LAWNDALE ELEMENTARY SCHOOL DISTRICT - CA.gov

TWO NEW ISSUES—BOOK-ENTRY ONLY RATING: S&P: “AA-” See “RATING” herein.

In the opinion of Quint & Thimmig LLP, Larkspur, California, Bond Counsel, subject to compliance by the District with certain covenants, under present law, interest on Bonds is excludable from gross income of the owners thereof for federal income tax purposes and is not included as an item of tax preference in computing the federal alternative minimum tax for individuals and corporations, but such interest is taken into account in computing an adjustment used in determining the federal alternative minimum tax for certain corporations. In addition, in the opinion of Bond Counsel, interest on the Bonds is exempt from personal income taxation imposed by the State of California. See “TAX MATTERS” herein.

LAWNDALE ELEMENTARY SCHOOL DISTRICT (Los Angeles County, California)

$10,000,000 General Obligation Bonds

Election of 2016, Series A (2017)

$5,080,000 2017 General Obligation Refunding Bonds

Dated: Date of Delivery Due: August 1, as shown on the inside cover

The $10,000,000 Lawndale Elementary School District (Los Angeles County, California) General Obligation Bonds, Election of 2016, Series A (2017) (the “2016A Bonds”) are being issued by the Lawndale Elementary School District (the “District”) pursuant to the provisions of Article 4.5 of Chapter 3 of Part 1 of Division 2 of Title 5 (commencing with section 53506) of the California Government Code and a resolution of the Board of Education of the District. The Bonds are being issued to (a) finance the acquisition and construction of educational facilities and projects which were described in the ballot measure approved by the electors of the District on November 8, 2016, which authorized the issuance of general obligation bonds in the maximum aggregate principal amount of $27,000,000 (the “2016 Authorization”), and (b) pay for costs of issuance of the Bonds. The Bonds constitute the first issue of bonds under the 2016 Authorization. The Bonds will be issued as current interest bonds.

The $5,080,000 Lawndale Elementary School District (Los Angeles County, California) 2017 General Obligation Refunding Bonds (the “2017 Refunding Bonds” and, with the 2017A Bonds, the “Bonds”), are being issued by the District provisions of Articles 9 and 11 of Chapter 3 (commencing with section 53550) of Division 2 of Title 5 of the California Government Code and a resolution of the Board of Education of the District. The 2017 Refunding Bonds are being issued to (a) refund, on an advance basis, the District’s outstanding General Obligation Bonds, 1998 Election, Series B, and (b) pay for costs of issuance of the Bonds.

The Bonds constitute general obligations of the District payable solely from ad valorem property taxes levied and collected by Los Angeles County (the “County”). The Board of Supervisors of the County is empowered and obligated to annually levy ad valorem taxes, without limitation as to rate or amount, for the payment of interest on, and principal of, the Bonds upon all property subject to taxation within the District (except certain personal property which is taxable at limited rates), all as more fully described herein under “THE BONDS” and “SECURITY AND SOURCE OF PAYMENT FOR THE BONDS—Property Taxation System.”

The Bonds are issuable in denominations of $5,000 and any integral multiple thereof. Interest on the Bonds is payable on February 1 and August 1 of each year, commencing August 1, 2017. See “THE BONDS” herein. The Bonds will be delivered in fully registered form only and, when delivered, will be registered in the name of Cede & Co., as nominee of The Depository Trust Company (“DTC”). DTC will act as securities depository of the Bonds. Ownership interests in the Bonds may be purchased in book-entry form only. Principal of and interest on the Bonds will be paid by U.S. Bank National Association, as agent of the Treasurer and Tax Collector of Los Angeles County, as paying agent, to DTC or its nominee, which will in turn remit such payment to its participants for subsequent disbursement to the beneficial owners of the Bonds. See “BOOK-ENTRY SYSTEM” herein.

The Bonds are subject to redemption prior to maturity as described herein. See “THE BONDS—Redemption” herein.

MATURITIES, PRINCIPAL AMOUNTS, INTEREST RATES, PRICES AND YIELDS

SEE THE INSIDE COVER

This cover page contains information for quick reference only. It is not a summary of these issues. Potential purchasers must read the entire Official Statement to obtain information essential to making an informed investment decision.

The Bonds will be offered when, as and if issued, and received by the purchaser thereof, subject to the approval as to their validity by Quint & Thimmig LLP, Larkspur, California, Bond Counsel, and certain other conditions. Certain legal matters will be passed upon for the District by Quint & Thimmig LLP, Larkspur, California, Disclosure Counsel. Certain legal matters will be passed upon for the Underwriter by Kronick Moskovitz Tiedemann & Girard, A Professional Corporation, Sacramento, California. It is anticipated that the Bonds will be available for delivery through the facilities of DTC on or about March 21, 2017.

March 2, 2017

2016-4050 and 2016-4057

2016-4050 2016-4057

$10,000,000 LAWNDALE ELEMENTARY SCHOOL DISTRICT

(Los Angeles County, California) General Obligation Bonds



$2,760,000 Serial Bonds

CUSIP† Prefix: 519547

Maturity Principal Interest CUSIP† Maturity Principal Interest CUSIP† (August 1) Amount Rate Yield Price Suffix (August 1) Amount Rate Yield Price Suffix

2018 $425,000 5.000% 0.900% 105.533% DT7 2033 $180,000 5.000% 3.280% 113.763%c DZ3 2019 720,000 5.000 1.080 109.112 DU4 2034 205,000 3.500 3.700 97.451 EA7 2029 100,000 5.000 2.960 116.569c DV2 2035 225,000 5.000 3.390 112.817c EB5 2030 100,000 5.000 3.040 115.860c DW0 2036 255,000 3.625 3.800 97.613 EC3 2031 125,000 5.000 3.120 115.156c DX8 2037 280,000 5.000 3.460 112.220c ED1 2032 145,000 5.000 3.210 114.370c DY6

$2,210,000 4.000% Term Bonds maturing August 1, 2041, Price: 100.000, to Yield 4.000%—CUSIP† 519547 EF6

$5,030,000 4.000% Term Bonds maturing August 1, 2046, Price: 99.141, to Yield 4.050%—CUSIP† 519547 EE9

$5,080,000 LAWNDALE ELEMENTARY SCHOOL DISTROCT

(Los Angeles County, California) 2017 General Obligation Refunding Bonds


CUSIP† Prefix: 519547

Maturity Principal Interest CUSIP† Maturity Principal Interest CUSIP† (August 1) Amount Rate Yield Price Suffix (August 1) Amount Rate Yield Price Suffix

2017 $ 60,000 2.000% 0.780% 100.438% EG4 2029 $715,000 3.000% 3.280% 97.170% EL3 2026 645,000 4.000 2.620 111.387 EH2 2030 740,000 3.125 3.400 97.064 EM1 2027 670,000 4.000 2.810 109.732c EJ8 2031 765,000 3.250 3.500 97.194 EN9 2028 695,000 3.000 3.120 98.857 EK5 2032 790,000 3.375 3.600 97.359 EP4

†Copyright 2017, American Bankers Association. CUSIP® is a registered trademark of the American Bankers Association. CUSIP data herein is provided by CUSIP Global Services, operated by Standard & Poor’s. This data is not intended to create a database and does not serve in any way as a substitute for CUSIP Global Services. CUSIP numbers have been assigned by an independent company not affiliated with the District and are included solely for the convenience of the registered owners of the Bonds. Neither the District nor the Underwriter is responsible for the selection or uses of these CUSIP numbers and no representation is made as to their correctness on the Bonds or as included herein. The CUSIP number for a specific maturity is subject to being changed after the delivery of the Bonds as a result of various subsequent actions including, but not limited to, a refunding in whole or in part or as a result of the procurement of secondary market portfolio insurance or other similar enhancement by investors that is applicable to all or a portion of certain maturities of the Bonds.

c Priced to the August 1, 2026, par call date.

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

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

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

Information in Official Statement. Certain of the information set forth in this Official Statement has been furnished by sources which are believed to be reliable, but it is not guaranteed as to accuracy or completeness.

Involvement of Underwriter. The Underwriter has provided the following statement for inclusion in this Official Statement: The Underwriter has reviewed the information in this Official Statement in accordance with, and as a 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.

Document Summaries. All summaries of the documents referred to in this Official Statement are made subject to the provisions of such documents and qualified in their entirety to reference to such documents, and do not purport to be complete statements of any or all of such provisions.

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

Estimates and Projections. 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 approval of an authorized officer of the District, the words or phrases “will likely result,” “are expected to,” “will continue,” “is anticipated,” “estimate,” “project,” “forecast,” “expect,” “intend” and similar expressions identify “forward looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements are subject to risks and uncertainties that could cause actual results to differ materially from those contemplated in such forward-looking statements. Any forecast is subject to such uncertainties. Inevitably, some assumptions used to develop the forecasts will not be realized and unanticipated events and circumstances may occur. Therefore, there are likely to be differences between forecasts and actual results, and those differences may be material.

Effective Date. This Official Statement speaks only as of its date, and the information and expressions of opinion contained in this Official Statement are subject to change without notice. Neither the delivery of this Official Statement nor any sale of the Bonds will, under any circumstances, give rise to any implication that there has been no change in the affairs of the District, the County, the other parties described in this Official Statement, or the condition of the property within the District since the date of this Official Statement.

Website. The District maintains a website. Unless specifically indicated otherwise, the information presented on such website is not incorporated by reference as part of this Official Statement and should not be relied upon in making investment decisions with respect to the Bonds.

THIS PAGE INTENTIONALLY LEFT BLANK

TABLE OF CONTENTS

INTRODUCTION ...................................................... 1 The District .............................................................. 1 Sources of Payment for the Bonds ............................ 1 Authority for Issue; Purpose of Issue ........................ 2 Description of the Bonds .......................................... 2 Tax Matters .............................................................. 3 Offering and Delivery ............................................... 3 Continuing Disclosure .............................................. 3 Other Information ..................................................... 3

THE BONDS ............................................................... 4 Authority for Issuance .............................................. 4 Purposes of Issuance ................................................. 4 Security ..................................................................... 4 Description of the Bonds .......................................... 5 Payment .................................................................... 6 Redemption .............................................................. 6 Defeasance ................................................................ 9 Registration, Transfer and Exchange of Bonds ....... 10 Estimated Sources and Uses of Funds .................... 12 Financing Plan ........................................................ 12 Debt Service Schedules .......................................... 14

PAYING AGENT ...................................................... 15 BOOK-ENTRY ONLY SYSTEM ............................. 15 THE DISTRICT ........................................................ 16

General Information ................................................ 16 Board of Education and Administration .................. 16

SECURITY AND SOURCE OF PAYMENT FOR THE BONDS ............................................................. 16

General .................................................................... 16 Property Taxation System ....................................... 16 Method of Property Taxation .................................. 17 Assessed Valuations ................................................. 19 Tax Rates ................................................................ 23 Tax Levies and Delinquencies ................................ 24 No Teeter Plan ....................................................... 25 Largest Property Owners ........................................ 26 Direct and Overlapping Debt .................................. 26 Bonding Capacity .................................................... 27

INVESTMENT OF DISTRICT FUNDS ................. 28 LEGAL MATTERS ................................................... 28

Possible Limitations on Remedies; Bankruptcy ...... 28 Legal Opinions ........................................................ 30

TAX MATTERS ....................................................... 30 MUNICIPAL ADVISOR ........................................... 32 CONTINUING DISCLOSURE ................................ 32 LEGALITY FOR INVESTMENT IN CALIFORNIA ........................................................... 33 ABSENCE OF MATERIAL LITIGATION ............. 33 VERIFICATION OF MATHEMATICAL COMPUTATIONS ................................................... 33 RATING .................................................................... 33 UNDERWRITING .................................................... 34 ADDITIONAL INFORMATION ............................. 34 EXECUTION ............................................................ 35

APPENDIX A: GENERAL INFORMATION REGARDING LAWNDALE AND THE COUNTY APPENDIX B: DISTRICT AND GENERAL SCHOOL DISTRICT FINANCIAL INFORMATION APPENDIX C: AUDITED FINANCIAL STATEMENTS OF THE DISTRICT FOR THE FISCAL

YEAR ENDED JUNE 30, 2016 APPENDIX D: LOS ANGELES COUNTY INVESTMENT POOL APPENDIX E: FORMS OF OPINIONS OF BOND COUNSEL APPENDIX F: FORMS OF CONTINUING DISCLOSURE CERTIFICATES APPENDIX G: BOOK-ENTRY SYSTEM

LAWNDALE ELEMENTARY SCHOOL DISTRICT 4161 West 147th Street

Lawndale, California 90260 (310) 973-1300

http://www.lawndale.k12.ca.us/*

BOARD OF EDUCATION

Cathy Burris, President Shirley Bennett, Clerk

Shirley Rudolph, Board Member Bonnie J. Coronado, Board Member

Ann M. Phillips, Board Member

DISTRICT ADMINISTRATION

Ellen Dougherty, Ed.D., Superintendent Gretchen Janson, Assistant Superintendent, Business Services

Betsy Hamilton, Ed.D., Assistant Superintendent of Educational Services Steven Miller, Assistant Superintendent of Human Resources

PROFESSIONAL SERVICES

BOND COUNSEL and DISCLOSURE COUNSEL Quint & Thimmig LLP

Larkspur, California

MUNICIPAL ADVISOR Isom Advisors, A Division of Urban Futures, Inc.

Walnut Creek, California

PAYING AGENT U.S. Bank National Association, as agent of the

Treasurer and Tax Collector of Los Angeles County Los Angeles, California

VERIFICATION AGENT Causey Demgen & Moore, P.C.

Denver, Colorado

*Information therein is not incorporated by reference into this Official Statement.


(Los Angeles County, California) General Obligation Bonds



(Los Angeles County, California) 2017 General Obligation Refunding Bonds

INTRODUCTION

This Official Statement, which includes the cover page, the inside cover page and the appendices hereto, provides information in connection with the sale of the $10,000,000 Lawndale Elementary School District (Los Angeles County, California) General Obligation Bonds, Election of 2016, Series A (2017) (the “2016A Bonds”), and the $5,080,000 Lawndale Elementary School District (Los Angeles County, California) 2017 General Obligation Refunding Bonds (the “2017 Refunding Bonds” and, with the 2016A Bonds, the “Bonds”).

This Introduction is not a summary of this Official Statement. It is only a brief description of and guide to, and is qualified by, more complete and detailed information contained in the entire Official Statement, including the cover page, the inside cover page and the appendices hereto, and the documents summarized or described herein. A full review should be made of the entire Official Statement. The offering of the Bonds to potential investors is made only by means of the entire Official Statement.

The District

The Lawndale Elementary School District (the “District”) was originally organized in October, 1906 and provides K-8 educational services to the residents of the Lawndale community in the South Bay region of Los Angeles County (the “County”). The District serves the City of Lawndale, as well as portions of the City of Hawthorne and unincorporated Los Angeles County. The District consists of eight school sites comprised of six elementary schools and two middle schools.

For more complete information concerning the District, including certain financial information, see “THE DISTRICT” and APPENDIX B—DISTRICT AND GENERAL SCHOOL DISTRICT FINANCIAL INFORMATION. The District’s audited financial statements for the fiscal year ended June 30, 2016, are included as APPENDIX C—AUDITED FINANCIAL STATEMENTS OF THE DISTRICT FOR THE FISCAL YEAR ENDED JUNE 30, 2016.

Sources of Payment for the Bonds

The Bonds constitute general obligations of the District payable solely from ad valorem property taxes levied and collected by the County. The Board of Supervisors of the County is empowered and is obligated to annually levy ad valorem taxes for the payment of the Bonds and the interest thereon upon all property in the District subject to taxation by the District without limitation of rate or amount (except

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certain personal property which is taxable at limited rates). See “SECURITY AND SOURCE OF PAYMENT FOR THE BONDS.”

Authority for Issue; Purpose of Issue

2016A Bonds. The 2016A Bonds are being issued by the District pursuant to the provisions of Article 4.5 of Chapter 3 of Part 1 of Division 2 of Title 5 (commencing with section 53506) of the California Government Code, and a resolution adopted by the Board of Education of the District (the “Board”) on January 31, 2017 (the “2016A Bond Resolution”).

The 2016A Bonds are being issued to (a) finance the acquisition and construction of educational facilities and projects which were described in the ballot measure approved by the electors of the District on November 8, 2016, which authorized the issuance of general obligation bonds in the maximum aggregate principal amount of $27,000,000 (the “2016 Authorization”), and (b) pay for costs of issuance of the 2016A Bonds. The 2016A Bonds constitute the first issue of bonds under the 2016 Authorization.

2017 Refunding Bonds. The 2017 Refunding Bonds are being issued by the District provisions of Articles 9 and 11 of Chapter 3 (commencing with section 53550) of Division 2 of Title 5 of the California Government Code and a resolution adopted by the Board on January 31, 2017 (the “2017 Refunding Bond Resolution” and, with the 2016A Bond Resolution, the “Resolutions”).

The 2017 Refunding Bonds are being issued to (a) refund, on an advance basis, the District’s outstanding General Obligation Bonds, 1998 Election, Series B (the “1998B Bonds”), and (b) pay for costs of issuance of the 2017 Refunding Bonds.

Description of the Bonds

The Bonds are being issued as current interest bonds. The Bonds will be dated as of their date of delivery, will be issued as fully registered bonds, without coupons, in the denominations of $5,000 or any integral multiple thereof. Interest on the Bonds accrues from their date of delivery and is payable semiannually on each February 1 and August 1 (each an “Interest Payment Date”), commencing August 1, 2017.

The Bonds will be issued in fully registered form only, registered in the name of Cede & Co. as nominee of The Depository Trust Company (“DTC”), and will be available to actual purchasers of the Bonds (the “Beneficial Owners”) in the denominations set forth on the inside cover page hereof, under the book-entry system maintained by DTC, only through brokers and dealers who are or act through DTC Participants as described herein. Beneficial Owners will not be entitled to receive physical delivery of the Bonds. See “BOOK-ENTRY SYSTEM” and APPENDIX G—BOOK-ENTRY SYSTEM. In event that the book-entry system described below is no longer used with respect to the Bonds, the Bonds will be registered in accordance with the Resolution as described herein. See “THE BONDS—Registration, Transfer and Exchange of Bonds.” Individual purchases of interests in the Bonds will be available to purchasers of the Bonds in the denominations of $5,000 principal amount or any integral multiple thereof.

Certain of the Bonds are subject to redemption prior to maturity. See “THE BONDS—Redemption.”

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Tax Matters

In the opinion of Quint & Thimmig LLP, Larkspur, California, Bond Counsel, subject to compliance by the District with certain covenants, under present law, interest on Bonds is excludable from gross income of the owners thereof for federal income tax purposes and is not included as an item of tax preference in computing the federal alternative minimum tax for individuals and corporations, but such interest is taken into account in computing an adjustment used in determining the federal alternative minimum tax for certain corporations. In addition, in the opinion of Bond Counsel, interest on the Bonds is exempt from personal income taxation imposed by the State of California. See “TAX MATTERS.”

Offering and Delivery

The Bonds are offered when, as and if issued and received by the purchaser, subject to approval as to their legality by Bond Counsel. It is anticipated that the Bonds will be available for delivery through the facilities of DTC on or about March 21, 2017.

Continuing Disclosure

The District has covenanted for the benefit of the holders and Beneficial Owners of the Bonds to make available certain financial information and operating data relating to the District and to provide notices of the occurrence of certain enumerated events in compliance with S.E.C. Rule 15c2-12(b)(5) (the “Rule”). The specific nature of the information to be made available and of the notices of enumerated events is summarized below under the caption “CONTINUING DISCLOSURE.” Also, see APPENDIX F—FORMS OF CONTINUING DISCLOSURE CERTIFICATES.

Other Information

This Official Statement speaks only as of its date, and the information contained herein is subject to change. Copies of documents referred to herein and information concerning the Bonds are available for inspection at the office of the Superintendent, Lawndale Elementary School District , 4161 West 147th Street, Lawndale, CA 90260, telephone (310) 973-1300. The District may impose a charge for copying, mailing and handling.

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

The information set forth herein has been obtained from official sources which are believed to be reliable but it is not guaranteed as to accuracy or completeness, and is not to be construed as a representation by the 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 submitted in connection with the sale of the Bonds referred to herein and may not be reproduced or used, in whole or in part, for any other purpose.

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THE BONDS

Authority for Issuance

2016A Bonds. The 2016A Bonds are issued pursuant to the Constitution and laws of the State, including the provisions of Article 4.5 of Chapter 3 of Part 1 of Division 2 of Title 5 (commencing with section 53506) of the California Government Code. The 2016A Bonds are authorized pursuant to the 2016A Bond Resolution.

2017 Refunding Bonds. The 2017 Refunding Bonds are issued pursuant to the Constitution and laws of the State, including the provisions of Articles 9 and 11 of Chapter 3 (commencing with section 53550) of Division 2 of Title 5 of the California Government Code. The 2017 Refunding Bonds are authorized pursuant to the 2017 Refunding Bond Resolution.

Purposes of Issuance

2016A Bonds. The 2016A Bonds are being issued to (a) finance the acquisition and construction of educational facilities and projects which were described in the 2016 Authorization, and (b) pay for costs of issuance of the 2016A Bonds. See “—Estimated Sources and Uses of Funds” and “—Financing Plan.”

2017 Refunding Bonds. The 2017 Refunding Bonds are being issued to (a) refund, on an advance basis, the 1998B Bonds, and (b) pay for costs of issuance of the 2017 Refunding Bonds. See “—Estimated Sources and Uses of Funds” and “—Financing Plan.”

The District has authorized and issued certain other general obligation bonds. See “APPENDIX B—DISTRICT AND GENERAL SCHOOL DISTRICT FINANCIAL INFORMATION—District Debt Structure—General Obligation Bonds.”

Security

The Bonds constitute general obligations of the District payable solely from ad valorem property taxes levied and collected by the County. The Board of Supervisors of the County is empowered and is obligated to levy ad valorem taxes for the payment of the Bonds, and the interest thereon, upon all property in the District subject to taxation by the District without limitation of rate or amount (except certain personal property which is taxable at limited rates). Such taxes are required to be levied annually, in addition to all other taxes, during the period that the Bonds are outstanding in an amount sufficient to pay the principal of and interest on the Bonds when due. The levy may include an allowance for a reserve, established to avoid fluctuations in tax levies. Such taxes, when collected, will be deposited, with respect to the Bonds, into the Interest and Sinking Fund and which is required by the California Education Code to be applied for the payment of principal of and interest on the Bonds when due. Although the County is obligated to levy an ad valorem tax for the payment of the Bonds, and the County Treasurer and Tax Collector will maintain the Interest and Sinking Fund, the Bonds are a debt of the District, not the County.

Moneys placed in the Interest and Sinking Fund of the District are irrevocably pledged for the payment of the principal of and interest on the Bonds when and as the same fall due. The property taxes and amounts held in the Interest and Sinking Fund of the District shall immediately be subject to this pledge, and the pledge shall constitute a lien and security interest which shall be effective, binding, and enforceable against the District, its successors, creditors and all others irrespective of whether those

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parties have notice of the pledge and without the need of any physical delivery, recordation, filing, or further act. The pledge is an agreement between the District and the Owners of the Bonds in addition to the statutory lien in accordance with section 53515(a) of the California Government Code, and the Bonds were issued to finance one or more projects and not to finance the general purposes of the District.

In accordance with section 53515(a) of the California Government Code, the Bonds shall be secured by a statutory lien on all revenues received pursuant to the levy and collection of the tax for the 2016 Authorization. The lien shall automatically attach without further action or authorization by the District or the County. The lien shall be valid and binding from the time the Bonds are issued and delivered. The revenues received pursuant to the levy and collection of the tax shall be immediately subject to the lien, and the lien shall automatically attach to the revenues and be effective, binding, and enforceable against the District, its successors, transferees, and creditors, and all others asserting rights therein, irrespective of whether those parties have notice of the lien and without the need for any physical delivery, recordation, filing, or further act.

The moneys in the Interest and Sinking Fund, to the extent necessary to pay the principal of and interest on the Bonds as the same become due and payable, will be transferred by the County, through the County Treasurer and Tax Collector, to the Paying Agent (hereinafter defined) which, in turn, will pay such moneys to DTC to pay the principal of and interest on the Bonds. DTC will thereupon make payments of principal and interest on the Bonds to the DTC Participants who will thereupon make payments of principal and interest to the Beneficial Owners (as defined herein) of the Bonds.

The amount of the annual ad valorem tax levied by the County to repay the Bonds will be determined by 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. Economic and other factors beyond the District’s control, such as a general market decline in land values, reclassification of property to a class exempt from taxation, whether by ownership or use (such as exemption for property owned by the State and local agencies and property used for qualified educational, hospital, charitable or religious purposes), or the complete or partial destruction of taxable property caused by natural or manmade disaster, such as earthquake, flood, drought or toxic contamination, 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, overlapping debt, and other matters concerning taxation, see “SECURITY AND SOURCE OF PAYMENT FOR THE BONDS.”

Description of the Bonds

The Bonds will be issued in book-entry form only, and will be initially issued and registered in the name of Cede & Co. as nominee for DTC. Beneficial Owners will not receive physical certificates representing their interest in the Bonds. See “Book-Entry Only System” and APPENDIX G—BOOK-ENTRY SYSTEM.

Interest on the Bonds accrues from their date of delivery and is payable semiannually on each Interest Payment Date. Interest on the Bonds accrues on the basis of a 360-day year comprised of twelve 30-day months. Each Bond will bear interest from the Interest Payment Date next preceding the date ofauthentication thereof unless it is authenticated as of a day during the period from the 16th day of themonth next preceding any Interest Payment Date to that Interest Payment Date, inclusive, in which event

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it will bear interest from such Interest Payment Date, or unless it is authenticated on or before July 15, 2017, in which event it will bear interest from its date of delivery.

The Bonds are issuable in denominations of $5,000 principal amount or any integral multiple thereof. The Bonds mature on the dates, in the years and amounts set forth on the inside cover page hereof. The principal of and interest on the Bonds (including the final interest payment upon maturity or earlier redemption) is payable by check or draft of the Paying Agent mailed by first-class mail to the Owner at the Owner’s address as it appears on the registration books maintained by the Paying Agent as of the close of business on the fifteenth day of the month next preceding such interest payment date (the “Record Date”), or at such other address as the Owner may have filed with the Paying Agent for that purpose; provided however, that payment of interest may be by wire transfer in immediately available funds to an account in the United States of America to any Owner of Bonds in the aggregate principal amount of $1,000,000 or more who shall furnish written wire instructions to the Paying Agent at least five (5) days before the applicable Record Date. See also “Book Entry Only System” below.

See the maturity schedule on the inside cover page hereof and “Debt Service Schedule.”

Payment

The redemption price, if any, on the Bonds will be payable upon maturity or redemption upon surrender of such Bonds at the principal office of the Paying Agent. The interest, principal and redemption price, if any, on the Bonds will be payable in lawful money of the United States of America. The Paying Agent is authorized to pay the Bonds when duly presented for payment at maturity, and to cancel all Bonds upon payment thereof. The Bonds are general obligations of the District and do not constitute obligations of the County. No part of any fund of the County is pledged or obligated to the payment of the Bonds.

Redemption

2016A Bonds.

Optional Redemption. The 2016A Bonds maturing on August 1, 2018, and August 1, 2019, are not callable for redemption prior to their stated maturity date. The 2016A Bonds maturing on and after August 1, 2029, are callable for redemption prior to their stated maturity date at the option of the District, in whole or in part on any date on or after August 1, 2026, from any source lawfully available therefor, at a redemption price equal to the principal amount of the 2016A Bonds called for redemption, together with accrued interest to the date fixed for redemption, without premium.

Mandatory Sinking Fund Redemption. The 2016A Bonds maturing on August 1, 2041, are also subject to mandatory sinking fund redemption on August 1 in the years, and in the amounts, as set forth in the following table, at a redemption price equal to one hundred percent (100%) of the principal amount thereof to be redeemed (without premium), together with interest accrued thereon to the date fixed for redemption:

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Sinking Fund Principal Redemption Date Amount to be

(August 1) August 2038 $310,000 2039 340,000 2040 750,000 2041† 810,000

†Maturity

The 2016A Bonds maturing on August 1, 2046, are also subject to mandatory sinking fund redemption on August 1 in the years, and in the amounts, as set forth in the following table, at a redemption price equal to one hundred percent (100%) of the principal amount thereof to be redeemed (without premium), together with interest accrued thereon to the date fixed for redemption:

Sinking Fund Principal Redemption Date Amount to be

(August 1) August 2042 $ 875,000 2043 930,000 2044 1,000,000 2045 1,075,000 2046† 1,150,000

†Maturity

2017 Refunding Bonds.

Optional Redemption. The 2017 Refunding Bonds maturing on August 1, 2017, and August 1, 2026, are not callable for redemption prior to their stated maturity date. The 2017 Refunding Bonds maturing on and after August 1, 2027, are callable for redemption prior to their stated maturity date at the option of the District, in whole or in part on any date on or after August 1, 2026, from any source lawfully available therefor, at a redemption price equal to the principal amount of the 2017 Refunding Bonds called for redemption, together with accrued interest to the date fixed for redemption, without premium.

Selection of Bonds for Redemption. If less than all of the Bonds are called for redemption, the particular Bonds or portions thereof to be redeemed shall be called in such order as shall be directed by the District and, in lieu of such direction, in inverse order of their maturity. Within a maturity, the Paying Agent shall select the Bonds for redemption by lot; provided, however, that the portion of any Bonds to be redeemed shall be in the principal amount of $5,000 or some integral multiple thereof and that, in selecting Bonds for redemption, the Paying Agent shall treat each Bonds as representing that number of Bonds which is obtained by dividing the principal amount of such Bonds by five thousand dollars.

Notice of Redemption. The Paying Agent is required to mail (by first class mail) notice of any redemption to: (i) the respective Owners of any Bonds designated for redemption, at least thirty (30) but not more than sixty (60) days prior to the redemption date, at their respective addresses appearing on the Bond Register, and (ii) the Securities Depositories and to one or more Information Services, at least thirty (30) but not more than sixty (60) days prior to the redemption; provided, however, that neither failure to

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receive any such notice so mailed nor any defect therein shall affect the validity of the proceedings for the redemption of such Bonds or the cessation of the accrual of interest thereon. Such notice will state the date of the notice, the redemption date, the redemption place and the redemption price and shall designate the CUSIP numbers, the Bond numbers and the maturity or maturities (in the event of redemption of all of the Bonds of such maturity or maturities in whole) of the Bonds to be redeemed, and will require that such Bonds be then surrendered for redemption at the redemption price, giving notice also that further interest on such Bonds will not accrue from and after the redemption date.

Notwithstanding the foregoing, in the case of any optional redemption of the Bonds, the notice of redemption will state that the redemption is conditioned upon receipt by the Paying Agent of sufficient moneys to redeem the Bonds on the scheduled redemption date, and that the optional redemption shall not occur if, by no later than the scheduled redemption date, sufficient moneys to redeem the Bonds have not been deposited with the Paying Agent. In the event that the Paying Agent does not receive sufficient funds by the scheduled optional redemption date to so redeem the Bonds to be optionally redeemed, the Paying Agent will send written notice to the Owners, to the Securities Depositories and to one or more of the Information Services to the effect that the redemption did not occur as anticipated, and the Bonds for which notice of optional redemption was given shall remain Outstanding for all purposes.

Conditional Notice of Redemption. Any notice of optional redemption of the Bonds may be conditional and if any condition stated in the notice of redemption shall not have been satisfied on or prior to the redemption date, (i) said notice shall be of no force and effect, (ii) the District shall not be required to redeem such Bonds; (iii) the redemption shall be cancelled and (iv) the Paying Agent shall within a reasonable time thereafter give notice to the persons and in the manner in which the conditional notice of redemption was given, that such condition or conditions were not met and that the redemption was cancelled. The actual receipt by the owner of any Bonds of notice of such cancellation shall not be a condition precedent to cancellation, and failure to receive such notice or any defect in such notice shall not affect the validity of the cancellation.

Rescission of Notice of Redemption. The District may rescind any optional redemption and notice thereof for any reason on any date on or prior to the date fixed for redemption by causing written notice of the rescission to be given to the owners of the Bonds so called for redemption. Any optional redemption and notice thereof will be rescinded if for any reason on the date fixed for redemption moneys are not available in the Interest and Sinking Fund or otherwise held in trust for such purpose in an amount sufficient to pay in full on said date the principal of, interest, and any premium due on the Bonds called for redemption. Notice of rescission of redemption will be given in the same manner in which the notice of redemption was originally given. The actual receipt by the owner of any Bonds of notice of such rescission will not be a condition precedent to rescission, and failure to receive such notice or any defect in such notice will not affect the validity of the rescission.

Partial Redemption of Bonds. In the event only a portion of any Bond is called for redemption, then upon surrender of such Bond the District will execute and the Paying Agent will authenticate and deliver to the Owner thereof, at the expense of the District, a new Bond or Bonds of the same maturity date, of authorized denominations in aggregate principal amount equal to the unredeemed portion of the Bond to be redeemed. Bonds need not be presented for mandatory sinking fund redemptions.

Effect of Redemption. Notice having been given as described above, and the moneys for the redemption (including the interest to the applicable date of redemption) having been set aside for such purpose, the Bonds to be redeemed will become due and payable on such date of redemption. If on such

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redemption date, money for the redemption of all the Bonds to be redeemed, together with interest to such redemption date, will be held by the Paying Agent so as to be available therefor on such redemption date, and if notice of redemption thereof will have been given as aforesaid, then from and after such redemption date, interest with respect to the Bonds to be redeemed will cease to accrue and become payable. All money held by or on behalf of the Paying Agent for the redemption of Bonds will be held in trust for the account of the registered owners of the Bonds so to be redeemed. Bonds (or portions thereof), which have been duly called for redemption prior to maturity, or with respect to which irrevocable instructions to call for redemption prior to maturity at the earliest redemption date have been given to the Paying Agent, and sufficient moneys are held by the Paying Agent irrevocably in trust for the payment of the redemption price of such Bonds or portions thereof, then such Bonds will no longer be deemed outstanding and will be surrendered to the Paying Agent for cancellation.

Defeasance

Discharge of Resolution. Bonds may be paid by the District in any of the following ways, provided that the District also pays or causes to be paid any other sums payable hereunder by the District:

(i) by paying or causing to be paid the principal or redemption price of and interest onBonds Outstanding, as and when the same become due and payable;

(ii) by depositing, in trust, at or before maturity, money or securities in the necessaryamount (as provided in the Resolution) to pay or redeem Bonds Outstanding; or

(iii) by delivering to the Paying Agent, for cancellation by it, Bonds Outstanding.

then and in that case, at the election of the District (evidenced by a certificate of a District Representative, filed with the Paying Agent, signifying the intention of the District to discharge all such indebtedness and the Resolution), and notwithstanding that any Bonds shall not have been surrendered for payment, the Resolution and all covenants, agreements and other obligations of the District under the Resolution shall cease, terminate, become void and be completely discharged and satisfied, except only as provided in the Resolution. In such event, upon request of the District, the Paying Agent shall cause an accounting for such period or periods as may be requested by the District to be prepared and filed with the District and shall execute and deliver to the District all such instruments as may be necessary to evidence such discharge and satisfaction, and the Paying Agent shall pay over, transfer, assign or deliver to the District all moneys or securities or other property held by it pursuant to the Resolution which are not required for the payment or redemption of Bonds not theretofore surrendered for such payment or redemption.

Discharge of Liability on Bonds. Upon the deposit, in trust, at or before maturity, of money or securities in the necessary amount (as provided in the Resolution to pay or redeem any Outstanding Bond (whether upon or prior to its maturity or the redemption date of such Bond), provided that, if such Bond is to be redeemed prior to maturity, notice of such redemption shall have been given as provided in the Resolution or provision satisfactory to the Paying Agent shall have been made for the giving of such notice, then all liability of the District in respect of such Bond shall cease and be completely discharged, except only that thereafter the Owner thereof shall be entitled only to payment of the principal of and interest on such Bond by the District, and the District shall remain liable for such payment, but only out of such money or securities deposited in trust with an escrow holder as aforesaid for such payment, provided further, however, that the provisions of the Resolution shall apply in all events.

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

Deposit of Money or Securities with Paying Agent. Whenever in the Resolution it is provided or permitted that there be deposited with or held in trust with an escrow holder money or securities in the necessary amount to pay or redeem any Bonds, the money or securities so to be deposited or held may include money or securities held by the Paying Agent in the funds and accounts established pursuant to the Resolution and shall be:

(i) lawful money of the United States of America in an amount equal to the principalamount of such Bonds and all unpaid interest thereon to maturity, except that, in the case of Bonds which are to be redeemed prior to maturity and in respect of which notice of such redemption shall have been given as provided in the Resolution or provision satisfactory to the Paying Agent will have been made for the giving of such notice, the amount to be deposited or held will be the principal amount or redemption price of such Bonds and all unpaid interest thereon to the redemption date; or

(ii) Federal Securities (not callable by the issuer thereof prior to maturity) the principal ofand interest on which when due, in the opinion of a certified public accountant delivered to the District, will provide money sufficient to pay the principal or redemption price of and all unpaid interest to maturity, or to the redemption date, as the case may be, on the Bonds to be paid or redeemed, as such principal or redemption price and interest become due, provided that, in the case of Bonds which are to be redeemed prior to the maturity thereof, notice of such redemption will have been given provided in the Resolution or provision satisfactory to the Paying Agent shall have been made for the giving of such notice;

provided, in each case, that the Paying Agent shall have been irrevocably instructed (by the terms of the Resolution or by request of the District) to apply such money to the payment of such principal or redemption price and interest with respect to such Bonds.

Payment of Bonds After Discharge of Resolution. Notwithstanding any provisions of the Resolution, any moneys held by an escrow holder in trust for the payment of the principal or redemption price of, or interest on, any Bonds and remaining unclaimed for one year after the principal of all of the Bonds has become due and payable (whether at maturity or upon call for redemption or by acceleration as provided in the Resolution), if such moneys were so held at such date, or one year after the date of deposit of such moneys if deposited after said date when all of the Bonds became due and payable, shall, upon request of the District, be repaid to the District free from the trusts created by the Resolution, and all liability of the escrow holder with respect to such moneys shall thereupon cease; provided, however, that before the repayment of such moneys to the District as aforesaid, the Paying Agent may (at the cost of the District) first mail to the Owners of all Bonds which have not been paid at the addresses shown on the registration books maintained by the Paying Agent a notice in such form as may be deemed appropriate by the Paying Agent, with respect to the Bonds so payable and not presented and with respect to the provisions relating to the repayment to the District of the moneys held for the payment thereof.

Registration, Transfer and Exchange of Bonds

So long as any of the Bonds remain outstanding, the District will cause the Paying Agent to maintain and keep at its principal office all books and records necessary for the registration, exchange and

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transfer of the Bonds as provided in the Resolution (the “Bond Register”). Subject to the provisions of the Resolution, the person in whose name a Bond is registered on the Bond Register will be regarded as the absolute owner of that Bond for all purposes of the Resolution. Payment of or on account of the principal of any Bond will be made only to or upon the order of that person; neither the District, nor the Paying Agent will be affected by any notice to the contrary, but the registration may be changed as provided in the Resolution. All such payments will be valid and effectual to satisfy and discharge the District’s liability upon the Bonds, including interest, to the extent of the amount or amounts so paid.

In the event that the book-entry system as described herein is no longer used with respect to the Bonds, the following provisions will govern the registration, transfer, and exchange of the Bonds.

Any Bond may be exchanged for Bonds of like tenor, maturity, and outstanding principal amount or maturity value (the “Transfer Amount”) upon presentation and surrender at the principal office of the Paying Agent, together with a request for exchange signed by the owner or by a person legally empowered to do so in a form satisfactory to the Paying Agent. A Bond may be transferred on the Bond Register only upon presentation and surrender of the Bond at the principal office of the Paying Agent together with an assignment executed by the owner or by a person legally empowered to do so in a form satisfactory to the Paying Agent. Upon exchange or transfer, the Paying Agent will complete, authenticate and deliver a new Bond or Bonds of like tenor and of any authorized denomination or denominations requested by the owner equal to the Transfer Amount of the Bond surrendered and bearing or accruing interest at the same rate and maturing on the same date.

In all cases of exchanged or transferred Bonds, the District will sign and the Paying Agent will authenticate and deliver Bonds in accordance with the provisions of the Resolutions. All fees and costs of transfer will be paid by the requesting party. Those charges may be required to be paid before the procedure is begun for the exchange or transfer. All Bonds issued upon any exchange or transfer will be valid obligations of the District, evidencing the same debt, and entitled to the same security and benefit under the Resolutions as the Bonds surrendered upon that exchange or transfer.

Any Bond surrendered to the Paying Agent for payment, retirement, exchange, replacement or transfer will be canceled by the Paying Agent. The District may at any time deliver to the Paying Agent for cancellation any previously authenticated and delivered Bonds that the District may have acquired in any manner whatsoever, and those Bonds will be promptly canceled by the Paying Agent. Written reports of the surrender and cancellation of Bonds will be made to the District by the Paying Agent. The canceled Bonds will be retained for a period of time, then returned to the District or destroyed by the Paying Agent as directed by the District.

Neither the District nor the Paying Agent will be required (a) to issue or transfer any Bonds during a period beginning with the opening of business on the 16th business day next preceding either any interest payment date or any date of selection of Bonds to be redeemed and ending with the close of business on the interest payment date or any day on which the applicable notice of redemption is given or (b) to transfer any Bonds which have been selected or called for redemption in whole or in part.

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Estimated Sources and Uses of Funds

The estimated sources and uses of funds in connection with the 2016A Bonds are as follows:

Sources of Funds: Principal Amount of 2016A Bonds $10,000,000.00 Plus: Net Original Issue Premium 194,639.80

Total Sources of Funds $10,194,639.80

Uses of Funds: Deposit to Building Fund $9,870,000.00 Deposit to Interest and Sinking Fund 155,639.80 Costs of Issuance (1) 169,000.00

Total Uses of Funds $10,194,639.80

(1) Includes the Underwriter’s discount, the fees of the municipal advisor, bond counsel, disclosure counsel, the rating agencyand other third party providers. Any excess in the Costs of Issuance Fund will be transferred to the District’s BuildingFund.

The estimated sources and uses of funds in connection with the 2017 Refunding Bonds are as follows:

Sources of Funds: Principal Amount of 2017 Refunding Bonds $5,080,000.00 Plus: Net Original Issue Premium 46,678.80

Total Sources of Funds $5,126,678.80

Uses of Funds: Deposit to Escrow Fund $5,017,375.00 Costs of Issuance (1) 109,303.80

Total Uses of Funds $5,126,678.80

(1) Includes the Underwriter’s discount, the fees of the municipal advisor, bond counsel, disclosure counsel, the rating agencyand other third party providers. Any excess in the Costs of Issuance Fund will be transferred to the District’s Interest andSinking Fund.

Financing Plan

2016A Bonds. A portion of the proceeds of sale of the 2016A Bonds, exclusive of any premium and accrued interest received, shall be deposited in the County treasury to the credit of the Building Fund of the District. Any premium and accrued interest shall be deposited upon receipt in the Interest and Sinking Fund of the District within the County Treasury. All funds held in the Interest and Sinking Fund of the District shall be invested at the sole discretion of the County Treasurer. All funds held in the Building Fund of the District by the County Treasurer hereunder shall be invested at the County Treasurer’s discretion, unless otherwise directed in writing by the District, pursuant to law and the investment policy of the County. In addition, at the written direction of the District, all or any portion of the Building Fund of the District may be invested in the Local Agency Investment Fund in the treasury of the State of California. The County Treasurer’s Office neither monitors investments for arbitrage compliance, nor does it perform arbitrage calculations. The District shall maintain or cause to be

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maintained detailed records with respect to the applicable proceeds. See “COUNTY POOLED INVESTMENT FUND.”

A portion of the proceeds of the 2016A Bonds will be retained by the Paying Agent in a costs of issuance account and used to pay costs associated with the issuance of the 2016A Bonds.

2017 Refunding Bonds. A portion of the proceeds of the Bonds will be held in cash in a separate fund for the 1998B Bonds (the “Escrow Fund”), established under an escrow agreement (the “Escrow Agreement”), by and between the District and U.S. Bank National Association as escrow agent (the “Escrow Bank”). See “—Sources and Uses of Funds.” The cash in the Escrow Fund will be applied to redeem all 1998B Bonds in full on August 1, 2017, at a redemption price equal to 100% of the par amount thereof, together with accrued interest to such date. The sufficiency of the moneys for such purposes will be verified by Causey Demgen & Moore, P.C. (the “Verification Agent”). See “VERIFICATION OF MATHEMATICAL COMPUTATIONS.” Assuming the accuracy of the Verification Agent’s computations, as a result of the deposit and application of funds as provided in the Escrow Agreement, the obligations of the District with respect to the 1998B Bonds will be defeased and discharged. The cash in the Escrow Fund will be held in trust solely for the 1998B Bonds and will not be available to pay principal of, or premium or interest on, the Bonds or any bonds other than the 1998B Bonds.

The 1998B Bonds are shown in the following table:

Maturity Amount Interest Date Refunded Rate Call Date Call Price CUSIP†

8/1/29 $2,585,000 5.000% 8/1/17 100.000 519547 CH4 8/1/32 2,310,000 5.000 8/1/17 100.000 519547 CL5

A portion of the proceeds of the 2017 Refunding Bonds will be retained by the Paying Agent in a costs of issuance account and used to pay costs associated with the issuance of the 2017 Refunding Bonds.

[The remainder of this page is intentionally left blank]

† Copyright 2017, American Bankers Association. CUSIP® is a registered trademark of the American Bankers Association. CUSIP data herein is provided by CUSIP Global Services, operated by Standard & Poor’s. This data is not intended to create a database and does not serve in any way as a substitute for CUSIP Global Services. CUSIP numbers have been assigned by an independent company not affiliated with the District and are included solely for the convenience of the registered owners of the Bonds.

CDIAC NUMBER 2002-1783

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Debt Service Schedules

The following table shows the debt service schedule with respect to the 2016A Bonds (assuming no optional redemptions).

Bond Year Ending

August 1 Principal(1) Interest(2) Total 2017 — $152,034.55 $ 152,034.55 2018 $ 425,000 421,018.76 846,018.76 2019 720,000 399,768.76 1,119,768.76 2020 — 363,768.76 363,768.76 2021 — 363,768.76 363,768.76 2022 — 363,768.76 363,768.76 2023 — 363,768.76 363,768.76 2024 — 363,768.76 363,768.76 2025 — 363,768.76 363,768.76 2026 — 363,768.76 363,768.76 2027 — 363,768.76 363,768.76 2028 — 363,768.76 363,768.76 2029 100,000 363,768.76 463,768.76 2030 100,000 358,768.76 458,768.76 2031 125,000 353,768.76 478,768.76 2032 145,000 347,518.76 492,518.76 2033 180,000 340,268.76 520,268.76 2034 205,000 331,268.76 536,268.76 2035 225,000 324,093.76 549,093.76 2036 255,000 312,843.76 567,843.76 2037 280,000 303,600.00 583,600.00 2038 310,000 289,600.00 599,600.00 2039 340,000 277,200.00 617,200.00 2040 750,000 263,600.00 1,013,600.00 2041 810,000 233,600.00 1,043,600.00 2042 875,000 201,200.00 1,076,200.00 2043 930,000 166,200.00 1,096,200.00 2044 1,000,000 129,000.00 1,129,000.00 2045 1,075,000 89,000.00 1,164,000.00 2046 1,150,000 46,000.00 1,196,000.00

TOTAL $10,000,000 $8,978,040.99 $18,978,040.99

(1) Includes mandatory sinking fund installments. (2) Interest on the Bonds is payable semiannually on each February 1 and August 1, commencing August 1, 2017.

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The following table shows the debt service schedule with respect to the 2017 Refunding Bonds (assuming no optional redemptions).

Bond Year Ending

August 1 Principal Interest(1) Total 2017 $ 60,000 $ 61,659.72 $ 121,659.72 2018 — 169,550.00 169,550.00 2019 — 169,550.00 169,550.00 2020 — 169,550.00 169,550.00 2021 — 169,550.00 169,550.00 2022 — 169,550.00 169,550.00 2023 — 169,550.00 169,550.00 2024 — 169,550.00 169,550.00 2025 — 169,550.00 169,550.00 2026 645,000 169,550.00 814,550.00 2027 670,000 143,750.00 813,750.00 2028 695,000 116,950.00 811,950.00 2029 715,000 96,100.00 811,100.00 2030 740,000 74,650.00 814,650.00 2031 765,000 51,525.00 816,525.00 2032 790,000 26,662.50 816,662.50

TOTAL $5,080,000 $2,097,247.22 $7,177,247.22

(1) Interest on the Bonds is payable semiannually on each February 1 and August 1, commencing August 1, 2017.

