,952,500.00 14.720,100.00 14.715,300.00

9,985,700.00 14,978,550.00

9,985,600.00 14,978,400.00

9,815,500.00 9,815,500.00

14,892,600.00 25,007,500.00

6,095,852.00 19,966,400.00 19,934,200.00 14,965,800.00 14,880,300.00 10,015,200.00 19,995,600.00

552,121.,581.47

9,997,700.00 24,995,750.00 24,996,750.00

4,999,100.00 14.972,550.00 19,997,200.00 24,954,250.00 24,943,500.00 24,957,250.00 24.947,250.00 24,931,750.00

14,995,950.00 24,993,250.00

9,997,300.00 10,001,000.00 14,999,400.00 10,000,300.00 10,000,300.00 15,000,450.00

4,973,450.00 25,272,472.50 15,654,225.50 24,996,250.00 10,001,200.00 15,034,500.00 20,046,000.00 10,027,000.00 15,083,100.00

5,027,700.00 5,022,050.00

25,097,250.00 25,074,000.00 10,278,657.60 50,165,500.00

7,614,453.00 9,999,000.00 9,999,000.00 5,017,000.00

24,896,500.00 9,820,900.00

14,979,000.00 9,841,200.00

15,036,600.00 14,649,600.00 15,040,500.00

9,749,100.00 15,033,000.00 15,033,000.00

9 920 300.00

24,945,750.00 49,897,500.00

8,867,965.50 25,002,000.00 10,056,700.00 15,115,050.00 25,036,500.00 25 042 250.00

109,120,/il6.5.50

26,842,392.50 24,975,520.83

25,613,250.00 12,885,000.00

5,000,000.00 7,500,000.00 9,268,354.85

9,597,549.60

163,750.00 -28,000.00

-140,000.00 -56,000.00 -37,350.00 -26,300.00 -64,315.00 -86,250.00

-172,200.00 -40,700.00

-279,900.00 -284,700.00

-14,300.00 -21,450.00 -14,400.00 -21,600.00

-184,500.00 -184,500.00 -107,400.00

36,500.00 5,765.35

-33,600.00 -65,800.00 -34,200.00

-119,700.00

1,059.00 -4,400.00

51,366.67 115,138.89 107,972.22

15,905.56 52,587.00 55,977.78 87,645.83 87,187.50 76,500.00 74,333.33 65,187.50

-4,050.00 -6,750.00

-260.00

1,000.00 8,400.00

300.00 300.00

10,500.00 -26,550.00 -99,106.25 -15,117.90

8,484.75 1,200.00

34,500.00 46,000.00 20,943.62 83,100.00 27,700.00 22,050.00 97,250.00 74,000.00

-31,342.40

165,500.00 -85,547.00 -1,000.00 -1,000.00 17,000.00

-103,500.00 -179,100.00

-9,000.00 -158,800.00

36,600.00 -350,400.00

40,500.00 -250,900.00

33,000.00 33,000.00

-79 700.00

38,791.67 72,875.00

1.U,666.67

17,965.50 2,000.00

56,700.00 115,050.00

36,500.00 42 250.00

32,458.67 4,687.50

0.00 0.00 0.00 0.00 0.00

0.00

3.363 1.502 1.502 1.502

.932

.932 1.787 2.500 2.467 1.646 4.488 4.488 3.594 3.594 3.621 3.621

"" "" 4.628 .789 .m

4.653 WC 4.653 WC

.352 4.653

.060

·'" .035 MC .329 .038 .329 .406 .313

·'"' .427

2.682 2.682 2.681 .218 .265 .016 .016 .016

1.680 .0% .303 .218 .150

1.020 1.020 1.804 2.050 2.050 1.618 2.157 3.212 2.117 3.161 3.143 me me 2.434 1.964 3.451 .887

3.522 2.666 3.584 2.703 3.633 2.756 2.756 3.697

.389

.367

·"· .588 .063

2.114 2.457 .889 .899

·'" .130

1.460 .499

2.592 .662

·'" 1.235

3.416 1.515 1.515 1.515

.937

.937 1.811 2.537 2.510 1.666 4.666 4.666 3.644 3.644 3.660 3.660 4.858 4.858 4.855