PAYING AGENT

The Los Angeles County Treasurer and Tax Collector (the “County Treasurer and Tax Collector”), Los Angeles, California, will act as the initial paying agent for the Bonds (the “Paying Agent”). U.S. Bank National Association, Los Angeles, California, will act as agent to the Treasurer. As long as DTC is the registered owner of the Bonds and DTC’s book-entry method is used for the Bonds, the Paying Agent will send any notice of prepayment or other notices to owners only to DTC. Any failure of DTC to advise any DTC Participant, or of any DTC Participant to notify any Beneficial Owner, of any such notice and its content or effect will not affect the validity or sufficiency of the proceedings relating to the prepayment of the Bonds called for prepayment or of any other action premised on such notice.

The Paying Agent, the District, the County and the Underwriter have no responsibility or liability for any aspects of the records relating to or payments made on account of beneficial ownership, or for maintaining, supervising or reviewing any records relating to beneficial ownership, of interests for the Bonds.

BOOK-ENTRY ONLY SYSTEM

The Depository Trust Company, New York, New York, will act as securities depository for the Bonds. The Bonds will be issued as fully-registered securities registered in the name of Cede & Co. (DTC’s partnership nominee) or such other name as may be requested by an authorized representative of DTC. See APPENDIX G—BOOK-ENTRY SYSTEM.

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THE DISTRICT

General Information

The District provides K-8 educational services to the residents of the Lawndale community in the South Bay region of the County. The District serves the City of Lawndale, as well as portions of the City of Hawthorne and unincorporated Los Angeles County. The District consists of eight school sites comprised of six elementary schools and two middle schools.

Board of Education and Administration

The District is governed by a five-member District Board, each member of which is elected to a four-year term. Elections for positions to the District Board are held every two years, alternating between two and three available positions.

District Board Member Office Current Term Expires

(December) Cathy Burris President 2017 Shirley Bennett Clerk 2019 Shirley Rudolph Board Member 2019 Bonnie J. Coronado Board Member 2017 Ann M. Phillips Board Member 2017

The day to day operations of the District are managed by the Board-appointed Superintendent, Ellen Dougherty, Ed.D., who has served in this capacity since July of 2009.

SECURITY AND SOURCE OF PAYMENT FOR THE BONDS

The information in this section describes ad valorem property taxation, assessed valuation, and other measures of the tax base of the District. The Bonds are payable solely from ad valorem taxes levied and collected by the County on taxable property in the District. The District’s General Fund is not a source for the repayment of the Bonds.

General

In order to provide sufficient funds for repayment of principal and interest when due on the Bonds, the Board of Supervisors of the County is empowered and is obligated to levy ad valorem taxes upon all property subject to taxation by the District, without limitation as to rate or amount (except as to certain personal property which is taxable at limited rates). Such taxes are in addition to other taxes levied upon property within the District, including the countywide tax of 1% of taxable value. When collected, the tax revenues will be deposited by the County in the District’s Interest and Sinking Fund, which is required to be maintained by the County and to be used solely for the payment of bonds of the District.

Property Taxation System

The collection of property taxes is significant to the District and the Owners of the Bonds in two respects. First, the Board of Supervisors of the County will levy and collect ad valorem taxes on all taxable

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parcels within the District, which are pledged specifically to the repayment of the Bonds. Second, the general ad valorem property tax levy levied in accordance with Article XIIIA of the California Constitution and its implementing legislation is taken into account in connection with the State’s Local Control Funding Formula (“LCFF”) which determines the amount of funding received by the District from the State to operate the District’s educational programs. The LCFF replaces revenue limit and most categorical program funding previously used to determine the amount of funding received by the District from the State with the LCFF which consists primarily of base, supplemental and concentration funding formulas that focus resources based on a school district’s student demographic. See APPENDIX B--“DISTRICT AND GENERAL SCHOOL DISTRICT FINANCIAL INFORMATION – Allocation of State Funding to School Districts; Restructuring of the K-12 Funding System” and “ –2016-17 State Budget Provisions Specific to K thru 12 Education” below. As described below, the general ad valorem property tax levy and the additional ad valorem property tax levy pledged to repay the Bonds will be collected on the annual tax bills distributed by the County to the owners of parcels within the boundaries of the District.

The District received approximately 8.34% of its total general fund operating revenues from local

property taxes in fiscal year 2015-16, excluding parcel tax revenues. Local property taxation is the responsibility of various officers of the counties. For each school

district located in a county, the county assessor computes the value of locally assessed taxable property. Based on the assessed value of property and the scheduled debt service on outstanding bonds in each year, the county auditor-controller computes the rate of tax necessary to pay such debt service, and presents the tax rolls (including rates of tax for all taxing jurisdictions in the county) to the county board of supervisors for approval. The County Treasurer and Tax Collector prepares and mails tax bills to taxpayers and collects the taxes according to the approved tax rolls. In addition, the Treasurer and Tax Collector, as ex officio treasurer of each school district located in the county, holds and invests school district funds, including taxes collected for payment of school bonds, and is charged with payment of principal and interest on such bonds when due. Taxes on property in a school district whose boundaries extend into more than one county are administered separately by the county in which the property is located. The State Board of Equalization also assesses certain special classes of property, as described later in this section.

Method of Property Taxation

Under Proposition 13, an amendment to the California Constitution adopted in 1978 that added Article XIIIA of the California Constitution, the county assessor’s valuation of real property is established as shown on the fiscal year 1975-76 tax bill, or, thereafter, as the appraised value of real property when purchased, newly constructed, or a change in ownership has occurred. Assessed value of property may be increased annually to reflect inflation at a rate not to exceed 2% per year, or reduced to reflect a reduction in the consumer price index or comparable data for the area under taxing jurisdiction or in the event of declining property value caused by substantial damage, destruction, market forces or other factors. As a result of these rules, real property that has been owned by the same taxpayer for many years can have an assessed value that is much lower than that of similar properties more recently sold, and may be lower than its own market value. Likewise, changes in ownership of property and reassessment of such property to market value commonly will lead to increases in aggregate assessed value even when the rate of inflation or consumer price index would not permit the full 2% increase on any property that has not changed ownership. See APPENDIX B-DISTRICT AND GENERAL SCHOOL DISTRICT FINANCIAL INFORMATION.

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Taxes are levied by the County for each fiscal year on taxable real and personal property which is

situated in the County as of the preceding January 1. Real property which changes ownership or is newly constructed is revalued at the time the change in ownership occurs or the new construction is completed. The current year property tax rate will be applied to the reassessment, and the taxes will then be adjusted by a proration factor to reflect the portion of the remaining tax year for which taxes are due.

Local agencies and schools will share the growth of “base” sources from the tax rate area. Each

year’s growth allocation becomes part of each local agency’s allocation in the following year. The availability of revenue from growth in the tax bases in such tax rate areas may be affected by the existence of redevelopment agencies (including their successor agencies) which, under certain circumstances, may be entitled to sources resulting from the increase in certain property values. State law exempts $7,000 of the assessed valuation of an owner-occupied principal residence. This exemption does not result in any loss of revenue to local agencies since an amount equivalent to the taxes that would have been payable on such exempt values is supplemented by the State.

For assessment and tax 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 property and property (real or personal) for which there is a lien on real property sufficient, in the opinion of the county assessor, to secure payment of the taxes. All other property is “unsecured,” and is assessed on the “unsecured roll.” Secured property assessed by the State Board of Equalization is commonly identified for taxation purposes as “utility” property.

Property taxes on the secured roll are due in two installments, on November 1 and February 1 of

each fiscal year, and if unpaid become delinquent on December 10 and April 10, respectively. A penalty of 10% attaches immediately to any delinquent payment. Property on the secured roll, with respect to which taxes are delinquent, becomes tax defaulted on or about June 30 of the fiscal year. Such property may thereafter be redeemed by payment of delinquent taxes and the delinquency penalty, plus costs and redemption penalty of one and one-half percent per month to the time of redemption. If taxes are unpaid for a period of five years or more, the property is subject to sale by the County Treasurer.

Property taxes on the unsecured roll are due as of the January 1 lien date and become delinquent,

if unpaid, on August 31. A 10% penalty attaches to delinquent unsecured taxes. If unsecured taxes are unpaid at 5 p.m. on October 31, an additional penalty of one and one-half percent per month attaches to such taxes on the first day of each month until paid. A county has four ways of collecting delinquent unsecured personal property taxes: (1) bringing a civil action against the taxpayer; (2) filing a certificate in the office of the County Clerk specifying certain facts in order to obtain a lien on certain property of the taxpayer; (3) filing a certificate of delinquency for record in the County Clerk and County Recorder’s office in order to obtain a lien on certain property of the taxpayer; and (4) seizing and selling personal property, improvements, or possessory interests belonging or assessed to the delinquent taxpayer.

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Assessed Valuations

The assessed valuation of property in the District is established by the County Assessor, except for public utility property which is assessed by the State Board of Equalization. Assessed valuations are reported at 100% of the “full value” of the property, as defined in Article XIIIA of the California Constitution.

Certain classes of property, such as churches, colleges, not-for-profit hospitals and charitable institutions, are exempt from property taxation and do not appear on the tax rolls. No reimbursement is made by the State for such exemptions. Both the general ad valorem property tax levy and the additional ad valorem levy for the Bonds are based upon the assessed valuation of the parcels of taxable property in the District. Property taxes allocated to the District are collected by the County at the same time and on the same tax rolls as are county, city and special district taxes. The assessed valuation of each parcel of property is the same for both District and county taxing purposes. The valuation of secured property by the County Assessor is established as of January 1, and is subsequently equalized in September of each year.

The greater the assessed value of taxable property in the District, the lower the tax rate necessary to generate taxes sufficient to pay scheduled debt service on the Bonds. The table below shows the assessed valuation of taxable property in the District for the five most recent fiscal years.

HISTORIC ASSESSED VALUATIONS

Fiscal Years 2012-13 to 2016-17

Fiscal Local Total Year Secured Utility Unsecured Valuation

2012-13 2,977,369,340 - 59,003,071 3,036,372,411 2013-14 3,050,216,335 - 62,888,365 3,113,104,700 2014-15 3,176,164,392 - 65,104,530 3,241,268,922 2015-16 3,354,887,309 - 64,600,338 3,419,487,647 2016-17 3,496,137,806 - 65,567,379 3,561,705,185

Source: California Municipal Statistics, Inc.

As indicated above, assessments may be adjusted during the course of the year when real property

changes ownership or new construction is completed. Assessments may also be appealed by taxpayers seeking a reduction as a result of economic and other factors beyond the District’s control, such as a general market decline in land values, reclassification of property to a class exempt from taxation, whether by ownership or use (such as exemptions for property owned by State and local agencies and property used for qualified educational, hospital, charitable or religious purposes), or the complete or partial destruction of taxable property caused by natural or manmade disaster, such as earthquake, flood, fire, toxic dumping, etc. When necessitated by changes in assessed value in the course of a year, taxes are pro-rated for each portion of the tax year.

Appeals of Assessed Valuation; Blanket Reductions of Assessed Values. There are two basic types of

property tax assessment appeals provided for under State law. The first type of appeal, commonly referred to as a base year assessment appeal, involves a dispute on the valuation assigned by the assessor immediately subsequent to an instance of a change in ownership or completion of new construction. If the base year value assigned by the assessor is reduced, the valuation of the property cannot increase in

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subsequent years more than 2% annually unless and until another change in ownership and/or additional new construction activity occurs.

The second type of appeal, commonly referred to as a Proposition 8 appeal (which Proposition 8

was approved by the voters in 1978), can result if factors occur causing a decline in the market value of the property to a level below the property’s then current taxable value (escalated base year value). Pursuant to State law, a property owner may apply for a Proposition 8 reduction of the property tax assessment for such owner’s property by filing a written application, in the form prescribed by the State Board of Equalization, with the appropriate county board of equalization or assessment appeals board. A property owner desiring a Proposition 8 reduction of the assessed value of such owner’s property in any one year must submit an application to the county assessment appeals board (the “Appeals Board”). Following a review of the application by the county assessor’s office, the county assessor may offer to the property owner the opportunity to stipulate to a reduced assessment, or may confirm the assessment. If no stipulation is agreed to, and the applicant elects to pursue the appeal, the matter is brought before the Appeals Board (or, in some cases, a hearing examiner) for a hearing and decision. The Appeals Board generally is required to determine the outcome of appeals within two years of each appeal’s filing date. Any reduction in the assessment ultimately granted applies only to the year for which application is made and during which the written application is filed. The assessed value increases to its pre-reduction level (escalated to the inflation rate of no more than 2%) following the year for which the reduction application is filed. However, the county assessor has the power to grant a reduction not only for the year for which application was originally made, but also for the then current year and any intervening years as well. In practice, such a reduced assessment may and often does remain in effect beyond the year in which it is granted.

In addition, Article XIIIA of the State Constitution provides that the full cash value base of real

property used in determining taxable value may be adjusted from year to year to reflect the inflationary rate, not to exceed a 2% increase for any given year, or may be reduced to reflect a reduction in the consumer price index or comparable local data. This measure is computed on a calendar year basis.

Risk of Decline in Property Values; Fire; Earthquake Risk. Property values could be reduced by

factors beyond the District’s control, including fire, earthquake and a depressed real estate market due to general economic conditions in the County, the region and the State.

Other possible causes for a reduction in assessed values include the complete or partial

destruction of taxable property caused by other natural or manmade disasters, such as flood, fire, drought, toxic dumping, acts of terrorism, etc., or reclassification of property to a class exempt from taxation, whether by ownership or use (such as exemptions for property owned by State and local agencies and property used for qualified educational, hospital, charitable or religious purposes). Lower assessed values could necessitate a corresponding increase in the annual tax rate to be levied to pay the principal of and interest on the Bonds. Issuance of additional bonds in the future might also cause the tax rate to increase.

No assurance can be given that property tax appeals and/or blanket reductions of assessed

property values will not significantly reduce the assessed valuation of property within the District in the future.

State-Assessed Property. Under the Constitution, the State Board of Equalization assesses property of State-regulated transportation and communications utilities, including railways, telephone and telegraph companies, and companies transmitting or selling gas or electricity. The Board of Equalization

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also is required to assess pipelines, flumes, canals and aqueducts lying within two or more counties. The value of property assessed by the Board of Equalization is allocated by a formula to local jurisdictions in the county, including school districts, and taxed by the local county tax officials in the same manner as for locally assessed property. Taxes on privately owned railway cars, however, are levied and collected directly by the Board of Equalization. Property used in the generation of electricity by a company that does not also transmit or sell that electricity is taxed locally instead of by the Board of Equalization. Thus, the reorganization of regulated utilities and the transfer of electricity-generating property to non-utility companies, as often occurred under electric power deregulation in California, affects how those assets are assessed, and which local agencies benefit from the property taxes derived. In general, the transfer of State-assessed property located in the District to non-utility companies will increase the assessed value of property in the District, since the property’s value will no longer be divided among all taxing jurisdictions in the County. The transfer of property located and taxed in the District to a State-assessed utility will have the opposite effect, generally reducing the assessed value in the District as the value is shared among the other jurisdictions in the County. The District is unable to predict future transfers of State-assessed property in the District and the County, the impact of such transfers on its utility property tax revenues, or whether future legislation or litigation may affect ownership of utility assets, the State’s methods of assessing utility property, or the method by which tax revenues of utility property is allocated to local taxing agencies, including the District.

The following table shows the 2016-17 assessed valuation of each jurisdiction within the boundaries of the District:

ASSESSED VALUATION BY JURISDICTION(1) Fiscal Year 2016-17

Jurisdiction

Assessed Value

in District % of

District

Assessed Value

of Jurisdiction

% of Jurisdiction In District

City of Hawthorne 706,773,307 19.84% 7,276,798,609 9.71% City of Lawndale 2,121,547,502 59.57 2,147,185,813 98.81 Unincorporated Los Angeles County 733,384,376 20.59 98,268,176,262 0.75 Total District 3,561,705,185 100.00

Los Angeles County 3,561,705,185 100.00 1,344,647,265,846 0.26

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

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The following table gives a distribution of taxable real property located in the District by principal purpose for which the land is used, and the assessed valuation and number of parcels for each use.

ASSESSED VALUATION AND PARCELS BY LAND USE

Fiscal Year 2016-17

2016-17 Assessed

Valuation(1) % of

Total No. of Parcels

% of Total

Non Residential: Commercial/Office Building 540,104,949 15.45% 515 5.59% Vacant Commercial 7,883,549 .23 33 .36 Industrial 112,098,724 3.21 112 1.22 Vacant Industrial 1,396,358 .04 14 .14 Recreational 373,415 .01 2 .02 Government/Social/Institutional 4,521,317 .13 41 .45 Miscellaneous/Communications 20,476,464 .59 11 .12 Subtotal Non-Residential 686,854,776 19.65 728 7.91

Residential: Single Family Residence 1,422,944,893 40.70 5,021 54.54 Condominium/Townhouse 246,275,309 7.04 952 10.34 Mobile Home Park 4,037,207 .12 7 .08 2-4 Residential Units 823,743,545 23.56 2,202 23.92 5+ Residential Units/Apartments 306,536,790 8.77 219 2.38 Vacant Residential 5,716,794 .16 77 .84 Subtotal Residential 2,809,254,538 80.35 8,478 92.09

Total 3,496,109,314 100.00 9,206 100.00

Source: California Municipal Statistics, Inc.

(1) Total Secured Assessed Valuation, excluding tax-exempt property.

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The following table shows the assessed valuations of single-family homes for the District.

ASSESSED VALUATION OF SINGLE FAMILY HOMES Fiscal Year 2016-17

No. of Parcels

2016-17 Assessed Valuation

Average Assessed Valuation

Median Assessed Valuation

Single Family Residential 5,021 1,422,944,893 283,399 273,551


No. of Parcels(1)

% of Total

Cumulative % of Total

Total Valuation

% of Total

Cumulative % of Total

$0 - $24,999 12 .239% .239% 160,554 .011% .011% $25,000 - $49,999 93 1.852 2.091 4,078,654 .287 .298 $50,000 - $74,999 433 8.624 10.715 26,782,187 1.882 2.180 $75,000 - $99,999 183 3.645 14.360 15,794,511 1.110 3.290

$100,000 - $124,999 128 2.549 16.909 14,327,089 1.007 4.297 $125,000 - $149,999 172 3.426 20.335 23,550,312 1.655 5.952 $150,000 - $174,999 179 3.565 23.900 29,214,868 2.053 8.005 $175,000 - $199,999 279 5.557 29.456 52,522,419 3.691 11.696 $200,000 - $224,999 312 6.214 35.670 66,443,804 4.669 16.366 $225,000 - $249,999 367 7.309 42.979 87,159,022 6.125 22.491 $250,000 - $274,999 368 7.329 50.309 96,310,888 6.768 29.259 $275,000 - $299,999 287 5.716 56.025 82,178,862 5.775 35.035 $300,000 - $324,999 286 5.696 61.721 89,458,033 6.287 41.321 $325,000 - $349,999 232 4.621 66.341 78,151,456 5.492 46.814 $350,000 - $374,999 264 5.258 71.599 95,705,268 6.726 53.540 $375,000 - $399,999 233 4.641 76.240 90,019,366 6.326 59.866 $400,000 - $424,999 227 4.521 80.761 93,640,413 6.581 66.447 $425,000 - $449,999 242 4.820 85.581 105,705,654 7.429 73.875 $450,000 - $474,999 183 3.645 89.225 84,458,100 5.935 79.811 $475,000 - $499,999 164 3.266 92.492 79,801,067 5.608 85.419 $500,000 and greater 377 7.508 100.000 207,482,366 14.581 100.000

Total 5,021 100.000 1,422,944,893 100.000

Source: California Municipal Statistics, Inc. (1) Improved single family residential parcels. Excludes condominiums and parcels with multiple family units.

Tax Rates

The State Constitution permits the levy of an ad valorem tax on taxable property not to exceed 1%

of the full cash value of the property, and State law requires the full 1% tax to be levied. The levy of special ad valorem property taxes in excess of the 1% levy is permitted as necessary to provide for debt service payments on school bonds and other voter-approved indebtedness.

The rate of tax necessary to pay fixed debt service on the Bonds in a given year depends on the

assessed value of taxable property in that year. (The rate of tax imposed on unsecured property for repayment of the Bonds is the prior year’s secured property tax rate.) Economic and other factors beyond the District’s control, such as a general market decline in land values, reclassification of property to a class exempt from taxation, whether by ownership or use (such as exemptions for property owned by State and local agencies and property used for qualified educational, hospital, charitable or religious purposes), or the complete or partial destruction of taxable property caused by natural or manmade disaster, such as earthquake, flood, fire, toxic dumping, etc., could cause a reduction in the assessed value of taxable property within the District and necessitate a corresponding increase in the annual tax rate to be levied to

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pay the principal of and interest on the Bonds. Issuance of additional authorized bonds in the future might also cause the tax rate to increase.

The table below summarizes the total ad valorem tax rates levied by all taxing entities in the

principal Tax Rate Area (“TRA”) within the District for the past five fiscal years. TRA 12711 comprises approximately 32% of the total assessed value of property in the District.

TYPICAL AD VALOREM TAX RATES

Total Tax Rates (TRA 12711 – 2016-17 Assessed Valuation: $1,134,593,832)

2012-13 2013-14 2014-15 2015-16 2016-17(1) General Tax Rate 1.000000% 1.000000% 1.000000% 1.000000% 1.000000% Lawndale School District .049187 .046511 .043337 .042070 .040645 Centinela Valley High School District .059061 .043693 .083654 .072406 .082963 El Camino Community College District .018486 .017498 .017422 .017447 .022942 Metropolitan Water District .003500 .003500 .003500 .003500 .003500

Total Tax Rate 1.130234 1.111202 1.147913 1.135423 1.150050

Source: California Municipal Statistics, Inc. (1) Last available data. Tax Levies and Delinquencies

Beginning in 1978-79, Article XIIIA and its implementing legislation shifted the function of

property taxation primarily to the counties, except for levies to support prior-voted debt, and prescribed how levies on county-wide property values are to be shared with local taxing entities within each county.

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The following tables reflects the historical secured tax levy and year-end delinquencies for general obligation bonds of the District for the past five fiscal years.

SECURED TAX CHARGE AND DELINQUENCY


General Fund Apportionment

Fiscal Year

Secured Tax Charge (1)

Amount Delinquent June 30

% Delinquent June 30

2011-12 1,886,654.50 39,450.41 2.09% 2012-13 1,910,615.64 34,413.85 1.80 2013-14 1,964,497.31 29,032.27 1.48 2014-15 2,052,109.15 29,634.45 1.44 2015-16 2,171,601.06 30,889.33 1.42

Debt Service Levy

Fiscal Year

Secured Tax Charge (2)

Amount Delinquent June 30

% Delinquent June 30

2011-12 1,270,451.51 23,888.28 1.88% 2012-13 1,446,819.87 22,652.38 1.57 2013-14 1,406,405.33 21,617.73 1.54 2014-15 1,367,846.78 17,858.79 1.31 2015-16 1,416,363.94 16,127.56 1.14

Source: California Municipal Statistics, Inc. (1) 1% General Fund apportionment. Excludes redevelopment agency impounds. (2) Debt Service Levy

No Teeter Plan

The County Board elected to discontinue the Alternative Method of Distribution of Tax Levies and Collections and of Tax Sales Proceeds (commonly referred to as the “Teeter Plan”) on July 1 2009. Under the terms of the Teeter Plan, the County had remitted to local agencies the amount of uncollected taxes in exchange for retaining any subsequent delinquent payments, penalties and interest that would have been due to the local agency. As the Teeter Plan has been discontinued, the District’s property tax revenues now reflect both reduced property tax revenue from uncollected taxes and increased revenue from the subsequent receipt of delinquent taxes, interest and penalty payments.

The District participates in the California Statewide Delinquent Tax Finance Authority

(“CSDTFA”). CSDTFA is a joint exercise of powers agency formed for the purpose of purchasing delinquent ad valorem property taxes of its members in accordance with section 6516.6 of the California Government Code. The District anticipates that CSDTFA will, from time to time, purchase delinquent ad valorem property tax receivables from the District. Any penalty charges collected with respect to such delinquencies will be retained by CSDTFA. CSDTFA does not ensure that the District will receive the timely payment of ad valorem property taxes levied to secure the Bonds.

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Largest Property Owners Concentration of Property Ownership. Based on fiscal year 2016-17 locally assessed taxable

valuations, the top twenty taxable property owners in the District represent approximately 7.42% of the total fiscal year 2016-17 taxable value.

The following table shows the 20 largest owners of taxable property in the District as determined

by secured assessed valuation in fiscal year 2016-17.

LARGEST LOCAL SECURED TAXPAYERS Fiscal Year 2016-17

Property Owner Primary Land Use


% of Total(1)

1. Oceangate Property LLC Shopping Center 36,054,419 1.03% 2. Oceangate Properties Inc. Auto Dealership 23,718,900 .68 3. St. Paul Properties Inc. Industrial 18,403,367 .53 4. Time Warner Communications Communications 16,535,874 .47 5. Eternal City LP Commercial 16,122,675 .46 6. HD Development of Maryland Inc. Commercial 14,990,463 .43 7. Marine Terrace Investment LP Apartments 13,521,236 .39 8. TRU 2005 RE 1 LLC Commercial 12,770,000 .37 9. Lawndale Market Place LLC Shopping Center 12,479,327 .36 10. 12544 Loma Vista Apartments LP Apartments 11,390,880 .33 11. Public Storage Industrial 11,338,571 .32 12. Caso Beate Industrial 10,590,106 .30 13. 94-20 Northern Blvd. Realty, Lessor Commercial 9,054,190 .26 14. Hawthorne Blvd. Investments LLC Industrial 8,243,306 .24 15. Lawndale LLC Shopping Center 7,771,888 .22 16. Schwarzblatt and Sirebrenik Commercial 7,736,125 .22 17. Delta JC LLC Shopping Center 7,422,710 .21 18. Baytower Corporate Center Office Building 7,300,224 .21 19. Ashley Real Estate LLC Commercial 7,087,667 .20 20. Rich Lawndale LLC Shopping Center 6,923,588 .20 Total Top 20 259,455,516 7.42

Source: California Municipal Statistics, Inc. (1) 2016-17 Local secured assessed valuation: $3,496,137,806.

Direct and Overlapping Debt

Direct and Overlapping Debt. Set forth below is a schedule of direct and overlapping debt prepared by California Municipal Statistics Inc. The table is included for general information purposes only. The District has not reviewed this table for completeness or accuracy and makes no representations in connection therewith. The first column in the table names each public agency which has outstanding debt as of February 1, 2017, and whose territory overlaps the District in whole or in part. The second column shows the percentage of each overlapping agency’s assessed value located within the boundaries of the District. This percentage, multiplied by the total outstanding debt of each overlapping agency (which is not shown in the table) produces the amount shown in the third column, which is the apportionment of each overlapping agency’s outstanding debt to taxable property in the District.

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The table generally includes long-term obligations sold in the public credit markets by the public

agencies listed. Such long-term obligations generally are not payable from revenues of the District (except as indicated) nor are they necessarily obligations secured by land within the District. In many cases, long-term obligations issued by a public agency are payable only from the general fund or other revenues of such public agency.

STATEMENT OF DIRECT AND OVERLAPPING BONDED DEBT

LAWNDALE SCHOOL DISTRICT

2016-17 Assessed Valuation: $3,561,705,185 DIRECT AND OVERLAPPING TAX AND ASSESSMENT DEBT: % Applicable Debt 2/1/17 (1) Los Angeles County Flood Control District .270% 34,101 Metropolitan Water District .138 128,033 El Camino Community College District 3.637 14,604,714 Centinela Valley Union High School District 20.560 49,890,268 Lawndale School District 100.000 17,425,000(2) Los Angeles County Regional Park and Open Space Assessment District .265 103,072 TOTAL DIRECT AND OVERLAPPING TAX AND ASSESSMENT DEBT 82,185,188 OVERLAPPING GENERAL FUND DEBT: Los Angeles County General Fund Obligations .265 5,208,168 Los Angeles County Superintendent of Schools General Fund Obligations .265 19,093 Centinela Valley Union High School District Certificates of Participation 38.098 2,600,189 City of Hawthorne Certificates of Participation and Pension Obligation Bonds 9.713 3,406,335 Los Angeles County Sanitation District No. 5 Authority 3.732 869,110 TOTAL OVERLAPPING GENERAL FUND DEBT 12,102,895 OVERLAPPING TAX INCREMENT DEBT (Successor Agency): 23,453,894 COMBINED TOTAL DEBT 117741,977(3) Ratios to 2016-17 Assessed Valuation: Direct Debt ($17,425,000) ................................................... 0.49% Total Direct and Overlapping Tax and Assessment Debt ................ 2.31 Combined Total Debt ....................................................................... 3.31 Ratio to Redevelopment Incremental Valuation ($848,452,824): Total Overlaping Tax Increment Debt ............................................. 2.76% Source: California Municipal Statistics, Inc. (1) Prepared in advance of 2/1/17 dated date. Excludes any bonds sold between 12/6/16 and 2/1/17. (2) Excludes issues to be sold. (3) Excludes tax and revenue anticipation notes, enterprise revenue, mortgage revenue and non-bonded capital lease obligations.

Bonding Capacity

As an elementary school district, the District may issue bonds in an amount up to 1.25% of the assessed valuation of taxable property within its boundaries. Based on the fiscal year 2016-17 assessment roll, the District’s gross bonding capacity is approximately $44,521,314, and its net bonding capacity is $27,096,314 (taking into account current outstanding debt before issuance of the Bonds). Refunding bonds may be issued without regard to this limitation; however, once issued, the outstanding principal of any refunding bonds is included when calculating the District’s bonding capacity.

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INVESTMENT OF DISTRICT FUNDS In accordance with Section 41001 of the California Education Code, each California public school

district maintains substantially all of its operating funds in the county treasury of the county in which it is located, and each county treasurer-tax collector serves as ex officio treasurer for those school districts located within the county. Each treasurer-tax collector has the authority to invest school district funds held in the county treasury. Generally, the treasurer-tax collector pools county funds with school district funds and funds from certain other public agencies and invests the cash. These pooled funds are carried at cost. Interest earnings are accounted for on either a cash or accrual basis and apportioned to pool participants on a regular basis. In addition, each county treasurer-tax collector is required to establish their own investment policies which may impose limitations beyond those required by the Government Code. See “APPENDIX D—LOS ANGELES COUNTY INVESTMENT POOL.”

LEGAL MATTERS

Possible Limitations on Remedies; Bankruptcy General. Following is a discussion of certain considerations relating to potential bankruptcies of

school districts in California. It is not an exhaustive discussion of the potential application of bankruptcy law to the District. State law contains a number of safeguards to protect the financial solvency of school districts. See “APPENDIX B—DISTRICT AND GENERAL SCHOOL DISTRICT FINANCIAL INFORMATION.” If the safeguards are not successful in preventing a school district from becoming insolvent, the State Superintendent of Public Instruction (the “State Superintendent”), operating through an administrator appointed by the State Superintendent, may be authorized under State law to file a petition under Chapter 9 of the United States Bankruptcy Code (the “Bankruptcy Code”) on behalf of a district for the adjustment of its debts, assuming that such district meets certain other requirements contained in the Bankruptcy Code necessary for filing such a petition. School districts under current State law are not themselves authorized to file a bankruptcy proceeding, and they are not subject to involuntary bankruptcy.

Bankruptcy courts are courts of equity and as such have broad discretionary powers. If the District

were to become the debtor in a proceeding under Chapter 9 of the Bankruptcy Code, the parties to the proceedings may be prohibited from taking any action to collect any amount from the District (including ad valorem tax revenues) or to enforce any obligation of the District, without the bankruptcy court’s permission. In such a proceeding, as part of its plan of adjustment in bankruptcy, the District may be able to alter the priority, interest rate, principal amount, payment terms, collateral, maturity dates, payment sources, covenants (including tax-related covenants), and other terms or provisions of the Bonds and other transaction documents related to the Bonds, if the bankruptcy court were to determine that the alterations were fair and equitable. In addition, in such a proceeding, as part of such a plan, the District may be able to eliminate the obligation of the Counties to raise taxes if necessary to pay the Bonds. There also may be other possible effects of a bankruptcy of the District that could result in delays or reductions in payments on the Bonds. Moreover, regardless of any specific adverse determinations in any District bankruptcy proceeding, a District bankruptcy proceeding could have an adverse effect on the liquidity and market price of the Bonds.

As stated above, if a school district were to go into bankruptcy, the bankruptcy petition would be

filed under Chapter 9 of the Bankruptcy Code. Chapter 9 provides that it does not limit or impair the

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power of a state to control, by legislation or otherwise, a municipality of or in such state in the exercise of the political or governmental powers of such municipality, including expenditures for such exercise. For purposes of the language of Chapter 9, a school district is a municipality. State law provides that the ad valorem taxes levied to pay the principal and interest on the Bonds shall be used for the payment of principal and interest of the District’s general obligation bonds and for no other purpose. If this restriction on the expenditure of such ad valorem taxes is respected in a bankruptcy case, then the ad valorem tax revenue could not be used by the District for any purpose other than to make payments on the Bonds. It is possible, however, that a bankruptcy court could conclude that the restriction should not be respected.

Statutory Lien. Pursuant to Senate Bill 222 (2015) (“SB 222”) that became effective on January 1,

2016, all general obligation bonds issued by local agencies in California, including the Bonds, will be secured by a statutory lien on all revenues received pursuant to the levy and collection of the tax. SB 222 provides that the lien will automatically arise, without the need for any action or authorization by the local agency or its governing board, and will be valid and binding from the time the bonds are executed and delivered. Although a statutory lien would not be automatically terminated by the filing of a Chapter 9 bankruptcy petition by the District, the automatic stay provisions of the Bankruptcy Code would apply and payments that become due and owing on the Bonds during the pendency of the Chapter 9 proceeding could be delayed unless the Bonds are determined to be secured by a pledge of “special revenues” within the meaning of the Bankruptcy Code and the pledged ad valorem taxes are applied to pay the Bonds in a manner consistent with the Bankruptcy Code.

Special Revenues. If the ad valorem tax revenues that are pledged to the payment of the Bonds (see

“THE BONDS – Security”) are determined to be “special revenues” within the meaning of the Bankruptcy Code, then the application in a manner consistent with the Bankruptcy Code of the pledged ad valorem revenues that are collected after the date of the bankruptcy filing should not be subject to the automatic stay. “Special revenues” are defined to include, among others, taxes specifically levied to finance one or more projects or systems of the debtor, but excluding receipts from general property, sales, or income taxes levied to finance the general purposes of the debtor. The District has specifically pledged the ad valorem taxes for payment of the Bonds. Additionally, the ad valorem taxes levied for payment of the Bonds are permitted under the State Constitution only where either (i) the applicable bond proposition is approved by 55% of the voters and such proposition contains a specific list of school facilities projects, or (ii) if the applicable bond proposition is approved by two-thirds of voters and such bonds must be issued for the acquisition or improvement of real property. Because State law prohibits the use of the tax proceeds for any purpose other than payment of the bonds and the bond proceeds can only be used to fund the acquisition or improvement of real property and other capital expenditures included in the proposition, such tax revenues appear to fit the definition of special revenues. However, there is no binding judicial precedent dealing with the treatment in bankruptcy proceedings of ad valorem tax revenues collected for the payments of bonds in California, so no assurance can be given that a bankruptcy court would not hold otherwise.

In addition, even if the ad valorem tax revenues are determined to be “special revenues,” the

Bankruptcy Code provides that special revenues can be applied to necessary operating expenses of the project or system, before they are applied to other obligations. This rule applies regardless of the provisions of the transaction documents. Thus, a bankruptcy court could determine that the District is entitled to use the ad valorem tax revenues to pay necessary operating expenses of the District and its schools, before the remaining revenues are paid to the owners of the Bonds.

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Possession of Tax Revenues; Remedies. If one or both of the Counties or the District goes into bankruptcy and has possession of tax revenues (whether collected before or after commencement of the bankruptcy), and if one or both of the Counties or the District, as applicable, does not voluntarily pay such tax revenues to the owners of the Bonds, it is not clear what procedures the owners of the Bonds would take or how effective they would be in obtaining possession of such tax revenues.

Opinion of Bond Counsel Qualified by Reference to Bankruptcy, Insolvency and Other Laws Relating to

or Affecting Creditor’s Rights. The proposed form of opinion of Bond Counsel, attached hereto as Appendix E, is qualified by reference to bankruptcy, insolvency and other laws relating to or affecting creditor’s rights.

Legal Opinions

The proceedings in connection with the issuance of the Bonds are subject to the approval as to

their legality of Quint & Thimmig LLP, Larkspur, California, Bond Counsel for the District. Certain legal matters will also be passed upon for the District by Quint & Thimmig LLP, Larkspur, California, as Disclosure Counsel. Certain legal matters will be passed upon for the Underwriter by Kronick Moskovitz Tiedemann & Girard, A Professional Corporation, Sacramento, California. The fees of Bond Counsel, Disclosure Counsel and Underwriter’s counsel are contingent upon the issuance and delivery of the Bonds.

TAX MATTERS

Federal tax law contains a number of requirements and restrictions which apply to the Bonds, including investment restrictions, periodic payments of arbitrage profits to the United States, requirements regarding the proper use of bond proceeds and the facilities financed therewith, and certain other matters. The District has covenanted to comply with all requirements that must be satisfied in order for the interest on the Bonds to be excludable from gross income for federal income tax purposes. Failure to comply with certain of such covenants could cause interest on the Bonds to become includible in gross income for federal income tax purposes retroactively to the date of issuance of the Bonds.

Subject to the District’s compliance with the above referenced covenants, under present law, in

the opinion of Quint & Thimmig LLP, Larkspur, California, Bond Counsel, interest on the Bonds is excludable from the gross income of the owners thereof for federal income tax purposes and is not included as an item of tax preference in computing the federal alternative minimum tax for individuals and corporations, but interest on the Bonds is taken into account, however, in computing an adjustment used in determining the federal alternative minimum tax for certain corporations.

In rendering its opinions, Bond Counsel will rely upon certifications of the District with respect to

certain material facts within the District’s knowledge. Bond Counsel’s opinion represents its legal judgment based upon its review of the law and the facts that it deems relevant to render such opinion and is not a guarantee of a result.

The Internal Revenue Code of 1986, as amended (the “Code”), includes provisions for an

alternative minimum tax (“AMT”) for corporations in addition to the corporate regular tax in certain cases. The AMT, if any, depends upon the corporation’s alternative minimum taxable income (“AMTI”), which is the corporation’s taxable income with certain adjustments. One of the adjustment

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items used in computing the AMTI of a corporation (with certain exceptions) is an amount equal to 75% of the excess of such corporation’s “adjusted current earnings” over an amount equal to its AMTI (before such adjustment item and the alternative tax net operating loss deduction). “Adjusted current earnings” would include certain tax exempt interest, including interest on the Bonds.

Ownership of the Bonds may result in collateral federal income tax consequences to certain

taxpayers, including, without limitation, corporations subject to the branch profits tax, financial institutions, certain insurance companies, certain S corporations, individual recipients of Social Security or Railroad Retirement benefits and taxpayers who may be deemed to have incurred (or continued) indebtedness to purchase or carry tax exempt obligations. Prospective purchasers of the Bonds should consult their tax advisors as to applicability of any such collateral consequences.

The issue price (the “Issue Price”) for the Bonds is the price at which a substantial amount of the

Bonds is first sold to the public. The Issue Price of the Bonds may be different from the price set forth, or the price corresponding to the yield set forth, on the inside cover page hereof.

Owners of Bonds who dispose of Bonds prior to the stated maturity (whether by sale, redemption

or otherwise), purchase Bonds in the initial public offering, but at a price different from the Issue Price or purchase Bonds subsequent to the initial public offering should consult their own tax advisors.

If a Bond is purchased at any time for a price that is less than the Bond’s stated redemption price

at maturity, the purchaser will be treated as having purchased a Bond with market discount subject to the market discount rules of the Code (unless a statutory de minimis rule applies). Accrued market discount is treated as taxable ordinary income and is recognized when a Bond is disposed of (to the extent such accrued discount does not exceed gain realized) or, at the purchaser’s election, as it accrues. The applicability of the market discount rules may adversely affect the liquidity or secondary market price of such Bond. Purchasers should consult their own tax advisors regarding the potential implications of market discount with respect to the Bonds.

An investor may purchase a Bond at a price in excess of its stated principal amount. Such excess is

characterized for federal income tax purposes as “bond premium” and must be amortized by an investor on a constant yield basis over the remaining term of the Bond in a manner that takes into account potential call dates and call prices. An investor cannot deduct amortized bond premium relating to a tax exempt bond. The amortized bond premium is treated as a reduction in the tax exempt interest received. As bond premium is amortized, it reduces the investor’s basis in the Bonds. Investors who purchase a Bond at a premium should consult their own tax advisors regarding the amortization of bond premium and its effect on the Bond’s basis for purposes of computing gain or loss in connection with the sale, exchange, redemption or early retirement of the Bonds.

There are or may be pending in the Congress of the United States legislative proposals, including

some that carry retroactive effective dates, that, if enacted, could alter or amend the federal tax matters referred to above or affect the market value of the Bonds. It cannot be predicted whether or in what form any such proposal might be enacted or whether, if enacted, it would apply to bonds issued prior to enactment. Prospective purchasers of the Bonds should consult their own tax advisors regarding any pending or proposed federal tax legislation. Bond Counsel expresses no opinion regarding any pending or proposed federal tax legislation.

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The Internal Revenue Service (the “Service”) has an ongoing program of auditing tax exempt obligations to determine whether, in the view of the Service, interest on such tax exempt obligations is includible in the gross income of the owners thereof for federal income tax purposes. It cannot be predicted whether or not the Service will commence an audit of the Bonds. If an audit is commenced, under current procedures the Service may treat the District as a taxpayer and the Bond owners may have no right to participate in such procedure. The commencement of an audit could adversely affect the market value and liquidity of the Bonds until the audit is concluded, regardless of the ultimate outcome.

Payments of interest on, and proceeds of the sale, redemption or maturity of, tax exempt

obligations, including the Bonds, are in certain cases required to be reported to the Service. Additionally, backup withholding may apply to any such payments to any Bond owner who fails to provide an accurate Form W-9 Request for Taxpayer Identification Number and Certification, or a substantially identical form, or to any Bond owner who is notified by the Service of a failure to report any interest or dividends required to be shown on federal income tax returns. The reporting and backup withholding requirements do not affect the excludability of such interest from gross income for federal tax purposes.

In the further opinion of Bond Counsel, interest on the Bonds is exempt from California personal

income taxes. Ownership of the Bonds may result in other state and local tax consequences to certain taxpayers.

Bond Counsel expresses no opinion regarding any such collateral consequences arising with respect to the Bonds. Prospective purchasers of the Bonds should consult their tax advisors regarding the applicability of any such state and local taxes.

The complete text of the final opinion that Bond Counsel expects to deliver upon the issuance of

the Bonds is set forth in APPENDIX E—FORMS OF OPINIONS OF BOND COUNSEL.

MUNICIPAL ADVISOR Isom Advisors, A Division of Urban Futures, Inc., Walnut Creek, California (“Isom Advisors”),

is an independent financial advisory firm registered as a “Municipal Advisor” with the Securities Exchange Commission and Municipal Securities Rulemaking Board. Isom Advisors does not underwrite, trade or distribute municipal or other public securities. Isom Advisors has assisted the District in connection with the planning, structuring, sale and issuance of the Bonds. Isom Advisors is not obligated to undertake, and has not undertaken to make, an independent verification of or to assume responsibilities for the accuracy, completeness or fairness of the information contained in this Official Statement not provided by Isom Advisors. The fees of Isom Advisors in respect to the Bonds are contingent upon their sale and delivery.

CONTINUING DISCLOSURE The District has covenanted for the benefit of holders and Beneficial Owners of the Bonds to

provide certain financial information and operating data relating to the District (the “Annual Report”) by not later than March 31 after the end of the District’s fiscal year (the current end of the District’s fiscal year is on June 30), commencing with the report for the 2016-17 fiscal year, and to provide notices of the occurrence of certain events listed in the District’s Continuing Disclosure Certificate, the forms of which are in APPENDIX F—FORMS OF CONTINUING DISCLOSURE CERTIFICATES. The Annual

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Report and notices of listed events will be filed by the District with the Municipal Securities Rulemaking Board (the “MSRB”), by posting on the MSRB’s Electronic Municipal Market Access or “EMMA” system (website: www.emma.msrb.org). These continuing disclosure covenants have been made in order to assist the Underwriter in complying with S.E.C. Rule 15c2-12(b)(5) (the “Rule”).

The District has existing disclosure undertakings that have been made pursuant to the Rule in connection with the issuance of other outstanding general obligation bonds. In the past five years, the District may not have timely filed notices of rating changes for bond insurers which insure some of the District’s obligations. The District has engaged Applied Best Practices, LLC to serve as its dissemination agent with respects to its prior undertakings and the undertaking in connection with the Bonds.

LEGALITY FOR INVESTMENT IN CALIFORNIA

Under provisions of the California Financial Code, the Bonds are legal investments for commercial banks in California to the extent that the Bonds, in the informed opinion of the bank, are prudent for the investment of funds of depositors, and under provisions of the California Government Code, are eligible for security for deposits of public moneys in California.

ABSENCE OF MATERIAL LITIGATION

No litigation is pending or threatened concerning the validity of the Bonds, and a certificate to that effect will be furnished by the District to the Underwriter at the 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 taxes or contesting the District’s ability to issue and retire the Bonds.

VERIFICATION OF MATHEMATICAL COMPUTATIONS

The Verification Agent will verify, from the information provided to it, the mathematical accuracy as of the date of the closing on the 2017 Refunding Bonds of computations relating to the adequacy of the proceeds of the 2017 Refunding Bonds to be deposited in the Escrow Fund for the defeasance of the 1998B Bonds. The Verification Agent will also verify the yield of the Bonds and on the Escrow Securities to be deposited in the Escrow Fund upon the delivery of the 2017 Refunding Bonds. The Verification Agent will restrict its procedures to examining the arithmetical accuracy of certain computations and will not make a study or evaluation of the information and assumptions on which such computations are based and, accordingly, will not express an opinion on the data used, the reasonableness of the assumptions or the achievability of the forecasted outcome.

RATING

S&P Global Ratings, a Standard & Poor’s Financial Services LLC business, (“S&P”) has assigned the rating of “AA-” to the Bonds. Such rating reflects only the views of S&P and an explanation of the significance of such rating may be obtained from S&P. There is no assurance that such rating will continue for any given period of time or that such rating will not be revised downward or withdrawn entirely by

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S&P, if in the judgment of the S&P, circumstances so warrant. Any such downward revision or withdrawal of such rating may have an adverse effect on the market price of the Bonds.

The District has covenanted in the Continuing Disclosure Certificate to file on the EMMA website notices of any rating changes on the Bonds. See APPENDIX F—FORMS OF CONTINUING DISCLOSURE CERTIFICATES. Notwithstanding such covenant, information relating to rating changes on the Bonds may be publicly available from S&P prior to such information being provided to the District and prior to the date the District is obligated to file a notice of a rating change on EMMA. Purchasers of the Bonds are directed to S&P, its website and official media outlet for the most current rating changes with respect to the Bonds after the initial issuance of the Bonds.

UNDERWRITING

The 2016A Bonds were purchased by Raymond James & Associates, Inc. (the “Underwriter”). The Underwriter has agreed to purchase the 2016A Bonds at a purchase price of $10,155,639.80 (being equal to the aggregate principal amount of the Series A Bonds ($10,000,000.00), plus a net original issue premium of $194,639.80, less an Underwriter’s discount of $39,000.00).The Underwriter will purchase all of the 2016A Bonds if any are purchased, the obligation to make such purchase being subject to the approval of certain legal matters by counsel and certain other conditions. The Underwriter may offer and sell 2016A Bonds to certain dealers and others at prices lower than the offering prices stated on the inside cover page hereof. The offering prices may be changed from time to time by the Underwriter.

The 2017 Refunding Bonds were also purchased by the Underwriter. The Underwriter has agreed to purchase the 2017 Refunding Bonds at a purchase price of $5,106,866.80 (being equal to the aggregate principal amount of the 2017 Refunding Bonds ($5,080,000.00), plus a net original issue premium of $46,678.80, less an Underwriter’s discount of $19,812.00). The Underwriter will purchase all of the 2017 Refunding Bonds if any are purchased, the obligation to make such purchase being subject to the approval of certain legal matters by counsel and certain other conditions. The Underwriter may offer and sell 2017 Refunding Bonds to certain dealers and others at prices lower than the offering prices stated on the inside cover page hereof. The offering prices may be changed from time to time by the Underwriter.

ADDITIONAL INFORMATION

Quotations from and summaries and explanations of the Bonds, the Bond Resolution, the Continuing Disclosure Certificate of the District and the constitutional provisions, statutes and other documents referenced herein, do not purport to be complete, and reference is made to said documents, constitutional provisions and statutes for full and complete statements of their provisions.

All data contained herein has been taken or constructed from District records. Appropriate District officials, acting in their official capacities, have reviewed this Official Statement and have determined that, as of the date hereof, the information contained herein is, to the best of their knowledge and belief, true and correct in all material respects and does not contain an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements made herein, in light of the circumstances under which they were made, not misleading. This Official Statement has been approved by the District Board.

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EXECUTION Execution and delivery of this Official Statement have been duly authorized by the District.

LAWNDALE ELEMENTARY SCHOOL DISTRICT By /s/ Ellen Dougherty, Ed.D

Ellen Dougherty, Ed.D., Superintendent

Appendix A Page 1

APPENDIX A

GENERAL, ECONOMIC AND DEMOGRAPHIC INFORMATION RELATING TO LAWNDALE AND THE COUNTY

Introduction

The City of Lawndale. The City of Lawndale (the “City”) is located in the South Bay region of

Los Angeles County (the “County”). The City is bordered by Redondo Beach on the west and southwest, Hawthorne on the north, Torrance on the southeast, and unincorporated area of El Camino Village (also known as Alondra Park) on the east. According to the United States Census Bureau, the city has a total area of 2.0 square miles (5.2 km2), all land. The City is 5.7 miles SE of Los Angeles International Airport and is located on Interstate 405.

Los Angeles County. The County was established by an act of the State Legislature on February 18, 1850 as one of California’s original 27 counties. Located in the southern portion of the State, the County covers 4,083 square miles. With a population of over 10 million, its population is the largest of any county in the nation.

The County’s economy is larger than that of 43 states and all but 20 countries. The County serves as the central trade district for the western United States and the gateway to the Asian economies, as it has evolved into a leader in international commerce and investments.

Population

The table below summarizes population of the City of Lawndale, Los Angeles County, and

California.

CITY OF LAWNDALE, LOS ANGELES COUNTY and CALIFORNIA Population

Year City of

Lawndale Los Angeles

County California 2012 33,086 9,956,722 37,881,357 2013 33,166 10,023,753 38,239,207 2014 33,272 10,093,053 38,568,459 2015 33,365 10,155,069 38,907,642 2016 33,496 10,241,335 39,255,883

Source: California Department of Finance, E-4 Population Estimate for Cities, Counties, and the State, 2011-2016, with 2010

Census Benchmark.

Appendix A Page 2

Employment

The following table summarizes the historical numbers of workers by industry in the Los Angeles-Long Beach-Glendale MD (Los Angeles County) for the last five years:

LOS ANGELES LONG BEACH GLENDALE MD (LOS ANGELES COUNTY)

Labor Force and Industry Employment Annual Averages by Industry

2011 2012 2013 2014 2015(1) Total, All Industries 3,951,300 4,041,400 4,118,100 4,194,200 4,279,200 Total Farm 5,600 5,400 5,500 5,200 5,000 Mining and Logging 4,100 4,300 4,500 4,300 3,900 Construction 105,100 109,200 116,200 119,600 126,100 Manufacturing 366,900 367,400 368,200 364,100 360,800 Wholesale Trade 205,800 211,900 218,700 222,500 227,000 Retail Trade 393,000 400,900 405,600 413,000 420,500 Transportation, Warehousing & Utilities 151,800 154,500 157,500 163,400 170,400 Information 192,000 191,500 196,400 198,000 202,700 Financial Activities 210,100 212,400 213,000 211,100 214,200 Professional & Business Services 542,500 570,100 593,200 599,100 600,300 Educational & Health Services 677,300 699,500 702,100 720,700 742,200 Leisure & Hospitality 394,700 415,800 440,500 466,600 488,100 Other Services 137,000 141,700 145,700 150,500 151,700 Government 565,500 556,800 551,200 556,200 566,400 Source: California Employment Development Department, based on March 2016 benchmark. Note: Does not include proprietors, self-employed, unpaid volunteers or family workers, domestic workers in households, and

persons involved in labor/management trade disputes. Employment reported by place of work. Items may not add to totals due to independent rounding.

(1) Last available full year data.

Appendix A Page 3

The following tables summarize historical employment and unemployment for Los Angeles County, the State of California and the United States:

LOS ANGELES COUNTY, CALIFORNIA, and UNITED STATES

Civilian Labor Force, Employment, and Unemployment (Annual Averages)

Unemployment

Year Area Labor Force Employment Unemployment Rate (1) 2011 Los Angeles County 4,928,500 4,327,900 600,500 12.2%

California 18,419,500 16,260,100 2,159,400 11.7 United States 153,617,000 139,869,000 13,747,000 8.9

2012 Los Angeles County 4,921,800 4,385,300 536,500 10.9% California 18,554,800 16,630,100 1,924,700 10.4 United States 154,975,000 142,469,000 12,506,000 8.1



2015(2) Los Angeles County 5,011,700 4,674,800 336,900 6.7% California 18,981,800 17,798,600 1,183,200 6.2 United States 157,130,000 148,834,000 146,411,000 5.3

Sources: California Employment Development Department, Monthly Labor Force Data for Counties, Annual Averages 2010-

2015 and US Bureau of Labor Statistics. (1) Data not seasonally adjusted. (2) Last available full year data.

Appendix A Page 4

Major Employers

The table below sets forth the principal employers of Los Angeles County in 2016.

LOS ANGELES COUNTY 2016 Major Employers

Employer Name Location Industry

AHMC Healthcare Inc Alhambra Health Care Management All Nations Church Sylmar Churches American Honda Motor Co Inc Torrance Automobile & Truck Brokers (whls) Cedar Sinai Medical Ctr West Hollywood Hospitals Century Plaza Towers Los Angeles Office Buildings & Parks Gov Republic of New Lemuria Not Available Government Offices-Us International Rectifier Corp El Segundo Semiconductor Devices (mfrs) Kaiser Permaente LA Med Ctr Los Angeles Hospitals LAC & USC MEDICAL CTR Los Angeles Hospitals Long Beach City Hall Long Beach Government Offices-City, Village & Twp Los Angeles County Sheriff Monterey Park Government Offices-County Los Angeles Police Dept Los Angeles Police Departments Miller Children's Hospital Long Beach Hospitals Nestle USA Inc Glendale Food Facilities (whls) Paramount Petroleum Corp Paramount Asphalt & Asphalt Products-Manufacturers Ronald Reagan UCLA Medical Ctr Los Angeles Hospitals Security Industry Specialist Culver City Security Systems Consultants Six Flags-Magic Mountain Inc Valencia Amusement & Theme Parks Sony Pictures Entertainment Culver City Motion Picture Producers & Studios Torrid City Of Industry Women's Apparel-Retail UCLA Los Angeles Schools-Universities & Colleges Academic UCLA Health System Los Angeles Physicians & Surgeons Vxi Global Solutions Los Angeles Call Centers Walt Disney Co Burbank Motion Picture Producers & Studios Warner Bros Studio Burbank Television Program Producers

Source: California Employment Development Department, Major Employers in Los Angeles County. Information based on the

America’s Labor Market Information System (ALMIS) Employer Database, 2017 1st Edition.

Appendix A Page 5

Construction Activity

The following table reflects the five-year history of building permit valuation for the City of

Lawndale and Los Angeles County:

CITY OF LAWNDALE Building Permits and Valuation

(Dollars in Thousands)

2011 2012 2013 2014 2015 Permit Valuation:

New Single-family 604 1,650 1,500 387 545 New Multi-family - - - - - Res. Alterations/Additions 1,858 1,827 1,312 1,625 2,166

Total Residential 2,463 3,477 2,812 2,012 2,711 Total Nonresidential 934 1,598 5,952 2,174 1,399

Total All Building 3,397 5,076 8,765 4,186 4,111 New Dwelling Units:

Single Family 3 8 4 3 2 Multiple Family - - - - -

Total 3 8 4 3 2 Source: Construction Industry Research Board: Building Permit Summary – California Cities and Counties Data for Calendar

Years 2011-2015. Note: Totals may not add due to independent rounding.

LOS ANGELES COUNTY Building Permits and Valuation

(Dollars in Thousands)

2011 2012 2013 2014 2015 Permit Valuation:

New Single-family 1,026,679 1,127,916 1,523,457 1,744,290 1,897,829 New Multi-family 1,225,553 1,484,648 1,953,088 2,290,197 2,843,749 Res. Alterations/Additions 1,431,581 1,208,758 1,267,408 1,474,930 1,641,457

Total Residential 3,683,814 3,821,323 4,743,954 5,509,417 6,383,036 Total Nonresidential 2,809,105 3,678,238 9,070,320 6,657,571 5,645,372

Total All Building 6,492,919 7,499,562 13,814,274 12,166,989 12,028,408 New Dwelling Units:

Single Family 2,338 2,820 3,607 4,358 4,487 Multiple Family 8,052 8,895 13,243 14,349 18,405

Total 10,390 11,715 16,850 18,707 22,892 Source: Construction Industry Research Board: Building Permit Summary – California Cities and Counties Data for Calendar

Years 2011-2015. Note: Totals may not add due to independent rounding.

Appendix A Page 6

Commercial Activity Taxable sales in the City of Lawndale and Los Angeles County for the five most recent years is

shown below. Beginning in 2009, reports summarize taxable sales and permits using the NAICS codes. As a result of the coding change, however, industry-level data for 2009 are not comparable to that of prior years.

CITY OF LAWNDALE

Taxable Sales (dollars in thousands)

2010 2011 2012 2013 2014(2)

Retail and Food Services Motor Vehicles and Parts Dealers 20,378 21,565 23,149 22,446 24,378 Home Furnishings and Appliance Stores 7,714 8,320 9,096 8,249 10,554 Bldg. Matrl. and Garden Equip. and Supplies 20,786 24,187 24,985 29,951 32,589 Food and Beverage Stores 12,997 13,007 13,282 13,416 13,577 Gasoline Stations 61,687 69,828 73,044 70,435 65,367 Clothing and Clothing Accessories Stores 3,618 3,726 3,216 3,110 3,068 General Merchandise Stores # # # # # Food Services and Drinking Places 29,278 31,271 32,090 31,566 35,380 Other Retail Group 21,365# 20,819# 20,116# 20,274# 23,162#

Total Retail and Food Services 177,823 192,724 198,977 199,447 208,075 All Other Outlets 26,772 27,329 27,216 28,782 29,704

Total All Outlets 204,595 220,052 226,193 228,229 237,779 Source: California Board of Equalization, Taxable Sales in California (Sales & Use Tax).

(1) Last available full year data. (#) Sales omitted because their publication would result in the disclosure of confidential information.

LOS ANGELES COUNTY

Taxable Sales (dollars in thousands)

2010 2011 2012 2013 2014(2)

Retail and Food Services Motor Vehicles and Parts Dealers 11,285,457 12,686,384 14,479,392 15,543,657 16,546,553 Furniture and Home Furnishings Stores 2,158,334 2,321,830 2,441,922 2,568,630 2,734,737 Electronics and Appliance Stores 3,454,412 3,416,744 3,570,668 3,576,308 4,040,534 Bldg Mtrl. and Garden Equip. and Supplies 6,129,586 6,306,814 6,510,966 6,558,312 6,971,149 Food and Beverage Stores 5,405,254 5,591,250 5,824,815 6,051,754 6,279,795 Health and Personal Care Stores 2,773,004 2,998,946 3,163,312 3,306,274 3,414,941 Gasoline Stations 11,012,642 13,394,467 14,037,507 13,817,056 13,265,979 Clothing and Clothing Accessories Stores 7,607,711 8,356,612 9,166,549 9,926,558 10,560,952 Sporting Goods, Hobby, Book and Music Stores 2,448,246 2,478,020 2,454,806 2,487,061 2,460,392 General Merchandise Stores 10,369,383 10,866,531 11,157,997 11,463,750 11,557,051 Miscellaneous Store Retailers 4,449,560 4,649,598 4,798,211 4,953,245 5,204,656 Nonstore Retailers 790,565 897,596 1,200,322 1,906,573 2,170,084 Food Services and Drinking Places 14,291,264 15,286,655 16,512,136 17,481,996 18,964,996

Total Retail and Food Services 82,175,416 89,251,447 95,318,603 99,641,174 104,189,819 All Other Outlets 34,766,918 37,189,291 39,976,979 40,438,534 43,257,109

Totals All Outlets(1) 116,942,334 126,446,737 135,295,582 140,079,708 147,446,927

Source: California Board of Equalization, Taxable Sales in California (Sales & Use Tax).

(1) Last available full year data.

Appendix A Page 7

Median Household Income The following table summarizes the median household effective buying income for the City of

Lawndale, Los Angeles County, the State of California and the nation for the five most recent years.

CITY OF LAWNDALE, LOS ANGELES COUNTY, CALIFORNIA and UNITED STATES

Effective Buying Income

Year

Area

Total Effective Buying Income (000’s Omitted)

Median Household Effective Buying Income

2011 City of Lawndale 425,345 38,585 Los Angeles County 197,831,465 43,083 California 814,578,457 47,062 United States 6,438,704,663 41,253





Source: Nielsen Claritas, Inc.

Appendix B Page 1

APPENDIX B

DISTRICT AND GENERAL SCHOOL DISTRICT FINANCIAL INFORMATION

The information in this appendix concerning the operations of the District, the District’s finances, and

State funding of education, is provided as supplementary information only, and it should not be inferred from the inclusion of this information in this Official Statement that the principal of and interest on the Bonds is payable from the general fund of the District or from State revenues. The Bonds are payable solely from the proceeds of an ad valorem tax approved by the voters of the District pursuant to all applicable laws and State Constitutional requirements, and required to be levied by the County on property within the District in an amount sufficient for the timely payment of principal and interest on the Bonds. See “SECURITY AND SOURCE OF PAYMENT FOR THE BONDS” in the Official Statement.

Allocation of State Funding to School Districts; Restructuring of the K-12 Funding System

California school districts receive a significant portion of their funding from State appropriations. As a result, changes in State revenues may affect appropriations made by the Legislature to school districts. Commencing with the Fiscal Year 2013-14, the State budget restructured the manner in which the State allocates funding for K-12 education. In Fiscal Year 2013-14, State legislation replaced the majority of revenue limit and categorical funding formulas with a new set of funding formulas. The new formula for school funding is known as the “Local Control Funding Formula” (the “Local Control Funding Formula” or “LCFF”). The State budget provided funding in Fiscal Year 2013-14 to begin implementing the new formulas. Under the prior funding system, school districts received different per-pupil funding rates based on historical factors and varying participation in categorical programs. The new system provides a more uniform base per-pupil rate for each of several grade levels. The base rates are augmented by several funding supplements such as for (1) students needing additional services, defined as English learners, students from lower income families, and foster youth; and (2) school districts with high concentrations of English learners and lower income families. The new funding system requires school districts to develop local control and accountability plans describing how the school district intends to educate its students and achieve annual education goals to be achieved in state-mandated areas of priority.

Under the prior system, California Education Code Section 42238 and following, each school

district was determined to have a target funding level: a “base revenue limit” per student multiplied by the school district’s student enrollment measured in units of average daily attendance (“ADA”). The base revenue limit was calculated from the school district’s prior-year funding level, as adjusted for a number of factors, such as inflation, special or increased instructional needs and costs, employee retirement costs, especially low enrollment, increased pupil transportation costs, etc. Generally, the amount of State funding allocated to each school district was the amount needed to reach that district’s base revenue limit after taking into account certain other revenues, in particular, locally generated property taxes. This was referred to as State “equalization aid.” To the extent local tax revenues increased due to growth in local property assessed valuation, the additional revenue was offset by a decline in the State’s contribution. A school district whose local property tax revenues exceed its base revenue limit is entitled to receive no State equalization aid, and receives only its special categorical aid, which is deemed to include the “basic aid” of $120 per student per year guaranteed by Article IX, Section 6 of the Constitution. Such school districts were known as “basic aid districts.” School districts that received some equalization aid were commonly referred to as “revenue limit districts.”

Appendix B Page 2

The Local Control Funding Formula is also based on enrollment. Enrollment can fluctuate due to

factors such as population growth or decline, competition from private, parochial, and public charter schools, inter-district transfers in or out, and other causes. Losses in enrollment will cause a school district to lose operating revenues, without necessarily permitting the school district to make adjustments in fixed operating costs. Average Daily Attendance

In the past, annual State apportionments of basic and equalization aid to school districts were computed based on a revenue limit per unit of ADA. Prior to Fiscal Year 1998-99, daily attendance numbers included students who were absent from school for an excused absence, such as illness. Effective in Fiscal Year 1998-99, only actual attendance is counted in the calculation of ADA. This change was essentially fiscally neutral for school districts which maintain the same excused absence rate. The rate per student was recalculated to provide the same total funding to school districts in the base year as would have been received under the old system. After Fiscal Year 1998-99, school districts which improved their actual attendance rate received additional funding.

As indicated above, commencing with the Fiscal Year 2013-14, the State budget restructured the manner in which the State allocates funding for K-12 education using the Local Control Funding Formula. Under the prior funding system, school districts received different per-pupil funding rates based on historical factors and varying participation in categorical programs. The following table shows the District’s enrollment, ADA and revenue limit per ADA for 2012-13 under the historical funding program and for 2013-14 through 2016-17 under the Local Control Funding Formula.

AVERAGE DAILY ATTENDANCE,

REVENUE LIMIT/LCFF AND ENROLLMENT Fiscal Years 2012-13 to 2016-17

Fiscal Year

Average Daily

Attendance(1)

Revenue Limit/LCFF Revenues(2) Enrollment(3)

2012-13 5,555 28,279,015 5,788 2013-14 5,603 36,670,266 5,785 2014-15 5,565 43,355,793 5,776 2015-16 5,477 49,552,352 5,677 2016-17(4) 5,338 51,960,074 5,516

Source: Lawndale Elementary School District (1) Except for fiscal year 2016-17, reflects ADA as of the second principal reporting period (P-2 ADA), ending on or before the

last attendance month prior to April 15 of each school year. (2) Deficit revenue limit funding, when provided for in State budgetary legislation, reduced the revenue limit allocations

received by school districts by applying a deficit factor to the base revenue limit 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 limit funding was most recently reinstated beginning in Fiscal Year 2008-09, and discontinued following the implementation of the LCFF.

(3) Except for fiscal year 2016-17, enrollment as of October report submitted to the California Basic Educational Data System (“CBEDS”) in each school year.

(4) As projected in the District’s 1st Interim Report, adopted December 6, 2016.

Appendix B Page 3

District Budget The District is required by the provisions of the State Education Code to maintain a balanced

budget each year, in which the sum of expenditures and the ending fund balance cannot exceed the sum of revenues and the carry-over fund balance from the previous year. The State Department of Education imposes a uniform budgeting and accounting format for school districts. The budget process for school districts was substantially amended by Assembly Bill 1200 (“AB 1200”), which became State law on October 14, 1991. Portions of AB 1200 are summarized below. The budget process has been further amended by subsequent amendments, including Senate Bill 97, which became law on September 26, 2013 (requiring budgets to include sufficient funds to implement local control and accountability plans), Senate Bill 858, which became law on June 20, 2014 (requiring budgets’ ending fund balances to exceed the minimum recommended reserve for economic uncertainties), and Assembly Bill 2585, which became State law on September 9, 2014 (eliminating the dual budget cycle option for school districts).

School districts must adopt a budget on or before July 1 of each year. The budget must be

submitted to the county superintendent within five days of adoption or by July 1, whichever occurs first. The county superintendent will examine the adopted budget for compliance with the standards and criteria adopted by the State Board of Education and identify technical corrections necessary to bring the budget into compliance, and will determine if the budget allows the district to meet its current obligations, if the budget is consistent with a financial plan that will enable the district to meet its multi-year financial commitments, whether the budget includes the expenditures necessary to implement a local control and accountability plan, and whether the budget’s ending fund balance exceeds the minimum recommended reserve for economic uncertainties.

On or before August 15, the county superintendent will approve, conditionally approve or disapprove the adopted budget for each school district. Budgets will be disapproved if they fail the above standards. The district boards must be notified by August 15 of the county superintendent’s recommendations. The committee must report its findings no later than August 20. Any recommendations made by the county superintendent must be made available by the district for public inspection. No later than September 22, the county superintendent must notify the State Superintendent of Public Instruction of all school districts whose budget may be disapproved.

For districts whose budgets have been disapproved, the district must revise and readopt its budget

by September 8, reflecting changes in projected income and expense since July 1, including responding to the county superintendent’s recommendations. The county superintendent must determine if the budget conforms with the standards and criteria applicable to final district budgets and not later than October 8, will approve or disapprove the revised budgets. If the budget is disapproved, the county superintendent will call for the formation of a budget review committee pursuant to Education Code Section 42127.1. No later than October 8, the county superintendent must notify the State Superintendent of Public Instruction of all school districts whose budget has been disapproved. Until a district’s budget is approved, the district will operate on the lesser of its proposed budget for the current fiscal year or the last budget adopted and reviewed for the prior fiscal year.

Under the provisions of AB 1200, each school district is required to file interim certifications with

the county office of education as to its ability to meet its financial obligations for the remainder of the then-current fiscal year and, based on current forecasts, for the subsequent 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 will meet its financial obligations for the

Appendix B Page 4

current fiscal year and subsequent two fiscal years. A negative certification is assigned to any school district that will be unable to meet its financial obligations for the remainder of the fiscal year or the subsequent fiscal year. A qualified certification is assigned to any school district that may not meets its financial obligations for the current fiscal year or two subsequent fiscal years.

The District’s First Interim Report for fiscal year 2016-17 was certified as “Positive.” The

District has not received a qualified or negative certification in any of the last five years. The District adopted its 2016-17 1st Interim Report on December 6, 2016.

The following table shows a breakdown of the District’s ADA by grade span, total enrollment, and the percentage of EL/LI student enrollment, for fiscal years 2013-14 through 2016-17.

ADA, ENROLLMENT AND EL/LI ENROLLMENT PERCENTAGE

Fiscal Years 2013-14 through 2016-17 (Estimated Actuals)

Total Total

Fiscal Average Daily Attendance District District % of EL/LI Year K-3 4-6 7-8 9-12 ADA Enrollment(2) Enrollment(3)

2013-14 2,502.81 1,940.70 1,159.93 - 5,603.44 5,785 87.42% 2014-15 2,478.56 1,910.57 1,175.59 - 5,564.72 5,776 85.40 2015-16(4) 2,339.94 1,905.89 1,231.14 - 5,476.97 5,677 83.12 2016-17(4) 2,289.14 1,864.51 1,204.41 - 5,358.06 5,516 85.40

Source: Lawndale Elementary School District (1) Reflects P-2 ADA. (2) Reflects CBEDS enrollment. (3) For purposes of calculating Supplemental and Concentration Grants, a school district’s fiscal year 2013-14 percentage of unduplicated

EL/LI students will be expressed solely as a percentage of its total fiscal year 2013-14 total enrollment. For fiscal year 2014-15, the percentage of unduplicated EL/LI enrollment will be based on the two-year average of EL/LI enrollment in fiscal years 2013-14 and 2014-15. Beginning in fiscal year 2015-16, a school district’s percentage of unduplicated EL/LI students will be based on a rolling average of such district’s EL/LI enrollment for the then-current fiscal year and the two immediately preceding fiscal years.

(4) As projected in the District’s 2016-17 Budget, adopted June 28, 2016.

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 California Education Code, is to be followed by all California 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 available to finance operations). Current taxes are considered susceptible to accrual. Delinquent taxes not received after the fiscal year end are not recorded as revenue until received. Revenues from specific state and federally funded projects 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 time to time explaining the acceptable 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

Appendix B Page 5

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 on July 1 and ends on June 30.

Financial Statements

The District’s general fund finances the basic operating activities of the District. General fund

revenues are derived from such sources as State school fund apportionments, taxes, use of money and property, and aid from other governmental agencies. Audited financial statements for the 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 Superintendent of the District, 4161 W 147th Street, Lawndale, California 90260, telephone number (310) 973-1300. Copies of such financial statements will be mailed to prospective investors and their representatives upon request directed to the District at such address. For further information, see also APPENDIX C—AUDITED FINANCIAL STATEMENTS OF THE DISTRICT FOR THE FISCAL YEAR ENDED JUNE 30, 2016.

Appendix B Page 6

The following table shows the District’s audited revenues, expenditures and changes in fund balances for the past four fiscal years as well as projections for 2016-17.

GENERAL FUND

STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES Fiscal Years 2012-13 to 2016-17

Fiscal Year 2012-13

Audited 2013-14(1)

Audited 2014-15(1)

Audited 2015-16(1)

Audited 2016-17(1)(2)(3)

Projected REVENUES Revenue Limit/LCFF Sources(1) 28,279,015 36,670,266 43,355,793 49,552,352 51,960,074 Federal Sources 4,869,996 3,724,478 3,825,105 4,284,821 4,260,851 Other State Sources 12,568,709 8,487,953 7,847,704 12,153,982 12,006,781 Other Local Sources 1,405,601 2,532,979 2,337,852 2,633,328 4,318,105

Total Revenues 47,123,321 51,415,676 57,366,454 68,624,483 72,545,811 EXPENDITURES

Certificated Salaries 25,068,375 26,602,948 28,866,172 32,108,790 33,014,014 Classified Salaries 8,408,226 8,561,287 9,333,600 10,567,414 11,939,008 Employee Benefits 8,120,423 7,994,532 8,819,006 10,485,141 12,513,933 Books and Supplies 2,126,967 2,708,007 3,058,740 3,997,280 4,733,277 Contract Services 5,079,256 5,410,051 5,395,606 5,657,696 7,920,535 Capital Outlay 37,548 114,285 - 335,969 998,916 Other Outgo 1,024,294 773,036 775,488 495,879 836,483 Debt Service – Principal - - - - - Debt Service - Interest - - - - - Total Expenditures 49,865,089 52,164,216 56,248,612 63,648,169 71,956,166

Excess (Deficiency) of Revenues over Expenditures

(2,741,768) (748,540) 1,117,842 4,976,314 589,645

OTHER FINANCING SOURCES Operating transfers in - 7,834 - - 343,486 Operating transfers out - (281,228) (944,658) (2,528,596) (214,445) Other sources - - - - -

Total financing sources (uses) - (273,394) (944,658) (2,528,596) 129,041 Net change in fund balances (2,741,768) (1,021,934) 173,184 2,447,718 718,686 Fund Balance, July 1 13,798,246 11,056,478 10,034,544 10,207,728 9,760,487 Fund Balance, June 30 11,056,478 10,034,544 10,207,728 12,655,446 10,479,173

Source: Lawndale Elementary School District 2013-2016 audited financial statements and 2016-17 1st Interim Report.

(1) Beginning in FY2013-14 the Local Control Funding Formula (LCFF) has replaced the prior revenue limit system of funding. (2) From the District’s 2016-17 1st Interim Report, adopted December 6, 2016. (3) The beginning fund balance in the 2016-17 First Interim Report does not correspond with the audited fund balance for the prior fiscal year

because the audited financial statements include other funds such as the “Special Reserve Fund for Other than Capital Outlay Projects” which are accounted for separately in the interim reports.

Appendix B Page 7

Summary of District Revenues and Expenditures The District’s audited financial statements for the year ending June 30, 2016, are reproduced in

Appendix C. The final (unaudited) statement of receipts and expenditures for each fiscal year ending June 30 is required by State law to be approved by the District Board by September 15, and the audit report must be filed with the County Superintendent of Schools and State officials by December 15 of each year.

The District is required by State law and regulation to maintain various reserves. The District is

generally required to maintain a reserve for economic uncertainties in the amount of 3% of its total general fund expenditures, based on total student attendance below 30,000. For fiscal year 2015-16, the District has budgeted an unrestricted general fund reserve of 3%, or approximately $517,478. Substantially all funds of the District are required by law to be deposited with and invested by the County Treasurer and Tax Collector on behalf of the District, pursuant to law and the investment policy of the County. See “COUNTY POOLED INVESTMENT FUND” in the front portion of this Official Statement.

Local Control Funding Formula. The State Constitution requires that from all State revenues there will be funds set aside to be allocated by the State for support of the public school system and public institutions of higher education. As discussed below, school districts in the State receive a significant portion of their funding from these State allocations. The general operating income of school districts in California is comprised of two major components: (i) a State portion funded from the State’s general fund, and (ii) a local portion derived from the School District’s share of the 1% local ad valorem tax authorized by the State Constitution. School districts may also be eligible for special categorical and grant funding from State and federal government programs.

As part of the State Budget for Fiscal Year 2013-14 (the “2013-14 State Budget”), State Assembly Bill 97 (Stats. 2013, Chapter 47) (“AB 97”) was enacted to establish a new system for funding State school districts, charter schools and county offices of education by the implementation of the Local Control Funding Formula or LCFF. This formula replaced the 40-year revenue limit funding system for determining State apportionments and the majority of categorical programs. Subsequently, AB 97 was amended and clarified by Senate Bill 91 (Stats. 2013 Chapter 49). The LCFF consists primarily of base, supplemental and concentration funding formulas that focus resources based on a school district’s student demographic. Each school district and charter school will receive a per pupil base grant used to support the basic costs of instruction and operations. The implementation of the LCFF is to occur over a period of several years. Beginning in fiscal year 2013-14 an annual transition adjustment has been calculated for each individual school district, equal to such district’s proportionate share of appropriations included in the State Budget. The Governor’s Department of Finance estimates the LCFF funding targets could be achieved in eight years, with LCFF being fully implemented by 2020-21.

The LCFF includes the following components:

• An average base grant for each local education agency equivalent to $7,643 per unit of ADA (by the end of the implementation period). This amount includes an adjustment of 10.4% to the base grant to support lowering class sizes in grades K-3, and an adjustment of 2.6% to reflect the cost of operating career technical education programs in high schools. It should be noted that the authorizing LCFF statute, AB 97, provides for a differentiated base grant amount according to four different grade spans: K-3, 4-6, 7-8, and 9-12. Unless otherwise collectively bargained for, following full implementation of the LCFF, school districts must maintain an average class

Appendix B Page 8

enrollment of 24 or fewer students in grades K-3 at each school site by the target year so as to continue receiving its adjustment to the K-3 base grant.

• A 20% supplemental grant for students classified as English learners (“EL”), those eligible to receive a free or reduced price meal (“FRPM”) and foster youth, to reflect increased costs associated with educating those students. These supplemental grants are only attributed to each eligible student once, and the total student population eligible for the additional funding is known as an “unduplicated count.”

• An additional concentration grant equal to 50% of a local education agency’s base grant, based on the number of unduplicated EL, FRPM and foster youth served by the local agency that comprise more than 55% of the school district’s or charter school’s total enrollment.

Of the more than $25 billion in funding to be invested through the LCFF over the next eight

years, the vast majority of new funding will be provided for base grants. Specifically, of every dollar invested through the LCFF, 84 cents will go to base grants, 10 cents will go to supplemental grants, and 6 cents will go to concentration grants. Under the 2013-14 State Budget, the target average base grant was $7,643, which was an increase of $2,375 from the prior year’s average revenue limit. Base grants are adjusted for cost-of-living increases by applying the implicit price deflator for government goods and services. Following full implementation of the LCFF, the provision of COLAs will be subject to appropriation for such adjustment in the annual State budget. The differences among base grants are linked to differentials in Statewide average revenue limit rates by district type, and are intended to recognize the generally higher costs of education at higher grade levels. For certain school districts that would have received greater funding levels under the prior revenue limit system, the LCFF provides for a permanent economic recovery target (“ERT”) add-on, equal to the difference between the revenue limit allocations such districts would have received under the prior system in Fiscal Year 2020-21, and the target LCFF allocations owed to such districts in the same year. To derive the projected funding levels, the LCFF assumes the discontinuance of deficit revenue limit funding and restoration of categorical funding to pre- recession levels. The sum of a school district’s adjusted base, supplemental and concentration grants will be multiplied by such district’s Second Principal Apportionment (P-2) ADA for the current or prior year, whichever is greater (with certain adjustments applicable to small school districts). This funding amount, together with categorical block grant add-ons, will yield a school district’s total LCFF allocation. Generally, the amount of annual State apportionments received by a school district will amount to the difference between such total LCFF allocation and the individual school district’s share of applicable local property taxes allocations. Most school districts receive a significant portion of their funding from such State apportionments. As a result, decreases in State revenues in a particular year may significantly affect appropriations made by the State Legislature to school districts.

The new legislation includes a “hold harmless” provision which provides that a school district or charter school will maintain total revenue limit and categorical funding at its Fiscal Year 2012-13 level, unadjusted for changes in ADA, or cost of living adjustments.

A summary of the target LCFF funding amounts for California school districts and charter schools based on grade levels and targeted students classified as English learners, those eligible to receive a free or reduced price meal, foster youth, or any combination of these factors (“unduplicated” count) is shown below:

Appendix B Page 9

CALIFORNIA SCHOOL DISTRICTS AND CHARTER SCHOOLS GRADE SPAN FUNDING AT FULL LCFF IMPLEMENTATION

LOCAL CONTROL TARGET FUNDING FORMULA 2016-17

Grade Levels

2015-16 Base Grants

per ADA

2016-17 COLA (0.00%)

Grade Span Adjustments

2016-17 Grant/Adjusted

Base Grant per ADA

TK-3 $ 7,083 $ - $737 $ 7,820 4-6 7,189 - — 7,189 7-8 7,403 - — 7,403

9-12 8,578 - 223 8,801 Source: California Department of Education

Beginning July 1, 2015, school districts are required to develop a three-year Local Control and

Accountability Plan (each, a “LCAP”). County Superintendent of Schools and the State Superintendent of Public Instruction will review and provide support to school districts and county offices of education under their jurisdiction. In addition, the 2013-14 State budget created the California Collaborative for Education Excellence (the “Collaborative”) to advise and assist school districts, county offices of education, and charter schools in achieving the goals identified in their plans. The State Superintendent of Public Instruction may direct the Collaborative to provide additional assistance to any district, county office, or charter school. For those entities that continue to struggle in meeting their goals, and when the Collaborative indicates that additional intervention is needed, the State Superintendent of Public Instruction has authority to make changes to school district or county office’s local plan. For charter schools, the charter authorizer will be required to consider revocation of a charter if the Collaborative finds that the inadequate performance is so persistent and acute as to warrant revocation. The State will continue to measure student achievement through statewide assessments, produce an Academic Performance Index for schools and subgroups of students, determine the contents of the school accountability report card, and establish policies to implement the federal accountability system.

Federal Sources. The federal government provides funding for several District programs, including

special education programs, programs under the Educational Consolidation and Improvement Act, and specialized programs such as Education for Economic Security, and the free and reduced lunch program.

Other State Sources. In addition to LCFF revenues, the District receives substantial other State

revenues. The LCFF replaced most of the State categorical program funding that existed prior to Fiscal Year 2013-14. Categorical funding for certain programs was excluded from the LCFF, and school districts continue to receive restricted State revenues to fund these programs. These other State revenues are primarily restricted revenue funding items such as the Special Education Master Plan, Economic Impact Aid, and Tier 3 Funding.

Other State revenues include the California State Lottery (the “Lottery”), which was established

by a constitutional amendment approved in the November 1984 general election. Lottery revenues must be used for the education of students and cannot be used for non-instructional purposes such as real property acquisition, facility construction, or the financing of research.

Appendix B Page 10

Other Local Sources. In addition to property taxes, the District receives additional local revenues from items such as leases and rentals, interest earnings, transportation fees, interagency services, and other local sources. District Expenditures

The largest part of each school district’s general fund budget is used to pay salaries and benefits of certificated (credentialed teaching) and classified (non-instructional) employees. Changes in salary and benefit expenditures from year to year are generally based on changes in staffing levels, negotiated salary increases, and the overall cost of employee benefits.

Labor Relations. Currently the District employs 298.8 full-time equivalent (FTE) certificated

employees, and 258.0 FTE classified employees and 72.0 FTE management employees. There are two formal bargaining organizations operating in the District, the Lawndale Teachers Association (for which 298.8 District employees are members) and the Lawndale Federation of Classified Employees (for which 258.0 District employees are members).

Retirement Programs

Information set forth below regarding the District’s retirement programs has been obtained from the

District’s most recent audited financial statements, included here as APPENDIX C. The information regarding the District’s retirement programs are believed to be reliable but are not guaranteed as to accuracy or completeness, and should not be constructed as a representation by either the District or the Underwriter.

Qualified employees are covered under multiple-employer contributory retirement plans

maintained by agencies of the State of California. Certificated employees are members of the California State Teachers’ Retirement System (CalSTRS), and classified employees are members of the California Public Employees’ Retirement System (CalPERS).

California State Teachers’ Retirement System (CalSTRS)

Plan Description. Teaching-certified employees of the District are provided with pensions through the State Teachers’ Retirement Plan (STRP) – a cost-sharing multiple employer defined benefit pension plan administered by the California State Teachers’ Retirement System (CalSTRS). The Teachers’ Retirement Law (California Education Code Section 22000 et seq.), as enacted and amended by the California Legislature, established this plan and CalSTRS as the administrator. The benefit terms of the plans may be amended through legislation. CalSTRS issues a publicly available financial report that can be obtained at http://www.calstrs.com/comprehensive-annual-financial-report. The information presented on such website, however, is not incorporated herein by reference.

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

CalSTRS 2% at 60 (certified employees hired on or before December 31, 2012) - Eligible for normal retirement at age 60, with a minimum of five years of credited service. The normal retirement benefit is equal to 2.0 percent of final compensation for each year of credited service. Early retirement options are available at age 55 with five years of credited service or as early as age 50 with 30 years of credited service. The age factor for retirements after age 60 increases with each quarter year of age to 2.4 percent at age 63 or older. Members who have 30

Appendix B Page 11

years or more of credited service receive an additional increase of up to 0.2 percent to the age factor, known as the career factor. The maximum benefit with the career factor is 2.4 percent of final compensation.

CalSTRS calculates retirement benefits based on a one-year final compensation for

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

CalSTRS 2% at 62 (certified employees hired on or after January 1, 2013) - Eligible for normal retirement at age 62, with a minimum of five years of credited service. The normal retirement benefit is equal to 2.0 percent of final compensation for each year of credited service. An early retirement option is available at age 55. The age factor for retirement after age 62 increases with each quarter year of age to 2.4 percent at age 65 or older.

All CalSTRS 2% at 62 members have their final compensation based on their highest

average annual compensation earnable for three consecutive years of credited service.

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

A summary of statutory contribution rates and other sources of contributions to the Defined

Benefit Program are as follows:

Members - Under CalSTRS 2% at 60, the member contribution rate was 8.15 percent of applicable member earnings for fiscal year 2014-15. Under CalSTRS 2% at 62, members contribute 50 percent of the normal cost of their retirement plan, which resulted in a contribution rate of 8.15 percent of applicable member earnings for fiscal year 2014-15.

In general, member contributions cannot increase unless members are provided with

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

Effective July 1, 2014, with the passage of AB 1469, member contributions for those

under the 2% at 60 benefit structure increase from 8.0 percent to a total of 10.25 percent of applicable member earnings, phased in over the next three years. For members under the 2% at 62 benefit structure, contributions will increase from 8.0 percent to 9.205 percent of applicable member earnings, again phased in over three years, if there is no change to normal cost.

Appendix B Page 12

Employers - 8.88 percent of applicable member earnings. In accordance with AB 1469, employer contributions will increase from 8.25 percent to a

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

The CalSTRS employer contribution rate increases effective for fiscal year 2015-16

through fiscal year 2045-46 are summarized in the table below:

CALSTRS EMPLOYER CONTRIBUTION RATE SUMMARY


Fiscal Year Prior Rate Increase Total FY2015-16 8.25% 4.33% 12.58% FY2016-17 8.25 6.18 14.43 FY2017-18 8.25 8.03 16.28 FY2018-19 8.25 9.88 18.13 FY2019-20 8.25 10.85 19.10

-- -- -- -- FY2046-47 8.25 n/a(1)

Source: CALSTRS (1) Increase from prior rate ceases in fiscal year 2046-47.

The District contributed $3,262,886 to the plan for the fiscal year ended June 30, 2016. State - 5.954 percent of the members' creditable earnings from the fiscal year ending in

the prior calendar year. Additionally, beginning October 1, 1998, a statutory contribution rate of 0.524 percent,

adjustable annually in 0.25 percent increments up to a maximum of 1.505 percent, of the creditable earnings from the fiscal year ending in the prior calendar year per Education Code Section 22955(b). This contribution is reduced to zero if there is no unfunded actuarial obligation and no normal cost deficit for benefits in place as of July 1, 1990. Based on the actuarial valuation, as of June 30, 2012 there was no normal cost deficit, but there was an unfunded obligation for benefits in place as of July 1, 1990. As a result, the state was required to make quarterly payments starting October 1, 2013, at an additional contribution rate of 1.024 percent. As of June 30, 2014, the state contributed $200.7 million of the $267.6 million total amount for fiscal year 2013-14. As a result of AB 1469, the fourth quarterly payment of $66.9 million was included in an increased first quarter payment of $94 million for the 2014-15 fiscal year, which was transferred on July 1, 2014.

In accordance with AB 1469, the portion of the state appropriation under Education Code

Section 22955(b) that is in addition to the 2.017 percent has been replaced by section 22955.1(b)

Appendix B Page 13

in order to fully fund the benefits in effect as of 1990 by 2046. The additional state contribution will increase from 1.437 percent in 2014-15 to 4.311 percent in 2016-17. The increased contributions end as of fiscal year 2046- 2047.

The CalSTRS state contribution rates effective for fiscal year 2015-16 and beyond are

summarized in the table below:

CALSTRS STATE CONTRIBUTION RATE SUMMARY


Effective Date Prior Rate

AV 1469 Increase For 1990 Benefit

Structure SBMA

Funding

Total State Appropriation to DB Program

FY2015-16 2.017% 4.311% 2.50% 8.828% FY2016-17 to FY2045-46 2.017 4.311(1) 2.50(1) 8.828(1)

FY2046-47 and thereafter

2.017 - 2.50(1) 4.571(1)

Source: CALSTRS (1) The new legislation also gives CalSTRS limited authority to adjust state contribution rates from July 1, 2017, through June

2046 in order to eliminate the remaining unfunded actuarial obligation associated with the 1990 benefit structure. The board cannot increase the rate by more than 0.50 percent in a fiscal year, and if there is no unfunded actuarial obligation, the contribution rate imposed to pay for the 1990 benefit structure shall be reduced to O percent. Rates in effect prior to July 1, 2014, are reinstated if necessary to address any remaining 1990 unfunded actuarial obligation from July 1, 2046, and thereafter.

Pension Liabilities, Pension Expense, and Deferred Outflows of Resources and Deferred Inflows of

Resources Related to Pensions. At June 30, 2016 the District reported a liability of $38,749,301 for its proportionate share of the net pension liability for CalSTRS. The net pension liability was measured as of June 30, 2015, and the total pension liability used to calculate the net pension liability was determined by applying update procedures to an actuarial valuation as of June 30, 2014. The District's proportion of the net pension liability was based on a projection of the District's and the State of California’s (non-employer contributing entity) long-term share of contributions to the pension plan relative to the projected contributions of all participating school districts and the state, actuarially determined. At June 30, 2016, the District's proportion of contributions was 0.0576 percent.

Appendix B Page 14

For the year ended June 30, 2016, the District recognized pension expense of 3,136,143. In addition, the District recognized revenue and pension expense of $1,587,499 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:

CALSTRS

DEFERRED FLOW OF RESOURCES Fiscal Year 2015-16

Deferred Outflows

of Resources Deferred Inflows

of Resources Difference between expected and actual earnings on plan investments $ - $ 6,211,779 Net change in proportionate share of net pension liability 992,474 - Difference between projected and actual earnings on plan investments 3,053,082 - Differences between expected and actual experience - 647,510 Contributions made subsequent to measurement date 3,262,886 -

Total 7,308,442 6,859,289 Source: Lawndale Elementary School District 2015-16 Audited Financial Statements.

Additional Information Concerning CalSTRS, Actuarial Methods and Assumptions, Discount Rate. For information concerning CalSTRS, descriptions of the actuarial methods and assumptions, and an explanation of the discount rate used by CalSTRS please See APPENDIX C—AUDITED FINANCIAL STATEMENTS OF THE DISTRICT FOR THE FISCAL YEAR ENDED JUNE 30, 2016, Note 12. California Public Employees’ Retirement System (CalPERS)

Plan Description. 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 CalPERS website under Forms and Publications at: https://www.calpers.ca.gov/page/forms-publications.

Benefits Provided. The benefits for the defined benefit plans are based on members' years of

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

Contributions. The benefits for the defined benefit pension plans are funded by contributions from

members and employers, and earnings from investments. Member and employer contributions are a percentage of applicable member compensation. Member contribution rates are defined by law and depend on the respective employer's benefit formulas. Employer contribution rates are determined by periodic actuarial valuations or by state statute. Actuarial valuations are based on the benefit formulas and employee groups of each employer. Employer contributions, including lump sum contributions made

Appendix B Page 15

when agencies first join the PERF, are credited with a market value adjustment in determining contribution rates.

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

Required contribution rates for active plan members and employers as a percentage of payroll for the year ended June 30, 2016 were as follows:

Members - The member contribution rate was 6.0 or 7.0 percent of applicable member

earnings for fiscal year 2015-16. Employers - The employer contribution rate was 11.771 percent of applicable member

earnings. The District contributed $1,312,191 to the plan for the fiscal year ended June 30, 2016. Pension Liabilities, Pension Expense, and Deferred Outflows of Resources and Deferred Inflows of

Resources Related to Pensions. At June 30, 2016, the District reported a liability of $13,460,371 for its proportionate share of the net pension liability. The net pension liability was measured as of June 30, 2015. The District's proportion of the net pension liability was based on the District's share of contributions to the pension plan relative to the contributions of all participating school Districts. At June 30, 2016, the District's proportion was 0.0913 percent.

For the year ended June 30, 2016, the District recognized pension expense of $1,345,901. Additional Information Concerning CalPERS, Actuarial Methods and Assumptions, Discount Rate.

For information concerning CalPERS, descriptions of the actuarial methods and assumptions, and an explanation of the discount rate used by CalPERS please See APPENDIX C—AUDITED FINANCIAL STATEMENTS OF THE DISTRICT FOR THE FISCAL YEAR ENDED JUNE 30, 2016, Note 12.

Recent Actions by CalPERS. On February 14, 2012, the CalPERS Board of Administration voted to

reduce its discount rate, which is attributable to its expected price inflation and investment rate of return (net of administrative expenses), from 7.75% to 7.5%. As a result of such discount rate decrease, among other things, (i) the amounts of CalPERS member state and schools employer contributions will increase by 1.2 to 1.6% for Miscellaneous plans and 2.2 to 2.4% for Safety plans beginning fiscal year 2012-13 and (ii) the amounts of CalPERS member public agency contributions will increase by 1 to 2% for Miscellaneous plans and 2 to 3% for Safety plans beginning fiscal year 2013-14.

The CalPERS Board adjustment has been undertaken in order to address underfunding of the CalPERS funds, which arose from significant losses incurred as a result of the economic crisis arising in 2008 and persists due to a slower than anticipated, subsequent economic recovery. The City is unable to predict what the amount of CalPERS liabilities will be in the future, or the amount of the CalPERS contributions which the City may be required to make.

At its April 17, 2013 meeting, the CalPERS Board of Administration approved a recommendation

to change the CalPERS amortization and smoothing policies. Prior to this change, CalPERS employed an amortization and smoothing policy which spread investment returns over a 15-year period with experience

Appendix B Page 16

gains and losses paid for over a rolling 30-year period. After this change, CalPERS will employ an amortization and smoothing policy that will pay for all gains and losses over a fixed 30-year period with the increases or decreases in the rate spread directly over a 5-year period.

The new amortization and smoothing policy were used for the first time in the June 30, 2013 actuarial valuations. These valuations were performed in the fall of 2014 and set employer contribution rates for the fiscal year 2015-16.

On February 20, 2014, the CalPERS Board of Administration adopted new mortality and retirement assumptions as part of a regular review of demographic experience. Key assumption changes included longer post-retirement life expectancy and earlier retirement ages. The impact of the assumption changes will be phased in over five years, with a twenty-year amortization, beginning in the 2016-17 Fiscal Year.

According to CalPERS, the current amortization and smoothing policy was designed to reduce

volatility in employer contribution rates, and, although the policy accomplished this goal fairly well since its adoption, a number of concerns have developed:

• The use of an actuarial value of assets corridor can lead to significant single year increases

to rates in years when there are large investment losses.

• The use of long asset smoothing periods and long rolling amortization periods result in slow progress toward full funding.