.795

.852 4.915 4.915 4.915 4.915

.353 4.915

.060

.044

.036

.047

.332

.038

.332

.408

.315

.381

.430

2.690 2.690 2.690

.219

.266

.016

.016

.016 1.704

.649

.304

.219

.151 1.025 1.025 1.811 2.068 2.068 1.627 2.173 3.167 2.156 3.200 3.238 4.315 4.315 2.452 1.992 3.564

.890 3.641 2.693 3.701 2.729 3.756 2.786 2.786 3.852

"'" .392 .370

.595

.063 2.129 2.482

.890

.904 1"14

.044

.132 -1.499

.499 2.666

.666

.247

1.247

9

Mouth fuJ Porlfolio lfolJings

Miiliili1y Yield'fo PM B<><>li Mittkd Ma:rbl Uiiie,illud MruiifieJ Y-T" CUSIP D-p1ilitt Dit!, Coopon Miitiinty :V,Jii,- :Vill.ne l'rliie :V>thl,- ~ Dutatfon Miitiinty

419792JG2 HAWAIISTATE 419792JH0 HAWAIISTATE 419792JE7 HAWAIISTATE 419792JF4 HAWAII STATE 76222RUK6 RHODE ISLAND STATE 76222RUJ9 RHODE ISLAND STATE 76222RUM2 RHODE ISLAND STATE

04/01/2019 04/01/2020 04/01/2017 04/01/2018 05/01/2018 05/01/2017 05/01/2020

76222RUL4 RHODE ISLAND STATE 05/01/2019

13063CP79 CALIFORNIASTATE 04/01/2018

13063CP61 CALIFORNIASTATE 04/01/2017

3733845H5 GEORGIASTATE 07/01/2017 3733845L6 GEORGIASTATE 07/01/2020 3733845)1 GEORGIASTATE 07/01/2018 3733845K8 GEORGIASTATE 07/01/2019 041042ZS4 ARKANSASSTATE 06/01/2018 041042ZT2 ARKANSASSTATE 06/01/2019 041042ZR6 ARKANSASSTATE 06/01/2017 419792ND4 HAWAIISTATE 10/01/2018

419792NE2 HAWAIISTATE 10/01/2019

419792NF9 HAWAIISTATE 10/01/2020

13063CFC9 CALIFORNIASTATE 11/01/2017

13063C4Ul CALLIFORNIASTATE 11/01/2017 13063C4V9 CALIFORNIASTATE 11/01/2018 4197915Fl HAWAIISTATE 08/01/2017

COMM PAPER 64105GP65 NESTLE 89233GPD2 TOY OT A

64105GSC9 NESTLE

64105GSB1 NESTLE

64105GSA3 NESTLE

02/06/2017 02/13/2017

05/12/2017

05/11/2017

05/10/2017

03785DPP5 APPLE 02/23/2017

89233GQP4 TOYOTAMOTORCORP 03/23/2017

89233GPT7 TOYOTAMOTORCORP 02/27/2017

89233GRC2 TOYOTAMOTORCORP 03785DRD0 APPLE 64105GQG2 NESTLE 64105GQL1 NESTLE 36960LQL2 GENERAL ELECTRIC 36960LQX6 GENERAL ELECTRIC 36960LPM1 GENERAL ELECTRIC 36960LQ65 GENERAL ELECTRIC 89233GRK4 TOTOTAMOTORCORP 03785DQT6 APPLE 03785DSF4 APPLE 19121ASB8 COCA-COLA

03785DR40 APPLE 19121ASC6 COCA-COLA CO

GrandT11tal

04/12/2017 04/13/2017 03/16/2017 03/20/2017 03/20/2017 03/31/2017 02/21/2017 03/06/2017 04/19/2017 03/27/2017 05/15/2017 05/11/2017 04/04/2017 05/12/2017

1.380 1.660 1.000 1.250 1.250

.750 1.625

1.375

.900

1.500

3.000 3.000 3.000 3.000 2.250 2.000 2.000 1.000

1.151

1.370

1.750

.850 1.050 1.231

.650

.950

.750

.790

.740

.620

.870

.740

.910

.800

.760

.720

.730

.780

.650

.680

.950

.780

.880

.850

.800

.850

1.380 1.660

.851 1.160 1.010

.720 1.520

1.220

1.127

.767

.701 1.370

.930 1.110

·'® 1.024 5c, .911

1.101

1.319

.820

.800

.950

.m

'"' .652 .955

.754

.794

·'"' .621

·'" .741

.913

.802

.761

.721

.731

.781

.651

.681

.963

.781

.883

.852

.801

.852

·"' .... ....