• The use of an actuarial value of assets requires the disclosure of two different funded statuses and unfunded liability numbers in actuarial valuation reports. This adds confusion and inhibits transparency.

• The use of rolling amortization and long asset smoothing periods makes it difficult for employers to predict when contribution rates will peak and how high that peak will be.

• The use of rolling amortization and asset smoothing periods may result in additional calculations for the new accounting standards. These calculations would be avoided with a quicker funded status recovery.

According to CalPERS, the adoption of the new smoothing and amortization policies will change

future employer contribution rates, as follows:

• Funding levels will improve, which will reduce the funding level risk.

• Local agencies’ plans will experience more rate volatility in normal years, but a much reduced chance of very large rate increases in years when there are large investment losses.

• Contribution rates in the near term will increase.

• Long-term contribution rates will be lower.

• There will be greater transparency about the timing and impact of future employer contribution rate changes.

• The new policy eliminates the need for an actuarial value of assets. As a result, there will be only one funded status and unfunded liability in actuarial reports.

Appendix B Page 17

• There will be less confusion when the new accounting standards are implemented since there will be no need for extra liability calculations.

California Public Employees’ Pension Reform Act of 2013. On September 12, 2012, the Governor

signed into law the California Public Employees’ Pension Reform Act of 2013 (“PEPRA”), which impacted various aspects of public retirement systems in the State, including the STRS and PERS programs. In general, PEPRA (i) increased the retirement age for public employees depending on job function, (ii) capped the annual pension benefit payouts for public employees hired after January 1, 2013, (iii) required public employees hired after January 1, 2013 to pay at least 50% of the costs of their pension benefits (as described in more detail below), (iv) required final compensation for public employees hired after January 1, 2013 to be determined based on the highest average annual pensionable compensation earned over a period of at least 36 consecutive months, and (v) attempted to address other perceived abuses in the public retirement systems in the State. PEPRA applies to all public employee retirement systems in the State, except the retirement systems of the University of California, and charter cities and charter counties whose pension plans are not governed by State law. PEPRA’s provisions went into effect on January 1, 2013 with respect to new State, school, and city and local agency employees hired on or after that date; existing employees who are members of employee associations, including employee associations of the District, have a five-year window to negotiate compliance with PEPRA through collective bargaining.

PERS has predicted that the impact of PEPRA on employees and employers, including the

District and other employers in the PERS system, will vary, based on each employer’s current level of benefits. As a result of the implementation of PEPRA, new members must pay at least 50% of the normal costs of the plan, which can fluctuate from year to year. To the extent that the new formulas lower retirement benefits, employer contribution rates could decrease over time as current employees retire and employees subject to the new formulas make up a larger percentage of the workforce. This change would, in some circumstances, result in a lower retirement benefit for employees than they currently earn.

With respect to the STRS pension program, employees hired after January 1, 2013 will pay the

greater of either (1) fifty percent of the normal cost of their retirement plan, rounded to the nearest one-quarter percent, or (2) the contribution rate paid by then-current members (i.e., employees in the STRS plan as of January 1, 2013). The member contribution rate could be increased from this level through collective bargaining or may be adjusted based on other factors. Employers will pay at least the normal cost rate, after subtracting the member’s contribution.

The District is unable to predict the amount of future contributions it will have to make to PERS

and STRS as a result of the implementation of PEPRA, and as a result of negotiations with its employee associations, or, notwithstanding the adoption of PEPRA, resulting from any legislative changes regarding the PERS and STRS employer contributions that may be adopted in the future. Other Post-Employment Benefits (OPEB)

Plan Description. The Postemployment Benefits Plan (the “Plan”) is a single-employer defined benefit healthcare plan administered by the District. The Plan provides medical and dental insurance benefits to eligible retirees and their spouses. Membership of the Plan consists of 53 retirees and beneficiaries currently receiving benefits, terminated Plan members entitled to, but not yet receiving benefits, and 371 active Plan members.

Appendix B Page 18

Contribution Information. The contribution requirements of plan members and the District are established and may be amended by the District and applicable groups. The required contribution is based on projected pay-as-you-go financing requirements. For fiscal year 2015-2016, the District contributed $243,487 to the Plan, all of which was used for current premiums which represented 100 percent of total premiums.

Annual 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 of GASB 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 (“UAAL”) (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:

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:

OPEB OBLIGATIONS Fiscal Year 2015-16

Annual required contribution $ 643,175 Interest on net OPEB obligation 101,878 Adjustment to annual required contribution (124,972)

Annual OPEB cost (expense) 620,081 Contributions made (243,487)

Increase in net OPEB obligation 376,594 Net OPEB obligation, beginning of the year $2,546,959 Net OPEB obligation, end of the year $2,923,553

Source: Lawndale Elementary School District 2015-16 Audited Financial Statements.

Trend information for annual OPEB cost, the percentage of annual OPEB cost contributed to the

Plan, and the net OPEB asset/obligation is as follows:

HISTORICAL OPEB OBLIGATIONS Fiscal Years 2012-13 to 2014-15

Annual Actual Percentage Net OPEB

Fiscal Year OPEB Cost Contribution Contributed Obligation 2013-14 $611,452 $229,628 38% $2,161,018 2014-15 $604,644 $218,703 36% $2,546,959 2015-16 $620,081 $243,487 39% $2,923,553

Source: Lawndale Elementary School District 2015-16 Audited Financial Statements.

Actuarial valuations of an ongoing plan involve estimates of the value of reported amounts and assumptions about the probability of occurrence of events far into the future. Examples include assumptions about future employment, mortality, and the healthcare cost trend. Amounts determined regarding the funded status of the plan and the annual required contributions of the employer are subject

Appendix B Page 19

to continual revision as actual results are compared with past expectations and new estimates are made about the future.

See also APPENDIX C—AUDITED FINANCIAL STATEMENTS OF THE DISTRICT FOR

THE FISCAL YEAR ENDED JUNE 30, 2016, Note 10.

District Debt Structure

The following table shows the District’s outstanding general obligation bonds.

ISSUED AND OUTSTANDING GENERAL OBLIGATION BONDED DEBT

As of March 21, 2017

Dated Date

Series

Final

Maturity

Amount of Original

Issue

Amount Outstanding

(as of 3/21/17) 8/25/10 1998 General Obligation Bonds (Series C) 8/1/27 $ 3,000,000 $ 3,000,000 8/25/10 2010 General Obligation Refunding Bonds 8/1/28 13,170,000 9,530,000 3/21/17 2016 General Obligation Bonds (Series A) 8/1/46 10,000,000 10,000,000 3/21/17 2017 General Obligation Refunding Bonds 8/1/32 5,080,000 5,080,000

Total $31,250,000 $27,610,000

Appendix B Page 20

The following table shows the District’s annual requirements to amortize its outstanding general obligation bonds, assuming no optional redemption:

AGGREGATE ANNUAL DEBT SERVICE REQUIREMENTS

FOR ALL OUTSTANDING BONDS

As of March 21, 2017

Bond Year

Ended 1998 2010 2016 2017 Aug. 1 Series C Refunding Series A Refunding Total 2017 $ 1,136,487.50 $ 119,475.00 $ 152,034.55 $ 121,659.72 $ 1,529,656.77 2018 1,130,887.50 169,475.00 846,018.76 169,550.00 2,315,931.26 2019 1,129,287.50 212,975.00 1,119,768.76 169,550.00 2,631,581.26 2020 1,129,687.50 260,125.00 363,768.76 169,550.00 1,923,131.26 2021 1,125,887.50 315,775.00 363,768.76 169,550.00 1,974,981.26 2022 1,120,262.50 372,575.00 363,768.76 169,550.00 2,026,156.26 2023 1,124,262.50 416,775.00 363,768.76 169,550.00 2,074,356.26 2024 1,124,012.50 473,775.00 363,768.76 169,550.00 2,131,106.26 2025 1,130,012.50 522,975.00 363,768.76 169,550.00 2,186,306.26 2026 576,662.50 533,425.00 363,768.76 814,550.00 2,288,406.26 2027 579,987.50 587,600.00 363,768.76 813,750.00 2,345,106.26 2028 578,587.50 — 363,768.76 811,950.00 1,754,306.26 2029 — — 463,768.76 811,100.00 1,274,868.76 2030 — — 458,768.76 814,650.00 1,273,418.76 2031 — — 478,768.76 816,525.00 1,295,293.76 2032 — — 492,518.76 816,662.50 1,309,181.26 2033 — — 520,268.76 — 520,268.76 2034 — — 536,268.76 — 536,268.76 2035 — — 549,093.76 — 549,093.76 2036 — — 567,843.76 — 567,843.76 2037 — — 583,600.00 — 583,600.00 2038 — — 599,600.00 — 599,600.00 2039 — — 617,200.00 — 617,200.00 2040 — — 1,013,600.00 — 1,013,600.00 2041 — — 1,043,600.00 — 1,043,600.00 2042 — — 1,076,200.00 — 1,076,200.00 2043 — — 1,096,200.00 — 1,096,200.00 2044 — — 1,129,000.00 — 1,129,000.00 2045 — — 1,164,000.00 — 1,164,000.00 2046 — — 1,196,000.00 — 1,196,000.00 Total $11,886,025.00 $3,984,950.00 $18,978,040.99 $2,097,247.22 $36,946,263.21

Appendix B Page 21

2016-17 State Budget

Information regarding the State Budget is regularly available at various State-maintained websites. The Fiscal Year 2016-17 State Budget further described below may be found at the website of the Department of Finance, www.dof.ca.gov, under the heading “California Budget.” Additionally, an impartial analysis of the State’s Budgets is posted by the Office of the Legislative Analyst at www.lao.ca.gov. The information referred to is prepared by the respective State agency maintaining each website and not by the District, and the District takes no responsibility for the continued accuracy of the internet addresses or for the accuracy, completeness or timeliness of information posted there, and such information is not incorporated herein by these references.

Fiscal Year 2016-17 Budget. Governor Edmund G. Brown Jr. signed the fiscal year 2016-17 State

budget (the “2016-17 State Budget”) on June 27, 2016. The 2016-17 State Budget proposes a multiyear plan that is balanced, while paying off budgetary debt from past years and setting aside reserves. The 2016-17 State Budget projects general fund revenues in the amount of $117 billion in fiscal year 2015-16 and $120 billion in fiscal year 2016-17. According to the 2016-17 State Budget, the primary reason for such additional revenues is the higher forecast for the personal income tax. Under the 2016-17 State Budget, general fund expenditures for fiscal year 2016-17 are $122 billion.

The 2016-17 State Budget focuses new spending on one-time activities, such as repairing and

replacing aged infrastructure, building affordable housing, and addressing the effectsof the drought. The 2016-17 State Budget begins implementation of raising the state minimum wage to $15 per hour by providing funding for an increase to $10.50 per hour. It implements the managed care financing package passed earlier in 2016, including rate adjustments for community-based providers serving individuals with developmental disabilities.

Rainy Day Fund. The passage of Proposition 2 in 2014 gave the State an opportunity to mitigate

the boom-and-bust budget cycles of the past two decades. Recent budget shortfalls had been driven by making ongoing commitments based upon temporary spikes in revenues, primarily from capital gains. Under Proposition 2, spikes in capital gains are used to save money for the next recession and to pay down the state’s debts and liabilities. Proposition 2 established a constitutional goal of having 10 percent of tax revenues in the Rainy Day Fund.

The 2016-17 State Budget funded the constitutionally required deposit into the Rainy Day

Fund($1.3 billion) and supplements this with an additional $2 billion deposit—bringing the fund’s balance to $6.7 billion in fiscal year 2017-18, or 54 percent of its goal. The 2016-17 State Budget also pays down debts and liabilities by a total of $1.3 billion from Proposition 2 funds.

Education. State funding for education has been at all-time highs since 2012-13 and is expected to

grow to $71.9 billion in fiscal year 2016-17, an increase of $24.6 billion in five years (52 percent). For K-12 schools, funding levels will increase by over $3,600 per student in 2016-17over

2011-12 levels. This reinvestment has given the state an opportunity to correct historical inequities in school district funding with continued implementation of the Local Control Funding Formula. The 2016-17 State Budget provides $2.9 billion in new funding, bringing the formula’s implementation to 96 percent complete.

The 2016-17 State Budget also invests in the State’s higher education system to maintain the

quality and affordability of one of California’s greatest strengths. The 2016-17 State Budget keeps

Appendix B Page 22

tuitionat 2011-12 levels. It also provides significant new one-time and ongoing funds for the University of California and the California State University.

Counteracting the Effects of Poverty. The State has an extensive safety net for the State’s neediest

residents who live in poverty. Since 2012, the General Fund has incurred new poverty-focused obligations totaling about $20 billion ($10.8 billion of which will be paid for through Proposition 98 funds). The 2016-17 State Budget includes the following new State efforts:

• The implementation of a $10.50 per hour minimum wage beginning on January 1, 2017.

• The first state cost-of-living increase for Supplemental Security Income/State

Supplementary Payment (SSI/SSP) recipients since 2005.

• The repeal of the maximum family grant rule in CalWORKs, which denied aid to children who were born while their parents were receiving aid.

• Limiting asset recovery from the estates of deceased Medi-Cal recipients to the extent

federally required.

Strengthening Infrastructure. The 2016-17 State Budget includes over $2 billion in funds for various infrastructure improvements, including $1.3 billion General Fund for improving Sacramento office buildings including the State Capitol Annex. The 2016-17 State Budget also includes $688 million ($485 million General Fund) for critical deferred maintenance at levees, state parks, universities, community colleges, prisons, state hospitals, and other state facilities, as well as $270 million in lease-revenue bond authority for local jail facilities.

Reducing the Cost of Housing. The 2016-17 State Budget reflects $3.6 billion in state and federal

funding and award authority for various affordable housing and homelessness programs, including increased funding for CalWORKs rapid rehousing and emergency homeless shelters. Of this amount, the Budget sets aside $400 million General Fund for allocation later in the legislative session for affordable housing programs. The funding will be coupled with the Administration’s proposed legislation requiring ministerial “by right” land use entitlements for multifamily in infill housing developments that include affordable housing. This will help constrain development costs, improve the pace of housing production, and encourage an increase in housing supply. In addition, legislation will authorize a $2 billion bond from a portion of future Proposition 63 mental health revenues to develop and administer homelessness and affordable housing programs for the mentally ill.

Addressing Climate Change. The California Global Warming Solutions Act of 2006 (AB 32) set

California’s initial greenhouse gas emission reduction goals, and directed the state to maintain and continue reductions beyond 2020. California adopted several ambitious policies in 2015 thatwill further advance clean energy reduce greenhouse gas emissions. Over multiple years, the Cap and Trade program will help the state transform its communities—particularly those disadvantaged ones—into innovative, sustainable economic centers.

Appendix B Page 23

2016-17 State Budget Provisions Specific to K through 12 Education The 2016-17 State Budget includes total funding of $88.3 billion ($51.6 billion General Fund and

$36.7 billion other funds) for all K-12 education programs. Proposition 98. Proposition 98 is a voter-approved constitutional amendment that guarantees

minimum funding levels for K-12 schools and community colleges. The guarantee, which went into effect in the 1988-89 fiscal year, determines funding levels according to multiple factors including the level of funding in 1986-87, General Fund revenues, per capita personal income, and school attendance growth or decline. The Local Control Funding Formula is the primary mechanism for distributing funding to support all students attending K-12 public schools in California.

The 2016-17 State Budget includes Proposition 98 funding of $71.9 billion for 2016-17, an

increase of $3.5 billion over the 2015-16 State Budget level. When combined with increases of $1.5 billion in 2014-15 and 2015-16 as well as other one-time savings and adjustments in those years, the 2016-17 State Budget provides a $5.9 billion increased investment in K-14 education. Since 2011-12, Proposition 98 funding for K-12 education has grown by more than $21.7 billion, representing an increase of more than $3,600 per student.

The Proposition 98 maintenance factor—an indicator of past reductions made to schools and

community colleges—totaled nearly $11 billion as recently as 2011-12. The 2016-17 State Budget reduces this obligation to $908 million.

Significant K-12 Budget Adjustments in the 2016-17 State Budget.

• Local Control Funding Formula—An increase of more than $2.9 billion Proposition 98 General Fund to continue the State’s landmark transition to the Local Control Funding Formula. This formula commits most new funding to districts serving English language learners, students from low-income families, and youth in foster care. This increase will bring the formula to 96 percent of full implementation.

• College Readiness Block Grant—An increase of $200 million one-time Proposition 98 General Fund for grants to school districts and charter schools serving high school students to provide additional services that support access and successful transition to higher education. These funds can be spent over the next three years. Allocation of the funding will be based on the number of students in grades 9 through 12 that are English-learners, low-income, or foster youth, with no school district or charter school receiving less than $75,000. The University of California will work to increase admissions of students who were enrolled in schools in which enrollment of English-learners, low-income students, or foster youth is greater than 75 percent of total enrollment.

• Teacher Workforce—A combined increase of $35 million one-time General Fund ($10 million

non-Proposition 98 and $25 million Proposition 98) to fund several programs aimed at recruiting additional teachers and streamlining teacher preparation programs:

o Integrated Teacher Preparation Grant Program—An increase of $10 million one-time

non-Proposition 98 General Fund for the Integrated Teacher Preparation Grant Program to provide competitive grants to colleges and universities to develop or improve four-year

Appendix B Page 24

integrated teacher credential programs enabling credential candidates to receive both a teaching credential and a bachelor’s degree.

o Classified School Employees Credentialing Program—An increase of $20 million one-time

Proposition 98, available for five years, to establish the California Classified School Employees Credentialing Program, and provide grants to K-12 local educational agencies to support recruitment of non-certificated school employees to participate in a teacher preparation program and become certificated classroom teachers in California public schools.

o California Center on Teacher Careers—An increase of $5 million one-time Proposition 98 General Fund for a multi-year competitive grant to a local educational agency to establish and operate the California Center on Teaching Careers to recruit qualified and capable individuals to the teaching profession. The center will host a referral database for teachers seeking employment, develop and distribute recruitment publications; conduct outreach activities to high school and college students; provide statewide public service announcements related to teacher recruitment; and provide prospective teachers information on credential requirements, financial aid, and loan assistance programs.

• Charter School Start Up Grants—An increase of $20 million one-time Proposition 98 General

Fund to support operational startup costs for new charter schools in 2016And 2017, which will help offset the loss of federal funding previously available for this purpose. These funds will be available for distribution after all current federal funding for startup costs has been exhausted.

• California Collaborative for Educational Excellence—An increase of $24 million one-time Proposition 98 General Fund for the California Collaborative for Educational Excellence to: (1) support statewide professional development training on use of the evaluation rubrics by local educational agencies, and (2) implement a pilot program to inform the Collaborative’s long-term efforts related to advising and assisting local educational agencies in improving pupil outcomes. This funding will build local and state capacity to implement a system of continuous improvement in the eight state priority areas upon which the Local Control Funding Formula is based.

• Multi-Tiered Systems of Support—An increase of $20 million one-time Proposition 98 General

Fund to allow local educational agencies to provide services that assist and encourage multi-tiered systems of supports. These services support academic, behavioral, social, and emotional needs and have been successful in improving outcomes for all students. This funding builds upon the $10 million included in the 2015 Budget Act, which was awarded to the Orange County Office of Education to develop guidance and supportive services for schools statewide in implementing these systems.

• Restorative Justice Grants—An increase of $18 million one-time Proposition 98 General Fund for

truancy and dropout prevention grants, consistent with Proposition 47, the Safe Neighborhoods and School Act.

• Safe Drinking Water in Schools—An increase of $9.5 million one-time Proposition 98 General

Fund to create a grant program to improve access to safe drinking water for schools located in isolated and economically disadvantaged areas. The program will be developed and administered by the Water Resources Control Board in consultation with the State Department of Education.

Appendix B Page 25

• K-12 Mandates—An increase of $1.3 billion one-time Proposition 98 General Fund to reimburse

K-12 local educational agencies for the costs of state-mandated programs. These funds, combined with previous years’ investments, will substantially reduce outstanding mandate debt owed to schools, while providing school districts, county offices of education, and charter schools with discretionary resources to support critical investments at the local level. These funds can be used for activities such as deferred maintenance, professional development, induction for beginning teachers, instructional materials, technology, and the implementation of new educational standards. The full summary of the 2016-17 State Budget can be viewed at www.ebudget.ca.gov or

www.dof.ca.gov. Such websites are not incorporated herein by reference. 2017-18 Proposed State Budget

Governor Edmund G. Brown Jr. released his proposed fiscal year 2017-18 State Budget (the “2017-18 Proposed State Budget”) on January 10, 2017. The 2017-18 Proposed State Budget includes a variety of solutions to bring the state’s finances into balance and prevent a projected 2017-18 budget deficit of almost $2 billion. The 2017-18 Proposed State Budget projects general fund revenues in the amount of $118 billion in fiscal year 2016-17 and $124 billion in fiscal year 2017-18, which represents slowing revenue growth as compared to prior years. According to the 2017-18 Proposed State Budget the two main factors causing slowing growth are a revenue forecast that is $5.8 billion lower than expected and a current-year shortfall in the Medi-Cal program. Under the 2017-18 Proposed State Budget general fund expenditures for fiscal year 2017-18 are $122 billion (a decrease of approximately $200 million from fiscal year 2016-17 general fund expenditures), of which $52.2 billion (42.6%) is allocated to K- 12 education.

To prevent the budget deficits and rebuild the state’s operating reserve, the 2017-18 Proposed

State Budget contains three proposed solutions that would result in $3.2 billion in cost savings. These proposals include adjusting Proposition 98 funding ($1.7 billion), recapturing certain 2016-17 allocations ($0.9 billion) related to a $400 million set-aside for affordable housing that was never allocated and a $300 million transfer to modernize state of office buildings planned for 2017-18, and constraints on spending growth ($0.6 billion).

The 2017-18 Proposed State Budget continues to prioritize maintaining a balanced budget for the

long term and fully funding the State’s Rainy Day Fund (the “Rainy Day Fund”). The Rainy Day Fund is expected to reach 63 percent of its target by the end of the fiscal year.

As it relates to K-12 education, the 2017-18 Proposed State Budget provides Proposition 98

funding of $73.5 billion for fiscal year 2017-18, representing a growth of 55 percent ($26.2 billion) over the past six years. Total K-12 Proposition 98 per-pupil expenditures of $10,579 in fiscal year 2016-17 and $10,910 in fiscal year 2017-18. Total per-pupil expenditures from all sources are projected to be $14,822 in fiscal year 2016-17 and $15,216 in fiscal year 2017-18, including funds provided for prior year “settle-up” obligations. However, the 2017-18 Proposed State Budget notes that General Fund tax revenues available to fund the Proposition 98 guarantee have declined by almost $5.4 billion over the prior three-year period.

Appendix B Page 26

California Public school attendance grew in 2013-14 and declined in 2014-15. Attendance grew in 2015-16 but is projected to decline in 2016-17 and again slightly in 2017-18. For 2015-16, K-12 average daily attendance is reported to be 5,971,343, an increase of 11,458 from 2014-15. 2016-17 K-12 average daily attendance is estimated to be 5,958,933, a decrease of 12,410 from 2015-16. For 2017-18, the Budget estimates that K-12 average daily attendance will drop by 645 from the 2016-17 level, to 5,958,288.

The 2017-18 Proposed State Budget projects additional growth of more than $744 million in

Proposition 98 General Fund for school districts and charter schools in 2017-18 to continue their transition to full implementation of the Local Control Funding Formula. The 2017-18 Proposed State Budget also includes reforms and investments relating to higher education, child care, and innovation.

The complete 2017-18 Proposed State Budget is available from the California Department of

Finance website at www.dof.ca.gov. The District can take no responsibility for the continued accuracy of this internet address or for the accuracy, completeness or timeliness of information posted therein, and such information is not incorporated herein by such reference.

Future State Budgets

The District receives a significant portion of its funding from the State. Changes in the revenues received by the State can affect the amount of funding, if any, to be received from the State by the District and other school districts in the State.

The District cannot predict the extent of the budgetary problems the State will encounter in this

Fiscal Year or in any future fiscal years, and, it is not clear what measures would be taken by the State to balance its budget, as required by law. In addition, the District cannot predict the final outcome of current and future State budget negotiations, the impact that such budgets will have on its finances and operations or what actions will be taken in the future by the State Legislature and Governor to deal with changing State revenues and expenditures. Current and future State budgets will be affected by national and State economic conditions and other factors, including the current economic downturn, over which the District has no control.

Supplemental Information Concerning Litigation Against the State of California

In June 1998, a complaint was filed in Los Angeles County Superior Court challenging the authority of the State Controller to make payments in the absence of a final, approved State Budget. The Superior Court judge issued a preliminary injunction preventing the State Controller from making payments including those made pursuant to continuing appropriations prior to the enactment of the State’s annual budget. As permitted by the State Constitution, the Legislature immediately enacted and the Governor signed an emergency appropriations bill that allowed continued payment of various State obligations, including debt service, and the injunction was stayed by the California Court of Appeal, pending its decision.

On May 29, 2003, the California Court of Appeal for the Second District decided the case of

Steven White, et al. v. Gray Davis (as Governor of the State of California), et al. The Court of Appeal concluded that, absent an emergency appropriation, the State Controller may authorize the payment of state funds during a budget impasse only when payment is either (i) authorized by a “continuing appropriation” enacted by the Legislature, (ii) authorized by a self-executing provision of the California

Appendix B Page 27

Constitution, or (iii) mandated by federal law. The Court of Appeal specifically concluded that the provisions of Article XVI, Section 8 of the California Constitution – the provision establishing minimum funding of K-14 education enacted as part of Proposition 98 – did not constitute a self-executing authorization to disburse funds, stating that such provisions merely provide formulas for determining the minimum funding to be appropriated every budget year but do not appropriate funds. The State Controller has concluded that the provisions of the Education Code establishing K-12 and county office revenue limit funding do constitute continuing appropriations enacted by the Legislature and, therefore, the State Controller has indicated that State payments of such amounts would continue during a budget impasse. However, no similar continuing appropriation has been cited with respect to K-12 categorical programs and revenue limit funding for community college districts, and the State Controller has concluded that such payments are not authorized pursuant to a continuing appropriation enacted by the Legislature and, therefore, cannot be paid during a budget impasse. The California Supreme Court granted the State Controller’s Petition for Review on a procedural issue unrelated to continuous appropriations and on the substantive question as to whether the State Controller is authorized to pay State employees their full and regular salaries during a budget impasse. No other aspect of the Court of Appeal’s decision was addressed by the State Supreme Court.

On May 1, 2003, with respect to the substantive question, the California Supreme Court

concluded that the State Controller is required, notwithstanding a budget impasse and the limitations imposed by State law, to timely pay those state employees who are subject to the minimum wage and overtime compensation provisions of the federal Fair Labor Standards Act. The Supreme Court also remanded the preliminary injunction issue to the Court of Appeal with instructions to set aside the preliminary injunction in its entirety.

CONSTITUTIONAL AND STATUTORY PROVISIONS AFFECTING DISTRICT REVENUES AND APPROPRIATIONS

The principal of and interest on the Bonds are payable from the proceeds of an ad valorem tax levied by

the County for the payment thereof. (See “THE BONDS—Security.”) Articles XIIIA, XIIIB, XIIIC and XIIID of the California Constitution, Propositions 98, 111, 218 and 39, and certain other provisions of law discussed below, are included in this section to describe the potential effect of these Constitutional and statutory measures on the ability of the County to levy taxes and of the District to spend tax proceeds and it should not be inferred from the inclusion of such materials that these laws impose any limitation on the ability of the County to levy taxes for payment of the Bonds. The tax levied by the County for payment of the Bonds was approved by the District’s voters in compliance with Article XIIIA, Article XIIIC, and all applicable laws.

Article XIIIA of the California Constitution

Article XIIIA of the State Constitution, adopted and known as Proposition 13, was approved by the voters in June 1978. Section 1(a) of Article XIIIA limits the maximum ad valorem tax on real property to 1% of “full cash value,” and provides that such tax shall be collected by the counties and apportioned according to State law. Section 1(b) of Article XIIIA provides that the 1% limitation does not apply to ad valorem taxes levied to pay interest and redemption charges on (i) indebtedness approved by the voters prior to July 1, 1978, or (ii) bonded indebtedness for the acquisition or improvement of real property approved on or after July 1, 1978, by two-thirds of the votes cast on the proposition, or (iii) bonded indebtedness incurred by a school district or community college district for the construction, reconstruction, rehabilitation or replacement of school facilities or the acquisition or lease of real property

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for school facilities, approved by 55% of the voters of the district, but only if certain accountability measures are included in the proposition.

Section 2 of Article XIIIA defines “full cash value” to mean the county assessor’s valuation of

real property as shown on the fiscal year 1975-76 tax bill, or, thereafter, the appraised value of real property when purchased, newly constructed, or a change in ownership has occurred. The full cash value may be adjusted annually to reflect inflation at a rate not to exceed 2% per year, or to reflect a reduction in the consumer price index or comparable data for the area under taxing jurisdiction, or may be reduced in the event of declining property value caused by substantial damage, destruction or other factors. The Revenue and Taxation Code permits county assessors who have reduced the assessed valuation of a property as a result of natural disasters, economic downturns or other factors, to subsequently “recapture” such value (up to the pre-decline value of the property) at an annual rate higher than 2%, depending on the assessor’s measure of the restored value of the damaged property. The State courts have upheld the constitutionality of this procedure. Legislation enacted by the State Legislature to implement Article XIIIA provides that, notwithstanding any other law, local agencies may not levy any ad valorem property tax except the 1% base tax levied by each county and taxes to pay debt service on indebtedness approved by the voters as described above.

Since its adoption, Article XIIIA has been amended a number of times. These amendments have

created a number of exceptions to the requirement that property be reassessed when purchased, newly constructed or a change in ownership has occurred. These exceptions include certain transfers of real property between family members, certain purchases of replacement dwellings for persons over age 55 and by property owners whose original property has been destroyed in a declared disaster, and certain improvements to accommodate disabled persons and for seismic upgrades to property. These amendments have resulted in marginal reductions in the property tax revenues of the District.

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

Article XIIIA.

Legislation Implementing Article XIIIA

Legislation has been enacted and amended a number of times since 1978 to implement Article XIIIA. Under current law, local agencies are no longer permitted to levy directly any property tax (except to pay voter-approved indebtedness). The 1% property tax is automatically levied by the 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.

That portion of annual property tax revenues generated by increases in assessed valuations within

each tax rate area within a county, subject to redevelopment agency, if any, claims on tax increment and subject to changes in organizations, if any, of affected jurisdictions, is allocated to each jurisdiction within the tax rate area in the same proportion that the total property tax revenue from the tax rate area for the prior year was allocated to such jurisdictions.

Increases of assessed valuation resulting from reappraisals of property due to new construction,

change in ownership or from the annual adjustment not to exceed 2% are allocated among the various jurisdictions in the “taxing area” based upon their respective “situs.” Any such allocation made to a local agency continues as part of its allocation in future years.

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Beginning in fiscal year 1981-82, assessors in California no longer record property values on tax rolls at the assessed value of 25% of market value which was expressed as $4 per $100 of assessed value. All taxable property is now shown at 100% of assessed value on the tax rolls. Consequently, the tax rate is expressed as $1 per $100 of taxable value. All taxable property value included in this Official Statement is shown at 100% of taxable value (unless noted differently) and all tax rates reflect the $1 per $100 of taxable value.

Both the United States Supreme Court and the California State Supreme Court have upheld the

general validity of Article XIIIA.

Article XIIIB of the California Constitution Article XIIIB of the State Constitution, as subsequently amended by Propositions 98 and 111,

respectively, limits the annual appropriations of the State and of any city, county, school district, authority or other political subdivision of the State to the level of appropriations of the particular governmental entity for the prior fiscal year, as adjusted for changes in the cost of living and in population and for transfers in the financial responsibility for providing services and for certain declared emergencies. As amended, Article XIIIB defines

(a) “change in the cost of living” with respect to school districts to mean the

percentage change in California per capita income from the preceding year, and (b) “change in population” with respect to a school district to mean the percentage

change in the average daily attendance of the school district from the preceding fiscal year. For fiscal years beginning on or after July 1, 1990, the appropriations limit of each entity of

government will be the appropriations limit for the 1986-87 fiscal year adjusted for the changes made from that fiscal year pursuant to the provisions of Article XIIIB, as amended.

The appropriations of an entity of local government subject to Article XIIIB limitations include

the proceeds of taxes levied by or for that entity and the proceeds of certain state subventions to that entity. “Proceeds of taxes” include, but are not limited to, all tax revenues and the proceeds to the entity from (a) regulatory licenses, user charges and user fees (but only to the extent that these proceeds exceed the reasonable costs in providing the regulation, product or service), and (b) the investment of tax revenues.

Appropriations subject to limitation do not include (a) refunds of taxes, (b) appropriations for

certain debt service, (c) appropriations required to comply with certain mandates of the courts or the federal government, (d) appropriations of certain special districts, (e) appropriations for all qualified capital outlay projects as defined by the legislature, (f) appropriations derived from certain fuel and vehicle taxes and (g) appropriations derived from certain taxes on tobacco products.

Article XIIIB includes a requirement that all revenues received by an entity of government other

than the State in a fiscal year and in the fiscal year immediately following it in excess of the amount permitted to be appropriated during that fiscal year and the fiscal year immediately following it shall be returned by a revision of tax rates or fee schedules within the next two subsequent fiscal years.

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Article XIIIB also includes a requirement that 50% of all revenues received by the State in a fiscal year and in the fiscal year immediately following it in excess of the amount permitted to be appropriated during that fiscal year and the fiscal year immediately following it will be transferred and allocated to the State School Fund pursuant to Section 8.5 of Article XVI of the State Constitution.

Unitary Property

AB 454 (Chapter 921, Statutes of 1986) provides that revenues derived from most utility property assessed by the State Board of Equalization (“Unitary Property”), commencing with the 1988-89 fiscal year, will be allocated as follows: (1) each jurisdiction will receive up to 102% of its prior year State-assessed revenue; and (2) if county-wide revenues generated from Unitary Property are less than the previous year’s revenues or greater than 102% of the previous year’s revenues, each jurisdiction will share the burden of the shortfall or excess revenues by a specified formula. This provision applies to all Unitary Property except railroads, whose valuation will continue to be allocated to individual tax rate areas.

The provisions of AB 454 do not constitute an elimination of the assessment of any State-assessed

properties nor a revision of the methods of assessing utilities by the State Board of Equalization. Generally, AB 454 allows valuation growth or decline of Unitary Property to be shared by all jurisdictions in a county.

California Lottery

In the November 1984 general election, the voters of the State approved a Constitutional Amendment establishing a California State Lottery, the net revenues (revenues less expenses and prizes) of which shall be used to supplement other moneys allocated to public education. The legislation further requires that the funds shall be used for the education of pupils and students and cannot be used for the acquisition of real property, the construction of facilities or the financing of research.

Allocation of Lottery net revenues is based upon the average daily attendance of each school and

community college district; however, the exact allocation formula may vary from year to year. The District estimates that it will receive $1,079,568 in Lottery aid in fiscal year 2016-17, representing approximately 1% of the District’s general fund revenues. At this time, the amount of additional revenues that may be generated by the Lottery in any given year cannot be predicted.

Proposition 46

On June 3, 1986, California voters approved Proposition 46, which added an additional exemption to the 1% tax limitation imposed by Article XIIIA. Under this amendment to Article XIIIA, local governments and school and community college districts may increase the property tax rate above 1% for the period necessary to retire new, general obligation bonds, if two-thirds of those voting in a local election approve the issuance of such bonds and the money raised through the sale of the bonds is used exclusively to purchase or improve real property.

Proposition 39

On November 7, 2000, California voters approved Proposition 39, called the “Smaller Classes, Safer Schools and Financial Accountability Act” (the “Smaller Classes Act”) which amends Section 1 of Article XIIIA, Section 18 of Article XVI of the California Constitution and Section 47614 of the California

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Education Code and allows an alternative means of seeking voter approval for bonded indebtedness by 55% of the vote, rather than the two-thirds majority required under Section 18 of Article XVI of the Constitution. The 55% voter requirement applies only if the bond measure submitted to the voters includes, among other items: (1) a restriction that the proceeds of the bonds may be used for “the construction, reconstruction, rehabilitation, or replacement of school facilities, including the furnishing and equipping of school facilities, or the acquisition or lease of real property for school facilities,” (2) a list of projects to be funded and a certification that the school district board has evaluated “safety, class size reduction, and information technology needs in developing that list” and (3) that annual, independent performance and financial audits will be conducted regarding the expenditure and use of the bond proceeds.

Section 1(b)(3) of Article XIIIA has been added to exempt the 1% ad valorem tax limitation that

Section 1(a) of Article XIIIA of the Constitution levies, to pay bonds approved by 55% of the voters, subject to the restrictions explained above.

The Legislature enacted AB 1908, Chapter 44, which became effective upon passage of

Proposition 39 and amends various sections of the Education Code. Under amendments to Section 15268 and 15270 of the Education Code, the following limits on ad valorem taxes apply in any single election: (1) for an elementary and high school district, indebtedness shall not exceed $30 per $100,000 of taxable property, (2) for a unified school district, indebtedness shall not exceed $60 per $100,000 of taxable property, and (3) for a community college district, indebtedness shall not exceed $25 per $100,000 of taxable property. These requirements are not part of Proposition 39 and can be changed with a majority vote of both houses of the Legislature and approval by the Governor. Finally, AB 1908 requires that a citizens’ oversight committee must be appointed who will review the use of the bond funds and inform the public about their proper usage.

Alternatively, charter schools are independent public schools formed by teachers, parents, and

other individuals and/or groups. The schools function under contracts or “charters” with local school districts, county boards of education, or the State Board of Education. They are exempt from most State laws and regulations affecting public schools. As of June 2000, there were 309 charter schools in California, serving about 105,000 students (less than 2% of all K-12 students). The law permits an additional 100 charter schools each year until 2003, at which time the charter school program will be reviewed by the Legislature. Under current law, school districts must allow charter schools to use, at no charge, facilities not currently used by the district for instructional or administrative purposes.

Proposition 39 requires that each local K-12 school district provide charter school facilities

sufficient to accommodate the charter school’s students. A K-12 school district, however, would not be required to spend its general discretionary revenues to provide these facilities for charter schools. Instead, the district could choose to use these or other revenues — including State and local bonds. Such facilities must be reasonably equivalent to the district schools that such charter students would otherwise attend. The respective K-12 school district is permitted charge the charter school for its facilities if district discretionary revenues are used to fund the facilities and a district may decline to provide facilities for a charter school with a current or projected enrollment of fewer than 80 students who are residents in the District. Article XIIIC and XIIID of the California Constitution

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On November 5, 1996, an initiative to amend the California Constitution known as the “Right to

Vote on Taxes Act” (“Proposition 218”) was approved by a majority of California voters. Proposition 218 added Articles XIIIC and XIIID to the State Constitution and requires majority voter approval for the imposition, extension or increase of general taxes and 2/3 voter approval for the imposition, extension or increase of special taxes by a local government, which is defined in Proposition 218 to include counties. Proposition 218 also provides that any general tax imposed, extended or increased without voter approval by any local government on or after January 1, 1995, and prior to November 6, 1996 shall continue to be imposed only if approved by a majority vote in an election held within two years following November 6, 1996. All local taxes and benefit assessments which may be imposed by public agencies will be defined as “general taxes” (defined as those used for general governmental purposes) or “special taxes” (defined as taxes for a specific purpose even if the revenues flow through the local government’s general fund) both of which would require a popular vote. New general taxes require a majority vote and new special taxes require a two-thirds vote. Proposition 218 also extends the initiative power to reducing or repealing local taxes, assessments, fees and charges, regardless of the date such taxes, assessments or fees or charges were imposed, and lowers the number of signatures necessary for the process. In addition, Proposition 218 limits the application of assessments, fees and charges and requires them to be submitted to property owners for approval or rejection, after notice and public hearing.

The District has no power to impose taxes except property taxes associated with a general

obligation bond election, following approval by 55% or 2/3 of the District’s voters, depending upon the Article of the Constitution under which it is passed.

Proposition 218 also expressly extends the initiative power to give voters the power to reduce or

repeal local taxes, assessments, fees and charges, regardless of the date such taxes, assessments, fees or charges were imposed, and reduces the number of signatures required for the initiative process. This extension of the initiative power to some extent constitutionalizes the February 6, 1995 State Supreme Court decision in Rossi v. Brown, which upheld an initiative that repealed a local tax and held that the State constitution does not preclude the repeal, including the prospective repeal, of a tax ordinance by an initiative, as contrasted with the State constitutional prohibition on referendum powers regarding statutes and ordinances which impose a tax. Generally, the initiative process enables California voters to enact legislation upon obtaining requisite voter approval at a general election. Proposition 218 extends the authority stated in Rossi v. Brown by expanding the initiative power to include reducing or repealing assessments, fees and charges, which had previously been considered administrative rather than legislative matters and therefore beyond the initiative power. This extension of the initiative power is not limited by the terms of Proposition 218 to fees imposed after November 6,1996 and absent other legal authority could result in retroactive reduction in any existing taxes, assessments or fees and charges. Such legal authority could include the limitations imposed on the impairment of contracts under the contract clause of the United States Constitution.

Proposition 218 has no effect upon the District’s ability to pursue approval of a general obligation

bond or a Mello-Roos Community Facilities District bond in the future, although certain procedures and burdens of proof may be altered slightly. The District is unable to predict the nature of any future challenges to Proposition 218 or the extent to which, if any, Proposition 218 may be held to be unconstitutional.

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Propositions 98 and 111 On November 8, 1988, voters approved Proposition 98, a combined initiative constitutional

amendment and statute called the “Classroom Instructional Improvement and Accountability Act” (the “Accountability Act”). Certain provisions of the Accountability Act have, however, been modified by Proposition 111, discussed below, the provisions of which became effective on July 1, 1990. The Accountability Act changes State funding of public education below the university level and the operation of the State’s appropriations limit. The Accountability Act guarantees State funding for K-12 school districts and community college districts (hereinafter referred to collectively as “K-14 school districts”) at a level equal to the greater of (a) the same percentage of general fund revenues as the percentage appropriated to such districts in 1986-87, and (b) the amount actually appropriated to such districts from the general fund in the previous fiscal year, adjusted for increases in enrollment and changes in the cost of living. The Accountability Act permits the Legislature to suspend this formula for a one-year period.

Since the Accountability Act is unclear in some details, there can be no assurances that the

Legislature or a court might not interpret the Accountability Act to require a different percentage of general fund revenues to be allocated to K-14 school districts, or to apply the relevant percentage to the State’s budgets in a different way than is proposed in the Governor’s Budget. In any event, the Governor and other fiscal observers expect the Accountability Act to place increasing pressure on the State’s budget over future years, potentially reducing resources available for other State programs, especially to the extent the Article XIIIB spending limit would restrain the State’s ability to fund such other programs by raising taxes.

The Accountability Act also changes how tax revenues in excess of the State appropriations limit

are distributed. Any excess State tax revenues up to a specified amount would, instead of being returned to taxpayers, be transferred to K-14 school districts. Any such transfer to K-14 school districts would be excluded from the appropriations limit for K-14 school districts and the K-14 school district appropriations limit for the next year would automatically be increased by the amount of such transfer. These additional moneys would enter the base funding calculation for K-14 school districts for subsequent years, creating further pressure on other portions of the State budget, particularly if revenues decline in a year following an Article XIIIB surplus. The maximum amount of excess tax revenues which could be transferred to K-14 school districts is 4% of the minimum State spending for education mandated by the Accountability Act.

On June 5, 1990, the voters approved Proposition 111 (Senate Constitutional Amendment No. 1)

called the “Traffic Congestion Relief and Spending Limit Act of 1990” (“Proposition 111”) which further modified Article XIIIB and Sections 8 and 8.5 of Article XVI of the State Constitution with respect to appropriations limitations and school funding priority and allocation.

The most significant provisions of Proposition 111 are summarized as follows:

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

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b. Treatment of Excess Tax Revenues. “Excess” tax revenues with respect to Article XIIIB are now determined based on a two-year cycle, so that the State can avoid having to return to taxpayers excess tax revenues in one year if its appropriations in the next fiscal year are under its limit. In addition, the Proposition 98 provision regarding excess tax revenues was modified. After any two-year period, if there are excess State tax revenues, 50% of the excess are to be transferred to K-14 school districts with the balance returned to taxpayers; under prior law, 100% of excess State tax revenues went to K-14 school districts, but only up to a maximum of 4% of the schools’ minimum funding level. Also, reversing prior law, any excess State tax revenues transferred to K-14 school districts are not built into the school districts’ base expenditures for calculating their entitlement for State aid in the next year, and the State’s appropriations limit is not to be increased by this amount.

c. Exclusions from Spending Limit. Two exceptions were added to the calculation

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

d. Recalculation of Appropriations Limit. The Article XIIIB appropriations limit

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

e. School Funding Guarantee. There is a complex adjustment in the formula

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

Proposition 30

On November 6, 2012, voters of the State approved the Temporary Taxes to Fund Education, Guaranteed Local Public Safety Funding, Initiative Constitutional Amendment (also known as “Proposition 30”), which temporarily increases the State Sales and Use Tax and personal income tax rates on higher incomes. Proposition 30 temporarily imposes an additional tax on all retailers, at the rate of

Appendix B Page 35

0.25% of gross receipts from the sale of all tangible personal property sold in the State from January 1, 2013 to December 31, 2016. Proposition 30 also imposes an additional excise tax on the storage, use, or other consumption in the State of tangible personal property purchased from a retailer on and after January 1, 2013 and before January 1, 2017, for storage, use, or other consumption in the State. This excise tax will be levied at a rate of 0.25% of the sales price of the property so purchased. Beginning in the taxable year commencing January 1, 2012 and through the taxable year ending December 31, 2018, Proposition 30 increases the marginal personal income tax rate by: (i) 1% for taxable income over $250,000 but less than $300,000 for single filers (over $340,000 but less than $408,000 for head-of-household filers and over $500,000 but less than $600,000 for joint filers), (ii) 2% for taxable income over $300,000 but less than $500,000 for single filers (over $408,000 but less than $680,000 for head-of-household filers and over $600,000 but less than $1,000,000 for joint filers), and (iii) 3% for taxable income over $500,000 for single filers (over $680,000 for head-of-household filers and over $1,000,000 for joint filers).

The revenues generated from the temporary tax increases will be included in the calculation of the

Proposition 98 minimum funding guarantee for school districts and community college districts. See “CONSTITUTIONAL AND STATUTORY PROVISIONS AFFECTING DISTRICT REVENUES AND APPROPRIATIONS – Propositions 98 and 111” herein. From an accounting perspective, the revenues generated from the temporary tax increases are being deposited into the State account created pursuant to Proposition 30 called the Education Protection Account (the “EPA”). Pursuant to Proposition 30, funds in the EPA are allocated quarterly, with 89% of such funds provided to schools districts and 11% provided to community college districts. The funds are distributed to school districts and community college districts in the same manner as existing unrestricted per-student funding, except that no school district will receive less than $200 per unit of ADA and no community college district will receive less than $100 per full time equivalent student. The governing board of each school district and community college district is granted sole authority to determine how the moneys received from the EPA are spent, provided that, the appropriate governing board is required to make these spending determinations in open session at a public meeting and such local governing boards are prohibited from using any funds from the EPA for salaries or benefits of administrators or any other administrative costs.

The California Children's Education and Health Care Protection Act of 2016, also known as Proposition 55, is a proposed constitutional amendment initiative that has qualified for the November 8, 2016 general election in California. Proposition 55 would extend the increases to personal income tax rates for high-income taxpayers that were approved as part of Proposition 30. Under Proposition 55, the Proposition 30 income tax rate increases on high-income Californians would not expire at the end of 2018, as scheduled under current law. The proposal would extend the income tax rate increases through 2030. Tax revenue received under Proposition 55 would be allocated 89% to K-12 schools and 11% to community colleges. Under the proposed constitutional amendment, the sales tax rate increase under Proposition 30 would not be extended. The District can make no representation as to whether Proposition 55 will be approved.

Proposition 2

Proposition 2, also known as The Rainy Day Budget Stabilization Fund Act (“Proposition 2”) was approved by California voters on November 4, 2014. Proposition 2 provides for changes to State budgeting practices, including revisions to certain conditions under which transfers are made into and from the State’s Budget Stabilization Account (the “Stabilization Account”) established by the California Balanced Budget Act of 2004 (also known as Proposition 58). Commencing in Fiscal Year 2015-16 and for each Fiscal Year thereafter, the State is required to make an annual transfer to the Stabilization Account in

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an amount equal to 1.5% of estimated State general fund revenues (the “Annual Stabilization Account Transfer”). For a Fiscal Year in which the estimated State general fund revenues allocable to capital gains taxes exceed 8% of the total estimated general fund tax revenues, supplemental transfers to the Stabilization Account (a “Supplemental Stabilization Account Transfer”) are also required. Such excess capital gains taxes, which are net of any portion thereof owed to K-14 school districts pursuant to Proposition 98, are required to be transferred to the Stabilization Account.