COUNTY OF RIVER{SIDE TREA5lJRER-TA>-: COLLECTOR

4,990,000.00 5,055,000.00 4,890,000.00 4,925,000.00 2,595,000.00 2,580,000.00 2,660,000.00

2,625,000.00

41,290,000.00

8,245,000.00

6,110,000.00 6,825,000.00 6,345,000.00 6,580,000.00

12,810,000.00 13,470,000.00

2,015,000.00 4,870,000.00

2,250,000.00

2,250,000.00

9,480,000.00

75,000,000.00 50,000,000.00 22,165,000.00

:!169,1.60,000.00

50,000,000.00 30,000,000.00

50,000,000.00

30,000,000.00

45,000,000.00

50,000,000.00

50,000,000.00

50,000,000.00

25,000,000.00 50,000,000.00 50,000,000.00 50,000,000.00 50,000,000.00 50,000,000.00 50,000,000.00 50,000,000.00 50,000,000.00 25,000,000.00 50,000,000.00 25,000,000.00 50,000,000.00 50,000,000.00

4,990,000.00 5,055,000.00 4,896,992.70 4,933,569.50 2,607,144.60 2,580,748.20 2,670,719.80

2,636,838.75

41,120,711.00

8,295,129.60

6,247,413.90 7,254,770.25 6,602,480.10 6,943,874.00

13,139,473.20 13,837,192.20

2,039,139.70 4,878,473.80

2,253,262.50

2,254,320.00

9,569,301.60

75,036,750.00 50,098,500.00 22,241,025.95

49,832,986.11 29,857,500.00

49,736,458.33

29,843,316.67

44,805,750.00

49,907,000.00

49,855,000.00

49,907,500.00

24,924,166.67 49,866,666.67 49,905,000.00 49,910,000.00 49,923,958.33 49,906,833.33 49,957,569.44 49,943,333.33 49,868,000.00 24,959,916.67 49,850,888.89 24,934,479.17 49,917,777.78 49,871,319.44

100.000000 100.000000 100.143000 100.174000 100.468000 100.029000 100.403000

100.451000

99.590000

100.608000

102.249000 106.297000 104.058000 105.530000 102.572000 102.726000 101.198000 100.174000

100.145000

100.192000

100.942000

100.049000 100.197000 100.343000

99.990694 99.977667

99.736111

99.738750

99.741389

99.959056

99.906944

99.951611

99.860000 99.858000 99.919972 99.912528 99.912528 99.892056 99.962778 99.938583 99.846000 99.899500 99.728194 99.738750 99.876000 99.736111

4,990,000.00 5,055,000.00 4,896,992.70 4,933,569.50 2,607,144.60 2,580,748.20 2,670,719.80

2,636,838.75

41,120,711.00

8,295,129.60

6,247,413.90 7,254,770.25 6,602,480.10 6,943,874.00

13,139,473.20 13,837,192.20

2,039,139.70 4,878,473.80

2,253,262.50

2,254,320.00

9,569,301.60

75,036,750.00 50,098,500.00 22,241,025.95

49,995,347.22 29,993,300.00

49,868,055.56

29,921,625.00

44,883,625.00

49,979,527.78

49,953,472.22

49,975,805.56

24,965,000.00 49,929,000.00 49,959,986.11 49,956,263.89 49,956,263.89 49,946,027.78 49,981,388.89 49,969,291.67 49,923,000.00 24.974,875.00 49,864,097.22 24,934,687.50 49,938,000.00 49,868,055.56

0.00 0.00 0.00 0.00 0.00 0.00 0.00

0.00

0.00

0.00

0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

0.00

0.00

0.00

0.00 0.00 0.00

"" 162,361.11 135,800.00

131,597.23

78,308.33

77,875.00

72,527.78

98,472.22

68,305.56

40,833.33 62,333.33 54,986.11 46,263.89 32,305.56 39,194.45 23,819.45 25,958.34 55,000.00 14,958.33 13,208.33

208.33 20,222.22 -3,263.88

2.119 3.058 .164

1.151 1.235

·'"' 3.144

2.203

1.154

.164

.412 3.249 1.389 2.334 1.315 2.279 .330

1.645

2.611

3.551

·'"' ·'" 1.726 .498

.016

.035

.274

.m

.269

.063

.138

.o,;

.193

.196

.120

.130

.130

.160

.057

.092

.212

·"' .282 .m .m .274

"'" "'"

2.164 3.167

.164 1.164 1.247

.247 3.249

2.247

1.164

.164

.414 3.416 1.414 2.414 1.332 2.332

.332 1.666

2.666

3.668

.751

.751 1.751

.499

.016

.036

.277

.274

.271

.063

.140

.074

.195

.197

.121

.132

.132

.162

.058

.093

.214

.151

.285

.274

.173

.277

,..,

l()

Full Compliance

The Treasurer's Pooled Investment Fund was in FULL

COMPLIANCE with the Treasurer's Statement of Investment Policy.