In addition, for each Fiscal Year, Proposition 2 increases the maximum size of the Stabilization Account to 10% of estimated State general fund revenues. Such excess amounts are to be expended on State infrastructure, including deferred maintenance, in any Fiscal Year in which a required transfer to the Stabilization Account would result in an amount in excess of the 10% threshold. For the period from Fiscal Year 2015-16 through Fiscal Year 2029-30, Proposition 2 requires that half of any such transfer to the Stabilization Account (annual or supplemental), shall be appropriated to reduce certain State liabilities, including repaying State interfund borrowing, reimbursing local governments for State mandated services, making certain payments owed to K-14 school districts, and reducing or prefunding accrued liabilities associated with State-level pension and retirement benefits. After Fiscal Year 2029-30, the Governor and the Legislature are given discretion to apply up to half of any required transfer to the Stabilization Account to the reduction of such State liabilities and any amount not so applied shall be transferred to the Stabilization Account or applied to infrastructure, as set forth above.

Accordingly, the conditions under which the Governor and the Legislature may draw upon or

reduce transfers to the Stabilization Account are impacted by Proposition 2. Unilateral discretion to suspend transfers to the Stabilization Account are not retained by the Governor. Neither does the Legislature retain discretion to transfer funds from the Stabilization Account for any reason, as was previously provided by law. Instead, the Governor must declare a “budget emergency” (defined as an emergency within the meaning of Article XIIIB of the Constitution) or a determination that estimated resources are inadequate to fund State general fund expenditure, 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, and any such declaration must be followed by a legislative bill providing for a reduction or transfer. Draws on the Stabilization Account are limited to the amount necessary to address the budget emergency, and no draw in any Fiscal Year may exceed 50% of the funds on deposit in the Stabilization Account, unless a budget emergency was declared in the preceding Fiscal Year.

Proposition 2 also provides for the creation of a Public School System Stabilization Account (the

“Public School System Stabilization Account”) into which transfers will be made in any Fiscal Year in which a Supplemental Stabilization Account Transfer is required, requiring that such transfer will be equal to the portion of capital gains taxes above the 8% threshold that would otherwise be paid to K-14 school districts as part of the minimum funding guarantee. Transfers to the Public School System Stabilization Account are only to be made if certain additional conditions are met, including that: (i) the minimum funding guarantee was not suspended in the immediately preceding Fiscal Year, (ii) the operative Proposition 98 formula for the Fiscal Year in which a Public School System Stabilization Account transfer might be made is “Test 1,” (iii) no maintenance factor obligation is being created in the budgetary legislation for the Fiscal Year in which a Public School System Stabilization Account transfer might be made, (iv) all prior maintenance factor obligations have been fully repaid, and (v) the minimum funding guarantee for the Fiscal Year in which a Public School System Stabilization Account transfer might be made is higher than the immediately preceding Fiscal Year, as adjusted for ADA growth and cost of living.

Appendix B Page 37

Under Proposition 2, the size of the Public School System Stabilization Account is capped at 10% of the estimated minimum guarantee in any Fiscal Year, and any excess funds must be paid to K-14 school districts. Any reductions to a required transfer to, or draws upon, the Public School System Stabilization Account, are subject to the budget emergency requirements as described above. However, in any Fiscal Year in which the estimated minimum funding guarantee is less than the prior year’s funding level, as adjusted for ADA growth and cost of living, Proposition 2 also mandates draws on the Public School System Stabilization Account.

Proposition 26

On November 2, 2010, voters in the State approved Proposition 26. Proposition 26 amends Article XIIIC of the State Constitution to expand the definition of “tax” to include “any levy, charge, or exaction of any kind imposed by a local government” except the following: (1) a charge imposed for a specific benefit conferred or privilege granted directly to the payor that is not provided to those not charged, and which does not exceed the reasonable costs to the local government of conferring the benefit or granting the privilege; (2) a charge imposed for a specific government service or product provided directly to the payor that is not provided to those not charged, and which does not exceed the reasonable costs to the local government of providing the service or product; (3) a charge imposed for the reasonable regulatory costs to a local government for issuing licenses and permits, performing investigations, inspections, and audits, enforcing agricultural marketing orders, and the administrative enforcement and adjudication thereof; (4) a charge imposed for entrance to or use of local government property, or the purchase, rental, or lease of local government property; (5) A fine, penalty, or other monetary charge imposed by the judicial branch of government or a local government, as a result of a violation of law; (6) a charge imposed as a condition of property development; and (7) assessments and property-related fees imposed in accordance with the provisions of Article XIIID. Proposition 26 provides that the local government bears the burden of proving by a preponderance of the evidence that a levy, charge, or other exaction is not a tax, that the amount is no more than necessary to cover the reasonable costs of the governmental activity, and that the manner in which those costs are allocated to a payor bear a fair or reasonable relationship to the payor’s burdens on, or benefits received from, the governmental activity.

California Senate Bill 222

Senate Bill 222 (“SB 222”) was signed by the California Governor on July 13, 2015 and became effective on January 1, 2016. SB 222 amended Section 15251 of the California Education Code and added Section 52515 to the California Government Code to provide that voter approved general obligation bonds which are secured by ad valorem tax collections such as the Bonds are secured by a statutory lien on all revenues received pursuant to the levy and collection of the property tax imposed to service those bonds. Said lien shall attach automatically and is valid and binding from the time the bonds are executed and delivered. The lien is enforceable against the issuer, its successors, transferees, and creditors, and all others asserting rights therein, irrespective of whether those parties have notice of the lien and without the need for any further act. The effect of SB 222 is the treatment of general obligation bonds as secured debt in bankruptcy due to the existence of a statutory lien.

Future Initiatives

Article XIIIA, Article XIIIB, Article XIIIC and Article XIIID of the State Constitution and Propositions 2, 22, 26, 30, 39, 46 and 98 were each adopted as measure that qualified for the State ballot pursuant to the State’s initiative process. From time to time other initiative measures could be adopted

Appendix B Page 38

further affecting District revenues or the District’s ability to expend revenues. The nature and impact of these measures cannot be anticipated by the District.

Appendix C

APPENDIX C

AUDITED FINANCIAL STATEMENTS OF THE DISTRICT FOR THE FISCAL YEAR ENDED JUNE 30, 2016

Lawndale ElementarySchool District

Annual Financial Report

June 30, 2016

LAWNDALE ELEMENTARY SCHOOL DISTRICT

TABLE OF CONTENTSJUNE 30, 2016

FINANCIAL SECTIONIndependent Auditor's Report 2Management's Discussion and Analysis 5Basic Financial Statements

Government-Wide Financial StatementsStatement of Net Position 15Statement of Activities 16

Fund Financial StatementsGovernmental Funds - Balance Sheet 17Reconciliation of the Governmental Funds Balance Sheet to the Statement of Net Position 18Governmental Funds - Statement of Revenues, Expenditures, and Changes in Fund Balances 19Reconciliation of the Governmental Funds Statement of Revenues, Expenditures, andChanges in Fund Balances to the Statement of Activities 20

Proprietary Funds - Statement of Net Position 21Proprietary Funds - Statement of Revenues, Expenses, and Changes in Fund Net Position 22Proprietary Funds - Statement of Cash Flows 23Fiduciary Funds - Statement of Net Position 24

Notes to Financial Statements 25

REQUIRED SUPPLEMENTARY INFORMATIONGeneral Fund - Budgetary Comparison Schedule 64Cafeteria - Budgetary Comparison Schedule 65Schedule of Other Postemployment Benefits (OPEB) Funding Progress 66Schedule of the District's Proportionate Share of the Net Pension Liability 67Schedule of District Contributions 68Note to Required Supplementary Information 69

SUPPLEMENTARY INFORMATIONSchedule of Expenditures of Federal Awards 71Local Education Agency Organization Structure 73Schedule of Average Daily Attendance 74Schedule of Instructional Time 75Reconciliation of Annual Financial and Budget Report With Audited Financial Statements 76Schedule of Financial Trends and Analysis 77Schedule of Charter Schools 78Combining Statements - Non-Major Governmental Funds

Combining Balance Sheet 79Combining Statement of Revenues, Expenditures, and Changes in Fund Balances 80

General Fund Selected Financial Information 81Note to Supplementary Information 82

INDEPENDENT AUDITOR'S REPORTSReport on Internal Control Over Financial Reporting and on Compliance and Other MattersBased on an Audit of Financial Statements Performed in Accordance With GovernmentAuditing Standards 85

Report on Compliance for Each Major Program and on Internal Control Over ComplianceRequired by the Uniform Guidance 87

Report on State Compliance 89


TABLE OF CONTENTSJUNE 30, 2016

SCHEDULE OF FINDINGS AND QUESTIONED COSTSSummary of Auditor's Results 93Financial Statement Findings 94Federal Awards Findings and Questioned Costs 95State Awards Findings and Questioned Costs 96Summary Schedule of Prior Audit Findings 97

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FINANCIAL SECTION

10681 Foothill Blvd., Suite 300 Rancho Cucamonga, CA 91730 Tel: 909.466.4410 www.vtdcpa.com Fax: 909.466.4431

Vavrinek, Trine, Day & Co., LLPCertified Public Accountants

VALUE THE D IFFERENCE

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INDEPENDENT AUDITOR'S REPORT

Governing BoardLawndale Elementary School DistrictLawndale, California

Report on the Financial Statements

We have audited the accompanying financial statements of the governmental activities, the business-typeactivities, each major fund, and the aggregate remaining fund information of the Lawndale Elementary SchoolDistrict (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 accordancewith 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 financialstatements 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 auditin accordance with auditing standards generally accepted in the United States of America and the standardsapplicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General ofthe United States; and the 2015-2016 Guide for Annual Audits of K-12 Local Education Agencies and StateCompliance Reporting, issued by the California Education Audit Appeals Panel as regulations. Those standardsrequire that we plan and perform the audit to obtain reasonable assurance about whether the financial statementsare free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in thefinancial statements. The procedures selected depend on the auditor's judgment, including the assessment of therisks of material misstatement of the financial statements, whether due to fraud or error. In making those riskassessments, the auditor considers internal control relevant to the District's preparation and fair presentation of thefinancial statements in order to design audit procedures that are appropriate in the circumstances, but not for thepurpose of expressing an opinion on the effectiveness of the District's internal control. Accordingly, we expressno such opinion. An audit also includes evaluating the appropriateness of accounting policies used and thereasonableness of significant accounting estimates made by management, as well as evaluating the overallpresentation of the financial statements.

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

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Opinions

In our opinion, the financial statements referred to above present fairly, in all material respects, the respectivefinancial position of the governmental activities, the business-type activities, each major fund, and the aggregateremaining fund information of the Lawndale Elementary School District, as of June 30, 2016, and the respectivechanges in financial position and, where applicable, cash flows thereof for the year then ended in accordance withaccounting principles generally accepted in the United States of America.

Other Matters

Required Supplementary Information

Accounting principles generally accepted in the United States of America require that management's discussionand analysis on pages 5 through 14, budgetary comparison schedules on pages 64 and 65, schedule of otherpostemployment benefits funding progress on page 66, schedule of the District's proportionate share of the netpension liability on page 67, and the schedule of District contributions on page 68, be presented to supplement thebasic financial statements. Such information, although not a part of the basic financial statements, is required bythe Governmental Accounting Standards Board who considers it to be an essential part of financial reporting forplacing the basic financial statements in an appropriate operational, economic, or historical context. We haveapplied certain limited procedures to the required supplementary information in accordance with auditingstandards generally accepted in the United States of America, which consisted of inquiries of management aboutthe methods of preparing the information and comparing the information for consistency with management'sresponses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of thebasic financial statements. We do not express an opinion or provide any assurance on the information because thelimited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance.

Other Information

Our audit was conducted for the purpose of forming opinions on the financial statements that collectivelycomprise the Lawndale Elementary School District's basic financial statements. The accompanyingsupplementary information such as the combining and individual non-major fund financial statements andSchedule of Expenditures of Federal Awards, as required by Title 2 U.S. Code of Federal Regulations (CFR) Part200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards and theother supplementary information as listed on the table of contents are presented for purposes of additionalanalysis and are not a required part of the basic financial statements.

The accompanying supplementary information is the responsibility of management and was derived from andrelates directly to the underlying accounting and other records used to prepare the basic financial statements. Suchinformation has been subjected to the auditing procedures applied in the audit of the basic financial statementsand certain additional procedures, including comparing and reconciling such information directly to theunderlying accounting and other records used to prepare the basic financial statements or to the basic financialstatements themselves, and other additional procedures in accordance with auditing standards generally acceptedin the United States of America. In our opinion, the accompanying supplementary information is fairly stated, inall material respects, in relation to the basic financial statements as a whole.

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Other Reporting Required by Government Auditing Standards

In accordance with Government Auditing Standards, we have also issued our report dated November 29, 2016, onour consideration of the Lawndale Elementary School District's internal control over financial reporting and onour tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and othermatters. The purpose of that report is to describe the scope of our testing of internal control over financialreporting and compliance and the results of that testing, and not to provide an opinion on internal control overfinancial reporting or on compliance. That report is an integral part of an audit performed in accordance withGovernment Auditing Standards in considering Lawndale Elementary School District's internal control overfinancial reporting and compliance.

Rancho Cucamonga, CaliforniaNovember 29, 2016

GOVERNING BOARD: Shirley A. Bennett Cathy Burris Bonnie J. Coronado Ann M. Phillips Shirley Rudolph

ADMINISTRATION: Ellen Dougherty, Superintendent John D. Vinke, Deputy. Supt.-Business Betsy Hamilton, Asst. Supt. - Ed. Services Steven Miller, Asst. Supt. - HR

L A W N D A L E E L E M E N T A R Y S C H O O L D I S T R I C T4161 West 147th Street Lawndale, CA 90260 (310) 973-1300 FAX (310) 263-6492

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This section of Lawndale Elementary School District's (the District) annual financial report presents ourdiscussion and analysis of the District's financial performance during the fiscal year that ended on June 30, 2016,with comparative information from the fiscal year ending June 30, 2015. Please read it in conjunction with theDistrict's financial statements, which immediately follow this section.

OVERVIEW OF THE FINANCIAL STATEMENTS

The Financial Statements

The financial statements presented herein include all of the activities of the District using the integrated approachas prescribed by Governmental Accounting Standards Board (GASB) Statement No. 34.

The Government-Wide Financial Statements present the financial picture of the District from the economicresources measurement focus using the accrual basis of accounting. They present governmental activities andbusiness-type activities separately. These statements include all assets (including capital assets) of the District, aswell as all liabilities (including long-term obligations). Additionally, certain eliminations have occurred asprescribed by the statement in regards to interfund activity, payables, and receivables.

The Fund Financial Statements include statements for each of the three categories of activities: governmental,proprietary and fiduciary.

The Governmental Funds are prepared using the current financial resources measurement focus and modifiedaccrual basis of accounting.

The Proprietary Funds are prepared using the economic resources measurement focus and the accrual basis ofaccounting.

The Fiduciary Funds are agency funds, which only report a balance sheet and do not have a measurement focus.

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

The Primary unit of the government is the Lawndale Elementary School District.


MANAGEMENT'S DISCUSSION AND ANALYSISJUNE 30, 2016

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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 andabout its activities. These statements include all assets and liabilities of the District using the accrual basis ofaccounting, which is similar to the accounting used by most private-sector companies. All of the current year'srevenues 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 differencebetween assets and deferred outflows of resources, and liabilities and deferred inflows of resources, which is oneway to measure the District's financial health, or financial position. Over time, increases or decreases in theDistrict's net position will serve as a useful indicator of whether the financial position of the District is improvingor deteriorating. Other factors to consider are changes in the District's property tax base and the condition of theDistrict's facilities.

The relationship between revenues and expenses is the District's operating results. Since the Governing Board'sresponsibility is to provide services to our students and not to generate profit as commercial entities do, one mustconsider other factors when evaluating the overall health of the District. The quality of the education and thesafety 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 - Most of the District's services are reported in this category. This includes theeducation of kindergarten through grade eight students, the operation of child development activities, and the on-going effort to improve and maintain buildings and sites. Property taxes, State income taxes, user fees, interestincome, Federal, State, and local grants, as well as general obligation bonds, finance these activities.

Business-Type Activities - The District charges fees to help it cover the costs of certain services it provides. TheDistrict's Child Care programs and services are included here.

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 awhole. Some funds are required to be established by State law and by bond covenants. However, managementestablishes many other funds to help it control and manage money for particular purposes or to show that it ismeeting legal responsibilities for using certain taxes, grants, and other money that it receives from theU.S. Department of Education.



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Governmental Funds - Most of the District's basic services are reported in governmental funds, which focus onhow 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 cashand all other financial assets that can readily be converted to cash. The governmental fund statements provide adetailed short-term view of the District's general government operations and the basic services it provides.Governmental fund information helps determine whether there are more or fewer financial resources that can bespent in the near future to finance the District's programs. The differences of results in the governmental fundfinancial statements to those in the government-wide financial statements are explained in a reconciliationfollowing each governmental fund financial statement.

Proprietary Funds - When the District charges users for the services it provides, whether to outside customers orto other departments within the District, these services are generally reported in proprietary funds. Proprietaryfunds are reported in the same way that all activities are reported in the Statement of Net Position and theStatement of Revenues, Expenses, and Changes in Fund Net Position. In fact, the District's enterprise funds arethe same as the business-type activities we report in the government-wide statements, but provide more detail andadditional information, such as cash flows, for proprietary funds.

THE DISTRICT AS A TRUSTEE

Reporting the District's Fiduciary Responsibilities

The District is the trustee, or fiduciary, for funds held on behalf of others, like the associated student bodyactivities. The District's fiduciary activities are reported in the Fiduciary Funds Statement of Net Position. Weexclude these activities from the District's other financial statements because the District cannot use these assetsto finance its operations. The District is responsible for ensuring that the assets reported in these funds are usedfor their intended purposes.



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FINANCIAL HIGHLIGHTS

THE DISTRICT AS A WHOLE

Net Position

The District's net position was $(8.2) million for governmental activities for the fiscal year ended June 30, 2016.Of this amount, $(39.7) million was unrestricted. Restricted net position are reported separately to show legalconstraints from debt covenants and enabling legislation that limit the governing board's ability to use those netposition 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 and business-type activities.

Table 1

(Amounts in thousands)

2016 2015 2016 2015 2016 2015

Assets

Current and other assets 26,703.1$ 22,012.1$ 432.6$ 473.8$ 27,135.7$ 22,485.9$

Capital assets 45,901.5 47,590.9 - - 45,901.5 47,590.9

Total Assets 72,604.6 69,603.0 432.6 473.8 73,037.2 70,076.8

Deferred Outflows

of Resources 12,051.5 3,608.7 - - 12,051.5 3,608.7

Liabilities

Current liabilities 7,736.0 6,518.1 18.4 11.6 7,754.4 6,529.7

Long-term obligations 22,276.0 22,628.3 - - 22,276.0 22,628.3

Aggregate net pension liability 52,209.7 42,620.7 - - 52,209.7 42,620.7

Total Liabilities 82,221.7 71,767.1 18.4 11.6 82,240.1 71,778.7

Deferred Inflows

of Resources 10,630.8 11,869.9 - - 10,630.8 11,869.9

Net Position

Net investment in capital assets 27,137.7 28,892.5 - - 27,137.7 28,892.5

Restricted 4,395.5 4,082.8 - - 4,395.5 4,082.8

Unrestricted (39,729.6) (43,400.6) 414.2 462.2 (39,315.4) (42,938.4)

Total Net Position (8,196.4)$ (10,425.3)$ 414.2$ 462.2$ (7,782.2)$ (9,963.1)$

Governmental Activities Business-Type Activities School District Activities



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Changes in Net Position

The results of this year's operations for the District as a whole are reported in the Statement of Activities onpage 16. Table 2 takes the information from the Statement, rounds off the numbers, and rearranges them slightlyso you can see our total revenues for the year.

Table 2


2016 2015 2016 2015 2016 2015

Revenues

Program revenues:

Charges for services 362.0$ 334.6$ -$ -$ 362.0$ 334.6$

Operating grants and

contributions 15,803.0 13,952.3 - - 15,803.0 13,952.3

General revenues:

State revenue limit sources 46,775.8 39,712.5 - - 46,775.8 39,712.5Federal and State aid

not restricted

Property taxes 10,006.1 7,826.1 - - 10,006.1 7,826.1

Other general revenues 7,490.2 4,300.7 100.7 94.9 7,590.9 4,395.6

Total Revenues 80,437.1 66,126.2 100.7 94.9 80,537.8 66,221.1

Expenses

Instruction-related 55,357.0 49,866.7 - - 55,357.0 49,866.7

Pupil services 8,010.1 7,584.0 - - 8,010.1 7,584.0

Administration 4,865.6 4,416.4 - - 4,865.6 4,416.4

Plant 4,689.0 4,559.6 - - 4,689.0 4,559.6

Other 5,286.4 2,830.9 148.7 80.6 5,435.1 2,911.5

Total Expenses 78,208.1 69,257.6 148.7 80.6 78,356.8 69,338.2

Change in Net Position 2,229.0$ (3,131.4)$ (48.0)$ 14.3$ 2,181.0$ (3,117.1)$

Governmental Activities Business-Type Activities School District Activities

Governmental Activities

As reported in the Statement of Activities on page 16, the cost of all of our governmental activities this year was$78.2 million. However, the amount that our taxpayers ultimately financed for these activities through local taxeswas only $10.0 million because the cost was paid by those who benefited from the programs ($15.8 million) or byother governments and organizations who subsidized certain programs with grants and contributions($0.04 million). We paid for the remaining "public benefit" portion of our governmental activities from the$46.8 million we received in State funds, and from $7.5 million of other revenues, like interest and generalentitlements.



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In Table 3, we have presented the cost of each of the Districts largest functions including instruction, instruction-related activities, pupil services, administration, plant, and other activities, as well as each program's net cost(total cost less revenues generated by these activities). As discussed on the previous page, net cost shows thefinancial burden that was placed on the District's taxpayers by each of these functions. Providing this informationallows our citizens to consider the cost of each function in comparison to the benefits they believe are provided bythat function.

Table 3


2016 2015 2016 2015

Instruction 48,880.5$ 44,081.3$ (38,669.6)$ (35,714.5)$

Instruction-related activities 6,476.5 5,785.4 (4,601.1) (4,197.6)

Pupil services 8,010.1 7,584.0 (4,773.0) (4,301.2)

Administration 4,865.6 4,416.4 (4,444.2) (3,925.1)

Plant 4,689.0 4,559.6 (4,652.0) (4,340.5)

Other 5,286.4 2,830.9 (4,903.2) (2,491.8)Total 78,208.1$ 69,257.6$ (62,043.1)$ (54,970.7)$

Total Cost of Services Net Cost of Services



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THE DISTRICT'S FUNDS

As the District completed the year, our governmental funds reported a combined fund balance of $19.2 million,which is an increase of $3.5 million from last year (Table 4). This $3.5 million increase is the net difference inthe following fund or program balances from the prior year.

Table 4


June 30, 2016 June 30, 2015

General Fund 12,655.5$ 10,207.7$

Cafeteria Fund 874.0 1,793.3

Special Reserve Fund for Capital Outlay Projects 4,019.5 1,294.7

Child Development Fund 147.3 49.5

Building Fund 74.6 896.9

Capital Facilities Fund 159.2 266.8

State School Building Fund 28.0 2.8

County School Facilities Fund 35.4 35.2

Bond Interest and Redemption Fund 1,164.7 1,153.0

Debt Service Fund 19.5 19.4Total 19,177.7$ 15,719.3$

Fund Balance

General Fund Budgetary Highlights

Over the course of the year, the District revises its budget to reflect expected and unexpected changes in revenuesand expenditures. The first Interim Budget report was prepared based upon actual information throughOctober 31, 2015, and the second Interim Budget report was prepared based upon the actual information throughJanuary 31, 2016. (A schedule showing the District's original and final budget amounts compared with amountsactually paid and received is provided in our annual report on page 64.)



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CAPITAL ASSET AND DEBT ADMINISTRATION

Capital Assets

At June 30, 2016, the District had $45.9 million in a broad range of capital assets (net of depreciation), includingland, buildings, furniture and equipment. This amount represents a net decrease (including additions, deductions,and depreciation) of approximately $1.7 million, or 3.5 percent, from last year (Table 5).

Table 5


2016 2015

Land and construction in progress 1,686.4$ 2,969.3$

Buildings and improvements 42,814.5 43,469.6

Equipment 1,400.6 1,152.0Total 45,901.5$ 47,590.9$


We present more detailed information about our capital assets in Note 5 to the financial statements.

Long-Term Obligations

At the end of this year, the District had $18.8 million in general obligation bonds outstanding versus $19.6 millionlast year, a decrease of four percent. The long-term obligations consisted of:

Table 6


2016 2015

General obligation bonds - net (financed with property taxes) 18,838.3$ 19,595.3$

Compensated absences 514.1 486.0

Net OPEB obligation 2,923.6 2,547.0Total 22,276.0$ 22,628.3$


The District's general obligation bond rating continues to be "AA+". The State limits the amount of generalobligation bonds debt that districts can issue to five percent of the assessed value of all taxable property within theDistrict's boundaries. The District's outstanding general obligation bonds debt of $18.8 million is significantlybelow the statutorily-imposed limit.

Other obligations include compensated absences and the net OPEB obligation. We present more detailedinformation regarding our long-term obligations in Note 9 of the financial statements.



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Net Pension Liability (NPL)

At year-end, the District had a net pension liability of $52.2 million. The District has therefore recorded itsproportionate share of net pension liabilities for CalSTRS and CalPERS.

SIGNIFICANT ACCOMPLISHMENTS OF FISCAL YEAR 2015-2016 ARE NOTED BELOW:

The District has completed its significant facilities improvement master plan of over $75 million for all of itsschools which began in 1998. In the 2015-2016 fiscal year, the District completed the comprehensive kitchenupgrades and food service equipment for the remaining three of five kitchens (Anderson, Green, and Twain)with a budget of $1.1 million.

ECONOMIC FACTORS AND NEXT YEAR'S BUDGETS AND RATES

In considering the District Budget for the 2016-2017 year, the Governing Board and management used thefollowing criteria:

The key assumptions in our revenue forecast are:

1. Continued implementation of the Local Control Funding Formula. The District also revised andadopted a Local Control Accountability Plan (LCAP) using stakeholder input to develop goals toenhance student achievement.

2. Average daily attendance (ADA) enrollments were down 187 from the prior year.3. Interest earnings remain low to reflect State and National interest rate policies.4. Developer fee collections were based upon actual receipts which are sensitive to the housing and

construction industry.5. MAA reimbursements are budgeted only upon receipt.6. Transfers to the early retiree fund of $294,765 annually, were reinstated.7. The District has recommitted a budgetary transfer of $214,445 to continue its commitment to

maintain its facilities, even though the former Deferred Maintenance program was eliminated andalso folded into the District's Local Control Funding Formula and LCAP.

Expenditures are based on the following forecasts:

Staffing Ratio EnrollmentGrades Pre-K and K through third 24:1 2,352Grades four and five 30:1 1,253Grades six, seven and eight 30:1 1,862Special Education (Ungraded) 14:1 117



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CONTACTING THE DISTRICT'S FINANCIAL MANAGEMENT

This financial report is designed to provide our citizens, taxpayers, students, and investors and creditors with ageneral overview of the District's finances and to show the District's accountability for the money it receives. Ifyou have questions about this report or need any additional financial information, contact the AssociateSuperintendent, Business Services, at Lawndale School District, Lawndale, California 90260, or e-mail [email protected].


STATEMENT OF NET POSITIONJUNE 30, 2016

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

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Governmental Business-Type

Activities Activities TotalASSETS

Deposits and investments 22,899,682$ 430,442$ 23,330,124$Receivables 3,716,302 2,215 3,718,517Stores inventories 84,904 - 84,904Other current assets 2,219 - 2,219Capital assets:

Land and construction in progress 1,686,365 - 1,686,365Other capital assets 93,766,153 - 93,766,153Less: Accumulated depreciation (49,551,041) - (49,551,041)

Total Capital Assets 45,901,477 - 45,901,477

Total Assets 72,604,584 432,657 73,037,241

DEFERRED OUTFLOWS OF RESOURCESDeferred outflows of resources related to pensions 12,051,495 - 12,051,495

LIABILITIESAccounts payable 7,501,367 18,453 7,519,820Accrued interest payable 210,609 - 210,609Unearned revenue 24,042 - 24,042Long-term obligations:

Current portion of long-term obligations

other than pensions 725,000 - 725,000

Noncurrent portion of long-term

obligations other than pensions 21,550,959 - 21,550,959

Total Long-Term Obligations 22,275,959 - 22,275,959Aggregate net pension liability 52,209,672 - 52,209,672

Total Liabilities 82,221,649 18,453 82,240,102

DEFERRED INFLOWS OF RESOURCES

Deferred inflows of resources related to pensions 10,630,789 - 10,630,789

NET POSITIONNet investment in capital assets 27,137,677 - 27,137,677Restricted for:

Debt service 973,678 - 973,678Capital projects 222,657 - 222,657Educational programs 2,204,818 - 2,204,818Other activities 994,430 - 994,430

Unrestricted (39,729,619) 414,204 (39,315,415)Total Net Position (8,196,359)$ 414,204$ (7,782,155)$


STATEMENT OF ACTIVITIESFOR THE YEAR ENDED JUNE 30, 2016


16

Charges for Operating

Services and Grants and

Functions/Programs Expenses Sales Contributions

Governmental Activities:

Instruction 48,880,492$ 172,759$ 10,038,165$

Instruction-related activities:

Supervision of instruction 2,332,966 13,541 1,781,091

Instructional library, media, and technology 716,036 - -

School site administration 3,427,519 - 80,810

Pupil services:

Home-to-school transportation 822,188 - 86,485

Food services 3,664,288 129,123 2,241,336

All other pupil services 3,523,632 19,282 760,869

General administration:

Data processing 835,887 - -

All other general administration 4,029,783 5,511 415,942

Plant services 4,688,957 141 36,829

Community services 294,732 - 37,926

Enterprise services 562 - -

Interest on long-term obligations 703,412 - -

Other outgo 4,287,689 21,681 323,576

Total Governmental Activities 78,208,143 362,038 15,803,029

Business-Type Activities

Enterprise services 148,669 - -Total School District 78,356,812$ 362,038$ 15,803,029$

General revenues and subventions:

Property taxes, levied for general purposes

Property taxes, levied for debt service

Taxes levied for other specific purposes

Interest and investment earnings

Miscellaneous

Total General Revenues and Subventions

Change in Net Position

Net Position - BeginningNet Position - Ending

Federal and State aid not restricted

to specific purposes

Program Revenues

16

Business-

Governmental Type

Activities Activities Total

(38,669,568)$ -$ (38,669,568)$

(538,334) - (538,334)

(716,036) - (716,036)

(3,346,709) - (3,346,709)

(735,703) - (735,703)

(1,293,829) - (1,293,829)

(2,743,481) - (2,743,481)

(835,887) - (835,887)

(3,608,330) - (3,608,330)

(4,651,987) - (4,651,987)

(256,806) - (256,806)

(562) - (562)

(703,412) - (703,412)

(3,942,432) - (3,942,432)

(62,043,076) - (62,043,076)

- (148,669) (148,669)(62,043,076) (148,669) (62,191,745)

6,972,617 - 6,972,617

1,475,220 - 1,475,220

1,558,302 - 1,558,302

46,775,782 - 46,775,782

89,801 3,586 93,387

7,400,327 97,065 7,497,392

64,272,049 100,651 64,372,700

2,228,973 (48,018) 2,180,955

(10,425,332) 462,222 (9,963,110)(8,196,359)$ 414,204$ (7,782,155)$

Net (Expenses) Revenues and

Changes in Net Position


GOVERNMENTAL FUNDSBALANCE SHEETJUNE 30, 2016


17

Special Reserve

Fund for

General Cafeteria Capital Outlay

Fund Fund Projects

ASSETS

Deposits and investments 15,441,354$ 520,060$ 4,318,752$

Receivables 2,840,631 543,620 7,272

Stores inventories 58,748 26,156 -

Other current assets 2,219 - -Total Assets 18,342,952$ 1,089,836$ 4,326,024$

LIABILITIES AND FUND BALANCES

Liabilities:

Accounts payable 5,663,464$ 215,869$ 306,512$

Unearned revenue 24,042 - -

Total Liabilities 5,687,506 215,869 306,512

Fund Balances:

Nonspendable 73,748 26,825 -

Restricted 2,204,818 847,142 -

Assigned 3,230,031 - 4,019,512

Unassigned 7,146,849 - -

Total Fund Balances 12,655,446 873,967 4,019,512

Total Liabilities andFund Balances 18,342,952$ 1,089,836$ 4,326,024$

17

Non-Major Total

Governmental Governmental

Funds Funds

2,619,516$ 22,899,682$

324,779 3,716,302

- 84,904

- 2,2192,944,295$ 26,703,107$

1,315,522$ 7,501,367$

- 24,042

1,315,522 7,525,409

- 100,573

1,628,773 4,680,733

- 7,249,543

- 7,146,849

1,628,773 19,177,698

2,944,295$ 26,703,107$


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

JUNE 30, 2016


18

Total Fund Balance - Governmental Funds 19,177,698$

Amounts Reported for Governmental Activities in the

Statement of Net Position are 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: 95,452,518$

Accumulated depreciation is: (49,551,041)

Total Net Capital Assets 45,901,477

Expenditures relating to contributions made to pension plans were

recognized on the modified accrual basis, but are not recognized on

the accrual basis. 4,575,077

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 remaining service life of members receiving pension benefits. 1,170,493

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. (3,619,591)

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. 121,770

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

pensions benefits. (827,043)

Net pension liabilities are not due and payable in the current period

and, therefore, are not reported as liabilities in the funds. (52,209,672)

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. (210,609)

Long-term obligations at year-end consist of:

General obligation bonds 18,838,341

Compensated absences 514,065

Other postemployment benefits (OPEB) 2,923,553

Total Long-Term Obligations (22,275,959)

Total Net Position - Governmental Activities (8,196,359)$


GOVERNMENTAL FUNDSSTATEMENT OF REVENUES, EXPENDITURES, ANDCHANGES IN FUND BALANCES

FOR THE YEAR ENDED JUNE 30, 2016


19

Special ReserveFund for

General Cafeteria Capital OutlayFund Fund Projects

REVENUESLocal Control Funding Formula 49,552,352$ -$ -$Federal sources 4,284,821 3,090,173 -Other State sources 12,153,982 210,904 -Other local sources 2,633,328 221,072 1,089,073

Total Revenues 68,624,483 3,522,149 1,089,073EXPENDITURESCurrent:

Instruction 43,403,934 - -Instruction-related activities:

Supervision of instruction 2,061,204 - -Instructional library, media,

and technology 725,274 - -School site administration 3,281,028 - -

Pupil services:Home-to-school transportation 729,875 - -Food services 4,836 3,414,976 -All other pupil services 3,331,516 - -

General administration:Data processing 820,704 - -All other general administration 3,312,760 134,000 -

Plant services 4,617,081 145 20,500Facility acquisition and construction 306,580 1,306,516 458,164Community services 294,732 - -Other outgo 758,645 - -

Debt servicePrincipal - - -Interest and other - - -

Total Expenditures 63,648,169 4,855,637 478,664Excess (Deficiency) of Revenues

Over Expenditures 4,976,314 (1,333,488) 610,409Other Financing Sources (Uses)

Transfers in - 414,151 2,114,445Transfers out (2,528,596) - -

Net Financing Sources (Uses) (2,528,596) 414,151 2,114,445

NET CHANGE IN FUND BALANCES 2,447,718 (919,337) 2,724,854Fund Balances - Beginning 10,207,728 1,793,304 1,294,658

Fund Balances - Ending 12,655,446$ 873,967$ 4,019,512$

19

Non-Major TotalGovernmental Governmental

Funds Funds

-$ 49,552,352$85,999 7,460,993

3,287,842 15,652,7281,515,411 5,458,8844,889,252 78,124,957

1,806,014 45,209,948

251,016 2,312,220

- 725,27467,310 3,348,338

- 729,87514,061 3,433,873

- 3,331,516

- 820,704128,766 3,575,526

19,584 4,657,310921,908 2,993,168

- 294,7321,000,448 1,759,093

700,000 700,000774,963 774,963

5,684,070 74,666,540

(794,818) 3,458,417

- 2,528,596- (2,528,596)- -

(794,818) 3,458,4172,423,591 15,719,281

1,628,773$ 19,177,698$


RECONCILIATION OF THE GOVERNMENTAL FUNDS STATEMENT OFREVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES TO THESTATEMENT OF ACTIVITIES



20

Total Net Change in Fund Balances - Governmental Funds 3,458,417$

Amounts Reported for Governmental Activities in the

Statement of Activities are Different Because:

Capital outlays to purchase or build capital assets are reported in

governmental funds as expenditures; however, for governmental

activities, those costs are shown in the Statement of Net Position and

allocated over their estimated useful lives as annual depreciation

expenses in the Statements of Activities.

This is the amount by which depreciation expense exceeded capital

outlays in the period.

Depreciation expense (4,726,687)$

Capital outlays 3,037,263 (1,689,424)

In the Statement of Activities, compensated absences (vacations) are

measured by the amounts earned during the year. In the governmental

funds, however, the related expenditures are measured by the amount of

financial resources used (essentially, the amounts actually paid).

Vacation earned was more than the amounts used by $28,011. (28,011)

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. 93,034

Governmental funds report the effect of premiums, discounts, issuance

costs, and the deferred amount on a refunding when the debt is first

issued, whereas the amounts are deferred and amortized in the Statement

of Activities:

Premium on issuance 56,967

Repayment of bond principal 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. 700,000

Contributions for postemployment benefits are recorded as an expense

in the governmental funds when paid. However, the difference between

the annual OPEB expense and the actual contribution made, if less, is

recorded in the government-wide statements as an expense. The actual

amount of the contribution was less than the annual OPEB expense. (376,594)

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 financial resources. In the Statement of Activities,

however, interest expense is recognized as the interest accrues, regardless

of when it is due. 14,584

Change in Net Position of Governmental Activities 2,228,973$


PROPRIETARY FUNDSSTATEMENT OF NET POSITIONJUNE 30, 2016


21

Business-Type

Activities

Enterprise

Fund

Child Care

Fund

ASSETS

Current Assets

Deposits and investments 430,442$

Receivables 2,215

Total Current Assets 432,657

LIABILITIES

Current Liabilities

Accounts payable 18,453

NET POSITIONUnrestricted 414,204$


PROPRIETARY FUNDSSTATEMENT OF REVENUES, EXPENSES, AND CHANGESIN FUND NET POSITION



22

Business-Type

Activities

Enterprise

Fund

Child Care

Fund

OPERATING REVENUES

Local and intermediate sources 97,065$

OPERATING EXPENSES

Payroll costs 56,521

Supplies and materials 39,789

Other operating cost 52,359

Total Operating Expenses 148,669

Operating Loss (51,604)

NONOPERATING REVENUES

Interest income 3,586

Change in Net Position (48,018)

Total Net Position - Beginning 462,222Total Net Position - Ending 414,204$


PROPRIETARY FUNDSSTATEMENT OF CASH FLOWSFOR THE YEAR ENDED JUNE 30, 2016


23

Business-Type

Activities

Enterprise

FundChild Care

Fund

CASH FLOWS FROM OPERATING ACTIVITIES

Cash received from user charges 97,065$

Cash payments for other operating expenses (141,833)

Net Cash Used by Operating Activities (44,768)

CASH FLOWS FROM INVESTING ACTIVITIES

Interest on investments 2,737

Net Change in Cash and Cash Equivalents (42,031)

Cash and Cash Equivalents - Beginning 472,473Cash and Cash Equivalents - Ending 430,442$

RECONCILIATION OF OPERATING LOSS TO NET CASH

USED BY OPERATING ACTIVITIES

Operating loss (51,604)$

Changes in liabilities:

Accounts payable 6,836NET CASH USED BY OPERATING ACTIVITIES (44,768)$


FIDUCIARY FUNDSSTATEMENT OF NET POSITIONJUNE 30, 2016


24

Agency

Funds

ASSETSDeposits and investments 41,237$

LIABILITIESDue to student groups 41,237$


NOTES TO FINANCIAL STATEMENTSJUNE 30, 2016

25

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Financial Reporting Entity

The Lawndale Elementary School District (the District) was organized in October 1906 under the laws of theState of California. The District operates under a locally elected five-member Board form of government andprovides educational services to grades K-8 as mandated by the State and/or Federal agencies. The Districtoperates six elementary schools and two middle schools.

A reporting entity is comprised of the primary government and other organizations that are included to ensure thefinancial statements are not misleading. The primary government of the District consists of all funds,departments, boards, and agencies that are not legally separate from the District. For Lawndale Elementary, thisincludes general operations, food service, and student related activities of the District.

Other Related Entities

Charter School The District has approved the Environmental Charter School pursuant to Education CodeSection 47605. The Charter School was approved in December 2000, for an original term of four years endingJune 30, 2004. The agreement has since been approved through June 30, 2014.

For financial reporting purposes the charter is not considered a component unit in accordance with GovernmentalAccounting Standards Board (GASB) Statement No. 14 as amended by Statement No. 39. The criterion thatestablishes financial accountability as a result of fiscal dependency was not met. Therefore, the charter isdetermined not to be a component unit and is not included as part of these financial statements.

The charter is subject to audit within the agreement. Audited financial statements are available from the charterorganization.

Basis of Presentation - Fund Accounting

The accounting system is organized and operated on a fund basis. A fund is defined as a fiscal and accountingentity with a self-balancing set of accounts, which are segregated for the purpose of carrying on specific activitiesor attaining certain objectives in accordance with special regulations, restrictions, or limitations. The District'sfunds are grouped into three broad fund categories: governmental, proprietary, and fiduciary.

Governmental Funds Governmental funds are those through which most governmental functions typically arefinanced. Governmental fund reporting focuses on the sources, uses, and balances of current financial resources.Expendable assets are assigned to the various governmental funds according to the purposes for which they mayor must be used. Current liabilities are assigned to the fund from which they will be paid. The differencebetween governmental fund assets and liabilities is reported as fund balance. The following are the District'smajor and non-major governmental funds:



26

Major Governmental Funds

General Fund The General Fund is the chief operating fund for all districts. It is used to account for the ordinaryoperations of the District. All transactions except those accounted for in another fund are accounted for in thisfund.

Two funds currently defined as a special revenue funds in the California State Accounting Manual (CSAM) donot meet the GASB Statement No. 54 special revenue fund definition. Fund 17, Special Reserve Fund for OtherThan Capital Outlay Projects and Fund 14 Deferred Maintenance Fund are not substantially composed ofrestricted or committed revenue sources. While these funds are authorized by statute and will remain open forinternal reporting purposes, these funds function effectively as an extension of the General Fund, and accordinglyhave been combined with the General Fund for presentation in these audited financial statements.

As a result, the General Fund reflects an increase in assets and fund balance of $2,894,958, and $2,894,958respectively, and an increase in revenues of $22,243.

Cafeteria Fund The Cafeteria Fund is used to account separately for Federal, State, and local resources tooperate the food service program (Education Code Sections 38090-38093) and is used only for those expendituresauthorized by the governing board as necessary for the operation of the District's food service program (EducationCode Sections 38091 and 38100).

Special Reserve Fund for Capital Outlay Projects The Special Reserve Fund for Capital Outlay Projects existsprimarily to provide for the accumulation of General Fund monies for capital outlay purposes (Education CodeSection 42840).

Non-Major Governmental Funds

Special Revenue Funds The Special Revenue funds are used to account for the proceeds from specificrevenue sources (other than trusts, major capital projects, or debt service) that are restricted or committed to thefinancing of particular activities and that compose a substantial portion of the inflows of the fund. Additionalresources that are restricted, committed, or assigned to the purpose of the fund may also be reported in the fund.

Special Education Pass-Through Fund The Special Education Pass-Through Fund is used by theAdministrative Unit of a multi-district Special Education Local Plan Area (SELPA) to account for SpecialEducation revenue passed through to other member districts.

Child Development Fund The Child Development Fund is used to account separately for Federal, State, andlocal revenues to operate child development programs and is to be used only for expenditures for the operationof child development programs.

Capital Project Funds The Capital Project funds are used to account for and report financial resources that arerestricted, committed, or assigned to the acquisition or construction of major capital facilities and other capitalassets (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 bonds(Education Code Section 15146) and may not be used for any purposes other than those for which the bondswere issued.



27

Capital Facilities Fund The Capital Facilities Fund is used primarily to account separately for moniesreceived 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 GovernmentCode Sections 65970-65981 or to the items specified in agreements with the developer (Government CodeSection 66006).

State School Building Fund The State School Building Fund is used primarily to account separately forState apportionments for the reconstruction, remodeling, or replacing of existing school buildings or theacquisition of new school sites and buildings, as provided in the Leroy F. Greene State School BuildingLease-Purchase Law of 1976 (Education Code Section 17000 et seq.).

County School Facilities Fund The County School Facilities Fund is established pursuant to EducationCode Section 17070.43 to receive apportionments from the 1998 State School Facilities Fund(Proposition lA), the 2002 State School Facilities Fund (Proposition 47), the 2004 State School FacilitiesFund (Proposition 55), or the 2006 State School Facilities Fund (Proposition 1D) authorized by the StateAllocation Board for new school facility construction, modernization projects, and facility hardship grants, asprovided in the Leroy F. Greene School Facilities Act of 1998 (Education Code Section 17070 et seq.).

Debt Service Funds The Debt Service funds are used to account for the accumulation of restricted, committed,or assigned resources for and the payment of principal and interest on general long-term obligations.

Bond Interest and Redemption Fund The Bond Interest and Redemption Fund is used for the repayment ofbonds issued for a district (Education Code Sections 15125-15262).

Tax Override Fund The Tax Override Fund is used for the repayment of voted indebtedness (other thanBond Interest and Redemption Fund) tax levies to be financed from ad valorem tax levies.

Debt Service Fund This fund is used for the accumulation of resources for and the retirement of principal

and interest on general long-term obligations.

Proprietary Funds Proprietary Fund reporting focuses on the determination of operating income, changes in netposition, financial position, and cash flows. The District applies all GASB pronouncements, as well as theFinancial Accounting Standards Board pronouncements issued on or before November 30, 1989, unless thosepronouncements conflict with or contradict GASB pronouncements. Proprietary funds are classified as enterpriseor internal service. The District has the following proprietary fund:

Enterprise Fund Enterprise Fund may be used to account for any activity for which a fee is charged toexternal users for goods or services. The only enterprise fund of the District accounts for the financialtransactions related to the child care operations of the District.

Fiduciary Funds Fiduciary funds are used to account for assets held in trustee or agent capacity for others thatcannot be used to support the District's own programs. The fiduciary fund category is split into fourclassifications: pension trust funds, investment trust funds, private-purpose trust funds, and agency funds. Thekey distinction between trust and agency funds is that trust funds are subject to a trust agreement that affects thedegree of management involvement and the length of time that the resources are held.



28

Agency funds are custodial in nature (assets equal liabilities) and do not involve measurement of results ofoperations. Such funds have no equity accounts since all assets are due to individuals or entities at some futuretime. The District's agency fund accounts for student body activities (ASB).

Basis of Accounting - Measurement Focus

Government-Wide Financial Statements The government-wide financial statements are prepared using theeconomic resources measurement focus and the accrual basis of accounting. This is the same approach used inthe preparation of the proprietary fund financial statements, but differs from the manner in which governmentalfund financial statements are prepared.

The government-wide statement of activities present a comparison between direct expenses and program revenuesfor each segment of the business-type activities of the District and for each governmental function, and excludesfiduciary activity. Direct expenses are those that are specifically associated with a service, program, ordepartment and are therefore clearly identifiable to a particular function. The District does not allocate indirectexpenses to functions in the Statement of Activities, except for depreciation. Program revenues include chargespaid by the recipients of the goods or services offered by the programs and grants and contributions that arerestricted to meeting the operational or capital requirements of a particular program. Revenues that are notclassified as program revenues are presented as general revenues. The comparison of program revenues andexpenses identifies the extent to which each program or business segment is self-financing or draws from thegeneral revenues of the District. Eliminations have been made to minimize the double counting of internalactivities.

Net position should be reported as restricted when constraints placed on net position use are either externallyimposed by creditors (such as through debt covenants), grantors, contributors, or laws or regulations of othergovernments or imposed by law through constitutional provisions or enabling legislation. The net positionrestricted for other purposes result from special revenue funds and the restrictions on their use.

Fund Financial Statements Fund Financial Statements report detailed information about the District. The focusof governmental and proprietary fund financial statements is on major funds rather than reporting funds by type.Each major governmental fund is presented in a separate column. Non-major governmental funds are aggregatedand presented in a single column. The enterprise fund is presented in a single column on the face of theproprietary fund statement.

Governmental Funds All governmental funds are accounted for using the flow of current financialresources measurement focus and the modified accrual basis of accounting. With this measurement focus,only current assets and current liabilities generally are included on the balance sheet. The statement ofrevenues, expenditures, and changes in fund balances reports on the sources (revenues and other financingsources) and uses (expenditures and other financing uses) of current financial resources. This approachdiffers from the manner in which the governmental activities of the government-wide financial statements areprepared. Governmental fund financial statements, therefore, include reconciliations with brief explanationsto better identify the relationship between the government-wide financial statements, prepared using theeconomic resources measurement focus and the accrual basis of accounting, and the governmental fundfinancial statements, prepared using the flow of current financial resources measurement focus and themodification accrual basis of accounting.



29

Proprietary Funds Proprietary funds are accounted for using the flow of economic resources measurementfocus and the accrual basis of accounting. All assets and all liabilities associated with the operation of thisfund are included in the statement of net position. The statement of changes in fund net position presentsincreases (revenues) and decreases (expenses) in net total assets. The statement of cash flows providesinformation about how the District finances and meets the cash flow needs of its proprietary fund.

Fiduciary Funds Fiduciary funds are accounted for using the flow of economic resources measurementfocus and the accrual basis of accounting. Fiduciary funds are excluded from the government-wide financialstatements because they do not represent resources of the District.

Revenues – Exchange and Non-Exchange Transactions Revenue resulting from exchange transactions, inwhich each party gives and receives essentially equal value, is recorded on the accrual basis when the exchangetakes place. On a modified accrual basis, revenue is recorded in the fiscal year in which the resources aremeasurable and become available. Available means that the resources will be collected within the current fiscalyear or are expected to be collected soon enough thereafter, to be used to pay liabilities of the current fiscal year.Generally, available is defined as collectible within 90 days. However, to achieve comparability of reportingamong California school districts and so as not to distort normal revenue patterns, with specific respect toreimbursement grants and corrections to State-aid apportionments, the California Department of Education hasdefined available for school districts as collectible within one year. The following revenue sources are consideredto be both measurable and available at fiscal year-end: State apportionments, interest, certain grants, and otherlocal sources.

Non-exchange transactions, in which the District receives value without directly giving equal value in return,include property taxes, certain grants, entitlements, and donations. Revenue from property taxes is recognized inthe fiscal year in which the taxes are received. Revenue from certain grants, entitlements, and donations isrecognized in the fiscal year in which all eligibility requirements have been satisfied. Eligibility requirementsinclude time and purpose restrictions. On a modified accrual basis, revenue from non-exchange transactions mustalso be available before it can be recognized.

Unearned Revenue Unearned revenue 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 theincurrence of qualifying expenditures. In subsequent periods, when both revenue recognition criteria are met, orwhen the District has a legal claim to the resources, the liability for unearned revenue is removed from the balancesheet and revenue is recognized.

Certain grants received before the eligibility requirements are met are recorded as unearned revenue. On thegovernmental fund financial statements, receivables that will not be collected within the available period are alsorecorded as unearned revenue.

Expenses/Expenditures On the accrual basis of accounting, expenses are recognized at the time they areincurred. 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 therelated fund liability is incurred, if measurable, and typically paid within 90 days. Principal and interest on long-term 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 arerecognized in the entity-wide statements.



30

Cash and Cash Equivalents

The District's cash and cash equivalents are considered to be cash on hand, demand deposits, and short-terminvestments with original maturities of three months or less from the date of acquisition. Cash equivalents alsoinclude cash with county treasury balances for purposes of the statement of cash flows.

Investments

Investments held at June 30, 2016, with original maturities greater than one year are stated at fair value. Fairvalue is estimated based on quoted market prices at year-end. All investments not required to be reported at fairvalue are stated at cost or amortized cost. Fair values of investments in county investment pools are determinedby the program sponsor.

Stores Inventories

Inventories consist of expendable food and supplies held for consumption. Inventories are stated at cost, on thefirst-in, first-out basis. The costs of inventory items are recorded as expenditures in the governmental-type fundswhen used.

Capital Assets and Depreciation

The accounting and reporting treatment applied to the capital assets associated with a fund are determined by itsmeasurement focus. Capital assets are long-lived assets of the District. The District maintains a capitalizationthreshold of $5,000. The District does not possess any infrastructure. Improvements are capitalized; the costs ofnormal maintenance and repairs that do not add to the value of the asset or materially extend an asset's life are notcapitalized, but are expensed as incurred.

When purchased, such assets are recorded as expenditures in the governmental funds and capitalized in thegovernment-wide statement of net position. The valuation basis for capital assets is historical cost, or wherehistorical cost is not available, estimated historical cost based on replacement cost. Donated capital assets arecapitalized at estimated fair market value on the date donated.

Depreciation is computed using the straight-line method. Estimated useful lives of the various classes ofdepreciable capital assets are as follows: buildings, 20 to 50 years; improvements, 5 to 50 years; equipment, 2 to15 years.

Compensated Absences

Compensated absences are accrued as a liability as the benefits are earned. The entire compensated absenceliability is reported on the government-wide financial statements. For governmental funds, the current portion ofunpaid compensated absences is recognized upon the occurrence of relevant events such as employee resignationsand retirements that occur prior to year-end that have not yet been paid with expendable available financialresources. These amounts are reported in the fund from which the employees who have accumulated leave arepaid.



31

Sick leave is accumulated without limit for each employee at the rate of one day for each month worked. Leavewith pay is provided when employees are absent for health reasons; however, the employees do not gain a vestedright to accumulated sick leave. Employees are never paid for any sick leave balance at termination ofemployment or any other time. Therefore, the value of accumulated sick leave is not recognized as a liability inthe District's financial statements. However, credit for unused sick leave is applicable to all classified schoolmembers who retire after January 1, 1999. At retirement, each member will receive .004 year of service credit foreach day of unused sick leave. Credit for unused sick leave is applicable to all certificated employees and isdetermined by dividing the number of unused sick days by the number of base service days required to completethe 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 and proprietaryfund financial statements. In general, governmental fund payables and accrued liabilities that, once incurred, arepaid in a timely manner and in full from current financial resources are reported as obligations of thegovernmental funds.

However, claims and judgments, compensated absences, special termination benefits, and contractually requiredpension contributions that will be paid from governmental funds are reported as a liability in the governmentalfund financial statements only to the extent that they are due for payment during the current year. Bonds, capitalleases, and other long-term obligations are recognized as liabilities in the governmental fund financial statementswhen due.

Debt Issuance Costs, Premiums and Discounts

In the government-wide financial statements, long-term obligations are reported as liabilities in the statement ofnet position. Debt premiums and discounts, as well as issuance costs related to prepaid insurance costs areamortized 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 arerecognized in the current period. The face amount of the debt is reported as other financing sources. Premiumsreceived on debt issuance are also reported as other financing sources. Issuance costs, whether or not withheldfrom the actual debt proceeds, are reported as debt services expenditures.

Deferred Outflows/Inflows of Resources

In addition to assets, the Statement of Net Position also reports deferred outflows of resources. This separatefinancial statement element represents a consumption of net position that applies to a future period and so will notbe recognized as an expense or expenditure until then. The District reports deferred outflows of resources forpension 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 periodand so will not be recognized as revenue until then. The District reports deferred inflows of resources for pensionrelated items.



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Pensions

For purposes of measuring the net pension liability and deferred outflows/inflows of resources related to pensionsand pension expense, information about the fiduciary net position of the California State Teachers' RetirementSystem (CalSTRS) and the California Public Employees' Retirement System (CalPERS) plan for schools(the Plans) and additions to/deductions from the Plans' fiduciary net position have been determined on the samebasis as they are reported by CalSTRS and CalPERS. For this purpose, benefit payments (including refunds ofemployee contributions) are recognized when due and payable in accordance with the benefit terms. Membercontributions 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 arelegally or contractually required to be maintained intact.

Committed – amounts that can be used only for specific purposes determined by a formal action of the governingboard. The governing board is the highest level of decision-making authority for the District. Commitments maybe established, modified, or rescinded only through resolutions or other actions as approved by the governingboard. The District currently does not have any committed funds.

Restricted - amounts that can be spent only for specific purposes because of constitutional provisions or enablinglegislation or because of constraints that are externally imposed by creditors, grantors, contributors, or the laws orregulations of other governments.

Assigned - amounts that do not meet the criteria to be classified as restricted or committed but that are intended tobe used for specific purposes. Under the District's adopted policy, only the governing board or Superintendent orChief Business Official may assign amounts for specific purposes.

Unassigned - all other spendable amounts.

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 whichcommitted, assigned, or unassigned fund balances are available, the District considers amounts to have been spentfirst out of committed funds, then assigned funds, and finally unassigned funds, as needed, unless the governingboard 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 districtagainst revenue shortfalls or unpredicted on-time expenditures. The policy requires a Reserve for EconomicUncertainties consisting of unassigned amounts equal to no less than three percent of General Fund expendituresand other financing uses.



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Net Position

Net position represents the difference between assets and liabilities. Net position net of investment in capitalassets consists of capital assets, net of accumulated depreciation, reduced by the outstanding balances of anyborrowings used for the acquisition, construction, or improvement of those assets. Net position is reported asrestricted when there are limitations imposed on their use either through the enabling legislation adopted by theDistrict or through external restrictions imposed by creditors, grantors, or laws or regulations of othergovernments. The District first applies restricted resources when an expense is incurred for purposes for whichboth restricted and unrestricted net position is available. The government-wide financial statements report$4,395,583 of restricted net position.

Operating Revenues and Expenses

Operating revenues are those revenues that are generated directly from the primary activity of the proprietaryfunds. For the District, these revenues are user fees. Operating expenses are necessary cost incurred to providethe good or service that is the primary activity of the fund. All revenues and expenses not meeting this definitionare reported as non-operating revenues and expenses.

Interfund Activity

Transfers between governmental and business-type activities in the government-wide financial statements arereported in the same manner as general revenues.

Exchange transactions between funds are reported as revenues in the seller funds and as expenditures/expenses inthe purchaser funds. Flows of cash or goods from one fund to another without a requirement for repayment arereported as interfund transfers. Interfund transfers are reported as other financing sources/uses in governmentalfunds and after non-operating revenues/expenses in proprietary funds. Repayments from funds responsible forparticular expenditures/expenses to the funds that initially paid for them are not presented in the financialstatements. Interfund transfers are eliminated in the governmental and business-type activities columns of theStatement of Activities, except for the net residual amounts transferred between governmental and business-typeactivities.

Estimates

The preparation of the financial statements in conformity with accounting principles generally accepted in theUnited States of America requires management to make estimates and assumptions that affect the amountsreported 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 governingboard to hold a public hearing and adopt an operating budget no later than July 1 of each year. The District'sgoverning board satisfied these requirements. The adopted budget is subject to amendment throughout the year togive consideration to unanticipated revenue and expenditures primarily resulting from events unknown at the timeof budget adoption with the legal restriction that expenditures cannot exceed appropriations by major objectaccount.



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The amounts reported as the original budgeted amounts in the budgetary statements reflect the amounts when theoriginal appropriations were adopted. The amounts reported as the final budgeted amounts in the budgetarystatements reflect the amounts after all budget amendments have been accounted for. For budget purposes, onbehalf payments have not been included as revenue and expenditures as required under generally acceptedaccounting principles.

Property Tax

Secured property taxes attach as an enforceable lien on property as of January 1. Taxes are payable in twoinstallments 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 Los Angelesbills and collects the taxes on behalf of the District. Local property tax revenues are recorded when received.

Parcel Tax

In November 2012 local voters passed Local Classrooms Funding Authority - Measure CL Parcel Tax to protectacademic quality in local K-12 schools; maintain math, science, English programs; provide education for studentswith disabilities/special needs, support computer technology and school security, prepare students forcollege/careers, and retain excellent teachers. Local Classrooms Funding Authority levied a special tax of2¢/square foot of lot for residential property, and 7.5¢/square foot for other property types; requiring citizensoversight, audits, senior exemptions and no money for administrator salaries. The District received $1,364,263 inparcel tax receipts.

Change in Accounting Principles

In February 2015, the GASB issued Statement No. 72, Fair Value Measurement and Application. This Statementaddresses accounting and financial reporting issues related to fair value measurements. The definition of fairvalue is the price that would be received to sell an asset or paid to transfer a liability in an orderly transactionbetween market participants at the measurement date. This Statement provides guidance for determining a fairvalue measurement for financial reporting purposes. This Statement also provides guidance for applying fair valueto 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 RelatedAssets That Are Not within the Scope of GASB Statement 68, and Amendments to Certain Provisions of GASBStatements 67 and 68. The objective of this Statement is to improve the usefulness of information about pensionsincluded in the general purpose external financial reports of State and local governments for making decisions andassessing accountability. This Statement results from a comprehensive review of the effectiveness of existingstandards of accounting and financial reporting for all postemployment benefits with regard to providingdecision-useful information, supporting assessments of accountability and inter-period equity, and creatingadditional transparency.



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This Statement establishes requirements for defined benefit pensions that are not within the scope of GASBStatement No. 68, Accounting and Financial Reporting for Pensions—an amendment to GASB Statement No. 27,as well as for the assets accumulated for purposes of providing those pensions. In addition, it establishesrequirements for defined contribution pensions that are not within the scope of GASB Statement No. 68. It alsoamends certain provisions of GASB Statement No. 67, Financial Reporting for Pension Plans—an amendment toGASB Statement No. 25, and GASB Statement No. 68 for pension plans and pensions that are within theirrespective scopes.

The provisions in this Statement, effective as of June 30, 2016, include the provisions for assets accumulated forpurposes of providing pensions through defined benefit plans and the amended provisions of GASB StatementsNo. 67 and No. 68. The District has implemented these provisions as of June 30, 2016. The provisions in thisStatement related to defined benefit pensions that are not within the scope of GASB Statement No. 68 areeffective for periods beginning after June 15, 2016.

In June 2015, the GASB issued Statement No. 76, The Hierarchy of Generally Accepted Accounting Principlesfor State and Local Governments. The objective of this Statement is to identify—in the context of the currentgovernmental financial reporting environment—the hierarchy of generally accepted accounting principles(GAAP). The "GAAP hierarchy" consists of the sources of accounting principles used to prepare financialstatements of State and local governmental entities in conformity with GAAP and the framework for selectingthose principles. This Statement reduces the GAAP hierarchy to two categories of authoritative GAAP andaddresses the use of authoritative and non-authoritative literature in the event that the accounting treatment for atransaction 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 Principlesfor State and Local Governments.


In December 2015, the GASB issued Statement No. 79, Certain External Investment Pools and Pool Participants.This Statement addresses accounting and financial reporting for certain external investment pools and poolparticipants. Specifically, it establishes criteria for an external investment pool to qualify for making the electionto measure all of its investments at amortized cost for financial reporting purposes. An external investment poolqualifies for that reporting if it meets all of the applicable criteria established in this Statement. The specificcriteria address (1) how the external investment pool transacts with participants; (2) requirements for portfoliomaturity, 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 atamortized cost for financial reporting purposes. Professional judgment is required to determine if instances ofnoncompliance with the criteria established by this Statement during the reporting period, individually or in theaggregate, were significant.

If an external investment pool does not meet the criteria established by this Statement, that pool should apply theprovisions in paragraph 16 of GASB Statement No. 31, Accounting and Financial Reporting for CertainInvestments and for External Investment Pools, as amended. If an external investment pool meets the criteria inthis Statement and measures all of its investments at amortized cost, the pool's participants also should measuretheir investments in that external investment pool at amortized cost for financial reporting purposes. If an externalinvestment pool does not meet the criteria in this Statement, the pool's participants should measure theirinvestments in that pool at fair value, as provided in paragraph 11 of GASB Statement No. 31, as amended.



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This Statement establishes additional note disclosure requirements for qualifying external investment pools thatmeasure all of their investments at amortized cost for financial reporting purposes and for governments thatparticipate in those pools. Those disclosures, for both the qualifying external investment pools and theirparticipants, include information about any limitations or restrictions on participant withdrawals.


New Accounting Pronouncements

In June 2015, the GASB issued Statement No. 74, Financial Reporting for Postemployment Benefit Plans OtherThan Pension Plans. The objective of this Statement is to improve the usefulness of information aboutpostemployment benefits other than pensions (other postemployment benefits or OPEB) included in the generalpurpose external financial reports of state and local governmental OPEB plans for making decisions and assessingaccountability. This Statement results from a comprehensive review of the effectiveness of existing standards ofaccounting and financial reporting for all postemployment benefits (pensions and OPEB) with regard to providingdecision-useful information, supporting assessments of accountability and inter-period equity, and creatingadditional transparency.

This Statement replaces Statements No. 43, Financial Reporting for Postemployment Benefit Plans Other ThanPension Plans, as amended, and No. 57, OPEB Measurements by Agent Employers and Agent Multiple-EmployerPlans. It also includes requirements for defined contribution OPEB plans that replace the requirements for thoseOPEB plans in Statement No. 25, Financial Reporting for Defined Benefit Pension Plans and Note Disclosuresfor 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 afterJune 15, 2016. Early implementation is encouraged.

In June 2015, the GASB issued Statement No. 75, Accounting and Financial Reporting for PostemploymentBenefits Other Than Pension. The primary objective of this Statement is to improve accounting and financialreporting by state and local governments for postemployment benefits other than pensions (other postemploymentbenefits or OPEB). It also improves information provided by state and local governmental employers aboutfinancial support for OPEB that is provided by other entities. This Statement results from a comprehensive reviewof 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 ofaccountability and inter-period equity, and creating additional transparency.

This Statement replaces the requirements of Statements No. 45, Accounting and Financial Reporting byEmployers for Postemployment Benefits Other Than Pensions, as amended, and No. 57, OPEB Measurements byAgent Employers and Agent Multiple-Employer Plans, for OPEB. Statement No. 74, Financial Reporting forPostemployment Benefit Plans Other Than Pension Plans, establishes new accounting and financial reportingrequirements for OPEB plans.

The requirements of this Statement are effective for financial statements for periods beginning afterJune 15, 2017. Early implementation is encouraged.



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In August 2015, the GASB issued Statement No. 77, Tax Abatement Disclosures. This Statement requiresgovernments 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 areprovided, eligibility criteria, the mechanism by which taxes are abated, provisions for recapturing abatedtaxes, 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

The requirements of this Statement are effective for financial statements for periods beginning afterDecember 15, 2015. Early implementation is encouraged.

In December 2015, the GASB issued Statement No. 78, Pensions Provided through Certain Multiple-EmployerDefined Benefit Pension Plans. The objective of this Statement is to address a practice issue regarding the scopeand applicability of GASB Statement No. 68, Accounting and Financial Reporting for Pensions—an amendmentto GASB Statement No. 27. This issue is associated with pensions provided through certain multiple-employerdefined benefit pension plans and to State or local governmental employers whose employees are provided withsuch pensions.

Prior to the issuance of this Statement, the requirements of GASB Statement No. 68 applied to the financialstatements of all State and local governmental employers whose employees are provided with pensions throughpension 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 toemployees of State or local governmental employers through a cost-sharing multiple-employer defined benefitpension plan that (1) is not a State or local governmental pension plan; (2) is used to provide defined benefitpensions both to employees of State or local governmental employers and to employees of employers that are notState 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 pensionsthrough the pension plan). This Statement establishes requirements for recognition and measurement of pensionexpense, expenditures, and liabilities; note disclosures; and required supplementary information for pensions thathave the characteristics described above.

The requirements of this Statement are effective for reporting periods beginning after December 15, 2015. Earlyimplementation is encouraged.

In January 2016, the GASB issued Statement No. 80, Blending Requirements for Certain Component Units—anamendment of GASB Statement No. 14. The objective of this Statement is to improve financial reporting byclarifying the financial statement presentation requirements for certain component units. This Statement amendsthe blending requirements established in paragraph 53 of GASB Statement No. 14, The Financial ReportingEntity. The additional criterion requires blending of a component unit incorporated as a not-for-profit corporationin which the primary government is the sole corporate member. The additional criterion does not apply tocomponent units included in the financial reporting entity pursuant to the provisions of GASB StatementNo. 39, Determining Whether Certain Organizations Are Component Units—an amendment of GASB StatementNo. 14.



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The requirements of this Statement are effective for reporting periods beginning after June 15, 2016. Earlyimplementation is encouraged.

In March 2016, the GASB issued Statement No. 81, Irrevocable Split-Interest Agreements. The objective of thisStatement is to improve accounting and financial reporting for irrevocable split-interest agreements by providingrecognition and measurement guidance for situations in which a government is a beneficiary of the agreement.

This Statement requires that a government that receives resources pursuant to an irrevocable split-interestagreement 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 inirrevocable split-interest agreements that are administered by a third party, if the government controls the presentservice capacity of the beneficial interests. This Statement requires that a government recognize revenue when theresources become applicable to the reporting period.

The requirements of this Statement are effective for financial statements for periods beginning afterDecember 15, 2016, and should be applied retroactively. Early implementation is encouraged.

In March 2016, the GASB issued Statement No. 82, Pension Issues—an amendment of GASB Statements No. 67,No. 68, and No. 73. The objective of this Statement is to address certain issues that have been raised with respectto GASB Statement No. 67, Financial Reporting for Pension Plans—an amendment to GASB Statement No. 25,GASB Statement No. 68, Accounting and Financial Reporting for Pensions—an amendment to GASB StatementNo. 27, and GASB Statement No. 73, Accounting and Financial Reporting for Pensions and Related Assets ThatAre Not within the Scope of GASB Statement 68, and Amendments to Certain Provisions of GASB Statements 67and 68. Specifically, this Statement addresses issues regarding (1) the presentation of payroll-related measures inrequired supplementary information; (2) the selection of assumptions and the treatment of deviations from theguidance in an Actuarial Standard of Practice for financial reporting purposes; and (3) the classification ofpayments 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 forthe requirements of this Statement for the selection of assumptions in a circumstance in which an employer'spension liability is measured as of a date other than the employer's most recent fiscal yearend. In thatcircumstance, the requirements for the selection of assumptions are effective for that employer in the firstreporting period in which the measurement date of the pension liability is on or after June 15, 2017. Earlyimplementation is encouraged.



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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 22,899,682$

Business-type activities 430,442

Fiduciary funds 41,237

Total Deposits and Investments 23,371,361$

Deposits and investments as of June 30, 2016, consist of the following:

Cash on hand and in banks 47,237$

Cash in revolving 15,669

Investments 23,308,455

Total Deposits and Investments 23,371,361$

Policies and Practices

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 depositplaced 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. TheDistricts investment policies do not address risk criteria included in GASB Statement No. 40.

Investment in County Treasury

The District is considered to be an involuntary participant in an external investment pool as the District is requiredto 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 amountsbased 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 theaccounting records maintained by the County Treasurer, which is recorded on the amortized cost basis.

The District is an involuntary participant in the Los Angeles County Investment Pool. The pool is managed bythe Los Angeles County Treasurer and is not registered as an investment company with the Securities ExchangeCommission. Oversight of the pool is the responsibility of the County Treasury Oversight Committee. CaliforniaGovernment Code statutes and the County Treasury Oversight Committee set forth the various investmentpolicies that the Treasurer follows.



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As provided by the Government Code, the cash balances of substantially all funds are pooled and invested by theCounty Treasurer for the purpose of increasing interest earnings through investment activities. Interest earned onpooled investments is deposited to the participating funds, based upon the funds average daily deposit balanceduring the allocation period.

General Authorizations

Limitations as they relate to interest rate risk, credit risk, and concentration of credit risk are indicated in theschedules 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 N/A 20% 10%

Money Market Mutual Funds N/A 20% 10%

Mortgage Pass-Through Securities 5 years 20% None

County Pooled Investment Funds N/A None None

Local Agency Investment Fund (LAIF) N/A None None

Joint Powers Authority Pools N/A None None

Interest Rate Risk

Interest rate risk is the risk that changes in market interest rates will adversely affect the fair value of aninvestment. Generally, the longer the maturity of an investment the greater the sensitivity of its fair value tochanges in market interest rates. The District does not have a formal investment policy that limits investmentmaturities as a means of managing its exposure to fair value losses arising from increasing interest rates. TheDistrict manages its exposure to interest rate risk by investing in the Los Angeles County Investment Pool and bypurchasing a combination of shorter term and longer term investments and by timing cash flows from maturitiesso that a portion of the portfolio is maturing or coming close to maturity evenly over time as necessary to providethe cash flow and liquidity needed for operations. The District maintains an investment of $23,335,685 with theLos Angeles County Investment Pool that has an average weighted maturity of 608 days.



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Credit Risk

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. TheDistrict's investment in the Los Angeles County Investment Pool is not rated, nor is it required to be rated as ofJune 30, 2016.

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 Districtdoes not have a policy for custodial credit risk for deposits. However, the California Government Code requiresthat a financial institution secure deposits made by State or local governmental units by pledging securities in anundivided collateral pool held by a depository regulated under State law (unless so waived by the governmentalunit). The market value of the pledged securities in the collateral pool must equal at least 110 percent of the totalamount deposited by the public agencies. California law also allows financial institutions to secure publicdeposits by pledging first trust deed mortgage notes having a value of 150 percent of the secured public depositsand letters of credit issued by the Federal Home Loan Bank of San Francisco having a value of 105 percent of thesecured deposits. As of June 30, 2016, the District did not have any deposits exposed to custodial credit riskbecause all balances were FDIC insured.

NOTE 3 - FAIR VALUE MEASUREMENTS

The District categorizes the fair value measurements of its investments based on the hierarchy established bygenerally accepted accounting principles. The fair value hierarchy, which has three levels, is based on thevaluation inputs used to measure an asset's fair value. The following provides a summary of the hierarchy used tomeasure fair value:

Level 1 - Quoted prices in active markets for identical assets that the District has the ability to access at themeasurement date. Level 1 assets may include debt and equity securities that are traded in an active exchangemarket and that are highly liquid and are actively traded in over-the-counter markets.

Level 2 - Observable inputs, other than Level 1 prices, such as quoted prices for similar assets in activemarkets, quoted prices for identical or similar assets in markets that are not active, or other inputs that areobservable, 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 isrequired to be observable for substantially the full term of the asset.

Level 3 - Unobservable inputs should be developed using the best information available under thecircumstances, which might include the District's own data. The District should adjust that data if reasonablyavailable information indicates that other market participants would use different data or certaincircumstances specific to the District are not available to other market participants.

Uncategorized - Investments in the Los Angeles County Investment Pool are not measured using the input levelsabove because the District's transactions are based on a stable net asset value per share. All contributions andredemptions are transacted at $1.00 net asset value per share.



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The District's fair value measurements are as follows at June 30, 2016:

Investment Type Fair Value UncategorizedLos Angeles County Pool 23,335,685$ 23,335,685$

All assets have been valued using a market approach, with quoted market prices.

NOTE 4 - RECEIVABLES

Receivables at June 30, 2016, consisted of intergovernmental grants, entitlements, interest, and other localsources. All receivables are considered collectible in full.

Special Reserve

Fund for Non-Major Total

General Cafeteria Capital Outlay Governmental Governmental Enterprise

Fund Fund Projects Funds Activities Fund

Federal Government

Categorical aid 1,222,546$ 496,510$ -$ -$ 1,719,056$ -$

State Government

Categorical aid 699,018 36,436 - 321,414 1,056,868 -

Lottery 637,728 - - - 637,728 -

Local Receivables

Interest 22,383 4,681 5,246 2,859 35,169 2,215

Other 258,956 5,993 2,026 506 267,481 -

Total 2,840,631$ 543,620$ 7,272$ 324,779$ 3,716,302$ 2,215$



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NOTE 5 - CAPITAL ASSETS

Capital asset activity for the fiscal year ended June 30, 2016, was as follows:

Balance Balance

July 1, 2015 Additions Deductions June 30, 2016


Capital Assets Not Being Depreciated:

Land 1,370,117$ -$ -$ 1,370,117$

Construction in progress 1,599,154 313,841 1,596,747 316,248

Total Capital Assets

Not Being Depreciated 2,969,271 313,841 1,596,747 1,686,365

Capital Assets Being Depreciated:

Land improvements 763,149 - - 763,149

Buildings and improvements 83,805,791 3,829,979 - 87,635,770

Furniture and equipment 4,877,044 490,190 - 5,367,234

Total Capital Assets Being

Depreciated 89,445,984 4,320,169 - 93,766,153

Total Capital Assets 92,415,255 4,634,010 1,596,747 95,452,518

Less Accumulated Depreciation:

Land improvements 578,547 10,609 - 589,156

Buildings and improvements 40,520,751 4,474,541 - 44,995,292

Furniture and equipment 3,725,056 241,537 - 3,966,593

Total Accumulated Depreciation 44,824,354 4,726,687 - 49,551,041

Governmental Activities Capital

Assets, Net 47,590,901$ (92,677)$ 1,596,747$ 45,901,477$

Depreciation expense was charged as a direct expense to the governmental functions as follows:


Instruction 3,886,073$

Home-to-school transportation 90,847

Food services 227,116

All other pupil services 90,847

All other general administration 404,839

Plant services 26,965

Total Depreciation Expenses Governmental Activities 4,726,687$



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NOTE 6 - INTERFUND TRANSACTIONS

Operating Transfers

Interfund transfers for the year ended June 30, 2016, consisted of the following:

Transfer From

Transfer To General Fund

Cafeteria Fund 414,151$

Special Reserve Fund for Capital Outlay Projects 2,114,4452,528,596$

414,151$

2,114,445Total 2,528,596$

The General Fund transferred to the Special Reserve Fund for Capital Outlay Projects for

capital expenditures.

The General Fund transferred to the Cafeteria Fund for reimbursement of expenditures.

NOTE 7 - ACCOUNTS PAYABLE

Accounts payable at June 30, 2016, consisted of the following:

Special Reserve

Fund for Non-Major Total

General Cafeteria Capital Outlay Governmental Governmental Enterprise

Fund Fund Projects Funds Activities Fund

Salaries and benefits 4,008,527$ 109,866$ -$ 287,899$ 4,406,292$ 12,093$

LCFF principal

apportionment 852,223 - - - 852,223 -

Construction - 89,683 306,512 1,514 397,709 -

Other Agencies 1,000,448 1,000,448

Vendor payables 802,714 16,320 - 25,661 844,695 6,360

Total 5,663,464$ 215,869$ 306,512$ 1,315,522$ 7,501,367$ 18,453$



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NOTE 8 - UNEARNED REVENUE

Unearned revenue at June 30, 2016, consists of the following:

General

Fund

Federal financial assistance 7,669$

State categorical aid 16,370

Other local 3

Total 24,042$

NOTE 9 - LONG-TERM OBLIGATIONS

Summary

The changes in the District's long-term obligations during the year consisted of the following:

Balance Balance Due in

July 1, 2015 Additions Deductions June 30, 2016 One Year

General obligation bonds 18,850,000$ -$ 700,000$ 18,150,000$ 725,000$

Premium on debt 745,308 - 56,967 688,341 -

Compensated absences 486,054 28,011 - 514,065 -

Net OPEB obligation 2,546,959 620,081 243,487 2,923,553 -

22,628,321$ 648,092$ 1,000,454$ 22,275,959$ 725,000$

Payments on the general obligation bonds are paid from the Bond Interest and Redemption Fund with localrevenues. The accrued vacation is paid by the fund for which the employee worked. Net OPEB obligations arepaid from the General Fund.

General Obligation Bonds

1998, General Obligation Bonds, Series B

In November 2002, the District issued, in the amount of $13,000,000, the General Obligation Bonds, Election of1998, Series B. The bonds bear interest rates of 3.50 to 5.25 percent and mature through the fiscal year 2033.The bonds were issued to finance the repair and refurbishment of existing school facilities, and the constructionand acquisition of new classrooms and school facilities. At June 30, 2016, the principal balance outstanding was$4,895,000.



46

1998, General Obligation Bonds, Series C

In August 2010, the District issued in the amount of $3,000,000, the General Obligation Bonds, Election 1998,Series C. The bonds bear interest rates of 3.00 to 4.25 percent and mature through the fiscal year 2028. Thebonds were issued to finance the repair and refurbishment of existing school facilities, and the construction andacquisition of new classrooms and school facilities. At June 30, 2016, the principal balance outstanding was$3,000,000.

2010 General Obligation Refunding Bonds

In August 2010, the District issued in the amount of $13,170,000, the 2010 General Obligation Refunding Bondsto advance refund all of the outstanding principal amount of the Lawndale Elementary School District GeneralObligation Bonds, 1998 Election, Series A, and a portion of the outstanding principal amount on the LawndaleElementary School District General Obligation Bonds, 1998 Election, Series B. The bonds bear interest rates of1.50 to 4.25 percent and mature through the fiscal year 2029. At June 30, 2016, the principal balance outstandingwas $10,255,000.

Bonded Debt

The outstanding general obligation bonded debt is as follows:

Bonds Bonds

Issue Maturity Interest Original Outstanding Outstanding Due in

Series Date Date Rate Issue July 1, 2015 Issued Redeemed June 30, 2016 One Year

1998, Series B 11/6/2002 8/1/2032 3.50-5.25% 13,000,000$ 4,895,000$ -$ -$ 4,895,000$ -$

1998, Series C 8/25/2010 8/1/2027 3.00-4.25% 3,000,000 3,000,000 - - 3,000,000 -

2010 Refunding 8/25/2010 8/1/2028 1.50-4.25% 13,170,000 10,955,000 - 700,000 10,255,000 725,000

18,850,000$ -$ 700,000$ 18,150,000$ 725,000$

Debt Service Requirements to Maturity

The 1998 Series B bonds mature through 2033 as follows:

Series B

Interest to

Fiscal Year Principal Maturity Total

2027-2031 3,315,000$ 825,625$ 4,140,625$

2032-2033 1,580,000 80,000 1,660,000

Total 4,895,000$ 905,625$ 5,800,625$



47

The 1998 Series C bonds mature through 2028 as follows:

Series C

Interest to


2017 -$ 119,475$ 119,475$

2018 - 119,475 119,475

2019 50,000 118,725 168,725

2020 95,000 116,550 211,550

2021 145,000 112,950 257,950

2022-2026 1,655,000 413,200 2,068,200

2027-2028 1,055,000 44,313 1,099,313

Total 3,000,000$ 1,044,688$ 4,044,688$

The 2010 Refunding bonds mature through 2029 as follows:

Refunding

Interest to


2017 725,000$ 385,988$ 1,110,988$

2018 765,000 356,188 1,121,188

2019 790,000 325,088 1,115,088

2020 820,000 296,988 1,116,988

2021 845,000 267,788 1,112,788

2022-2026 4,710,000 822,325 5,532,325

2027-2029 1,600,000 101,906 1,701,906

Total 10,255,000$ 2,556,271$ 12,811,271$

Compensated Absences

The long-term portion of accumulated unpaid employee vacation for the District at June 30, 2016, amounted to$514,065.

Other Postemployment Benefits (OPEB) Obligation

The District's annual required contribution for the year ended June 30, 2016, was $643,175, and contributionsmade by the District during the year were $243,487. Interest on the net OPEB obligation and adjustments to theannual required contribution were $101,878 and $(124,972), respectively, which resulted in an increase to the netOPEB obligation of $376,594. As of June 30, 2016, the net OPEB obligation was $2,923,553. See Note 12 foradditional information regarding the OPEB obligation and the postemployment benefits plan.



48

NOTE 10 - FUND BALANCES

Fund balances are composed of the following elements:

Special Reserve

Fund for Non-Major

General Cafeteria Capital Outlay Governmental

Fund Fund Projects Funds Total

Nonspendable

Revolving cash 15,000$ 669$ -$ -$ 15,669$

Stores inventories 58,748 26,156 - - 84,904

Total Nonspendable 73,748 26,825 - - 100,573

Restricted

Legally restricted programs 2,204,818 847,142 - 147,288 3,199,248

Capital projects - - - 297,198 297,198

Debt services - - - 1,184,287 1,184,287

Total Restricted 2,204,818 847,142 - 1,628,773 4,680,733

Assigned

Retiree benefits 2,890,593 - - - 2,890,593

Deferred maintenance 4,365 - - - 4,365

Capital projects - - 4,019,512 - 4,019,512

Measure CL carryover 313,877 - - - 313,877

USC Grant 21,196 - - - 21,196

Total Assigned 3,230,031 - 4,019,512 - 7,249,543

UnassignedReserve for economic

uncertainties 7,146,849 - - - 7,146,849

Total Unassigned 7,146,849 - - - 7,146,849Total 12,655,446$ 873,967$ 4,019,512$ 1,628,773$ 19,177,698$

NOTE 11 - EXPENDITURES (BUDGET VERSUS ACTUAL)

At June 30, 2016, the District's Cafeteria Fund exceeded the budgeted amount in totals as follows:

Budget Actual ExcessCafeteria Fund 4,847,095$ 4,855,637$ 8,542$

Expenditures



49

NOTE 12 - POSTEMPLOYMENT HEALTH CARE PLAN AND OTHER POSTEMPLOYMENTBENEFITS (OPEB) OBLIGATION

Plan Description

The Postemployment Benefits Plan (the Plan) is a single-employer defined benefit healthcare plan administeredby the District. The Plan provides medical and dental insurance benefits to eligible retirees and their spouses.Membership of the Plan consists of 53 retirees and beneficiaries currently receiving benefits, terminated Planmembers entitled to, but not yet receiving benefits, and 371 active Plan members.

Contribution Information

The contribution requirements of plan members and the District are established and may be amended by theDistrict and applicable groups. The required contribution is based on projected pay-as-you-go financingrequirements. For fiscal year 2015-2016, the District contributed $243,487 to the Plan, all of which was used forcurrent premiums which represented 100 percent of total premiums.

Annual 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 of GASB Statement No. 45. TheARC represents a level of funding that, if paid on an ongoing basis, is projected to cover normal cost each yearand amortize any unfunded actuarial accrued liabilities (UAAL) (or funding excess) over a period not to exceedthirty years. The following table shows the components of the District's annual OPEB cost for the year, theamount actually contributed to the plan, and changes in the District's net OPEB obligation to the Plan:

Annual required contribution 643,175$

Interest on net OPEB obligation 101,878

Adjustment to annual required contribution (124,972)

Annual OPEB cost (expense) 620,081

Contributions made (243,487)

Increase in net OPEB obligation 376,594

Net OPEB obligation, beginning of year 2,546,959

Net OPEB obligation, end of year 2,923,553$

Trend Information

Trend information for annual OPEB cost, the percentage of annual OPEB cost contributed to the Plan, and the netOPEB obligation is as follows:

Year Ended Annual OPEB Actual Percentage Net OPEB

June 30, Cost Contribution Contributed Obligation

2014 611,452$ 229,628$ 38% 2,161,018$

2015 604,644 218,703 36% 2,546,959

2016 620,081 243,487 39% 2,923,553



50

Funded Status and Funding Progress

A schedule of funding progress as of the most recent valuation is as follows:

Actuarial

Accrued

Liability Unfunded UAAL as a

Actuarial Actuarial (AAL) - AAL Funded Percentage of

Valuation Value Projected (UAAL) Ratio Covered Covered Payroll

Date of Assets (a) Unit Credit (b) (b - a) (a / b) Payroll (c) ([b - a] / c)

July 1, 2013 -$ 5,534,711$ 5,534,711$ 0% 23,895,812$ 23%

Actuarial valuations of an ongoing plan involve estimates of the value of reported amounts and assumptions aboutthe probability of occurrence of events far into the future. Examples include assumptions about futureemployment, investment returns, mortality, and the healthcare cost trend. Amounts determined regarding thefunded status of the Plan and the annual required contributions of the employer are subject to continual revision asactual results are compared with past expectations and new estimates are made about the future. The schedule offunding progress, presented as required supplementary information following the notes to the financial statements,presents multiyear trend information about whether the actuarial value of plan assets is increasing or decreasingover 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 understoodby the employer and the plan members) and include the types of benefits provided at the time of each valuationand the historical pattern of sharing of benefit costs between the employer and plan members to that point. Theactuarial methods and assumptions used include techniques that are designed to reduce the effects of short-termvolatility in actuarial accrued liabilities and the actuarial value of assets, consistent with the long-term perspectiveof the calculations.

In the July 1, 2013, actuarial valuation, the projected unit credit method was used. The actuarial assumptionsincluded a four percent investment rate of return (net of administrative expenses). The District has not formed anirrevocable trust and currently funds the benefits on a pay-as-you-go basis. Health care cost trend rates changedfrom an initial five percent to an ultimate eight percent. The UAAL is being amortized at a level dollar methodusing a 30 year amortization period. The actuarial value of assets was not determined in this actuarial valuation asthere were none.



51

NOTE 13 - RISK MANAGEMENT

Property and Liability

The District is exposed to various risks of loss related to torts; theft of, damage to, and destruction of assets; errorsand omissions; injuries to employees and natural disasters. During fiscal year ending June 30, 2016, the Districtcontracted with Alliance of Schools for Cooperative Insurance Programs (ASCIP) for property and liabilityinsurance 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.

For insured programs, there have been no significant reductions in insurance coverage. Settlement amounts havenot exceeded insurance coverage for the current year or the three prior years.

Workers' Compensation

For fiscal year 2016, the District participated in the Alliance of Schools for Cooperative Insurance Programs(ASCIP) joint powers authorities' insurance purchasing pool. The intent of the ASCIP is to achieve the benefit ofa reduced premium for the District by virtue of its grouping and representation with other participants in the pool.The workers' compensation experience of the participating districts is calculated as one experience and a commonpremium rate is applied to all districts in the pool. Each participant pays its workers' compensation premiumbased on its individual rate. A participant will then either receive a refund or credit from ASCIP or will berequired to contribute to the "equity-pooling fund". This "equity pooling" arrangement insures that eachparticipant shares equally in the overall performance of the pool. Participation in the pool is limited to districtsthat can meet the ASCIP selection criteria.

Coverage provided by ASCIP for property and liability and workers' compensation is as follows:

Insurance Program / Company Name Type of Coverage Limits

Workers' Compensation Program

Alliance of Schools for Cooperative Insurance Programs Workers'

(ASCIP) Compensation 1,000,000$

Property and Liability Program

Alliance of Schools for Cooperative Insurance Programs General and

(ASCIP) Automotive 1,000,000$

Alliance of Schools for Cooperative Insurance Programs Comprehensive

(ASCIP) Crime 3,250,000$

Excess Property and Liability Program

Schools Excess Liability Fund Excess Property

(SELF) and Liability 14,000,000$



52

NOTE 14 - EMPLOYEE RETIREMENT SYSTEMS

Qualified employees are covered under multiple-employer defined benefit pension plans maintained by agenciesof the State of California. Academic employees are members of CalSTRS and classified employees are membersof CalPERS.

For the fiscal year ended June 30, 2016, the District reported net pension liabilities, deferred outflows ofresources, deferred inflows of resources, and pension expense for each of the above plans as follows:

Collective Collective

Collective Net Deferred Outflows Deferred Inflows Collective

Pension Plan Pension Liability of Resources of Resources Pension Expense

CalSTRS 38,749,301$ 7,308,442$ 6,859,289$ 3,136,143$

CalPERS 13,460,371 4,743,053 3,771,500 1,345,901Total 52,209,672$ 12,051,495$ 10,630,789$ 4,482,044$

The details of each plan are as follows:

California State Teachers' Retirement System (CalSTRS)

Plan Description

The District contributes to the State Teachers' Retirement Plan (STRP) administered by CalSTRS. STRP is acost-sharing multiple-employer public employee retirement system defined benefit pension plan. Benefitprovisions 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 accountingpurposes), and membership information is listed in the June 30, 2014, annual actuarial valuation report, DefinedBenefit Program Actuarial Valuation. This report and CalSTRS audited financial information are publicallyavailable reports that can be found on the CalSTRS website under Publications at:http://www.calstrs.com/member-publications.

Benefits Provided

The STRP provides retirement, disability, and survivor benefits to beneficiaries. Benefits are based on members'final compensation, age, and years of service credit. Members hired on or before December 31, 2012, withfive years of credited service are eligible for the normal retirement benefit at age 60. Members hired on or afterJanuary 1, 2013, with five years of credited service are eligible for the normal retirement benefit at age 62. Thenormal retirement benefit is equal to 2.0 percent of final compensation for each year of credited service.

The STRP is comprised of four programs: Defined Benefit Program, Defined Benefit Supplement Program, CashBalance Benefit Program, and Replacement Benefits Program. The STRP holds assets for the exclusive purposeof providing benefits to members and beneficiaries of these programs. CalSTRS also uses plan assets to defrayreasonable expenses of administering the STRP. Although CalSTRS is the administrator of the STRP, the State isthe sponsor of the STRP and obligor of the trust. In addition, the State is both an employer and nonemployercontributing entity to the STRP.



53

The District contributes exclusively to the STRP Defined Benefit Program, thus disclosures are not included forthe other plans.

The STRP provisions and benefits in effect at June 30, 2016, are summarized as follows:

Hire date

On or before

December 31, 2012

On or after

January 1, 2013

Benefit formula 2% at 60 2% at 62

Benefit vesting schedule 5 years of service 5 years of service

Benefit payments Monthly for life Monthly for life

Retirement age 60 62

Monthly benefits as a percentage of eligible compensation 2.0% - 2.4% 2.0% - 2.4%

Required employee contribution rate 9.20% 8.56%

Required employer contribution rate 10.73% 10.73%

Required State contribution rate 7.12589% 7.12589%

STRP Defined Benefit Program

Contributions

Required member, District, and State of California contribution rates are set by the California Legislature andGovernor and detailed in Teachers' Retirement Law. The contribution rates are expressed as a level percentage ofpayroll using the entry age normal actuarial method. In accordance with AB 1469, employer contributions intothe CalSTRS will be increasing to a total of 19.1 percent of applicable member earnings phased over a seven-yearperiod. The contribution rates for each plan for the year ended June 30, 2016, are presented above, and theDistrict's total contributions were $3,262,886.

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

At June 30, 2016, the District reported a liability for its proportionate share of the net pension liability thatreflected a reduction for State pension support provided to the District. The amount recognized by the District asits proportionate share of the net pension liability, the related State support, and the total portion of the netpension liability that was associated with the District were as follows:

38,749,301$

20,494,109

59,243,410$

Total net pension liability, including State share:

District's proportionate share of net pension liability

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

Total

The net pension liability was measured as of June 30, 2015. The District's proportion of the net pension liabilitywas based on a projection of the District's long-term share of contributions to the pension plan relative to theprojected contributions of all participating school districts and the State, actuarially determined. The District'sproportionate share for the measurement periods of June 30, 2015 and June 30, 2014, was 0.0576 percent and0.0560 percent, respectively, resulting in a net increase in the proportionate share of 0.0016 percent.



54

For the year ended June 30, 2016, the District recognized pension expense of $3,136,143. In addition, the Districtrecognized pension expense and revenue of $1,587,499 for support provided by the State. At June 30, 2016, theDistrict reported deferred outflows of resources and deferred inflows of resources related to pensions from thefollowing sources:

Deferred Outflows

of Resources

Deferred Inflows

of Resources

3,262,886$ -$

992,474 -

- 647,510

Total 7,308,442$ 6,859,289$

Differences between expected and actual experience in

the measurement of the total pension liability

Pension contributions subsequent to measurement date

Difference between projected and actual earnings on

pension plan investments 3,053,082 6,211,779

Net change in proportionate share of net pension liability

The deferred outflows of resources related to pensions resulting from District contributions subsequent to themeasurement 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 earnings onpension plan investments will be amortized over a closed five-year period and will be recognized in pensionexpense as follows:

Deferred

Year Ended Outflows/(Inflows)

June 30, Amortization

2017 (1,307,323)$

2018 (1,307,323)

2019 (1,307,323)

2020 763,272

Total (3,158,697)$



55

The deferred outflows/(inflows) of resources related to the net change in proportionate share of net pensionliability and differences between expected and actual experience in the measurement of the total pension liabilitywill be amortized over the Expected Average Remaining Service Life (EARSL) of all members that are providedbenefits (active, inactive, and retirees) as of the beginning of the measurement period. The EARSL for the2014-2015 measurement period is 7 years and will be recognized in pension expense as follows:

Deferred


June 30, Amortization

2017 57,494$

2018 57,494

2019 57,494

2020 57,494

2021 57,494

Thereafter 57,494

Total 344,964$


Total pension liability for STRP was determined by applying update procedures to a financial reporting actuarialvaluation as of June 30, 2014, and rolling forward the total pension liability to June 30, 2015. The financialreporting actuarial valuation as of June 30, 2014, used the following methods and assumptions, applied to all priorperiods included in the measurement:

Valuation date June 30, 2014Measurement date June 30, 2015Experience study July 1, 2006 through June 30, 2010Actuarial cost method Entry age normalDiscount rate 7.60%Investment rate of return 7.60%Consumer price inflation 3.00%Wage growth 3.75%

CalSTRS uses custom mortality tables to best fit the patterns of mortality among its members. These customtables are based on RP2000 series tables adjusted to fit CalSTRS experience.