The County's Investment Policy is more restrictive than the

California Government Code. This policy is reviewed annually by

the County's Investment Oversight Committee and approved by the

County Board of Supervisors.

MUNICIPAL BONDS 5 YEARS NO LIMIT NA 4 YEARS

(MUNI)

U.S. TREASURIES 5 YEARS NO LIMIT NA 5 YEARS

LOCAL AGENCY 5 YEARS NO LIMIT NA 3 YEARS

OBLIGATIONS (LAO)

FEDERAL AGENCIES 5 YEARS NO LIMIT AAA 5 YEARS

COMMERCIAL PAPER (CP) 270 DAYS 40% Al/Pl 270 DAYS

15%

100%

2.5%

100%

40%

CERTIFICATE & TIME 5 YEARS 30% NA 1 YEAR 25% Combined

DEPOSITS (NCO & TCD)

REPURCHASE 1 YEARS NO LIMIT NA 45 DAYS 40% max, 25% in term

AGREEMENTS (REPO) repo over 7 days

REVERSE REPOS 92 DAYS 20% NA 60 DAYS 10%

MEDIUM TERM NOTES 5 YEARS 30% A 3 YEARS 20%

(MTNO)

CAL TRUST SHORT TERM NA NA NA DAILY 1.0%

FUND LIQUIDITY

MONEY MARKET MUTUAL 60 DAYS (ll 20% AAA/Aaa DAILY 20%

FUNDS(MMF) [21 LIQUIDITY

LOCAL AGENCY NA NA NA DAILY Max $50 million

INVESTMENT FUND (LAIF) LIQUIDITY

CASH/DEPOSIT ACCOUNT NA NA NA NA NA

1 Mutual Funds maturity may be interpreted as weighted average maturity not exceeding 60 days.

AA-/ Aa3/ AA-

NA

INVESTMENT

GRADE

NA

Al/Pl/Fl

Al/Pl/Fl

Al/Pl/Fl

NA

AA/Aa2/AA

NA

AAAby20!3

RATINGS AGC.

NA

NA

2 Or must have an investment advisor with not less than 5 years experience and with assets under management of $500,000,000.

6.22%

10.62%

0.00%

54.12%

14.JJ%

0.00%

0.00%

0.00%

0.00%

0.79%

8.06%

0.00%

5.86%

100.00%

THIS COMPLETES THE REPORT REQUIREMENTS OF CALIFORNIA GOVERNMENT CODE 63646

COUNTY OF RIVERSIDE TREASURER-TAX COLLECTOR 11

County of Riverside Treasurer-Tax Collector

Capital Markets

4080 Lemon Street, 4th Floor Riverside, CA 92502-2205

(951) 955-3979

(This page intentionally left blank)

APPENDIX F

SPECIMEN MUNICIPAL BOND INSURANCE POLICY

F-1

MUNICIPAL

ISSUER:

MUNICIPAL BOND INSURANCE POLICY

-N

BONDS: $ in aggregate principal amount of

ASSURED GUARANTY MUNICIPAL CORP. ('AGM"), UNCONDITIONALLY AND IRREVOCABLY agrees to pay to the tr "Paying Agent") (as set forth in the documentation providing for the Bonds, for the benefit of the Owners or, at the election of the terms of this Policy (which includes each endorsement intereston the Bonds that shall become Due for Payment buts the Issuer.