56

The long-term expected rate of return on pension plan investments was determined using a building-block methodin which best estimate ranges of expected future real rates of return (expected returns, net of pension planinvestment expense, and inflation) are developed for each major asset class. The best estimate ranges weredeveloped using capital market assumptions from CalSTRS general investment consultant. Based on the modelfor CalSTRS consulting actuary's investment practice, a best estimate range was determined by assuming theportfolio is re-balanced annually and that the annual returns are lognormally distributed and independent fromyear to year to develop expected percentiles for the long-term distribution of annualized returns. The assumedasset allocation is based on 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 wasapproved by the board. Best estimates of 10-year geometric real rates of return and the assumed asset allocationfor each major asset class used as input to develop the actuarial investment rate of return are summarized in thefollowing 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%

Discount Rate

The discount rate used to measure the total pension liability was 7.60 percent. The projection of cash flows usedto determine the discount rate assumed the contributions from plan members and employers will be made atstatutory contribution rates. Projected inflows from investment earnings were calculated using the long-termassumed investment rate of return (7.60 percent) and assuming that contributions, benefit payments, andadministrative expense occurred midyear. Based on these assumptions, the STRP's fiduciary net position wasprojected to be available to make all projected future benefit payments to current plan members. Therefore, thelong-term assumed investment rate of return was applied to all periods of projected benefit payments to determinetotal pension liability.

The following presents the District's proportionate share of the net pension liability calculated using the currentdiscount rate, as well as what the net pension liability would be if it were calculated using a discount rate that isone percent lower or higher than the current rate:

Net Pension

Discount Rate Liability

1% decrease (6.60%) 58,508,429$

Current discount rate (7.60%) 38,749,301

1% increase (8.60%) 22,327,872



57

California Public Employees' Retirement System (CalPERS)

Plan Description

Qualified employees are eligible to participate in the School Employer Pool (SEP) under CalPERS, a cost-sharingmultiple-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 accountingpurposes), and membership information is listed in the June 30, 2014, annual actuarial valuation report, SchoolsPool Actuarial Valuation, 2014. This report and CalPERS audited financial information are publically availablereports that can be found on the CalPERS website under Forms and Publications at:https://www.calpers.ca.gov/page/forms-publications.

Benefits Provided

CalPERS provides service retirement and disability benefits, annual cost of living adjustments, and death benefitsto plan members who must be public employees and beneficiaries. Benefits are based on years of service credit, abenefit factor, and the member's final compensation. Members hired on or before December 31, 2012, withfive years of total service are eligible to retire at age 50 with statutorily reduced benefits. Members hired on orafter January 1, 2013, with five years of total service are eligible to retire at age 52 with statutorily reducedbenefits. All members are eligible for non-duty disability benefits after five years of service. The Basic DeathBenefit is paid to any member's beneficiary if the member dies while actively employed. An employee's eligiblesurvivor may receive the 1957 Survivor Benefit if the member dies while actively employed, is at least age 50 (orage 52 for members hired on or after January 1, 2013), and has at least five years of credited service. The cost ofliving adjustments for each plan are applied as specified by the Public Employees' Retirement Law.

The CalPERS provisions and benefits in effect at June 30, 2016, are summarized as follows:

Hire date

On or before

December 31, 2012

On or after

January 1, 2013

Benefit formula 2% at 55 2% at 62

Benefit vesting schedule 5 years of service 5 years of service

Benefit payments Monthly for life Monthly for life

Retirement age 55 62

Monthly benefits as a percentage of eligible compensation 1.1% - 2.5% 1.0% - 2.5%

Required employee contribution rate 7.000% 6.000%

Required employer contribution rate 11.847% 11.847%

School Employer Pool (CalPERS)



58

Contributions

Section 20814(c) of the California Public Employees' Retirement Law requires that the employer contributionrates for all public employers be determined on an annual basis by the actuary and shall be effective on July 1following notice of a change in the rate. Total plan contributions are calculated through the CalPERS annualactuarial valuation process. The actuarially determined rate is the estimated amount necessary to finance the costsof benefits earned by employees during the year, with an additional amount to finance any unfunded accruedliability. The District is required to contribute the difference between the actuarially determined rate and thecontribution rate of employees. The contribution rates are expressed as a percentage of annual payroll. Thecontribution rates for each plan for the year ended June 30, 2016, are presented above, and the total Districtcontributions were $1,312,191.

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

As of June 30, 2016, the District reported net pension liabilities for its proportionate share of the CalPERS netpension liability totaling $13,460,371. The net pension liability was measured as of June 30, 2015. The District'sproportion of the net pension liability was based on a projection of the District's long-term share of contributionsto the pension plan relative to the projected contributions of all participating school districts, actuariallydetermined. The District's proportionate share for the measurement periods of June 30, 2015 and June 30, 2014,was 0.0913 percent and 0.0873 percent, respectively, resulting in a net increase in the proportionate share of0.0040 percent.

For the year ended June 30, 2016, the District recognized pension expense of $1,345,901. At June 30, 2016, theDistrict reported deferred outflows of resources and deferred inflows of resources related to pensions from thefollowing sources:

Deferred Outflows

of Resources

Deferred Inflows

of Resources

1,312,191$ -$

450,859 272,840

Differences between expected and actual experience in the

measurement of the total pension liability 769,280 -

Changes of assumptions - 827,043

4,743,053$ 3,771,500$

Pension contributions subsequent to measurement date

Difference between projected and actual earnings on

pension plan investments 2,210,723 2,671,617

Total

Net change in proportionate share of net pension liability



59

The deferred outflows of resources related to pensions resulting from District contributions subsequent to themeasurement 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 earnings onpension plan investments will be amortized over a closed five-year period and will be recognized in pensionexpense as follows:

Deferred


June 30, of Resources

2017 (337,858)$

2018 (337,858)

2019 (337,858)

2020 552,680

Total (460,894)$

The deferred outflows/(inflows) of resources related to the net change in proportionate share of net pensionliability, changes of assumptions, and differences between expected and actual experience in the measurement ofthe total pension liability will be amortized over the Expected Average Remaining Service Life (EARSL) of allmembers 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 asfollows:

Deferred


June 30, of Resources

2017 (869)$

2018 (869)

2019 121,994

Total 120,256$


Total pension liability for the SEP was determined by applying update procedures to a financial reportingactuarial valuation as of June 30, 2014, and rolling forward the total pension liability to June 30, 2015. Thefinancial reporting actuarial valuation as of June 30, 2014, used the following methods and assumptions, appliedto all prior periods included in the measurement:

Valuation date June 30, 2014Measurement date June 30, 2015Experience study July 1, 1997 through June 30, 2011Actuarial cost method Entry age normalDiscount rate 7.65%Investment rate of return 7.65%Consumer price inflation 2.75%Wage growth Varies by entry age and service



60

Mortality assumptions are based on mortality rates resulting from the most recent CalPERS experience studyadopted by the CalPERS Board. For purposes of the post-retirement mortality rates, those revised rates includefive years of projected ongoing mortality improvement using Scale AA published by the Society of Actuaries.

In determining the long-term expected rate of return, CalPERS took into account both short-term and long-termmarket return expectations, as well as the expected pension fund cash flows. Using historical returns of all thefunds' asset classes, expected compound returns were calculated over the short-term (first ten years) and the long-term (11-60 years) using a building-block approach. Using the expected nominal returns for both short-term andlong-term, the present value of benefits was calculated for each fund. The expected rate of return was set bycalculating the single equivalent expected return that arrived at the same present value of benefits for cash flowsas the one calculated using both short-term and long-term returns. The expected rate of return was then setequivalent to the single equivalent rate calculated above and rounded down to the nearest one quarter ofone percent. The target asset allocation and best estimates of arithmetic real rates of return for each major assetclass are summarized in the following table:

Long-Term

Assumed Asset Expected Real

Asset Class Allocation Rate of Return

Global equity 51% 5.25%

Global fixed income 19% 0.99%

Private equity 10% 6.83%

Real estate 10% 4.50%

Inflation sensitive 6% 0.45%

Infrastructure and Forestland 2% 4.50%

Liquidity 2% -0.55%

Discount Rate

The discount rate used to measure the total pension liability was 7.65 percent. The projection of cash flows usedto determine the discount rate assumed the contributions from plan members and employers will be made atstatutory contribution rates. Based on these assumptions, the School Employer Pool fiduciary net position wasprojected to be available to make all projected future benefit payments to current plan members. Therefore, thelong-term assumed investment rate of return was applied to all periods of projected benefit payments to determinetotal pension liability.

The following presents the District's proportionate share of the net pension liability calculated using the currentdiscount rate, as well as what the net pension liability would be if it were calculated using a discount rate that isone percent lower or higher than the current rate:

Net Pension

Discount Rate Liability

1% decrease (6.65%) 21,907,876$

Current discount rate (7.65%) 13,460,371

1% increase (8.65%) 6,435,707



61

Social Security

As established by Federal law, all public sector employees who are not members of their employer's existingretirement system (CalSTRS or CalPERS) must be covered by Social Security or an alternative plan. The Districthas elected to use the Social Security as its alternative plan. Contributions made by the District and an employeevest immediately. The District and employees combined contribution rate is 6.2 percent of employees earningsbased on a contribution formula.

On Behalf Payments

The State of California makes contributions to CalSTRS and CalPERS on behalf of the District. These paymentsconsist of State General Fund contributions to CalSTRS in the amount of $1,803,936 (7.12589 percent of annualpayroll.) Contributions are no longer appropriated in the annual Budget Act for the legislatively mandatedbenefits to CalPERS. Therefore, there is no on behalf contribution rate for CalPERS. Under accountingprinciples generally accepted in the United States of America, these amounts are to be reported as revenues andexpenditures. Accordingly, these amounts have been recorded in these financial statements. On behalf paymentshave been included in the calculation of available reserves, but have not been included in the budgeted amountsreported in the General Fund - Budgetary Comparison Schedule.

NOTE 15 - COMMITMENTS AND CONTINGENCIES

Grants

The District received financial assistance from Federal and State agencies in the form of grants. Thedisbursement of funds received under these programs generally requires compliance with terms and conditionsspecified in the grant agreements and are subject to audit by the grantor agencies. Any disallowed claimsresulting from such audits could become a liability of the General Fund or other applicable funds. However, inthe opinion of management, any such disallowed claims will not have a material adverse effect on the overallfinancial 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 ofmanagement and legal counsel, the disposition of all litigation pending is not expected to have a material adverseeffect on the overall financial position of the District at June 30, 2016.



62

NOTE 16 - PARTICIPATION IN JOINT POWER AUTHORITY

The District is a member of the Alliance of Schools for Cooperative Insurance Programs (ASCIP) joint powersauthority (JPA). The District pays an annual premium to the applicable entity for its, workers' compensation andproperty liability coverage. Payments for insurance are paid to the JPA. The relationship between the Districtand the JPA is such that it is not a component unit of the District for financial reporting purposes.

Joint Power Authorities have budgeting and financial reporting requirements independent of member units andtheir financial statements are not presented in these financial statements; however, fund transactions between theentity and the District are included in these statements. Audited financial statements are generally available fromthe respective entities.

The District has appointed one board member to the governing board of the ASCIP JPA.

During the year ended June 30, 2016, the District made payments of $1,386,590 to the ASCIP.

63

REQUIRED SUPPLEMENTARY INFORMATION


GENERAL FUNDBUDGETARY COMPARISON SCHEDULEFOR THE YEAR ENDED JUNE 30, 2016

See accompanying note to required supplementary information.

64

Variances -

Positive(Negative)

Actual FinalOriginal Final (GAAP Basis) to Actual

REVENUES

Local Control Funding Formula 49,779,767$ 49,406,546$ 49,552,352$ 145,806$

Federal sources 3,545,373 4,658,526 4,284,821 (373,705)

Other State sources 6,826,190 9,476,579 12,153,982 2,677,403

Other local sources 1,981,916 2,222,285 2,633,328 411,043

Total Revenues 162,133,246 65,763,936 68,624,483 2,860,547

EXPENDITURES

Current

Certificated salaries 30,101,531 30,663,331 32,108,790 (1,445,459)

Classified salaries 10,224,885 10,973,701 10,567,414 406,287

Employee benefits 10,106,494 10,663,550 10,485,141 178,409

Books and supplies 3,645,077 4,398,061 3,997,280 400,781

Services and operating expenditures 5,753,438 6,883,867 5,657,696 1,226,171

Other outgo 866,902 804,796 495,879 308,917

Capital outlay - 388,009 335,969 52,040

Total Expenditures 160,698,327 64,775,315 63,648,169 1,127,146

Excess of Revenues Over Expenditures 1,434,919 988,621 4,976,314 3,987,693

Other Financing Uses

Transfers out (214,445) (2,514,445) (2,528,596) (14,151)

NET CHANGE IN FUND BALANCES 1,220,474 (1,525,824) 2,447,718 3,973,542

Fund Balances - Beginning 10,207,728 10,207,728 10,207,728 -

Fund Balances - Ending 11,428,202$ 8,681,904$ 12,655,446$ 3,973,542$

Budgeted Amounts

_________________________1

On behalf payments of $1,803,936 are included in the actual revenues and expenditures, but have not been included in the budgetedamounts. In addition, due to the consolidation of Fund 14, Deferred Maintenance Fund, and Fund 17, Special Reserve Fund for OtherThan Capital Outlay Projects for reporting purposes into the General Fund, additional revenues and expenditures pertaining to theseother funds are included in the Actual (GAAP Basis) revenues and expenditures; however, are not included in the original and finalGeneral Fund budget.


CAFETERIA BUDGETARY COMPARISON SCHEDULEFOR THE YEAR ENDED JUNE 30, 2016


65

Variances -

Positive

(Negative)

Actual Final

Original Final (GAAP Basis) to Actual

REVENUES

Federal sources 2,763,890$ 2,974,108$ 3,090,173$ 116,065$

Other State sources 272,265 211,591 210,904 (687)

Other local sources 212,444 240,717 221,072 (19,645)

Total Revenues 3,248,599 3,426,416 3,522,149 95,733

EXPENDITURES

Current

Classified salaries 1,536,137 1,336,475 1,277,282 59,193

Employee benefits 460,579 383,701 379,288 4,413

Books and supplies 1,593,750 1,588,552 1,662,451 (73,899)

Services and operating expenditures 72,500 101,720 99,969 1,751

Other outgo 130,000 134,000 134,000 -

Capital outlay 423,462 1,302,647 1,302,647 -

Total Expenditures 4,216,428 4,847,095 4,855,637 (8,542)

Excess (Deficiency) of Revenues

Over Expenditures (967,829) (1,420,679) (1,333,488) 87,191

Other Financing Sources

Transfers in - 400,000 414,151 14,151

NET CHANGE IN FUND BALANCES (967,829) (1,020,679) (919,337) 101,342

Fund Balance - Beginning 1,793,304 1,793,304 1,793,304 -

Fund Balance - Ending 825,475$ 772,625$ 873,967$ 101,342$

Budgeted Amounts


SCHEDULE OF OTHER POSTEMPLOYMENT BENEFITS (OPEB) FUNDINGPROGRESS



66

Actuarial

Accrued

Liability Unfunded UAAL as a

Actuarial Actuarial (AAL) - AAL Funded Percentage of

Valuation Value Projected (UAAL) Ratio Covered Covered Payroll

Date of Assets (a) Unit Credit (b) (b - a) (a / b) Payroll (c) ([b - a] / c)

July 1, 2009 -$ 4,159,207$ 4,159,207$ 0% 24,190,675$ 17%

July 1, 2011 - 4,941,563 4,941,563 0% 23,537,702 21%

July 1, 2013 - 5,534,711 5,534,711 0% 23,895,812 23%


SCHEDULE OF THE DISTRICT'S PROPORTIONATE SHARE OF THENET PENSION LIABILITY



67

2016 2015

CalSTRS

District's proportion of the net pension liability 0.0576% 0.0560%

District's proportionate share of the net pension liability 38,749,301$ 32,705,162$

State's proportionate share of the net pension liability associated with

the District 20,494,109 19,748,789Total 59,243,410$ 52,453,951$

District's covered - employee payroll 26,259,617$ 25,289,611$

District's proportionate share of the net pension liability as a percentage

of its covered - employee payroll 147.56% 129.32%

Plan fiduciary net position as a percentage of the total pension liability 74% 77%

CalPERS

District's proportion of the net pension liability 0.0913% 0.0873%

District's proportionate share of the net pension liability 13,460,371$ 9,915,554$


District's proportionate share of the net pension liability as a percentage

of its covered - employee payroll 124.08% 107.79%

Plan fiduciary net position as a percentage of the total pension liability 79% 83%

Note : In the future, as data become available, ten years of information will be presented.


SCHEDULE OF DISTRICT CONTRIBUTIONSFOR THE YEAR ENDED JUNE 30, 2016


68

2016 2015

CalSTRS

Contractually required contribution 3,262,886$ 2,331,854$

Contributions in relation to the contractually required contribution 3,262,886 2,331,854Contribution deficiency (excess) -$ -$


Contributions as a percentage of covered - employee payroll 10.73% 8.88%

CalPERS

Contractually required contribution 1,312,191$ 1,276,803$

Contributions in relation to the contractually required contribution 1,312,191 1,276,803Contribution deficiency (excess) -$ -$


Contributions as a percentage of covered - employee payroll 11.85% 11.77%

Note : In the future, as data become available, ten years of information will be presented.


NOTE TO REQUIRED SUPPLEMENTARY INFORMATIONJUNE 30, 2016

69

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 asthe 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 determinedliability 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), theplans' fiduciary net positions and, when applicable, the State's proportionate share of the NPL associated with theDistrict. 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, andany excess or deficiency related to the required contribution. In the future, as data becomes available, ten years ofinformation 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. TheCalPERS plan rate of investment return assumption was changed from 7.50 percent to 7.65 percent since theprevious valuation.

70

SUPPLEMENTARY INFORMATION


See accompanying note to supplementary information.

71

SCHEDULE OF EXPENDITURES OF FEDERAL AWARDSFOR THE YEAR ENDED JUNE 30, 2016

Pass-Through

Entity

Federal Grantor/Pass-Through CFDA Identifying Federal

Grantor/Program or Cluster Title Number Number Expenditures

U.S. DEPARTMENT OF EDUCATION

Passed through California Department of Education (CDE)

No Child Left Behind Act

Title I, Part A, Basic Grants Low-Income and Neglected 84.010 14329 1,871,655$

Title II, Part A, Improving Teacher Quality Local Grants 84.367 14341 290,445

Title III, Limited English Proficient (LEP) Student Program 84.365 14346 236,744

Passed through Los Angeles County Office of Education

Title X, McKinney - Vento Homeless Children Assistance Grants 84.196 14332 2,500

Special Education (IDEA) Cluster

Basic Local Assistance Entitlement, Part B, Section 611 84.027 13379 892,607

Mental Health Allocation Plan, Part B, Section 611 84.027A 15197 30,001

Preschool Grants, Part B, Section 619 84.173 13430 108,935

Preschool Local Entitlement, Part B, Section 611 84.027A 13682 222,820

Preschool Staff Development, Part B, Section 619 84.173A 13431 523

Total Special Education (IDEA) Cluster 1,254,886

Total U.S. Department of Education 3,656,230

U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICES

Passed through CDE

Child Development: Federal Child Care, Center-Based 93.596 13609 85,999

Passed through California Department of Health Services

Medicaid Cluster

Medi-Cal Administrative Activities 93.778 10060 259,676

Medi-Cal Billing Option 93.778 10013 29,335

Total Medicaid Cluster 289,011

Total U.S. Department of Health and

Human Services 375,010



72

SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS, CONTINUEDFOR THE YEAR ENDED JUNE 30, 2016

Pass-Through

Entity

Federal Grantor/Pass-Through CFDA Identifying Federal

Grantor/Program or Cluster Title Number Number Expenditures

U.S. DEPARTMENT OF AGRICULTURE

Passed through CDE

Child Nutrition Cluster

National School Lunch Program 10.555 13391 2,114,866$

Meal Supplement 10.555 13391 137,778

Especially Needy Breakfast Program 10.553 13526 422,083

Summer Seamless Option 10.559 13004 107,662

Commodities 10.555 13396 160,299

Total Child Nutrition Cluster 2,942,688

Child Nutrition - Centers and Family Day Care 10.558 13393 147,485

Passed through Los Angeles County Department of Health

Nutrition Education Obesity Prevention 10.561 [1] 350,626

Total U.S. Department of Agriculture 3,440,799

Total Expenditures of Federal Awards 7,472,039$

[1] Pass-Through Entity Identifying Number is not available.



73

LOCAL EDUCATION AGENCY ORGANIZATION STRUCTUREJUNE 30, 2016

ORGANIZATION

The Lawndale Elementary School District was established in October 1906 and consists of an area comprisingapproximately 2.5 square miles. The District operates six elementary schools and two middle schools. Therewere no boundary changes during the year.

GOVERNING BOARD

MEMBER OFFICE TERM EXPIRES

Mrs. Shirley Rudolph President 2017

Mrs. Cathy Burris Clerk 2019

Mrs. Shirley Bennett Trustee 2019

Ms. Bonnie J. Coronado Trustee 2017

Mrs. Ann Phillips Trustee 2017

ADMINISTRATION

Dr. Ellen Dougherty Superintendent of Schools

Mr. John D. Vinke Deputy Superintendent

Dr. Betsy Hamilton Assistant Superintendent of Educational Services

Mr. Steven Miller Assistant Superintendent of Human Resources



74

SCHEDULE OF AVERAGE DAILY ATTENDANCEFOR THE YEAR ENDED JUNE 30, 2016

Final Report

Second Period AnnualReport Report

Regular ADA

Transitional kindergarten through third 2,331.20 2,331.48

Fourth through sixth 1,897.89 1,892.07

Seventh and eighth 1,229.31 1,227.51

Total Regular ADA 5,458.40 5,451.06

Extended Year Special Education

Transitional kindergarten through third 6.82 6.82

Fourth through sixth 3.29 3.29

Seventh and eighth 0.90 0.90Total Extended Year

Special Education 11.01 11.01

Special Education, Nonpublic, Nonsectarian Schools

Transitional kindergarten through third 1.92 2.14

Fourth through sixth 4.71 4.58

Seventh and eighth 0.93 0.91Total Special Education,

Nonpublic, Nonsectarian

Schools 7.56 7.63Total ADA 5,476.97 5,469.70



75

SCHEDULE OF INSTRUCTIONAL TIMEFOR THE YEAR ENDED JUNE 30, 2016

1986-87 2015-16 Number of Days

Minutes Actual Traditional Multitrack

Grade Level Requirement Minutes Calendar Calendar Status

Kindergarten 36,000 50,515 180 N/A Complied

Grades 1 - 3 50,400

Grade 1 50,515 180 N/A Complied



Grades 4 - 6 54,000




Grades 7 - 8 54,000





76

RECONCILIATION OF ANNUAL FINANCIAL AND BUDGET REPORT WITHAUDITED FINANCIAL STATEMENTS


Summarized below are the fund balance reconciliations between the Unaudited Actual Financial Report and theaudited financial statements.

Non-Major

Governmental

Special Education

Pass-Through

Fund

FUND BALANCE

Balance, June 30, 2016, Unaudited Actuals 1,000,448$

Increase in:

Accounts payable (1,000,448)Balance, June 30, 2016, Audited Financial Statement -$



77

SCHEDULE OF FINANCIAL TRENDS AND ANALYSISFOR THE YEAR ENDED JUNE 30, 2016

(Budget)

2017 12016 2015 2014

GENERAL FUND 4

Revenues 69,429,484$ 68,602,240$ 57,347,995$ 50,109,244$

Other sources and transfers in 343,486 243,486 - 237,462

Total Revenues

and Other Sources 69,772,970 68,845,726 57,347,995 50,346,706

Expenditures 69,699,560 63,648,169 56,324,673 50,876,504

Other uses and transfers out 214,445 2,823,361 944,658 281,228

Total Expenditures

and Other Uses 69,914,005 66,471,530 57,269,331 51,157,732INCREASE (DECREASE) IN FUND

BALANCE (141,035)$ 2,374,196$ 78,664$ (811,026)$

ENDING FUND BALANCE 9,619,453$ 9,760,488$ 7,386,292$ 7,307,628$

AVAILABLE RESERVES 27,295,814$ 7,146,849$ 5,889,247$ 5,590,383$

AVAILABLE RESERVES AS A

PERCENTAGE OF TOTAL OUTGO 310.44% 10.75% 10.53% 11.21%

LONG-TERM OBLIGATIONS N/A 22,275,959$ 22,628,321$ 22,963,034$

K-12 AVERAGE DAILYATTENDANCE AT P-2 5,477 5,477 5,565 5,603

The General Fund balance has increased by $2,452,860 over the past two years. The fiscal year 2016-2017budget projects a decrease of $141,035 (1.4 percent). For a district this size, the State recommends availablereserves of at least three percent of total General Fund expenditures, transfers out, and other uses (total outgo).

The District has incurred an operating surplus in two of the past three years, but anticipates incurring an operatingdeficit during the 2016-2017 fiscal year. Total long-term obligations have decreased by $687,075 over the pasttwo years.

Average daily attendance has decreased by 126 over the past two years. No change in ADA is anticipated duringfiscal year 2016-2017.

1 Budget 2017 is included for analytical purposes only and has not been subjected to audit.2 Available reserves consist of all unassigned fund balances including all amounts reserved for economic uncertainties contained with the

General Fund.3 On behalf payments of $1,357,043 and $1,287,712 have been excluded from the calculation of available reserves for the fiscal years

ending June 30, 2015 and 2014, respectively.4 General Fund amounts do not include activity related to the consolidation of the Deferred Maintenance Fund, and Special Reserve Fund

for Other Than Capital Outlay Projects as required by GASB Statement No. 54.



78

SCHEDULE OF CHARTER SCHOOLSFOR THE YEAR ENDED JUNE 30, 2016

Included in

Name of Charter School Audit Report

Environmental Charter School (0353) No



79

NON-MAJOR GOVERNMENTAL FUNDSCOMBINING BALANCE SHEETJUNE 30, 2016

Special

Education Child Capital

Pass-Through Development Building Facilities

Fund Fund Fund Fund

ASSETS

Deposits and investments 1,000,000$ 118,249$ 75,705$ 177,533$

Receivables 448 323,118 350 603Total Assets 1,000,448$ 441,367$ 76,055$ 178,136$

LIABILITIES AND FUND BALANCES

Liabilities:

Accounts payable 1,000,448$ 294,079$ 1,514$ 18,922$

Fund Balances:

Restricted - 147,288 74,541 159,214

Total Liabilities andFund Balances 1,000,448$ 441,367$ 76,055$ 178,136$

79

County

State School School Bond Interest Tax Debt Non-Major

Building Facilities and Redemption Override Service Governmental

Fund Fund Fund Fund Fund Funds

28,477$ 35,326$ 1,164,738$ 9$ 19,479$ 2,619,516$

89 110 - - 61 324,77928,566$ 35,436$ 1,164,738$ 9$ 19,540$ 2,944,295$

559$ -$ -$ -$ -$ 1,315,522$

28,007 35,436 1,164,738 9 19,540 1,628,773

28,566$ 35,436$ 1,164,738$ 9$ 19,540$ 2,944,295$



80

NON-MAJOR GOVERNMENTAL FUNDSCOMBINING STATEMENT OF REVENUES, EXPENDITURES,AND CHANGES IN FUND BALANCES


SpecialEducation Child Capital

Pass-Through Development Building FacilitiesFund Fund Fund Fund

REVENUESFederal sources -$ 85,999$ -$ -$Other State sources 1,000,000 2,275,827 - -Other local sources 448 4,553 2,388 7,753

Total Revenues 1,000,448 2,366,379 2,388 7,753EXPENDITURESCurrent

Instruction - 1,806,014 - -Instruction-related activities:

Supervision of instruction - 251,016 - -School site administration - 67,310 - -

Pupil services:Food services - 14,061 - -

General administration:All other general administration - 128,766 - -

Plant services - 1,446 15,494 2,644Facility acquisition and construction - - 809,264 112,644Other outgo 1,000,448 - - -

Debt servicePrincipal - - - -Interest and other - - - -

Total Expenditures 1,000,448 2,268,613 824,758 115,288NET CHANGE IN FUND BALANCES - 97,766 (822,370) (107,535)Fund Balances - Beginning - 49,522 896,911 266,749Fund Balances - Ending -$ 147,288$ 74,541$ 159,214$

80

CountySchool State School Bond Interest Tax Debt Non-Major

Building Facilities and Redemption Override Service GovernmentalFund Fund Fund Fund Fund Funds

-$ -$ -$ -$ -$ 85,999$- - 12,015 - - 3,287,842

25,194 277 1,474,645 - 153 1,515,41125,194 277 1,486,660 - 153 4,889,252

- - - - - 1,806,014

- - - - - 251,016- - - - - 67,310

- - - - - 14,061

- - - - - 128,766- - - - - 19,584- - - - - 921,908- - - - - 1,000,448

- - 700,000 - - 700,000- - 774,963 - - 774,963- - 1,474,963 - - 5,684,070

25,194 277 11,697 - 153 (794,818)2,813 35,159 1,153,041 9 19,387 2,423,591

28,007$ 35,436$ 1,164,738$ 9$ 19,540$ 1,628,773$



81

GENERAL FUND SELECTED FINANCIAL INFORMATIONTHREE-YEAR SUMMARY OF REVENUES, EXPENDITURES, ANDCHANGES OF FUND BALANCE



Actual Results for the Years

Percent Percent Percent

of of of

Amount Revenue Amount Revenue Amount Revenue

REVENUES1

Federal revenue 4,285$ 6.2 3,825$ 6.7 3,725$ 7.4

State and local revenue included

in Local Control Funding Formula 49,552 72.3 43,356 75.6 36,670 73.2

Other State revenue 12,154 17.7 7,848 13.7 7,200 14.4

Other local revenue 2,611 3.8 2,319 4.0 2,514 5.0

Total Revenues 68,602 100.0 57,348 100.0 50,109 100.0

EXPENDITURES1

Salaries and Benefits

Certificated salaries 32,109 46.8 27,509 48.0 25,315 50.5

Classified salaries 10,567 15.4 9,334 16.3 8,561 17.1

Employee benefits 10,485 15.3 10,176 17.7 7,995 16.0

Total Salaries

and Benefits 53,161 77.5 47,019 82.0 41,871 83.6

Books and supplies 3,997 5.8 3,059 5.3 2,708 5.4

Services and operating expenses 5,658 8.2 5,396 9.4 5,410 10.8

Capital outlay 336 0.5 - 0.0 114 0.2

Other outgo 496 0.7 851 1.5 773 1.5

Total Expenditures 63,648 92.7 56,325 98.2 50,876 101.5

EXCESS (DEFICIENCY) OF REVENUES

OVER EXPENDITURES 4,954 7.3 1,023 1.8 (767) (1.5)

OTHER FINANCING SOURCES (USES)

Transfers in 243 0.4 - 0.0 237 0.5

Transfers out (2,823) (4.1) (945) (1.6) (281) (0.6)

CHANGE IN FUND BALANCE 2,374 3.6 78 0.2 (811) (1.6)

FUND BALANCE, BEGINNING 7,386 7,308 8,119

FUND BALANCE, ENDING 9,760$ 7,386$ 7,308$

2015-2016 2014-2015 2013-2014

1General Fund amounts do not include activity related to the consolidation of the Deferred Maintenance Fund and the Special ReserveFund for Other Than Capital Outlay Projects as required by GASB Statement No. 54.


82

NOTE TO SUPPLEMENTARY INFORMATIONJUNE 30, 2016

NOTE 1 - PURPOSE OF SCHEDULES

Schedule of Expenditures of Federal Awards

The accompanying Schedule of Expenditures of Federal Awards includes the Federal grant activity of the Districtand is presented on the modified accrual basis of accounting. The information in this schedule is presented inaccordance with the requirements of Title 2 U.S. Code of Federal Regulations Part 200, Uniform AdministrativeRequirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance). Therefore,some amounts presented in this schedule may differ from amounts presented in, or used in the preparation of, thefinancial statements. The District has not elected to use the ten percent de minimis cost rate as covered in Section200.414 Indirect (F&A) costs of the Uniform Guidance.

The following schedule provides reconciliation between revenues reported on the Statement of Revenues,Expenditures, and Changes in Fund Balances and the related expenditures reported on the Schedule ofExpenditures of Federal Awards. The reconciling amounts consist primarily of Medi-Cal AdministrativeActivities funds that in the previous period were recorded as revenues but were unspent. These unspent balanceshave been expended in the current period. In addition, Medi-Cal Billing Option funds have been recorded in thecurrent period as revenues that have not been expended as of June 30, 2016. These unspent balances are reportedas legally restricted ending balances within the General Fund.

CFDA

Number AmountTotal Federal Revenues From the Statement of Revenues, Expenditures,

and Changes in Fund Balances: 7,460,993$

Medi-Call Administrative Activities 93.778 33,819

Medi-Cal Billing Option 93.778 (22,773)Total Schedule of Expenditures of Federal Awards 7,472,039$

Local Education Agency Organization Structure

This schedule provides information about the District's boundaries and schools operated members of thegoverning 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. Thepurpose of attendance accounting from a fiscal standpoint is to provide the basis on which apportionments ofState funds are made to school districts. This schedule provides information regarding the attendance of studentsat various grade levels and in different programs.


83

NOTE TO SUPPLEMENTARY INFORMATIONJUNE 30, 2016

Schedule of Instructional Time

The District has received incentive funding for increasing instructional time as provided by the Incentives forLonger Instructional Day. The District neither met nor exceeded its target funding. This schedule presentsinformation on the amount of instructional time offered by the District and whether the District complied with theprovisions of Education Code Sections 46200 through 46206.

Districts must maintain their instructional minutes at the 1986-87 requirements, as required by Education CodeSection 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 theUnaudited 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 budgetinformation. These financial trend disclosures are used to evaluate the District's ability to continue as a goingconcern for a reasonable period of time.

Schedule of Charter Schools

This schedule lists all Charter Schools chartered by the School District, and displays information for each CharterSchool on whether or not the Charter School is included in the School District audit.

Non-Major Governmental Funds - Balance Sheet and Statement of Revenues, Expenditures, and Changesin Fund Balances

The Non-Major Governmental Funds Combining Balance Sheet and Combining Statement of Revenues,Expenditures, and Changes in Fund Balances are included to provide information regarding the individual fundsthat have been included in the Non-Major Governmental Funds column on the Governmental Funds BalanceSheet and Statement of Revenues, Expenditures, and Changes in Fund Balances.

General Fund Selected Financial Information

This schedule provides a comparison of revenues and expenditures as a percentage of total revenue for theGeneral Fund for the past three years.

84

INDEPENDENT AUDITOR'S REPORTS




85

INDEPENDENT AUDITOR'S REPORT ON INTERNAL CONTROL OVERFINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS

BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED INACCORDANCE WITH GOVERNMENT AUDITING STANDARDS


We have audited, in accordance with the auditing standards generally accepted in the United States of Americaand the standards applicable to financial audits contained in Government Auditing Standards issued by theComptroller General of the United States, the financial statements of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of Lawndale Elementary SchoolDistrict (the District) as of and for the year ended June 30, 2016, and the related notes to the financial statements,which collectively comprise Lawndale Elementary School District's basic financial statements, and have issuedour report thereon dated November 29, 2016.

Internal Control Over Financial Reporting

In planning and performing our audit of the financial statements, we considered Lawndale Elementary SchoolDistrict's internal control over financial reporting (internal control) to determine the audit procedures that areappropriate in the circumstances for the purpose of expressing our opinions on the financial statements, but notfor the purpose of expressing an opinion on the effectiveness of Lawndale Elementary School District's internalcontrol. Accordingly, we do not express an opinion on the effectiveness of Lawndale Elementary School District'sinternal control.

A deficiency in internal control exists when the design or operation of a control does not allow management oremployees, 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 internalcontrol, such that there is a reasonable possibility that a material misstatement of the District's financial statementswill not be prevented, or detected and corrected on a timely basis. A significant deficiency is a deficiency, or acombination of deficiencies, in internal control that is less severe than a material weakness, yet important enoughto merit attention by those charged with governance.

Our consideration of internal control was for the limited purpose described in the first paragraph of this sectionand was not designed to identify all deficiencies in internal control that might be material weaknesses orsignificant deficiencies. Given these limitations, during our audit we did not identify any deficiencies in internalcontrol that we consider to be material weaknesses. However, material weaknesses may exist that have not beenidentified.

86

Compliance and Other Matters

As part of obtaining reasonable assurance about whether Lawndale Elementary School District's financialstatements are free from material misstatement, we performed tests of its compliance with certain provisions oflaws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and materialeffect on the determination of financial statement amounts. However, providing an opinion on compliance withthose provisions was not an objective of our audit, and accordingly, we do not express such an opinion. Theresults of our tests disclosed no instances of noncompliance or other matters that are required to be reported underGovernment Auditing Standards.

Purpose of This Report

The purpose of this report is solely to describe the scope of our testing of internal control and compliance and theresults of that testing, and not to provide an opinion on the effectiveness of the District's internal control or oncompliance. This report is an integral part of an audit performed in accordance with Government AuditingStandards in considering the District's internal control and compliance. Accordingly, this communication is notsuitable for any other purpose.





87

INDEPENDENT AUDITOR'S REPORT ON COMPLIANCE FOREACH MAJOR PROGRAM AND ON INTERNAL CONTROL

OVER COMPLIANCE REQUIRED BY THE UNIFORM GUIDANCE


Report on Compliance for Each Major Federal Program

We have audited Lawndale Elementary School District's (the District) compliance with the types of compliancerequirements described in the OMB Compliance Supplement that could have a direct and material effect on eachof Lawndale Elementary School District's major Federal programs for the year ended June 30, 2016. LawndaleElementary School District's major Federal programs are identified in the summary of auditor's results section ofthe 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 ofits Federal awards applicable to its Federal programs.


Our responsibility is to express an opinion on compliance for each of Lawndale Elementary School District'smajor Federal programs based on our audit of the types of compliance requirements referred to above. Weconducted our audit of compliance in accordance with auditing standards generally accepted in the United Statesof America; the standards applicable to financial audits contained in Government Auditing Standards, issued bythe Comptroller General of the United States; and the audit requirements of Title 2 U.S. Code of FederalRegulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements forFederal Awards (Uniform Guidance). Those standards and the Uniform Guidance require that we plan andperform the audit to obtain reasonable assurance about whether noncompliance with the types of compliancerequirements 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 Lawndale Elementary School District's compliancewith 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 Federalprogram. However, our audit does not provide a legal determination of Lawndale Elementary School District'scompliance.

Opinion on Each Major Federal Program

In our opinion, Lawndale Elementary School District complied, in all material respects, with the types ofcompliance requirements referred to above that could have a direct and material effect on each of its majorFederal programs for the year ended June 30, 2016.

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Report on Internal Control Over Compliance

Management of Lawndale Elementary School District is responsible for establishing and maintaining effectiveinternal control over compliance with the types of compliance requirements referred to above. In planning andperforming our audit of compliance, we considered Lawndale Elementary School District's internal control overcompliance with the types of requirements that could have a direct and material effect on each major Federalprogram to determine the auditing procedures that are appropriate in the circumstances for the purpose ofexpressing an opinion on compliance for each major Federal program and to test and report on internal controlover compliance in accordance with the Uniform Guidance, but not for the purpose of expressing an opinion onthe effectiveness of internal control over compliance. Accordingly, we do not express an opinion on theeffectiveness of Lawndale Elementary School District's internal control over compliance.

A deficiency in internal control over compliance exists when the design or operation of a control over compliancedoes not allow management or employees, in the normal course of performing their assigned functions, toprevent, or detect and correct, noncompliance with a type of compliance requirement of a Federal program on atimely basis. A material weakness in internal control over compliance is a deficiency, or combination ofdeficiencies, in internal control over compliance, such that there is a reasonable possibility that materialnoncompliance with a type of compliance requirement of a Federal program will not be prevented, or detected andcorrected, on a timely basis. A significant deficiency in internal control over compliance is a deficiency, or acombination of deficiencies, in internal control over compliance with a type of compliance requirement of aFederal program that is less severe than a material weakness in internal control over compliance, yet importantenough to merit attention by those charged with governance.

Our consideration of internal control over compliance was for the limited purpose described in the first paragraphof this section and was not designed to identify all deficiencies in internal control over compliance that might bematerial weaknesses or significant deficiencies. We did not identify any deficiencies in internal control overcompliance that we consider to be material weaknesses. However, material weaknesses may exist that have notbeen identified.

The purpose of this report on internal control over compliance is solely to describe the scope of our testing ofinternal control over compliance and the results of that testing based on the requirements of the UniformGuidance. Accordingly, this report is not suitable for any other purpose.





89

INDEPENDENT AUDITOR'S REPORT ON STATE COMPLIANCE


Report on State Compliance

We have audited Lawndale Elementary School District's (the District) compliance with the types of compliancerequirements as identified in the 2015-2016 Guide for Annual Audits of K-12 Local Education Agencies and StateCompliance Reporting that could have a direct and material effect on each of the Lawndale Elementary SchoolDistrict'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 andconditions of its State awards applicable to its State programs.


Our responsibility is to express an opinion on compliance of each of Lawndale Elementary School District's Stateprograms based on our audit of the types of compliance requirements referred to above. We conducted our auditin accordance with auditing standards generally accepted in the United States of America; the standardsapplicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General ofthe United States; and the 2015-2016 Guide for Annual Audits of K-12 Local Education Agencies and StateCompliance Reporting. These standards require that we plan and perform the audit to obtain reasonable assuranceabout whether noncompliance with the compliance requirements referred to above that could have a materialeffect on the applicable government programs noted below. An audit includes examining, on a test basis, evidenceabout Lawndale Elementary School District's compliance with those requirements and performing such otherprocedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basisfor our opinion. Our audit does not provide a legal determination of Lawndale Elementary School District'scompliance with those requirements.

Unmodified Opinion on Each of the Programs

In our opinion, Lawndale Elementary School District complied, in all material respects, with the compliancerequirements referred to above that are applicable to the government programs noted below that were audited forthe year ended June 30, 2016.

90

In connection with the audit referred to above, we selected and tested transactions and records to determineLawndale Elementary School District's compliance with the State laws and regulations applicable to the followingitems:

LOCAL EDUCATION AGENCIES OTHER THAN CHARTER SCHOOLSProceduresPerformed

Attendance YesTeacher Certification and Misassignments YesKindergarten Continuance YesIndependent Study No, see belowContinuation Education No, see belowInstructional Time YesInstructional Materials YesRatios of Administrative Employees to Teachers YesClassroom Teacher Salaries YesEarly Retirement Incentive No, see belowGann Limit Calculation YesSchool Accountability Report Card YesJuvenile Court Schools No, see belowMiddle or Early College High Schools No, see belowK-3 Grade Span Adjustment YesTransportation Maintenance of Effort Yes

SCHOOL DISTRICTS, COUNTY OFFICES OF EDUCATION, ANDCHARTER SCHOOLS

Educator Effectiveness YesCalifornia Clean Energy Jobs Act Yes, see belowAfter School Education and Safety Program:

General Requirements YesAfter School YesBefore School Yes

Proper Expenditure of Education Protection Account Funds YesUnduplicated Local Control Funding Formula Pupil Counts YesLocal Control Accountability Plan YesIndependent Study - Course Based No, see belowImmunizations Yes, see below

CHARTER SCHOOLSAttendance No, see belowMode of Instruction No, see belowNon Classroom-Based Instruction/Independent Study for Charter Schools No, see belowDetermination of Funding for Non Classroom-Based Instruction No, see belowAnnual Instruction Minutes Classroom-Based No, see belowCharter School Facility Grant Program No, see below

The District does not offer an Independent Study Program; therefore, we did not perform procedures related to theIndependent Study Program within the Attendance Accounting Program.

The District does not offer a Continuation Education Program; therefore, we did not perform procedures related tothe Continuation Education Attendance Program.

91

The District did not offer an Early Retirement Incentive Program during the current year; therefore, we did notperform 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 toJuvenile Court Schools.

The District does not offer a Middle or Early College High Schools; therefore, we did not perform any proceduresrelated to the Middle or Early College High Schools Program.

The District did not expend any California Clean Energy Jobs Act Funding; therefore, we did not perform anyprocedures for the California Clean Energy Jobs Act.

The District did not offer an Independent Study Course Based Program; therefore, we did not perform anyprocedures related to the Independent Study Course Based Program.

The District did not have any schools listed on the immunization assessment reports; therefore, we did notperform any related procedures.

The District does not have any Charter Schools; therefore, we did not perform any procedures for Charter SchoolPrograms.


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SCHEDULE OF FINDINGS AND QUESTIONED COSTS


SUMMARY OF AUDITOR'S RESULTSFOR THE YEAR ENDED JUNE 30, 2016

93

FINANCIAL STATEMENTS

Unmodified

No

None reported

No

FEDERAL AWARDS

No

None reported

Unmodified

No

CFDA Numbers Name of Federal Program or Cluster10.553, 10.555, 10.559 Child Nutrition Cluster

750,000$

Auditee qualified as low-risk auditee? Yes

STATE AWARDS

Unmodified

Dollar threshold used to distinguish between Type A and Type B programs:

Type of auditor's report issued on compliance for State programs:

Any audit findings disclosed that are required to be reported in accordance

with Section 200.516(a) of the Uniform Guidance?

Noncompliance material to financial statements noted?

Internal control over major Federal programs:

Material weakness identified?

Identification of major Federal programs:

Significant deficiency identified?

Type of auditor's report issued on compliance for major Federal programs:

Type of auditor's report issued:

Internal control over financial reporting:

Material weakness identified?

Significant deficiency identified?


FINANCIAL STATEMENT FINDINGSFOR THE YEAR ENDED JUNE 30, 2016

94

None reported.


FEDERAL AWARDS FINDINGS AND QUESTIONED COSTSFOR THE YEAR ENDED JUNE 30, 2016

95

None reported.


STATE AWARDS FINDINGS AND QUESTIONED COSTSFOR THE YEAR ENDED JUNE 30, 2016

96

None reported.


SUMMARY SCHEDULE OF PRIOR AUDIT FINDINGSFOR THE YEAR ENDED JUNE 30, 2016

97

Except as specified in previous sections of this report, summarized below is the current status of all audit findingsreported in the prior year's Schedule of Findings and Questioned Costs.

Financial Statement Findings

None reported.

Federal Awards Findings

None reported.

State Awards Findings

None reported.

Appendix D

APPENDIX D

LOS ANGELES COUNTY INVESTMENT POOL

The following information concerning the Los Angeles County (the “County”) Treasury Pool (the “Treasury Pool”) has been provided by the Treasurer and Tax Collector (the “Treasurer”) and has not been confirmed or verified by the District, the Municipal Advisor or the Underwriter. None of the District, the Municipal Advisor or the Underwriter has made an independent investigation of the investments in the Treasury Pool nor any assessment of the current County investment policy. The value of the various investments 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 economic conditions. Additionally, the Treasurer may change the investment policy at any time. Therefore, there can be no assurance that the values of the various investments in the Treasury Pool will not vary significantly from the values described herein. Finally, none of the District, the Municipal Advisor or the Underwriter makes any representation as to the accuracy or adequacy of such information or as to the absence of material adverse changes in such information subsequent to the date hereof, or that the information contained is correct as of any time subsequent to its date. Further information may be obtained from the Treasurer at the following website: https://ttc.lacounty.gov/. However, the information presented on such website is not incorporated into this Official Statement by any reference.

THE LOS ANGELES COUNTY POOLED SURPLUS INVESTMENTS The Treasurer and Tax Collector (the Treasurer) of Los Angeles County has the delegated authority to invest funds on deposit in the County Treasury (the Treasury Pool). As of January 31, 2017, investments in the Treasury Pool were held for local agencies including school districts, community college districts, special districts and discretionary depositors such as cities and independent districts in the following amounts:

Local Agency Invested Funds

(in billions) County of Los Angeles and Special Districts $12.795 Schools and Community Colleges 13.277 Discretionary Participants 2.358 Total $28.430

The Treasury Pool participation composition is as follows:

Non-discretionary Participants 91.71% Discretionary Participants: Independent Public Agencies 7.49% County Bond Proceeds and Repayment Funds 0.80% Total 100.00%

Decisions on the investment of funds in the Treasury Pool are made by the County Investment Officer in accordance with established policy, with certain transactions requiring the Treasurer's prior approval. In Los Angeles County, investment decisions are governed by Chapter 4 (commencing with Section 53600) of Part 1 of Division 2 of Title 5 of the California Government Code, which governs legal investments by local agencies in the State of California, and by a more restrictive Investment Policy developed by the Treasurer and adopted by the Los Angeles County Board of Supervisors on an annual basis. The Investment Policy adopted on March 29, 2016, reaffirmed the following criteria and order of priority for selecting investments: 1. Safety of Principal 2. Liquidity 3. Return on Investment The Treasurer prepares a monthly Report of Investments (the Investment Report) summarizing the status of the Treasury Pool, including the current market value of all investments. This report is submitted monthly to the Board of Supervisors. According to

the Investment Report dated February 28, 2017, the January 31, 2017 book value of the Treasury Pool was approximately $28.430 billion and the corresponding market value was approximately $28.230 billion. An internal controls system for monitoring cash accounting and investment practices is in place. The Treasurer's Compliance Auditor, who operates independently from the Investment Officer, reconciles cash and investments to fund balances daily. The Compliance Auditor’s staff also reviews each investment trade for accuracy and compliance with the Board adopted Investment Policy. On a quarterly basis, the County’s outside independent auditor (External Auditor) reviews the cash and investment reconciliations for completeness and accuracy. Additionally, the External Auditor reviews investment transactions on a quarterly basis for conformance with the approved Investment Policy and annually accounts for all investments. The following table identifies the types of securities held by the Treasury Pool as of January 31, 2017:

Type of Investment % of Pool U.S. Government and Agency Obligations 56.31 Certificates of Deposit 14.07 Commercial Paper 29.20 Bankers Acceptances 0.00 Municipal Obligations 0.25 Corporate Notes & Deposit Notes 0.17 Asset Backed Instruments 0.00 Repurchase Agreements 0.00 Other 0.00 100.00 The Treasury Pool is highly liquid. As of January 31, 2017, approximately 40.41% of the investments mature within 60 days, with an average of 675 days to maturity for the entire portfolio. TreasPool Update 01/31/2017

Appendix E Page 1

APPENDIX E

FORMS OF OPINIONS OF BOND COUNSEL

2016A BONDS

[Letterhead of Quint & Thimmig LLP]

[Closing Date] Board of Education of the Lawndale Elementary School District 4161 W 147th Street Lawndale, California 90260

OPINION: $10,000,000 Lawndale Elementary School District (Los Angeles County, California) General Obligation Bonds, Election of 2016, Series A (2017)

Members of the Board of Education:

We have acted as bond counsel to the Lawndale Elementary School District (the “District”) in connection with the issuance by the District of $10,000,000 principal amount of Lawndale Elementary School District (Los Angeles County, California) General Obligation Bonds, Election of 2016, Series A (2017) (the “Bonds”), pursuant to the provisions of Article 4.5 of Chapter 3 of Part 1 of Division 2 of Title 5 (commencing with section 53506) of the California Government Code (the “Act”), and a resolution adopted by the Board of Education of the District on December 7, 2016 (the “Resolution”). We have examined the law and such certified proceedings and other papers as we deemed necessary to render this opinion.

As to questions of fact material to our opinion, we have relied upon representations of the District

contained in the Resolution and in the certified proceedings and certifications of public officials and others furnished to us, without undertaking to verify such facts by independent investigation.

Based upon our examination, we are of the opinion, as of the date hereof, that: 1. The District is duly created and validly existing as a school district with the power to cause the Board to

issue the Bonds in its name and to perform its obligations under the Resolution and the Bonds. 2. The Resolution has been duly adopted by the District and creates a valid first lien on the funds pledged

under the Resolution for the security of the Bonds. 3. The Bonds have been duly authorized, executed and delivered by the Board and are valid and binding

General obligations of the District. The Board of Supervisors of Los Angeles County isrequired under the Act to levy a tax upon all taxable property in the District for the interest and redemption of all outstanding bonds of the District, including the Bonds. The Bonds are payable from an ad valorem tax levied without limitation as to rate or amount.

4. Subject to the District’s compliance with certain covenants, interest on the Bonds is excludable from

gross income of the owners thereof for federal income tax purposes and is not included as an item of tax preference in computing the alternative minimum tax for individuals and corporations under the Internal Revenue Code of

Appendix E Page 2

1986, as amended, but is taken into account in computing an adjustment used in determining the federal alternative minimum tax for certain corporations. Failure to comply with certain of such District covenants could cause interest on the Bonds to be includible in gross income for federal income tax purposes retroactively to the date of issuance of the Bonds.

5. The interest on the Bonds is exempt from personal income taxation imposed by the State of California. Ownership of the Bonds may result in other tax consequences to certain taxpayers, and we express no

opinion regarding any such collateral consequences arising with respect to the Bonds. The rights of the owners of the Bonds and the enforceability of the Bonds and the Resolution may be subject

to the bankruptcy, insolvency, reorganization, moratorium and other similar laws affecting creditors’ rights heretofore or hereafter enacted and also may be subject to the exercise of judicial discretion in accordance with General principles of equity.

Our opinion represents our legal judgment based upon such review of the law and the facts that we deem

relevant to render our opinion and is not a guarantee of a result. This opinion is given as of the date hereof and we assume no obligation to revise or supplement this opinion to reflect any facts or circumstances that may hereafter come to our attention or any changes in law that may hereafter occur.

Respectfully submitted,

Appendix E Page 3

2017 REFUNDING BONDS

[Letterhead of Quint & Thimmig LLP]

[Closing Date] Board of Education of the Lawndale Elementary School District 4161 W 147th Street Lawndale, California 90260

OPINION: $5,080,000 Lawndale Elementary School District (Los Angeles County, California) General Obligation Refunding Bonds

Members of the Board of Education:

We have acted as bond counsel to the Lawndale Elementary School District (the “District”) in connection with the issuance by the District of $5,080,000 principal amount of Lawndale Elementary School District (Los Angeles County, California) 2017 General Obligation Refunding Bonds (the “Bonds”), pursuant to the provisions of Articles 9 and 11 of Chapter 3 (commencing with section 53550) of Division 2 of Title 5 of the California Government Code (the “Act”), and a resolution adopted by the Board of Education of the District on January 31, 2017 (the “Resolution”). We have examined the law and such certified proceedings and other papers as we deemed necessary to render this opinion.

As to questions of fact material to our opinion, we have relied upon representations of the District

contained in the Resolution and in the certified proceedings and certifications of public officials and others furnished to us, without undertaking to verify such facts by independent investigation.

Based upon our examination, we are of the opinion, as of the date hereof, that: 1. The District is duly created and validly existing as a school district with the power to cause the

Board to issue the Bonds in its name and to perform its obligations under the Resolution and the Bonds. 2. The Resolution has been duly adopted by the District and creates a valid first lien on the funds

pledged under the Resolution for the security of the Bonds. 3. The Bonds have been duly authorized, executed and delivered by the Board and are valid and

binding general obligations of the District. The Board of Supervisors of Los Angeles County is required under the Act to levy a tax upon all taxable property in the District for the interest and redemption of all outstanding bonds of the District, including the Bonds. The Bonds are payable from an ad valorem tax levied without limitation as to rate or amount.

4. Subject to the District’s compliance with certain covenants, interest on the Bonds is excludable from gross income of the owners thereof for federal income tax purposes and is not included as an item of tax preference in computing the alternative minimum tax for individuals and corporations under the Internal Revenue Code of 1986, as amended, but is taken into account in computing an adjustment used in

Appendix E Page 4

determining the federal alternative minimum tax for certain corporations. Failure to comply with certain of such District covenants could cause interest on the Bonds to be includible in gross income for federal income tax purposes retroactively to the date of issuance of the Bonds.

5. The interest on the Bonds is exempt from personal income taxation imposed by the State of

California. Ownership of the Bonds may result in other tax consequences to certain taxpayers, and we

express no opinion regarding any such collateral consequences arising with respect to the Bonds. The rights of the owners of the Bonds and the enforceability of the Bonds and the Resolution may

be subject to the bankruptcy, insolvency, reorganization, moratorium and other similar laws affecting creditors’ rights heretofore or hereafter enacted and also may be subject to the exercise of judicial discretion in accordance with general principles of equity.

Our opinion represents our legal judgment based upon such review of the law and the facts that

we deem relevant to render our opinion and is not a guarantee of a result. This opinion is given as of the date hereof and we assume no obligation to revise or supplement this opinion to reflect any facts or circumstances that may hereafter come to our attention or any changes in law that may hereafter occur.

Respectfully submitted,

Appendix F Page 1

APPENDIX F

FORMS OF CONTINUING DISCLOSURE CERTIFICATES

2016A BONDS

This Continuing Disclosure Certificate (the “Disclosure Certificate”) is executed and delivered by the LAWNDALE ELEMENTARY SCHOOL DISTRICT (the “District”) in connection with the issuance by the District of its $5,080,000 Lawndale Elementary School District (Los Angeles County, California) General Obligation Bonds, Election of 2016, Series A (2017) (the “Bonds”). The Bonds are being issued pursuant to a resolution adopted by the Board of Education of the District on January 31 2017 (the “Bond Resolution”). The District covenants and agrees as follows:

Section 1. Definitions. In addition to the definitions set forth in the Bond Resolution, which apply to any

capitalized term used in this Disclosure Certificate, unless otherwise defined in this Section 1, the following capitalized terms shall have the following meanings when used in this Disclosure Certificate:

“Annual Report” shall mean any Annual Report provided by the District pursuant to, and as described in,

Sections 3 and 4 of this Disclosure Certificate. “Beneficial Owner” shall mean any person who (a) has the power, directly or indirectly, to vote or consent

with respect to, or to dispose of ownership of, any Bonds (including persons holding Bonds through nominees, depositories or other intermediaries), or (b) is treated as the owner of any Bonds for federal income tax purposes.

“Dissemination Agent” shall mean Applied Best Practices, LLC or any successor Dissemination Agent

designated in writing by the District and which has filed with the District a written acceptance of such designation. In the absence of such a designation, the District shall act as the Dissemination Agent.

“EMMA” or “Electronic Municipal Market Access” means the centralized on-line repository for documents

to be filed with the MSRB, such as official statements and disclosure information relating to municipal bonds, notes and other securities as issued by state and local governments.

“Listed Events” shall mean any of the events listed in Section 5(a) or 5(b) of this Disclosure Certificate. “MSRB” means the Municipal Securities Rulemaking Board, which has been designated by the Securities

and Exchange Commission as the sole repository of disclosure information for purposes of the Rule, or any other repository of disclosure information which may be designated by the Securities and Exchange Commission as such for purposes of the Rule in the future.

“Participating Underwriter” shall mean Raymond James & Associates, Inc., the original underwriter of the

Bonds, required to comply with the Rule in connection with offering of the Bonds. “Rule” shall mean Rule 15c2-12 adopted by the Securities and Exchange Commission under the Securities

Exchange Act of 1934, as the same may be amended from time to time. Section 2. Purpose of the Disclosure Certificate. This Disclosure Certificate is being executed and delivered

by the District for the benefit of the owners and Beneficial Owners of the Bonds and in order to assist the Participating Underwriter in complying with Securities and Exchange Commission Rule 15c2-12(b)(5).

Appendix F Page 2

Section 3. Provision of Annual Reports. (a) Delivery of Annual Report. The District shall, or shall cause the Dissemination Agent to, not later than

nine months after the end of the District’s fiscal year (which currently ends on June 30), commencing with the report for the 2016-17 Fiscal Year, which is due not later than March 31, 2018, file with EMMA, in a readable PDF or other electronic format as prescribed by the MSRB, an Annual Report that is consistent with the requirements of Section 4 of this Disclosure Certificate. The Annual Report may be submitted as a single document or as separate documents comprising a package and may cross-reference other information as provided in Section 4 of this Disclosure Certificate; provided that the audited financial statements of the District may be submitted separately from the balance of the Annual Report and later than the date required above for the filing of the Annual Report if they are not available by that date.

(b) Change of Fiscal Year. If the District’s fiscal year changes, it shall give notice of such change in the same

manner as for a Listed Event under Section 5(c), and subsequent Annual Report filings shall be made no later than nine months after the end of such new fiscal year end.

(c) Delivery of Annual Report to Dissemination Agent. Not later than fifteen (15) Business Days prior to the

date specified in subsection (a) (or, if applicable, subsection (b)) of this Section 3 for providing the Annual Report to EMMA, the District shall provide the Annual Report to the Dissemination Agent (if other than the District). If by such date, the Dissemination Agent has not received a copy of the Annual Report, the Dissemination Agent shall notify the District.

(d) Report of Non-Compliance. If the District is the Dissemination Agent and is unable to file an Annual

Report by the date required in subsection (a) (or, if applicable, subsection (b)) of this Section 3, the District shall send a notice to EMMA, in a timely manner, substantially in the form attached hereto as Exhibit A. If the District is not the Dissemination Agent and is unable to provide an Annual Report to the Dissemination Agent by the date required in subsection (c) of this Section 3, the Dissemination Agent shall send a notice to EMMA, in a timely manner, in substantially the form attached hereto as Exhibit A.

(e) Annual Compliance Certification. The Dissemination Agent shall, if the Dissemination Agent is other

than the District, file a report with the District certifying that the Annual Report has been filed with EMMA pursuant to Section 3 of this Disclosure Certificate, stating the date it was so provided and filed.

Section 4. Content of Annual Reports. The Annual Report shall contain or incorporate by reference the

following: (a) Financial Statements. Audited financial statements of the District for the preceding fiscal year, prepared

in accordance Generally accepted accounting principles. If the District’s audited financial statements are not available by the time the Annual Report is required to be filed pursuant to Section 3(a), the Annual Report shall contain unaudited financial statements in a format similar to the financial statements contained in the final Official Statement, and the audited financial statements shall be filed in the same manner as the Annual Report when they become available.

(b) Other Annual Information. To the extent not included in the audited final statements of the District, the

Annual Report shall also include financial and operating data with respect to the District for preceding fiscal year, substantially similar to that provided in the corresponding tables and charts in the official statement for the Bonds, as follows:

Appendix F Page 3

(i) The District’s approved budget for the then current fiscal year;

(ii) Assessed value of taxable property in the District as shown on the most recent equalized assessment roll; and

(iii) Property tax levies, collections and delinquencies for the District, for the most recent completed fiscal year.

(c) Cross References. Any or all of the items listed above may be included by specific reference to other

documents, including official statements of debt issues of the District or related public entities, which are available to the public on EMMA. The District shall clearly identify each such other document so included by reference.

If the document included by reference is a final official statement, it must be available from EMMA. (d) Further Information. In addition to any of the information expressly required to be provided under

paragraph (b) of this Section 4, the District shall provide such further information, if any, as may be necessary to make the specifically required statements, in the light of the circumstances under which they are made, not misleading.

Section 5. Reporting of Listed Events. (a) Reportable Events. The District shall, or shall cause the Dissemination (if not the District) to, give notice

of the occurrence of any of the following events with respect to the Bonds:

(1) Principal and interest payment delinquencies. (2) Unscheduled draws on debt service reserves reflecting financial difficulties. (3) Unscheduled draws on credit enhancements reflecting financial difficulties. (4) Substitution of credit or liquidity providers, or their failure to perform. (5) Defeasances. (6) Rating changes. (7) Tender offers. (8) Bankruptcy, insolvency, receivership or similar event of the obligated person. (9) Adverse tax opinions, the issuance by the Internal Revenue Service of proposed or final

determinations of taxability, Notices of Proposed Issue (IRS Form 5701-TEB) or other material notices or determinations with respect to the tax status of the security, or other material events affecting the tax status of the security.

Note: For the purposes of the event identified in subparagraph (8), the event is considered to occur when any of the following occur: the appointment of a receiver, fiscal agent or similar officer for an obligated person in a proceeding under the U.S. Bankruptcy Code or in any other proceeding under state or federal law in which a court or governmental authority has assumed jurisdiction over substantially all of the assets or business of the obligated person, or if such jurisdiction has been assumed by leaving the existing governmental body and officials or officers in possession but subject to the supervision and orders of a court or governmental authority, or the entry of an order confirming a plan of reorganization, arrangement or liquidation by a court or governmental authority having supervision or jurisdiction over substantially all of the assets or business of the obligated person.

Appendix F Page 4

(b) Material Reportable Events. The District shall give, or cause to be given, notice of the occurrence of any of the following events with respect to the Bonds, if material:

(1) Non-payment related defaults. (2) Modifications to rights of security holders. (3) Bond calls. (4) The release, substitution, or sale of property securing repayment of the securities. (5) The consummation of a merger, consolidation, or acquisition involving an obligated

person or the sale of all or substantially all of the assets of the obligated person, other than in the ordinary course of business, the entry into a definitive agreement to undertake such an action or the termination of a definitive agreement relating to any such actions, other than pursuant to its terms.

(6) Appointment of a successor or additional trustee, or the change of name of a trustee.

(c) Time to Disclose. The District shall, or shall cause the Dissemination Agent (if not the District) to, file a notice of such occurrence with EMMA, in an electronic format as prescribed by the MSRB, in a timely manner not in excess of 10 business days after the occurrence of the Listed Event. Notwithstanding the foregoing, notice of Listed Events described in subsections (a)(5) and (b)(3) above need not be given under this subsection any earlier than the notice (if any) of the underlying event is given to owners of affected Bonds under the Bond Resolution.

Section 6. Identifying Information for Filings with EMMA. All documents provided to EMMA under this

Disclosure Certificate shall be accompanied by identifying information as prescribed by the MSRB. Section 7. Termination of Reporting Obligation. The District’s obligations under this Disclosure Certificate

shall terminate upon the defeasance, prior redemption or payment in full of all of the Bonds. If such termination occurs prior to the final maturity of the Bonds, the District shall give notice of such termination in the same manner as for a Listed Event under Section 5(c).

Section 8. Dissemination Agent. (a) Appointment of Dissemination Agent. The District may, from time to time, appoint or engage a

Dissemination Agent to assist it in carrying out its obligations under this Disclosure Certificate and may discharge any such agent, with or without appointing a successor Dissemination Agent. If the Dissemination Agent is not the District, the Dissemination Agent shall not be responsible in any manner for the content of any notice or report prepared by the District pursuant to this Disclosure Certificate. It is understood and agreed that any information that the Dissemination Agent may be instructed to file with EMMA shall be prepared and provided to it by the District. The Dissemination Agent has undertaken no responsibility with respect to the content of any reports, notices or disclosures provided to it under this Disclosure Certificate and has no liability to any person, including any Bondholder, with respect to any such reports, notices or disclosures. The fact that the Dissemination Agent or any affiliate thereof may have any fiduciary or banking relationship with the District shall not be construed to mean that the Dissemination Agent has actual knowledge of any event or condition, except as may be provided by written notice from the District.

(b) Compensation of Dissemination Agent. The Dissemination Agent shall be paid compensation by the

District for its services provided hereunder in accordance with its schedule of fees as agreed to between the Dissemination Agent and the District from time to time and all expenses, legal fees and expenses and advances made or incurred by the Dissemination Agent in the performance of its duties hereunder. The Dissemination Agent shall not be deemed to be acting in any fiduciary capacity for the District, owners or Beneficial Owners, or any other party. The Dissemination Agent may rely, and shall be protected in acting or refraining from acting, upon any direction from the District or an opinion of nationally recognized bond counsel. The Dissemination Agent may at any time resign by giving written notice of such resignation to the District. The Dissemination Agent shall not be liable hereunder except for its negligence or willful misconduct.

Appendix F Page 5

(c) Responsibilities of Dissemination Agent. In addition of the filing obligations of the Dissemination Agent set forth in Sections 3(e) and 5, the Dissemination Agent shall be obligated, and hereby agrees, to provide a request to the District to compile the information required for its Annual Report at least 30 days prior to the date such information is to be provided to the Dissemination Agent pursuant to subsection (c) of Section 3. The failure to provide or receive any such request shall not affect the obligations of the District under Section 3.

Section 9. Amendment; Waiver. Notwithstanding any other provision of this Disclosure Certificate, the

District may amend this Disclosure Certificate (and the Dissemination Agent shall agree to any amendment so requested by the District that does not impose any greater duties or risk of liability on the Dissemination Agent), and any provision of this Disclosure Certificate may be waived, provided that all of the following conditions are satisfied:

(a) Change in Circumstances. If the amendment or waiver relates to the provisions of Sections 3(a), 4 or 5(a)

or (b), it may only be made in connection with a change in circumstances that arises from a change in legal requirements, change in law, or change in the identity, nature, or status of an obligated person with respect to the Bonds, or the type of business conducted.

(b) Compliance as of Issue Date. The undertaking, as amended or taking into account such waiver, would, in

the opinion of a nationally recognized bond counsel, have complied with the requirements of the Rule at the time of the original issuance of the Bonds, after taking into account any amendments or interpretations of the Rule, as well as any change in circumstances.

(c) Consent of Holders; Non-impairment Opinion. The amendment or waiver either (i) is approved by the

Bondholders in the same manner as provided in the Bond Resolution for amendments to the Bond Resolution with the consent of Bondholders, or (ii) does not, in the opinion of nationally recognized bond counsel, materially impair the interests of the Bondholders or Beneficial Owners.

If this Disclosure Certificate is amended or any provision of this Disclosure Certificate is waived, the

District shall describe such amendment or waiver in the next following Annual Report and shall include, as applicable, a narrative explanation of the reason for the amendment or waiver and its impact on the type (or in the case of a change of accounting principles, on the presentation) of financial information or operating data being presented by the District. In addition, if the amendment relates to the accounting principles to be followed in preparing financial statements, (i) notice of such change shall be given in the same manner as for a Listed Event under Section 5(c), and (ii) the Annual Report for the year in which the change is made should present a comparison (in narrative form and also, if feasible, in quantitative form) between the financial statements as prepared on the basis of the new accounting principles and those prepared on the basis of the former accounting principles.

Section 10. Additional Information. Nothing in this Disclosure Certificate shall be deemed to prevent the

District from disseminating any other information, using the means of dissemination set forth in this Disclosure Certificate or any other means of communication, or including any other information in any Annual Report or notice of occurrence of a Listed Event, in addition to that which is required by this Disclosure Certificate. If the District chooses to include any information in any Annual Report or notice of occurrence of a Listed Event in addition to that which is specifically required by this Disclosure Certificate, the District shall have no obligation under this Disclosure Certificate to update such information or include it in any future Annual Report or notice of occurrence of a Listed Event.

Section 11. Default. In the event of a failure of the District to comply with any provision of this Disclosure

Certificate, any Bondholder or Beneficial Owner may take such actions as may be necessary and appropriate, including seeking mandate or specific performance by court order, to cause the District to comply with its obligations under this Disclosure Certificate. The sole remedy under this Disclosure Certificate in the event of any failure of the District to comply with this Disclosure Certificate shall be an action to compel performance.

Section 12. Duties, Immunities and Liabilities of Dissemination Agent. The Dissemination Agent shall have

only such duties as are specifically set forth in this Disclosure Certificate, and no implied covenants or obligations

Appendix F Page 6

shall be read into this Disclosure Certificate against the Dissemination Agent, and the District agrees to indemnify and save the Dissemination Agent, its officers, directors, employees and agents, harmless against any loss, expense and liabilities which it may incur arising out of or in the exercise or performance of its powers and duties hereunder, including the costs and expenses (including attorneys fees and expenses) of defending against any claim of liability, but excluding liabilities due to the Dissemination Agent’s negligence or willful misconduct. The Dissemination Agent shall have the same rights, privileges and immunities hereunder as are afforded to the Paying Agent under the Bond Resolution. The obligations of the District under this Section 12 shall survive resignation or removal of the Dissemination Agent and payment of the Bonds.

Section 13. Beneficiaries. This Disclosure Certificate shall inure solely to the benefit of the District, the

Dissemination Agent, the Participating Underwriter and the owners and Beneficial Owners from time to time of the Bonds, and shall create no rights in any other person or entity.

Date: [Closing Date]

LAWNDALE ELEMENTARY SCHOOL DISTRICT By

Authorized Officer ACKNOWLEDGED: APPLIED BEST PRACTICES, LLC, as Dissemination Agent By

Authorized Officer

Appendix F Page 7

EXHIBIT A

NOTICE TO EMMA OF FAILURE TO FILE ANNUAL REPORT Name of Issuer: Lawndale Elementary School District Name of Issue: Lawndale Elementary School District (Los Angeles County, California) General

Obligation Bonds, Election of 2016, Series A (2017) Date of Issuance: [Closing Date]

NOTICE IS HEREBY GIVEN that the Obligor has not provided an Annual Report with respect to the above-named Issue as required by the Continuing Disclosure Certificate, dated [Closing Date], furnished by the Issuer in connection with the Issue. The Issuer anticipates that the Annual Report will be filed by _____________.

Dated: ______________________

APPLIED BEST PRACTICES, LLC, as Dissemination Agent By Title

cc: Paying Agent

Appendix F Page 8

2017 REFUNDING BONDS

This Continuing Disclosure Certificate (the “Disclosure Certificate”) is executed and delivered by the

LAWNDALE ELEMENTARY SCHOOL DISTRICT (the “District”) in connection with the issuance by the District of its $5,080,000 Lawndale Elementary School District (Los Angeles County, California) 2017 General Obligation Refunding Bonds (the “Bonds”). The Bonds are being issued pursuant to a resolution adopted by the Board of Education of the District on January 31, 2017 (the “Bond Resolution”). The District covenants and agrees as follows:

Section 1. Definitions. In addition to the definitions set forth in the Bond Resolution, which apply to any

capitalized term used in this Disclosure Certificate, unless otherwise defined in this Section 1, the following capitalized terms shall have the following meanings when used in this Disclosure Certificate:

“Annual Report” shall mean any Annual Report provided by the District pursuant to, and as described in,

Sections 3 and 4 of this Disclosure Certificate. “Beneficial Owner” shall mean any person who (a) has the power, directly or indirectly, to vote or consent

with respect to, or to dispose of ownership of, any Bonds (including persons holding Bonds through nominees, depositories or other intermediaries), or (b) is treated as the owner of any Bonds for federal income tax purposes.

“Dissemination Agent” shall mean Applied Best Practices, LLC or any successor Dissemination Agent

designated in writing by the District and which has filed with the District a written acceptance of such designation. In the absence of such a designation, the District shall act as the Dissemination Agent.

“EMMA” or “Electronic Municipal Market Access” means the centralized on-line repository for documents

to be filed with the MSRB, such as official statements and disclosure information relating to municipal bonds, notes and other securities as issued by state and local governments.

“Listed Events” shall mean any of the events listed in Section 5(a) or 5(b) of this Disclosure Certificate. “MSRB” means the Municipal Securities Rulemaking Board, which has been designated by the Securities

and Exchange Commission as the sole repository of disclosure information for purposes of the Rule, or any other repository of disclosure information which may be designated by the Securities and Exchange Commission as such for purposes of the Rule in the future.

“Participating Underwriter” shall mean Raymond James & Associates, Inc., the original underwriter of the

Bonds, required to comply with the Rule in connection with offering of the Bonds. “Rule” shall mean Rule 15c2-12 adopted by the Securities and Exchange Commission under the Securities

Exchange Act of 1934, as the same may be amended from time to time. Section 2. Purpose of the Disclosure Certificate. This Disclosure Certificate is being executed and delivered

by the District for the benefit of the owners and Beneficial Owners of the Bonds and in order to assist the Participating Underwriter in complying with Securities and Exchange Commission Rule 15c2-12(b)(5).

Section 3. Provision of Annual Reports. (a) Delivery of Annual Report. The District shall, or shall cause the Dissemination Agent to, not later than

nine months after the end of the District’s fiscal year (which currently ends on June 30), commencing with the report for the 2016-17 Fiscal Year, which is due not later than March 31, 2018, file with EMMA, in a readable PDF or other electronic format as prescribed by the MSRB, an Annual Report that is consistent with the requirements of Section 4 of this Disclosure Certificate. The Annual Report may be submitted as a single document or as separate

Appendix F Page 9

documents comprising a package and may cross-reference other information as provided in Section 4 of this Disclosure Certificate; provided that the audited financial statements of the District may be submitted separately from the balance of the Annual Report and later than the date required above for the filing of the Annual Report if they are not available by that date.

(b) Change of Fiscal Year. If the District’s fiscal year changes, it shall give notice of such change in the same

manner as for a Listed Event under Section 5(c), and subsequent Annual Report filings shall be made no later than nine months after the end of such new fiscal year end.

(c) Delivery of Annual Report to Dissemination Agent. Not later than fifteen (15) Business Days prior to the

date specified in subsection (a) (or, if applicable, subsection (b)) of this Section 3 for providing the Annual Report to EMMA, the District shall provide the Annual Report to the Dissemination Agent (if other than the District). If by such date, the Dissemination Agent has not received a copy of the Annual Report, the Dissemination Agent shall notify the District.

(d) Report of Non-Compliance. If the District is the Dissemination Agent and is unable to file an Annual

Report by the date required in subsection (a) (or, if applicable, subsection (b)) of this Section 3, the District shall send a notice to EMMA, in a timely manner, substantially in the form attached hereto as Exhibit A. If the District is not the Dissemination Agent and is unable to provide an Annual Report to the Dissemination Agent by the date required in subsection (c) of this Section 3, the Dissemination Agent shall send a notice to EMMA, in a timely manner, in substantially the form attached hereto as Exhibit A.

(e) Annual Compliance Certification. The Dissemination Agent shall, if the Dissemination Agent is other

than the District, file a report with the District certifying that the Annual Report has been filed with EMMA pursuant to Section 3 of this Disclosure Certificate, stating the date it was so provided and filed.

Section 4. Content of Annual Reports. The Annual Report shall contain or incorporate by reference the

following: (a) Financial Statements. Audited financial statements of the District for the preceding fiscal year, prepared

in accordance Generally accepted accounting principles. If the District’s audited financial statements are not available by the time the Annual Report is required to be filed pursuant to Section 3(a), the Annual Report shall contain unaudited financial statements in a format similar to the financial statements contained in the final Official Statement, and the audited financial statements shall be filed in the same manner as the Annual Report when they become available.

(b) Other Annual Information. To the extent not included in the audited final statements of the District, the

Annual Report shall also include financial and operating data with respect to the District for preceding fiscal year, substantially similar to that provided in the corresponding tables and charts in the official statement for the Bonds, as follows:

(i) The District’s approved budget for the then current fiscal year;

(ii) Assessed value of taxable property in the District as shown on the most recent equalized assessment roll; and

(iii) Property tax levies, collections and delinquencies for the District, for the most recent completed fiscal year

(c) Cross References. Any or all of the items listed above may be included by specific reference to other

documents, including official statements of debt issues of the District or related public entities, which are available to the public on EMMA. The District shall clearly identify each such other document so included by reference.

If the document included by reference is a final official statement, it must be available from EMMA.

Appendix F Page 10

(d) Further Information. In addition to any of the information expressly required to be provided under paragraph (b) of this Section 4, the District shall provide such further information, if any, as may be necessary to make the specifically required statements, in the light of the circumstances under which they are made, not misleading.

Section 5. Reporting of Listed Events. (a) Reportable Events. The District shall, or shall cause the Dissemination (if not the District) to, give notice

of the occurrence of any of the following events with respect to the Bonds:

(1) Principal and interest payment delinquencies. (2) Unscheduled draws on debt service reserves reflecting financial difficulties. (3) Unscheduled draws on credit enhancements reflecting financial difficulties. (4) Substitution of credit or liquidity providers, or their failure to perform. (5) Defeasances. (6) Rating changes. (7) Tender offers. (8) Bankruptcy, insolvency, receivership or similar event of the obligated person. (9) Adverse tax opinions, the issuance by the Internal Revenue Service of proposed or final

determinations of taxability, Notices of Proposed Issue (IRS Form 5701-TEB) or other material notices or determinations with respect to the tax status of the security, or other material events affecting the tax status of the security.

Note: For the purposes of the event identified in subparagraph (8), the event is considered to occur when any of the following occur: the appointment of a receiver, fiscal agent or similar officer for an obligated person in a proceeding under the U.S. Bankruptcy Code or in any other proceeding under state or federal law in which a court or governmental authority has assumed jurisdiction over substantially all of the assets or business of the obligated person, or if such jurisdiction has been assumed by leaving the existing governmental body and officials or officers in possession but subject to the supervision and orders of a court or governmental authority, or the entry of an order confirming a plan of reorganization, arrangement or liquidation by a court or governmental authority having supervision or jurisdiction over substantially all of the assets or business of the obligated person.

(b) Material Reportable Events. The District shall give, or cause to be given, notice of the occurrence of any of the following events with respect to the Bonds, if material:

(1) Non-payment related defaults. (2) Modifications to rights of security holders. (3) Bond calls. (4) The release, substitution, or sale of property securing repayment of the securities. (5) The consummation of a merger, consolidation, or acquisition involving an obligated

person or the sale of all or substantially all of the assets of the obligated person, other than in the ordinary course of business, the entry into a definitive agreement to undertake such an action or the termination of a definitive agreement relating to any such actions, other than pursuant to its terms.

(6) Appointment of a successor or additional trustee, or the change of name of a trustee.

(c) Time to Disclose. The District shall, or shall cause the Dissemination Agent (if not the District) to, file a notice of such occurrence with EMMA, in an electronic format as prescribed by the MSRB, in a timely manner not in excess of 10 business days after the occurrence of the Listed Event. Notwithstanding the foregoing, notice of Listed Events described in subsections (a)(5) and (b)(3) above need not be given under this subsection any earlier than the notice (if any) of the underlying event is given to owners of affected Bonds under the Bond Resolution.

Appendix F Page 11

Section 6. Identifying Information for Filings with EMMA. All documents provided to EMMA under this

Disclosure Certificate shall be accompanied by identifying information as prescribed by the MSRB. Section 7. Termination of Reporting Obligation. The District’s obligations under this Disclosure Certificate

shall terminate upon the defeasance, prior redemption or payment in full of all of the Bonds. If such termination occurs prior to the final maturity of the Bonds, the District shall give notice of such termination in the same manner as for a Listed Event under Section 5(c).

Section 8. Dissemination Agent. (a) Appointment of Dissemination Agent. The District may, from time to time, appoint or engage a

Dissemination Agent to assist it in carrying out its obligations under this Disclosure Certificate and may discharge any such agent, with or without appointing a successor Dissemination Agent. If the Dissemination Agent is not the District, the Dissemination Agent shall not be responsible in any manner for the content of any notice or report prepared by the District pursuant to this Disclosure Certificate. It is understood and agreed that any information that the Dissemination Agent may be instructed to file with EMMA shall be prepared and provided to it by the District. The Dissemination Agent has undertaken no responsibility with respect to the content of any reports, notices or disclosures provided to it under this Disclosure Certificate and has no liability to any person, including any Bondholder, with respect to any such reports, notices or disclosures. The fact that the Dissemination Agent or any affiliate thereof may have any fiduciary or banking relationship with the District shall not be construed to mean that the Dissemination Agent has actual knowledge of any event or condition, except as may be provided by written notice from the District.

(b) Compensation of Dissemination Agent. The Dissemination Agent shall be paid compensation by the

District for its services provided hereunder in accordance with its schedule of fees as agreed to between the Dissemination Agent and the District from time to time and all expenses, legal fees and expenses and advances made or incurred by the Dissemination Agent in the performance of its duties hereunder. The Dissemination Agent shall not be deemed to be acting in any fiduciary capacity for the District, owners or Beneficial Owners, or any other party. The Dissemination Agent may rely, and shall be protected in acting or refraining from acting, upon any direction from the District or an opinion of nationally recognized bond counsel. The Dissemination Agent may at any time resign by giving written notice of such resignation to the District. The Dissemination Agent shall not be liable hereunder except for its negligence or willful misconduct.

(c) Responsibilities of Dissemination Agent. In addition of the filing obligations of the Dissemination Agent set

forth in Sections 3(e) and 5, the Dissemination Agent shall be obligated, and hereby agrees, to provide a request to the District to compile the information required for its Annual Report at least 30 days prior to the date such information is to be provided to the Dissemination Agent pursuant to subsection (c) of Section 3. The failure to provide or receive any such request shall not affect the obligations of the District under Section 3.

Section 9. Amendment; Waiver. Notwithstanding any other provision of this Disclosure Certificate, the

District may amend this Disclosure Certificate (and the Dissemination Agent shall agree to any amendment so requested by the District that does not impose any greater duties or risk of liability on the Dissemination Agent), and any provision of this Disclosure Certificate may be waived, provided that all of the following conditions are satisfied:

(a) Change in Circumstances. If the amendment or waiver relates to the provisions of Sections 3(a), 4 or 5(a)

or (b), it may only be made in connection with a change in circumstances that arises from a change in legal requirements, change in law, or change in the identity, nature, or status of an obligated person with respect to the Bonds, or the type of business conducted.

(b) Compliance as of Issue Date. The undertaking, as amended or taking into account such waiver, would, in

the opinion of a nationally recognized bond counsel, have complied with the requirements of the Rule at the time of

Appendix F Page 12

the original issuance of the Bonds, after taking into account any amendments or interpretations of the Rule, as well as any change in circumstances.

(c) Consent of Holders; Non-impairment Opinion. The amendment or waiver either (i) is approved by the

Bondholders in the same manner as provided in the Bond Resolution for amendments to the Bond Resolution with the consent of Bondholders, or (ii) does not, in the opinion of nationally recognized bond counsel, materially impair the interests of the Bondholders or Beneficial Owners.

If this Disclosure Certificate is amended or any provision of this Disclosure Certificate is waived, the

District shall describe such amendment or waiver in the next following Annual Report and shall include, as applicable, a narrative explanation of the reason for the amendment or waiver and its impact on the type (or in the case of a change of accounting principles, on the presentation) of financial information or operating data being presented by the District. In addition, if the amendment relates to the accounting principles to be followed in preparing financial statements, (i) notice of such change shall be given in the same manner as for a Listed Event under Section 5(c), and (ii) the Annual Report for the year in which the change is made should present a comparison (in narrative form and also, if feasible, in quantitative form) between the financial statements as prepared on the basis of the new accounting principles and those prepared on the basis of the former accounting principles.

Section 10. Additional Information. Nothing in this Disclosure Certificate shall be deemed to prevent the

District from disseminating any other information, using the means of dissemination set forth in this Disclosure Certificate or any other means of communication, or including any other information in any Annual Report or notice of occurrence of a Listed Event, in addition to that which is required by this Disclosure Certificate. If the District chooses to include any information in any Annual Report or notice of occurrence of a Listed Event in addition to that which is specifically required by this Disclosure Certificate, the District shall have no obligation under this Disclosure Certificate to update such information or include it in any future Annual Report or notice of occurrence of a Listed Event.

Section 11. Default. In the event of a failure of the District to comply with any provision of this Disclosure

Certificate, any Bondholder or Beneficial Owner may take such actions as may be necessary and appropriate, including seeking mandate or specific performance by court order, to cause the District to comply with its obligations under this Disclosure Certificate. The sole remedy under this Disclosure Certificate in the event of any failure of the District to comply with this Disclosure Certificate shall be an action to compel performance.

Section 12. Duties, Immunities and Liabilities of Dissemination Agent. The Dissemination Agent shall have

only such duties as are specifically set forth in this Disclosure Certificate, and no implied covenants or obligations shall be read into this Disclosure Certificate against the Dissemination Agent, and the District agrees to indemnify and save the Dissemination Agent, its officers, directors, employees and agents, harmless against any loss, expense and liabilities which it may incur arising out of or in the exercise or performance of its powers and duties hereunder, including the costs and expenses (including attorneys fees and expenses) of defending against any claim of liability, but excluding liabilities due to the Dissemination Agent’s negligence or willful misconduct. The Dissemination Agent shall have the same rights, privileges and immunities hereunder as are afforded to the Paying Agent under the Bond Resolution. The obligations of the District under this Section 12 shall survive resignation or removal of the Dissemination Agent and payment of the Bonds.

Appendix F Page 13

Section 13. Beneficiaries. This Disclosure Certificate shall inure solely to the benefit of the District, the Dissemination Agent, the Participating Underwriter and the owners and Beneficial Owners from time to time of the Bonds, and shall create no rights in any other person or entity.

Date: [Closing Date]

LAWNDALE ELEMENTARY SCHOOL DISTRICT By

Authorized Officer ACKNOWLEDGED: APPLIED BEST PRACTICES, LLC, as Dissemination Agent By

Authorized Officer

Appendix F Page 14

EXHIBIT A

NOTICE TO EMMA OF FAILURE TO FILE ANNUAL REPORT Name of Issuer: Lawndale Elementary School District Name of Issue: Lawndale Elementary School District (Los Angeles County, California) 2017 General

Obligation Refunding Bonds Date of Issuance: [Closing Date]

NOTICE IS HEREBY GIVEN that the Obligor has not provided an Annual Report with respect to the above-named Issue as required by the Continuing Disclosure Certificate, dated [Closing Date], furnished by the Issuer in connection with the Issue. The Issuer anticipates that the Annual Report will be filed by _____________.

Dated: ______________________

APPLIED BEST PRACTICES, LLC, as Dissemination Agent By Title

cc: Paying Agent

Appendix G Page 1

APPENDIX G

BOOK-ENTRY SYSTEM The following description of the procedures and record keeping with respect to beneficial ownership interests in the

Bonds, payment of principal of and interest on the Bonds to Direct Participants, Indirect Participants or Beneficial Owners (as such terms are defined below) of the Bonds, confirmation and transfer of beneficial ownership interests in the Bonds and other Bond related transactions by and between DTC, Direct Participants, Indirect Participants and Beneficial Owners of the Bonds is based solely on information furnished by DTC to the District which the District believes to be reliable, but the District and the Underwriter do not and cannot make any independent representations concerning these matters and do not take responsibility for the accuracy or completeness thereof. Neither the DTC, Direct Participants, Indirect Participants nor the Beneficial Owners should rely on the foregoing information with respect to such matters, but should instead confirm the same with DTC or the DTC Participants, as the case may be.

The Depository Trust Company (“DTC”), New York, New York, will act as securities depository for the

Bonds. The Bonds will be issued as fully-registered securities registered in the name of Cede & Co. (DTC’s partnership nominee) or such other name as may be requested by an authorized representative of DTC. One fully-registered Bond will be issued for each maturity of the Bonds, each in the aggregate principal amount of such maturity, and will be deposited with DTC.

DTC, the world’s largest securities depository, is a limited-purpose trust company organized under the

New York Banking Law, a “banking organization” within the meaning of the New York Banking Law, a member of the Federal Reserve System, a “clearing corporation” within the meaning of the New York Uniform Commercial Code, and a “clearing agency” registered pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934. DTC holds and provides asset servicing for over 3.5 million issues of U.S. and non-U.S. equity issues, corporate and municipal debt issues and money market instruments (from over 100 countries) that DTC’s participants (“Direct Participants”) deposit with DTC. DTC also facilitates the post-trade settlement among Direct Participants of sales and other securities transactions in deposited securities, through electronic computerized book-entry transfers and pledges between Direct Participants’ accounts. This eliminates the need for physical movement of securities certificates. Direct Participants include both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations. DTC is a wholly-owned subsidiary of The Depository Trust & Clearing Corporation (“DTCC”). DTCC is the holding company for DTC, National Securities Clearing Corporation and Fixed Income Clearing Corporation all of which are registered clearing agencies. DTCC is owned by the users of its regulated subsidiaries. Access to the DTC system is also available to others such as both U.S. and non-U.S. securities brokers and dealers, banks, trust companies and clearing corporations that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly (“Indirect Participants”). DTC has a Standard & Poor’s rating of AA+. The DTC Rules applicable to its Participants are on file with the Securities and Exchange Commission. More information about DTC can be found at www.dtcc.com and www.dtc.org.

Purchases of Bonds under the DTC system must be made by or through Direct Participants, which will

receive a credit for the Bonds on DTC’s records. The ownership interest of each actual purchaser of each Bond (“Beneficial Owner”) is in turn to be recorded on the Direct and Indirect Participants’ records. Beneficial Owners will not receive written confirmation from DTC of their purchase. Beneficial Owners are, however, expected to receive written confirmations providing details of the transaction, as well as periodic statements of their holdings, from the Direct or Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers of ownership interests in the Bonds are to be accomplished by entries made on the books of Direct and Indirect Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interests in the Bonds, except in the event that use of the book-entry system for the Bonds is discontinued.

To facilitate subsequent transfers, all Bonds deposited by Direct Participants with DTC are registered in

Appendix G Page 2

the name of DTC’s partnership nominee, Cede &Co. or such other name as requested by an authorized representative of DTC. The deposit of the Bonds with DTC and their registration in the name of Cede & Co. or such other DTC nominee do not affect any change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the Bonds; DTC’s records reflect only the identity of the Direct Participants to whose accounts such Bonds are credited, which may or may not be the Beneficial Owners. The Direct or Indirect Participants will remain responsible for keeping account of their holdings on behalf of their customers.

Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to

Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. Beneficial Owners of Bonds may wish to take certain steps to augment the transmission to them of notices of significant events with respect to the Bonds, such as tenders, defaults, and proposed amendments to the Bonds documents. For example, Beneficial Owners of the Bonds may wish to ascertain that the nominee holding the Bonds for their benefit has agreed to obtain and transmit notices to Beneficial Owners. In the alternative, Beneficial Owners may wish to provide their names and addresses to the Paying Agent and request that copies of notices be provided directly to them.

Neither DTC nor Cede & Co. (nor such other DTC nominee) will consent or vote with respect to the

Bonds unless authorized by a Direct Participant in accordance with DTC’s MMI Procedures. Under its usual procedures, DTC mails an Omnibus Proxy to the District as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co.’s consenting or voting rights to those Direct Participants to whose accounts the Bonds are credited on the record date (identified in a listing attached to the Omnibus Proxy).

Payments of principal of and interest on the Bonds will be made to Cede & Co., or such other nominee as

may be requested by an authorized representative of DTC. DTC’s practice is to credit Direct Participants’ accounts upon DTC’s receipt of funds and corresponding detail information from the District or the Paying Agent, on payable date in accordance with their respective holdings shown on DTC’s records. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered in “street name,” and will be the responsibility of such Participant and not of DTC, the Paying Agent or the District, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of principal and interest to Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) is the responsibility of the Paying Agent, disbursement of such payments to Direct Participants will be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners will be the responsibility of Direct and Indirect Participants.

DTC may discontinue providing its service as depository with respect to the Bonds at any time by giving

reasonable notice to the District or the Paying Agent. Under such circumstances, in the event that a successor depository is not obtained, 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, the Bond certificates will be printed and delivered to DTC. The information in this section concerning DTC and DTC’s book-entry system has been obtained from

sources that the District believes to be reliable, but the District takes no responsibility for the accuracy thereof. In the event that (a) DTC determines not to continue to act as securities depository for the Bonds, or (b)

the District determines that DTC shall no longer act and delivers a written certificate to the Paying Agent to that effect, then the District will discontinue the Book-Entry System with DTC for the Bonds. If the District determines to replace DTC with another qualified securities depository, the District will prepare or direct the preparation of a new single separate, fully registered Bond for each maturity of the Bonds registered in the name of such successor or substitute securities depository as are not inconsistent with the terms of the Resolution. If the District fails to identify another qualified securities depository to replace the incumbent securities depository for the Bonds, then the Bonds shall no longer be restricted to being registered in the Bond registration books in the name of the incumbent

Appendix G Page 3

securities depository or its nominee, but shall be registered in whatever name or names the incumbent securities depository or its nominee transferring or exchanging the Bonds shall designate.

In the event that the Book-Entry System is discontinued, the following provisions would also apply: (i) the

Bonds will be made available in physical form, (ii) payment of principal of and interest on the Bonds will be payable upon surrender thereof at the trust office of the Paying Agent identified in the Resolution, and (iii) the Bonds will be transferable and exchangeable as provided in the Resolution.

The District and the Paying Agent do not have any responsibility or obligation to DTC Participants, to the persons

for whom they act as nominees, to Beneficial Owners, or to any other person who is not shown on the registration books as being an owner of the Bonds, with respect to (i) the accuracy of any records maintained by DTC or any DTC Participants; (ii) the payment by DTC or any DTC Participant of any amount in respect of the principal of and interest on the Bonds; (iii) the delivery of any notice which is permitted or required to be given to registered owners under the Resolution; (iv) any consent given or other action taken by DTC as registered owner; or (v) any other matter arising with respect to the Bonds or the Resolution. The District and the Paying Agent cannot and do not give any assurances that DTC, DTC Participants or others will distribute payments of principal of and interest on the Bonds paid to DTC or its nominee, as the registered owner, or any notices to the Beneficial Owners or that they will do so on a timely basis or will serve and act in a manner described in this Official Statement. The District and the Paying Agent are not responsible or liable for the failure of DTC or any DTC Participant to make any payment or give any notice to a Beneficial Owner in respect to the Bonds or any error or delay relating thereto.

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