On the later of the day on which such Business Day next following the Business Da AG M will disburse to or for the benefit of ea on the Bond that is then Due for Payme only upon receipt by AGM, in a form r receive payment of the principal appropriate instruments of assign principal or inte:rest that is Due for deemed received on a given Busi

ue for Payment or the d Notice of Nonpaymen~

a t of principal of and inte:rest f Nonpayment by the Issuer, but

of (a evidence of the Owners right to t and (b) evidence, including any

er's hts with respect to payment of such ,n AGM. A Notice ofNonpaymentwill be

rior to l :00 p.m. (New York time) on such Business Day; otherwise, I eemed receiv the next Business Day. If any Notice of Nonpayment received purposes of the pre Owner, as approp · respect of a Bond, A to receipt of p Owner, incl AGM her thee

te, it shall e deemed not to have been received by AG M for M promptly so advise the Trustee, Paying Agent or

ed Notice of Nonpayment Upon disbursement in ner of the Bond, any appurtenant coupon to the Bond or right ton the Bond and shall be fully subrogated to the rights of the

payments under the Bond, to the exlEnt of any payment by Trustee or Paying Agent for the benefit of the Owners shall, to

n of AGM under this Policy.

x'ent expre sly modified by an endorsement hereto, the following terms shall have r all purposes of this Policy. "Business Day" means any day other than (a) a

ay on which banking institutions in the State: of New York or the Insurer's or required by law or executive order to remain closed. "Due for Payment''

to the principal of a Bond, payable on the stated maturity date thereofor the date all have been duly called for mandato,y sinking fund redemption and does not refer to ich payment is due by reason of call for redemption (other than by mandato,y sinking

fund rede , acceleration or other advancement of maturity unless AGM shall elect, in its sole discretion, to p y such principal due upon such acceleration together with any accrued interest to the date of acceleration and (b) when referring to interest on a Bond, payable on the stated date for payment of interest "Nonpayment'' means, in respect of a Bond, the failure of the Issuer to have provided sufficient funds to the Trustee or, if there is no Trustee, to the Paying Agent for payment in full of all principal and interest that is Due for Payment on such Bond. "Nonpayment'' shall also include, in respect of a Bond, any payment of principal or interest that is Due for Payment made to an Owner by or on behalf of the Issuer which has been recovered from such Owner pursuant to the

Page 2 of2 Policy No. -N

Unied States Bankrup1I:y Code by a trus1ee in bankrup1I:y in accordance with a final, nonappealable order of a court having competent jurisdiction. "Notice" means telephonic or te:lecopied notice, subsequently confirmed in a signed writing, or written notice by registered or certified mail, from an Owner, the Truste:e or the Paying Agent to AG M which notice shall specify (a) the person or entity making the claim, (b) the Policy Number, (c) the claimed amount and (d) the date such claimed amount became Due for Payment "Owner" means, in respect of a Bond, the person or entity who, at the time of Nonpayment, is entitled under the terms of such Bond to payment thereof, exceptthat"Owne~· shall not include the Issuer rany person or entity whose direct or indirect obligation constitutes the underlying security for the Bonds.

AGM may appoint a fiscal agent (the "Insurer's Fiscal Agent') for purposes giving written notice to the Truste:e and the Paying Agent specifying the name and notic: Insurer's Fiscal Agent From and afte:r the date of receipt of such notice by Agent (a) copies of all notices required to be delivered to AGM pur simultaneously delivered to the Insurers Fiscal Agent and to AGM ands received by both and (b) all payments required to be made by AGM u byAGM or by the Insurer's FiscalAgenton behalfofAGM. The Ins only and the Insurers F iscalAgent shall in no event be liable to an Agent or any failure of AGM 1D depos~ or cause to be depos under this Policy.

To the fullest extent perm~d by applicable law, AG only for the benefit of each Owner, all rights (whether by coun1e (including, without lim~tion, the defense of fra ether a

d hereby waives, ise) and defenses

tion, assignment or to avoid payment of its otherwise, to the extent that such rights and d

obligations under this Policy in accordance wi

This Policy sets forth in full affe:cted by any other agreement or in the extent expressly modified by a nonrefundable for any reason wha Bonds prior to maturity and (b) COVERED BY THE PROPE lY,C OF THE NEW YORK INS E

A subsidiary of Assured Guaranty Municipal Holdings Inc. 1633 Broadway, New York, N.Y. 10019 (212) 974-0100

Form S0ONY (5;90)

hall not be modified, altered or ·on or amendment thereto. Except to

ium paid in respect of this Policy is ovision being made for payment, of the

d or revoked. THIS POLICY IS NOT CURllY FUND SPECIFIED IN ARTICLE 76

MUNICIPAL CORP. has caused this Policy to be

ASSURED GUARANTY MUNICIPAL CORP.

By---~~~~~=-----­Authorized Officer